U.S.
      SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549





FORM
      10-QSB





(Mark
      One)


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





For
      the
      quarterly period ended: June 30, 2007





OR





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





For
      the
      transition period from to





NACEL
      ENERGY CORPORATION


(Exact
      name of Registrant as specified in its charter)


WYOMING
              4911
              20-4315791(State
                  or other Jurisdiction of
              (Standard
                  Industrial
              (I.R.S.
                  EmployerIncorporation
                  or Organization)
              Classification
                  Code Number)
              Identification
                  No.)




627
                  Sterling Drive, Cheyenne, Wyoming
              
              82009(Name
                  and address of principal executive offices)
              
              (Zip
                  Code)




Registrant's
      telephone number, including area code: 307-461-4221





SEC
      File
      Number: File No. 333-142860





Check
      whether the issuer: (1) filed all reports required to be filed by Section13
      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 such filing requirements for the past 90 days. Yes x No o





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




1




APPLICABLE
      ONLY TO CORPORATE ISSUERS





State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of the latest practicable date: 550,000 shares of common stock outstanding
      as
      of June 30, 2007.








Transitional
      Small Business Disclosure Format (check one): Yes o  No x




2




NACEL
      ENERGY CORPORATION





INDEX





FOR
      THE
      QUARTERLY PERIOD ENDED JUNE 30, 2007


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


3




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




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




The
      accompanying unaudited financial statements have been prepared in accordance
      with generally accepted accounting principles for interim financial reporting
      and pursuant to the rules and regulations of the Securities and Exchange
      Commission ("Commission"). While these statements reflect all normal recurring
      adjustments which are, in the opinion of management, necessary for fair
      presentation of the results of the interim period, they do not include all
      of
      the information and footnotes required by generally accepted accounting
      principles for complete financial statements. For further information, refer
      to
      the financial statements and footnotes thereto, contained in Nacel Energy
      Corporation’s registration statement on Form SB-2 filed with the
      Commission.




**Consolidated
      Balance Sheets**




**Nacel
                Energy Corporation****(A
                Development Stage Company)****Consolidated
                Balance Sheets****(Unaudited)****June
                30, 2007**
            
            **March
                31, 2007****ASSETS****Current
                assets****Cash**
            
            **$**
            21,160
            
            **$**
            20,258**Marketable
                securities**
            
            
            5,821
            
            
            5,318**TOTAL
                ASSETS**
            
            **$**
            **26,981**
            
            **$**
            **25,576****LIABILITIES
                AND STOCKHOLDERS’ DEFICIT********Shareholder
                line of credit**
            
            **$**
            74,934
            
            **$**
            52,449**Stockholders’
                deficit****Common
                stock, $.001 par value, 5,000,000 shares****authorized;
                550,000 shares issued and outstanding**
            
            
            550
            
            
            550**Additional
                paid in capital**
            
            
            2,919
            
            
            1,025**Deficit
                accumulated during the development stage**
            
            
            (51,806
            )
            
            (28,221
            )**Accumulated
                other comprehensive income (loss):****unrealized
                gain (loss) on marketable securities**
            
            
            384
            
            
            (227
            )**Total
                stockholders’ deficit**
            
            
            **(47,953**
            **)**
            
            **(26,873**
            **)****TOTAL
                LIABILITIES AND STOCKHOLDERS’ DEFICIT**
            
            **$**
            **26,981**
            
            **$**
            **25,576**





4




**Consolidated
      Statements of Operations**




**Nacel
                Energy Corporation****(A
                Development Stage Company)****Consolidated
                Statements of Operations****(Unaudited)****Three
                months ended June 30, 2007 and 2006 and the
                period****from
                February 7, 2006 (Inception) through June 30,
                2007****June
                30, 2007**
            
            **June
                30, 2006**
            
            **Inception
                through June 30, 2007****General
                and administrative expenses**
            
            **$**
            21,796
            
            $
            595
            
            **$**
            49,023**Other
                (income) expense****Interest
                expense**
            
            
            1,894
            
            
            -
            
            
            2,919**Interest
                income**
            
            
            (105
            )
            
