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, 2009





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


Commission
file number: 0-53150





NACEL ENERGY
CORPORATION





9375
E. Shea Blvd., Suite 100


Scottsdale,
Arizona 85260


Telephone
(602) 235-0355





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 10, 2010:  22,181,000





NACEL
ENERGY CORPORATION





INDEX





FOR THE
QUARTERLY PERIOD ENDED DECEMBER 31, 2009





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
                
                11Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk
                
                16Item
      4.  Controls and Procedures
                
                16PART
      II. OTHER INFORMATION
                
                17Item
      1.  Legal Proceedings
                
                17Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
                
                17Item
      3.  Defaults Upon Senior Securities
                
                17Item
      4.  Submission of Matters to a Vote of Security
      Holders
                
                18Item
      5.  Other Information
                
                18Item
      6.  Exhibits
                
                18


2


PART I.
FINANCIAL INFORMATION




Item
1.  Financial Statements





Nacel
Energy Corporation


(A
Development Stage Company)


Consolidated
Balance Sheets


(Unaudited)





December
                  
                  
                  March
      31,2009
                  
                  
                  2009ASSETSCurrent
      AssetsCash
                  
                  $
                  340,248
                  
                  
                  $
                  564,677Prepaid
      expenses
                  
                  
                  4,000
                  
                  
                  
                  -Deferred
      financing costs
                  
                  
                  159,467
                  
                  
                  
                  -Total
      current assets
                  
                  
                  503,715
                  
                  
                  
                  564,677Property,
      plant and equipment, net of accumulated depreciation of $11,778 and $1,682
      at December 31, 2009 and March 31, 2009, respectively
                  
                  
                  314,009
                  
                  
                  
                  166,495TOTAL
      ASSETS
                  
                  $
                  817,724
                  
                  
                  $
                  731,172LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)Current
      LiabilitiesAccounts
      payable
                  
                  $
                  166,347
                  
                  
                  $
                  7,537Accrued
      interest
                  
                  
                  -
                  
                  
                  
                  3,894Demand
      note payable
                  
                  
                  250,000
                  
                  
                  
                  -Shareholder
      line of credit
                  
                  
                  460,753
                  
                  
                  
                  -Convertible
      note, net of discount of $808,767
                  
                  
                  91,233
                  
                  
                  
                  -Derivative
      liabilities
                  
                  
                  1,972,418
                  
                  
                  
                  -Total
      current liabilities
                  
                  
                  2,940,751
                  
                  
                  
                  11,431Shareholder
      line of credit
                  
                  
                  -
                  
                  
                  
                  250,000Total
      liabilities
                  
                  
                  2,940,751
                  
                  
                  
                  261,431Stockholders'
      equityCommon
      stock of $.001 par value.  Authorized 50,000,000 shares; issued
      22,111,000  and 21,786,000 at December 31, 2009 and March 31,
      2009, respectively
                  
                  
                  22,111
                  
                  
                  
                  21,786Additional
      paid-in capital
                  
                  
                  3,945,861
                  
                  
                  
                  3,636,886Deficit
      accumulated during the development stage
                  
                  
                  (6,090,999
                  )
                  
                  
                  (3,188,931
                  )Total
      stockholders' equity (deficit)
                  
                  
                  (2,123,027
                  )
                  
                  
                  469,741TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                  
                  $
                  817,724
                  
                  
                  $
                  731,172





See notes
to the financial statements.


3





Nacel
      Energy Corporation(A
      Development Stage Company)Consolidated
      Statements of Expenses(Unaudited)Nine
      months ended December 31, 2009 and 2008 and the periodfrom February 7, 2006 (Inception) through December
      31, 2009





InceptionThree Months Ended
                    
                    
                    Nine Months Ended
                    
                    
                    throughDecember 31,
                    
                    
                    December 31,
                    
                    
                    December 31,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008
                    
                    
                    2009General
      and administrative expenses
                    
                    $
                    173,871
                    
                    
                    $
                    62,517
                    
                    
                    $
                    663,641
                    
                    
                    $
                    1,510,247
                    
                    
                    $
                    2,656,483Wind
      projects donated by related party
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    490,000Wind
      project development costs
                    
                    
                    265,349
                    
                    
                    
                    419,971
                    
                    
                    
                    910,749
                    
                    
                    
                    538,920
                    
                    
                    
                    1,597,517Net
      loss from operations
                    
                    
                    (439,220
                    )
                    
                    
                    (482,488
                    )
                    
                    
                    (1,574,390
                    )
                    
                    
                    (2,049,167
                    )
                    
                    
                    (4,744,000
                    )Other
      income (expenses):Interest
      expense
                    
                    
                    (135,950
                    )
                    
                    
                    (3,969
                    )
                    
                    
                    (153,852
                    )
                    
                    
                    (9,342
                    )
                    
                    
                    (177,440
                    )Interest
      income
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    3,671
                    
                    
                    
                    3,848Other
      income
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    279
                    
                    
                    
                    419Loss
      on derivative financial instruments
                    
                    
                    (1,173,826
                    )
                    
                    
                    -
                    
                    
                    
                    (1,173,826
                    )
                    
                    
                    -
                    
                    
                    
                    (1,173,826
                    )Total
      other expense
                    
                    
                    (1,309,776
                    )
                    
                    
                    (3,969
                    )
                    
                    
                    (1,327,678
                    )
                    
                    
                    (5,392
                    )
                    
                    
                    (1,346,999
                    )Net
      Loss
                    
                    $
                    (1,748,996
                    )
                    
                    $
                    (486,457
                    )
                    
                    $
                    (2,902,068
                    )
                    
                    $
                    (2,054,559
                    )
                    
                    $
                    (6,090,999
                    )Basic
      and diluted net loss per share
                    
                    $
                    (0.08
                    )
                    
                    $
                    (0.02
                    )
                    
                    $
                    (0.13
                    )
                    
                    $
                    (0.09
                    )
                    
                    
                    N/ABasic
      and diluted weighted average common shares outstanding
                    
                    
                    22,111,000
                    
                    
                    
                    21,809,696
                    
                    
                    
                    21,927,764
                    
                    
                    
                    21,655,091
                    
                    
                    
                    N/A





See notes
to the financial statements.


