UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended: December 31, ~~2016~~2017

Commission File Number: 001-37696

FIRST NATIONAL ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

Nevada

66-0349372

(State of other jurisdiction of

incorporation or organization)

(IRS Employer
Identification No.)

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 [ ] No [X]

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 [ ] No [X]

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. Yes [X] No [ ]

Indicate by check mark whether 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes [X] No

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

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

Large accelerated file [ ]		Accelerated filer [ ]
Non-Accelerated filer [ ]	Smaller reporting company [X]	Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]

As of December 31, ~~2016~~2017, the last day of registrant’s fiscal year, the aggregate market value of the registrant’s ~~common~~ common stock, $0.001 par value, held by non-affiliates, computed by reference to the closing sale price of the common stock reported on the OTC Pink Sheets as of December 31, ~~2016~~2017, was $6,702,044 For purposes of the above statement only, all directors, ~~executive~~ executive officers and 10% shareholders are assumed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of shares outstanding of the registrant’s Common Stock, $0.001 par value, as of ~~May~~June 198, ~~2017~~2018 was 99100,~~915~~225,228.

Documents Incorporated By Reference None

	TABLE OF CONTENTS
PART I
ITEM 1.	BUSINESS	4
ITEM 1A.	RISK FACTORS	6
ITEM 1B.	UNRESOLVED STAFF COMMENTS	16
ITEM 2.	PROPERTIES	16
ITEM 3.	LEGAL PROCEEDINGS	16
ITEM 4.	MINE SAFETY DISCLOSURES	16
PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	16
ITEM 6.	SELECTED FINANCIAL DATA	1718
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	18
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	2322
ITEM 8.	CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	2322
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	23
ITEM 9A.	CONTROLS AND PROCEDURES	23
ITEM 9B.	OTHER INFORMATION	24
PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE	24
ITEM 11.	EXECUTIVE COMPENSATION	27
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	2928
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	30
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	30
PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	31
	SIGNATURES	3332

CERTIFICATION PURSUANT TO SECTION 302 (a) OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

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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.

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PART I

ITEM 1. BUSINESS

Business Development

First National Energy Corporation (“Company”) 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 ( SEC ~~File~~ File No. 333-62588, filed on June 8, 2001). The Company’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 Company 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.

On February 12, 2009, the Company effected a reorganization pursuant to that certain Agreement and Plan of Merger to Form Holding Company, dated as of December 10, 2009, 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, ; (2) merging the Company with and into First National Power Corporation, a Nevada corporation and a wholly-owned indirect (second tier) subsidiary of the Company, such that First National Energy Corporation, a Nevada corporation and a wholly-owned direct (first tier) subsidiary of the Company, succeeded the Company 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 Company for all purposes; (3) exchanging each issued and outstanding share of the Company on the record date (and after giving effect to the reverse stock split described above) into one new common share of the successor issuer; (4) shifting the Company’s charter from the State of Delaware to the State of Nevada; (5) increasing the authorized capital of the Company from 100 million common shares to 300 million common shares; (6) changing the Company’s name from “First National Power Corporation” to “First National Energy Corporation”; and (7) changing the Company’s stock symbol from FNPR to FNEC.

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

On April 20, 2009, the Company acquired a territorial license to certain rights in alternative wind energy technology in exchange for 98,800,000 newly issued common shares of the Company, which resulted in a change in control of the Company. 2009. As a result of such transaction, the Company was after such date no longer deemed to be a “shell company” as defined in Rule 12b-2 under the Securities Exchange Act of 1934.

On February 3, 2016, the Company entered into a Memorandum of Understanding with Sergey Bolotov and affiliates. Sergey Bolotov designed, patented, developed, and manufactured the VAWT/VRTB/Bolotov Rotor wind turbine and agreed to transfer all technical and intellectual related property related to the VAWT/VRTB/Bolotov Rotor wind turbine to the Company. In addition, Sergey Bolotov agreed to assign all patents, designs, drawings, blueprints, plans, images, promotional material, websites, and anything else that could be useful in marketing and distributing the VRTB technology (collectively, the “Assets”).

As compensation for the Assets, Sergey Bolotov will be paid ten percent (10%) of the Company profits arising from the Assets and realized by the Company, provided that Sergey Bolotov continues to consult with the Company. In addition, Sergey Bolotov will receive a signing bonus of One Million Dollars ($1,000,000) solely derived from Eleven percent (11%) of the initial profits realized by the Company from the Assets. Further, Sergey Bolotov will be appointed as a member of the Board of Directors and will be issued One Hundred Thousand shares of Company common stock upon such appointment. As of the date of this filing, Mr. Bolotov has not been appointed. Subsequently, Sergey Bolotov will consult with the Company and, upon the Company receiving sufficient funding, Sergey Bolotov will receive a consulting fee of Eight Thousand Dollars ($8,000 Canadian) monthly as well research and development facility with support staff.

On February 5, 2016, pursuant to the terms and conditions of the Memorandum of Understanding, the Company and Sergey Bolotov agreed to accept the Memorandum of Understanding as binding and the Board of Directors of the Company ratified the Memorandum of Understanding as binding on February 9, 2016.

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4. Business of Issuer

(i) Principal products or services and their markets.

Since acquiring the technology license described above, management of the Company 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 Company is also evaluating other alternatives in order to improve the Company’s financial condition, including merger and acquisition opportunities. There is no assurance that the Company will be successful in raising capital or closing any such merger or acquisition transactions.

(ii) Distribution methods of the products or services.

The Company 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 Company are the subject of intense research and development efforts by the Company, with the object of achieving optimum performance, facilitating large scale manufacturing at multiple locations, and protecting the Company’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 Company’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 Company 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 Company 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.

On April 21, 2009, the Company entered a Technology License and Stock Purchase Agreement (the “Agreement”), between the Company and Boreas Research Corporation (“BRC”), pursuant to which BRC granted the Company a license (the “License”) to manufacture certain alternative energy systems incorporating proprietary technology owned by BRC. .

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

No government approval is required for the Company’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.

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(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 Company, please see “Risk Factors-RISKS RELATED TO WIND ENERGY INDUSTRY” below.

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

Research and development activities for the fiscal year ending December 31, 2016 and 2015 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 Company to be material.

(xii) Number of total employees and number of full-time employees. The Company has no paid employees nor any full-time employees, as the directors and officers of the Company are currently performing their services without compensation.

(xiii) Recent Events. The development of the technology made a major advance when 2 of the units were imported into Canada during the year. The one unit is being used for training and further development while the second unit was installed at a potential client’s site where was to power the clients assets and located in an area remote from a power source. The demonstration unit performed well all through the Canadian winter as well as some of the wettest periods in Canadian history.

5. Reports to Security Holders

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

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the Internet at the website at http://www.sec.gov. The public may also read and copy any document we file with the SEC at its Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, on official business days during the hours of 10:00 am to 3:00 pm. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

ITEM 1A. RISK FACTORS.

The risk factors required pursuant to Regulation S-K, Item 503(c) are not required for smaller reporting companies. Accordingly, the Company has determined to provide particular risk factors at this time. The risks and uncertainties described below are not the only ones facing us. Other events that we do not currently anticipate or that we currently deem immaterial also may affect our results of operations and financial condition. If any events described in the risk factors actually occur, our business, operating results, prospects and financial condition could be materially harmed. In connection with the forward looking statements that appear elsewhere in this annual report, you should also carefully review the cautionary statement referred to under “Special Note Regarding Forward Looking Statements.”

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SHOULD ONE OR MORE OF THE FOREGOING RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS OF OUR BUSINESS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR PLANNED 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.

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The Company has not demonstrated that it can:

	●	manufacture products in a manner that will enable it to be profitable;
	●	establish many of the business functions necessary to operate, including sales, marketing, manufacturing, administrative and financial functions;
	●	establish appropriate financial controls;
	●	respond effectively to competitive pressures; or
	●	raise the capital necessary to implement its business plan.

FIRST NATIONAL ENERGY CORPORATION HAS INCURRED OPERATING LOSSES SINCE INCEPTION.