            -
            
            
            (136
            )**Net
                loss**
            
            
            **(
                23,585**
            **)**
            
            **(595**
            **)**
            
            **(51,806**
            **)****Other
                comprehensive income :**
              **unrealized
                gain on marketable****securities**
            
            
            **611**
            
            
            **-**
            
            
            **384****Comprehensive
                net loss**
            
            **$**
            **(22,974**
            **)**
            **$**
            **(595**
            **)**
            **$**
            **(51,422**
            **)****Basic
                and diluted net loss per share**
            
            **$**
            **(0.04**
            **)**
            **$**
            **(0.00**
            **)****Basic
                and diluted weighted average common shares
                outstanding**
            
            
            **550,000**
            
            
            **550,000**





5




**Consolidated
      Statements of Cash Flows**




**Nacel
                Energy Corporation****(A
                Development Stage Company)****Consolidated
                Statements of Cash Flows****Three
                months ended June 30, 2007 and 2006 and the period****from
                February 7, 2006 (Inception) through June 30,
                2007****June
                30, 2007**
            
            **June
                30, 2006**
            
            **Inception
                through June 2007****CASH
                FLOWS FROM OPERATING ACTIVITIES****Net
                loss**
            
            **$**
            (23,585
            )
            **$**
            (595
            )
            **$**
            (51,806
            )**Adjustments
                to reconcile net loss to****cash
                used in operating activities:****Stock
                for services**
            
            
            -
            
            
            -
            
            
            550**Imputed
                interest**
            
            
            1,894
            
            
            -
            
            
            2,919**Cash
                used in operating activities**
            
            
            (21,691
            )
            
            (595
            )
            
            (48,337
            )**CASH
                FLOW FROM INVESTING ACTIVITIES****Sale
                (purchase) of marketable securities**
            
            
            108
            
            
            -
            
            
            (5,437
            )**CASH
                FLOW FROM FINANCING ACTIVITIES****Proceeds
                from shareholder line of****credit**
            
            
            22,485
            
            
            595
            
            
            74,934**Net
                change in cash**
            
            
            902
            
            
            -
            
            
            21,160**Cash,
                beginning of period**
            
            
            20,258
            
            
            -
            
            
            **-****Cash,
                end of period**
            
            **$**
            **21,160**
            
            **$**
            **-**
            
            **$**
            **21,160****SUPPLEMENTAL
                CASH FLOW INFORMATION****Interest
                paid**
            
            **$**
            **-**
            
            **$**
            **-**
            
            **$**
            **-****Income
                tax paid**
            
            
            **-**
            
            
            **-**
            
            
            **-**




6




NACEL
      ENERGY CORPORATION


**(A
      Development Stage Company)**


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


UNAUDITED





1. BASIS
      OF PRESENTATION





The
      accompanying unaudited interim financial statements of Nacel Energy Corporation,
      have been prepared in accordance with accounting principles generally accepted
      in the United States of America and the rules of the Securities and Exchange
      Commission, and should be read in conjunction with the audited financial
      statements and notes thereto contained in Nacel Energy Annual Report filed
      with
      the SEC on Form SB-2. In the opinion of management, 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. 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 substantially duplicate the disclosure contained
      in the audited financial statements for year end March 31, 2007 as reported
      in
      the Form SB-2 have been omitted.





2. GOING
      CONCERN





As
      shown
      in the accompanying financial statements, Nacel Energy generated a loss of
      $23,585 for the three months ended June 30, 2007 and has an accumulated deficit
      of $51,806 and negative working capital of $47,953 as of June 30, 2007. These
      conditions raise substantial doubt as to Nacel Energy's ability to continue
      as a
      going concern. Management is trying to raise additional capital through sales
      of
      common stock and loans. The financial statements do not include any adjustments
      that might result from the outcome of this uncertainty.





3. WARRANT





In
      April,
      Nacel Energy sold one warrant for 120,000 common shares with an exercise price
      of $.50 per share to a third party. The warrants expire in September 2010 and
      vest immediately.


