**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**




þ
            
            **QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**


**For
      the Quarterly Period Ended September 30, 2008**





o
            
            **TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**


**Commission
      file number: 333-142860**





**NACEL
      ENERGY CORPORATION**





**600
      17** **th** **Street, Suite 2800S**


**Denver,
      Colorado 80202**


**Telephone
      (720) 204-1150**





Incorporated
                in Wyoming
            
            IRS
                ID# 20-4315791





Check
      whether the issuer (1) filed all reports required to be filed by
      Section 13 or 15(d) of the Exchange Act during the past 12 months (or
      for such shorter period that the registrant was required to file such reports),
      and (2) has been subject to the filing requirements for the past
      90 days.     Yes þ No  ̈





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





Large
                accelerated filer ̈
            Accelerated
                filer ̈Non-accelerated
                filer ̈(Do not check if a smaller reporting company)
            Smaller
                reporting companyþ





Check
      whether the issuer is a shell Company (as defined in Rule 12b-2 of the
      Exchange Act).


Yes  ̈ No þ




Shares
      of
      common stock outstanding on November 11, 2008: 21,666,000









NACEL
      ENERGY CORPORATION





INDEX





FOR
      THE
      QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008




PART
                I. FINANCIAL INFORMATION
            3Item
                1. Financial Statements
            3Consolidated
                Balance Sheets
            3Consolidated
                Statements of Expenses
            4Consolidated
                Statements of Cash Flows
            5Notes
                to Consolidated Financial Statements
            6Item
                2. Management’s Discussion and Analysis or Plan of
                Operation
            8Item
                3. Quantitative and Qualitative Disclosures About Market
                Risk
            12Item
                4. Controls and Procedures
            12PART
                II. OTHER INFORMATION
            13Item
                1. Legal Proceedings
            13Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            14Item
                3. Defaults Upon Senior Securities
            14Item
                4. Submission of Matters to a Vote of Security Holders
            15Item
                5. Other Information
            15Item
                6. Exhibits
            15




2




**PART
      I. FINANCIAL INFORMATION** ****




***Item
      1. Financial Statements*** ******





**Nacel
      Energy Corporation**


**(A
      Development Stage Company)**


**Consolidated
      Balance Sheets**


**(Unaudited)**





**September 30,**
            
            **March 31,****2008**
            
            **2008****ASSETS**Current
                AssetsCash
            
            $
            438,965
            
            $
            380,567Other
                current assets
            
            
            20,000
            
            
            1,277Total
                current assets
            
            
            458,965
            
            
            381,844Property,
                plant and equipment, net of accumulated depreciation of $0
            
            
            72,582
            
            
            30,018**TOTAL
                ASSETS**
            
            **$**
            **531,547**
            
            **$**
            **411,862****LIABILITIES
                AND STOCKHOLDERS' EQUITY**Accounts
                payable
            
            $
            -
            
            $
            78,660Shareholder
                line of credit
            
            
            141,779
            
            
            138,075Total
                liabilities
            
            
            141,779
            
            
            216,735Stockholders'
                equityCommon
                stock of $.001 par value. Authorized 50,000,000 shares;issued
                21,666,000 at September 30, and 21,400,000 at March 31,
                2008
            
            
            21,666
            
            
            21,400Additional
                paid-in capital
            
            
            2,791,606
            
            
            1,719,502Subscription
                receivable
            
            
            -
            
            
            (690,373
            )Deficit
                accumulated during the development stage
            
            
            (2,423,504
            )
            