Since its inception in 2000, the Company has incurred losses every quarter. The extent of the Company’s future operating losses and the timing of profitability are highly uncertain, and it may never achieve or sustain profitability. The Company has incurred a net loss for the twelve months ended December 31, 2016 of $12,364. At December 31, 2016, the Company had an accumulated deficit of $911,451 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.

OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM HAS EXPRESSED SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.

Our independent registered public accounting firm issued its report dated May 19, 2017 in connection with the audit of our financial statements as of December 31, 2016, which included an explanatory paragraph in Note 2 describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern. If we are not able to continue as a going concern, it is likely that holders of our common stock will lose all of their investment. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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.

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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.

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

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

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

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

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

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

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

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

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

●	the issuance of new equity securities pursuant to its recent issuance of shares for a technology license, or a future offering;
●	changes in interest rates;
●	competitive developments, including announcements by competitors of new products or services or significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;
●	variations in quarterly operating results;
●	changes in financial estimates by securities analysts;
●	the depth and liquidity of the market for the Company’s common stock;
●	investor perceptions of the Company and the alternative energy industry generally; and
●	general economic and other national conditions.

THE COMPANY’S COMMON STOCK IS CONSIDERED A “PENNY STOCK.”

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

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OUR COMMON STOCK MAY BE CONSIDERED A “PENNY STOCK,” AND THEREBY BE SUBJECT TO ADDITIONAL SALE AND TRADING REGULATIONS THAT MAY MAKE IT MORE DIFFICULT TO SELL.

Our common stock is considered to be a “penny stock.” It does not qualify for one of the exemptions from the definition of “penny stock” under Section 3a51-1 of the Exchange Act. Our common stock is a “penny stock” because it meets one or more of the following conditions (i) the stock trades at a price less than $5.00 per share; (ii) it is not traded on a “recognized” national exchange or (iii) it is not quoted on the NASDAQ Global Market, or has a price less than $5.00 per share. The principal result or effect of being designated a “penny stock” is that securities broker-dealers participating in sales of our common stock are subject to the “penny stock” regulations set forth in Rules 15-2 through 15g-9 promulgated under the Securities Exchange Act. For example, Rule 15g-2 requires 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 at least two business days before effecting any transaction in a penny stock for the investor’s account. 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 and time consuming for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.

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FINRA SALES PRACTICE REQUIREMENTS MAY LIMIT A SHAREHOLDER’S ABILITY TO BUY AND SELL OUR COMMON SHARES.

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common shares, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

RULE 144 SALES IN THE FUTURE MAY HAVE A DEPRESSIVE EFFECT ON THE COMPANY’S STOCK PRICE AS AN INCREASE IN SUPPLY OF SHARES FOR SALE, WITH NO CORRESPONDING INCREASE IN DEMAND WILL CAUSE PRICES TO FALL.

All of the outstanding shares of common stock held by the present officers, directors, and affiliate stockholders are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, as amended. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Securities Act of 1933 and as required under applicable state securities laws. Rule 144 provides in essence that a person who is an affiliate or officer or director who has held restricted securities for six months may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed the greater of 1.0% of a Company’s issued and outstanding common stock. There is no limit on the amount of restricted securities that may be sold by a non-affiliate after the owner has held the restricted securities for a period of six months if the Company is a current reporting company under the Securities Exchange Act of 1934. A sale under Rule 144 or under any other exemption from the Securities Act of 1933, if available, or pursuant to subsequent registration of shares of common stock of present stockholders, may have a depressive effect upon the price of the common stock in any market that may develop. In addition, if we are deemed a shell company pursuant to Section 12(b)-2 of the Act, our “restricted securities”, whether held by affiliates or non-affiliates, may not be re-sold for a period of 12 months following the filing of a Form 10 level disclosure or registration pursuant to the Securities Act of 1933.

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FAILURE TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH SECTION 404 OF THE SARBANES-OXLEY ACT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND OPERATING RESULTS.

It is time consuming, difficult and costly for us to develop and maintain the internal controls, processes and reporting procedures required by the Sarbanes-Oxley Act, and as our business develops, we may need to hire additional financial reporting, internal auditing and other finance staff in order to remain compliant. The cost of compliance will adversely affect our financial results, while, if we are unable to comply, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires of publicly traded companies.

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If we fail to comply in a timely manner with the requirements of Section 404 of the Sarbanes-Oxley Act regarding internal control over financial reporting or to remedy any material weaknesses in our internal controls that we may identify, such failure could result in material misstatements in our financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our common stock.

Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC regulations, we are required to prepare assessments regarding internal controls over financial reporting and furnish a report by our management on our internal control over financial reporting. Failure to achieve and maintain an effective internal control environment or complete our Section 404 certifications could have a material adverse effect on our stock price.

In addition, in connection with our on-going assessment of the effectiveness of our internal control over financial reporting, we may discover “material weaknesses” in our internal controls as defined in standards established by the Public Company Accounting Oversight Board, or the PCAOB. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The PCAOB defines “significant deficiency” as a deficiency that results in more than a remote likelihood that a misstatement of the financial statements that is more than inconsequential will not be prevented or detected.

In the event that a material weakness is identified, upon receiving sufficient financing or generating sufficient revenues, we will employ qualified personnel and adopt and implement policies and procedures to address any such material weaknesses. However, the process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you that the measures we will take will remediate any material weaknesses that we may identify or that we will implement and maintain adequate controls over our financial process and reporting in the future.

Any failure to complete our assessment of our internal control over financial reporting, to remediate any material weaknesses that we may identify or to implement new or improved controls, or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of the periodic management evaluations of our internal controls and, in the case of a failure to remediate any material weaknesses that we may identify, would adversely affect the annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting that are required under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

The systems of internal controls and procedures that we have developed and implemented to date are adequate in a research and development business/. The current transaction volume and limited transaction channels mean that operating management, financial management, board members and auditor can, and do, efficiently perform a very extensive and detailed transaction review to ensure compliance with the Company’s established procedures and controls.. If our business grows rapidly, we may not be able to keep up with recruiting and training personnel, and enhancing our systems of internal control in line with the growth in transaction volumes and compliance risks which could result in loss of assets, profit, and ability to manage the daily operations of our Company.

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PUBLIC DISCLOSURE REQUIREMENTS AND COMPLIANCE WITH CHANGING REGULATION OF CORPORATE GOVERNANCE POSE CHALLENGES FOR OUR MANAGEMENT TEAM AND RESULT IN ADDITIONAL EXPENSES AND COSTS WHICH MAY REDUCE THE FOCUS OF MANAGEMENT AND THE PROFITABILITY OF OUR COMPANY.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated thereunder, the Sarbanes-Oxley Act and SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the U.S. public markets. Our management team will need to devote significant time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.

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, 86.02% of the Company’s outstanding voting stock. As a result, the principal shareholders of Boreas Research Corporation, the Company’s technology licensor, will possess significant influence over the Company, giving them the ability, among other things, to elect a majority of the Company’s Board of Directors and to approve significant corporate transactions. Such stock ownership and control may also have the effect of delaying or preventing a future change in control of the Company, impeding an acquisition, consolidation, takeover or other business combination or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company.

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

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

ANTICIPATED LIQUIDITY AND CAPITAL RESOURCES

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

RISKS RELATED TO WIND ENERGY INDUSTRY

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

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

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

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

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

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

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

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

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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.

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.

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

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

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

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

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

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

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SHOULD ONE OR MORE OF THE FOREGOING RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR PLANNED

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Item 1B. Unresolved Staff Comments

This Item is not applicable to us as we are not an accelerated filer, a large accelerated filer, or a well-seasoned issuer.

ITEM 2. PROPERTIES.

The Company maintains office space in Georgetown, Ontario Canada. There is no cost for the use of the office as it is provided as a courtesy by a director. It currently does not own any equipment at that location.

ITEM 3. LEGAL PROCEEDINGS.

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

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

PART II

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

Market Information.

Market Information

Our common stock is listed on the OTC Markets under the symbol “FNEC”. For the periods indicated, the following table sets forth the high and low bid prices per share of common stock, as reported by the OTC Markets. These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions. The following table sets forth the high and low bid quotations for our common stock for each quarter during the past two fiscal years as reported by the OTC Markets.