7


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





*This
      10−QSB contains forward-looking statements. Our actual results could differ
      materially from those set forth as a result of general economic conditions
      and
      changes in the assumptions used in making such forward-looking statements.
      The
      following discussion and analysis of our financial condition and results of
      operations should be read together with the audited consolidated financial
      statements and accompanying notes and the other financial information* *contained
      in Nacel Energy Corporation’s registration statement on Form SB-2 filed with the
      Commission.*





*The
      analysis set forth below is provided pursuant to applicable Securities and
      Exchange Commission regulations and is not intended to serve as a basis for
      projections of future events. Refer also to "Cautionary Note Regarding Forward
      Looking Statements," below.*


*The
      following discussion of our financial condition and results of operations as
      of
      June 30, 2007 should be read in conjunction with our financial statements and
      the related notes as provided under Item 1. With respect to the discussion
      within this Item 2, the terms “Nacel Energy,” “we,” “us,” and “our” refer to
      Nacel Energy Corporation.*





**Overview**





We
      intend
      to become a wind and hydro electric energy generation company. We intend to
      identify and evaluate the economic feasibility and resource potential of wind
      and hydro properties, predominantly in the States of Montana, Wyoming, Colorado,
      New Mexico, Texas, and in Canada, for the purposes of developing commercial
      scale wind and hydro turbine projects. We intend to participate in these
      projects with development partners and receive revenue from the sale of electric
      energy through our working interests in the partnerships. As of the time of
      this
      filing, we have not identified any suitable properties, project opportunities
      or
      development partners.





We
      are a
      development stage company that has generated no revenues from operations since
      our incorporation on February 7, 2006. We have incurred losses since our
      inception, have no operations and rely upon the sale of our securities and
      funds
      provided by management to cover expenses. In addition, our independent
      accountant has issued an opinion indicating that there is substantial doubt
      about our ability to continue as a going concern.





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




8





Our
      registration statement for the sale of 400,000 shares of common stock at a
      price
      of $0.10 per share was declared effective by the SEC on June 7, 2007. As of
      the
      date of this quarterly report, we have not sold any common stock under this
      registration statement. In April, Nacel Energy sold one warrant for 120,000
      common shares with an exercise price of $.50 per share to a third party. The
      warrants expire in September 2010 and vest immediately.





**Plan
      of Operation**





Prior
      to
      generating any revenue from operations, we must complete the following
      steps:




1.
            Site
                and Development Partner Identification and Agreement





2.
            Due
                Diligence Data Collection to Determine Site Suitability





3.
            Complete
                and Secure Approval of an Environmental Assessment





4.
            Enter
                into Power Purchase Agreements





5.
            Finalize
                Land Use or Acquisition Terms with Government or Private Land Owner





6.
            Develop
                Access Roads to Our Site





7.
            Complete
                Interconnection Studies Concerning Connection with Power Grid





8.
            Complete
                Construction





We
      have
      not completed the work required on these steps. Additional financing must be
      obtained by us and our development partners to implement our business plan.
      There is no assurance that financing to cover the costs of implementing our
      business plan can be obtained.





**Results
      of Operations (Three Months Ended June 30, 2007 compared to the Three Months
      Ended June 30, 2006)**





We
      generated no revenues from our operations for the three months ended June 30,
      2007 (“Q1 2007 Period”) and for the three months ended June 30, 2006 (“Q1 2006
      Period”).





Our
      operating expenses were $21,796 for the Q1 2007 Period compared to operating
      expenses of $595 reported for the Q1 2006 Period. Our operating expenses for
      the
      Q1 2007 Period included $16,187 in legal and professional fees; a $15,592
      increase over legal and professional fees of $595 reported for the Q1 2006
      Period. The additional legal and professional fees for the Q1 2007 Period were
      incurred as a result the Company’s decision to proceed with an SB-2 registration
      of common stock.