4





Nacel
      Energy Corporation(A
      Development Stage Company)Consolidated
      Statements of Cash Flows(Unaudited)Nine
      months ended December 31, 2009 and 2008 and the periodfrom February 7, 2006 (Inception) through December
      31, 2009





InceptionNine Months Ended
                            
                            
                            Nine Months Ended
                            
                            
                            throughDecember 31,
                            
                            
                            December 31,
                            
                            
                            December 31,2009
                            
                            
                            2008
                            
                            
                            2009CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                            
                            $
                            (2,902,068
                            )
                            
                            $
                            (2,054,559
                            )
                            
                            $
                            (6,090,999
                            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation,
      amortization and accretion
                            
                            
                            126,454
                            
                            
                            
                            -
                            
                            
                            
                            128,136Stock
      for services
                            
                            
                            144,300
                            
                            
                            
                            157,640
                            
                            
                            
                            302,490Wind
      projects donated by related party
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            490,000Imputed
      interest
                            
                            
                            -
                            
                            
                            
                            2,630
                            
                            
                            
                            15,725Stock
      issued for executive compensation
                            
                            
                            -
                            
                            
                            
                            1,007,500
                            
                            
                            
                            1,007,500Derivative
      loss
                            
                            
                            1,173,826
                            
                            
                            
                            -
                            
                            
                            
                            1,173,826Changes
      in:Prepaid
      and other current assets
                            
                            
                            (4,000
                            )
                            
                            
                            (18,723
                            )
                            
                            
                            (4,000
                            )Accounts
      payable
                            
                            
                            158,810
                            
                            
                            
                            (78,660
                            )
                            
                            
                            166,347Accrued
      interest
                            
                            
                            (3,894
                            )
                            
                            
                            2,744
                            
                            
                            
                            -Net
      Cash Used in Operating Activities
                            
                            
                            (1,306,572
                            )
                            
                            
                            (981,428
                            )
                            
                            
                            (2,810,975
                            )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of fixed assets
                            
                            
                            (153,610
                            )
                            
                            
                            (86,559
                            )
                            
                            
                            (321,878
                            )Net
      Cash Used in Investing Activities
                            
                            
                            (153,610
                            )
                            
                            
                            (86,559
                            )
                            
                            
                            (321,878
                            )CASH
      FLOWS FROM FINANCING ACTIVITIESCash
      paid for financing costs
                            
                            
                            (120,000
                            )
                            
                            
                            
                            
                            
                            
                            (120,000
                            )Proceeds
      from shareholder line of credit
                            
                            
                            210,753
                            
                            
                            
                            109,182
                            
                            
                            
                            458,010Borrowings
      on debt
                            
                            
                            980,000
                            
                            
                            
                            -
                            
                            
                            
                            980,000Proceeds
      from sale of common stock
                            
                            
                            165,000
                            
                            
                            
                            750,000
                            
                            
                            
                            955,000Proceeds
      from exercise of warrant
                            
                            
                            -
                            
                            
                            
                            690,373
                            
                            
                            
                            1,200,000NET
      CASH PROVIDED BY FINANCING ACTIVITIES
                            
                            
                            1,255,753
                            
                            
                            
                            1,549,554
                            
                            
                            
                            3,473,010NET
      INCREASE IN CASH
                            
                            
                            (224,429
                            )
                            
                            
                            481,567
                            
                            
                            
                            340,248CASH
      AT BEGINNING OF PERIOD
                            
                            
                            564,677
                            
                            
                            
                            380,567
                            
                            
                            
                            -CASH
      AT END OF PERIOD
                            
                            $
                            340,248
                            
                            
                            $
                            862,134
                            
                            
                            $
                            340,248NON-CASH
      TRANSACTIONSIssuance
      of warrants for loan fees
                            
                            $
                            68,592
                            
                            
                            $
                            -
                            
                            
                            $
                            68,592Debt
      discount due to derivative liabilities
                            
                            $
                            730,000
                            
                            
                            $
                            -
                            
                            
                            $
                            730,000SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATIONCASH
      PAID FOR:Interest
                            
                            $
                            35,382
                            
                            
                            $
                            3,969
                            
                            
                            $
                            46,780Income
      taxes
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -





See notes
to the financial statements.


5





NACEL
ENERGY CORPORATION


(A
Development Stage Company)


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


UNAUDITED





NOTE
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-K for the year ended March 31, 2009, 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-K have been omitted.