Year ended December 31, 2016	High		Low
Year ended December 31, 2017	High		Low
4th quarter, ended December 31, 2016	$	1.15	$	0.40
4th quarter, ended December 31, 2017	$	1.00	$	0.55
3rd quarter, ended September 30, 2016	$	1.40	$	0.70
3rd quarter, ended September 30, 2017	$	0.75	$	0.75
2nd quarter, ended June 30, 2016	$	1.49	$	0.70
2nd quarter, ended June 30, 2017	$	0.85	$	0.60
1st quarter, ended March 31, 2016	$	1.50	$	0.90
1st quarter, ended March 31, 2017	$	1.00	$	0.40

Year ended December 31, 2015	High		Low
Year ended December 31, 2016	High		Low
4th quarter, ended December 31, 2015	$	1.40	$	0.08
4th quarter, ended December 31, 2016	$	1.15	$	.40
3rd quarter, ended September 30, 2015	$	0.70	$	0.60
3rd quarter, ended September 30, 2016	$	1.40	$	.70
2nd quarter, ended June 30, 2015	$	0.03	$	0.03
2nd quarter, ended June 30, 2016	$	1.49	$	.70
1st quarter, ended March 31, 2015	$	0.03	$	0.03
1st quarter, ended March 31, 2016	$	1.50	$	.90

Holders.

At December 31, ~~2016~~2017, there were approximately 28 holders of the Registrant’s common stock.

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Dividend Policy.

As of December 31, ~~2016~~2017, the Company 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 Company to pay dividends in the future.

Securities authorized for issuance under equity compensation plans.

	(1)	The Registrant maintained a stock incentive plan, entitled “2005 Stock Incentive Plan for Employees and Consultants” and had 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. Under this plan, 830,000 shares have been issued before the plan expired in 2015. All options pursuant to this plan have expired.
	(2)	In February ~~2016~~2017, the Company adopted the ~~2016~~2017 Omnibus Equity Compensation Plan. 5,000,000 shares of common stock were reserved pursuant to the Omnibus Equity Compensation Plan. As at December 31, 2017, the Company has not yet issued any shares of common stock under this plan.
	(3)	The following information is provided in accordance with Item 201(d) (Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters) of Regulation S-K:

Equity Compensation Plan Information

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans [excluding securities reflected in column (a)] (c)
Equity compensation plans approved by security holders		None	N/A		None
Equity compensation plans not approved by security holders		5,000,000	N/A		5,000,000 Common Shares
Shares expired with the plan itself		None	N/A		-0-)
Total		5,000,000	N/A		5,000,000 Common Shares

Sales of Unregistered Securities

During the ~~2016~~2017 Fiscal year, there were nothe following capital transactions.

	-	January 27, 2017, the Company closed a private placement of 50,000 shares sold at a price of $0.50 per share
	-	December 1, 2017, the Company closed a private placement of 30,000 shares sold at a price of $0.50 per share
	-	December 5, 2017, the Company issued 250,000 shares to a consultant who has been instrumental in the development of new business for the Company

Issuer Purchases of Equity Securities

None.

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ITEM 6. SELECTED FINANCIAL DATA

Not required under Regulation S-K for “smaller reporting companies.” There are no financial data which, if selected, would highlight any significant trends in the registrant’s financial condition and results of operations.

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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 A 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 effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Plan of Operation in the Next Twelve Months

Product Development

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

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

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

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

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Locate Suitable Administrative and Assembly Facilities

We plan to move to a new facility in fiscal 2017 in order to accommodate our operations and plans for expansion. We are currently seeking office and assembly/test space where we can perform testing and final assembly of our supplemental wind energy systems. Our site selection criteria will include available tax credits and incentives.

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

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

Sales and Distribution Strategy

Our goal is for our supplemental wind energy systems to become leading products in the wind power marketplace in North America and internationally. In order to achieve our goal, we intend to increase awareness of our products with potential customers, who we anticipate will primarily be those who operate or are planning the development of significant wind energy resources. We expect, but cannot guarantee, 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 intent is to produce and ship 25 supplemental wind energy systems during the fiscal year ending December 31, 2017. 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. No assurances can be provided that we will meet our objectives.

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.

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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.

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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 2017 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.

Sergey Bolotov and affiliates

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.

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*	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, 2016 and 2015

Liquidity and Capital Resources

	31-Dec-16			31-Dec-15			31-Dec-14			31-Dec-13
	31-Dec-17			31-Dec-16			31-Dec-15			31-Dec-14			31-Dec-13
Income	-	-		-	-		-	-		-	-			-
Administration Expenses		12176,~~364~~676			2212,~~612~~364			1222,~~092~~612			1512,~~347~~092			15,347
Development Expenses
Net Loss		12176,~~364~~676			2212,~~612~~364			1222,~~092~~612			1512,~~347~~092			15,347
		31-Dec-16			31-Dec-15			31-Dec-14			31-Dec-13
		31-Dec-17			31-Dec-16			31-Dec-15			31-Dec-14			31-Dec-13
Current Assets		~~1,059~~644			1,~~937~~059			21,~~437~~937			12,~~296~~437			1,296
Current Liabilities		709,573			698,087			675,775			662,542
Current Liabillities		725,834			709,573			698,087			675,775			662,542
Resulting Working Capital Deficit		(708,514	)		(696,150	)		(673,338	)		(661,246	)
Resulting Working Capital		(725,190	)		(708,514	)		(696,150	)		(673,338	)		(661,246	)

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.

Page │ 21

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.

Page...21

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-16

31-Dec-15

31-Dec-14

31-Dec-13

31-Dec-17

31-Dec-16

31-Dec-15

31-Dec-14

31-Dec-13

Net Cash used in activities

(1560,~~761~~014

)

(3415,~~259~~761

)

2(34,~~908~~259

)

~~(18~~2,~~847~~908

)

(18,847

)

Net cash from financing

1459,~~883~~599

3314,~~959~~883

(133,~~767~~959

)

17(1,~~144~~767

)

17,144

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 Company’s most critical accounting policies include the use of estimates in the preparation of financial statements. The methods, estimates and judgments the Company uses in applying these most critical accounting policies have a significant impact on the results the Company reports in its financial statements.

The preparation of these financial statements requires the Company 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 Company evaluates these estimates, including those related to revenue recognition and concentration of credit risk. The Company 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.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Page │ 22

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

Not required for smaller reporting companies.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements as of and for the year ended December 31, 2016 with comparative data for December 31, 2015 are presented in a separate section of this report following Item 14.

Page...22

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

None

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

(a) Evaluation of disclosure controls and procedures

As of December 31, 2016, 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, 2016, there were no changes to this system of internal controls or in other factors that could significantly affect those controls.

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.

Page │ 23

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

In connection with the preparation of this Annual Report on Form 10-K for the year’s ended December 31, 2016, and 2015 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.

Page...23

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.

(b) Changes in internal control over financial reporting

There were no changes in our internal controls over financial reporting that occurred during the year ended December 31, ~~2016~~2017 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

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

Executive Officers and Directors

Set forth below is information regarding our executive officers and directors as of December 31, ~~2016~~2017

Gregory Sheller	59	60	~~Director, Chief Executive Officer, Chairman of the Board~~	Director, Chief Executive Officer, Chairman of the Board
Peter Wanner	64	65	~~Director, Chief Financial Officer~~	Director, Chief Financial Officer
Gianni Caputo	36	37	~~Director, Vice President, Secretary~~	Director, Vice President, Secretary

GREGORY SHELLER - Director, Chairman of the Board of Directors, Chief Executive Officer and President of the Company. Mr. Sheller is and for the past ~~five~~six 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.

Page │ 24

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

Mr. Wanner is a qualified accountant certified in Canada and Ontario and for the past 2324 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. :

Page...24

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 36, has served as Project and Kiosk Integration Manager of Aareas Interative, Inc., 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.

Family Relationships

There are no family relationships among our executive officers and directors.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent (10%) of our outstanding Common Stock, or the Reporting Persons, to file with the SEC initial reports of ownership on Form 3 and reports of changes in ownership of Common Stock on Forms 4 or 5. Such persons are required by SEC regulation to furnish us with copies of all such reports they file. Based solely on a review of Forms 3 and 4 furnished to us by the Reporting Persons or prepared on behalf of the Reporting Persons by the Company and on written representations from certain Reporting Persons that no Forms 5 were required, the Company believes that the Reporting Persons have complied with reporting requirements applicable to them.