9





Our
      other
      expenses were $1,894 for the Q1 2007 Period compared to no other expenses
      reported for the Q1 2006 Period. Our other expenses consisted of an imputed
      interest expense of $1,894 for the Q1 2007 Period compared to no reported
      imputed interest expense for the Q1 2006 Period. The imputed interest expense
      is
      due to an unsecured, no-interest $250,000 line of credit facility repayable
      at
      an unspecified future date. We had interest income of $105 for the Q1 2007
      Period compared to none reported for the Q1 2006 Period. We had other
      comprehensive income of $611 for the Q1 2007 Period compared to none reported
      for the Q1 2006 Period. The Company reports changes in net unrealized valuations
      of marketable securities, consisting of non-operated wind and hydro electric
      energy stapled security and unit trust investments, as other comprehensive
      income.





**Liquidity
      and Capital Resources**





We
      had
      total assets of $26,981 as of June 30, 2007, which consisted of current assets,
      including cash of $21,160 and marketable securities of $5,821.





We
      had
      total liabilities of $74,934 as of June 30, 2007. The Company entered into
      an
      agreement with a shareholder with respect to an unsecured, no-interest $250,000
      line of credit facility repayable at an unspecified future date. Interest is
      being imputed at Prime plus 2% for a total of $1894 of imputed interest expense
      in the three months ended June 30, 2007. $175,066 was available for borrowing
      as
      of June 30, 2007. Our line of credit had a balance of $74,934 at June 30, 2007.





We
      had an
      accumulated deficit of $51,806 as of June 30, 2007.





We
      had
      net cash used in operating activities of $21,691 for the three months ended
      June
      30, 2007, which consisted of net loss of $23,585 and imputed interest of $1,894.





We
      had
      net cash provided by investing activities of $108 for the three months ended
      June 30, 2007, which consisted of a sale of marketable securities.





We
      had
      net cash provided by financing activities of $22,485 for the three months ended
      June 30, 2007, which consisted of a $22,485 draw down on the line of
      credit.




10





At
      inception, February 7, 2006, Nacel Energy issued 550,000 shares of Common Stock
      at par value to two founders for reimbursement of $550 of Nacel Energy expenses
      paid by the two founders.





On
      April
      12, 2007, Nacel Energy sold one warrant for 120,000 shares of common stock
      with
      an exercise price of $.50 per share. The warrants expire in September 2010
      and
      vest immediately.





Historically,
      our cash has been provided by a shareholder line of credit bearing an imputed
      interest rate of prime plus 2% or 10.25% at June 30, 2007. We had no outstanding
      cash commitments as of June 30, 2007.





As
      we
      expand, we may need to make sizeable cash commitments to develop our wind and
      hydro power generation facilities, and the impact of this potential trend on
      our
      business is uncertain. We believe that our mix of capital resources will shift
      from short-term debt to equity-based financing as we become a public company,
      which will cause dilution of current shareholders. Because the Company generated
      no operating revenues, the predominant component of our liquidity is cash on
      hand.





Our
      ability to continue as a going concern is dependent upon our ability to
      successfully accomplish our business plans and secure additional funding sources
      and attaining profitable operations. We do not have any commitments or
      identified sources of additional capital from third parties or from our
      officers, directors or majority shareholders. Additional financing may not
      be
      available to us on favorable terms, if at all.





Accordingly,
      our accountants have indicated there is substantial doubt about our ability
      to
      continue as a going concern over the next twelve months. Revenues have not
      been
      sufficient to cover operating costs and to allow us to continue as a going
      concern. Our poor financial condition could inhibit our ability to continue
      in
      business or achieve our business plan.





Cautionary
      Note Regarding Forward Looking Statements





Some
      of
      the statements in this report are “forward-looking statements.” These
      forward-looking statements involve certain known and unknown risks,
      uncertainties and other factors which may cause our actual results, performance
      or achievements to be materially different from any future results, performance
      or achievements expressed or implied by these forward-looking statements. These
      factors include, among others, the factors set forth above under “Risk Factors.”
The words “believe,” “expect,” “anticipate,” “intend,” “plan,” and similar
      expressions identify forward-looking statements. We caution you not to place
      undue reliance on these forward-looking statements. We undertake no obligation
      to update and revise any forward-looking statements or to publicly announce
      the
      result of any revisions to any of the forward-looking statements in this
      document to reflect any future or developments. However, the Private Securities
      Litigation Reform Act of 1995 is not available to us as a penny stock issuer
      and
      thus we may not rely on the statutory safe harbor from liability for
      forward-looking statements. Further, Section 27A(b)(2)(D) of the Securities
      Act
      and Section 21E(b)(2)(D) of the Securities Exchange Act expressly state that
      the
      safe harbor for forward looking statements does not apply to statements made
      in
      connection with this offering.