            (855,402
            )Total
                stockholders' equity
            
            
            389,768
            
            
            195,127**TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY**
            
            **$**
            **531,547**
            
            **$**
            **411,862**




See
      accompanying notes to consolidated financial statements




3




**Nacel
      Energy Corporation**


**(A
      Development Stage Company)**


**Consolidated
      Statement of Expenses**


**(Unaudited)**


**Three
      and six months ended September 30, 2008 and 2007 and the
      period**


**From
      February 7, 2006 (Inception) through September 30, 2008**





**Inception****Three Months Ended September 30,**
            
            **Six Months Ended September 30,**
            
            **through****2008**
            
            **2007**
            
            **2008**
            
            **2007**
            
            **September 30, 2008**General
                and administrative expenses
            
            $
            143,056
            
            $
            20,662
            
            $
            1,447,729
            
            $
            42,458
            
            $
            1,803,096Wind
                projects donated by related party
            
            
            72,021
            
            
            -
            
            
            118,950
            
            
            -
            
            
            608,950Other
                (income) expenseInterest
                expense
            
            
            2,743
            
            
            1,894
            
            
            5,373
            
            
            3,788
            
            
            15,725Interest
                income
            
            
            (3,671
            )
            
            (151
            )
            
            (3,671
            )
            
            (177
            )
            
            (3,848
            )Other
                income
            
            
            -
            
            
            (29
            )
            
            (279
            )
            
            (108
            )
            
            (419
            )Total
                other (income) expense
            
            
            (928
            )
            
            1,714
            
            
            1,423
            
            
            3,503
            
            
            11,458Net
                loss
            
            
            (214,149
            )
            
            (22,376
            )
            
            (1,568,102
            )
            
            (45,961
            )
            
            (2,423,504
            )Other
                comprehensive incomeUnrealized
                gain (loss) on marketable securities
            
            
            -
            
            
            160
            
            
            -
            
            
            (647
            )
            
            -Comprehensive
                net loss
            
            $
            (214,149
            )
            $
            (22,216
            )
            $
            (1,568,102
            )
            $
            (46,608
            )
            $
            (2,423,504
            )Basic
                and diluted net loss per share
            
            $
            (0.01
            )
            $
            (0.00
            )
            $
            (0.07
            )
            $
            (0.00
            )
            
            N/ABasic
                and diluted weighted average common shares outstanding
            
            
            21,666,000
            
            
            12,131,440
            
            
            21,577,366
            
            
            11,568,300
            
            
            N/A





**See
      accompanying notes to consolidated financial statements**




4




**Nacel
      Energy Corporation**


**(A
      Development Stage Company)**


**Consolidated
      Statements of Cash Flows**


**(Unaudited)**


**Six
      months ended September 30, 2008 and 2007 and the period**


**from
      February 7, 2006 (Inception) through September 30, 2008**




InceptionSix Months Ended September 30,
              
              through2008
              
              2007
              
              September 30, 2008**CASH
                  FLOWS FROM OPERATING ACTIVITIES**Net
                  loss
              
              $
              (1,568,102
              )
              $
              (45,961
              )
              $
              (2,423,504
              )Adjustments
                  to reconcile loss to net cash used in operating
                  activities:Stock
                  for services
              
              
              62,240
              
              
              -
              
              
              62,790Wind
                  projects donated by related party
              
              
              -
              
              
              -
              
              
              490,000Imputed
                  interest
              
              
              2,630
              
              
              3,788
              
              
              12,982Stock
                  issued for executive compensation
              
              
              1,007,500
              
              
              -
              
              
              1,007,500Changes
                  in:Prepaids
                  and other current assets
              
              
              (18,723
              )
              
              -
              
              
              (20,000
              )Accounts
                  payable
              
              
              (78,660
              )
              
              -
              
              
              -Accrued
                  expenses
              
              
              2,743
              
              
              -
              
              
              2,743**Net
                  Cash Used in Operating Activities**
              
              
              (590,372
              )
              
              (42,173
              )
              
              (867,489
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES**Purchase
                  of fixed assets
              
              
              (42,564
              )
              
              -
              
              
              (72,582
              )**Net
                  Cash Used in Investing Activities**
              
              
              (42,564
              )
              
              -
              
              
              (72,582
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES**Proceeds
                  from shareholder line of credit
              
