UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM SUPER 10-K





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





For the fiscal years ended: December 31, 2012, 2013, & 2014





Commission File Number: 333-62588





FIRST NATIONAL ENERGY CORPORATION


(Exact name of registrant as specified in its charter)





Nevada

66-0349372(State of other jurisdiction ofincorporation or organization)

(IRS EmployerIdentification No.)





44 Greystone Crescent, Georgetown, Ontario Canada L7G 1G9


(Address of principal executive offices)      (Zip Code)





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





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





Common Stock, $0.001 par value per share


(Title of class)





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þNo o





Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes þNo o





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þNo o





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes oNo þ





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





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




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





As of November 10, 2015, the aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates of the registrant was $79,892,182 based on the latest transaction price as reported on the OTC Bulletin Board on such date.  This calculation does not reflect a determination that certain persons are affiliates of the registrant for any other purposes.





The number of shares of the registrant's common stock outstanding on December 31, 2014, was 99,865,228.





DOCUMENTS INCORPORATED BY REFERENCE


[NONE]












TABLE OF CONTENTS
 
 PAGEPART IItem 1.
Business

4Item 1A.
Risk Factors

6Item 2.
Properties

13Item 3.
Legal Proceedings

13Item 4.
Reserved

13PART IIItem 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

14Item 6.
Selected Financial Data

15Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

15Item 7A.
Quantitative and Qualitative Disclosures About Market Risk

23Item 8.
Financial Statements and Supplementary Data

23Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

23Item 9A.
Controls and Procedures

23Item 9A(T)
Controls and Procedures

23Item 9B.
Other Information

23PART IIIItem 10.
Directors, Executive Officers and Corporate Governance

24Item 11.
Executive Compensation

25Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

26Item 13.
Certain Relationships and Related Transactions, and Director Independence

27Item 14.
Principal Accountant Fees and Services

27PART IVItem 15.
Exhibits and Financial Statement Schedules

28


2




Unless otherwise indicated, references in this Form 10-K to “First National”, “the Company”, the "registrant", “we”, “our” and “us” refer to First National Energy Corporation and its subsidiaries.
 
 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
 Some of the statements contained in this Annual Report that are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Exchange Act. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Annual Report is filed with the SEC. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including statements regarding: projections of revenue, profit margins, expenses, tax provisions and tax rates, earnings or losses from operations, impact of foreign exchange rates, cash flows, pension and benefit obligations and funding requirements, synergies or other financial items; plans, strategies and objectives of management for future operations including statements relating to potential acquisitions, compensation plans, purchase commitments; developments, performance or industry or market rankings relating to products or services; future economic conditions or performance; the outcome of outstanding claims or legal; potential gains and recoveries of costs; assumptions underlying any of the foregoing; and any other statements that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future. Forward-looking statements may be characterized by terminology such as “believe,” “anticipate,” “should,” “would,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy,” and similar expressions. These statements are based on assumptions and assessments made by our management in light of their experience and perception of historical trends, current conditions, expected future developments and other factors we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including but not limited to the following:
 
 ●
risks associated with our international operations;●
significant movements in foreign currency exchange rates;●
changes in the general economy, including the current global economic downturn, as well as the cyclical nature of global alternative energy markets;●
availability and cost of raw materials, parts and components that may be used in our products;●
the competitive environment in our industry;●
our ability to identify, finance, acquire and successfully integrate attractive installation targets;●
our ability to manage and grow our business and the execution of our business and growth strategies;●
loss of key management;●
our ability and the ability of our strategic partners to access required capital at a reasonable cost;●
our ability to expand our business in our targeted markets;●
our financial performance;●
our ability to identify, address and remediate any material weaknesses in our internal control over financial reporting; and●
other risks and factors, listed in Item 1A. Risk Factors in Part I of this Form 10-K.
 
 Any such forward-looking statements are not guarantees of future performance and actual results; future developments and business decisions may differ materially from those envisaged by such forward-looking statements. These forward-looking statements speak only as of the date the Original Form 10-K was filed with the SEC. We do not assume any obligation and do not intend to update any forward-looking statement except as required by law. See Item IA. Risk Factors in Part I of this Form 10-K for a further discussion regarding some of the reasons that actual results may be materially different from those that we anticipate.
  3
 PART I
 
 ITEM 1.    BUSINESS
 
 Business Development
 
 1.  First National Energy Corporation (the “Registrant”) was incorporated as Capstone International Corporation on November 16, 2000, in the state of Delaware, and has a class of shares registered with the Securities and Exchange Commission on Form SB-2 as SEC File No. 333-62588, filed on June 8, 2001. The Registrant’s name was changed to “First National Power Corporation” on January 28, 2004, and was changed again to “First National Energy Corporation” on February 12, 2009, at which time the Registrant effected a reverse stock split, adopted a holding company structure, and relocated its corporate charter from Delaware to Nevada as part of the reorganization described in the next succeeding paragraph.
 
 As described in the definitive information statement on Form DEF 14-C filed with the Securities and Exchange Commission on December 22, 2009, and pursuant to the approval of the Registrant’s board of directors and a majority of its stockholders, on February 12, 2009, the Registrant effected a reorganization pursuant to that certain Agreement and Plan of Merger to Form Holding Company, dated as of December 10, 2009 (a true and complete copy of which is included in the Form DEF 14-C information statement described above), which had the effect of (1) implementing a reverse stock split of its issued and outstanding common shares at the rate of 100 to 1, thereby reducing the number of issued and outstanding common shares from 76,522,760 to 765,228, with no effect on the number of authorized common shares; (2) merging the Registrant with and into First National Power Corporation, a Nevada corporation and a wholly-owned indirect (second tier) subsidiary of the Registrant, such that First National Energy Corporation, a Nevada corporation and a wholly-owned direct (first tier) subsidiary of the Registrant, succeeded the Registrant as a successor issuer of its registered securities, pursuant to Rule 12g-3 under the Securities Exchange Act of 1934, and continued the business of the Registrant for all purposes; (3) exchanging each issued and outstanding share of the Registrant (bearing CUSIP number 32113F 10 3) on the record date (and after giving effect to the reverse stock split described above) into one new common share of the successor issuer (bearing CUSIP number 321129 108); (4) shifting the Registrant’s charter from the State of Delaware to the State of Nevada; (5) increasing the authorized capital of the Registrant from 100 million common shares to 300 million common shares; (6) changing the Registrant’s name from “First National Power Corporation” to “First National Energy Corporation”; and (7) changing the Registrant’s stock symbol from FNPR to FNEC.
 
 2.  The Registrant has not at any time been the subject of any bankruptcy, receivership or similar proceeding.
 
 3.  On April 20, 2009, the Registrant acquired a territorial license to certain rights in alternative wind energy technology in exchange for 98,800,000 newly issued common shares of the Registrant, which resulted in a change in control of the Registrant, all as more particularly described in the definitive information statement on Form DEF 14-C filed with the Securities and Exchange Commission on May 4, 2009. As a result of such transaction, the Registrant was after such date no longer deemed to be a "shell company" as defined in Rule 12b-2 under the Securities Exchange Act of 1934.
 
 4.  Business of Issuer
 
 (i) Principal products or services and their markets.
 
 Since acquiring the technology license described above, management of the Registrant has expended significant time seeking sources of capital to implement its business plan, which is primarily designed to exploit the licensed technology throughout the United States and Canada for commercial gain by building, installing and operating its proprietary supplemental wind generation devices. The Registrant is also evaluating other alternatives in order to improve the Registrant's financial condition, including merger and acquisition opportunities. There is no assurance that the Registrant will be successful in raising capital or closing any such merger or acquisition transactions.




4




(ii) Distribution methods of the products or services.
 
 The Registrant intends to market and distribute its licensed proprietary supplemental wind generation devices by achieving strategic alliances with wind industry participants operating construction and maintenance enterprises in the licensed territories.
 
 (iii) Status of any publicly announced new product or service.
 
 The publicly announced licensed proprietary supplemental wind generation devices of the Registrant are the subject of intense research and development efforts by the Registrant, with the object of achieving optimum performance, facilitating large scale manufacturing at multiple locations, and protecting the Registrant's unique product designs.
 
 (iv)  Competitive business conditions and the smaller reporting company's competitive position in the industry and methods of competition.
 
 For a discussion of competitive business conditions and the Registrant's competitive position in the industry and methods of competition, please see "Risk Factors - RISKS RELATED TO WIND ENERGY INDUSTRY" below.
 
 (v) Sources and availability of raw materials and the names of principal suppliers.
 
 The Registrant has identified ready sources and availability of raw materials and multiple suppliers of the materials and components to be incorporated in its licensed proprietary supplemental wind generation devices, and does not foresee any dependence on any sole source or supplier for such materials and components.
 
 (vi)  Dependence on one or a few major customers.
 
 The Registrant does not foresee any likely dependence on one or a few major customers.
 
 (vii) Patents, trademarks, licenses, franchises, concessions, royalty agreements or labor contracts, including duration.
 
 For a description of the license agreement held by the Registrant, the reader is referred to the definitive information statement on Form DEF 14-C filed by the Registrant with the Securities and Exchange Commission on May 4, 2009.
 
 (viii) Need for any government approval of principal products or services.
 
 No government approval is required for the Registrant's principal products, but certain certifications may be necessary to obtain liability insurance for the products in order to satisfy the contractual requirements of potential customers.
 
 (ix) Effect of existing or probable governmental regulations on the business.
 
 For a discussion of the effect of existing or probable governmental regulations on the business of the Registrant, please see "Risk Factors-RISKS RELATED TO WIND ENERGY INDUSTRY" below.




5




(x) Estimate of the amount spent during each of the last two fiscal years on research and development activities.
 
 Research and development activities for the fiscal year ending December 31, 2014 and 2013 were nil.
 
 (xi) Costs and effects of compliance with environmental laws (federal, state and local).
 
 Such costs are unknown, but are not considered by the Registrant to be material.
 
 (xii) Number of total employees and number of full-time employees. The Registrant has no paid employees nor any full-time employees, as the directors and officers of the Registrant are currently performing their services without compensation.
 
 5.  Reports to Security Holders
 
 The Registrant is a reporting entity and files annual, quarterly and special event reports with the Securities and Exchange Commission, as well as proxy and information statements.
 
 The Registrant will voluntarily make available to security holders upon request a copy of this annual report on Form 10-K, including audited financials.
 
 The public may read and copy any materials filed by the registrant with the Securities and Exchange Commission at the SEC’s Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. The public may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1–800–SEC–0330. The Securities and Exchange Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Securities and Exchange Commission at its web site (http://www.sec.gov).
 
 ITEM 1A.  RISK FACTORS.
 
 An investment in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with the information included elsewhere in this Annual Report on Form 10-K/A and other documents we file with the SEC. If any of the following risks actually occur, our business, financial condition or operating results could suffer. As a result, the trading price of our common stock could decline and you could lose all or part of your investment in our common stock. The risks and uncertainties described below are those that we have identified as material, but are not the only risks and uncertainties facing us and we caution that this list of risk factors may not be exhaustive. Our business is also subject to general risks and uncertainties that affect many other companies, such as overall U.S. and non-U.S. economic and industry conditions, a global economic slowdown, geopolitical events, changes in laws or accounting rules, fluctuations in interest rates, terrorism, international conflicts, natural disasters or other disruptions of expected economic or business conditions. We operate in a continually changing business environment, and new risk factors emerge from time to time which we cannot predict. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impair our business, including our results of operations, liquidity and financial condition.
 
 FIRST NATIONAL ENERGY CORPORATION IS A DEVELOPMENT STAGE COMPANY WITH A LIMITED OPERATING HISTORY THAT MAKES IT IMPOSSIBLE TO RELIABLY PREDICT FUTURE GROWTH AND OPERATING RESULTS.
 
 The Company has not demonstrated that it can:
  ●
manufacture products in a manner that will enable it to be profitable;●
establish many of the business functions necessary to operate, including sales, marketing, manufacturing, administrative and financial functions;●
establish appropriate financial controls;●
respond effectively to competitive pressures; or●
raise the capital necessary to implement its business plan.
 
 6




FIRST NATIONAL ENERGY CORPORATION HAS INCURRED OPERATING LOSSES SINCE INCEPTION.
 
 Since its inception in 2000, the Company has incurred losses every quarter. The extent of the Company’s future operating losses and the timing of profitability are highly uncertain, and it may never achieve or sustain profitability.  The Company has incurred a net loss for the twelve months ended December 31, 2014 of ($12,092).  At December 31, 2014, the Company had an accumulated deficit of ($876,475). The Company anticipates that it will continue to incur operating losses for the foreseeable future and it is possible that the Company will never generate substantial revenues from its products.
 
 THE COMPANY’S FUTURE CAPITAL NEEDS ARE UNCERTAIN. THE COMPANY WILL NEED TO RAISE ADDITIONAL FUNDS NOW AND IN THE FUTURE AND THESE FUNDS MAY NOT BE AVAILABLE ON ACCEPTABLE TERMS OR AT ALL.
 
 The Company believes that its current cash will not be sufficient to meet projected operating requirements for at least the next 3 months and it is therefore necessary that the Company will need to seek additional funds from public and/or private stock offerings, borrowings under credit lines or other sources. The Company’s capital requirements will depend on many factors, including:
  ●
the revenues generated by products that it manufactures;●
the costs required to develop its manufacturing processes;●
the expenses it incurs in manufacturing and placing its products;●
the costs associated with any expansion of its business;●
the costs associated with capital expenditures; and●
the number and timing of any acquisitions or other strategic transactions.
  As a result of these factors, the Company will need to raise additional funds, and these funds may not be available on favorable terms, or at all. Furthermore, if the Company issues equity or debt securities to raise additional funds, its existing shareholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of its existing shareholders. If the Company cannot raise funds on acceptable terms, it may not be able to develop or enhance its products, execute its business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated counterparty requirements.
 
 THE COMPANY’S SUCCESS WILL DEPEND ON ITS ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL AND TECHNICAL STAFF.
 
 The Company believes future success will depend on its ability to manage its growth successfully, including attracting and retaining skilled personnel for its manufacturing and site maintenance operations. Hiring qualified management and technical personnel may be difficult.  If the Company fails to attract and retain personnel, particularly management and technical personnel, it may not be able to succeed in its planned operations.
 
 Our executive officers, board of directors and key employees are crucial to our business, and we may not be able to recruit, integrate and retain the personnel we need to succeed.
 
 Our success will depend upon a number of key management, sales, technical and other critical personnel, including our executive officers, our board of directors and key employees with expertise in the industry. The loss of the services of any key personnel, or our inability to attract, integrate and retain highly skilled technical, management, sales and marketing personnel could result in significant disruption to our operations, including our inability or limited success in locating new sites, effectiveness of sales efforts, quality of customer service, and completion of our initiatives, including growth plans and the results of our operations. Any failure by us to find suitable replacements for our key senior management may be disruptive to our operations. Competition for such personnel in the technology industries is intense, and we may be unable to attract, integrate and retain such personnel successfully.




7




We may have to depend on outside advisors for some of our primary business operations.
 
 To supplement the business experience of our officers and directors, we may be required to employ accountants, technical experts, appraisers and attorneys or engage other consultants or advisors. The selection of any such advisors will be made by our directors and officers without any input from shareholders. Furthermore, it is anticipated that such persons may be engaged on an “as needed” basis without a continuing fiduciary or other obligation to us. In the event management considers it necessary to hire outside advisors, they may elect to hire persons who are affiliates, if they are able to provide the required services.
 
 IF THE COMPANY DOES NOT EFFECTIVELY MANAGE ITS GROWTH, ITS BUSINESS RESOURCES MAY BECOME STRAINED AND ITS RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED.
 
 The Company expects to rapidly increase its employee base proportionate to expansion of its manufacturing capabilities. This may provide challenges to the Company’s organization and may strain its management and operations. The Company may misjudge the amount of time or resources that will be required to effectively manage any anticipated or unanticipated growth in its business or it may not be able to attract, hire and retain sufficient personnel to meet its needs. If the Company cannot scale its business appropriately, maintain control over expenses or otherwise adapt to anticipated and unanticipated growth, its business resources may become strained, it may not be able to deliver contracted products in a timely manner and its results of operations may be adversely affected
 
 THE COMPANY MAY BE SUBJECT TO POTENTIAL PRODUCT LIABILITY AND OTHER CLAIMS AND IT MAY NOT HAVE THE INSURANCE OR OTHER RESOURCES TO COVER THE COSTS OF ANY SUCCESSFUL CLAIM.
 
 Defects in the Company's products could subject it to potential product liability claims for damage to property or personal injuries.  The Company’s product liability insurance, if available at reasonable cost, may not be adequate to cover future claims. Product liability insurance is expensive and, in the future, may not be available on terms that are acceptable to the Company, if it is available to it at all. Plaintiffs may also advance other legal theories supporting their claims that the Company's products or actions resulted in some harm.  A successful claim brought against the Company in excess of its insurance coverage could significantly harm its business and financial condition.
 
 RISKS RELATED TO CAPITAL STRUCTURE
 
 THERE IS NO ASSURANCE OF AN ESTABLISHED PUBLIC TRADING MARKET.
 
