UNITED
STATES


SECURIITES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q


(Mark
One)


þQUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934


For the
quarterly period ended March
31, 2010.





or





oTRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934


For the
transition period from ____________ to ________________.





Commission
File Number: 333-62588




FIRST
      NATIONAL ENERGY CORPORATION(Exact
      name of registrant as specified in its
  charter)




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




1551
Second Street, Sarasota, Florida 34236


(Address
of principal executive offices)





(416)
918-6987


(Registrant’s
telephone number, including area code)





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





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 of 1934 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.  þYes  oNo





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.




Large accelerated
      filer
            o
            Accelerated
      filer
            oNon-accelerated
      filer
            o (do not
      check if a smaller reporting company)
            Smaller reporting
      company
            þ




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) Yes o Noþ





APPLICABLE
ONLY TO CORPORATE ISSUERS:





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.





As
of May 12, 2010, there were 99,665,228 common shares issued and
outstanding.











PART
I—FINANCIAL INFORMATION


ITEM
1. FINANCIAL STATEMENTS.


First
National Energy Corporation
  (Formerly
First National Power Corporation)
  (A
Development Stage Company)
  Consolidated
Financial Statements (unaudited)
  For the 3
Month period ended March 31, 2009
  Amounts
expressed in US Dollars
   
  
 
 Index
  Consolidated
      Interim Balance Sheets as at March 31, 2010 (unaudited) and December 31,
      2009 (audited)
              
              
              3Consolidated  Interim
      Statements of Operations for the 3 month periods ended  March
      31, 2010 and March 31, 2009 for the cumulative period since inception
      (unaudited)
              
              
              4Consolidated  Interim
      Statements of Cash Flows for the 3 month periods ended  March
      31, 2010 and March 31, 2009 and for the cumulative period since inception
      (unaudited)
              
              
              5Consolidated  Interim
      Statements of Changes in Stockholders’ Deficiency for the period since
      inception (unaudited)
              
              
              6-8Condensed
      Notes to Consolidated Interim Financial Statements
    (unaudited)
              
              
              9 -
      12
   
 
 FIRST
      NATIONAL ENERGY CORPORATION(Formerly
      First National Power Corporation)(A
      Development Stage Company)Consolidated
      Interim Balance SheetsAs
      of March 31, 2010 and December 31, 2009(Amounts
      expressed in US Dollars)  March
      31
                
                
                December
      312010
                
                
                2009$
                
                
                $ASSETSCURRENT
      ASSETSCash
                
                
                28,003
                
                
                
                36,73028,003
                
                
                
                36,730License
      for SWEG technology, net of amortization
                
                
                2,279,577
                
                
                
                1,725,9672,307,580
                
                
                
                1,762,697LIABILITIESCURRENT
      LIABILITIESAccounts
      payable and accrued liabilities
                
                
                9,500
                
                
                
                14,568Payable
      to Boreas Research for SWEG license
                
                
                600,000Loans
      from shareholders
                
                
                258,313
                
                
                
                258,313867,813
                
                
                
                272,881Going
      Concern (Note 2)STOCKHOLDERS’
      EQUITY (DEFICIENCY)CAPITAL
      STOCK
                
                
                99,665
                
                
                
                99,665ADDITIONAL
      PAID-IN-CAPITAL
                
                
                2,185,801
                
                
                
                2,185,801DEFICIT,
      ACCUMULATED DURING THE DEVELOPMENT STAGE
                
                
                (845,698
                
                
                
                (795,650
                )1,439,767
                
                
                
                1,489,8162,307,580
                
                
                
                1,762,697




The Notes
form an integral part of the consolidated interim financial
statements


3
 
 FIRST
      NATIONAL ENERGY CORPORATION(Formerly
      First National Power Corporation)(A
      Development Stage Company)Consolidated
      Interim Statements of Operations and Comprehensive LossFor
      the 3 Month periods ended March 31, 2010 and March 31, 2009 and the
      cumulative period since Inception (Amounts
expressed in US Dollars)
  3
      Months
                