              
              961
              
              
              22,485
              
              
              139,036Proceeds
                  from sale of common stock
              
              
              -
              
              
              40,000
              
              
              40,000Proceeds
                  from exercise of warrant
              
              
              690,373
              
              
              -
              
              
              1,200,000**Net
                  cash Provided by Financing Activities**
              
              
              691,334
              
              
              62,485
              
              
              1,379,086**NET
                  INCREASE IN CASH**
              
              
              **58,398**
              
              
              **21,644**
              
              
              **438,965**CASH
                  AT BEGINNING OF PERIOD
              
              
              380,567
              
              
              20,258
              
              
              -**CASH
                  AT END OF PERIOD**
              
              **$**
              **438,965**
              
              **$**
              **41,902**
              
              **$**
              **438,965**SUPPLEMENTAL
                  DISCLOSURES OF CASH FLOW INFORMATIONCASH
                  PAID FOR:Interest
              
              $
              -
              
              $
              -
              
              $
              -Income
                  taxes
              
              $
              -
              
              $
              -
              
              $
              -





**See
      accompanying notes to consolidated financial statements**




5




NACEL
      ENERGY CORPORATION


**(A
      Development Stage Company)**


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


UNAUDITED





1. BASIS
      OF PRESENTATION





The
      unaudited interim financial statements included herein have been prepared by
      the
      Company in accordance with accounting principles generally accepted in the
      United States of America and the rules of the Securities and Exchange
      Commission. We suggest that these interim financial statements be read in
      conjunction with the audited financial statements and notes thereto included
      in
      our Form 10-KSB for the year ended March 31, 2008, as filed with the SEC. We
      believe that all adjustments, consisting of normal recurring adjustments,
      necessary for a fair presentation of financial position and the results of
      operations for the interim periods presented have been reflected herein and
      that
      the disclosures made are adequate to make the information not misleading. The
      results of operations for interim periods are not necessarily indicative of
      the
      results to be expected for the full year. Notes to the financial statements
      which would substantially duplicate the disclosure contained in the audited
      financial statements for the most recent fiscal year as reported in Form 10-KSB
      have been omitted.





**Property
      and equipment**





Property
      and equipment is recorded at cost and depreciated on the straight-line method
      over the estimated useful lives. Expenditures for normal repairs and maintenance
      are charged to expense as incurred. The cost and related accumulated
      depreciation of assets sold or otherwise disposed of are removed from the
      accounts, and any gain or loss is included in operations. As of September 30,
      2008, none of our property had been placed in service and therefore we have
      not
      recorded any depreciation.





2. COMMON
      STOCK





During
      the six months ended September 30, 2008, Nacel issued 16,000 shares of common
      stock to consultants and other service providers for services. These shares
      were
      recorded at their fair value of $62,240.





During
      the six months ended September 30, 2008, Nacel issued 250,000 shares of common
      stock to a former executive as compensation. These shares were recorded at
      their
      fair value of $1,007,500.




6




3. SHAREHOLDER
      LINE OF CREDIT





Nacel
      entered into an agreement with a director with respect to an unsecured,
      no-interest $250,000 line of credit facility repayable at an unspecified future
      date. Interest was imputed at Prime plus 2% for a total of $2,630 and $3,788
      for
      the six months ended September 30, 2008 and 2007, respectively.





On
      July
      31, 2008, Nacel authorized new terms for the line of credit, which provide
      for
      simple interest to be added to the outstanding balance of the line of credit,
      once each quarter, based upon the current 3 month LIBOR plus 500 basis points,
      effective for the Company’s second fiscal quarter, beginning July 1, 2008.
      Interest was accrued for a total of $2,743 for the three months ended September
      30, 2008 and is included in shareholder line of credit on the balance sheet.
      As
      of September 30, 2008, a total of $108,221 was available for
      borrowing.




