UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





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


For
the Quarterly Period Ended September 30, 2009





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


Commission
file number: 333-142860





NACEL
ENERGY CORPORATION





9375
E Shea Blvd Ste 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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  The registrant has not been
phased into the Interactive Data reporting system.


Yes  ̈ No þ





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





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





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


Yes  ̈ No þ





Shares of
common stock outstanding on November 13, 2009: 22,111,000










NACEL
ENERGY CORPORATION





INDEX





FOR THE
QUARTERLY PERIOD ENDED SEPTEMBER 30, 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
              
              
              8Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk
              
              
              12Item
      4.  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
              
              
              13









2


PART
I. FINANCIAL INFORMATION





Item
1.  Financial Statements





Nacel
Energy Corporation


(A
Development Stage Company)


Consolidated
Balance Sheets


(Unaudited)





September
      30,
                            
                            
                            March 31,2009
                            
                            
                            2009ASSETSCurrent
      AssetsCash
                            
                            $
                            225,949
                            
                            
                            $
                            564,677Property,
      plant and equipment, net of accumulated depreciation of $8,818 and $1,682,
      respectively
                            
                            
                            181,969
                            
                            
                            
                            166,495TOTAL
      ASSETS
                            
                            $
                            407,918
                            
                            
                            $
                            731,172LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)Current
      LiabilitiesAccounts
      payable
                            
                            $
                            75,439
                            
                            
                            $
                            7,537Accrued
      interest
                            
                            
                            14,367
                            
                            
                            
                            3,894Demand
      note payable
                            
                            
                            250,000
                            
                            
                            
                            -Shareholder
      line of credit
                            
                            
                            442,143Total
      current liabilities
                            
                            
                            781,949
                            
                            
                            
                            11,431Shareholder
      line of credit
                            
                            
                            -
                            
                            
                            
                            250,000Total
      liabilities
                            
                            
                            781,949
                            
                            
                            
                            261,431Stockholders'
      equity (deficit)Common
      stock of $.001 par value. Authorized 50,000,000 issued 22,111,000 at
      September 30, and 21,786,000 at March 31, 2009
                            
                            
                            22,111
                            
                            
                            
                            21,786Additional
      paid-in capital
                            
                            
                            3,945,861
                            
                            
                            
                            3,636,886Deficit
      accumulated during the development stage
                            
                            
                            (4,342,003
                            )
                            
                            
                            (3,188,931
                            )Total
      stockholders' equity (deficit)
                            
                            
                            (374,031
                            )
                            
                            
                            469,741TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                            
                            $
                            407,918
                            
                            
                            $
                            731,172





See
accompanying notes to consolidated financial statements


3





Nacel
Energy Corporation


(A
Development Stage Company)


Consolidated
Statements of Expenses


(Unaudited)


Six
months ended September 30, 2009 and 2008 and the period


from
February 7, 2006 (Inception) through September 30, 2009





InceptionThree
      Months Ended
                        
                        
                        Six
      Months Ended
                        
                        
                        throughSeptember
      30,
                        
                        
                        September
      30,
                        
                        
                        September
      30,2009
                        
                        
                        2008
                        
                        
                        2009
                        
                        
                        2008
                        
                        
                        2009General
      and administrative expenses
                        
                        $
                        287,316
                        
                        
                        $
                        143,056
                        
                        
                        $
                        489,770
                        
                        
                        $
                        1,447,729
                        
                        
                        $
                        2,482,612Wind
      projects donated by related party
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        490,000Wind
      project development costs
                        
                        
                        357,739
                        
                        
                        
                        72,021
                        
                        
                        
                        645,400
                        
                        
                        
                        118,950
                        
                        
                        
                        1,332,168Net
      loss from operations
                        
                        
                        (645,055
                        )
                        
                        
                        (215,077
                        )
                        
                        
                        (1,135,170
                        )
                        
                        
                        (1,566,679
                        )
                        