Derivative
Financial Instruments





Nacel
does not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks.  Nacel evaluates all of it financial
instruments to determine if such instruments are derivatives or contain features
that qualify as embedded derivatives.  For derivative financial
instruments that are accounted for as liabilities, the derivative instrument is
initially recorded at its fair value and is then re-valued at each reporting
date, with changes in the fair value reported as charges or credits to
income.  For option-based derivative financial instruments, Nacel uses
the Black-Scholes option-pricing model to value the derivative instruments at
inception and subsequent valuation dates. The classification of derivative
instruments, including whether such instruments should be recorded as
liabilities or as equity, is re-assessed at the end of each reporting
period.  Derivative instrument liabilities are classified in the
balance sheet as current or non-current based on whether or not net-cash
settlement of the derivative instrument could be required within 12 months of
the balance sheet date.





Fair
Value Measurements





In
September 2006, the FASB issued ASC 820 (previously SFAS 157) which defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. The provisions of ASC 820 were effective
January 1, 2008. The FASB has also issued Staff Position (FSP) SFAS 157-2
(FSP No. 157-2), which delays the effective date of SFAS 157 for
nonfinancial assets and liabilities, except for items that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at
least annually), until fiscal years beginning after November 15,
2008.





As
defined in ASC 820, fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date (exit price). The Company utilizes market
data or assumptions that market participants would use in pricing the asset or
liability, including assumptions about risk and the risks inherent in the inputs
to the valuation technique. These inputs can be readily observable, market
corroborated, or generally unobservable. The Company classifies fair value
balances based on the observations of those inputs. ASC 820 establishes a fair
value hierarchy that prioritizes the inputs used to measure fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (level 1 measurement) and the lowest
priority to unobservable inputs (level 3 measurement).


6


The three
levels of the fair value hierarchy defined by ASC 820 are as
follows:





Level 1 –
Quoted prices are available in active markets for identical assets or
liabilities as of the reporting date. Active markets are those in which
transactions for the asset or liability occur in sufficient frequency and volume
to provide pricing information on an ongoing basis. Level 1 primarily consists
of financial instruments such as exchange-traded derivatives, marketable
securities and listed equities.





Level 2 –
Pricing inputs are other than quoted prices in active markets included in level
1, which are either directly or indirectly observable as of the reported date.
Level 2 includes those financial instruments that are valued using models or
other valuation methodologies. These models are primarily industry-standard
models that consider various assumptions, including quoted forward prices for
commodities, time value, volatility factors, and current market and contractual
prices for the underlying instruments, as well as other relevant economic
measures. Substantially all of these assumptions are observable in the
marketplace throughout the full term of the instrument, can be derived from
observable data or are supported by observable levels at which transactions are
executed in the marketplace. Instruments in this category generally include
non-exchange-traded derivatives such as commodity swaps, interest rate swaps,
options and collars.





Level 3 –
Pricing inputs include significant inputs that are generally less observable
from objective sources. These inputs may be used with internally developed
methodologies that result in management’s best estimate of fair
value.





The
following table sets forth by level within the fair value hierarchy the
Company’s financial assets and liabilities that were accounted for at fair value
as of December 31, 2009. As required by ASC 820, financial assets and
liabilities are classified in their entirety based on the lowest level of input
that is significant to the fair value measurement. The Company’s assessment of
the significance of a particular input to the fair value measurement requires
judgment, and may affect the valuation of fair value assets and liabilities and
their placement within the fair value hierarchy levels.





December31,2009Level1
                              
                              
                              Level2
                              
                              
                              Level 3
                              
                              
                              TotalFreestanding
      and Embedded derivatives
                              
                              
                              —
                              
                              
                              $
                              1,972,418
                              
                              
                              
                              —
                              
                              
                              $
                              1,972,418





The
derivatives listed above are carried at fair value. The fair value amounts in
current period earnings associated with the Company’s derivatives resulted from
Level 2 fair value methodologies; that is, the Company is able to value the
assets and liabilities based on observable market data for similar instruments.
This observable data includes the quoted market prices and estimated volatility
factors.





Reclassifications.




Certain
prior year amounts have been reclassified to conform with the current year
presentation.





Consolidation.





The
consolidated financial statements include the accounts of Nacel Energy and its
wholly-owned subsidiaries, 0758817 BC Ltd., Blue Creek Wind Energy Facility,
LLC, Channing Flats Wind Energy Facility, LLC, Swisher Wind Energy Facility, LLC
and Hedley Pointe Wind Energy Facility LLC.  Significant inter-company
accounts and transactions have been eliminated.


7


New
Accounting Pronouncements.





In June
2009, the Financial Accounting Standards Board (“FASB”) issued an update of
Accounting Standards Codification 105, “Generally Accepted Accounting
Principles” (“ASC 105”) which establishes the FASB Accounting Standards
Codification TM (the “ASC”).  The ASC is the sole source of
authoritative U.S. generally accepted accounting principles (“GAAP”) recognized
by the FASB to be applied by nongovernmental entities.  The ASC
superseded all then-existing non-SEC accounting and reporting standards. All
other non-grandfathered, non-SEC accounting literature not included in the ASC
is no longer authoritative. While the ASC does not change GAAP, it introduces a
new structure that reorganizes the GAAP pronouncements into accounting topics.
All content of the ASC carries the same level of authority.  The ASC
is effective for our financial statements as of September 30, 2009.





In May
2009, the FASB issued SFAS No. 165, “Subsequent Events,” (now ASC 855) which
modifies the definition of subsequent events and requires disclosure of the date
through which an entity has evaluated subsequent events and the basis for that
date. These requirements became effective for us on June 15, 2009. We evaluated
subsequent events through February 15, 2010, which represents the date our
financial statements were issued.