 Although the Company's common stock trades on the OTC Bulletin Board, a regular trading market for the securities may not be sustained in the future. The OTC Bulletin Board is an inter-dealer, over-the-counter market that provides significantly less liquidity than other exchanges. Quotes for stocks included on the OTC Bulletin Board are not listed in the financial sections of newspapers as are those for other major exchanges. Therefore, prices for securities traded solely on the OTC Bulletin Board may be difficult to obtain and holders of common stock may be unable to resell their securities at or near their original offering price or at any price. Market prices for the Company's common stock will be influenced by a number of factors, including:
  ●
the issuance of new equity securities pursuant to its recent issuance of shares for a technology license, or a future offering;●
changes in interest rates;●
competitive developments, including announcements by competitors of new products or services or significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;●
variations in quarterly operating results;●
changes in financial estimates by securities analysts;●
the depth and liquidity of the market for the Company's common stock;●
investor perceptions of the Company and the alternative energy industry generally; and●
general economic and other national conditions.
  8




THE COMPANY'S COMMON STOCK IS CONSIDERED A "PENNY STOCK."
 
 The Company's common stock is considered to be a "penny stock" since it meets one or more of the definitions in Rules 15g-2 through 15g-6 promulgated under Section 15(g) of the Exchange Act. These include but are not limited to the following: (i) the stock trades at a price less than $5.00 per share; (ii) it is not traded on a "recognized" national exchange; (iii) it is not quoted on the NASDAQ Stock Market, or even if so, has a price less than $5.00 per share; or (iv) is issued by a company with net tangible assets less than $2.0 million, if in business more than three years, or with average revenues of less than $6.0 million for the past three years. The principal result or effect of being designated a "penny stock" is that securities broker-dealers cannot recommend the stock but must trade in it on an unsolicited basis.
  BROKER-DEALER REQUIREMENTS MAY AFFECT TRADING AND LIQUIDITY.
 
 Section 15(g) of the Exchange Act and Rule 15g-2 promulgated thereunder by the SEC require broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor's account.
 
 Potential investors in the Company's common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be "penny stock." Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for holders of the Company's common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.
 
 FOLLOWING THE COMPANY’S RECENT TECHNOLOGY LICENSE TRANSACTION, THE PRINCIPAL SHAREHOLDERS OF THE LICENSOR WILL HAVE SIGNIFICANT INFLUENCE OVER THE COMPANY.
 
 The officers, directors and insiders of Boreas beneficially own, in the aggregate, 86.4% of the Company's outstanding voting stock. As a result, the principal shareholders of Boreas Research Corporation, the Company’s technology licensor, will possess significant influence over the Company, giving them the ability, among other things, to elect a majority of the Company's Board of Directors and to approve significant corporate transactions. Such stock ownership and control may also have the effect of delaying or preventing a future change in control of the Company, impeding an acquisition, consolidation, takeover or other business combination or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company.
 
 THE COMPANY DOES NOT FORESEE PAYING CASH DIVIDENDS IN THE FORESEEABLE FUTURE.
 
 We currently intend to retain our future earnings to support operations and to finance expansion and, therefore, we do not anticipate paying any cash dividends on our common stock in the foreseeable future.  The Company has not paid any dividends since its inception.
 
 9




ANTICIPATED LIQUIDITY AND CAPITAL RESOURCES
 
 The Company’s management anticipates that substantial additional capital will be required to implement its business plan. However, there can be no assurance that management will be successful in raising such necessary additional capital. If additional funds are raised through the issuance of equity or convertible debt securities, the percentage ownership of our shareholders will be reduced, shareholders may experience additional dilution and such securities may have rights, preferences and privileges senior to those of our common stock. There can be no assurance that additional financing will be available on terms favorable to us or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to implement our business plan, fund expansion, take advantage of unanticipated acquisition opportunities, develop or enhance services or products or respond to competitive pressures. Such inability could harm the Company’s business, results of operations and financial condition.
 
 
 RISKS RELATED TO WIND ENERGY INDUSTRY
 
 We have a limited operating history and we have not demonstrated that we can develop, market, install and manage our licensed supplemental energy generating systems on a large scale.
 
 We have a limited history of managing supplemental energy generating systems and limited data upon which you can evaluate our business. Our prospects for success must be considered in the context of a new company in a developing industry. The risks we face include developing and acquiring successful relationships with large scale wind farms, reliance on third parties, operating in a competitive environment in which electricity rates will be set by the operation of market forces and regulatory constraints, uncertain performance of our supplemental energy generating systems, financing our business and meeting the challenges of the other risk factors described herein. If we are unable to address all of these risks, our business, results of operations and financial condition may suffer.
 
 The revenues generated by wind farms depend on market prices of energy in competitive wholesale energy markets. Market prices for both energy and capacity are volatile and depend on numerous factors outside our control including economic conditions, population growth, electrical load growth, government and regulatory policy, weather, the availability of alternate generation and transmission facilities, balance of supply and demand, seasonality, transmission and transportation constraints and the price of natural gas and alternative fuels or energy sources. The wholesale power markets are also subject to market regulation by the Federal Energy Regulatory Commission, independent system operators, and regional transmission operators which can impact market prices for energy and capacity sold in such markets, including by imposing price caps, mechanisms to address price volatility or illiquidity in the markets or system instability and market power mitigation measures. We cannot assure you that market prices will be at levels that enable us to operate profitably or as anticipated. A decline in electricity or capacity market prices below anticipated levels could have a material adverse impact on our revenues or results of operations. In markets where wind farms qualify to receive capacity payments, it is typical that only a portion of the wind farm’s capacity is eligible to receive capacity payments. This portion is typically based on the previous year’s average net capacity factor during peak periods. In addition, changes to regulatory policy or market rules regarding the qualification of wind generation as a capacity resource could limit or eliminate a wind farm’s ability to receive payments for its generating capacity.
 
 The governments of the United States and Canada may not extend or may decrease existing tax incentives for renewable energy, including wind energy, which would have an adverse impact on our development strategy.
 
 Tax incentives applicable to the wind energy industry currently in effect include the production tax credit (“PTC”) and accelerated tax depreciation for certain assets of wind farms. The current version of the PTC provides the owner of a wind turbine with a credit against its federal income tax obligations based on the amount of electricity generated by the wind turbine. The accelerated depreciation for certain assets of wind farms provides for a five-year depreciable life for these assets, rather than the 15 to 25 year depreciable lives of many non-renewable energy assets. We also cannot assure you that the tax laws providing for accelerated depreciation of wind farm assets will not be modified, amended or repealed in the future. If the current tax incentives are not extended or renewed, or are extended or renewed at a lower rate, financing options for wind farms may be reduced and development plans for additional wind farms could be adversely affected, thereby severely restricting the number of potential sites for the Company’s products.


10




Tax equity investors have limited funds, and wind energy producers compete with other renewable energy producers for tax equity financing. In the current rapidly expanding market, the cost of tax equity financing may increase and there may not be sufficient tax equity financing available to meet the total demand in any year. In addition, one or more current tax equity investors may decide to withdraw from this market thereby depleting the pool of funds available for tax equity financing. Alternative financing will be more expensive and there may not be sufficient liquidity in alternate financial markets. As a result, development of additional wind farms and the Company’s growth potential would both be adversely affected.
 
 The performance of wind farms and, by extension, the Company’s products, is dependent upon meteorological and atmospheric conditions that fluctuate over time. The production of electricity generated by our supplemental wind energy systems will be the source of substantially all of our revenues. As a result, our results of operations will be highly dependent on meteorological and atmospheric conditions.
 
 Operational factors may reduce energy production from the Company’s supplemental wind energy generation systems below projections, causing a reduction in revenue. The amount of electricity generated depends upon many factors in addition to the quality of the wind resources, including but not limited to turbine performance, aerodynamic losses resulting from wear on the wind turbine, degradation of other components, icing or soiling of the blades and the number of times an individual turbine or an entire wind farm may need to be shut down for maintenance or to avoid damage due to extreme weather conditions. In addition, conditions on the electrical transmission network can impact the amount of energy a wind farm can deliver to the network. We cannot assure you that any of our supplemental wind energy generation systems will meet energy production expectations in any given time period.
 
 As with all power generation facilities, operation of our supplemental wind energy generation systems will involve operating risks, including:
  ●
our possible inability to achieve the output and efficiency levels for our supplemental wind energy generation systems that we have projected; and●
shutdown due to a breakdown or failure of equipment or processes, violation of permit requirements (whether through operations or change in law), operator error or catastrophic events such as fires, explosions, floods or other similar occurrences affecting us, our supplemental wind energy generation systems or third parties upon which our business may depend.
 The occurrence of one or more of these events could significantly reduce revenues expected to be produced by our supplemental wind energy generation systems or significantly increase the expenses of our supplemental wind energy generation systems, thereby adversely affecting our business, results of operations and financial condition.
 
 The Company’s financial projections assume that they will be able to operate their supplemental wind energy generation systems nearly continually and they may have trouble meeting those obligations if they are not successful.
 
 The Company will need to achieve high levels of availability and dispatch for these supplemental wind energy generation systems to operate profitably. The Company will operate under the assumption that they will achieve high levels of availability and dispatch in developing the revenue figures included in their financial projections. However, developments could affect the dispatch rate of their supplemental wind energy generation systems, including the following:
  ●
equipment problems or other problems which affect the ability of our supplemental wind energy generation systems to operate;●
implementation of additional or more stringent environmental compliance measures; or●
the market introduction of new and competing products which may be more efficient and cost effective than our supplemental wind energy generation systems.






11




Changes in energy laws or regulations or interpretations of these laws or regulations could result in increased compliance costs or result in additional expenditures for us. Failure by us to comply or failure to satisfy requirements could also subject us to the imposition of penalties and fines. Governmental laws, regulations and policies applicable to alternative energy sources are currently subject to modifications and are expected to continue to evolve. Resulting laws and policies may restrict the structuring of the sales of the power generated by wind farms. Federal law regulates wholesale sales of electricity and the transmission of electricity in interstate commerce by public utilities. We cannot predict whether federal or state governmental entities or regulatory authorities will adopt new laws or regulations or modify existing laws affecting the generation and/or transmission of electricity, or the ability of our counterparty wind farm operators to comply with them. Such new laws or regulations could have a material adverse impact on our business, results of operations or financial condition.
 
 Various state governments may not extend or may decrease incentives for renewable energy, including wind energy, which would have an adverse impact on our development strategy.
 
 Various types of incentives which support the sale of electricity generated from wind energy presently exist in regions where we plan to market, install and operate our products on existing wind farms. We cannot assure you that governmental support for alternative energy sources will continue at current levels or that the wind farms we partner with will qualify for such incentives. Any decrease in such state-level incentives could have an adverse impact on our development strategy.
 
 We depend on our ability to locate and develop new sources of wind power in a timely and consistent manner, and failure to do so would adversely affect our operations and financial performance.
 
 Our success in the industry requires additional and continuing development to become and remain competitive. We expect to continue to make substantial investments in development activities. Our future success will depend, in part, on our ability to continue to locate additional wind power sites. This development activity will require continued investment in order to maintain and grow our market position. We may experience unforeseen problems in our development endeavors. We may not achieve widespread market acceptance of our supplemental wind energy generation systems. These factors could materially affect our ability to forecast operations and negatively affect our stock price, results of operations, cash flow and financial condition.
 
 The number of desirable sites available for successful wind farms is limited, and our inability to successfully negotiate for access with the owners and operators of such sites would limit our ability to implement our development strategy.
 
 We are a small company, and we will be operating in a highly competitive market, and this competition may accelerate in the future. Potential competitors have, or may have, substantially greater financial, marketing or technical resources, and in some cases, greater name recognition and experience than we have. Such potential competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements, and may also be able to devote greater resources to the development and promotion of supplemental wind energy generation systems than we can. Potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties that enhance their ability to address the needs of our prospective counterparties. It is possible that new competitors or alliances among potential competitors may emerge and rapidly gain significant market share. This would in turn reduce our market share, reduce our overall revenues and require us to invest additional funds in new technology development. If we cannot compete successfully against competitors, this will have a negative impact on our business, financial condition, results of operations and cash flow.
 
 12




We will depend on electric transmission facilities owned and operated by third parties to deliver the electricity that we sell. We will typically connect to transmission networks through the facilities owned and controlled by our counterparty wind farm owners and operators. The capacity of the local transmission network may be limited or constrained, and the owner of the network may not allow us to interconnect our supplemental wind energy system without first constructing any necessary system upgrades. Many wind farms are located in remote areas with limited transmission networks where intense competition exists for access to, and use of capacity on, the existing transmission facilities. We cannot assure you that we will obtain sufficient network connections for all future installations within planned timetables and budgetary constraints.
 
 Our counterparty wind farm owners and operators are required to meet certain technical specifications in order to be connected to the transmission network. If any wind farm does not meet, or ceases to comply with, these specifications, we will not be able to connect, to or remain connected, to the transmission network. We may also incur liabilities and penalties, including disconnection from the network, if the transmission of electricity by one or more of such host wind farms does not comply with applicable technical requirements. In the interconnection agreements between wind farms and the applicable transmission owner or operator, the transmission owner or operator retains the right to interrupt or curtail transmission deliveries as required in order to maintain the reliability of the transmission network. We cannot assure you that the Company will not be adversely impacted by any such interruption or curtailment.
  ITEM 2.   PROPERTIES.
 
 The Registrant maintains office space in Georgetown, Ontario Canada, at minimal cost. It currently does not own any equipment at that location.
 
 ITEM 3.   LEGAL PROCEEDINGS.
 
 The Registrant is not a party to any pending or threatened legal proceedings.
 
 ITEM 4.   RESERVED.
 
 
 13




PART II
 
 ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
 
 Market Information.
 
 Our common stock is traded on the Over the Counter Bulletin Board (the “OTCBB”) under the symbol “FNEC”. The following table sets forth the high and low bid quotations for our common stock for each quarter during the past two fiscal years as reported by the OTCBB.
 
 The below quotations, as determined through a query of Yahoo Finance, reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions:
 Year ended December 31, 2014

High


Low4th quarter, ended December 31, 2014

$
0.25


$
0.253rd quarter, ended September 30, 2014

$
0.70


$
0.252nd quarter, ended June 30, 2014

$
0.90


$
0.251st quarter, ended March 31, 2014

$
0.50


$
0.30Year ended December 31, 20134th quarter, ended December 31, 2013

$
0.30


$
0.303rd quarter, ended September 30, 2013

$
0.40


$
0.302nd quarter, ended June 30, 2013

$
0.80


$
0.401st quarter, ended March 31, 2013

$
0.74


$
0.42Year ended December 31, 20124th quarter, ended December 31, 2012

$
1.00


$
0.473rd quarter, ended September 30, 2012

$
1.00


$
1.002nd quarter, ended June 30, 2012

$
1.00


$
1.001st quarter, ended March 31, 2012

$
1.00


$
1.00Year ended December 31, 20114th quarter, ended December 31, 2011

$
1.00


$
1.003rd quarter, ended September 30, 2011

$
1.00


$
1.002nd quarter, ended June 30, 2011

$
1.00


$
0.151st quarter, ended March 31, 2011

$
0.15


$
0.15




Holders.
 
 At December 31, 2014, there were approximately 65 holders of the Registrant's common stock.
 
 Dividend Policy.
 
 As of December 31, 2014, the Registrant has not paid any dividends to its shareholders and does not intend to pay dividends to its shareholders in the foreseeable future.  However, there are no restrictions which would limit the ability of the Registrant to pay dividends in the future.
 
 Securities authorized for issuance under equity compensation plans.
 
 (1) The Registrant maintains a stock incentive plan, entitled “2005 Stock Incentive Plan for Employees and Consultants” and has registered 3 million of its common shares (1 million on February 25, 2005 and 2 million on April 11, 2005) for issuance under such stock incentive plan. To date, 830,000 shares have been issued under the stock incentive plan.




14




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

Number of securities tobe issued upon exerciseof outstanding options,warrants and rights

(a)

Weighted-averageexercise price ofoutstanding options,warrants and rights

(b)

Number of securities remainingavailable for future issuanceunder equity compensationplans [excluding securities

reflected in column (a)](c)Equity compensationplans approved bysecurity holders

None

N/A

NoneEquity compensationplans not approvedby security holders

None

N/A

2,170,000 Common SharesTotal

None

N/A

2,170,000 Common Shares
 
 (3) For a description of the material features of the Registrant's “2005 Stock Incentive Plan for Employees and Consultants”, a compensation plan under which equity securities of the Registrant are authorized for issuance that was adopted without the approval of security holders, the reader is referred to the registration statements filed with the SEC by the Registrant on Form S-8 on February 25, 2005 and April 11, 2005.
 
 Please refer to “ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE,” and “ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.”
 
 (b) Report of Offering of Securities and Use of Proceeds Therefrom.
 
 Not Applicable.
 
 (c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
 
 None.
 
 Sales of Unregistered Securities
 
 During the 2014 Fiscal year, there were no capital transactions.
 
 ITEM 6.  SELECTED FINANCIAL DATA
 
 There are no financial data which, if selected, would highlight any significant trends in the registrant's financial condition and results of operations.
 
 ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 Forward-Looking Statements
 
 Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.




15


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 120 to 180 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.
  16
 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, 2015. 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 2015 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.
 
 17




Expenses
 
 We estimate the costs to implement our business strategy over the following twelve months to be:
  ●
Product Research and Development, primarily related to refining wind turbine assembly system designs, and establishing a supply chain and production. We estimate product development related expenses for the next twelve months will be approximately $100,000.●
Marketing, including efforts to present our products to potential end users, direct marketing and attendance at trade shows as discussed above. We estimate initial marketing expenses for the next twelve months will be approximately $200,000.●
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
 
 The Company plans 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, 2014, 2013, 2012, and 2011
 
 31-Dec-14


31-Dec-13


31-Dec-12


31-Dec-11Income


-



-



-



-Operating expenses

$
12,092


$
15,347


$
47,566


$
60,242Administration Expenses

$
12,092


$
15,347


$
47,566


$
60,242Development expenses

$
-


$
-


$
-


$
-Net Loss

$
12,087


$
15,347


$
47,566


$
60,242
 
 Development Costs.
 
