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 December 31, 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
17th
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 o





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





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





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


YesoNoþ





Shares of
common stock outstanding on February 17, 2009: 21,786,000










NACEL
ENERGY CORPORATION





INDEX





FOR THE
QUARTERLY PERIOD ENDED DECEMBER 31, 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
                
                
                13Item
      4.  Controls and Procedures
                
                
                13PART
      II. OTHER INFORMATION
                
                
                13Item
      1.  Legal Proceedings
                
                
                13Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
                
                
                14Item
      3.  Defaults Upon Senior Securities
                
                
                15Item
      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)





December 31,
                  
                  
                  March 31,2008
                  
                  
                  2008ASSETSCurrent
      AssetsCash
                  
                  $
                  862,134
                  
                  
                  $
                  380,567Other
      current assets
                  
                  
                  20,000
                  
                  
                  
                  1,277Total
      current assets
                  
                  
                  882,134
                  
                  
                  
                  381,844Property,
      plant and equipment, net of accumulated depreciation of $0
                  
                  
                  116,577
                  
                  
                  
                  30,018TOTAL
      ASSETS
                  
                  $
                  998,711
                  
                  
                  $
                  411,862LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable
                  
                  $
                  -
                  
                  
                  $
                  78,660Non-current
      LiabilitiesShareholder
      line of credit
                  
                  
                  250,000
                  
                  
                  
                  138,075Total
      liabilities
                  
                  
                  250,000
                  
                  
                  
                  216,735Stockholders'
      equityCommon
      stock of $.001 par value. Authorized 50,000,000 issued 21,786,000 at
      December 31, and 21,400,000 at March 31, 2008
                  
                  
                  21,786
                  
                  
                  
                  21,400Additional
      paid-in capital
                  
                  
                  3,636,886
                  
                  
                  
                  1,719,502Subscription
      receivable
                  
                  
                  -
                  
                  
                  
                  (690,373
                  )Deficit
      accumulated during the development stage
                  
                  
                  (2,909,961
                  )
                  
                  
                  (855,402
                  )Total
      stockholders' equity
                  
                  
                  748,711
                  
                  
                  
                  195,127TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                  
                  $
                  998,711
                  
                  
                  $
                  411,862





See
accompanying notes to consolidated financial statements




3




Nacel
Energy Corporation


(
A Development Stage Company)


Consolidated
Statements of Expenses


(Unaudited)


Three
and nine months ended December 31, 2008 and 2007 and the period


from
February 7, 2006 (Inception) through December 31, 2008





Three Months Ended December 31,
                                                
                                                
                                                Nine Months Ended
                                                  December 31,
                                                
                                                
                                                Inception
                                                  through2008
                                                
                                                
                                                2007
                                                
                                                
                                                2008
                                                
                                                
                                                2007
                                                
                                                
                                                December 31, 2008General
      and administrative expenses
                                                
                                                $
                                                62,517
                                                
                                                
                                                $
                                                93,273
                                                
                                                
                                                $
                                                1,510,247
                                                
                                                
                                                $
                                                135,732
                                                
                                                
                                                $
                                                1,865,614Wind
      projects donated by related party
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                490,000Wind
      project development costs
                                                
                                                
                                                419,971
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                538,920
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                538,920Net
      loss from operations
                                                
                                                
                                                482,488
                                                
                                                
                                                
                                                93,273
                                                
                                                
                                                
                                                2,049,167
                                                
                                                
                                                
                                                135,732
                                                
                                                
                                                
                                                2,894,534Other
      (income) expenseInterest
      expense
                                                
                                                
                                                3,969
                                                
                                                
                                                
                                                3,070
                                                
                                                
                                                
                                                9,342
                                                
                                                
                                                
                                                6,858
                                                
                                                
                                                
                                                19,694Interest
      income
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (3,671
                                                )
                                                
                                                
                                                (178
                                                )
                                                
                                                
                                                (3,671
                                                )Other
      income
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (279
                                                )
                                                
                                                
                                                (108
                                                )
                                                
                                                
                                                (596
                                                )Total
      other (income) expense
                                                
                                                
                                                3,969
                                                
                                                
                                                
                                                3,070
                                                
                                                
                                                