NOTE
2 - GOING CONCERN




The
accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. Nacel Energy has incurred material
recurring losses from operations.  Since inception, Nacel Energy has
incurred losses of approximately $6.1 million.  In addition, Nacel
Energy is experiencing a continuing operating cash flow deficiency. These
factors, among others, raise substantial doubt about Nacel Energy’s ability to
continue as a going concern for a reasonable period of time.





Nacel
Energy is pursuing, and will  continue to pursue, additional equity
financing and/or debt financing while managing cash flow in an effort to provide
funds and cash flow to meet its obligations on a timely basis and to support
wind project development activities.





The
consolidated financial statements do not contain any adjustments to reflect the
possible future effects on the classification of assets or the amounts and
classification of liability that may result should Nacel Energy be unable to
continue as a going concern.





NOTE
3 – DEMAND NOTES PAYABLE





In July
2009, Nacel executed a new loan with a lender in the amount of $250,000, which
provides for simple interest of 10% to be paid upon the outstanding
balance.  The note is due on demand and is unsecured.





NOTE
4 – SHAREHOLDER LINE OF CREDIT





At
inception, Nacel Energy entered into an agreement with Mr. Fleming with respect
to an unsecured, no-interest $250,000 line of credit repayable at an unspecified
future date.





Effective
July 1, 2008, Nacel Energy 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.  Prior to that date, interest on the line of credit was
imputed to paid-in capital based on the market rate of interest for the
period.





On June
30, 2009, Mr. Fleming loaned an additional $150,000 on the line of
credit.  On July 1, 2009, we ratified the terms for the line of credit
to allow an increase in the balance to $400,000, which provides for simple
interest of 8% per annum on the outstanding balance with interest payments
beginning October 1, 2009.  The line of credit is due July 1,
2010.


8


On
September 29, 2009, we ratified the terms for the line of credit to allow an
additional increase in the balance to $442,143.  The terms and payment
arrangements remain the same as agreed upon on June 30, 2009.





On
October 26, 2009, we ratified the terms for the line of credit to allow an
additional increase in the balance to $460,753.  The terms and payment
arrangements remain the same as agreed upon on June 30, 2009.





As of
December 31, 2009, interest of $9,291 was accrued.





As of
December 31, 2009, the $460,753 line of credit extended by the director was
fully drawn upon, and no further amounts are available for borrowing unless the
agreement is re-negotiated, of which there is no certainty.





NOTE
5 – CONVERTIBLE NOTE PAYABLE





On
November 24, 2009, Nacel entered into a definitive Securities Purchase Agreement
for the issuance of a Senior Secured Convertible Note (the “Note”) and 3,500,000
Warrants in a private placement with a single institutional
investor.  Proceeds from the Note were $730,000 with repayment amount
of $900,000.  The Note has an original issue discount of $150,000.
$20,000 of the initial proceeds were used to pay legal costs for the
investor.  In addition, Nacel paid an additional $25,000 in separate
legal fees associated with the offering.  The legal fees were deferred
and will be amortized until maturity to interest expense.





The note
is payable over nine monthly installments and matures on December 1,
2010.  The repayment amount of $900,000 does not accrue interest
unless an event of default occurs, in which case the interest rate shall be 18%
per annum.





Nacel may
pay each monthly installment in cash or, at its option, subject to the
satisfaction of customary equity conditions, in shares of common
stock.  The Note is convertible into shares of Nacel’s common stock at
an initial conversion price of $0.90 per share.  The embedded
conversion option contains a reset provision that can cause an adjustment to the
conversion price if Nacel sells or issues an equity instrument at a price lower
than the initial conversion price.   Due to this provision, the
embedded conversion option qualifies for derivative accounting under ASC 815-15
(See Note 7 below).  The fair value of the embedded conversion option
was determined to be $374,228 at the inception of the note.  This fair
value in conjunction with the fair value of the warrants issued with the note
(See Note 6 below) resulted in a full discount to the note payable at
inception.  As of December 31, 2009, $91,233 of the discount had been
amortized to interest expense.





In
conjunction with the note payable, Nacel paid $75,000 and issued 83,333 warrants
to a placement agent with a fair value of $68,590.  Both amounts were
deferred and will be amortized until maturity to interest expense.  As
of December 31, 2009, $29,125 of the amounts deferred (including legal fees
mentioned above) had been amortized to interest expense.





NOTE
5 - EQUITY TRANSACTIONS





During
the nine months ended December 31, 2009, the Company issued 105,000 shares of
restricted common stock to Renergix Wind LLC, our project development
consultants, for services related to the achievement of a wind project
development milestone as specified in our joint development
agreement.  We expensed $144,300 during the period related to this
stock issuance.





On
September 24, 2009, the Company sold 220,000 shares of common stock to a third
party.  These shares were sold under the terms of a non-brokered
private placement agreement in exchange for proceeds of
$165,000.


9


NOTE
6 - WARRANTS


During
the quarter, Nacel issued 3,500,000 warrants in relation to convertible notes
and an additional 83,333 to the placement agent in the transaction (see Note 4
above) .  The warrants are exercisable at $0.90 per share for 5
years.  The warrants granted contain reset provisions that can cause
an adjustment to the exercise price if Nacel sells or issues an equity
instrument at a price lower than the initial exercise price.  Due to
this provision, the warrants qualify for derivative accounting under ASC 815-15
(See Note 7 below).