 As more particularly described in Note 3(c) of the accompanying financial statements, the Company is expensing development costs, rather than capitalizing them, until the Company has a reasonable expectation of revenues.




Liquidity and Capital Resources




31-Dec-14


31-Dec-13


31-Dec-12


31-Dec-11Current Assets

$
2,437


$
1,296


$
2,999


$
4,763Current Liabilities

$
675,775


$
662,542


$
648,898


$
603,086Resutling Working Capital Deficit

$
(673,338
)

$
(661,246
)

$
(645,899
)

$
(598,323
)




18




On May 25, 2009,  the Company acquired technology license rights valued at $100 (as restated) in exchange for 98,800,000 new restricted shares of the Company’s common stock, which were issued as more particularly described in Note 1(b) of the accompanying consolidated financial statements.
 
 On March 22, 2010, Pavana Power Corporation (“Pavana”), a Nevada corporation, the Company’s 99.9% owned subsidiary, acquired an exclusive territorial 25 year license for the Republic of India (“India”), from Boreas Research Corporation (‘Boreas”, the stockholders of whom hold controlling interests in the Company), pursuant to which the Company’s subsidiary acquired technology rights for India in the technology of Boreas that maximizes the energy productivity of existing wind turbines by capturing energy that flows through and underneath existing wind turbine systems.  The consideration due from the Company’s subsidiary to Boreas for the license was a deferred cash payment of $600,000, and a future royalty equal to 5% of Pavana’s “EBITDA” (earnings before interest, taxes, depreciation and amortization) from exploitation of the acquired license.
 
 On November 8, 2010, Pavana paid Boreas $60,000 as a payment due under the India technology license agreement, leaving a cash consideration due of $540,000. The remaining debt is non-interest bearing and are due on demand.
 
 In accordance with Topic ASC 850, Pavana recorded the acquisition of the Supplementary Wind Energy Generator (SWEG) technology license for the geographical territory of India, at the carrying amount of the license technology acquired which was $100 and the balance of the cash consideration of $599,900 was accounted for as additional paid in capital.
 
 The Company does not anticipate paying dividends in the foreseeable future.
 
 At present, the Company lacks sufficient capital resources to fund operations and business plan for the next twelve months.  The Company intends to obtain business capital through the use of private equity fundraising or shareholder loans. If the Company is not able to secure additional funding, the implementation of its 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.  The plan is that, in time, the primary source of capital for our business model will be revenue from the sale of power produced by installed products.
 
 Cash Flows from Operating Activities
 
 31-Dec-14


31-Dec-13


31-Dec-12


31-Dec-11Net Cash used in activities

$
2,908


$
(18,847
)

$
(22,691
)

$
(10,425
)Net Cash from financing

$
(1,767
)

$
17,144


$
20,937


$
-
 
 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.




19




The Registrant has incurred net losses: ($15,347) for the fiscal year ended December 31, 2013 and ($47,566) for the fiscal year ended December 31, 2012.  At December 31, 2013, the Registrant had an accumulated deficit of ($864,388). This raises substantial doubt about the Registrant's ability to continue as a going concern.
 
 As a result of the fixed nature of many of the Registrant's expenses, the Registrant may be unable to adjust spending in a timely manner to compensate for any unexpected delays in the development of the Registrant's business or any capital raising or revenue shortfall. Any such delays or shortfalls will have an immediate adverse impact on the Registrants business, operations and financial condition.
 
 (B)  NEED FOR ADDITIONAL FINANCING MAY AFFECT OPERATIONS AND PLAN OF BUSINESS.
 
 The working capital requirements associated with any adopted plan of business of the Registrant may be significant. The Registrant anticipates, based on currently proposed assumptions relating to its operations (including with respect to costs and expenditures and projected cash flow from operations), that it must seek financing to continue its operations (an amount which is as yet to be determined). However, such financing, when needed, may not be available, or on terms acceptable to management. The ability of the Registrant to continue as a going concern is dependent on additional sources of capital and the success of the Registrant's business plan. The Registrant's independent accountant audit reports included in this Form 10-K includes a substantial doubt paragraph regarding the Registrant's ability to continue as a going concern.
 
 If funding is insufficient at any time in the future, the Registrant may not be able to take advantage of business opportunities or respond to competitive pressures, or may be required to reduce the scope of its planned product development and marketing efforts, any of which could have a negative impact on its business, operating results and financial condition. In addition, insufficient funding may have a material adverse effect on the Registrant's financial condition, which could require the Registrant to:
  o
curtail operations significantly;o
sell significant assets;o
seek arrangements with strategic partners or other parties that may require the Registrant to relinquish significant rights to products, technologies or markets;o
explore other strategic alternatives including a merger or sale of the Registrant.
 
 To the extent that the Registrant raises capital through the sale of equity or convertible debt securities, the issuance of such securities will result in dilution to existing stockholders. If additional funds are raised through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on the Registrant's operations. Regardless of whether the Registrant's cash assets prove to be inadequate to meet the Registrant's operational needs, the Registrant may seek to compensate providers of services by issuance of stock in lieu of cash, which will also result in dilution to existing shareholders.
 
 (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.
 
 In addition, all decisions with respect to the management of the Registrant will be made exclusively by the officers and directors of the Registrant. Investors will only have rights as stockholders to make decisions which affect the Registrant. The success of the Registrant, to a large extent, will depend on the quality of the directors and officers of the Registrant. Accordingly, no person should invest in the shares unless they are willing to entrust all aspects of the management of the Registrant to its officers and directors.
 
 20




(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.




21




(I)  FAILURE TO MAINTAIN MARKET MAKERS MAY AFFECT VALUE OF REGISTRANT'S STOCK.
 
 If the Registrant is unable to maintain National Association of Securities Dealers, Inc. member broker/dealers as market makers, the liquidity of the common stock could be impaired, not only in the number of shares of common stock which could be bought and sold, but also through possible delays in the timing of transactions, and lower prices for the common stock than might otherwise prevail. Furthermore, the lack of market makers could result in persons being unable to buy or sell shares of the common stock on any secondary market. There can be no assurance the Registrant will be able to maintain such market makers.
 
 (J)  SALE OF SHARES ELIGIBLE FOR FUTURE SALE COULD ADVERSELY AFFECT THE MARKET PRICE.
 
 If a substantial number of the shares of common stock of the Registrant that have been issued in reliance on Rule 144 under the Securities Act of 1933 were sold under Rule 144 or a registered offering, the market price of the common stock could be adversely affected.
 
 CRITICAL ACCOUNTING POLICIES.
 
 The Securities and Exchange Commission has issued Financial Reporting Release No. 60, "Cautionary Advice Regarding Disclosure About Critical Accounting Policies" ("FRR 60"), suggesting companies provide additional disclosure and commentary on their most critical accounting policies. In FRR 60, the Securities and Exchange Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of a company's financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, the Registrant's most critical accounting policies include the use of estimates in the preparation of financial statements. The methods, estimates and judgments the Registrant uses in applying these most critical accounting policies have a significant impact on the results the Registrant reports in its financial statements.
 
 The preparation of these financial statements requires the Registrant to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Registrant evaluates these estimates, including those related to revenue recognition and concentration of credit risk. The Registrant bases its estimates on historical experience and on various other assumptions that is believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
 
 FORWARD LOOKING STATEMENTS.
 
 The foregoing plan of operation contains "forward looking statements" within the meaning of Rule 175 of the Securities Act of 1933, as amended, and Rule 3b-6 of the Securities Act of 1934, as amended. The words "believe," "expect," "anticipate," "intends," "forecast," "project," and similar expressions identify forward-looking statements. These are statements that relate to future periods and include, but are not limited to, statements as to the Registrant's estimates as to the adequacy of its capital resources, its need and ability to obtain additional financing, its operating losses and negative cash flow, and its critical accounting policies. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, those discussed above. These forward-looking statements speak only as of the date hereof. The Registrant expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
 
 22




ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
 ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 Financial statements as of and for the year ended December 31, 2014 with comparative data for December 31, 2013 as well as the Financial statements as of and for the year ended December 31, 2012 with comparative data for December 31, 2011 are presented in a separate section of this report following Item 14.
 
 ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.
 
 None
 
 ITEM 9A.  CONTROLS AND PROCEDURES
 
 As of December 31, 2014, the Registrant carried out an evaluation of the effectiveness of the Registrant’s disclosure controls and procedures (as defined by Rule 13a-15(e) under the Securities Exchange Act of 1934) under the supervision and with the participation of the Chief Financial Officer. Based on and as of the date of such evaluation, the aforementioned officers have concluded that the Registrant’s disclosure controls and procedures were not effective, due to a material weakness in our internal control over financial reporting, consisting of inadequate staffing within the accounting operations by employees who are responsible for accounting functions which prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews.
 
 The Registrant also maintains a system of internal accounting controls that is designed to provide assurance that assets are safeguarded and that transactions are executed in accordance with management’s authorization and properly recorded. This system is continually reviewed and is augmented by written policies and procedures, the careful selection and training of qualified personnel and an internal audit program to monitor its effectiveness. During the fiscal year ended December 31, 2013, 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
 Company management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting refers to a process designed by, or under the supervision of our Chief Financial Officer and effected by our Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in connection with generally accepted accounting principles, including those policies and procedures that:




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




Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance of the prevention or detection of misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
 In connection with the preparation of this Annual Report on Form 10-K for the years ended December 31, 2014, 2013, 2012 and 2011 management, with the participation of our Chief Financial Officer, has evaluated the effectiveness of our internal controls over financial reporting, pursuant to Rule 13a-15 under the Exchange Act. Management conducted its evaluation of the Registrant’s internal control over financial reporting based on the framework in Internal Control – Integrated Framework,issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified one material weakness in our internal control over financial reporting. This material weakness consisted of inadequate staffing within the accounting operations of our company. The small number of employees who are responsible for accounting functions (more specifically, one) prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. There were no changes in our internal controls over financial reporting that occurred during  the year ended December 31, 2014 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




23




PART III
 
 ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.
 
 GREGORY SHELLER - Director, Chairman of the Board of Directors, Chief Executive Officer and President of the Company.   Age 56, is and for the past five years has been principally employed as a real estate consultant with Re/Max Alliance Group, a real estate firm headquartered in Sarasota, Florida.
 
 Mr. Sheller's education and work experience qualify him to serve as a director and officer of the Company.
 
 PETER WANNER - Director, Treasurer, and Chief Financial Officer.
 Mr. Wanner, age 62, is a qualified accountant certified in Canada and Ontario and for the past 23 years has served as a business consultant to start-up companies, as well as companies in refinancing and turnaround. He also has 31 years of experience in financing accounting, including 2 years in public accounting as well as international experience working in Mexico, United Kingdom and United States. Mr. Wanner has served as a director since May 4, 2004.  The term of office for any director is for a period of one year, or until the next annual meeting (or special meeting in lieu of an annual) of the shareholders.Mr. Wanner has served as a director and officer of the Company since May 4, 2004. :
 
 Mr. Wanner's education and accounting and work experience qualify him to serve as a director and officer of the Company.
 
 GIANNI CAPUTO - Director, Vice President and Secretary of the Company.
 
 For the past 8 years, Mr. Caputo, age 35, has served as Project and Kiosk Integration Manager of Aareas Interative, Inc. (www.aareas.com), a developer of technologies for real estate sales and marketing serving the building industry in the United States and Canada with annual revenues of approximately $4 million.  Mr. Caputo supervises 17 Aareas employees. Mr. Caputo has served as a director and officer of the Company since May 25, 2009.
 
 Mr. Caputo's technical skills and technology work experience qualify him to serve as a director and officer of the Company.
 
 Significant Employees.
 
 The Registrant has no employees.
 
 Involvement in certain legal proceedings.
 
 During the past ten years, none of the Registrant's directors and officers have been subject to any of the following events:
 
 1.  A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing.
 
 2.  A conviction in a criminal proceeding or being named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses).
 
 3.  Being the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
 
 i.Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
 
 ii.Engaging in any type of business practice; or
 
 iii.Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
 
 4.  Being the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;
 
 5.  Being found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated.




24




6.  Being found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated.
 
 7.  Being the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
 
 i. Any Federal or State securities or commodities law or regulation; or
 
 ii.Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
 
 iii.Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity.
 
 8.  the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
 
 The Board of Directors includes Greg Sheller, Peter Wanner, and Gianni Caputo.
 
 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, 2014, was a director, officer, beneficial owner of more than ten percent of any class of equity securities of the registrant that failed to file on a timely basis reports required by Section 16(a) during the most recent fiscal year or prior years.
 
 Code of Ethics
 
 As of the date of filing this report, the Registrant has not adopted a Code of Ethics, but has resolved to adopt a formal Code of Ethics prior to the end of the fiscal 2014 year.  The delay has resulted from management's exclusive concentration of their efforts on business development and the inability thereby to devote the time required to get a code of ethics drafted, approved, and posted on its website.
  ITEM 11.  EXECUTIVE COMPENSATION.
 
 Executive officers and directors of the Registrant do not currently receive and are not accruing any compensation:
 
 SUMMARY COMPENSATION TABLE
 
 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.




25




ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
 
 Name and principal position

Year

Salary


Bonus


Stock awards


Option awards


Nonequity in-centive plan compensation


Nonqualified deferred compensation earnings


All other compensation


Total($)


($)


($)


($)


($)


($)


($)


($)Gregory Sheller, President CEO

2014

$
0


$
0


$
0


$
0


$
0


$
0


$
0


$
02013

$
0


$
0


$
0


$
0


$
0


$
0


$
0


$
02012

$
0


$
0


$
0


$
0


$
0


$
0


$
0


$
02011

$
0


$
0


$
0


$
0


$
0


$
0


$
0


$
0Peter Wanner, Chief Financial Officer

2014

$
0


$
0


$
0


$
0


$
0


$
0


$
0


$
02013

$
0


$
0


$
0


$
0


$
0


$
0


$
0


$
02012

$
0


$
0


$
0


$
0


$
0


$
0


$
0


$
02011

$
0


$
0


$
0


$
0


$
0


$
0


$
0


$
0Gianni Caputo, Vice President

2014

$
0


$
0


$
0


$
0


$
0


$
0


$
0


$
02013

$
0


$
0


$
0


$
0


$
0


$
0


$
0


$
02012

$
0


$
0


$
0


$
0


$
0


$
0


$
0


$
02011

$
0


$
0


$
0


$
0


$
0


$
0


$
0


$
0
 The following table sets forth information regarding the beneficial ownership of shares of the Registrant's common stock as of December 31, 2013 (99,865,228 common shares issued and outstanding) by (i) all stockholders known to the Registrant to be beneficial owners of more than 5% of the outstanding common stock; and (ii) all officers and directors of the Registrant, individually and as a group (each person has sole voting power and sole dispositive power as to all of the shares shown as beneficially owned by them):
 
 Title of Class

Name and Address of Beneficial Owner

Amount and Nature of Beneficial Ownership(1)


Percent of ClassCommon

Lubi Investments, Inc.(2)


85,462,000



85.58
%1551 Second Street Sarasota, Florida 34236Common

Gregory Sheller


40,000



0.04
%1551 Second Street, Sarasota FL 34236Common

Gianni Caputo


296,400



0.30
%1551 Second Street Sarasota FL 34236Common

Peter Wanner, 44 Greystone Crescent, Georgetown, ON Canada L7G1 G9


104,320



0.10
%Common

Directors and officers as a group


85,902,720



86.02
%
 
 (1) None of these security holders has the right to acquire any amount of shares within sixty days from options, warrants, rights, conversion privilege, or similar obligations. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days after the date indicated in the table are deemed beneficially owned by the optionees.  Subject to any applicable community property laws, the persons or entities named in the table above have sole voting and investment power with respect to all shares indicated as beneficially owned by them.
 
 (2) Lubi Investments Inc. was incorporated and is beneficially owned and controlled by Mr. Frank Cavicchia, of the same address.




26




ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
 
 Except as otherwise disclosed elsewhere herein, during the last two fiscal years there have not been any transactions between the Registrant and any of its officers, directors, and five percent or greater shareholders.
 
 ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES
 
 (1)           Audit Fees:  Aggregate  fees billed for each of the last two (2) fiscal years for professional services rendered by the principal accountant for the audits of the annual financial statements and reviews of financial statements included on Form 10-K:
  2014:                     $5,000
 2013:                     $5,000
 2012:                     $5,000
 2011                      $10,250
 
 (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 audits or reviews of the financial statements and are not reported previously.
 
 2014:                      $-0-
 2013:                      $-0-
 2012:                      $-0-
 2011-                      $-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.
 
 2014:                      $-0-
 2013:                      $-0-
 2012:                      $-0-
 2011-                      $-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.
 
 2014:                      $-0-
 2013:                      $-0-
 2012:                      $-0-
 2011-                      $-0-
  (5)           Audit Committee Pre-Approval Procedures.  The Board of Directors has not, to date, appointed an Audit Committee.
 
 (6)           Not applicable.
 
 27




PART IV
 
 ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
  (a)
The following documents are filed as part of this report:
 
 (1)
 Consolidated Financial Statements
 Consolidated Balance Sheets as of December 31, 2014, 2013 2012 and 2011
 Consolidated Statements of Operations and Comprehensive Loss for the Years ended December 31, 2014, 2013 2012 and 2011
 Consolidated Statements of Stockholders’ Equity (Deficiency) for the years ended December 31, 2014, 2013 2012 and 2011
 Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 2012 and 2011
 Notes to Consolidated Financial Statements for the years ended December 31, 2014, 2013 2012 and 2011
 
 (b)
Exhibits included or incorporated by reference herein are set forth in the following Exhibit Index.  Exhibits referred to as "Previously Filed" are incorporated herein by reference.  Exhibit No.