                                                5,392
                                                
                                                
                                                
                                                6,572
                                                
                                                
                                                
                                                15,427Net
      loss
                                                
                                                
                                                (486,457
                                                )
                                                
                                                
                                                (96,343
                                                )
                                                
                                                
                                                (2,054,559
                                                )
                                                
                                                
                                                (142,304
                                                )
                                                
                                                
                                                (2,909,961
                                                )Other
      comprehensive incomeUnrealized
      gain (loss) on marketable securities
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (98
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (709
                                                )
                                                
                                                
                                                -Comprehensive
      net loss
                                                
                                                $
                                                (486,457
                                                )
                                                
                                                $
                                                (96,441
                                                )
                                                
                                                $
                                                (2,054,559
                                                )
                                                
                                                $
                                                (143,013
                                                )
                                                
                                                $
                                                (2,909,961
                                                )Basic
      and diluted net loss per share
                                                
                                                $
                                                (0.02
                                                )
                                                
                                                $
                                                (0.00
                                                )
                                                
                                                $
                                                (0.09
                                                )
                                                
                                                $
                                                (0.01
                                                )
                                                
                                                
                                                N/ABasic
      and diluted weighted average common shares outstanding
                                                
                                                
                                                21,809,696
                                                
                                                
                                                
                                                20,434,783
                                                
                                                
                                                
                                                21,655,091
                                                
                                                
                                                
                                                14,534,545
                                                
                                                
                                                
                                                N/A




See
accompanying notes to consolidated financial statements




4




Nacel
Energy Corporation


(A
Development Stage Company)


Consolidated
Statements of Cash Flows


(Unaudited)


Nine
months ended December 31, 2008 and 2007 and the period


from
February 7, 2006 (Inception) through December31, 2008





InceptionNine Months Ended December 31,
                      
                      
                      through2008
                      
                      
                      2007
                      
                      
                      December 31, 2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                      
                      $
                      (2,054,559
                      )
                      
                      $
                      (142,304
                      )
                      
                      $
                      (2,909,961
                      )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Stock
      for services
                      
                      
                      157,640
                      
                      
                      
                      -
                      
                      
                      
                      158,190Wind
      projects donated by related party
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      490,000Imputed
      interest
                      
                      
                      2,630
                      
                      
                      
                      6,858
                      
                      
                      
                      12,982Stock
      issued for executive compensation
                      
                      
                      1,007,500
                      
                      
                      
                      -
                      
                      
                      
                      1,007,500Changes
      in:Prepaid
      and other current assets
                      
                      
                      (18,723
                      )
                      
                      
                      1,332
                      
                      
                      
                      (20,000
                      )Accounts
      payable
                      
                      
                      (78,660
                      )
                      
                      
                      -
                      
                      
                      
                      -Accrued
      interest
                      
                      
                      2,744
                      
                      
                      
                      -
                      
                      
                      
                      2,744Net
      Cash Used in Operating Activities
                      
                      
                      (981,428
                      )
                      
                      
                      (134,114
                      )
                      
                      
                      (1,258,545
                      )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of fixed assets
                      
                      
                      (86,559
                      )
                      
                      
                      -
                      
                      
                      
                      (116,577
                      )Net
      Cash Used in Investing Activities
                      
                      
                      (86,559
                      )
                      
                      
                      -
                      
                      
                      
                      (116,577
                      )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from shareholder line of credit
                      
                      
                      109,182
                      
                      
                      
                      68,970
                      
                      
                      
                      247,257Proceeds
      from sale of common stock
                      
                      
                      750,000
                      
                      
                      
                      40,000
                      
                      
                      
                      790,000Proceeds
      from exercise of warrant
                      
                      
                      690,373
                      
                      
                      
                      27,712
                      
                      
                      
                      1,200,000Net
      cash Provided by Financing Activities
                      
                      
                      1,549,554
                      
                      
                      
                      136,682
                      
                      
                      
                      2,238,813NET
      INCREASE IN CASH
                      
                      
                      481,567
                      
                      
                      
                      2,568
                      
                      
                      
                      862,134CASH
      AT BEGINNING OF PERIOD
                      
                      
                      380,567
                      
                      
                      
                      20,258
                      
                      
                      
                      -CASH
      AT END OF PERIOD
                      
                      $
                      862,134
                      
                      
                      $
                      22,826
                      
                      
                      $
                      862,134Non-cash
      investing and financing activities:Subscription
      receivable
                      
                      
                      -
                      
                      
                      
                      1,172,288
                      
                      
                      
                      -SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATIONCASH
      PAID FOR:Interest
                      
                      $
                      3,969
                      
                      
                      $
                      -
                      
                      
                      $
                      -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
December 31, 2008, none of our property had been placed in service and therefore
we have not recorded any depreciation.