                
                3
      MonthsCumulative
                
                
                ended
                
                
                endedSince
                
                
                March
      31
                
                
                March
      31Inception
                
                
                2010
                
                
                2009$
                
                
                
                $
                
                
                
                $OPERATING
      EXPENSESInterest
      Income
                
                
                (6,916
                )
                
                
                (12
                )
                
                
                (34
                )Forgiveness
      of accounts payable and loans
                
                
                (47,394
                )General
      and administrative expenses
                
                
                447,317
                
                
                
                3,670
                
                
                
                10,237Loss
      on Foreign Exchange
                
                
                580Amortization
                
                
                176,028
                
                
                
                46,390
                
                
                
                -Project
      development costs
                
                
                272,857Interest
      Expense
                
                
                3,226
                
                
                
                -
                
                
                
                -845,698
                
                
                
                50,048
                
                
                
                10,203NET
      LOSS AND COMPREHENSIVE LOSS
                
                
                (845,698
                )
                
                
                (50,048
                )
                
                
                (10,203
                )Net
      loss per share, basic and diluted
                
                
                
                
                
                $
                (0.00
                )
                
                $
                (0.01
                )Weighted
      average common shares outstanding
                
                
                
                99,665,228
                
                
                
                765,228
  
 4
 
 FIRST
      NATIONAL ENERGY CORPORATION(Formerly
      First National Power Corporation)(A
      Development Stage Company)Consolidated
      Interim Statements of Cash FlowsFor
      the 3 Month Periods ended March 31, 2010 and March 31, 2009 and the
      cumulative period since inception(Amounts
      expressed in US Dollars)3
      Months
              
              
              3
      MonthsCumulative
              
              
              ended
              
              
              endedSince
              
              
              March
      31
              
              
              March
      31Inception
              
              
              2010
              
              
              2009$
              
              
              
              $
              
              
              
              $CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
              
              $
              (845,698
              )
              
              $
              (50,048
              )
              
              $
              (10,203
              )Adjustments
      for items not affecting cashAmortization
              
              
              176,028
              
              
              
              46,390Shares
      issued for services rendered
              
              
              332,390
              
              
              
              -
              
              
              
              -Forgiveness
      of accounts payable and loans
              
              
              (47,394
              )Increase
      (decrease) in accounts payableand
      accrued liabilities
              
              
              13,498
              
              
              
              (5,069
              )
              
              
              (9,605
              )Net
      cash used in operating activities
              
              
              (371,176
              )
              
              
              (8,727
              )
              
              
              (19,808
              )CASH
      FLOWS FROM FINANCING ACTIVITIESLoans
      from Shareholders
              
              
              301,708
              
              
              
              -Proceeds
      from sale of capital stock
              
              
              97,471Net
      cash provided by financing activities
              
              
              399,179
              
              
              
              -
              
              
              
              -NET
      INCREASE (DECREASE) IN CASH
              
              
              28,003
              
              
              
              (8,727
              )
              
              
              (19,808
              )Cash,
      beginning of period
              
              
              -
              
              
              
              36,730
              
              
              
              85,122CASH,
      END OF PERIOD
              
              
              28,003
              
              
              
              28,003
              
              
              
              65,314INCOME
      TAXES PAID
              
              
              -
              
              
              
              -
              
              
              
              -INTEREST
      PAID
              
              
              3,226
              
              
              
              -
              
              
              
              -NON-CASH
      TRANSACTIONS - PURCHASE OF SWEG TECHNOLOGY FOR SHARES
              
              
              1,855,605
              
              
              
              -
              
              
              
              -PURCHASE
      OF SWEG TECHNOLOGY BY SUBSIDIARY FOR NOTE PAYABLE
              
              
              600,000
              
              
              
              600,000
              
              
              
              -
    5
 
 FIRST
      NATIONAL ENERGY CORPORATION(Formerly
      First National Power Corporation)(A
      Development Stage Company)Consolidated
      Interim Statements of Changes in Stockholders’ Equity
      (Deficiency)From
      Inception until March 31, 2010(Amounts
      expressed in US Dollars)  DeficitCommon
                
                
                
                
                