Document

Location3.1

Articles of Incorporation

Previously Filed3.2

Bylaws

Previously Filed4.1

S-8 Registration Filed 02/25/2005

Previously Filed4.2

S-8 Registration Filed 04/11/2005

Previously Filed19

DEF 14-C Information Statement

Previously Filed21

Subsidiaries of the Registrant

Included31.1

Sect. 302 Certification

Included31.2

Sect. 302 Certification

Included32.1

Sect. 906 Certification

Included32.2

Sect. 906 Certification

Included






28




Signatures
 
 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act, the registrant has duly caused this annual report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 Registrant:
FIRST NATIONAL ENERGY CORPORATIONDate: November 12, 2015
By:
/s/ Gregory Sheller/s/ Gregory ShellerGregory ShellerChief Executive Officer
 
 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
  Date: November 12, 2015
By:
/s/ Gregory ShellerGregory ShellerChief Executive OfficerDate: November 12, 2015
By:
/s/ Peter WannerPeter WannerChief Financial Officer
 
 
 29




Comparative Quarterly Results
 
 Balance Sheets
  FIRST NATIONAL ENERGY CORPORATION
 (Formerly First National Power Corporation)
 Consolidated Balance Sheets
 As of December 31, 2014, 2013, 2012 and 2011
 (Amounts expressed in US Dollars)
  31-Mar-11


30-Jun-11


30-Sep-11


31-Dec-11


31-Mar-12


30-Jun-12


30-Sep-12


31-Dec-12$


$


$


$


$


$


$


$ASSETSCURRENT ASSETSCash


10,098



6,368



6,417



4,563



3,270



3,246



3,222



2,799Licenses for technology (Note 4)


200



200



200



200



200



200



200



20010,298



6,568



6,617



4,763



3,470



3,446



3,422



2,999LIABILITIESCURRENT LIABILITIESAccounts payable and accrued liabilities


15,669



30,770



18,776



23,125



81,847



36,800



35,800



48,000Loan payable to director






230



23,196



39,961



39,956



50,512



57,924



60,898Loan payable to Boreas Research Corporation


540,000



540,000



540,000



540,000



540,000



540,000



540,000



540,000555,669



571,000



581,972



603,086



661,803



627,312



633,724



648,898STOCKHOLDERS’ DEFICIENCYCapital Stock


99,765



99,765



99,765



99,765



99,765



99,765



99,765



99,765Additional paid-in Capital


103,329



103,329



103,329



103,329



103,329



103,329



103,329



103,329Deficit accumulated during the development stage


(748,539
)


(767,600
)


(778,516
)


(801,481
)


(821,529
)


(827,014
)


(833,450
)


(849,041
)Accumulated Other Comprehensive Loss


74



74



67



64



58



54



54



(10
)Total FNEC Stockholders' Deficit


(545,371
)


(564,432
)


(575,355
)


(598,323
)


(618,377
)


(623,866
)


(630,302
)


(645,957
)Non-controlling interest






























58(545,371
)


(564,432
)


(575,355
)


(598,323
)


(618,377
)


(623,866
)


(630,302
)


(645,899
)10,298



6,568



6,617



4,763



43,426



3,446



3,422



2,999






30


FIRST NATIONAL ENERGY CORPORATION
 (Formerly First National Power Corporation)
 Consolidated Balance Sheets
 As of December 31, 2014, 2013, 2012 and 2011
 (Amounts expressed in US Dollars)
  31-Mar-13


30-Jun-13


30-Sep-13


31-Dec-13


31-Mar-14


30-Jun-14


30-Sep-14


31-Dec-14$


$


$


$


$


$


$


$ASSETSCURRENT ASSETSCash


1,274



987



963



1,096



784



554



1,012



2,237Licenses for technology (Note 4)


200



200



200



200



200



200



200



2001,474



1,187



1,163



1,296



984



754



1,212



2,437LIABILITIESCURRENT LIABILITIESAccounts payable and accrued liabilities


44,500



44,500



44,500



44,500



44,500



44,500



44,500



59,500Loan payable to director


66,992



71,092



75,079



78,042



78,724



78,662



79,162



76,275Loan payable to Boreas Research Corporation


540,000



540,000



540,000



540,000



540,000



540,000



540,000



540,000651,492



655,592



659,579



662,542



663,224



663,162



663,662



675,775STOCKHOLDERS’ DEFICIENCYCapital Stock


99,765



99,765



99,765



99,765



99,765



99,765



99,765



99,765Additional paid-in Capital


103,329



103,329



103,329



103,329



103,329



103,329



103,329



103,329Deficit accumulated during the development stage


(853,170
)


(857,557
)


(861,568
)


(864,388
)


(865,392
)


(865,560
)


(865,602
)


(876,475
)Accumulated Other Comprehensive Loss














(10
)














(10
)Total FNEC Stockholders' Deficit


(650,076
)


(654,463
)


(658,474
)


(661,304
)


(662,298
)


(662,466
)


(662,508
)


(673,391
)Non-controlling interest


58



58



58



58



58



58



58



53(650,018
)


(654,405
)


(658,416
)


(661,246
)


(662,240
)


(662,408
)


(662,450
)


(673,338
)1,474



1,187



1,163



1,296



984



754



1,212



2,437
 31
 Comparative Quarterly Results
 
 Statement of Income and Expense
  FIRST NATIONAL ENERGY CORPORATION
 (Formerly First National Power Corporation)
 Consolidated Statements of Operations and Comprehensive Loss
 For the 12-month periods ended December 31, 2014, 2013, 2012 and 2011
 (Amounts expressed in US Dollars)
 31-Mar-11


30-Jun-11


30-Sep-11


31-Dec-11


31-Mar-12


30-Jun-12


30-Sep-12


31-Dec-12$


$


$


$


$


$


$


$REVENUES


-



-



-



-



-



-



-



-OPERATING EXPENSESGeneral and administrative expenses


7,290



5,489



10,923



36,540



19,755



5,489



6,467



15,855Loss on foreign exchange


-















299







(32
)


(267
)NET LOSS


7,290



5,489



10,923



36,540



20,054



5,489



6,435



15,588Net loss attributable to non-controlling interest


-



(4
)


(3
)


(3
)


(6
)


(4
)






4Net (gain) loss attributable to FNEC Stockholders


7,290



5,485



10,920



36,537



20,048



5,485



6,435



15,592Net loss (gain) per share, basic and diluted

$
0.00


$
0.00


$
0.00


$
0.00


$
0.00


$
0.00


$
0.00


$
0.00Weighted average common shares outstanding


99,746,598



99,746,598



99,865,228



99,865,228



99,865,228



99,865,228



99,865,228



99,865,228
  FIRST NATIONAL ENERGY CORPORATION
 (Formerly First National Power Corporation)
 Consolidated Statements of Operations and Comprehensive Loss
 For the 12-month periods ended December 31, 2014, 2013, 2012 and 2011
 (Amounts expressed in US Dollars)
  31-Mar-13


30-Jun-13


30-Sep-13


31-Dec-13


31-Mar-14


30-Jun-14


30-Sep-14


31-Dec-14$


$


$


$


$


$


$


$REVENUES


-



-



-



-



-



-



-



-OPERATING EXPENSESGeneral and administrative expenses


4,131



4,387



4,011



2,818



706



859



42



10,485Loss on foreign exchange


(1
)


-







1







15







(15
)NET LOSS


4,130



4,387



4,011



2,819



706



874



42



10,470Net loss attributable to non-controlling interest












-















(5
)Net (gain) loss attributable to FNEC Stockholders


4,130



4,387



4,011



2,819



706



874



42



10,465Net loss (gain) per share, basic and diluted

$
0.00


$
0.00


$
0.00


$
0.00


$
0.00


$
0.00


$
0.00


$
0.00Weighted average common shares outstanding


99,865,228



99,865,228



99,865,228



99,865,228



99,865,228



99,865,228



99,865,228



99,865,228
 32




Comparative Quarterly Statements
 Cash Flows




FIRST NATIONAL ENERGY CORPORATION


(Formerly First National Power Corporation)


Consolidated Statements of Cash Flows


For the 12-month periods ended December 31, 2014, 2013, 2012 and 2011


(Amounts expressed in US Dollars)


31-Mar-11


30-Jun-11


30-Sep-11


31-Dec-11


31-Mar-12


30-Jun-12


30-Sep-12


31-Dec-12$


$


$


$


$


$


$


$CASH FLOWS FROM OPERATING ACTIVITIESNet gain (loss)


(7,290
)


(19,061
)


(10,923
)


(22,968
)


(20,054
)


(5,489
)


(6,467
)


(15,556
)Adjustments for items not affecting cashIncrease (decrease) in accounts payable


2,400



15,101



(11,994
)


(4,222
)


18,766



(5,091
)


(969
)


10,828and accrued liabilitiesNet cash used in operating activities


(4,890
)


(3,960
)


(22,917
)


(27,190
)


(1,288
)


(10,580
)


(7,436
)


(4,728
)CASH FLOWS FROM FINANCING ACTIVITIESLoan from Director






230



22,966



16,765



(5
)


10,556



7,412



2,974Effects of foreign exchange rate changes






























(10
)Net cash provided by financing activities


-



230



22,966



16,765



(5
)


10,556



7,412



2,964NET INCREASE (DECREASE) IN CASH


(4,890
)


(3,730
)


49



(10,425
)


(1,293
)


(24
)


(24
)


(1,764
)Cash, beginning of period


14,988



10,098



6,368



14,988



4,563



3,270



3,246



4,563CASH, END OF PERIOD


10,098



6,368



6,417



4,563



3,270



3,246



3,222



2,799SUPPLEMENTARY DISCLOSUREINCOME TAXES PAID


-



-



-



-



-



-



-



-






33




FIRST NATIONAL ENERGY CORPORATION


(Formerly First National Power Corporation)


Consolidated Statements of Cash Flows


For the 12-month periods ended December 31, 2014, 2013, 2012 and 2011


(Amounts expressed in US Dollars)




31-Mar-13


30-Jun-13


30-Sep-13


31-Dec-13


31-Mar-14


30-Jun-14


30-Sep-14


31-Dec-14$


$


$


$


$


$


$


$CASH FLOWS FROM OPERATING ACTIVITIESNet gain (loss)


(4,130
)


(4,387
)


(4,011
)


(2,819
)


(706
)


(874
)


(42
)


(10,465
)Adjustments for items not affecting cashIncrease (decrease) in accounts payable


(3,489
)


-



-and accrued liabilities














-



-



-



-



15,000Net cash used in operating activities


(7,619
)


(4,387
)


(4,011
)


(2,819
)


(706
)


(874
)


(42
)


4,535CASH FLOWS FROM FINANCING ACTIVITIESLoan from Director


6,094



4,100



3,987



1,116



394



644



500



(3,394
)Effects of foreign exchange rate changes


-



-



-



-Net cash provided by financing activities


6,094



4,100



3,987



1,116



394



644



500



(3,394
)NET INCREASE (DECREASE) IN CASH


(1,525
)


(287
)


(24
)


(1,703
)


(312
)


(230
)


458



1,141Cash, beginning of period


2,799



1,274



987



2,799



1,096



784



554



1,096CASH, END OF PERIOD


1,274



987



963



1,096



784



554



1,012



2,237SUPPLEMENTARY DISCLOSUREINCOME TAXES PAID


-



-



-



-



-



-



-



-




34




First National Energy Corporation
  (Formerly First National Power Corporation)
  Consolidated Financial Statements
  December 31, 2012 and 2011
  (Amounts expressed in US Dollars)









Index
  Report of Independent Public Accounting Firm

1Consolidated Balance Sheets as at December 31, 2012 and 2011

2Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2012 and 2011

3Consolidated Statements of Stockholders’ Deficiency for the years ended December 31, 2012 and 2011

4Consolidated Statements of Cash Flows for the years ended December 31, 2012 and 2011

5Notes to Consolidated Financial Statements

6 – 17
 
  
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the Board of Directors and Stockholders of
 First National Energy Corporation
  We have audited the accompanying consolidated balance sheets of First National Energy Corporation (formerly First National Power Corporation) (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of operations and comprehensive loss, cash flows and stockholders’ deficiency for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits 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 control over financial reporting.  Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
  In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First National Energy Corporation (formerly First National Power Corporation) as at December 31, 2012 and 2011, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles in the United States of America.
  The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has not generated any revenues and expects to continue to incur significant expenses from operations. The Company’s future success is dependent upon its ability to raise sufficient capital, not only to cover its operating expenses, but also to continue to develop and be able to profitably market its products. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 2.The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty
  /s/ SCHWARTZ LEVITSKY FELDMAN LLPToronto, Ontario

Chartered AccountantsNovember 12, 2015

Licensed Public Accountants
   1
  FIRST NATIONAL ENERGY CORPORATION


(Formerly First National Power Corporation)
 Consolidated Balance Sheets
 As at December 31, 2012 and 2011
 (Amounts expressed in US Dollars)
 2012


2011$


$ASSETSCURRENTCash


2,799



4,563Total Current Assets


2,799



4,563LICENSES FOR TECHNOLOGY (Note 4)


200



200Total Assets


2,999



4,763LIABILITIESCURRENTAccounts payable and accrued liabilities


48,000



23,125Loan payable to director (Note 8)


60,898



39,961Loan payable to related party (Note 5)


540,000



540,000Total Liabilities


648,898



603,086Going Concern (Note 2)Related Party Transaction (Note 8)Commitment and Contingency (Note 10)STOCKHOLDERS’ DEFICIENCYCapital Stock ($0.001 par value, 300,000,000 common shares authorized, 99,865,228 issued and outstanding as of December 31, 2012 and 2011 (Note 6)


99,765



99,765Additional paid-in Capital


103,329



103,329Accumulated Deficit


(849,041
)


(801,481
)Accumulated Other Comprehensive Loss


(10
)


-Total Stockholders' Deficiency Attributable to FNEC Stockholders


(645,957
)


(598,387
)Non-controlling interest


58



64Total Stockholders' Deficiency


(645,899
)


(598,323
)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY


2,999



4,763




The accompanying notes are an integral part of these consolidated financial statements.
  2




FIRST NATIONAL ENERGY CORPORATION


Consolidated Statements of Operations and Comprehensive Loss


Years Ended December 31, 2012 and 2011


(Amounts expressed in US Dollars)




2012


2011$


$REVENUE


-



-EXPENSESGeneral and administrative expenses


47,566



60,242TOTAL OPERATING EXPENSES


47,566



60,242LOSS BEFORE INCOME TAXES


47,566



60,242Income taxes (Note 7)


-



-NET LOSS


47,566



60,242Net loss attributable to non-controlling interest


(6
)


(10
)Net loss attributable to FNEC stockholders


47,560



60,232Loss per share - basic and diluted

$
0.00


$
0.00Weighted average common shares outstanding during the year


99,865,228



99,865,228COMPREHENSIVE LOSS:NET LOSS INCLUDING NON-CONTROLLING INTEREST


47,566



60,242Foreign exchange transition adjustment for the year


10



-OTHER COMPREHENSIVE LOSS


47,576



60,242Comprehensive loss attributable to non-controlling interest


(6
)


-Comprehensive loss attributable to FNEC stockholders


47,570



60,242




The accompanying notes are an integral part of these consolidated financial statements.




3




FIRST NATIONAL ENERGY CORPORATION


(Formerly First National Power Corporation)


Consolidated Statements of Changes in Stockholders' Deficiency


For the years ended December 31, 2012 and 2011


(Amounts expressed in US Dollars)




Number of Common Shares


Common Shares Amount


Additional Paid-in Capital


Accumulated Deficit


Accumulated Other Comprehensive Loss


Non-controlling Interests


Total Stockholders' Deficiency$


$


$


$


$


$Balance as of December 31, 2010


99,865,228



99,765



103,329



(741,249
)


-



74



(538,081
)Net Loss for the Year














(60,232
)






(10
)


(60,242
)Unrealized foreign currency translation adjustment

























-Balance as of December 31, 2011


99,865,228



99,765



103,329



(801,481
)






64



(598,323
)Net Loss for the Year














(47,560
)






(6
)


(47,566
)Unrealized foreign currency translation adjustment

















(10
)






(10
)Balance as of December 31, 2012


99,865,228



99,765



103,329



(849,041
)


(10
)


58



(645,899
)




The accompanying notes are an integral part of these consolidated financial statements.
  4




FIRST NATIONAL ENERGY CORPORATION


(Formerly First National Power Corporation)


Consolidated Statements of Cash Flows


Years Ended December 31, 2012 and 2011


(Amounts expressed in US Dollars)




2012


2011$


$CASH FLOWS FROM OPERATING ACTIVITIESNet loss


(47,566
)


(60,242
)Increase in accounts payable and accrued liabilities


24,875



49,817Net cash used in operating activities


(22,691
)


(10,425
)CASH FLOWS FROM FINANCING ACTIVITIESLoan from director


20,937



-Net cash provided by financing activities


20,937



-Effects of foreign currency exchange rate changes


(10
)


-NET DECREASE IN CASH


(1,764
)


(10,425
)Cash, beginning of year


4,563



14,988CASH, END OF YEAR


2,799



4,563SUPPLEMENTAL INFORMATION:INCOME TAXES PAID


-



-INTEREST PAID


-



-




The accompanying notes are an integral part of these consolidated financial statements.