2.   COMMON
STOCK





During
the nine months ended December 31, 2008, we issued 120,000 shares of restricted
common stock to consultants for services related to the achievement of certain
milestones for our wind projects and 16,000 free-trading shares under our S-8
plan for Director’s fees. These shares were recorded at their fair value of
$157,640.





During
the nine months ended December 31, 2008, our subscription receivable from March
31, 2008 was collected in full for an amount of $690,373.




6




During
the nine months ended December 31, 2008, we also issued 250,000 shares of
restricted common stock to our former President and CEO, Mr. Daniel Leach, as
compensation.  These shares were recorded at their fair value of
$1,007,500.





During
the three months ended December 31, 2008, our President and CEO, Mr. Brian
Lavery, returned 1,000,000 of his founders’ shares for cancellation
simultaneously with the issuance of 1,000,000 shares of our common stock. These
shares were sold under the term of a non-brokered private placement agreement in
exchange for proceeds of $750,000.  The cancellation of Mr. Lavery’s
shares was done to prevent diluting our common stock and shareholders. The
shares were returned to us and cancelled at par value of $.001 per
share.





3.   SHAREHOLDER LINE OF
CREDIT





We
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 for
the three months ended June 30, 2008.





On July
31, 2008, we agreed to new terms for the line of credit, which provided 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 our second fiscal quarter, beginning July 1,
2008.  Interest was accrued for a total of $2,744 for the three months
ended September 30, 2008 and is included in shareholder line of credit amount on
the balance sheet.





On
December 31, 2008, we amended the July 31, 2008 agreement to provide for payment
of interest out of our funds once each quarter rather than having such interest
added to the outstanding shareholder line of credit balance. Interest of $3,969
was paid for the three months ended December 31, 2008.  Also, January
1, 2010 was established as the due date for repayment of the shareholder line of
credit balance. As of December 31, 2008, the $250,000 line of credit provided by
the director was fully drawn upon, and no further amounts are able for borrowing
unless the loan agreement is re-negotiated, of which there is no
certainty.





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.




History




We were
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. We have recently commenced entering into
agreements in furtherance of the development of our wind generation power
projects.




8




Current
Operations





In March,
2008, we acquired from a director various rights to four development stage wind
power generation projects known as Blue Creek, Channing Flats, Kansas and the
Dominican Republic. The transaction also included the acquisition of wind
measurement data collected from anemometers at various locations over a period
of years in the States of Texas, Kansas, Wyoming, Colorado and New Mexico. For
further information concerning each of our development stage wind power
generation 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 our Form 8-K filed on October 16, 2008, we announced that we had
retained the four wind power generation projects delivered to us, rather than
accept the proposal of our former President and CEO, Mr. Daniel Leach, to
transfer the projects back to him, in exchange for his 1,250,000 shares of the
Company’s common stock.





The four
wind power generation projects retained by us are the 30MW Blue Creek and 20MW
Channing Flats projects, both located in the Texas Panhandle; the proposed three
phase 600MW project known as Nacel Ridge, located in the Dominican Republic; and
a Kansas project for which a feasible wind development rights agreement, in
our  area of interest, has yet to be consummated.





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





In
October, 2008, we entered into a Wind Project Agreement covering 2,082 acres of
land located in Moore County, Texas, which pertains to the development of our
Blue Creek wind energy project. In addition, we entered into a Right of First
Refusal Agreement whereby we can lease an additional 1,413 acres of land located
in Moore County, Texas, which pertains to the development of our Channing Flat
wind energy project. For more information concerning these two agreements, see
our Form 8-K filed on November 7, 2008.