                Additional
                
                
                accumulatedCommon
                
                
                Stock
                
                
                Common
                
                
                Paid-In
                
                
                during
      the
                
                
                TotalStock
                
                
                Number
      of
                
                
                Stock
                
                
                Capital
                
                
                development
                
                
                Shareholders'Amount
                
                
                Shares
                
                
                Subscribed
                
                
                (Discount)
                
                
                stage
                
                
                Equity$
                
                
                
                
                
                $
                
                
                $
                
                
                $
                
                
                $Balance
      at November 16, 2000Issuance
      of common stock for cash
                
                
                100
                
                
                
                100,000
                
                
                
                
                
                
                900
                
                
                
                
                
                
                1,000Net
      Loss for the Period
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (968
                
                
                
                (968
                )Balance
      as of December 31, 2000
                
                
                100
                
                
                
                100,000
                
                
                
                -
                
                
                
                900
                
                
                
                (968
                
                
                
                32Issuance
      of stock for cash
                
                
                400
                
                
                
                400,000
                
                
                
                
                
                
                
                3,600
                
                
                
                
                
                
                
                4,000Issuance
      of stock for cash
                
                
                700
                
                
                
                700,000
                
                
                
                
                
                
                
                6,300
                
                
                
                
                
                
                
                7,000Issuance
      of stock for cash
                
                
                850
                
                
                
                850,000
                
                
                
                
                
                
                
                7,650
                
                
                
                
                
                
                
                8,500Currency
      Translation
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                100
                
                
                
                
                
                
                
                100Net
      Loss for the Year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (23,954
                
                
                
                (23,954
                )Balance
      as of December 31, 2001
                
                
                2,050
                
                
                
                2,050,000
                
                
                
                -
                
                
                
                18,550
                
                
                
                (24,922
                
                
                
                (4,322
                )Expiration
      of recission offer forsale
      of stock
                
                
                64
                
                
                
                63,536
                
                
                
                
                
                
                
                6,290
                
                
                
                
                
                
                
                6,354Net
      Loss for the Year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (26,047
                
                
                
                (26,047
                )Balance
      as of December 31, 2002
                
                
                2,114
                
                
                
                2,113,536
                
                
                
                -
                
                
                
                24,840
                
                
                
                (50,969
                
                
                
                (24,015
                )
  
 6
 
 FIRST
      NATIONAL ENERGY CORPORATION(Formerly
      First National Power Corporation)(A
      Development Stage Company)Consolidated
      Interim Statements of Changes in Stockholders’ Equity
      (Deficiency)From
      Inception until March 31, 2010(Amounts
      expressed in US Dollars)  Stock
      split 5:1
                
                
                8,454
                
                
                
                8,454,144
                
                
                
                
                
                
                (8,454
                )
                
                
                
                
                
                -Shares
      issued for services rendered
                
                
                200
                
                
                
                200,000
                
                
                
                
                
                
                79,800
                
                
                
                
                
                
                80,000Net
      Loss for the Year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (107,245
                )
                
                
                (107,245
                )Balance
      as of December 31, 2003
                
                
                10,768
                
                
                
                10,767,680
                
                
                
                -
                
                
                
                96,186
                
                
                
                (158,214
                )
                
                
                (51,260
                )Stock
      split 7:1
                
                
                64,606
                
                
                
                64,606,080
                
                
                
                
                
                
                
                (64,606
                )
                
                
                
                
                
                
                -Shares
      issued for services rendered
                
                
                30
                
                
                
                30,000
                
                
                
                
                
                
                
                15,870
                
                
                
                
                
                
                
                15,900Shares
      subscribed
                
                
                
                
                
                
                
                
                
                
                146
                
                
                
                70,371
                
                
                
                
                
                
                
                70,517Shares
      issued for services rendered
                
                
                44
                
                
                
                43,000
                
                
                
                
                
                
                
                9,956
                
                
                
                
                
                
                
                10,000Net
      Loss for the Year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (75,414
                )
                
                
                (75,414
                )Balance
      as of December 31, 2004
                
                
                75,448
                
                
                
                75,446,760
                
                
                
                146
                
                
                