5




First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2012
 (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, under the name Capstone International Corporation.  On March 28, 2004, the Company changed its name to First National Power Corporation. On February 12, 2009, the Company relocated its charter to the State of Nevada and changed its name to First National Energy Corporation. As part of its reorganization, the Company increased its authorized capital to 300 million common shares and effected a 100 for 1 reverse stock split of its issued and outstanding shares of common stock. The accompanying consolidated financial statements reflect all share data based on the 100 for 1 reverse common stock split.
 
 The Company’s business purpose is the provision of wind-driven solutions for power generation. Current projects for the Company are the completion of power generation projects from supplemental wind generation technologies.
 
 b)
Purchase of Technology License
 
 On April 20, 2009, the Company entered into a preliminary letter of intent with Boreas Research Corporation (“Boreas”), a Florida corporation, pursuant to which the Company would acquire a territorial license to certain rights in alternative energy technology of Boreas, in exchange for a quantity of newly issued common shares of the Company. The letter of intent was superseded by a Technology License and Stock Purchase Agreement (the “Agreement”) between the Company and Boreas that was consummated on May 25, 2009 (the “Closing”), at which time the Company issued to the stockholders of Boreas 98,800,000 new restricted and unregistered common shares of the Company and agreed to pay certain future royalties to Boreas from net revenues realized by the Company from the technology license. The consideration issued in the transaction was determined as a result of arm’s-length negotiations between the parties.
 
 The preliminary letter of intent was reported by the Company on form 8-K to the Securities and Exchange Commission (“SEC”) on April 21, 2009, and the Agreement was annexed to an information statement on form 14-C filed with the SEC in preliminary and definitive forms on April 22, 2009 and May 4, 2009, respectively.  The definitive information statement was mailed to the Stockholders of the Company on May 4, 2009.
 
 The Company obtained written consent to the Agreement and the transaction from the holders of 55.82% of its issued and outstanding shares of common stock in lieu of a meeting of stockholders.
 
 On May 14, 2009, the Company and Boreas amended the Agreement by making and entering into a First Amendment of Technology License and Stock Purchase Agreement (the “Amendment”), pursuant to which (1) Boreas elected, as authorized by the Agreement, to cause the new restricted and unregistered common shares of the Company due to Boreas at the Closing to be issued to the stockholders of Boreas, and (2) the Company and Boreas agreed to reduce the number of new restricted and unregistered common shares of the Company to be issued at the closing of the transaction, from 98,915,000 shares to 98,800,000 shares.




6


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2012
 (Amounts expressed in US Dollars)


1.         GENERAL   (cont’d)
 
 b)
Purchase of Technology License   (cont’d)
 
 In exchange for the Company acquiring the technology license from Boreas at the Closing pursuant to the Agreement (as amended by the Amendment), the Stockholders of Boreas received an aggregate of 98,800,000 new restricted and unregistered common shares of the Company's common stock. Accordingly, the Boreas Stockholders now own 98.93% of the Company's 99,865,228 outstanding common shares. No finder’s fees were paid or consulting agreements entered into by the Company in connection with the transaction.
 
 Prior to the transaction, there were no material relationships between the Company and Boreas, between Boreas and the Company’s affiliates, directors or officers, or between any associates of Boreas and the Company’s officers or directors. All of the Company’s transaction liabilities were settled on or immediately following the Closing.
 
 Upon the Closing on May 25, 2009, the Company was no longer deemed to be a "shell company" as defined in Rule 12b-2 under the Securities Exchange Act of 1934 (the "Exchange Act"). Accordingly, the Company filed an amended current report on Form 8-K/A with the SEC on May 26, 2009, setting forth the information that would be required if the Company were filing a general form for registration of securities on Form 10 under the Exchange Act.
 
 On April 18, 2011, First National Energy Corporation (the “Company”) entered into a Novation Agreement (the "Novation") with all of the stockholders of Boreas revising the structure of the May 25, 2009 transaction by which the Company acquired a territorial license to certain rights in alternative energy technology of Boreas, in exchange for a quantity of newly issued common shares of the Company. The Novation amended the Technology License and Stock Purchase Agreement (the “Original Agreement”) to substitute the stockholders of Boreas as the licensor under the Original Agreement.
 
 c)
Further Purchase of Technology License
 
 On March 22, 2010, Pavana Power Corporation (“Pavana”), a Nevada corporation, the Company’s 99.9% owned subsidiary, acquired an exclusive, territorial, 25-year license for the Republic of India (“India”), from Boreas, 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” (earnings before interest, taxes, depreciation and amortization) from exploitation of the acquired license.
 The transaction between related corporations was valued at the amount of the monetary consideration that was provided to Boreas.
 
 The transaction between related corporations was valued at the amount of the monetary consideration that was provided to Boreas.
 
 7


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2012
 (Amounts expressed in US Dollars)




2.         GOING CONCERN
 
 The Company’s consolidated financial statements are prepared using accounting principles generally accepted in the United States of America and applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  However, the Company has not generated any revenues from its planned principal operations through December 31, 2012 and has recorded losses since inception, has negative working capital, has yet to achieve profitable operations and expects further losses in the development of its business.  There can be no assurance that the Company will have adequate capital resources to fund planned operations or that any additional funds will be available to the Company when needed, or if available, will be available on favorable terms in the amounts required by the Company. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from this uncertainty.
 
 Management has plans to raise cash through debt offerings once the sales of the technologies begin. The personnel, facilities and equipment required for successfully completing the business model have been identified but until the resources are available, have not been acquired or engaged. In the period prior to the onset of operations, the Company will undertake to raise further cash through further capital offerings. There is no assurance that the Company will be successful in raising additional capital.
 
 3.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 a)
Basis of Consolidation
 
 The consolidated financial statements include the accounts of First National Energy Corporation, its wholly-owned subsidiary First National Energy (Canada) Corporation and its 99.99% owned subsidiary Pavana 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. As the precise determination of assets and liabilities, and revenues and expenses, depends on future events, the preparation of financial statements for any period necessarily involves the use of estimates. Actual amounts may differ from these estimates. 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 Company’s financial instruments consist of cash, accounts payable and accrued liabilities, and loans payable. Unless otherwise noted, it is of management’s opinion that the Company is not exposed to significant interest, or credit risks arising from these financial instruments. The fair values of these financial instruments approximate their carrying values due to the relatively short period to maturity for these instruments.
 
 The Company’s financial assets and liabilities are generally classified and measured as follows:
 
 8


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2012
 (Amounts expressed in US Dollars)




3.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   (cont’d)
 
 c)         Financial Instruments (cont’d)
 
 Assets / Liabilities

Classification

MeasurementCash

Held for trading

Fair ValueAccounts Payable and Accrued Liabilities

Other liability

Amortized CostLoan payable to Director

Other liability

Amortized CostLoan Payable to Boreas Research

Other liability

Amortized cost
 
 The Company follows ASC 820-10, “Fair Value Measurements and Disclosures” (ASC 820-10), which among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:
 
 ● Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
 
 Fair valued assets that are generally included in this category are cash and cash equivalents comprised of money market funds, restricted cash and short-term investments.
 
 ● Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
 
 ● Level 3—Unobservable 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, 2012 and 2011, the only assets measured at fair value using level 1 of the three fair value hierarchy tiers described above was cash of $2,799 ($4,563 – 2011), and accounts payable, loan payable to director, and loan payable to related party are measured using amortized cost at level 2. The Company did not have any fair value assets or liabilities classified as level 3.
  9


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2012
 (Amounts expressed in US Dollars)




3.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   (cont’d)
 
 c)         Financial Instruments (cont’d)
 
 2012


2011Carrying Value


Fair Value


Carrying Value


Fair ValueCash


2,799



2,799



4,563



4,563Accounts payable and accrued liabilities


48,000



48,000



23,125



23,125Loan payable to director


60,898



60,898



39,961



39,961Loan payable to related party


540,000



540,000



540,000



540,000
  Foreign exchange risk:
 
 The Company’s subsidiary conducts its opening activities in Canadian dollars. The Company is therefore subject to gains or losses due to fluctuations in Canadian currency relative to the US dollar. The Company has no exposure to this given its limited activity and assets through the year.
 
 Liquidity risk:
 
 The Company monitors its liquidity position regularly to assess whether it has the funds necessary to fulfill planned commitments on its alternative energy technology or viable options are available to fund such commitments from new equity issuance or alternative sources such as debt financing. However, as a development stage company and without significant internally generated cash flow, there are inherent liquidity risks, including the possibility that additional financing may not be available to the Company, or that actual development expenditures may exceed those planned. The current uncertainty in global markets could have an impact on the Company’s future ability to access capital on terms that are acceptable to the Company. The company has so far been able to raise the required financing to meet its obligations on time. The Company has no exposure to this given its limited activity through the year.
 
 d)
Income Taxes
 
 The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets likely. The Company did not incur any material impact to its financial condition or results of operations due to the financial statement recognition and measurement of a tax position tax or expected to be taken in a tax return.
 
 Deferred income taxes are established for all temporary differences between the book and the tax basis of assets and liabilities. In addition, deferred tax balances must reflect tax rates expected to be in effect in years in which the temporary differences reverse. Canadian taxes are calculated at rates expected to be in effect in Canada. U.S. deferred tax liabilities are not recognized on profits that are expected to be permanently reinvested in Canada and thus not considered available for distribution to the parent company. It is not practicable to




10


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2012
 (Amounts expressed in US Dollars)


3.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   (cont’d)
 
 d)
Income Taxes (cont’d)
 
 determine our unrecognized deferred tax liability for temporary differences related to investments in foreign subsidiaries that are essentially permanent in duration. Net operating loss carry-forwards and other deferred tax assets are reviewed annually for recoverability, and, if necessary, are recorded net of a valuation allowance. Note 7 contains additional discussion regarding income taxes.
 
 e)
Comprehensive loss
 
 Comprehensive loss includes all changes in equity (net assets) during a period from non-owner sources. Examples of items to be included in comprehensive loss, which are excluded from net loss, include foreign currency translation adjustments and unrealized gains and losses on available-for-sale securities.
 
 f)
Intangible Assets
 
 Intangible assets include the technology licenses which are amortized over the estimated useful life of 10 years on a straight line basis. However, since these licenses were written to nominal value, no amortization was recognized for accounting purposes.
 
 g)
Impairment of Long-Lived Assets
 
 Long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset group over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value.
 
 h)
Loss per share
 
 Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the year. Diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive). As of December 31, 2012, there were no common stock equivalents.
 
 i)
Stock-Based Compensation
 
 The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees using the estimated fair market value of the consideration received or estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services. As of December




11


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2012
 (Amounts expressed in US Dollars)




3.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   (cont’d)
 
 i)
Stock-Based Compensation (cont’d)
 
 31, 2012, there was $nil of unrecognized expense related to stock-based compensation, and stock based compensation expense relating to all employees and non-employees were $nil for the years ended December 31, 2012 and 2011.
 
 j)
Foreign Currency
 
 The parent Company maintains its books and records in U.S. dollars which is its functional and reporting currency. One of the Company’s operating subsidiary is a foreign private company and maintains its books in Canadian dollars (the functional currency). The subsidiary’s financial statements are converted to US dollars for consolidation purposes. The translation method used is the current rate method, where the functional currency is the foreign currency. Under the current rate method all assets and liabilities are translated at the current rate, stockholders’ equity are translated at historical rates and revenues and expenses are translated at average rates for the year.
 
 Due to the fact that items in the financial statements are being translated at different rates according to their nature, a translation adjustment is created. This translation adjustment has been included in Other Comprehensive Loss.
 
 k)
Recent Accounting Pronouncements
 
 In June 2014, the FASB issued ASU 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements” (“ASU 2014-10”), which eliminates the distinction of a development stage entity and certain related disclosure requirements, including the elimination of inception-to-date information on the statements of operations, cash flows and changes in stockholders’ equity. The amendments in ASU 2014-10 are effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods; however early adoption is permitted. The Company evaluated and adopted ASU 2014-10 early for the current period presented.
 
 In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”), which includes amendments that change the requirements for reporting discontinued operations and require additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results. Additionally, ASU 2014-08 requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The new standard is effective for annual reporting periods beginning on or after December 15, 2014. Early application is permitted. The Company is evaluating the effect that ASU 2014-08 will have on its consolidated financial statements and related disclosures.
 
 In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-




12


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2012
 (Amounts expressed in US Dollars)




3.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   (cont’d)
 
 k)         Recent Accounting Pronouncements (cont’d)
 
 09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for annual reporting periods beginning on or after December 15, 2016. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures.
 
 In August 2014, the FASB issued ASU 2014-15 Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year after the date the financial statements are issued. An entity must provide certain disclosures if “conditions or events raise substantial doubt about the entity’s ability to continue as a going concern.” ASU 2014-15 applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company is currently assessing the impact of this guidance.
 
 On January 9, 2015, FASB issued ASU 2015-01, Income Statement- Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. The ASU eliminates the concept of extraordinary items and the uncertainty in determining when an item is both unusual in nature and infrequent in occurrence. Presently, an event or transaction is presumed to be ordinary activity unless evidence supports the transaction as unusual in nature and infrequent in occurrence. If an event or transaction is determined to be unusual and infrequent, it is deemed to be extraordinary, and is required to be segregated from the results of ordinary operations on the face of the income statement, net of tax, after income from continuing operations, along with other financial statement disclosures. ASU 2015-01 eliminates the concept of extraordinary items from the income statement presentation. Eliminating this concept removes the uncertainty in determining when a transaction is both unusual in nature and infrequent in occurrence. However, the presentation and disclosure guidance for items that are unusual in nature OR occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. This ASU aligns US GAAP with IAS 1, which prohibits presentation and disclosure of extraordinary items. This ASU is effective for years beginning after December 15, 2015, with early adoption permitted. The Company is currently assessing the impact of this guidance.
 
 l)
Non-controlling Interest
 
 Non-controlling interests in the Company’s subsidiaries are recorded in accordance with the provisions of ASC 810 and are reported as a component of equity, separate from the parent’s equity. Purchase or sale of equity interests that do not result in a change of control are accounted for as equity transactions. Results of operations attributable to the non-controlling interest are included in our consolidated results of operations and, upon loss of control, the interest sold, as well as interest retained, if any, will be reported at fair value with any gain or loss recognized in earnings.




13


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2012
 (Amounts expressed in US Dollars)




4.      LICENSES FOR TECHNOLOGY
 
 2012

Cost


Accumulated Amortization


Net Book Value


2011

Net Book ValueNorth American Technology License

$
100


$
-


$
100


$
100Indian Technology License


100



-



100



100$
200


$
-


$
200


$
200
 5.      LOAN PAYABLE TO RELATED PARTY
 
 On March 22, 2010, the Company acquired an exclusive territorial 25 year Supplemental Wind Energy Generator (“SWEG”) Technology license for the Republic of India (“India”), from Boreas. The stockholders of Boreas hold a controlling interest in the Company through their controlling interest in First National Energy Corporation. The technology of Boreas maximizes the energy productivity of existing wind turbines by capturing energy that flows through and underneath existing wind turbine systems.  The consideration due from the Company to Boreas for the license was a deferred cash payment of $600,000, and a future royalty equal to 5% of the subsidiary’s “EBITDA” (earnings) from exploitation of the acquired license.
 
 On November 8, 2010, the subsidiary paid Boreas $60,000 as a payment due under the India technology license agreement, leaving a balance of cash consideration due of $540,000. The remaining debt is non-interest bearing and is due on demand.
 
 6.      CAPITAL STOCK
 
 a)      Authorized
 
 300,000,000 Common shares, $0.001 per value
 
 b)      Issued
 
 99,865,228 Common shares (2011: 99,865,228 Common shares)
 
 7.      INCOME TAXES
 
 The reconciliation of income taxes at statutory income tax rates to the income tax expense is as follows. The losses incurred by the wholly-owned Canadian subsidiary are insignificant, hence no separate disclosure has been made:




14


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2012
 (Amounts expressed in US Dollars)


7.      INCOME TAXES (cont’d)
 
 2012


2011Loss before income taxes

$
(47,566
)

$
(56,242
)Applicable statutory tax rate


34
%


34
%Income tax recovery at statutory rate


(16,172
)


(19,122
)Timing difference


(43,420
)


(43,420
)Tax benefit not recognized


59,592



62,542Income taxes - current and deferred

$
-


$
-
 Total income tax (expense) benefit differed from the amounts computed by applying the U.S. Federal statutory tax rates and estimated state rates to pre-tax income for the years as follows:
 
 2012


2011Statutory rate - benefit


34
%


34
%State taxes, net of federal benefit


-



-Effective rate - benefit


34
%


34
%
 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
  2012


2011Deferred tax asset:Operating losses available to offset future income-taxes

$
429,184


$
369,761Tax basis of license in excess of accounting basis


493,344



536,765922,528



906,526Valuation Allowance


(922,528
)


(906,526
)Net deferred tax asset

$
-


$
-
 Realization of the deferred tax asset also depend on the Company’s ability to generate taxable income within the carryforward period. Due to uncertainty related to the Company’s ability to generate taxable income sufficient to realize all of its deferred tax assets, the Company has recorded 100% valuation allowances.
 
 As at December 31, 2012, the company has non-capital losses of $1,262,305 ($1,087,532 – 2011) for tax purposes which can be applied against future taxable income. These losses expire as follows:
  2032


175,2732031


183,9492030


187,1502029


131,6022028


78,1452027


30,7602026


32,9122025


208,8872024


233,627Total

$
1,262,305




15


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2012
 (Amounts expressed in US Dollars)


8.      RELATED PARTY TRANSACTIONS
 
 Transactions with related parties are incurred in the normal course of business and are measured at the exchange amount which is the amount of consideration established by and agreed to by the related parties.
 