Plan
of Operation





Since our
inception, we have been a development stage company and, accordingly, have
incurred losses from our operations. For the nine months ended December 31,
2008, we incurred net losses of $2,054,559 and have an accumulated deficit since
inception of $2,909,961. We currently have no revenues and potential future
revenues from our wind power generation projects, if any, will, in all
likelihood, not be generated before our next fiscal year, ending March 31, 2010,
and will certainly require the expenditure of substantial additional
capital.




9




For the
nine months ended December 31, 2008, we incurred total wind power project
development expenses of $538,920, of which $419,971 was incurred during the
three months ended December 31, 2008. The acceleration of the pace of wind power
project development expenses incurred in the current quarter was due to the
retention of new wind power project managers and technical consultants, their
continuing work in advancing development of the projects we acquired and
retained from Mr. Leach, and the expenses related to other new projects we have
commenced feasibility work on.





We also
assess our wind power project development business regularly with regard to the
need for capital equipment. During the first nine months of the period ending
December 31, 2008, we acquired capital equipment of $86,559, of which $44,000 in
capital equipment was acquired during this quarter ended December 31, 2008. We
do not anticipate spending more than $100,000 for additional capital equipment
during the final three months of our fiscal year.





We
expended $2,049,167 in operating  expenses for the first nine months
of the year and $482,488 for the current quarter. We anticipate that we may
expend approximately $200,000 for operating expenses during the three months of
our fiscal year ending March 31, 2009.





Liquidity
and Capital Resources





A
component of our operating plan is the ability to conserve existing cash
resources and the ability to obtain additional capital through 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 our wind
power generation development projects, we may have to cease or significantly
curtail our operations. This could materially impact our ability to continue
operations.





As of
December 31, 2008, we had cash and working capital of $862,134. Included in the
cash amount and working capital is $750,000 in proceeds received from the
issuance, in December 2008, of 1,000,000 shares of our common stock sold in a
non-brokered private placement. There were no fees or commissions paid to any
investment banking firm or broker dealer related to this private placement. We
believe our cash resources will be sufficient to finance our operations for the
next 12 months. However, sometime immediately thereafter, we believe that it
will be necessary to raise additional equity and/or debt financing.





We
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 was imputed at prime plus 2% for a total of $2,630 of imputed interest
expense for the three months ended June 30, 2008.




10




On July
31, 2008, we agreed to new terms on the line of credit, which provide for simple
interest to be added to the outstanding line of credit balance, once each
quarter, based upon the current 3 month LIBOR plus 500 basis points, effective
for our second fiscal quarter, beginning July 1, 2008.  Interest was
accrued for a total of $2,743 for the three months ended September 30,
2008.





On
December 31, 2008 we amended the terms of the line of credit to provide for
payment of interest out of our funds rather than have interest accrued and added
to the outstanding line of credit balance.  Interest of $3,969 was
paid for the three months ended December 31, 2008. Also, January 1, 2010 was
established as the due date for repayment of the shareholder line of credit
balance. As of December 31, 2008, we had borrowed $250,000 under this credit
facility, thereby leaving no additional amounts available for future
borrowing.  There are no assurances that the director will agree to
extend the due date for repayment of the line of credit balance or otherwise
change any of the repayment terms. Accordingly, if the repayment date of the
line of credit remains unchanged, this could have a material impact on the
future liquidity of the Company and its future operations.





Results of
Operations





Nine
Months Ended December 31, 2008 compared to the Nine Months Ended December 31,
2007





Overview.The net loss for the nine months ended December 31, 2008 (“2008 Period”)
was $2,054,559 compared to a net loss of $142,304 for the nine months ended
December 31, 2007 (“2007 Period”), an increase of $1,911,546. This increase in
net loss is primarily attributable to the issuance of 250,000 shares of our
common stock to the Company’s former President, Mr. Daniel Leach, as
compensation during the 2008 Period, which shares were recorded at their fair
value of $1,007,500 and an increase in expenditures for project development
costs, consulting and professional fees of $824,893.





Revenues.
We generated no revenues from our operations for the nine months ended December
31, 2008 or for the nine months ended December 31, 2007. Our operations have
focused upon various business planning and wind power project development
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 $2,049,167 for the 2008 Period compared to operating
expenses of $135,732 reported for the 2007 Period, an increase of
$1,913,435.