A summary
of the options issued by us for the nine months ended December 31, 2009 as
follows:





Warrants
                            
                            
                            Weighted-Average
                              Exercise Price
                            
                            
                            Weighted-Average
                              Remaining
                              Contracted Life
                              (Years)
                            
                            
                            Aggregate
                              Intrinsic ValueOutstanding
      on March 31, 2009
                            
                            
                            -
                            
                            
                            $
                            -
                            
                            
                            
                            
                            
                            $
                            -Granted
                            
                            
                            3,583,333
                            
                            
                            
                            0.90
                            
                            
                            
                            5.00
                            
                            
                            
                            -Exercised
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Forfeited
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Expired
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Outstanding
      on December 31, 2009
                            
                            
                            3,583,833
                            
                            
                            $
                            0.90
                            
                            
                            
                            4.92
                            
                            
                            $
                            -





NOTE
7 - DERIVATIVE LIABILITY





Embedded
feature of equity-linked financial instrument:





ASC
815-15, "Determining Whether an Instrument (or Embedded Feature) is indexed to
an Entity's Own Stock" lays out a procedure to determine if an
equity-linked financial instrument (or embedded feature) is indexed to its own
common stock. The ASC815-15 is effective for fiscal years beginning after
December 15, 2008. Nacel’s 3,583,333 outstanding warrants and the embedded
conversion option in its note payable were classified as derivative liabilities
on November 24, 2009 as a result of ASC 815-15.  The fair value of these
liabilities at inception of the instruments was $3,323,593. Because the fair
value of the instruments at inception exceeded the carrying amount of the note
payable, a loss of $2,525,001 was recorded.  The fair value of these
liabilities will be re-measured at the end of every reporting period and the
change in fair value will be reported in our consolidated statement of
operations as a gain or loss on derivative financial instruments. The fair value
of these liabilities as of December 31, 2009 was $1,972,418 and a gain of
$1,351,175 was recorded as a result of the change in fair value since inception
of the instruments resulting in a net loss of $1,173,826 for the three and nine
months, ending December 31, 2009.





Nacel
used the Black-Scholes option pricing model to value the embedded feature of the
liability and the warrants using the following assumptions: number of options as
set forth in the option agreements; no expected dividend yield; expected
volatility ranging from 100% - 152%; risk-free interest rates ranging from 0.06%
- 2.69% and expected terms based on the contractual term.





NOTE
8 - CONCENTRATIONS OF CREDIT RISK ARISING FROM CASH DEPOSITS IN EXCESS OF
INSURED LIMITS





The
Company maintains its cash balances in one financial institution located in
Point Roberts, Washington.  The balances are insured by the Federal
Deposit Insurance Corporation up to $250,000.  At December 31, 2009,
the Company has a cash balance of $340,248, of which $90,248 is
uninsured.


10




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





Nacel
Energy Corporation is a Wyoming corporation incorporated on February 7, 2006,
with our principal executive office currently located at 9375 E Shea Blvd, Suite
100, Scottsdale, Arizona 85260. We are a development stage wind power generation
company engaged in the business of developing wind power generation facilities
from “green field” (or blank state) up to and including operation. Our domestic
development efforts are primarily focused upon wind power generation facilities
in the 10 MW to 30 MW range. We have not ruled out the possibility of larger
projects including internationally.





Current
Operations





As of
December 31, 2009, we had six (6) wind energy projects totaling 120 MW or more
of potential power generating capacity located on 7015 acres of land in the
Panhandle area of Texas and northern Arizona.  We follow a 25 step
wind power development model and the status of  our wind energy
projects has been summarized in our Annual Report on Form 10-K for the fiscal
year ended March 31, 2009 and in subsequent Forms 8-K, filed with the
Commission. We are also engaged in efforts to locate and evaluate additional
“green field” locations for the development of additional wind power generation
facilities, primarily in Kansas and Illinois. None of our wind energy projects
are currently in operation and we estimate a further 12 to 24 months before any
of our projects become operational.  Prior to operations we also must
obtain substantial additional financing and/or equity and complete many other
steps in our development model. There are no assurances that we will be able to
obtain the additional financing and/or equity and even if obtained, that any of
our wind power generation facilities will ultimately become operational or
generate sufficient revenues to be profitable.




During
the three month period ending December 31, 2009, the following activities have
occurred with respect to our six (6) wind power generations
projects:





·
            Interconnection
      negotiations are currently underway for multiple
  projects.


11





·
            Met
      tower data is being analyzed and reviewed to determine the most suitable
      turbines for each project.





·
            Project
      financing discussions are underway for multiple
  projects.





·
            Turbine
      procurement discussions continue to proceed for all
    projects.





·
            Off
      take discussions are underway with the appropriate load-serving entities
      for various projects.





In
addition to the foregoing, we also assess our business regularly with regard to
the need for capital equipment. During the nine months ending December 31, 2009,
we acquired $22,610 in additional capital equipment.




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,
2009, we incurred net losses of $2,902,068 and have an accumulated deficit since
inception of $6,090,999. We currently have no revenues.  The potential
future revenues we expect from our wind power generation projects will not be
generated until sometime after January 1, 2011, and will require the expenditure
of additional capital, obtaining of construction and project debt financing and
establishing turbine supply relationships.





For the
foreseeable future, our operating plan is dependent upon both the ability to
conserve existing cash resources and the ability to obtain additional capital
through equity financing and/or debt financing in an effort to provide the
necessary funds and cash flow to meet our obligations on a timely basis and to
support our wind power project development activities. In the event that we are
unable to conserve existing cash resources and/or obtain the additional and
necessary capital, we may have to cease or significantly curtail our operations.
This could materially impact our ability to continue operations.





Recent
Financings





We
completed the following financings during the three month period ending December
31, 2009.