                        
                        (4,304,780
                        )Other
      income (expenses)Interest
      expense
                        
                        
                        (14,367
                        )
                        
                        
                        (2,743
                        )
                        
                        
                        (17,902
                        )
                        
                        
                        (5,373
                        )
                        
                        
                        (41,490
                        )Interest
      income
                        
                        
                        -
                        
                        
                        
                        3,671
                        
                        
                        
                        
                        
                        
                        
                        3,671
                        
                        
                        
                        3,848Other
      income
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        
                        
                        
                        
                        279
                        
                        
                        
                        419Total
      other expense
                        
                        
                        (14,367
                        )
                        
                        
                        928
                        
                        
                        
                        (17,902
                        )
                        
                        
                        (1,423
                        )
                        
                        
                        (37,223
                        )Net
      Loss
                        
                        $
                        (659,422
                        )
                        
                        $
                        (214,149
                        )
                        
                        $
                        (1,153,072
                        )
                        
                        $
                        (1,568,102
                        )
                        
                        $
                        (4,342,003
                        )Basic
      and diluted net loss per share
                        
                        $
                        (0.03
                        )
                        
                        $
                        (0.01
                        )
                        
                        $
                        (0.05
                        )
                        
                        $
                        (0.07
                        )
                        
                        
                        N/ABasic
      and diluted weighted average common shares outstanding
                        
                        
                        21,877,087
                        
                        
                        
                        21,666,000
                        
                        
                        
                        21,850,645
                        
                        
                        
                        21,577,366
                        
                        
                        
                        N/A




See
accompanying notes to consolidated financial statements


4





Nacel
Energy Corporation


(A
Development Stage Company)


Consolidated
Statements of Cash Flows


(Unaudited)


Six
months ended September 30, 2009 and 2008 and the period


from
February 7, 2006 (Inception) through September 30, 2009





InceptionSix Months Ended September
      30,
                
                
                through
                  September
      30,2009
                
                
                2008
                
                
                2009CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                
                $
                (1,153,072
                )
                
                $
                (1,568,102
                )
                
                $
                (4,342,003
                )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
                
                
                7,136
                
                
                
                -
                
                
                
                8,818Stock
      for services
                
                
                144,300
                
                
                
                62,240
                
                
                
                302,490Wind
      projects donated by related party
                
                
                -
                
                
                
                -
                
                
                
                490,000Imputed
      interest
                
                
                -
                
                
                
                2,630
                
                
                
                15,725Stock
      issued for executive compensation
                
                
                -
                
                
                
                1,007,500
                
                
                
                1,007,500Changes
      in:Prepaid
      and other current assets
                
                
                -
                
                
                
                (18,723
                )
                
                
                -Accounts
      payable
                
                
                67,902
                
                
                
                (78,660
                )
                
                
                75,439Accrued
      interest
                
                
                10,473
                
                
                
                2,743
                
                
                
                14,367Net
      Cash Used in Operating Activities
                
                
                (923,261
                )
                
                
                (590,372
                )
                
                
                (2,427,664
                )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of fixed assets
                
                
                (22,610
                )
                
                
                (42,564
                )
                
                
                (190,787
                )Net
      Cash Used in Investing Activities
                
                
                (22,610
                )
                
                
                (42,564
                )
                
                
                (190,787
                )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from shareholder line of credit
                
                
                192,143
                
                
                
                961
                
                
                
                439,400Borrowings
      on debt
                
                
                250,000
                
                
                
                -
                
                
                
                250,000Proceeds
      from sale of common stock
                
                
                165,000
                
                
                
                -
                
                
                
                955,000Proceeds
      from exercise of warrant
                
                
                -
                
                
                
                690,373
                
                
                
                1,200,000Net
      cash Provided by Financing Activities
                
                
                607,143
                
                
                
                691,334
                
                
                
                2,844,400NET
      INCREASE IN CASH
                
                
                (338,728
                )
                
                
                58,398
                
                
                