                127,777
                
                
                
                (233,628
                )
                
                
                (30,257
                )Shares
      issued for services rendered
                
                
                830
                
                
                
                830,000
                
                
                
                
                
                
                
                193,160
                
                
                
                
                
                
                
                193,990Net
      Loss for the Year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (208,886
                )
                
                
                (208,886
                )Balance
      as of December 31, 2005
                
                
                76,278
                
                
                
                76,276,760
                
                
                
                146
                
                
                
                320,937
                
                
                
                (442,514
                )
                
                
                (45,153
                )Net
      Loss for the Year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (32,962
                )
                
                
                (32,962
                )Balance
      as of December 31, 2006
                
                
                76,278
                
                
                
                76,276,760
                
                
                
                146
                
                
                
                320,937
                
                
                
                (475,476
                )
                
                
                (78,115
                )Net
      Loss for the Year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (30,760
                )
                
                
                (30,760
                )Issue
      shares bought under subscription
                
                
                146
                
                
                
                146,000
                
                
                
                (146
                )
                
                
                
                
                
                
                
                
                
                
                -Balance
      as of December 31, 2007
                
                
                76,424
                
                
                
                76,422,760
                
                
                
                -
                
                
                
                320,937
                
                
                
                (506,236
                )
                
                
                (108,875
                )




7
 
 FIRST
      NATIONAL ENERGY CORPORATION(Formerly
      First National Power Corporation)(A
      Development Stage Company)Consolidated
      Interim Statements of Changes in Stockholders’ Equity
      (Deficiency)From
      Inception until March 31, 2010(Amounts
      expressed in US Dollars)  Shares
      issued for services rendered
                
                
                100
                
                
                
                100,000
                
                
                
                
                
                
                400
                
                
                
                
                
                
                500Net
      Loss for the period
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (78,645
                )
                
                
                (78,645
                )Balance
      as of December 31, 2008
                
                
                76,524
                
                
                
                76,522,760
                
                
                
                -
                
                
                
                321,337
                
                
                
                (584,881
                )
                
                
                (187,020
                )Reverse
      Stock split 1:100
                
                
                (75,759
                )
                
                
                (75,757,532
                )
                
                
                
                
                
                
                75,759
                
                
                
                
                
                
                
                -Shares
      issued for services rendered
                
                
                100
                
                
                
                100,000
                
                
                
                
                
                
                
                31,900
                
                
                
                
                
                
                
                32,000Purchase
      of SWEG license for shares
                
                
                98,800
                
                
                
                98,800,000
                
                
                
                
                
                
                
                1,756,805
                
                
                
                
                
                
                
                1,855,605Net
      Loss for the Year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (210,769
                )
                
                
                (210,769
                )Balance
      as of December 31, 2009
                
                
                99,665
                
                
                
                99,665,228
                
                
                
                -
                
                
                
                2,185,801
                
                
                
                (795,650
                )
                
                
                1,489,816Net
      Loss for the Year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (50,048
                )
                
                
                (50,048
                )Balance
      as of March 31, 2010
                
                
                99,665
                
                
                
                99,665,228
                
                
                
                -
                
                
                
                2,185,801
                
                
                
                (845,698
                )
                
                
                1,439,768






8
 First National Energy
Corporation
 (Formerly
First National Power Corporation)
 (A
Development Stage Company)
 Condensed
Notes to the Consolidated Interim Financial Statements
 For
the 3 months ended March 31, 2010 (unaudited)
 Amounts
expressed in US Dollars
 NOTES
TO INTERIM FINANCIAL STATEMENTS
 
 The
accompanying unaudited interim financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements.  In the opinion of management, all
adjustments (consisting of all recurring accruals considered necessary for fair
presentation) have been included as necessary in order to make the financial
statements not misleading.  Operating results for the interim periods
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2010. Interim financial statements should be read in
conjunction with the Company’s annual audited financial statements.
  1. 
GENERAL
 
 a) Description
of the Business
 
 First
National Energy Corporation (the Company) was incorporated in the State of
Delaware on November 16, 2000, with the name Capstone International
Corporation.  On March 28, 2004, the Company changed its name to First
National Power Corporation. On February 12, 2009, the Company relocated its
charter to the State of Nevada and changed its name to First National Energy
Corporation. As part of reorganization, the Company increased its authorized
capital to 300 million common shares and effected a 100 for 1 reverse stock
split of its issued and outstanding shares of common stock. The accompanying
financial statements reflect all share data based on the 100 for 1 reverse
common stock split.
 