Demand
Note. In July 2009, we executed a new loan with a lender in the
amount of $250,000, which provides for simple interest of 10% to be paid in
consecutive monthly installments of interest only commencing on July 1st,
2009.  Payment is due when the lender has provided the borrowers with
written notice of demand.  Payment is to be made within 15 days of any
such notice of demand.  The loan is unsecured. Since the lender can
make demand for payment at its discretion, there are no assurances that as to
when repayment of this loan may be required or whether we would be able to
convince the lender to delay repayment of the loan for an extended period of
time. The repayment of this loan has been subordinated to the payment in full of
the Senior Secured Convertible Note issued November 2009 issued in connection
with the transaction described below.





Senior Secured
Convertible Note and Warrants.On November 23, 2009, we
entered into a Securities Purchase Agreement and thereafter other related
agreements pursuant to which we agreed to issue a Senior Secured Convertible
Note in the original principal amount of $900,000 (the “Note”) and common stock
warrants (the “Warrants”) for an aggregate purchase price of $750,000 in a
private placement (the “November Private Placement”) with a single institutional
investor (the "Investor"). The November Private Placement closed on November 24,
2009. The principal purposes of the November Private Placement were to
strengthen our cash position and to provide us with general working capital. The
November Private Placement resulted in gross proceeds to us of $750,000 before
placement agent fees and other expenses associated with the
transaction.


12


The Note
matures December 1, 2010 and provides for payment in nine equal installments
beginning on April 1, 2010. No interest accrues on the principal amount
outstanding unless an event of default occurs in which event interest shall
thereafter accrue at the rate of 18% per annum. We may pay installments of
principal in cash or, at our option, in shares of common stock. Our ability to
pay with common stock is subject to certain conditions noted below. If we elect
to pay the principal in shares of our common stock, the value of each share of
common stock will be equal to the lower of (a) the initial conversion price of
$0.90 per share, or (b) 90% of the average of the volume weighted average prices
of our common stock on each of the twenty (20) consecutive trading days
immediately preceding the applicable payment date, with such price being subject
to a floor of $0.75.  In addition, at the option of the Investor
holding the Note, all or any part of the principal amount outstanding under the
Note is convertible at any time and from time to time into shares of our common
stock at an initial conversion price of $0.90 per share. However, the conversion
price may be reduced if we issue securities at a price per share less than the
conversion price of the Notes then in effect.





Beginning
on April 1, 2010, and on the first of each month thereafter, we will be required
to convert one ninth of the face value of the Note into shares of our common
stock or, at our election, redeem such amount in cash. Our ability to convert
installment payments into shares of our common stock will be subject to certain
conditions, including the existence of an effective registration statement
covering the resale of the shares issued in payment of the installment amount
and certain minimum trading volumes in the stock to be issued. No payment in
shares of our common stock may exceed 25% of the total dollar traded volume in
our common stock for the 20 trading days prior to the installment notice date.
Any shares of our common stock delivered in satisfaction of a scheduled monthly
payment will be valued at the lesser of (i) the conversion price in effect at
the time of the scheduled monthly payment or (ii) 90% of the average of the
daily volume weighted average price of the applicable shares for the 20 trading
days prior to the amortization payment, with such price being subject to a floor
of $0.75.





In
accordance with the terms of a Security Agreement, our obligations under the
Note and the other transaction documents are secured by a first priority,
perfected security interest in all of our assets.  Additionally, in
accordance with the terms of a Guaranty, each of our subsidiaries guarantee our
obligations  under the Note and the other transaction documents, and
each such guarantee is secured by a first priority, perfected security interest
in all of the assets of each such subsidiary





Under the
terms of the Note, we and each of our subsidiaries agree not to incur or allow
to exist any indebtedness, other than the indebtedness evidenced the Note and
Permitted Indebtedness.  Permitted Indebtedness is defined to include,
among other things, our existing unsecured indebtedness provided that such
existing indebtedness is subordinated to payment of the Note, other indebtedness
of us or our  subsidiaries not to exceed an aggregate of $250,000
provided that such indebtedness is subordinated to payment of the Note,
equipment leases and purchase money obligations not to exceed an aggregate of
$150,000, and indebtedness incurred by a NACEL subsidiary for the specific
purpose of development, construction and/or commission of a specific wind energy
project (“Project Indebtedness”). Such Project Indebtedness shall be consented
to and approved by the Investor,  which consent and approval shall not
be unreasonably withheld, and can be secured only by the specific project
without NACEL or any of our other subsidiaries being obligated on, or a
guarantor of, the Project Indebtedness. The Investor agrees to subordinate its
security interest, if necessary, to approved Project Indebtedness.





The Note
lists certain “Events of Default”, which include, without limitation, any
default in the payment of principal of, or other charges in respect of, the Note
as and when they become due and payable, and our failure to observe or perform
any other covenant, agreement or warranty contained in, or otherwise commit any
breach or default of any provision of the Note, the Securities Purchase
Agreement or the Security Agreement. Upon the occurrence of an Event of Default,
the Investor may require us to redeem all or any portion of the Note by
delivering written notice to us at a default redemption price as calculated
pursuant to certain formulas set forth in the Note (“Event of Default Redemption
Right”). Until the default redemption price (together with any interest thereon)
is paid in full, the amount of the Note submitted for redemption (together with
any interest thereon) may be converted, in whole or in part, by the Investor
into common stock. In the event of a partial redemption, the principal amount
redeemed shall be deducted from the installment amounts relating to the
applicable installment date(s) as set forth in the notice of default and
redemption.