Conflicts of Interest

Members of our management are associated with other firms involved in a range of business activities. Consequently, there are potential inherent conflicts of interest in their acting as officers and directors of our company. Although the officers and directors are engaged in other business activities, we anticipate they will devote an important amount of time to our affairs.

Our officers and directors are now and may in the future become shareholders, officers or directors of other companies, which may be formed for the purpose of engaging in business activities similar to ours. Accordingly, additional direct conflicts of interest may arise in the future with respect to such individuals acting on behalf of us or other entities. Moreover, additional conflicts of interest may arise with respect to opportunities which come to the attention of such individuals in the performance of their duties or otherwise. Currently, we do not have a right of first refusal pertaining to opportunities that come to their attention and may relate to our business operations.

Page │ 25

Our officers and directors are, so long as they are our officers or directors, subject to the restriction that all opportunities contemplated by our plan of operation which come to their attention, either in the performance of their duties or in any other manner, will be considered opportunities of, and be made available to us and the companies that they are affiliated with on an equal basis. A breach of this requirement will be a breach of the fiduciary duties of the officer or director. If we or the companies with which the officers and directors are affiliated both desire to take advantage of an opportunity, then said officers and directors would abstain from negotiating and voting upon the opportunity. However, all directors may still individually take advantage of opportunities if we should decline to do so. Except as set forth above, we have not adopted any other conflict of interest policy with respect to such transactions.

Page...25

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.

Page │ 26

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

Page...26

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. Mr. Sheller and Peter Wanner are the Registrant’s audit committee.

Code of Ethics

The Registrant has adopted a Code of Ethics (filed with the Annual report on Form 10-K for the year ended December 31, 2016).

ITEM 11. EXECUTIVE COMPENSATION.

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

SUMMARY COMPENSATION TABLE

Summary Compensation Table

The following table sets forth, for the fiscal years ended December 31, 2016 and 2015, the aggregate compensation awarded to, earned by or paid to our Chief Executive Officer and our two most highly compensated officers (other than the Chief Executive Officer), who were serving as executive officers as of December 31, 2016, or the Named Executive Officers.

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		~~2016~~2017	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
		2015	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
		2016	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Peter Wanner, Chief Financial Officer		~~2016~~2017	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
		2015	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
		2016	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Gianni Caputo, Vice President		~~2016~~2017	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
		2015	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
		2016	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0

Page │ 27

Outstanding Equity Awards at Fiscal Year End

There were no outstanding equity awards held by our Named Executive Officers as of December 31, ~~2016~~2017:

Options Exercises and Stocks Vested

There were no options exercised and stocks vested as at December 31, ~~2016~~2017.

Page...27

Grants of Plan-Based Awards

There were no grants of plan-based awards as at December 31, ~~2016~~2017.

Non-Qualified Deferred Compensation

As at December 31, ~~2016~~2017, the Company had no formalized deferred compensation plan.

Golden Parachute Compensation

As at December 31, ~~2016~~2017, the Company had no arrangements in place relating to the termination of employees.

Compensation of Directors

The Company, as of December 31, ~~2016~~2017, did not compensate Directors.

Pension Benefits

As of December 31, ~~2016~~2017, the Company had no pension or retirement plans.

Equity Compensation Plan Information

There were no grants under any equity compensation plan as of December 31, ~~2016~~2017.

Page │ 28

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

The following table sets forth information regarding the beneficial ownership of shares of the Registrant’s common stock as of December 31, ~~2016~~2017 (99100,~~865~~195,228 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)		~~Amount and Nature of Beneficial Ownership(1)~~		Percent of Class		~~Percent of Class~~
Common	Frank Cavicchia , 1551 Second Street, Sarasota FL 34236	~~1551 Sarasota~~	85,462,000		~~85,462,000~~	85.30	%		~~85.58~~	%
Common	Gregory Sheller, ~~Second~~1551Second Street Sarasota, FL 34236	~~1551 Sarasota~~	40,000		~~40,000~~	0.04	%		~~0.04~~	%
Common	Gianni Caputo, 1551 Second Street Sarasota FL 34236	~~1551 Sarasota~~	296,400		~~296,400~~	0.30	%		~~0.30~~	%
Common	Peter Wanner, 44 Greystone Crescent, Georgetown, ON Canada ~~L7G1~~L7G G91G9		165,000		~~165,000~~	0.17	%		~~0.17~~	%
Common	Directors and officers as a group		85,963,400		~~85,963,400~~	85.8	%		~~86.08~~	%

(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.

Page...28

DESCRIPTION OF SECURITIES

The following statements relating to the capital stock set forth the material terms of our securities; however, reference is made to the more detailed provisions of, and such statements are qualified in their entirety by reference to, the Articles of Incorporation and the By-laws.

Common Stock

The holders of our Common Stock are entitled to one vote per share on all matters to be voted on by our stockholders, including the election of directors. Our stockholders are not entitled to cumulative voting rights, and, accordingly, the holders of a majority of the shares voting for the election of directors can elect the entire board of directors if they choose to do so and, in that event, the holders of the remaining shares will not be able to elect any person to our board of directors.

Common Stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors, in its discretion, from funds legally available there for and subject to prior dividend rights of holders of any shares of our Preferred Stock which may be outstanding. Upon the Company’s liquidation, dissolution or winding up, subject to prior liquidation rights of the holders of our Preferred Stock, if any, the holders of our Common Stock are entitled to receive on a pro rata basis our remaining assets available for distribution. Holders of the Company’s Common Stock have no preemptive or other subscription rights, and there are no conversion rights or redemption or sinking fund provisions with respect to such shares. All outstanding shares of the Company’s Common Stock are, fully paid and not liable to further calls or assessment by the Company.

Page │ 29

Dividends

Dividends, if any, will be contingent upon our revenues and earnings, if any, capital requirements and financial conditions. The payment of dividends, if any, will be within the discretion of our Board of Directors. We presently intend to retain all earnings, if any, for use in its business operations and accordingly, the Board of Directors does not anticipate declaring any dividends prior to a business combination.

Indemnification of Directors and Officers.

Under the Nevada General Corporation Law, we can indemnify our directors and officers against liabilities they may incur in such capacities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Our amended and restated articles of incorporation provide that, pursuant to Nevada law, our directors shall not be liable for monetary damages for breach of the directors’ fiduciary duty of care to us and our stockholders. This provision in the articles of incorporation does not eliminate the duty of care, and in appropriate circumstances equitable remedies such as injunctive or other forms of non-monetary relief will remain available under Nevada law. In addition, each director will continue to be subject to liability for breach of the director’s duty of loyalty to us or our stockholders, for acts or omissions not in good faith or involving intentional misconduct or knowing violations of law, for any transaction from which the director directly or indirectly derived an improper personal benefit, and for payment of dividends or approval of stock repurchases or redemptions that are unlawful under Nevada law. The provision also does not affect a director’s responsibilities under any other law, such as the federal securities laws or state or federal environmental laws.

Page...29

Our bylaws, as amended, provide for the indemnification of our directors and officers to the fullest extent permitted by the Nevada General Corporation Law. We are not, however, required to indemnify any director or officer in connection with any (a) willful misconduct, (b) willful neglect, or (c) gross negligence toward or on behalf of us in the performance of his or her duties as a director or officer. We are required to advance, prior to the final disposition of any proceeding, promptly on request, all expenses incurred by any director or officer in connection with that proceeding on receipt of any undertaking by or on behalf of that director or officer to repay those amounts if it should be determined ultimately that he or she is not entitled to be indemnified under our bylaws or otherwise.

We have been advised that, in the opinion of the SEC, any indemnification for liabilities arising under the Securities Act of 1933 is against public policy, as expressed in the Securities Act, and is, therefore, unenforceable.

Amendment of our Bylaws

Our bylaws may be adopted, amended or repealed by the affirmative vote of a majority of our outstanding shares. Subject to applicable law, our bylaws also may be adopted, amended or repealed by our Board of Directors.