 The
Company’s business purpose is the provision of wind-driven solutions for power
generation. Current projects for the Company are the completion of power
generation projects from supplemental wind generation technologies.
 
 b) Purchase
of Technology License
 
 On April
20, 2009, the Company entered into a preliminary letter of intent with Boreas
Research Corporation (“Boreas”), a Florida corporation, pursuant to which the
Company would acquire a territorial license to certain rights in alternative
energy technology of Boreas, in exchange for a quantity of newly issued common
shares of the Company. Such letter of intent was superseded by a Technology
License and Stock Purchase Agreement (the “Agreement”) between the Company and
Boreas that was consummated on May 25, 2009 (the “Closing”), at which time the
Company issued the stockholders of Boreas 98,800,000 new restricted and
unregistered common shares of the Company and agreed to pay certain future
royalties to Boreas from net revenues realized by the Company from the
technology license. The consideration issued in the transaction was determined
as a result of arm’s-length negotiations between the parties.
 
 The
preliminary letter of intent was reported by the Company on form 8-K to the
Securities and Exchange Commission (“SEC”) on April 21, 2009, and the Agreement
was annexed to an information statement on form 14-C filed with the SEC in
preliminary and definitive forms on April 22, 2009 and May 4, 2009,
respectively.  The definitive information statement was mailed to the
shareholders of the Company on May 4, 2009.
  9
 First National Energy
Corporation
 (Formerly
First National Power Corporation)
 (A
Development Stage Company)
 Condensed
Notes to the Consolidated Interim Financial Statements
 For
the 3 months ended March 31, 2010 (unaudited)
 Amounts
expressed in US Dollars
  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.
 
 In
exchange for the Company acquiring the technology license from Boreas at the
Closing pursuant to the Agreement (as amended by the Amendment), the
shareholders of Boreas received an aggregate of 98,800,000 new restricted and
unregistered common shares of the Company's common stock. Accordingly, the
Boreas Shareholders now own 99.13% of the Company's 99,665,228 outstanding
shares. No finder’s fees were paid or consulting agreements entered into by the
Company in connection with the transaction.
  The
Company has valued the technology license received from Boreas at the Closing on
the books of the Company at $1,855,605 after consulting with an outside
valuation expert.
 
 Also upon
the Closing, Mr. Peter Wanner, then the sole member of the Company’s board of
directors, appointed Douglas Lindeblom and Gianni Caputo to vacant positions on
the Company’s board of directors, and the new board of directors, as so
constituted, elected the following officers:
 
 Douglas
Lindeblom - Chairman, Chief Executive Officer and President
 Peter
Wanner - Chief Operating Officer, Treasurer and Chief Financial
Officer
 Gianni
Caputo - Vice President and Secretary
 
 Prior to
the transaction, there were no material relationships between the Company and
Boreas, between Boreas and the Company’s affiliates, directors or officers, or
between any associates of Boreas and the Company’s officers or directors. All of
the Company’s transaction liabilities were settled on or immediately following
the Closing.
 
 Upon the
Closing on May 25, 2009, the Company was no longer deemed to be a "shell
company" as defined in Rule 12b-2 under the Securities Exchange Act of 1934 (the
"Exchange Act"). Accordingly, the Company filed an amended current report on
Form 8-K/A with the SEC on May 26, 2009, setting forth the information that
would be required if the Company were filing a general form for registration of
securities on Form 10 under the Exchange Act.
 