7




***Item
      2. Management’s Discussion and Analysis or Plan of
      Operation*** ******





At
      the
      directive of the Securities and Exchange Commission to use “plain English” in
      its public filings, the Company will use such terms as “we”, “our” and “us” in
      place of Nacel Energy Corporation or “the Company.” When such terms are used in
      this manner throughout this document they are in reference only to the
      corporation, Nacel Energy Corporation and its subsidiary, and are not used
      in
      reference to the board of directors, corporate officers, management, or any
      individual employee or group of employees.





**Forward-Looking
      Statements**




This
      Form
      10-Q includes “forward-looking statements” within the meaning of
      Section 27A of the Securities Act of 1933, as amended, and Section 21E
      of the Securities Exchange Act of 1934, as amended. All statements other than
      statements of historical fact included in this Form 10-Q, including, without
      limitation, the statements under both “Notes to Consolidated Financial
      Statements” and “Item 2. Management’s Discussion and Analysis or Plan of
      Operation” located elsewhere herein regarding the Company’s financial position
      and liquidity, the amount of and its ability to make debt service payments,
      its
      strategies, financial instruments, and other matters, are forward-looking
      statements. Although we believe that the expectations reflected in such
      forward-looking statements are reasonable, we can give no assurance that such
      expectations will prove to have been correct. Important factors that could
      cause
      actual results to differ materially from our expectations are disclosed in
      this
      Form 10-Q.




**Overview**




We
      were
      originally incorporated in the State of Wyoming on February 7, 2006. We are
      a
      development stage company that has generated no revenues from our operations
      since incorporation. We have incurred losses since inception and rely upon
      the
      sale of our securities and funds provided by management to cover expenses.





Since
      our
      inception, we have been engaged in business planning activities, including
      researching wind energy technologies, developing our economic models and
      financial forecasts, performing due-diligence regarding potential development
      partners, investigating wind electric energy properties and project
      opportunities and raising capital.




8




**Current
      Operations**





In
      March,
      2008, we acquired from a director various rights to four development stage
      wind
      energy projects known as Blue Creek, Channing Flats, Kansas and the Dominican
      Republic. The transaction also included wind data collected from anemometers
      at
      various locations over a period of years in the State of Texas, Kansas, Wyoming,
      Colorado and New Mexico. For further information concerning each of our
      development stage wind energy projects referenced herein, see our Annual Report
      on Form 10-KSB for the fiscal year ended March 31, 2008, filed with the
      Commission.





As
      disclosed in its Form 8-K filed on October 16, 2008, the Company announced
      that
      it had retained the four wind energy projects delivered to the Company, rather
      than accept the proposal of its former CEO, Mr. Dan Leach, to transfer the
      wind
      energy projects back to him in exchange for his 1,250,000 shares of the
      Company’s common stock.





The
      four
      wind energy projects retained by the Company are the 20MW Blue Creek and 20MW
      Channing Flats wind energy projects, located in the Texas panhandle; the
      proposed three phase 600MW wind energy project known as Nacel Ridge, located
      in
      the Dominican Republic; and a Kansas wind energy project for which a feasible
      location has yet to be secured.





Following
      Mr. Leach’s departure, the Company reached an agreement with new wind power
      project managers and technical consultants (see the Company’s Form 8-K dated
      August 27, 2008) and resumed its work in advancing development of the retained
      projects.





During
      the period ended September 30, 2008, we continued to work on several of the
      25
      steps included in our wind energy project development model. In this regard,
      we
      acquired approximately $42,500 in equipment related to the development of the
      wind energy projects.





**Plan
      of Operation**





Since
      our
      inception, we have been a development company and, accordingly, have incurred
      losses from operations. For the six months ended September 30, 2008, we
      sustained net losses of $1,568,102 and have an accumulated deficit since
      inception of $2,423,504. We have no revenues and any potential revenues from
      wind development projects will, in all likelihood, not be generated for several
      years and then only with the expenditure of substantial additional capital.





We
      will
      continue to assess and evaluate each of our development stage wind energy
      projects during the ensuing months. During this period, we may acquire
      additional equipment for certain projects which can be quickly developed.
      However, we don’t envision spending more than approximately $90,000 for
      additional equipment during the next six months unless reasonably necessary
      to
      maintain and proceed with an orderly development of a specific project.