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:

2017: $17,000

2016: $17,000

2015: $8,000

Page │ 30

(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.

2017: $-0-

2016: $-0-

2015: $-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.

2017: $-0-

2016: $-0-

2015: $-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.

2017: $-0-

2016: $-0-

2015: $-0-

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

(6) Not applicable.

Page...30

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, ~~2016~~2017 and ~~2015~~2016

Consolidated Statements of Operations and Comprehensive Loss for the Years ended December 31, ~~2016~~2017 and ~~2015~~2016

Consolidated Statements of Stockholders’ Equity (Deficiency) for the years ended December 31, ~~2016~~2017 and ~~2015~~2016

Consolidated Statements of Cash Flows for the years ended December 31, ~~2016~~2017 and ~~2015~~2016

Notes to Consolidated Financial Statements for the years ended December 31, ~~2016~~2017 and ~~2015~~2016

(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
2.1 (7)		Memorandum of Understanding between First National Energy Corporation and Serge Bolotov, dated February 3, 2016, accepted as binding February 5, 2016.
3.1(1)		Articles of Incorporation
3.2 (4)		Articles of Incorporation (Nevada)
3.2(1)		Bylaws
4.1(2)		2005 Stock Incentive Plan For Employees And Consultants (2)
4.2(8)		2016 Omnibus Equity Compensation Plan
10.1(3)		Letter of Intent with Boreas Research Corporation, dated April 17, 2009
10.2(4)		First Amendment Of Technology License And Stock Purchase Agreement with Boreas Research Corporation, dated May 14, 2009
10.3(5)		Novation Agreement with Boreas Research Corporation, dated April 18, 2011.
14.(6)		Financial Code of Ethics
21*		Subsidiaries of the Registrant
31.1*		Sect. 302 Certification
31.2*		Sect. 302 Certification
32.1*		Sect. 906 Certification
32.2*		Sect. 906 Certification

Page │ 31

3.2 (4)		Articles of Incorporation (Nevada)
3.2(1)		Bylaws
4.1(2)		2005 Stock Incentive Plan For Employees And Consultants (2)
4.2(8)		2016 Omnibus Equity Compensation Plan
10.1(3)		Letter of Intent with Boreas Research Corporation, dated April 17, 2009
10.2(4)		First Amendment Of Technology License And Stock Purchase Agreement with Boreas Research Corporation, dated May 14, 2009
10.3(5)		Novation Agreement with Boreas Research Corporation, dated April 18, 2011.
14.(6)		Financial Code of Ethics
21*		Subsidiaries of the Registrant
31.1*		Sect. 302 Certification
31.2*		Sect. 302 Certification
32.1*		Sect. 906 Certification
32.2*		Sect. 906 Certification

	(1)	Incorporated by reference to the Company’s Form SB-2 filed on June 8, 2001.
	(2)	Incorporated by reference to the Company’s Form S-8, filed April 11, 2005.
	(3)	Incorporated by reference to the Company’s Form 8-K, filed April 21, 2009.
	(4)	Incorporated by reference to the Company’s Form 8-K, filed May 26, 2009.
	(5)	Incorporated by reference to the Company’s Form 8-K, filed April 20, 2011.
	(6)	Incorporated by reference to Exhibit 19 in the Company’s Form 10-K, filed March 16, 2012.
	(7)	Incorporated by reference to the Company’s Form 8-K, filed February 16, 2016.
	(8)	Incorporated by reference to the Company’s Form S-8, filed February 23, 2016.

Page ~~│ 32~~...31

Signatures

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

Registrant:	FIRST NATIONAL ENERGY CORPORATION
Date: May 23, 2017	By:	/s/ Gregory Sheller
Date: June 8, 2018	By:	/s/ Gregory Sheller
		Gregory Sheller
		Chief Executive Officer

Date: May 23, 2017	By:	/s/ Peter Wanner
Date: June 8, 2018	By:	/s/ Peter Wanner
		Peter Wanner
		Chief Financial (Accounting) 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: May 23, 2017	By:	/s/ Gregory Sheller
Date: June 8, 2018	By:	/s/ Gregory Sheller
		Gregory Sheller
		Chief Executive Officer, Director
Date: May 23, 2017	By:	/s/ Peter Wanner
Date: June 8, 2018	By:	/s/ Peter Wanner
		Peter Wanner
		Chief Financial Officer, Director
Date: May 23, 2017	By:	/s/ Gianni Caputo
Date: June 8, 2018	By:	/s/ Gianni Caputo
		Gianni Caputo
		Director

Page ~~│ 33~~...32

First National Energy Corporation

(Formerly First National Power Corporation)

Consolidated Financial Statements

December 31, ~~2016~~2017 and ~~2015~~2016

(Amounts expressed in US Dollars)

Index

	Page
Report of Independent Registered Public Accounting Firm	1-2
Report of Independent Registered Public Accounting Firm	3
Consolidated Balance Sheets as at December 31, 2017 and 2016	3
Consolidated Balance Sheets as at December 31, 2016 and 2015	4
Consolidated Statements of Operations and Other Comprehensive Loss for the years ended December 31, 2017 and 2016	4
Consolidated Statements of Operations and Other Comprehensive Loss for the years ended December 31, 2016 and 2015	5
Consolidated Statements of Changes in Stockholders’ Deficiency for the years ended December 31, 2017 and 2016	5
Consolidated Statements of Changes in Stockholders’ Deficiency for the years ended December 31, 2016 and 2015	6
Consolidated Statements of Cash Flows for the years ended December 31, 2017 and 2016	6
Consolidated Statements of Cash Flows for the years ended December 31, 2016 and 2015	7
Notes to Consolidated Financial Statements	7 – 17
Notes to Consolidated Financial Statements	8 – 18

Report of Independent Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

First National Energy Corporation (formerly First National Power Corporation)

We have audited the accompanying consolidated balance sheets of First National Energy Corporation (formerly First National Power Corporation) as of December 31, 2016 and 2015, and the related consolidated statements of operations and other comprehensive loss, changes in stockholders' deficiency and cash flows 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. 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 of December 31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted 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 has significant negative working capital as of December 31, 2016 that raise substantial doubt about its ability to continue as a going concern. Management's plans in regards to these matters are also described 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 LLP
Toronto, Ontario	Chartered Accountants
May 19, 2017	Licensed Public Accountants

FIRST NATIONAL ENERGY CORPORATION

(Formerly First National Power Corporation)

Consolidated Balance Sheets

As of December 31,

(Amounts Expressed in US Dollars)

	2016			2015
	2017			2016
	$			$
ASSETS
CURRENT
Cash		~~1,059~~644			1,~~937~~059
Total Current Assets		~~1,059~~644			1,~~937~~059
LICENSES FOR TECHNOLOGY (Note 4)		200			200
Total assets		~~1,259~~844			21,~~137~~259
LIABILITIES
CURRENT
Accounts payable and accrued liabilities		4436,~~456~~118			4744,~~853~~456
Loan payable to director (Note 9)		~~125~~149,~~117~~716			~~110~~125,~~234~~117
Loan payable (Note 5)		-			540,000
Loan payable to related party (Note 5)		540,000			540,000
Loan payable to related party (Note 5)		540,000			-
Total current liabilities		725,834			709,573
Total current liabilities		709,573			698,087
Going Concern (Note 2)
Related Party Transactions (Note 9)
Commitment and Contingencies (Note 11)
Subsequent Events (Note 15)
STOCKHOLDERS’ DEFICIENCY
Capital Stock (Note 6)		99100,~~765~~095			99,765
Additional paid-in Capital		~~103~~262,~~329~~999			103,329
Accumulated Deficit		(~~911~~1,~~451~~088,127	)		(~~899~~911,~~087~~451	)
Accumulated Other Comprehensive Loss		(10	)		(10	)
Total Stockholders’ Deficiency Attributable to the Company’s Stockholders		(~~708~~725,~~367~~043	)		(~~696~~708,~~003~~367	)
Non-controlling interest		53			53
Total Stockholders’ Deficiency		(~~708~~724,~~314~~990	)		(~~695~~708,~~950~~314	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY		~~1,259~~844			21,~~137~~259