 In 2010, the Company’s owned subsidiary Pavana Power Corporation, purchased the Indian license to the SWEG technology from Boreas, who is related by virtue of common control. (see Note  1 (c)).
 
 A director of the Company has advanced monies to the Company to pay certain expenses. The advances have no interest rate and is due on demand. The amount owing to the director was $60,898 ($39,961 in 2011).
 
 9.      SEGMENT DISCLOSURE
 
 The Company, after reviewing its reporting systems, has determined that it has one reportable segment and geographic segment. The Company’s operations are all related to the d provision of wind-driven solutions for power generation. All assets of the business are located the United States.
 
 10.       COMMITMENT AND CONTINGENCY
 
 Pursuant to Note 1 (c), under the Technology License purchased by Pavana, the Company has a commitment for royalties at the rate of 5% of Pavana’s EBITDA derived using this technology.
 
 11.       CAPITAL MANAGEMENT
 
 The Company’s capital management objective is to secure the ability to continue as a going concern and to optimize the cost of capital in order to enhance value to shareholders. As part of this objective the Company seeks to maintain access to loan and capital markets at all times. The Board of Directors reviews the capital structure of the Group on a regular basis.
 
 Capital structure and debt capacity are taken into account when deciding new investments. Practical tools to manage capital include application of dividend policy, share buybacks and share issuances. Debt capital is managed considering the requirement to secure liquidity and the capability to refinance maturing debt.
 The Group’s internal capital structure is reviewed on a regular basis with an aim to optimize the structure e.g. by applying internal dividends and equity adjustments. Net investment in foreign entities is monitored and the Company has the intent to hedge related translation risk.
 
 On December 31, 2012, the Company had no interest-bearing debt.






16




First National Energy Corporation
  (Formerly First National Power Corporation)
  Consolidated Financial Statements
  December 31, 2013 and 2012
  (Amounts expressed in US Dollars)









Index
  Report of Independent Public Accounting Firm

1Consolidated Balance Sheets as at December 31, 2013 and 2012

2Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2013 and 2012

3Consolidated Statements of Stockholders’ Deficiency for the years ended December 31, 2013 and 2012

4Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012

5Notes to Consolidated Financial Statements

6 – 16




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the Board of Directors and Stockholders of
 First National Energy Corporation
  We have audited the accompanying consolidated balance sheets of First National Energy Corporation (formerly First National Power Corporation) (the “Company”) as of December 31, 2013 and 2012, and the related consolidated statements of operations and comprehensive loss, cash flows and stockholders’ deficiency for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits 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 control over financial reporting.  Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
  In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First National Energy Corporation (formerly First National Power Corporation) as at December 31, 2013 and 2012, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles in the United States of America.
  The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has not generated any revenues and expects to continue to incur significant expenses from operations. The Company’s future success is dependent upon its ability to raise sufficient capital, not only to cover its operating expenses, but also to continue to develop and be able to profitably market its products. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.


/s/ SCHWARTZ LEVITSKY FELDMAN LLPToronto, Ontario

Chartered AccountantsNovember 12, 2015

Licensed Public Accountants






1




FIRST NATIONAL ENERGY CORPORATION


(Formerly First National Power Corporation)


Consolidated Balance Sheets


As at December 31, 2013 and 2012


(Amounts expressed in US Dollars)




2013


2012$


$ASSETSCURRENTCash


1,096



2,799Total Current Assets


1,096



2,799LICENSES FOR TECHNOLOGY (Note 4)


200



200Total Assets


1,296



2,999LIABILITIESCURRENTAccounts payable and accrued liabilities


44,500



48,000Loan payable to director (Note 8)


78,042



60,898Loan payable to related party (Note 5)


540,000



540,000Total Liabilities


662,542



648,898Going Concern (Note 2)Related Party Transaction (Note 8)Commitment and Contingency (Note 10)STOCKHOLDERS’ DEFICIENCYCapital Stock ($0.001 par value, 300,000,000 common shares authorized, 99,865,228 issued and outstanding as of December 31, 2013 and 2012 (Note 6)


99,765



99,765Additional paid-in Capital


103,329



103,329Accumulated Deficit


(864,388
)


(849,041
)Accumulated Other Comprehensive Loss


(10
)


(10
)Total Stockholders' Deficiency Attributable to FNEC Stockholders


(661,304
)


(645,957
)Non-controlling interest


58



58Total Stockholders' Deficiency


(661,246
)


(645,899
)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY


1,296



2,999




The accompanying notes are an integral part of these consolidated financial statements.




2




FIRST NATIONAL ENERGY CORPORATION


(Formerly First National Power Corporation)


Consolidated Statements of Operations and Comprehensive Loss


Years Ended December 31, 2013 and 2012


(Amounts expressed in US Dollars)




2013


2012$


$REVENUE


-



-EXPENSESGeneral and administrative expenses


15,347



47,566TOTAL OPERATING EXPENSES


15,347



47,566LOSS BEFORE INCOME TAXES


15,347



47,566Income taxes (Note 7)


-



-NET LOSS


15,347



47,566Net loss attributable to non-controlling interest


-



(6
)Net loss attributable to FNEC stockholders


15,347



47,560Loss per share - basic and diluted

$
0.00


$
0.00Weighted average common shares outstanding during the year


99,865,228



99,865,228COMPREHENSIVE LOSS:NET LOSS INCLUDING NON-CONTROLLING INTEREST


15,347



47,566Foreign exchange transition adjustment for the year


-



10OTHER COMPREHENSIVE LOSS


15,347



47,576Comprehensive loss attributable to non-controlling interest


-



(6
)Comprehensive loss attributable to FNEC stockholders


15,347



47,570




The accompanying notes are an integral part of these consolidated financial statements.




3




FIRST NATIONAL ENERGY CORPORATION


(Formerly First National Power Corporation)


Consolidated Statements of Changes in Stockholders’ Deficiency


For the years ended December 31, 2013 and 2012


(Amounts expressed in US Dollars)




Number of Common Shares


Common Shares amount


Additional Paid-in Capital


Accumulated Deficit


Accumulated Other Comprehensive Loss


Non-controlling Interests


Total Stockholders' Deficiency$


$


$


$


$


$Balance as of December 31, 2011


99,865,228



99,765



103,329



(801,481
)


-



64



(598,323
)Net Loss for the Year














(47,560
)






(6
)


(47,566
)Unrealized foreign currency translation


















(10
)






(10
)Balance as of December 31, 2012


99,865,228



99,765



103,329



(849,041
)


(10
)


58



(645,899
)Net Loss for the Year














(15,347
)










(15,347
)Balance as of December 31, 2013


99,865,228



99,765



103,329



(864,388
)


(10
)


58



(661,246
)






The accompanying notes are an integral part of these consolidated financial statements.




4




FIRST NATIONAL ENERGY CORPORATION


(Formerly First National Power Corporation)


Consolidated Statements of Cash Flows


Years Ended December 31, 2013 and 2012


(Amounts expressed in US Dollars)




2013


2012$


$CASH FLOWS FROM OPERATING ACTIVITIESNet loss


(15,347
)


(47,566
)Increase (decrease) in accounts payable and accrued liabilities


(3,500
)


24,875Net cash used in operating activities


(18,847
)


(22,691
)CASH FLOWS FROM FINANCING ACTIVITIESLoan from director


17,144



20,937Net cash provided by financing activities


17,144



20,937Effects from foreign currency exchange rate changes


-



(10
)NET DECREASE IN CASH


(1,703
)


(1,764
)Cash, beginning of year


2,799



4,563CASH, END OF YEAR


1,096



2,799SUPPLEMENTARY  DISCLOSUREINCOME TAXES PAID


-



-INTEREST PAID


-



-




The accompanying notes are an integral part of these consolidated financial statements.






5




First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2013
 (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, under the name Capstone International Corporation.  On March 28, 2004, the Company changed its name to First National Power Corporation. On February 12, 2009, the Company relocated its charter to the State of Nevada and changed its name to First National Energy Corporation. As part of its reorganization, the Company increased its authorized capital to 300 million common shares and effected a 100 for 1 reverse stock split of its issued and outstanding shares of common stock. The accompanying consolidated financial statements reflect all share data based on the 100 for 1 reverse common stock split.
 
 The Company’s business purpose is the provision of wind-driven solutions for power generation. Current projects for the Company are the completion of power generation projects from supplemental wind generation technologies.
 
 b)
Purchase of Technology License
 
 On April 20, 2009, the Company entered into a preliminary letter of intent with Boreas Research Corporation (“Boreas”), a Florida corporation, pursuant to which the Company would acquire a territorial license to certain rights in alternative energy technology of Boreas, in exchange for a quantity of newly issued common shares of the Company. The letter of intent was superseded by a Technology License and Stock Purchase Agreement (the “Agreement”) between the Company and Boreas that was consummated on May 25, 2009 (the “Closing”), at which time the Company issued to the stockholders of Boreas 98,800,000 new restricted and unregistered common shares of the Company and agreed to pay certain future royalties to Boreas from net revenues realized by the Company from the technology license. The consideration issued in the transaction was determined as a result of arm’s-length negotiations between the parties.
 
 The preliminary letter of intent was reported by the Company on form 8-K to the Securities and Exchange Commission (“SEC”) on April 21, 2009, and the Agreement was annexed to an information statement on form 14-C filed with the SEC in preliminary and definitive forms on April 22, 2009 and May 4, 2009, respectively.  The definitive information statement was mailed to the Stockholders of the Company on May 4, 2009.
 
 The Company obtained written consent to the Agreement and the transaction from the holders of 55.82% of its issued and outstanding shares of common stock in lieu of a meeting of stockholders.
 
 On May 14, 2009, the Company and Boreas amended the Agreement by making and entering into a First Amendment of Technology License and Stock Purchase Agreement (the “Amendment”), pursuant to which (1) Boreas elected, as authorized by the Agreement, to cause the new restricted and unregistered common shares of the Company due to Boreas at the Closing to be issued to the stockholders of Boreas, and (2) the Company and Boreas agreed to reduce the number of new restricted and unregistered common shares of the Company to be issued at the closing of the transaction, from 98,915,000 shares to 98,800,000 shares.




6


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2013
 (Amounts expressed in US Dollars)


1.         GENERAL   (cont’d)
 
 b)
Purchase of Technology License   (cont’d)
 
 In exchange for the Company acquiring the technology license from Boreas at the Closing pursuant to the Agreement (as amended by the Amendment), the Stockholders of Boreas received an aggregate of 98,800,000 new restricted and unregistered common shares of the Company's common stock. Accordingly, the Boreas Stockholders now own 98.93% of the Company's 99,865,228 outstanding common shares. No finder’s fees were paid or consulting agreements entered into by the Company in connection with the transaction.
 
 Prior to the transaction, there were no material relationships between the Company and Boreas, between Boreas and the Company’s affiliates, directors or officers, or between any associates of Boreas and the Company’s officers or directors. All of the Company’s transaction liabilities were settled on or immediately following the Closing.
 
 Upon the Closing on May 25, 2009, the Company was no longer deemed to be a "shell company" as defined in Rule 12b-2 under the Securities Exchange Act of 1934 (the "Exchange Act"). Accordingly, the Company filed an amended current report on Form 8-K/A with the SEC on May 26, 2009, setting forth the information that would be required if the Company were filing a general form for registration of securities on Form 10 under the Exchange Act.
 
 On April 18, 2011, First National Energy Corporation (the “Company”) entered into a Novation Agreement (the "Novation") with all of the stockholders of Boreas revising the structure of the May 25, 2009 transaction by which the Company acquired a territorial license to certain rights in alternative energy technology of Boreas, in exchange for a quantity of newly issued common shares of the Company. The Novation amended the Technology License and Stock Purchase Agreement (the “Original Agreement”) to substitute the stockholders of Boreas as the licensor under the Original Agreement.
 
 c)
Further Purchase of Technology License
 
 On March 22, 2010, Pavana Power Corporation (“Pavana”), a Nevada corporation, the Company’s 99.9% owned subsidiary, acquired an exclusive, territorial, 25-year license for the Republic of India (“India”), from Boreas, 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” (earnings before interest, taxes, depreciation and amortization) from exploitation of the acquired license.
 
 The transaction between related corporations was valued at the amount of the monetary consideration that was provided to Boreas.
 
 2.         GOING CONCERN
 
 The Company’s consolidated financial statements are prepared using accounting principles generally accepted in the United States of America and applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  However, the Company has not generated any




7


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2013
 (Amounts expressed in US Dollars)




2.         GOING CONCERN (cont’d)
 
 revenues from its planned principal operations through December 31, 2013 and has recorded losses since inception, has negative working capital, has yet to achieve profitable operations and expects further losses in the development of its business.  There can be no assurance that the Company will have adequate capital resources to fund planned operations or that any additional funds will be available to the Company when needed, or if available, will be available on favorable terms in the amounts required by the Company. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 Management has plans to raise cash through debt offerings once the sales of the technologies begin. The personnel, facilities and equipment required for successfully completing the business model have been identified but until the resources are available, have not been acquired or engaged. In the period prior to the onset of operations, the Company will undertake to raise further cash through further capital offerings. There is no assurance that the Company will be successful in raising additional capital.
 
 3.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 a)
Basis of Consolidation
 
 The consolidated financial statements include the accounts of First National Energy Corporation, its wholly-owned subsidiary First National Energy (Canada) Corporation and its 99.9% owned subsidiary Pavana 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. As the precise determination of assets and liabilities, and revenues and expenses, depends on future events, the preparation of financial statements for any period necessarily involves the use of estimates. Actual amounts may differ from these estimates. 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 Company’s financial instruments consist of cash, accounts payable and accrued liabilities, and loans payable. Unless otherwise noted, it is of management’s opinion that the Company is not exposed to significant interest, or credit risks arising from these financial instruments. The fair values of these financial instruments approximate their carrying values due to the relatively short period to maturity for these instruments.
 
 The Company’s financial assets and liabilities are generally classified and measured as follows:




8


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2013
 (Amounts expressed in US Dollars)




3.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   (cont’d)
 
 c)         Financial Instruments (cont’d)
 
 Assets / Liabilities

Classification

MeasurementCash

Held for trading

Fair ValueAccounts Payable and Accrued Liabilities

Other liability

Amortized CostLoan payable to Director

Other liability

Amortized CostLoan Payable to Related Party

Other liability

Amortized cost
 
 The Company follows ASC 820-10, “Fair Value Measurements and Disclosures” (ASC 820-10), which among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:
 
 ● Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
 
 Fair valued assets that are generally included in this category are cash and cash equivalents comprised of money market funds, restricted cash and short-term investments.
 
 ● Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
 
 ● Level 3—Unobservable 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, 2013 and 2012, the only assets measured at fair value using level 1 of the three fair value hierarchy tiers described above was cash of $1,096 ($2,799 – 2012), and accounts payable, loan payable to director, and loan payable to related party are measured using amortized cost at level 2. The Company did not have any fair value assets or liabilities classified as level 3.




2013


2012Carrying Value


Fair Value


Carrying Value


Fair ValueCash


1,096



1,096



2,799



2,799Accounts payable and accrued liabilities


44,500



44,500



48,000



48,000Loan payable to director


78,042



78,042



60,898



60,898Loan payable to related party


540,000



540,000



540,000



540,000




9


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2013
 (Amounts expressed in US Dollars)




3.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   (cont’d)
 
 c)         Financial Instruments (cont’d)
 
 Foreign exchange risk:
 
 The Company’s subsidiary conducts its opening activities in Canadian dollars. The Company is therefore subject to gains or losses due to fluctuations in Canadian currency relative to the US dollar. The Company has no exposure to this given its limited activity and assets through the year.
 
 Liquidity risk:
 
 The Company monitors its liquidity position regularly to assess whether it has the funds necessary to fulfill planned commitments on its alternative energy technology or viable options are available to fund such commitments from new equity issuance or alternative sources such as debt financing. However, as a development stage company and without significant internally generated cash flow, there are inherent liquidity risks, including the possibility that additional financing may not be available to the Company, or that actual development expenditures may exceed those planned. The current uncertainty in global markets could have an impact on the Company’s future ability to access capital on terms that are acceptable to the Company. The company has so far been able to raise the required financing to meet its obligations on time. The Company has no exposure to this given its limited activity through the year.
 
 d)
Income Taxes
 
 The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is
 recognized in income in the period that includes the enactment date. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets likely. The Company  did not incur any material impact to its financial condition or results of operations due to the financial statement recognition and measurement of a tax position tax or expected to be taken in a tax return.
 
 Deferred income taxes are established for all temporary differences between the book and the tax basis of assets and liabilities. In addition, deferred tax balances must reflect tax rates expected to be in effect in years in which the temporary differences reverse. Canadian taxes are calculated at rates expected to be in effect in Canada. U.S. deferred tax liabilities are not recognized on profits that are expected to be permanently reinvested in Canada and thus not considered available for distribution to the parent company. It is not practicable to determine our unrecognized deferred tax liability for temporary differences related to investments in foreign subsidiaries that are essentially permanent in duration. Net operating loss carry-forwards and other deferred tax assets are reviewed annually for recoverability, and, if necessary, are recorded net of a valuation allowance. Note 7 contains additional discussion regarding income taxes.