9




**Liquidity
      and Capital Resources**





A
      critical component of our operating plan impacting our continued existence
      is
      the ability to conserve existing cash resources and the ability to obtain
      additional capital through additional equity and/or debt financing. In the
      event
      that we are unable to conserve existing cash resources and obtain the additional
      and necessary capital to pursue wind development projects, we may have to cease
      or significantly curtail our operations. This could materially impact our
      ability to continue operations.





As
      of
      September 30, 2008, we had cash of $438,965 and had working capital of
      approximately $317,000. We believe that these cash resources will be sufficient
      to finance our operations for the next 12 months. We currently anticipate that
      we may expend approximately $70,000 for general and administrative expenses
      during the remaining months of our fiscal year ending March 31, 2009.
      Accordingly, we believe there may be limited, if any, need to raise any
      additional equity and/or debt financing at any time during the next 12 months,
      except as may be necessary to maintain and proceed with an orderly development
      of, or specific commitments arising from, one or more specific projects. There
      are no assurances that we will be able to successfully raise any additional
      equity and/or debt financing, or that any such additional equity and/or debt
      financing will be on terms and conditions which are acceptable.





We
      have
      entered into an agreement with a director concerning an unsecured, no-interest
      $250,000 line of credit facility repayable at an unspecified future date.
      Interest is being imputed at prime plus 2% for a total of $2,360 of imputed
      interest expense for the three months ended September 30, 2008.





On
      July
      31, 2008, Nacel authorized new terms for the line of credit, which provide
      for
      simple interest to be added to the outstanding balance of the line of credit,
      once each quarter, based upon the current 3 month LIBOR plus 500 basis points,
      effective for the Company’s second fiscal quarter, beginning July 1, 2008.
      Interest was accrued for a total of $2,743 for the three months ended September
      30, 2008. As of September 30, 2008, we had borrowed $141,779 under this credit
      facility, thereby leaving $108,221 available for future borrowing. If the
      director were to require payment on this credit facility or otherwise limit
      additional amounts available for borrowing, this could have a material impact
      on
      the liquidity of the Company and its future operations.




On
      June
      20, 2008, we were informed by HPC Capital Management that it was suspending
      its
      investment banking agreement to provide us with investment banking services
      in
      light of the SEC’s inquiry. As of the date of the suspension, the Company and
      potential investors had been unable to come to final terms regarding certain
      private financing for the Company. Consequently, we have no current agreements
      with any private investors to provide private financing to the
      Company.




10




**Results
      of Operations**





**Six
      Months Ended September 30, 2008 compared to the Six Months Ended September
      30,
      2007**





***Overview.*** The
      net
      loss for the six months ended September 30, 2008 (“2008 Period”) was $1,568,102
      compared to a net loss of $45,961 for the six months ended September 30, 2007
      (“2007 Period”), an increase of $1,522,141. This increase in net loss is
      primarily attributable to the issuance of 250,000 shares of our common stock
      to
      a former executive as compensation during the 2008 Period, which shares were
      recorded at their fair value of $1,007,500.





***Revenues*** .
      We
      generated no revenues from our operations for the six months ended September
      30,
      2008 or for the six months ended September 30, 2007. Our operations have focused
      upon various business planning activities since inception, and have not
      generated any revenues. Accordingly, we are considered to be in the development
      stage as defined in Financial Accounting Standards Board Statement No.
      7.





***Expenses.*** Our
      operating expenses were $1,566,679 for the 2008 Period compared to operating
      expenses of $42,458 reported for the 2007 Period, an increase of $1,524,221.