 c) Further
Purchase of Technology License
 
 On March
22, 2010, Pavana Power Corporation, a Nevada corporation, the Company’s
wholly-owned subsidiary, acquired an exclusive, territorial 25 year license for
the Republic of India (“India”), from Boreas Research Corporation (‘Boreas”, the
stockholders of whom hold controlling interests in the Company), pursuant to
which the Company’s subsidiary acquired technology rights for India in the
technology of Boreas that maximizes the energy productivity of existing wind
turbines by capturing energy that flows through and underneath existing wind
turbine systems.  The consideration due from the Company’s subsidiary
to Boreas for the license is a deferred cash payment of $600,000, and a future
royalty equal to 5% of the subsidiary’s “EBITDA” (revenues before interest,
taxes, depreciation and amortization) from exploitation of the acquired license.
The transaction was measured at the exchange amount which is the amount agreed
upon between the related parties.
 
 10
  First National Energy
Corporation
 (Formerly
First National Power Corporation)
 (A
Development Stage Company)
 Condensed
Notes to the Consolidated Interim Financial Statements
 For
the 3 months ended March 31, 2010 (unaudited)
 Amounts
expressed in US Dollars
 2. 
GOING CONCERN
 
 The
Company’s financial statements are prepared using accounting principles
generally accepted in the United States of America and applicable to a going
concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business.  However, the Company
has not generated any revenues from its planned principal operations through
March 31, 2010 has recorded losses since inception, has negative working
capital, has yet to achieve profitable operations and expects further losses in
the development of its business.  These conditions raise substantial
doubt about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from this
uncertainty.
  3. 
BASIS OF CONSOLIDATION
  The
consolidated financial statements include the accounts of First National Energy
Corporation and its wholly-owned subsidiary Pavana Power Corporation. All
material inter-company amounts have been eliminated.
 
 4. 
LICENSE FOR SWEG TECHNOLOGY
 2010
                
                
                2009Cost
                
                
                Accumulated
      Amortization
                
                
                Net
      Book Value
                
                
                Net
      Book ValueNorth
      American Technology License
                
                $
                1,855,605
                
                
                $
                176,028
                
                
                $
                1,679,577
                
                
                $
                1,725,967Indian
      Technology License
                
                $
                600,000
                
                
                $
                -
                
                
                $
                600,000
                
                
                $
                -$
                2,455,605
                
                
                $
                176,028
                
                
                $
                2,279,577
                
                
                $
                1,725,967
 
 Amortization
for the next 5 years is estimated to be as follows:
 2010
                
                $
                230,5612011
                
                
                245,5612012
                
                
                245,5612013
                
                
                245,5612014
                
                
                245,561$
                1,212,805
  11
  First National Energy
Corporation
 (Formerly
First National Power Corporation)
 (A
Development Stage Company)
 Condensed
Notes to the Consolidated Interim Financial Statements
 For
the 3 months ended March 31, 2010 (unaudited)
 Amounts
expressed in US Dollars
  5. 
SUBSEQUENT EVENT
  On April
12, 2010, Pavana Power Corporation, a wholly-owned subsidiary of the Company,
entered into a common stock and warrant purchase agreement whereby the purchaser
has subscribed for 1,000,000 units (consisting of one common share and one
warrant) of the subsidiary at a price of $1 per unit.  On April 14,
2010, payment of $100,000 was received pursuant to the subscription of these
units.
 
 
  Page
 12


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





CAUTIONARY
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION





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




Description
of Business





Business
Development





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





As
described in the definitive information statement on Form DEF 14-C filed with
the Securities and Exchange Commission on December 22, 2008, 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, 2008 (a true and complete copy of which is included in
the Form DEF 14-C information statement described above),which had the effect of (1)
implementing a reverse stock split of its issued and outstanding common shares
at the rate of 100 to 1, thereby reducing the number of issued and outstanding
common shares from 76,522,760 to 765,228, with no effect on the number of
authorized common shares; (2) merging the Registrant with and into First
National Power Corporation, a Nevada corporation and a wholly-owned indirect
(second tier) subsidiary of the Registrant, such that First National Energy
Corporation, a Nevada corporation and a wholly-owned direct (first tier)
subsidiary of the Registrant, succeeded the Registrant as a successor issuer of
its registered securities, pursuant to Rule 12g-3 under the Securities Exchange
Act of 1934, and continued the business of the Registrant for all purposes; (3)
exchanging each issued and outstanding share of the Registrant (bearing CUSIP
number 32113F 10 3) on the record date (and after giving effect to the reverse
stock split described above) into one new common share of the successor issuer
(bearing CUSIP number 321129 108); (4) shifting the Registrant’s charter from
the State of Delaware to the State of Nevada; (5) increasing the authorized
capital of the Registrant from 100 million common shares to 300 million common
shares; (6) changing the Registrant’s name from “First National Power
Corporation” to “First National Energy Corporation”; and (7) changing the
Registrant’s stock symbol from FNPR to FNEC.