                225,949CASH
      AT BEGINNING OF PERIOD
                
                
                564,677
                
                
                
                380,567
                
                
                
                -CASH
      AT END OF PERIOD
                
                $
                225,949
                
                
                $
                438,965
                
                
                $
                225,949SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATIONCASH
      PAID FOR:Interest
                
                $
                7,429
                
                
                $
                -
                
                
                $
                11,398Income
      taxes
                
                $
                -
                
                
                $
                -
                
                
                $
                -





See
accompanying notes to consolidated 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. The consolidated financial statements include the accounts of Nacel
Energy and its wholly-owned subsidiary, 0758817 BC Ltd. Significant
inter-company accounts and transactions have been eliminated. 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.





Reclassifications.




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





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 November 13, 2009, 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 $4.34 million. For the three months ended
September 30, 2009, Nacel Energy sustained a loss of $659,422. 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.


6


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 NOTE 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.





For the
three months ended September 30, 2009, interest of $6,301 was
accrued.





NOTE
4 - 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.





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.





For the
three months ended September 30, 2009, interest of $8,066 was
accrued.  For the three months ended September 30, 2008, interest of
$2,743 was accrued.





As of
September 30, 2009, the $442,143 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 - EQUITY TRANSACTIONS




During
the nine months ended September 30, 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.


7


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





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





Forward-Looking
Statements




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




History




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
September 30, 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 and
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 September 30, 2009, the following activities have
occurred with respect to our six (6) wind power generations
projects:





·
            In
      July, 2009, we entered into four (4) separate Wind Project Agreements
      dated effective as of July 1, 2009 covering an aggregate of 1,025 acres of
      land located in Donley County, Texas, being in the Texas panhandle. These
      agreements concern our Leila Lake wind energy project. For further
      information, see our Current Report on Form 8-K dated July 2, 2009, filed
      with the Commission.


8


·
            In
      July, 2009,we entered into a Wind Project Agreement dated as of July 6,
      2009 covering an aggregate of 640 acres of land located in Navajo County,
      Arizona. This agreement concerns our Snowflake wind energy project. For
      further information, see our Current Report on Form 8-K dated July 6,
      2009, filed with the Commission.





·
            In
      August, 2009, we entered into three (3) separate Wind Project Agreements
      covering an aggregate of 1,032 acres of land located in Donley County,
      Texas, being in the Texas panhandle. These agreements concern our existing
      Liela Lake wind energy project. For further information, see out Current
      Report on Form 8-K dated August 13, 2009, filed with the
      Commission.





·
            In
      July, 2009, we filed an Application for Interconnection with Southwestern
      Public Service Company, a subsidiary of XCEL Energy, for our 20 MW
      Channing Flats wind power project located in Moore County, Texas. For
      further information, see our Current Report on Form 8-K dated July 8,
      2009, filed with the Commission.





·
            In
      July, 2009, we submitted an Application for Operation of Customer Owned
      Generation to Swisher Electric Cooperative, Inc. for our 20 MW Swisher
      wind power project located in Swisher County, Texas. For further
      information, see our Current Report on Form 8-K dated July 14, 2009, filed
      with the Commission.





·
            In
      September, 2009, we completed major environmental assessment work,
      significant pre-construction work and other efforts at our Blue Creek wind
      power project located in Moore County, Texas. We also received FAA permits
      covering the placement of 27 turbines at Blue Creek project. For further
      information, see our Current Report on Form 8-K dated September 8, 2009,
      filed with the Commission.





·
            In
      September, 2009, we submitted a Request for Small Generator
      Interconnection to Golden Spread Electric Cooperative, Inc., acting as
      agent for Swisher Electric Cooperative, Inc., for our Hedley Pointe wind
      power project located in Donley County, Texas. For further information,
      see our Current Report on Form 8-K dated September 16, 2009, filed with
      the Commission.