The
      $1,524,221 increase in operating expenses was primarily due to the
      following:





·
            $1,007,500
                of executive stock based
                compensation


·
            $141,856
                increase in legal, accounting, filing fees, and related compliance
                costs


·
            $118,950
                in project development costs consisting of project management, consulting,
                project valuation and training
                costs


·
            $129,996
                incurred for director fees, consulting services, and office
                expenses


·
            $118,195
                incurred for online marketing, advertising, and travel to promote
                interest
                in the Company and our wind development
                projects





**Three
      Months Ended September 30, 2008 compared to the Three Months Ended September
      30,
      2007**





***Overview.*** The
      net
      loss for the three months ended September 30, 2008 (“Q2 2008 Period”) was
      $214,149 compared to a net loss of $22,376 for the three months ended September
      30, 2007 (“Q2 2007 Period”), an increase of $191,773. This increase in net loss
      is primarily attributable to additional legal fees of $100,509 and additional
      project development costs of $72,021 during the Q2 2008 Period.




11




***Revenues*** .
      We
      generated no revenues from our operations for the three months ended September
      30, 2008 or for the three months ended September 30, 2007. Our operations have
      been focused upon various business planning activities since inception, and
      have
      not generated any revenues. Accordingly, we are considered to be in the
      development stage as defined in Financial Accounting Standards Board Statement
      No. 7.





***Expenses.*** Our
      operating expenses were $215,077 for the Q2 2008 Period compared to operating
      expenses of $20,662 reported for the Q2 2007 Period, an increase of $194,415.





The
      $194,415 increase in operating expenses was primarily due to the
      following:





·
            $72,021
                incurred for project development cost for consulting and project
                management fees.


·
            $100,509
                increase in legal, accounting, filing fees, and related compliance
                costs.


·
            $17,121
                incurred for travel, advertising, promotion and shareholder
                services.





**Off
      Balance Sheet Transactions, Arrangements, or Obligations.**





We
      have
      no material off balance sheet transactions, arrangements or
      obligations.




***Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk.***




As
      a
“smaller reporting company” (as defined by §229.10(f)(1)0, we are not required
      to provide the information required by this item. ****




**Item
      4. Controls and Procedures** ****





Evaluation
      of Disclosure Controls and Procedures




As
      of the
      end of the period covered by this report on Form 10-Q, our Chief Executive
      Officer and our Chief Financial Officer performed an evaluation of the
      effectiveness of our disclosure controls and procedures as defined in Rule
      13a-15(e) or Rule 15d-15(e) under the Exchange Act. Based on that evaluation,
      our Chief Executive Officer and our Chief Financial Officer concluded that
      as of
      the end of the period covered by this report on Form 10-Q, our disclosure
      controls and procedures were effective in timely recording, processing,
      summarizing and reporting material information required to be included in our
      Exchange Act filings.




12




Changes
      in Internal Control Over Financial Reporting




After
      the
      fiscal year ending March 31, 2008, the Company engaged an outside accounting
      firm to review its books and records for accuracy, to prepare its financial
      statements and review its internal controls. The addition of the accountants
      has
      corrected the material weakness in our internal control over financial reporting
      that existed as of March 31, 2008 related to a lack of segregation of duties.




**PART
      II. OTHER INFORMATION**




***Item
      1. Legal Proceedings*** ******




We
      know
      of no material, active or pending legal proceedings against our company, nor
      are
      we involved as a plaintiff in any material proceeding or pending litigation.
      There are no proceedings in which any of our directors, officers or affiliates,
      or any registered or beneficial shareholder, is an adverse party or has a
      material interest adverse to our interest.




As
      previously reported in a Form 8-K filed on July 23, 2008, we were notified
      on
      June 13, 2008 that the staff of the Securities and Exchange Commission (“SEC”)
      was conducting an inquiry relating to the Company. The inquiry is non-public
      and
      should not be construed as an indication that the SEC or its staff believes
      that
      any violation has occurred, nor should the Company consider the inquiry as
      an
      adverse reflection upon any person, entity or security. The Form 8-K summarizes
      the actions which we have taken in connection with this SEC inquiry. As of
      July
      21, 2008, we had retained David Roos, of the law firm Moye White LLC in Denver,
      Colorado, to complete an independent internal investigation, address any SEC’s
      requests for information and undertake any other matters which, in his
      discretion, are relevant under the circumstances.