10


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2013
 (Amounts expressed in US Dollars)




3.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   (cont’d)
 
 e)
Comprehensive loss
 
 Comprehensive loss includes all changes in equity (net assets) during a period from non-owner sources. Examples of items to be included in comprehensive loss, which are excluded from net loss, include foreign currency translation adjustments and unrealized gains and losses on available-for-sale securities.
 
 f)
Intangible Assets
 
 Intangible assets include the technology licenses which are amortized over the estimated useful life of 10 years on a straight line basis. However, since these licenses were written to nominal value, no amortization was recognized for accounting purposes.
 
 g)
Impairment of Long-Lived Assets
 
 Long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset group over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value.
 
 h)
Loss per share
 
 Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the year. Diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive). As of December 31, 2013, there were no common stock equivalents.
  i)
Stock-Based Compensation
 
 The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees using the estimated fair market value of the consideration received or estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services. As of December 31, 2013, there was $nil of unrecognized expense related to stock-based compensation, and stock based compensation expense relating to all employees and non-employees were $nil for the years ended December 31, 2013 and 2012.
 
 j)
Foreign Currency
 
 The parent Company maintains its books and records in U.S. dollars which is its functional and reporting currency. One of the Company’s operating subsidiary is a foreign private company and maintains its books in




11


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2013
 (Amounts expressed in US Dollars)




3.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   (cont’d)
 
 h)
Foreign Currency (cont’d)
 
 Canadian dollars (the functional currency). The subsidiary’s financial statements are converted to US dollars for consolidation purposes. The translation method used is the current rate method, where the functional
 currency is the foreign currency. Under the current rate method all assets and liabilities are translated at the current rate, stockholders’ equity are translated at historical rates and revenues and expenses are translated at average rates for the year.
 
 Due to the fact that items in the financial statements are being translated at different rates according to their nature, a translation adjustment is created. This translation adjustment has been included in Other Comprehensive Loss.
 
 k)
Recent Accounting Pronouncements
 
 In June 2014, the FASB issued ASU 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements” (“ASU 2014-10”), which eliminates the distinction of a development stage entity and certain related disclosure requirements, including the elimination of inception-to-date information on the statements of operations, cash flows and changes in stockholders’ equity. The amendments in ASU 2014-10 are effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods; however early adoption is permitted. The Company evaluated and adopted ASU 2014-10 early for the current period presented.
 
 In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”), which includes amendments that change the requirements for reporting discontinued operations and require additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results. Additionally, ASU 2014-08 requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The new standard is effective for annual reporting periods beginning on or after December 15, 2014. Early application is permitted. The Company is evaluating the effect that ASU 2014-08 will have on its consolidated financial statements and related disclosures.
 
 In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for annual reporting periods beginning on or after December 15, 2016. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures.
 
 In August 2014, the FASB issued ASU 2014-15 Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”),




12


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2013
 (Amounts expressed in US Dollars)




3.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   (cont’d)
 
 k)         Recent Accounting Pronouncements (cont’d)
 
 which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year after the date the financial statements are issued. An entity must provide certain disclosures if “conditions or events raise substantial doubt about the entity’s ability to continue as a going concern.” ASU 2014-15 applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company is currently assessing the impact of this guidance.
 
 On January 9, 2015, FASB issued ASU 2015-01, Income Statement- Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. The ASU eliminates the concept of extraordinary items and the uncertainty in determining when an item is both unusual in nature and infrequent in occurrence. Presently, an event or transaction is presumed to be ordinary activity unless evidence supports the transaction as unusual in nature and infrequent in occurrence. If an event or transaction is determined to be unusual and infrequent, it is deemed to be extraordinary, and is required to be segregated from the results of ordinary operations on the face of the income statement, net of tax, after income from continuing operations, along with other financial statement disclosures. ASU 2015-01 eliminates the concept of extraordinary items from the income statement presentation. Eliminating this concept removes the uncertainty in determining when a transaction is both unusual in nature and infrequent in occurrence. However, the presentation and disclosure guidance for items that are unusual in nature OR occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. This ASU aligns US GAAP with IAS 1, which prohibits presentation and disclosure of extraordinary items. This ASU is effective for years beginning after December 15, 2015, with early adoption permitted. The Company is currently assessing the impact of this guidance.
 
 l)
Non-controlling Interest
 
 Non-controlling interests in the Company’s subsidiaries are recorded in accordance with the provisions of ASC 810 and are reported as a component of equity, separate from the parent’s equity. Purchase or sale of equity interests that do not result in a change of control are accounted for as equity transactions. Results of operations attributable to the non-controlling interest are included in our consolidated results of operations and, upon loss of control, the interest sold, as well as interest retained, if any, will be reported at fair value with any gain or loss recognized in earnings.
 
 4.         LICENSES FOR TECHNOLOGY




2013





2012Cost


Accumulated Amortization


Net Book Value


Net Book ValueNorth American Technology License

$
100


$
-


$
100


$
100Indian Technology License


100



-



100



100$
200


$
-


$
200


$
200






13


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2013
 (Amounts expressed in US Dollars)




5.         LOAN PAYABLE TO RELATED PARTY
 
 On March 22, 2010, the Company acquired an exclusive territorial 25 year Supplemental Wind Energy Generator (“SWEG”) Technology license for the Republic of India (“India”), from Boreas. The stockholders of Boreas hold a controlling interest in the Company through their controlling interest in First National Energy Corporation. The technology of Boreas maximizes the energy productivity of existing wind turbines by capturing energy that flows through and underneath existing wind turbine systems.  The consideration due from the Company to Boreas for the license was a deferred cash payment of $600,000, and a future royalty equal to 5% of the subsidiary’s “EBITDA” (earnings) from exploitation of the acquired license.
 
 On November 8, 2010, the subsidiary paid Boreas $60,000 as a payment due under the India technology license agreement, leaving a balance of cash consideration due of $540,000. The remaining debt is non-interest bearing and is due on demand.
 
 6.         CAPITAL STOCK
 
 a)         Authorized
 
 300,000,000 Common shares, $0.001 per value
 
 b)         Issued
 
 99,865,228 Common shares (2012: 99,865,228 Common shares)
 
 7.      INCOME TAXES
 
 The reconciliation of income taxes at statutory income tax rates to the income tax expense is as follows. The losses incurred by the wholly-owned Canadian subsidiary are insignificant, hence no separate disclosure has been made:




2013


2012Loss before income taxes

$
(15,347
)

$
(47,566
)Applicable statutory tax rate


34
%


34
%Income tax recovery at statutory rate


(5,218
)


(16,172
)Timing difference


(43,420
)


(43,420
)Tax benefit not recognized


48,638



59,592Income taxes - current and deferred

$
-


$
-




Total income tax (expense) benefit differed from the amounts computed by applying the U.S. Federal statutory tax rates and estimated state rates to pre-tax income for the years as follows:




14


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2013
 (Amounts expressed in US Dollars)


7.      INCOME TAXES (cont’d)
 
 2013


2012Statutory rate - benefit


34
%


34
%State taxes, net of federal benefit


-



-Effective rate - benefit


34
%


34
%
 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
  2013


2012Deferred tax asset:Operating losses available to offset future income-taxes

$
477,822


$
429,184Tax basis of license in excess of accounting basis


449,924



493,344927,746



922,528Valuation Allowance


(927,746
)


(922,528
)Net deferred tax asset

$
-


$
-
 Realization of the deferred tax asset also depend on the Company’s ability to generate taxable income within the carryforward period. Due to uncertainty related to the Company’s ability to generate taxable income sufficient to realize all of its deferred tax assets, the Company has recorded 100% valuation allowances.
 
 As at December 31, 2013, the company has non-capital losses of $1,405,359 ($1,262,305 – 2012) for tax purposes which can be applied against future taxable income. These losses expire as follows:
 
 2033


143,0542032


175,2732031


183,9492030


187,1502029


131,6022028


78,1452027


30,7602026


32,9122025


208,8872024


233,627Total

$
1,405,359
 8.         RELATED PARTY TRANSACTIONS
 
 Transactions with related parties are incurred in the normal course of business and are measured at the exchange amount which is the amount of consideration established by and agreed to by the related parties.
 
 In 2010, the Company’s majority owned subsidiary Pavana Power Corporation, purchased the Indian license to the SWEG technology from Boreas, which is related by virtue of common control. (see Note  1 (c)).






15


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2013
 (Amounts expressed in US Dollars)




8.         RELATED PARTY TRANSACTIONS (cont’d)
 
 A director of the Company has advanced monies to the Company to pay certain expenses. The advances have no interest rate and is due on demand. The amount owing to the director was $78,042 ($60,898 in 2012).
 
 9.      SEGMENT DISCLOSURE
 
 The Company, after reviewing its reporting systems, has determined that it has one reportable segment and geographic segment. The Company’s operations are all related to the provision of wind-driven solutions for power generation. All assets of the business are located the United States.
 
 10.       COMMITMENT AND CONTINGENCY
 
 Pursuant to Note 1 (c), under the Technology License purchased by Pavana, the Company has a commitment for royalties at the rate of 5% Pavana’s EBITDA derived using this technology.
 
 11.       CAPITAL MANAGEMENT
 
 The Company’s capital management objective is to secure the ability to continue as a going concern and to optimize the cost of capital in order to enhance value to shareholders. As part of this objective the Company seeks to maintain access to loan and capital markets at all times. The Board of Directors reviews the capital structure of the Group on a regular basis.
 
 Capital structure and debt capacity are taken into account when deciding new investments. Practical tools to manage capital include application of dividend policy, share buybacks and share issuances. Debt capital is managed considering the requirement to secure liquidity and the capability to refinance maturing debt. The Group’s internal capital structure is reviewed on a regular basis with an aim to optimize the structure e.g. by applying internal dividends and equity adjustments. Net investment in foreign entities is monitored and the Company has the intent to hedge related translation risk.
 
 On December 31, 2013, the Company had no interest-bearing debt.








16




First National Energy Corporation
  (Formerly First National Power Corporation)
  Consolidated Financial Statements
  December 31, 2014 and 2013
  (Amounts expressed in US Dollars)




Index
  Report of Independent Public Accounting Firm

1Consolidated Balance Sheets as at December 31, 2014 and 2013

2Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2014 and 2013

3Consolidated Statements of Stockholders’ Deficiency for the years ended December 31, 2014 and 2013

4Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2013

5Notes to Consolidated Financial Statements

6 – 17









REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the Board of Directors and Stockholders of
 First National Energy Corporation
  We have audited the accompanying consolidated balance sheets of First National Energy Corporation (formerly First National Power Corporation) (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations and comprehensive loss, cash flows and stockholders’ deficiency for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audits of its internal control over financial reporting.  Our audits 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 control over financial reporting.  Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
  In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First National Energy Corporation (formerly First National Power Corporation) as at December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles in the United States of America.


The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has not generated any revenues and expects to continue to incur significant expenses from operations. The Company’s future success is dependent upon its ability to raise sufficient capital, not only to cover its operating expenses, but also to continue to develop and be able to profitably market its products. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 2.   The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.


/s/ SCHWARTZ LEVITSKY FELDMAN LLPToronto, Ontario

Chartered AccountantsNovember 12, 2015

Licensed Public Accountants






1




FIRST NATIONAL ENERGY CORPORATION


(Formerly First National Power Corporation)


Consolidated Balance Sheets


As at December 31, 2014 and 2013


(Amounts expressed in US Dollars)




2014


2013$


$ASSETSCURRENTCash


2,237



1,096Total Current Assets


2,237



1,096LICENSES FOR TECHNOLOGY (Note 4)


200



200Total Assets


2,437



1,296LIABILITIESCURRENTAccounts payable and accrued liabilities


59,500



44,500Loan payable to director (Note 8)


76,275



78,042Loan payable to related party (Note 5)


540,000



540,000Total Liabilities


675,775



662,542Going Concern (Note 2)Related Party Transaction (Note 8)Commitment and Contingency (Note 10)STOCKHOLDERS’ DEFICIENCYCapital Stock ($0.001 par value, 300,000,000 common shares authorized, 99,865,228 issued and outstanding as of December 31, 2014 and 2013 (Note 6)


99,765



99,765Additional paid-in Capital


103,329



103,329Accumulated Deficit


(876,475
)


(864,388
)Accumulated Other Comprehensive Loss


(10
)


(10
)Total Stockholders' Deficiency Attributable to FNEC Stockholders


(673,391
)


(661,304
)Non-controlling interest


53



58Total Stockholders' Deficiency


(673,338
)


(661,246
)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY


2,437



1,296




The accompanying notes are an integral part of these consolidated financial statements.




2




FIRST NATIONAL ENERGY CORPORATION


(Formerly First National Power Corporation)


Consolidated Statements of Operations and Comprehensive Loss


2014 and 2013


(Amounts expressed in US Dollars)




2014


2013$


$REVENUE


-



-EXPENSESGeneral and administrative expenses


12,092



15,347TOTAL OPERATING EXPENSES


12,092



15,347LOSS BEFORE INCOME TAXES


12,092



15,347Income taxes (Note 7)


-



-NET LOSS


12,092



15,347Net loss attributable to non-controlling interest


(5
)


-Net loss attributable to FNEC stockholders


12,087



15,347Loss per share - basic and diluted

$
0.00


$
0.00Weighted average common shares outstanding during the year


99,865,228



99,865,228COMPREHENSIVE LOSS:NET LOSS INCLUDING NON-CONTROLLING INTEREST


12,092



15,347Foreign exchange transition adjustment for the year


-



-OTHER COMPREHENSIVE LOSS


12,092



15,347Comprehensive loss attributable to non-controlling interest


(5
)


-Comprehensive loss attributable to FNEC stockholders


12,087



15,347




The accompanying notes are an integral part of these consolidated financial statements.




3




FIRST NATIONAL ENERGY CORPORATION


(Formerly First National Power Corporation)


Consolidated Statements of Changes in Stockholders’ Deficiency


For the years ended December 31, 2014 and 2013


(Amounts expressed in US Dollars)


Number of Common Shares


Common Shares amount


Additional Paid-in Capital


Accumulated Deficit


Accumulated Other Comprehensive Loss


Non-controlling Interests


Total Stockholders' Deficit$


$


$


$


$


$Balance as of December 31, 2012


99,865,228



99,765



103,329



(849,041
)


(10
)


58



(645,899
)Net Loss for the Year














(15,347
)










(15,347
)Balance as of December 31, 2013


99,865,228



99,765



103,329



(864,388
)


(10
)


58



(661,246
)Net Loss for the Year














(12,087
)






(5
)


(12,092
)Balance as of December 31, 2014


99,865,228



99,765



103,329



(876,475
)


(10
)


53



(673,338
)




The accompanying notes are an integral part of these consolidated financial statements.




4




FIRST NATIONAL ENERGY CORPORATION


(Formerly First National Power Corporation)


Consolidated Statements of Cash Flows


Years Ended December 31, 2014 and 2013


(Amounts expressed in US Dollars)




2014


2013$


$CASH FLOWS FROM OPERATING ACTIVITIESNet loss


(12,092
)


(15,347
)Increase (decrease) in accounts payable and accrued liabilities


15,000



(3,500
)Net cash provided by (used in) operating activities


2,908



(18,847
)CASH FLOWS FROM FINANCING ACTIVITIESLoan from director


(1,767
)


17,144Net cash provided by (used in) financing activities


(1,767
)


17,144NET INCREASE (DECREASE) IN CASH


1,141



(1,703
)Cash, beginning of year


1,096



2,799CASH, END OF YEAR


2,237



1,096SUPPLEMENTARY  DISCLOSUREINCOME TAXES PAID


-



-INTEREST PAID


-



-




The accompanying notes are an integral part of these consolidated financial statements.




5




First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2014
 (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, under the name Capstone International Corporation.  On March 28, 2004, the Company changed its name to First National Power Corporation. On February 12, 2009, the Company relocated its charter to the State of Nevada and changed its name to First National Energy Corporation. As part of its reorganization, the Company increased its authorized capital to 300 million common shares and effected a 100 for 1 reverse stock split of its issued and outstanding shares of common stock. The accompanying consolidated financial statements reflect all share data based on the 100 for 1 reverse common stock split.
 
 The Company’s business purpose is the provision of wind-driven solutions for power generation. Current projects for the Company are the completion of power generation projects from supplemental wind generation technologies.
 
 b)      Purchase of Technology License
 
 On April 20, 2009, the Company entered into a preliminary letter of intent with Boreas Research Corporation (“Boreas”), a Florida corporation, pursuant to which the Company would acquire a territorial license to certain rights in alternative energy technology of Boreas, in exchange for a quantity of newly issued common shares of the Company. The letter of intent was superseded by a Technology License and Stock Purchase Agreement (the “Agreement”) between the Company and Boreas that was consummated on May 25, 2009 (the “Closing”), at which time the Company issued to the stockholders of Boreas 98,800,000 new restricted and unregistered common shares of the Company and agreed to pay certain future royalties to Boreas from net revenues realized by the Company from the technology license. The consideration issued in the transaction was determined as a result of arm’s-length negotiations between the parties.
 
 The preliminary letter of intent was reported by the Company on form 8-K to the Securities and Exchange Commission (“SEC”) on April 21, 2009, and the Agreement was annexed to an information statement on form 14-C filed with the SEC in preliminary and definitive forms on April 22, 2009 and May 4, 2009, respectively.  The definitive information statement was mailed to the Stockholders of the Company on May 4, 2009.
 
 The Company obtained written consent to the Agreement and the transaction from the holders of 55.82% of its issued and outstanding shares of common stock in lieu of a meeting of stockholders.
 