·
            In
      September, 2009, we completed major environmental assessment work,
      significant pre-construction work and other efforts at our Channing Flats
      wind power project located in Moore County, Texas. We also received FAA
      permits covering the placement of 18 turbines at Channing Flats project.
      For further information, see our Current Report on Form 8-K dated
      September 18, 2009, filed with the
Commission.





·
            In
      September, 2009 we completed major environmental assessment work,
      significant pre-construction work and other efforts at our Swisher wind
      power project located in Swisher County, Texas. We also received FAA
      permits covering the placement of 18 turbines at the Swisher project. For
      further information, see our Current Report on Form 8-K dated September
      23, 2009, filed with the
Commission.





·
            We
      are engaged in completing work for the filing of additional applications
      for electrical interconnection of our remaining projects with other
      utilities.





·
            We
      are engaged in completing work for obtaining permits and other necessary
      approvals for our projects.





·
            We
      are engaged in efforts to obtain construction and project debt financing
      for our projects.





·
            We
      are engaged in efforts to enter into turbine supply relationships for our
      projects.





·
            We
      are engaged in efforts to pursue additional “green field” project
      opportunities in Kansas.





·
            We
      continue to collect and model the wind data being generated at our project
      sites.


9


In
addition to the foregoing, we also assess our business regularly with regard to
the need for capital equipment. During the three months ending September 30,
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 three months ended September 30,
2009, we incurred net losses of $659,422 and have an accumulated deficit since
inception of $4,342,003. 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.





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.





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 September 30, 2009, we incurred net
losses of $659,422 and have an accumulated deficit since inception of
$4,342,003. 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 $442,143 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, indicate that we may be unable to
continue as a going concern for a reasonable period of time.




As of
September 30, 2009, we had cash of $225,949 and working capital deficit of
$556,000. This compares to cash of $564,677 and working capital of $553,246 at
March 31, 2009. Based upon commitments arising from our joint development
agreement with Renergix Wind LLC, and other general and administrative expenses,
we anticipate that operating expenses during each succeeding quarter will be, at
a minimum, approximately $225,000. This amount does not include anticipated
capital expenditures for our wind energy projects or other related wind project
development costs which may be incurred. Based upon the foregoing, we believe
our cash resources may not be sufficient to finance operations through December
31, 2009, being the end of our third fiscal quarter, without obtaining further
equity and/or debt financing.  Accordingly, we have commenced, and will
continuing pursuing, efforts to raise additional equity and/or debt financing.
There are no assurances we will be able to raise such equity and/or debt
financing and, even if obtained, such financing will be sufficient to continue
operations until one or more of our wind power generation facilities become
operational or until we can generate revenues to be profitable.


10


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.  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. The
first payment under the amended credit line is due on October 1, 2009. As of
September 30, 2009, we had borrowed the entire $442,143 under this credit
facility, which currently leaves no additional funds available for future
borrowing. The unpaid principal amount and any accrued interest is due and
payable in full on July 1, 2010. There are no assurances that Mr. Fleming will
agree to further 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 or the amount available for
borrowing is not increased, this could have a material impact on the future
liquidity and operations of the Company.





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 in consecutive monthly
installments of interest only commencing on July 1st, 2009.  Payment
is due when the lender has provided the borrower with written notice of demand.
The balance owing under this agreement will be paid 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.
Accordingly, if the repayment of this loan were demanded by the lender, this
could have a material impact on the future liquidity and operations of the
Company.





Results of
Operations





Six
Months Ended September 30, 2009 compared to the Six Months Ended September 30,
2008





Overview.The net loss for the six months ended September 30, 2009 (“2009 Period”)
was $1,153,072 compared to a net loss of $1,568,102 for the six months ended
September 30, 2008 (“2008 Period”), a decrease of $415,030. This decrease in net
loss is primarily attributable to the issuance of 250,000 shares of our common
stock to a former executive as compensation during the 2008 Period, which shares
were recorded at their fair value of $1,007,500 which was offset by an increase
in our wind projet development costs as discussed below.