On April
20, 2009, the Registrant acquired a territorial license to certain rights in
alternative wind energy technology in exchange for 98,800,000 newly issued
common shares of the Registrant, which resulted in a change in control of the
Registrant. The Registrant valued the technology license received in such
transaction at $1,855,605 after consulting with an outside valuation
expert.





In
addition, the Registrant has acquired technology rights to an additional
territory for the licensed technology, and intends to exploit such rights
through a newly formed and wholly-owned subsidiary [see Note 1(c) of
accompanying interim financial statements].





13




Business
of Issuer





Since
acquiring the technology license described above, management of the Registrant
has expended significant time seeking sources of capital to implement its
business plan, which is primarily designed to exploit the licensed technology
throughout the United States and Canada for commercial gain. In addition, the
Registrant has acquired technology rights to an additional territory for the
licensed technology, and intends to exploit such rights through a newly formed
and wholly-owned subsidiary [see Note 1(c) of accompanying interim financial
statements]. The Registrant is also evaluating other alternatives in order to
improve the Registrant's financial condition, including merger and acquisition
opportunities. There is no assurance that the Registrant will be successful in
raising capital or closing any such merger or acquisition
transactions.





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





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





Critical
Accounting Policies and Estimates




The
consolidated financial statements of the Company are prepared in accordance with
accounting principles generally accepted in the United States of America. The
amounts of assets, liabilities, revenues and expenses reported in the Company’s
financial statements are affected by accounting policies, estimates and
assumptions that are necessary to comply with generally accepted accounting
principles. Estimates used in the financial statements are derived from prior
experience, statistical analysis and professional judgments. Actual results may
differ significantly from these estimates and assumptions.




The
Company considers an estimate to be critical if it is material to the financial
statements and it requires assumptions to be made that were uncertain at the
time the estimate was made and changes in the estimate are reasonably likely to
occur from period to period.




Recently
Issued Accounting Pronouncements





See Note
1, Recently Issued Accounting
Pronouncements, of the Notes to the accompanying interim financial
statements, included in Item 1 of this report, for recently issued
accounting pronouncements.





Plan
of Operation





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. In addition, the
Registrant has acquired technology rights to an additional territory for the
licensed technology, and intends to exploit such rights through Pavana Power
Corporation, a Nevada corporation, a newly formed and wholly-owned subsidiary
that was organized on April 21, 2011 [see Note 1(c) of accompanying interim
financial statements]. 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.





Results
of Operations





Three
Months Ended March 31, 2010, compared to the Three Months Ended
March 31, 2009




Assets





Licensed
technology assets, net of amortization, increased from $1,725,967 at December
31, 2009, to $2,279,577, as a result of a reduction of $46,390 through
amortization and an increase of $600,000 through the acquisition of an
additional technology license more particularly described in Note 1(c) of the
accompanying financial statements.





Revenues





The
Company did not generate any operating revenues in the three months ended March
31, 2010 or in the three months ended March 31, 2009.










14




Costs and
Expenses





Amortization
of Acquired Technology





Amortization
of the Company’s technology assets increased by $46,390 during the three months
ended March 31, 2010 to $46,390 as compared to $Nil during the comparable
period in 2009. The increase was solely due to the fact that no technology
assets were held by the Company during the prior period.