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

FIRST NATIONAL ENERGY CORPORATION

(Formerly First National Power Corporation)

Consolidated Statements of Operations and Other Comprehensive Loss

For the years ended December 31,

(Amounts Expressed in US Dollars)

	2016			2015
	2017			2016
	$			$
REVENUE		-			-
EXPENSES
General and administrative		1251,~~364~~676			2212,~~612~~364
TOTAL OPERATING EXPENSES		12,364			22,612
Share-based compensation		125,000			-
LOSS BEFORE INCOME TAXES		(12,364	)		(22,612	)
TOTAL OPERATING EXPENSES		176,676			12,364
LOSS BEFORE INCOME TAXES		(176,676	)		(12,364	)
Income taxes (Note 7)		-			-
NET LOSS AND COMPREHENSIVE LOSS		(12176,~~364~~676	)		(2212,~~612~~364	)
Net loss and comprehensive loss attributable to the Company’s stockholders		(12176,~~364~~676	)		(2212,~~612~~364	)
Net loss and comprehensive loss attributable to to non-controlling interest		-			-
Net loss and comprehensive loss attributable to non-controlling interest		-			-
		(12,364	)		(22,612	)
		(176,676	)		(12,364	)
Net loss per share - basic and diluted	$	(0.00	)	$	(0.00	)
Weighted average common shares outstanding		99,~~865~~932,~~228~~707			99,865,228

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

FIRST NATIONAL ENERGY CORPORATION

(Formerly First National Power Corporation)

Consolidated Statements of Changes in Stockholders’ Deficiency

For the years ended December 31,

(Amounts Expressed in US Dollars)

											Accumulated
	Number of		Common		Additional						Other			Non-			Total
	Common		Shares		Paid-in			Accumulated			Comprehensive			controlling			Stockholders’
	Shares		Amount		Capital			Deficit			Loss			~~Interests~~Interest			Deficiency
				$		$			$			$			$			$
Balance as of December 31, 2014		99,865,228		99,765		103,329			(876,475	)		(10	)		58			(673,338	)
Balance as of December 31, 2015		99,865,228		99,765		103,329			(899,087	)		(10	)		53			(695.950	)
Net loss for the year		-		-		-			(2212,~~612~~364)			-			(5-	)		(2212,~~612~~364	)
Balance as of December 31, 2015		99,865,228		99,765		103,329			(899,087	)		(10	)		53			(695,950	)
Net loss for the year		-		-		-			(12,364	)		-			-			(12,364	)
Balance as of December 31, 2016		99,865,228		99,765		103,329			(911,451	)		(10	)		53			(708,314	)
Sale of 50,000 shares of common stock		50,000		50		24,950												25,000
Financing Costs						(5,000	)											(5,000	)
Sale of 30,000 shares of common stock		30,000		30		14,970												15,000
Share-based compensation		250,000		250		124,750												125,000
Net loss for the year		-		-		-			(176,676	)		-			-			(176,676	)
Balance as of December 31, 2017		100,195,228		100,095		262,999			(1,088,127	)		(10	)		53			(724,990	)

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

FIRST NATIONAL ENERGY CORPORATION

(Formerly First National Power Corporation)

Consolidated Statements of Cash Flows

For the years ended December 31,

(Amounts Expressed in US Dollars)

	2016			2015
	2017			2016
	$			$
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		(12176,~~364~~676	)		(2212,~~612~~364	)
Decrease in accounts payable and accrued liabilities		(3,397	)		(11,647	)
Share-based compensation		125,000
Net cash used in operating activities		(15,761	)		(34,259	)
Decrease in accounts payable and accrued liabilities		(8,338	)		(3,397	)
Net cash used in operating activities		(60,014	)		(15,761	)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in loan from director		1424,~~883~~599			3314,~~959~~883
Net cash provided by financing activities		14,883			33,959
Sale of shares		40,000			-
NET DECREASE IN CASH		(878	)		(300	)
Finance cost pursuant to sale of shares		(5,000	)		-
Cash, beginning of year		1,937			2,237
Net cash provided by financing activities		59,599			14,883
CASH, END OF YEAR		1,059			1,937
NET DECREASE IN CASH		(415	)		(878	)
Cash, beginning of year		1,059			1,937
CASH, END OF YEAR		644			1,059

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

~~First~~FIRST ~~National~~ NATIONAL ~~Energy~~ENERGY ~~Corporation~~CORPORATION

(Formerly First National Power Corporation)

Notes to the Consolidated Financial Statements

December 31, ~~2016~~2017 and ~~2015~~2016

(Amounts expressed in US Dollars)

1.	NATURE OF OPERATIONS AND PURCHASE OF TECHNOLOGY

a)	Nature of operations

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.

The company is close to commence marketing its product and has been trying to establish the use of its technology in various applications.

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.

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.

~~First~~FIRST NATIONAL ~~National~~ENERGY ~~Energy Corporation~~CORPORATION

(Formerly First National Power Corporation)

Notes to the Consolidated Financial Statements

December 31, ~~2016~~2017 and ~~2015~~2016

(Amounts expressed in US Dollars)

1.	NATURE OF OPERATIONS AND PURCHASE OF TECHNOLOGY (cont’d)

b)	Purchase of Technology License (cont’d)

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.

The Company has been looking into the commercial applicability of this technology in various applications.

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 Company has been looking into the commercial applicability of this technology in various applications.

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, ~~2016~~2017 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 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.

~~First~~FIRST NATIONAL ~~National~~ENERGY ~~Energy Corporation~~CORPORATION

(Formerly First National Power Corporation)

Notes to the Consolidated Financial Statements

December 31, ~~2016~~2017 and ~~2015~~2016

(Amounts expressed in US Dollars)

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a)	Basis of Consolidation

The consolidated financial statements include the accounts of First National Energy Corporation, 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~~The preparation of financial statements ~~have~~for ~~been~~any ~~prepared~~period ~~in accordance with generally accepted accounting principles in~~ involves the ~~United~~use ~~States~~ of ~~America. As~~estimates 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 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 to related party and to director. Unless otherwise noted, it is 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 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.

● 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.

Assets and liabilities measured at fair value as of December 31, ~~2016~~2017 and ~~2015~~2016 are classified below based on the three fair value hierarchy tiers described above:

109

~~First~~FIRST NATIONAL ~~National~~ENERGY ~~Energy Corporation~~CORPORATION

(Formerly First National Power Corporation)

Notes to the Consolidated Financial Statements

December 31, ~~2016~~2017 and ~~2015~~2016

(Amounts expressed in US Dollars)

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

c)	Financial Instruments (cont’d)

2016

2015

2017

2016

Carrying

Fair

Carrying

Fair

Value

Cash

~~1,059~~644

1,~~937~~059

Accounts payable and accrued liabilities

4436,~~456~~118

4744,~~853~~456

Loan payable to director

~~125~~149,~~117~~716

~~110~~125,~~234~~117

Loan payable

540,000

Loan payable to related party

540,000

Loan payable to related party

540,000

Cash has been measured using Level 1 of the fair value hierarchy. Accounts payable and accrued liabilities, loans payable ~~and loans payable~~ to related party and ~~directors~~director have been measured using Level 3 of the fair value hierarchy.

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.

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 during a period from non-owner sources.

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 previously written down to a nominal value, no amortization was recognized during the year for accounting purposes.

g)	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, ~~2016~~2017, there were no common stock equivalents.

1110

~~First~~FIRST NATIONAL ~~National~~ENERGY ~~Energy Corporation~~CORPORATION

(Formerly First National Power Corporation)

Notes to the Consolidated Financial Statements

December 31, ~~2016~~2017 and ~~2015~~2016

(Amounts expressed in US Dollars)

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

h)	Stock-Based Compensation

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from parties 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, ~~2016~~ 2017, there was $nil of unrecognized expense related to stock-based compensation, and stock based compensation expense relating to all employees and non-employees were $125,000 and $nil for the years ended December 31, ~~2016~~2017 and ~~2015~~2016.

i)	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 of the subsidiary 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 dormant status of the wholly owned subsidiary, there have been no adjustments for the past years.

j)	Recent Accounting Pronouncements

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and other than the below, does not expect the future adoption of any such pronouncements to have a significant impact on its results of operations, financial condition or cash flow.