The
$1,913,435 increase in operating expenses was primarily due to the
following:




11




·
            $1,007,500
      of executive stock based compensation paid to the Company’s former
      President and CEO, Mr. Daniel Leach


·
            $163,670
      in legal, accounting, filing fees, and related compliance
      costs


·
            $538,920
      in wind power project development costs consisting of project management,
      consulting, project valuation and training
costs


·
            $234,544
      incurred for director fees, consulting services, and general
      expenses


·
            $64,201
      incurred for online marketing, advertising, and travel to promote interest
      in the Company





Three
Months Ended December 31, 2008 compared to the Three Months Ended December 31,
2007





Overview.The net loss for the three months ended December 31, 2008 (“Q3 2008
Period”) was $486,457 compared to a net loss of $96,343 for the three months
ended December 31, 2007 (“Q3 2007 Period”), an increase of $390,016. This
increase in net loss is primarily attributable to additional wind power project
development costs of $419,971 which was partially offset by a $30,756 reduction
in general and administrative expenses during the Q3 2008 Period as compared to
the Q3 2007 Period.





Revenues.
We generated no revenues from our operations for the three months ended December
31, 2008 or for the three months ended December 31, 2007. Our operations have
been focused upon various business planning activities and the development of
our wind power generation projects, 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 $482,488 for the Q3 2008 Period compared to
operating expenses of $93,273 reported for the Q3 2007 Period, an increase of
$389,215.





The
$389,215 increase in operating expenses was primarily due to the
following:





·
            $419,971
      incurred for wind power project development costs related to technical
      consulting and project management
fees.


·
            $30,756
      decrease in general and administrative expenses related to marketing,
      business promotion, legal, accounting and other compliance
      costs.





Off
Balance Sheet Transactions, Arrangements, or Obligations.





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




12




Item
3. Quantitative and Qualitative Disclosures About Market Risk.




As a “smaller reporting company” (as
defined by §229.10(f)(1)), 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.





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 to 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.




13




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





(a)    Unregistered
Sales of Equity Securities.





During
the three month period ending December 31, 2008, we issued 1,000,000 shares of
restricted common stock to a single entity in a non-brokered private placement
generating sale proceeds of $750,000.





We relied
upon the exemption from federal registration under Sections 4(2) and 4(6) of the
Securities Act of 1933, as amended, based on our belief that the issuance of
such shares did not involve a public offering or general solicitation and the
investor’s representation that it is an “accredited investor” as defined in Rule
501(a) of Regulation. The recipient of the shares was afforded an opportunity
for effective access to our files and records that contained relevant
information needed to make an investment decision, including our financial
statements and periodic reports filed pursuant to the 1934 Act. We reasonably
believed that the recipient had such knowledge and experience in financial and
business matters so that it was capable of evaluating the risks of the
investment. All certificates evidencing the subject shares contain restrictive
investment legends noted thereon.





(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
December 31, 2008, we had used a total of $1,352,503 in the operation and
conduct of our business, which is in excess of the net proceeds of $1,240,000
referenced above. These expenditures included $183,176 for marketing,
advertising and travel, $246,733 of legal and professional fees, $192,560 for
consulting fees, $463,521 for project development expenditures, $88,457 for
shareholder services, $12,875 for rent and office expenses, $116,577 for
purchases of fixed assets and $48,604 for general and administrative expenses.
Based on the foregoing, all net proceeds derived from the public offering have
now been expended.





14




Item
3.  Defaults Upon Senior Securities





None




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 December 31, 2008.




Item
5.  Other Information




None




Item
6.  Exhibits




a)
Exhibits.





Exhibit No.
              
              Document10.1
              
              Wind
      Power Agreement (Oglesby Farms)31.1
              
              Certification
      Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 (Brian. M.
      Lavery, President, Principal Executive Officer)31.2
              
              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. Lavery, 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.
    LaveryBrian
      M. LaveryPresident
      and Principal Executive OfficerBy:
              /s/  Murray
    FlemingMurray
      FlemingPrincipal
      Accounting OfficerDate:
              February
      17, 2009




16