With
      respect to the SEC inquiry, Mr. Roos completed the independent internal
      investigation undertaken and, on September 10, 2008, provided the findings
      of
      this investigation to the officers and directors of the Company. In connection
      with those findings, recommendations were made which the Company is endeavoring
      to follow and/or implement. Among the recommendations which has been implemented
      by the Company is to insure that securities counsel is involved in the
      preparation and review of all SEC filings and any press release or other public
      statement that the Company may disseminate. Thereafter, Mr. Roos met with the
      SEC staff at its Denver offices and provided them with the findings of the
      independent internal investigation. Subsequent to that meeting, the SEC has
      requested and received further documents and records from third parties. No
      further developments have occurred concerning the SEC inquiry.




13




***Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds*** ******





(a)
      Unregistered Sales of Equity Securities.




During
      the three month period ending September 30, 2008, the Company did not issue
      any
      unregistered shares of its common stock.





(b)
      Use
      of Proceeds.




On
      September 24, 2007, the Securities and Exchange Commission declared effective
      our Registration Statement on Form SB-2 (File No. 333-142860) relating to the
      offer and sale of 8,000,000 shares of our common stock, at a price of $0.005
      per
      share, and 2,400,000 shares of our common stock underlying a warrant, at an
      exercise price of $0.50. The aggregate price of the offering amount registered
      was $1,240,000. On September 24, 2007, we closed our offering, having sold
      all
      8,000,000 common shares to 50 investors and received sale proceeds of $40,000.
      On November 19, 2007, all 2,400,000 post-split shares underlying the warrant
      were exercised and delivered to the warrant holder. In connection with the
      warrant exercise, we received a promissory note for $1,200,000 and, as of
      quarter ending June 30, 2008, we had received all $1,200,000 payable on this
      promissory note. Since the offering was conducted on a best efforts, no minimum,
      direct public offering, without involvement of underwriters or broker-dealers,
      we did not pay any commissions in connection with the sale of any of the shares.





As
      of
      September 30, 2008, we had used a total of $815,020 of the net proceeds of
      $1,240,000 in the operation and conduct of our business including $169,670
      for
      marketing, advertising and travel, $215,657 of legal and professional fees,
      $97,160 for consulting fees, $127,950 for project development expenses, $73,841
      for shareholder services, $12,589 for rent and office expenses, $72,582 for
      purchases of fixed assets and $45,571 for general and administrative expenses.
      We intend to use the remaining net proceeds for capital expenditures and ongoing
      development of wind energy projects. We also intend to use the remaining net
      proceeds for marketing and advertising, working capital and other general
      corporate purposes. In addition, we may use a portion of the remaining proceeds
      to pay amounts due from time to time under an unsecured $250,000 line of credit
      facility established with a director of the Company.




***Item
      3. Defaults Upon Senior Securities*** ******





None




14




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





The
      Registrant did not submit any matters to a vote of its security holders during
      the three-months ended September 30, 2008.




***Item
      5. Other Information*** ******





None




***Item
      6. Exhibits*** ******





a)
      Exhibits.




Exhibit
                No.
            
            Document31.1
            
            Certification
                Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 (Brian.
                M.
                Lavey, President, Principal Executive Officer31.2
            
            Certification
                Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 (Murray
                Fleming, Principal Accounting Officer)32.1
            
            Certification
                Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002 (Brian. M. Lavey, President, Principal
                Executive Officer)32.2
            
            Certification
                Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002 (Murray Fleming, Principal Accounting
                Officer)




15




**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.





NACEL
                ENERGY CORPORATIONBy:
            */s/
                Brian M. Lavery*Brian
                M. LaveryPresident
                and Principal Executive OfficerBy:
            */s/
                Murray Fleming*Murray
                FlemingPrincipal
                Accounting OfficerDate:
            November
                11, 2008




16