InFASB ~~March~~ASU ~~2016,~~2017-11 ~~the~~“Earnings ~~Financial~~Per ~~Accounting~~Share ~~Standards Board~~ (~~“FASB”~~Topic 260), ~~issued~~Distinguishing ~~Accounting~~Liabilities ~~Standards~~from ~~Update~~Equity (~~“ASU”~~Topic 480) ~~2016-09~~ ~~amending~~and ~~several~~Derivatives ~~aspects~~and ofHedging (Topic ~~share~~815)” -~~based~~ ~~payment~~In ~~accounting.~~July ~~This~~2017, ~~guidance~~the ~~requires~~FASB ~~all~~issued ~~excess~~2017-11. ~~tax~~The ~~benefits~~guidance ~~and~~eliminates ~~tax~~the ~~deficiencies~~ requirement to beconsider ~~recorded~~“down inround” features ~~the~~when ~~income~~determining ~~statement~~whether ~~when~~certain ~~the~~equity-linked ~~awards~~financial ~~vest~~instruments or ~~are~~embedded ~~settled,~~features ~~with~~are ~~prospective~~indexed ~~application~~to ~~required.~~an ~~The guidance~~entity’s ~~also~~own ~~changes~~stock. ~~the~~Our ~~classification~~warrants ofissued ~~such~~with ~~tax~~our ~~benefits~~convertible ornotes ~~tax~~are ~~deficiencies~~treated onas ~~the~~derivative ~~statement~~instruments, ofbecause ~~cash~~they ~~flows~~include ~~from~~ a ~~financing activity~~“down toround” anfeature. ~~operating~~The ~~activity,~~ASU ~~with~~is ~~retrospective~~effective orfor ~~prospective~~annual ~~application~~periods ~~allowed.~~beginning ~~Additionally~~after December 15, ~~the~~2018, ~~guidance~~and ~~requires~~for ~~the~~interim ~~classification~~periods within ofthose ~~employee~~years, ~~taxes~~with ~~paid~~early ~~when~~adoption anpermitted. ~~employer~~Early ~~withholds~~adoption ~~shares~~of ~~for~~this ~~tax-withholding~~guidance ~~purposes~~could ashave a ~~financing~~significant ~~activity~~impact on ~~the~~our ~~statement of~~financial ~~cash flows~~statements, as ~~with~~it ~~retrospective~~would ~~application~~effectively ~~required.~~eliminate ~~This~~the ~~ASU~~warrant isderivative ~~effective~~liability ~~for annual periods,~~ and ~~interim~~the ~~periods~~gain ~~within~~or ~~those annual~~loss ~~periods,~~from ~~beginning~~changes ~~after~~in ~~December~~the ~~15,~~fair ~~2016.~~value ~~Early~~of ~~adoption~~the warrant isderivative ~~permitted~~liability. ~~The~~We ~~Company~~do isnot ~~currently~~expect ~~evaluating~~this ~~the~~ASU ~~impact of~~to ~~the~~have ~~new~~a ~~guidance~~significant impact on ~~its~~our consolidated financial statements and related disclosures.

~~In August 2014,~~ FASB ~~issued~~ ASU ~~2014~~2017-~~15—Presentation~~09 “Scope of ~~Financial~~Modification ~~Statements—Going~~Accounting ~~Concern~~ (~~ASC~~Topic ~~Subtopic~~718)” ~~205~~-~~40):~~ ~~“Disclosure of~~In ~~Uncertainties~~May ~~about~~2017, anthe ~~Entity’s~~FASB ~~Ability~~issued ~~to Continue as a Going Concern”~~2017-09. The ~~update~~guidance ~~requires management to assess~~clarifies athe ~~company’s~~accounting ~~ability~~for towhen ~~continue~~the asterms of a ~~going~~share-based ~~concern~~award ~~and~~are ~~to provide related footnote disclosures in certain circumstances~~modified. ~~All~~ ~~entities~~The ~~are~~ASU ~~required~~is toeffective ~~apply~~for ~~the new requirements in~~ annual reporting periods ~~ending~~ beginning after December 15, ~~2016~~2017, and for interim periods ~~thereafter.~~ ~~Early~~within ~~application~~those ~~is permitted. As such~~years, ~~the~~with ~~Company~~early isadoption ~~required~~permitted. toThis ~~adopt~~new ~~these~~guidance ~~provisions~~would ~~for~~only impact ~~the~~our ~~annual~~consolidated ~~period~~financial ~~ending October~~statements 1if, ~~2017.~~in ~~The~~the ~~Company~~future, iswe ~~currently~~modified ~~evaluating~~ the ~~impact~~terms of ~~FASB~~any ~~ASU~~of ~~2014~~our share-15based ~~but does not expect the adoption thereof to have a material effect on its financial statements~~awards.

12FASB ASU2018-05, “Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.118” – In March 2018, the amendments provide guidance on when to record and disclose provisional amounts for certain income tax effects of the Tax Cuts and Jobs Act, and also require any provisional amounts or subsequent adjustments to be included in net income. Additionally, ASU 2018-05 discusses required disclosures that an entity must make with regard to the Tax Reform Act. ASU2018-05 is effective immediately as new information is available to adjust provisional amounts that were previously recorded. We do not expect this ASU to have a significant impact on our consolidated financial statements and related disclosures.

~~First National Energy Corporation~~11

~~(Formerly~~FIRST NATIONAL ~~First~~ENERGY ~~National Power Corporation)~~CORPORATION

Notes to the Consolidated Financial Statements

December 31, ~~2016~~2017 and ~~2015~~2016

(Amounts expressed in US Dollars)

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

k)	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 Company’s equity.

4. LICENSES FOR TECHNOLOGY

Licenses are recorded at carrying amount. No amortization was recorded during the year.

	2016		2016		2015
	2017		2017		2016
	Cost		Net Book Value		Net Book Value
	$	$	$	$	$	$
North American
Technology License		100		100		100
Indian Technology		100		100		100
License		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 was 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.

On November 8, 2010, the Pavana 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.

On October 28, 2016, Boreas assigned its loan receivable due from the Company to one of the Company’s shareholders. The amount previously owed by the Company to Boreas is now owed to a shareholder of the Company. The loan to shareholder is non-interest bearing, is due on demand and has no security or conversion features.

First National Energy Corporation

(Formerly First National Power Corporation)

Notes to the Consolidated Financial Statements

December 31, 2016 and 2015

(Amounts expressed in US Dollars)

6. CAPITAL STOCK

a)	Authorized

300,000,000 Common shares, $0.001 per value

b)	Issued

99100,~~865~~195,228 Common shares (~~2015~~2016: 99,865,228 Common shares) valued at $99100,~~765~~095 (~~2015~~2016: $99,765)

First National Energy Corporation

Notes to the Consolidated Financial Statements

December 31, 2017 and 2016

(Amounts expressed in US Dollars)

6. CAPITAL STOCK (cont’d)

On January 27, 2017, the Company issued and sold on a private placement basis, 50,000 shares at a price of $0.50 per share for total proceeds of $25,000. Financing expenses in the amount of $5,000 pursuant to the private placement were recorded as a reduction in additional paid-in capital.

On December 1, 2017, the Company issued and sold on a private placement basis, 30,000 shares at a price of $0.50 per share for total proceeds of $15,000.

On December 5, 2017, the company issued 250,000 shares to compensate an external consultant for the services performed. The fair value of the shares issued was determined by reference to the most recently private placement offering price. Share-based compensation expense in amount of $125,000 has been recorded.