13


The
Warrants issued to the Investor in the November Private Placement include the
following:





·           Series
A Warrants, which are exercisable for a period of 5 years into an aggregate of
125% of the number of shares of our common stock initially issuable upon
conversion of the Note, with the Series A Warrant being exercisable into
1,250,000 shares immediately upon issuance.





·           Series
B Warrants, which are exercisable beginning November 24, 2009 into 100% of the
shares of our common stock initially issuable upon conversion of the Notes
(initially 1,000,000 shares) and remaining exercisable for a period equal to the
earlier of (a) 12 months after a registration statement covering the shares of
our common stock issuable upon conversion or exercise (as the case may be) of
the Note and Warrants is declared effective by the SEC, or (b) November 24,
2011; and





·           Series
C Warrants, which are exercisable for a period of 5 years beginning November24,
2009, but only to the extent that the Series B Warrant are exercised and only in
the same percentage that the Series B Warrants are exercised, up to a maximum
percentage of 125% of the number of shares of our common stock initially
issuable upon conversion of the Note (initially a maximum of 1,000,000
shares).





The
initial exercise price of each Series A Warrant, Series B Warrant and Series C
Warrant is the same as the initial conversion price under the Note ($0.90 per
share). Like the conversion price of the Note, the exercise price of the
Warrants is subject to a full-ratchet adjustment upon the occurrence of certain
events, including our issuance of securities at a price per share less than the
exercise price then in effect. If we issue shares of common stock or options
exercisable for or securities convertible into common stock at an effective
price per share of common stock less than the exercise price then in effect, the
exercise price will be reduced to the effective price of the new
issuance.





In
connection with the November Private Placement, we paid to a placement agent a
cash fee equal to 10% of the gross proceeds received and the issuance of Series
A Warrants, which will be exercisable for a period of 5 years, for up to 83,333
shares of our common stock, with an initial exercise price of
$0.90.





As noted
above, the Note and the Warrants have conversion features which result in them
being recorded as derivative liabilities as described further in Note 7 to the
consolidated financial statements included herein. As derivative liabilities,
the existing uncertainties as to the ultimate amount of shares which could be
required to issue is not known and may increase significantly. Accordingly,
these uncertainties are reflected as obligations until they are resolved through
conversion, exercise or expiration.


14


Liquidity
and Capital Resources





The
accompanying financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and satisfaction of liabilities in
the normal course of business.  Since our inception, we have been a
development stage company and, accordingly, have incurred losses from our
operations. For the three months ended December 31, 2009, we incurred net losses
of $1,748,996 and have an accumulated deficit since inception of $6,090,999. We
currently have no revenues. The potential future revenues we expect from our
wind power generation projects, will not be generated until sometime after the
end of our current fiscal year, March 31, 2010, and will require the expenditure
of additional capital, obtaining of construction and project debt financing and
establishing turbine  supply relationships. In addition, our
shareholder line of credit in the amount of $460,753 is due and payable on July
1, 2010, unless we are able to obtain a further extension. Also, our
recent $250,000 loan is due and payable within 15 days after demand for
payment is received, with demand for payment being at the discretion of the
lender. These factors, among others, raise substantial doubt of our ability to
continue as a going concern for a reasonable period of time.





As of
December 31, 2009, we had cash of $340,248 and working capital deficit of
$2,437,036. This compares to cash of $564,677 and working capital of $303,246 at
March 31, 2009. Based on commitments arising from the agreement with
Renergix Wind LLC, our project development consultants, and other general
and administrative expenses, we anticipate that that operating expenses during
each succeeding quarter will be, at a minimum, approximately $200,000. This
amount does not include any capital requirements for our wind energy projects or
project development costs which may be incurred. Based on the foregoing, we
believe our cash resources may be sufficient to finance our operations through
March 31, 2010, being the end of our fiscal year. However, in anticipation of
the need to raise additional equity financing and/or debt financing in the
immediate future, we have commenced, and will continue to pursue, efforts to
raise additional equity financing and/or equity financing from a variety of
sources and means. There are no assurances that we will be able to obtain any
additional financing and/or equity and, even if obtained, that such financing
will be in a sufficient amount to be able to continue operations for a
sufficient period until one or more of our wind power generation facilities
become operational or until we can generate sufficient revenues to be
profitable.





As of
March 31, 2009, our $250,000 line of credit facility extended by Murray Fleming,
a director, was fully borrowed, thereby leaving no additional funds available
for future borrowing. However, on June 30, 2009, the line of credit was
increased to $400,000 and then on September 29, 2009, the line of credit was
increased to $442,143 and again on October 26, 2009 the line of credit was
increased to $460,753.  The terms of the line of credit facility
provides for simple interest of 8% per annum, to be paid upon the outstanding
balance, payable on the first day of the month after each calendar
quarter.  As of December 31, 2009, our $460,753 Shareholder line of
credit was fully borrowed, thereby leaving no additional amounts for future
borrowing.  The line of credit is due July 1, 2010, but repayment has
been subordinated to the payment in full of the Senior Secured Convertible Note
issued in November, 2009.  There are no assurances that Mr. Fleming
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, 2009 compared to the Nine Months Ended December 31,
2008





Overview.The net loss for the nine months ended December 31, 2009 (“2009 Period”)
was $2,902,068 compared to a net loss of $2,054,559 for the nine months ended
December 31, 2008 (“2008 Period”), an increase of $847,509. This increase in net
loss is primarily attributable to losses on derivative financial instruments of
$1,173,826, interest and other expenses of $153,852; offset by a reduction in
operating costs of $474,777.