Amortization
for the next 5 years is estimated to be as follows:




2010
              
              $
              230,5612011
              
              
              245,5612012
              
              
              245,5612013
              
              
              245,5612014
              
              
              245,561$
              1,212,805


General
and Administrative





General
and administrative expenses decreased to $3,670 during the three months ended
March 31, 2010, as compared to $10,237 during the comparable period in
2009. This decrease was primarily due to a difference in the nonrecurring
professional fees and filing fees incurred in the prior period in anticipation
of the Company’s reorganization as more particularly described
above.





Liquidity
and Capital Resources




Cash and
cash equivalents were $28,003 at March 31, 2010, compared to $36,730 at
December 31, 2009.





The
Company is a development stage company and has not generated any operating
revenues as of March 31, 2010. In addition, the Company will continue to
incur net losses and cash flow deficiencies from operating activities for the
foreseeable future.





Based on
its cash flow projections, the Company will need additional financing to carry
out its planned business activities and complete its plan of operations through
December 31, 2010. At the Company’s present level of activities, the
Company’s cash and cash equivalents are believed, at this time, to be sufficient
to fund its operations only into the fourth quarter of this current fiscal year.
Accordingly, there is substantial doubt as to the Company’s ability to continue
as a going concern by the end of its current fiscal year.





Much of
the Company’s ability to raise additional capital or secure a strategic
collaboration for the financing of its continued operations and product
development will depend substantially on the successful outcome of its efforts
to negotiate joint venture with wind power industry participants, the results of
which will not be available until June or July of 2010. Since the Company is
unable to fund its operations through December 31, 2010, it is making every
effort to secure capital commitments for funds at this time. The Company is also
currently seeking to raise funds through corporate collaboration and
sub-licensing arrangements in connection with its ongoing and long-term
operations. The Company does not know whether additional financing will be
available when needed or, if available, will be on acceptable or favorable terms
to it or its stockholders.





The
Company’s independent registered public accounting firm expressed substantial
doubt about the Company’s ability to continue as a going concern in the audit
report on the Company’s audited financial statements for the fiscal year ended
December 31, 2009 included in the 2009 10-K.





Net cash
used in operating activities was ($8,727) for the three months ended
March 31, 2010 as compared to ($19,808) during the comparable period in
2009. The increase in net cash used in operations was primarily due to a
difference in the nonrecurring professional fees and filing fees incurred in the
prior period in anticipation of the Company’s reorganization as more
particularly described above.




The
Company had no net cash used in or provided by financing activities during the
three months ended March 31, 2010 and 2009.





ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.(Not
applicable)





ITEM
4. CONTROLS AND PROCEDURES.


As of
March 31, 2010, 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 Registrant’s chief executive and chief financial
officer. Based on and as of the date of such evaluation, the aforementioned
officer has concluded that the Registrant’s disclosure controls and procedures
were not effective.


The
Registrant also maintains a system of internal accounting controls that is
designed to provide assurance that assets are safeguarded and that transactions
are executed in accordance with management’s authorization and properly
recorded. This system is continually reviewed and is augmented by written
policies and procedures, the careful selection and training of qualified
personnel and an internal audit program to monitor its effectiveness. During the
interim period ended March 31, 2010, there were no changes to this system of
internal controls or in other factors that could significantly affect those
controls.




15




PART
II—OTHER INFORMATION





ITEM
1.   LEGAL PROCEEDINGS


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





ITEM
2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS.





The
Registrant has not sold any unregistered equity securities during the period
covered by this report.





ITEM
3.   DEFAULTS UPON SENIOR SECURITIES.
 Not
Applicable.





ITEM
4.   REMOVED AND RESERVED.


ITEM
5.   OTHER INFORMATION.
 (Not
Applicable)








ITEM 6.  
EXHIBITS.





Exhibit
      No.
            
            Document31*
            
            Sect.
      302 Certification Statement of the Chief Executive Officer and Chief
      Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
      200232*
            
            Sect.
      906 Certification Statement of the Principal Executive Officer and
      Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act Of
      2002





*Filed herewith











16





SIGNATURES





Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.








FIRST
      NATIONAL ENERGY CORPORATIONDated:
      May 14, 2010
              By:
              /s/ Doug
      LindeblomDoug
      Lindeblom, Chief Executive Officer


17