 On May 14, 2009, the Company and Boreas amended the Agreement by making and entering into a First Amendment of Technology License and Stock Purchase Agreement (the “Amendment”), pursuant to which (1) Boreas elected, as authorized by the Agreement, to cause the new restricted and unregistered common shares of the Company due to Boreas at the Closing to be issued to the stockholders of Boreas, and (2) the Company and Boreas agreed to reduce the number of new restricted and unregistered common shares of the Company to be issued at the closing of the transaction, from 98,915,000 shares to 98,800,000 shares.
 
 6
 First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2014
 (Amounts expressed in US Dollars)
 1.         GENERAL   (cont’d)
 
 b)
Purchase of Technology License   (cont’d)
 
 In exchange for the Company acquiring the technology license from Boreas at the Closing pursuant to the Agreement (as amended by the Amendment), the Stockholders of Boreas received an aggregate of 98,800,000 new restricted and unregistered common shares of the Company's common stock. Accordingly, the Boreas Stockholders now own 98.93% of the Company's 99,865,228 outstanding common shares. No finder’s fees were paid or consulting agreements entered into by the Company in connection with the transaction.
 
 Prior to the transaction, there were no material relationships between the Company and Boreas, between Boreas and the Company’s affiliates, directors or officers, or between any associates of Boreas and the Company’s officers or directors. All of the Company’s transaction liabilities were settled on or immediately following the Closing.
 
 Upon the Closing on May 25, 2009, the Company was no longer deemed to be a "shell company" as defined in Rule 12b-2 under the Securities Exchange Act of 1934 (the "Exchange Act"). Accordingly, the Company filed an amended current report on Form 8-K/A with the SEC on May 26, 2009, setting forth the information that would be required if the Company were filing a general form for registration of securities on Form 10 under the Exchange Act.
 
 On April 18, 2011, First National Energy Corporation (the “Company”) entered into a Novation Agreement (the "Novation") with all of the stockholders of Boreas revising the structure of the May 25, 2009 transaction by which the Company acquired a territorial license to certain rights in alternative energy technology of Boreas, in exchange for a quantity of newly issued common shares of the Company. The Novation amended the Technology License and Stock Purchase Agreement (the “Original Agreement”) to substitute the stockholders of Boreas as the licensor under the Original Agreement.
 
 c)      Further Purchase of Technology License
 
 On March 22, 2010, Pavana Power Corporation (“Pavana”), a Nevada corporation, the Company’s 99.9% owned subsidiary, acquired an exclusive, territorial, 25-year license for the Republic of India (“India”), from Boreas, 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” (earnings before interest, taxes, depreciation and amortization) from exploitation of the acquired license.
 
 The transaction between related corporations was valued at the amount of the monetary consideration that was provided to Boreas.
 
 2.         GOING CONCERN
 
 The Company’s consolidated financial statements are prepared using accounting principles generally accepted in the United States of America and applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  However, the Company has not generated any
 
 7


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2014
 (Amounts expressed in US Dollars)




2.         GOING CONCERN (cont’d)
 
 revenues from its planned principal operations through December 31, 2014 and has recorded losses since inception, has negative working capital, has yet to achieve profitable operations and expects further losses in the development of its business.  There can be no assurance that the Company will have adequate capital resources to fund planned operations or that any additional funds will be available to the Company when needed, or if available, will be available on favorable terms in the amounts required by the Company. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 Management has plans to raise cash through debt offerings once the sales of the technologies begin. The personnel, facilities and equipment required for successfully completing the business model have been identified but until the resources are available, have not been acquired or engaged. In the period prior to the onset of operations, the Company will undertake to raise further cash through further capital offerings. There is no assurance that the Company will be successful in raising additional capital.
 
 3.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 a)
Basis of Consolidation
 
 The consolidated financial statements include the accounts of First National Energy Corporation, its wholly-owned subsidiary First National Energy (Canada) Corporation and its 99.99% owned subsidiary Pavana 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. As the precise determination of assets and liabilities, and revenues and expenses, depends on future events, the preparation of financial statements for any period necessarily involves the use of estimates. Actual amounts may differ from these estimates. 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 Company’s financial instruments consist of cash, accounts payable and accrued liabilities, and loans payable. Unless otherwise noted, it is of management’s opinion that the Company is not exposed to significant interest, or credit risks arising from these financial instruments. The fair values of these financial instruments approximate their carrying values due to the relatively short period to maturity for these instruments.
 
 The Company’s financial assets and liabilities are generally classified and measured as follows:
 
 8


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2014
 (Amounts expressed in US Dollars)


3.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   (cont’d)
 
 c)         Financial Instruments (cont’d)
 
 Assets / Liabilities

Classification

MeasurementCash

Held for trading

Fair valueAccounts Payable and Accrued Liabilities

Other liability

Amortized CostLoan payable to director

Other liability

Amortized CostLoan Payable to related party

Other liability

Amortized cost
 
 The Company follows ASC 820-10, “Fair Value Measurements and Disclosures” (ASC 820-10), which among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:
 
 ● Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
 
 Fair valued assets that are generally included in this category are cash and cash equivalents comprised of money market funds, restricted cash and short-term investments.
 
 ● Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
 
 ● Level 3—Unobservable 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, 2014 and 2013, the only assets measured at fair value using level 1 of the three fair value hierarchy tiers described above was cash of $2,237 ($1,096 – 2013), and accounts payable, loan payable to director, and loan payable to related party are measured using amortized cost at level 2. The Company did not have any fair value assets or liabilities classified as level 3.
 
 2014


2013Carrying Value


Fair Value


Carrying Value


Fair ValueCash


2,237



2,237



1,096



1,096Accounts payable and accrued liabilities


59,500



59,500



44,500



44,500Loan payable to director


76,275



76,275



78,042



78,042Loan payable to related party


540,000



540,000



540,000



540,000
 9
 First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2014
 (Amounts expressed in US Dollars)


3.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   (cont’d)
 
 c)         Financial Instruments (cont’d)
 
 Foreign exchange risk:
 
 The Company’s subsidiary conducts its opening activities in Canadian dollars. The Company is therefore subject to gains or losses due to fluctuations in Canadian currency relative to the US dollar. The Company has no exposure to this given its limited activity and assets through the year.
 
 Liquidity risk:
 
 The Company monitors its liquidity position regularly to assess whether it has the funds necessary to fulfill planned commitments on its alternative energy technology or viable options are available to fund such commitments from new equity issuance or alternative sources such as debt financing. However, as a development stage company and without significant internally generated cash flow, there are inherent liquidity risks, including the possibility that additional financing may not be available to the Company, or that actual development expenditures may exceed those planned. The current uncertainty in global markets could have an impact on the Company’s future ability to access capital on terms that are acceptable to the Company. The company has so far been able to raise the required financing to meet its obligations on time. The Company has no exposure to this given its limited activity through the year.
 
 d)
Income Taxes
 
 The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets likely. The Company did not incur any material impact to its financial condition or results of operations due to the financial statement recognition and measurement of a tax position tax or expected to be taken in a tax return.
 
 Deferred income taxes are established for all temporary differences between the book and the tax basis of assets and liabilities. In addition, deferred tax balances must reflect tax rates expected to be in effect in years in which the temporary differences reverse. Canadian taxes are calculated at rates expected to be in effect in Canada. U.S. deferred tax liabilities are not recognized on profits that are expected to be permanently reinvested in Canada and thus not considered available for distribution to the parent company. It is not practicable to determine our unrecognized deferred tax liability for temporary differences related to investments in foreign subsidiaries that are essentially permanent in duration. Net operating loss carry-forwards and other deferred tax assets are reviewed annually for recoverability, and, if necessary, are recorded net of a valuation allowance. Note 7 contains additional discussion regarding income taxes.
 
 10
 First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2014
 (Amounts expressed in US Dollars)


3.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   (cont’d)
 
 e)
Comprehensive loss
 
 Comprehensive loss includes all changes in equity (net assets) during a period from non-owner sources. Examples of items to be included in comprehensive loss, which are excluded from net loss, include foreign currency translation adjustments and unrealized gains and losses on available-for-sale securities.
 
 f)
Intangible Assets
 
 Intangible assets include the technology licenses which are amortized over the estimated useful life of 10 years on a straight line basis. However, since these licenses were written to nominal value, no amortization was recognized during the year for accounting purposes.
 
 g)
Impairment of Long-Lived Assets
 
 Long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset group over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value.
 
 h)
Loss per share
 
 Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the year. Diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive). As of December 31, 2014, there were no common stock equivalents.
 
 i)
Stock-Based Compensation
 
 The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees using the estimated fair market value of the consideration received or estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services. As of December 31, 2014, there was $nil of unrecognized expense related to stock-based compensation, and stock based compensation expense relating to all employees and non-employees were $nil for the years ended December 31, 2014 and 2013.
 
 11


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2014
 (Amounts expressed in US Dollars)


3.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   (cont’d)
 
 j)
Foreign Currency
 
 The parent Company maintains its books and records in U.S. dollars which is its functional and reporting currency. One of the Company’s operating subsidiary is a foreign private company and maintains its books in
 
 Canadian dollars (the functional currency). The subsidiary’s financial statements are converted to US dollars for consolidation purposes. The translation method used is the current rate method, where the functional currency is the foreign currency. Under the current rate method all assets and liabilities are translated at the current rate, stockholders’ equity are translated at historical rates and revenues and expenses are translated at average rates for the year.
 
 Due to the fact that items in the financial statements are being translated at different rates according to their nature, a translation adjustment is created. This translation adjustment has been included in Other Comprehensive Loss.
 
 k)
Recent Accounting Pronouncements
 
 In June 2014, the FASB issued ASU 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements” (“ASU 2014-10”), which eliminates the distinction of a development stage entity and certain related disclosure requirements, including the elimination of inception-to-date information on the statements of operations, cash flows and changes in stockholders’ equity. The amendments in ASU 2014-10 are effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods; however early adoption is permitted. The Company evaluated and adopted ASU 2014-10 early for the current period presented.
 
 In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”), which includes amendments that change the requirements for reporting discontinued operations and require additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results. Additionally, ASU 2014-08 requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The new standard is effective for annual reporting periods beginning on or after December 15, 2014. Early application is permitted. The Company is evaluating the effect that ASU 2014-08 will have on its consolidated financial statements and related disclosures.
 
 12
 First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2014
 (Amounts expressed in US Dollars)
 3.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   (cont’d)
 
 j)
Recent Accounting Pronouncements (cont’d)
 
 In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for annual reporting periods beginning on or after December 15, 2016. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures.
 
 In August 2014, the FASB issued ASU 2014-15 Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year after the date the financial statements are issued. An entity must provide certain disclosures if “conditions or events raise substantial doubt about the entity’s ability to continue as a going concern.” ASU 2014-15 applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company is currently assessing the impact of this guidance.
 
 On January 9, 2015, FASB issued ASU 2015-01, Income Statement- Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. The ASU eliminates the concept of extraordinary items and the uncertainty in determining when an item is both unusual in nature and infrequent in occurrence. Presently, an event or transaction is presumed to be ordinary activity unless evidence supports the transaction as unusual in nature and infrequent in occurrence. If an event or transaction is determined to be unusual and infrequent, it is deemed to be extraordinary, and is required to be segregated from the results of ordinary operations on the face of the income statement, net of tax, after income from continuing operations, along with other financial statement disclosures. ASU 2015-01 eliminates the concept of extraordinary items from the income statement presentation. Eliminating this concept removes the uncertainty in determining when a transaction is both unusual in nature and infrequent in occurrence. However, the presentation and disclosure guidance for items that are unusual in nature OR occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. This ASU aligns US GAAP with IAS 1, which prohibits presentation and disclosure of extraordinary items. This ASU is effective for years beginning after December 15, 2015, with early adoption permitted. The Company is currently assessing the impact of this guidance.
 
 l)
Non-controlling Interest
 
 Non-controlling interests in the Company’s subsidiaries are recorded in accordance with the provisions of ASC 810 and are reported as a component of equity, separate from the parent’s equity. Purchase or sale of equity interests that do not result in a change of control are accounted for as equity transactions. Results of operations attributable to the non-controlling interest are included in our consolidated results of operations and, upon loss of control, the interest sold, as well as interest retained, if any, will be reported at fair value with any gain or loss recognized in earnings.
 
 13


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2014
 (Amounts expressed in US Dollars)


4.      LICENSES FOR TECHNOLOGY
  2014





2013Cost


Accumulated Amortization


Net Book Value


Net Book ValueNorth American Technology License

$
100


$
-


$
100


$
100Indian Technology License


100



-



100



100$
200


$
-


$
200


$
200
 5.         LOAN PAYABLE TO RELATED PARTY
 
 On March 22, 2010, the Company acquired an exclusive territorial 25 year Supplemental Wind Energy Generator (“SWEG”) Technology license for the Republic of India (“India”), from Boreas. The stockholders of Boreas hold a controlling interest in the Company through their controlling interest in First National Energy Corporation. The technology of Boreas maximizes the energy productivity of existing wind turbines by capturing energy that flows through and underneath existing wind turbine systems.  The consideration due from the Company to Boreas for the license was a deferred cash payment of $600,000, and a future royalty equal to 5% of the subsidiary’s “EBITDA” (revenues before interest, taxes, depreciation and amortization) from exploitation of the acquired license.
 
 On November 8, 2010, the subsidiary paid Boreas $60,000 as a payment due under the India technology license agreement, leaving a balance of cash consideration due of $540,000. The remaining debt is non-interest bearing and is due on demand.
 
 6.         CAPITAL STOCK
 
 a)         Authorized
 
 300,000,000 Common shares, $0.001 per value
 
 b)         Issued
 
 99,865,228 Common shares (2013: 99,865,228 Common shares)
 
 14
 First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2014
 (Amounts expressed in US Dollars)
 7.      INCOME TAXES
 
 The reconciliation of income taxes at statutory income tax rates to the income tax expense is as follows. The losses incurred by the wholly-owned Canadian subsidiary are insignificant, hence no separate disclosure has been made:
  2014


2013Loss before income taxes

$
(12,092
)

$
(15,347
)Applicable statutory tax rate


34
%


34
%Income tax recovery at statutory rate


(4,111
)


(5,218
)Timing difference


(43,420
)


(43,420
)Tax benefit not recognized


47,531



48,638Income taxes - current and deferred

$
-


$
-
 Total income tax (expense) benefit differed from the amounts computed by applying the U.S. Federal statutory tax rates and estimated state rates to pre-tax income for the years as follows:
  2014


2013Statutory rate - benefit


34
%


34
%State taxes, net of federal benefit


-



-Effective rate - benefit


34
%


34
%
 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
  2014


2013Deferred tax asset:Operating losses available to offset future income-taxes

$
525,354


$
477,822Tax basis of license in excess of accounting basis


406,504



449,924931,858



927,746Valuation Allowance


(931,858
)


(927,746
)Net deferred tax asset

$
-


$
-
 Realization of the deferred tax asset also depend on the Company’s ability to generate taxable income within the carryforward period. Due to uncertainty related to the Company’s ability to generate taxable income sufficient to realize all of its deferred tax assets, the Company has recorded 100% valuation allowances.
 
 15


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2014
 (Amounts expressed in US Dollars)




7.      INCOME TAXES (cont’d)
 
 As at December 31, 2014, the company has non-capital losses of $1,545,158 ($1,405,359 – 2013) for tax purposes which can be applied against future taxable income. These losses expire as follows:
 
 2034


139,7992033


143,0542032


175,2732031


183,9492030


187,1502029


131,6022028


78,1452027


30,7602026


32,9122025


208,8872024


233,627Total

$
1,545,158
 8.         RELATED PARTY TRANSACTIONS
 
 Transactions with related parties are incurred in the normal course of business and are measured at the exchange amount which is the amount of consideration established by and agreed to by the related parties.
 
 In 2010, the Company’s majority owned subsidiary Pavana Power Corporation, purchased the Indian license to the SWEG technology from Boreas, which is related by virtue of common control. (see Note  1 (c)).
 
 A director of the Company has advanced monies to the Company to pay certain expenses. The advances have no interest rate and is due on demand. The amount owing to the director was $76,275 ($78,042 in 2013).
 
 9.      SEGMENT DISCLOSURE
 
 The Company, after reviewing its reporting systems, has determined that it has one reportable segment and geographic segment. The Company’s operations are all related to the provision of wind-driven solutions for power generation. All assets of the business are located the United States of America.
 
 10.       COMMITMENT AND CONTINGENCY
 
 Pursuant to Note 1 (c), under the Technology License purchased by Pavana, the Company has a commitment for royalties at the rate of 5% of Pavana’s EBITDA derived using this technology.
 
 16


First National Energy Corporation
 (Formerly First National Power Corporation)
 Notes to the Consolidated Financial Statements
 December 31, 2014
 (Amounts expressed in US Dollars)


11.       CAPITAL MANAGEMENT
 
 The Company’s capital management objective is to secure the ability to continue as a going concern and to optimize the cost of capital in order to enhance value to shareholders. As part of this objective the Company seeks to maintain access to loan and capital markets at all times. The Board of Directors reviews the capital structure of the Group on a regular basis.
 
 Capital structure and debt capacity are taken into account when deciding new investments. Practical tools to manage capital include application of dividend policy, share buybacks and share issuances. Debt capital is managed considering the requirement to secure liquidity and the capability to refinance maturing debt. The Group’s internal capital structure is reviewed on a regular basis with an aim to optimize the structure e.g. by applying internal dividends and equity adjustments. Net investment in foreign entities is monitored and the Company has the intent to hedge related translation risk.
 
 On December 31, 2014, the Company had no interest-bearing debt.