11




***Item
      3. Controls and Procedures*** ******





Evaluation
      of Disclosure Controls and Procedures




As
      of the
      end of the period covered by this report on Form 10-QSB, 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-QSB, 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




There
      were no changes in the Company’s internal control over financial reporting that
      occurred during the most recent fiscal quarter that have materially affected,
      or
      are reasonably likely to materially affect, its internal control over financial
      reporting for that period.




**PART
      II. OTHER INFORMATION**




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




None




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




(a)
      Unregistered Sales of Equity Securities.




12




The
      Registrant did not sell any unregistered securities during the three months
      ended June 30, 2007.




(b)
      Use
      of Proceeds.




On
      June
      7, 2007, the Securities and Exchange Commission declared the Company's
      registration statement on Form SB-2 (File No. 333-142860) relating to the offer
      and sale of 400,000 shares of the Company’s common stock at a price of $0.10 per
      share and 120,000 shares of the Company’s common stock underlying a warrant at
      an exercise price of $0.50, effective. The aggregate price of the offering
      amount registered is $100,000. As of June 30, 2007, no shares have been sold.
      Nacel Energy has entered into an agreement with a shareholder with respect
      to an
      unsecured, no-interest $250,000 line of credit facility repayable at an
      unspecified future date. Interest is being imputed at Prime plus 2% or 10.25%
      for a total of $1,894 of interest expense in the quarter ended June 30, 2007.
      $175,066 was available for borrowing as of June 30, 2007. Our line of credit
      had
      a balance of $74,934 at June 30, 2007. To the extent amounts are outstanding
      the
      Company may use additional proceeds from the offering to pay amounts under
      the
      line of credit. The offering has not terminated as of the filing of this
      report.





The
      offering is being conducted in a best efforts, no minimum, direct public
      offering without any involvement of underwriters or broker-dealers and the
      Company has not paid and will not pay commissions in connection with the sale
      of
      the shares. Since June 7, 2007 through the end of the period covered by this
      Report on Form 10-QSB, the Company’s offering expenses (all of which were
      incurred to persons other than our directors, officers or ten percent or greater
      stockholders) were $0.




***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 June 30, 2007.




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




Not
      Applicable




13




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




a)
      Exhibits.




Exhibit
      Item





31.1
      Certification of Principal Executive and Principal Financial Officer pursuant
      to
      Section 302(a) of the Sarbanes-Oxley Act of 2002





32.1*
      Certification of Principal Executive and Principal Financial Officer pursuant
      to
      Section 302(a) of the Sarbanes-Oxley Act of 2002





*
      This
      exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities
      Exchange Act of 1934 or otherwise subject to the liabilities of that section,
      nor shall it be deemed incorporated by reference in any filing under the
      Securities Act of 1933 of the Securities Exchange Act of 1934, whether made
      before or after the date hereof and irrespective of any general incorporation
      language in any filings.


14





**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 Corporation





Date:  August
      9,
      2007





By:  /s/
      Brian
      M. Lavery, President


(Authorized
      Officer and Principal Executive Officer)





EXHIBIT
      INDEX




Exhibit
      Item





31.1
      Certification of Principal Executive and Principal Financial Officer pursuant
      to
      Section 302(a) of the Sarbanes-Oxley Act of 2002





32.1*
      Certification of Principal Executive and Principal Financial Officer pursuant
      to
      Section 906 of the Sarbanes-Oxley Act of 2002





*
      This
      exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities
      Exchange Act of 1934 or otherwise subject to the liabilities of that section,
      nor shall it be deemed incorporated by reference in any filing under the
      Securities Act of 1933 of the Securities Exchange Act of 1934, whether made
      before or after the date hereof and irrespective of any general incorporation
      language in any filings.


15