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:

	2016			2015
	2017			2016
Loss before income taxes	$	(12176,~~364~~676	)	$	(2212,~~612~~364	)
Applicable statutory tax rate		34	%		34	%
Income tax recovery at statutory rate		(460,~~204~~070	)		(74,~~689~~204	)
Timing difference		(43,420	)		(43,420	)
Tax loss benefit not recognized		47,624			51,109
Stock-based compensation		42,500			-
Tax loss benefit not recognized		60,990			47,624
Income tax - current and deferred	$	-		$	-

The enacted U.S. Federal statutory tax rates and estimated state rates for the years is as follows:

	2016			2015
	2017			2016
Statutory rate - benefit		34	%		34	%
State taxes, net of federal benefit		-			-
Effective rate - benefit		34	%		34	%

First National Energy Corporation

Notes to the Consolidated Financial Statements

December 31, 2017 and 2016

(Amounts expressed in US Dollars)

7. INCOME TAXES (cont’d)

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

Deferred tax asset:	~~2016~~2017			~~2015~~2016
Operating losses available to offset future income taxes	$	~~624~~685,~~807~~077		$	~~576~~624,~~463~~807
Tax basis of license in excess of accounting basis		~~319~~276,~~663~~242			~~363~~319,~~084~~663
Deferred tax asset		~~943~~961,~~750~~319			~~939~~943,~~547~~750
Valuation allowance		(~~943~~961,~~750~~319	)		(~~939~~943,~~547~~750	)
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 allowance.

As at December 31, 2017, the Company has losses for tax purposes which can be applied against future taxable income. These losses expire as follows:

2037		179,383
2036		140,071
2035		150,320
2034		139,799
2033		143,054
2032		175,273
2031		183,949
2030		187,150
2029		131,602
2028		78,145
2027		30,760
2026		32,912
2025		208,887
2024		233,627

Total	$	2,014,932

First National Energy Corporation

(Formerly First National Power Corporation)

Notes to the Consolidated Financial Statements

December 31, ~~2016~~2017 and ~~2015~~2016

(Amounts expressed in US Dollars)

7. INCOME TAXES (cont’d)

As at December 31, 2016, the Company has losses for tax purposes which can be applied against future taxable income. These losses expire as follows:

2036		140,071
2035		150,320
2034		139,799
2033		143,054
2032		175,273
2031		183,949
2030		187,150
2029		131,602
2028		78,145
2027		30,760
2026		32,912
2025		208,887
2024		233,627
Total	$	1,835,549

8. INTANGIBLE ASSET

Effective February 5, 2016, the Company acquired VAWT/VRTB/Bolotov Rotor wind turbine technology (“Technology”) from Bolotov and affiliates (“Serge Bolotov”). The technical and intellectual property were designed, patented, developed and manufactured by Serge Bolotov.

The Company valued this technology under the guidance of ASC 350, Intangibles-Goodwill and Other which states that an intangible asset that is acquired either individually or with a group of other assets shall be initially measured based on its fair value. As there is no active market and the future cash flows and economic viability of this intellectual property are uncertain and cannot be measured reliably, no value was assigned to the technology.

The future compensation to Serge Bolotov consists of:

	-	10% of all profits generated by sale of this technology as royalties
	-	A purchase bonus of $1,000,000 to be paid out of 11% of the net profits from the intellectual property. (See also note 11)

In the event the Company or a related or assigned party does not use the assets transferred in the transaction within a period of 3 years from the date the memorandum of understanding was accepted as a final agreement on February 5^th, 2016, Serge Bolotov will have the right, but not the obligation, to purchase all unused assets, following ten days written notice to the Company or a related or assigned party for the amount of US $5,000.

First National Energy Corporation

(Formerly First National Power Corporation)

Notes to the Consolidated Financial Statements

December 31, 2016 and 2015

(Amounts expressed in US Dollars)

9. LOAN PAYABLE TO DIRECTOR AND 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.

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 $~~125~~149,~~117~~716 ($~~110~~125,~~234~~117 in ~~2015~~2016).

10. 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 in the United States of America.

First National Energy Corporation

Notes to the Consolidated Financial Statements

December 31, 2017 and 2016

(Amounts expressed in US Dollars)

11. COMMITMENT AND CONTINGENCIES

a)	Pursuant to Note 1 (c), under the Technology License purchased by Pavana, the Company has a commitment for royalties at 5% of earnings before interest, taxes, depreciation and amortization (“EBITDA”) derived by Pavana using this technology.

b)	Pursuant to the purchase of intellectual property from Serge Bolotov (the “vendor”), the Company has the following commitments related to the purchase:

i. As consideration for the transaction, the vendor shall be paid 10% of the profits realized by the Company or a related or assigned party and a signing bonus of $1,000,000 to be derived from 11% of the initial profits from the intellectual property. ii. Following completion of sufficient funding of the Company or related or assigned party, the following shall occur: the vendor will be paid the sum of $8,000 CAD per month in cash or shares, as long as the vendor is needed as a consultant with the Company or a related or assigned party. The Company or related or assigned party will provide research and development facility with support staff. iii. The Company or a related or assigned party will act to appoint Serge Bolotov as a member of the Board of Directors. Upon successful appointment to the Board, the Company or a related or assigned party will issue the vendor 100,000 common shares as compensation for his Board of Director appointment and Director services. As at December 31, ~~2016~~2017, the vendor has not yet been appointed to the Board.

c)	Effective February 1, 2016, the Company executed an agreement with legal counsel to pay a monthly fee of $2,500 commencing February 1, 2016 with respect to legal matters of securities regulation, private placements, corporate governance, and related matters in connection with the Company. The two parties reserve the right to terminate or withdraw from the agreement at any time.

d)	Pursuant to Note 1 (b), under the Technology License and Stock Purchase Agreement signed with Boreas, the Company agreed to pay certain future royalties to Boreas from net future revenues realized by the Company from the technology license.

12. 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 and the Company may consider share buybacks and share issuances as other strategies. Debt capital is managed considering the requirement to secure liquidity and the capability to refinance maturing debt.

On December 31, 2017, the Company had no interest-bearing debt.

First National Energy Corporation

(Formerly First National Power Corporation)

Notes to the Consolidated Financial Statements

December 31, ~~2016~~2017 and ~~2015~~2016

(Amounts expressed in US Dollars)

12. CAPITAL MANAGEMENT

On December 31, 2016, the Company had no interest-bearing debt.

13. FINANCIAL INSTRUMENTS

The Company is exposed to risks that arise from its use of financial instruments. This note describes the Company’s objectives, policies and processes for managing those risks and the methods used to measure them.

Foreign exchange risk:

The Company’s subsidiary conducts its 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, 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~~Company has so far been able to raise the required financing to meet its obligations on time. The Company continues to pursue potential investees ~~and have already secured additional equity financing from investors subsequent to the year end~~. ~~See note 15.~~

14. ~~2016~~2017 OMNIBUS EQUITY COMPENSATION PLAN

~~The~~In ~~Registrant~~February ~~maintained~~2017, athe ~~stock~~Company ~~incentive~~adopted ~~plan,~~the ~~entitled~~2017 ~~“2005~~Omnibus ~~Stock~~Equity ~~Incentive~~Compensation Plan. ~~for~~5,000,000 ~~Employees~~shares ~~and Consultants” and had registered 3 million~~ of ~~its~~ common ~~shares~~stock (1were ~~million~~reserved onpursuant to ~~February~~the ~~25,~~Omnibus ~~2005~~Equity ~~and~~Compensation 2Plan. ~~million~~As onat ~~April~~December 1131, ~~2005)~~2017, ~~for~~the ~~issuance~~Company ~~under such~~has ~~stock~~not ~~incentive~~yet ~~plan.~~issued ~~Under~~any ~~this plan, 830,000~~ shares ~~have~~of ~~been~~common ~~issued~~stock ~~before the plan expired in 2015. All options pursuant~~under to this plan ~~have expired~~.

First National Energy Corporation

(Formerly First National Power Corporation)

Notes to the Consolidated Financial Statements

December 31, 2016 and 2015

(Amounts expressed in US Dollars)

In February 2016, the Company adopted the 2016 Omnibus Equity Compensation Plan. 5,000,000 shares of common stock were reserved pursuant to the Omnibus Equity Compensation Plan. As at December 31, 2016, the Company has not yet issued any shares of common stock under this plan.

15. SUBSEQUENT EVENTS

Subsequent to the year end, the Company offered up to 500,000 shares of common stock at a price of $0.50 per share, $0.001 par value (the “Offering”). On January 27, 2017, in connection with the Offering, the Company issued and sold on a private placement basis, 50,000 shares at a price of $0.50 per share for total proceeds of $25,000.

Filing Compare · First National Energy Corp.