Revenues.
We generated no revenues from our operations for the six months ended September
30, 2009 or for the six months ended September 30, 2008. Our operations have
focused upon various business planning activities since inception, and have not
generated any revenues.  Accordingly, we are considered to be in the
development stage as defined in FASB ASC 915.





Expenses.
Our operating expenses were $1,135,170 for the 2009 Period compared to operating
expenses of $1,566,679 reported for the 2008 Period, a decrease of
$431,509.  The $431,509 decrease in operating expenses was primarily
due a $957,959 decrease in general and administrative expenses which was offset
by  a $526,450 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 that are
described above in the Current Operations section..





Three
Months Ended September 30, 2009 compared to the Three Months Ended September 30,
2008





Overview.The net loss for the three months ended September 30, 2009 (“2009
Period”) was $659,422 compared to a net loss of $214,149 for the three months
ended September 30, 2008 (“2008 Period”), an increase of $445,273.





Revenues.
We generated no revenues from our operations for the three months ended
September 30, 2009 or for the three months ended September 30, 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
..


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Expenses.  Our
operating expenses were $645,055 for the 2009 Period compared to operating
expenses of $215,077 reported for the 2008 Period, an increase of $429,978. This
increase in operating expenses is primarily attributable to an increase in wind
power project development costs of $285,717 which included the issuance of
90,000 shares of our common stock to Renergix Wind LLC, our project development
consultants, as compensation during the 2009 Period.  The shares
issued to Renergix Wind LLC were recorded at their fair value of
$126,000.  There also was an increase of $141,407 in expenses for
advertising, investor services and shareholder relations and an increase of
$2,854 in other administrative expenses.





Off
Balance Sheet Transactions, Arrangements, or Obligations.





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




Item
3. Quantitative and Qualitative Disclosures About Market Risk.




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




Item
4.  Controls and Procedures





Evaluation of Disclosure
Controls and Procedures





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





Changes in Internal Control
Over Financial Reporting





There
have been no changes in our internal control over financial reporting that
occurred during the quarter ended September 30, 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
1A.  Risk Factors





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
2.  Unregistered Sales of Equity Securities and Use of
Proceeds





(a)    Unregistered
Sales of Equity Securities.


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During
the three month period ending September 30, 2009, we issued 90,000 shares of
restricted common stock to Renergix Wind LLC, our project development
consultants. For further details concerning the issuance of these shares, see
our Current Reports on Form 8-K dated July 9, July 15 and September 16, 2009, as
filed with the SEC.





On
September 24, 2009, we sold 220,000 shares of common stock to a third party in a
non-brokered private placement agreement in exchange for proceeds of $165,000.
We relied upon the exemption from federal registration under Sections 4(2) and
4(6) of the Securities Act of 1933, as amended, based on our belief that the
issuance of such shares did not involve a public offering or general
solicitation and the third party is an “accredited investor” as defined in Rule
501(a) of Regulation D. The third party was afforded an opportunity for
effective access to our files and records that contained relevant information
needed to make an investment decision, including our financial statements and
periodic reports filed pursuant to the 1934 Act. We reasonably believed that the
third party has such knowledge and experience in financial and business matters
so that the third party is capable of evaluating the risks of the investment.
The certificate evidencing the subject shares shall contain restrictive
investment legends noted thereon.





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 September 30, 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 (Brian. M.
      Lavery, President, Principal Executive Officer)31.2
              
              Certification
      Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 (Murray
      Fleming, Principal Accounting Officer)32.1
              
              Certification
      Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002 (Brian. M. Lavery, President, Principal
      Executive Officer)32.2
              
              Certification
      Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002 (Murray Fleming, Principal Accounting
      Officer)


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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 Officer
                
                Date:
      November 13, 2009By:
              /s/  Mark
      SchaftleinMark
      SchaftleinChief
      Financial OfficerDate:
      November 13, 2009


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