15


Revenues.
We generated no revenues from our operations for the nine months ended December
31, 2009 or for the nine months ended December 31, 2008. 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 FASB ASC 915.





Expenses.
Our operating expenses were $1,574,390 for the 2009 Period compared to operating
expenses of $2,049,167 reported for the 2008 Period, a decrease of $474,777. The
$474,777 decrease in operating expenses was primarily due to a $846,606 decrease
in general and administrative expenses which was offset by a $371,829
increase in wind project development costs during the 2009 Period as compared to
the 2008 Period. The decrease in general and administration expenses occurred
since there was no executive stock based compensation of $1,007,500 during the
2009 Period as compared to the 2008 Period. The increase in wind project
development costs during the  2009 Period was due to additional
expenses incurred related to the wind project agreements entered into during the
2009 Period, as described herein and as principally described in the Form 10-Q
for the period ended September 30, 2009, as filed with the SEC.





Three
Months Ended December 31, 2009 compared to the Three Months Ended December 31,
2008





Overview.The net loss for the three months ended December 31, 2009 (“Q3 2009
Period”) was $1,748,996 compared to a net loss of $486,457 for the three months
ended December 31, 2008 (“Q3 2008 Period”), an increase of
$1,262,539.





Revenues.
We generated no revenues from our operations for the three months ended December
31, 2009 or for the three months ended December 31, 2008. Our operations have
focused upon our 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 FASB ASC 915.





Expenses.
Our operating expenses were $439,220 for the Q3 2009 Period compared to
operating expenses of $482,488 reported for the Q3 2008 Period, an increase of
$43,268.  This increase in operating expenses is primarily
attributable to an increase in depreciation, amortization of loan fees and
accretion of debt discount totaling $131,981, an increase in consultant,
professional fees and other expenses by $121,258, offset by a decrease
in project development fees by $154,621.





Off
Balance Sheet Transactions or Arrangements.





We have
no material off balance sheet transactions or arrangements.




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
4T4.  Controls and Procedures


Evaluation of Disclosure
Controls and Procedures





The
Company maintains a system of disclosure controls and procedures that are
designed for the purpose of ensuring that information required to be disclosed
in its SEC reports is recorded, processed, summarized and reported within the
time periods specified in the SEC’s rules and forms, and that such information
is accumulated and communicated to the Company’s management, including the Chief
Executive Officer and the Principal Accounting Officer, as appropriate to allow
timely decisions regarding required disclosures.


16


For the
quarter ended December 31, 2009, we carried out an evaluation, under the
supervision and with the participation of our Chief Executive Officer and our
Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures as defined in Rule 13a-15(e) or Rule
15d-15(e) under the Exchange Act. In the course of this evaluation, our
management considered the material weaknesses in our internal control over
financial reporting as discussed in our Annual Report on Form 10-K for the
fiscal year ended March 31, 2009. Based on that evaluation, our Chief Executive
Officer and our Chief Financial Officer concluded that our disclosure controls
and procedures were effective for the purposes stated above.





Changes in Internal Control
Over Financial Reporting





To
address the issues associated with our material weaknesses as described in our
Annual Report on Form 10-K, we have previously made changes in our internal
controls over financial reporting during the nine month period ending December
31, 2009. A financial consultant was engaged which allowed implementation of
additional procedures for monitoring and review of work performed by our Chief
Financial Officer and to mitigate the segregation of duty issue where the Chief
Financial Officer is involved in drafting financial statements and cannot
conduct an independent review. In addition, we hired a new Chief Financial
Officer with more extensive public accounting and SEC experience. We believe
these remedial actions will result in proper segregation of duties and provide
more checks and balances in our disclosure controls and procedures.





We will
continue to monitor and evaluate the effectiveness of our internal controls and
procedures and our internal controls over financing reporting on an ongoing
basis and are committed to taking further action and implementing additional
enhancements or improvements, as necessary and as funds allow.





There
have been no changes in our internal control over financial reporting that
occurred during the quarter ended December 31, 2009 that have materially
affected, or were reasonably likely to materially affect, our internal control
over financial reporting.




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.




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


(a)    Unregistered
Sales of Equity Securities.





On
November 24, 2009, we issued a senior secured convertible note in the principal
amount of $900,000 and warrants in a private placement to an institutional
investor, as described in our Current Report on Form 8-K dated November 27,
2009, as filed with the SEC. We relied upon exemptions from registration
pursuant to Rule 506 of Regulation D and Section 18(b)(4)(D) of the Securities
Act and/or Section 4(6) of the Securities Act based on our belief that the
issuance of the convertible note and warrants did not involve a public offering
or general solicitation and the investor is an “accredited investor” as defined
in Rule 501(a) of Regulation D. The instruments evidencing the convertible note
and the warrants contain restrictive investment legends noted
thereon.




Item
3.  Defaults Upon Senior Securities


None


17




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, 2009.




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 (Paul Turner,
      President, Principal Executive Officer)*31.2
                  
                  Certification
      Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 (Andre
      Schwegler, 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 (Paul Turner, 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 (Andre Schwegler, Principal Accounting
      Officer)*





*    Filed
herein.




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/  Paul
      TurnerPaul
      TurnerChief
      Executive OfficerDate:
      February 12, 2010By:
                      /s/  Andre
      SchweglerAndre
      SchweglerPrincipal
      Financial OfficerDate:
      February 12,
2010


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