UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549







Form
10-Q





(Mark
One)






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




For
the quarterly period ended September 30, 2009





OR




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


Commission
File Number: 001-12941





EASTERN
LIGHT CAPITAL, INCORPORATED


(Exact
Name of Registrant as Specified in Its Charter)








Delaware
            94-3240473(State
      or other jurisdiction
              of
      incorporation or organization)
            (I.R.S.
      Employer
              Identification
      Number)




100 Pine Street, Suite
      560,   San Francisco,
      California
              94111(Address of principal executive
      office)
              (zip
      code)
  (415)
693-9500
 (Registrant’s
Telephone Number, including Area Code)
  
  Securities
registered pursuant to Section 12(b) of the Act:




Title
      of each class
            
            Name
      of each exchange on which registeredCommon
      Stock $0.01 par value
            
            NYSE
      Amex




Securities
registered pursuant to Section 12(g) of the Act:
 None
 (Title of
Class)





Indicate
by check mark whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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 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 Section 232.405, during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).   Yes   x    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 12b02 of the Exchange Act.




Large
      accelerated filer:   o
            Accelerated
      filer:   oNon-accelerated
      filer:   o
            Smaller
      reporting company:   x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes  o   No  x .





As of
September 30, 2009, the registrant has approximately 352,527 shares of common
stock outstanding.








TABLE
OF CONTENTS








PART
      I  – FINANCIAL INFORMATION (UNAUDITED)ITEM
      1
            CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS:Condensed
      Consolidated Balance Sheets
            1Condensed
      Consolidated Statements of Operations
            2Condensed
      Consolidated Statements of Cash Flows
            3Notes
      to Condensed Consolidated Financial Statements
            4-9ITEM
      2
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
            10-13ITEM
      3
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            13ITEM
      4
            CONTROLS
      AND PROCEDURES
            13-14PART
      II – OTHER INFORMATIONITEM
      1
            LEGAL
      PROCEEDINGS
            14ITEM
      1A
            RISK
      FACTORS
            14ITEM
      1B
            UNRESOLVED
      STAFF COMMENTS
            14ITEM
      2
            CHANGES
      IN SECURITIES
            14ITEM
      3
            DEFAULTS
      UPON SENIOR SECURITIES
            14ITEM
      4
            SUBMISSION
      OF MATTERS TO VOTE OF SECURITY HOLDERS
            14ITEM
      5
            OTHER
      INFORMATION
            14ITEM
      6
            EXHIBITS
      AND REPORTS ON FORM 8-K
            15SIGNATURES
            16CERTIFICATIONS










All other items called for by the
instructions to Form 10-Q have been omitted because the items are not applicable
or the relevant information is not material.














EASTERN LIGHT CAPITAL, INCORPORATED




Condensed Consolidated Balance
Sheets(unaudited)


September
      30, 2009
              
              
              December
      31, 2008ASSETSCash
      and cash equivalents
              
              $
              361,309
              
              
              $
              1,974,687Marketable
      securities
              
              
              149
              
              
              
              213,839Accounts
      receivable
              
              
              549,925
              
              
              
              734,193Allowance
      for doubtful accounts
              
              
              (453,974
              )
              
              
              (550,808
              )Net
      accounts receivable
              
              
              95,951
              
              
              
              183,385Mortgage
      notes receivable
              
              
              3,128,777
              
              
              
              5,460,948Allowance
      for loan losses
              
              
              (200,000
              )
              
              
              (720,000
              )Net
      mortgage notes receivable
              
              
              2,928,777
              
              
              
              4,740,948Real
      estate owned
              
              
              7,632,523
              
              
              
              5,228,190Other
      assets
              
              
              37,262
              
              
              
              30,157Total
      assets
              
              $
              11,055,971
              
              
              $
              12,371,206LIABILITIES
      AND STOCKHOLDERS’ EQUITYLiabilitiesBank
      loans payable
              
              $
              ---
              
              
              $
              2,005,184Senior
      debt
              
              
              3,773,126
              
              
              $
              2,631,696Other
      liabilities
              
              
              195,924
              
              
              
              191,783Total
      liabilities
              
              
              3,969,050
              
              
              
              4,828,663Stockholders’
      equityPreferred stock, $.01 par value;1,600,000 shares
    authorized;213,820
      shares issued and outstanding at September 30, 2009and
      December 31, 2008
              
              
              2,138
              
              
              
              2,138Additional
      paid in capital - preferred stock
              
              
              5,509,728
              
              
              
              5,509,728Less treasury stock: 16,919 preferred shares atSeptember
      30, 2009 and December 31, 2008 at cost
              
              
              (229,179
              )
              
              
              (229,179
              )Common
      stock, $.01 par value; 2,000,000 shares authorized;500,432
      and 500,032 shares issued and outstandingat
      September 30, 2009 and December 31, 2008
              
              
              5,005
              
              
              
              5,000Additional
      paid in capital - common stock
              
              
              9,408,747
              
              
              
              9,404,245Less treasury stock: 147,905 and 133,500 common shares atSeptember
      30, 2009 and December 31, 2008 at cost
              
              
              (1,824,992
              )
              
              
              (1,761,912
              )Accumulated
      other comprehensive income (loss)
              
              
              (579
              )
              
              
              334Accumulated
      deficit
              
              
              (5,783,947
              )
              
              
              (5,387,811
              )Total stockholders’ equity
              
              
              7,086,921
              
              
              
              7,542,543Total liabilities and stockholders’ equity
              
              $
              11,055,971
              
              
              $
              12,371,206

















EASTERN LIGHT
CAPITAL, INCORPORATED




Condensed
Consolidated Statements of Operations(unaudited)


Three
      Months Ended
              September
      30
            
            
            Nine
      Months Ended
              September
      302009
            
            
            2008
            
            
            2009
            
            
            2008REVENUESInterest
      income
            
            $
            65,298
            
            
            $
            142,095
            
            
            $
            187,827
            
            
            $
            501,796Rental
      income
            
            
            38,800
            
            
            
            ---
            
            
            
            104,281
            
            
            
            ---Other
      income
            
            
            10,287
            
            
            
            17,092
            
            
            
            29,235
            
            
            
            23,445Total
      revenues
            
            
            114,385
            
            
            
            159,187
            
            
            
            321,343
            
            
            
            525,241EXPENSESInterest
      expense on loans
            
            
            2,746
            
            
            
            23,734
            
            
            
            24,169
            
            
            
            104,820Provision
      for (recovery of) loan losses
            
            
            -
            
            
            
            -
            
            
            
            54,794
            
            
            
            (56,509
            )Provision
      for (recovery of) doubtful accounts
            
            
            1,062
            
            
            
            (26,478
            )
            
            
            17,297
            
            
            
            (66,524
            )Operating
      expenses (credit) of real estate owned
            
            
            210,142
            
            
            
            -
            
            
            
            325,973
            
            
            
            (7,379
            )Wages
      and benefits
            
            
            106,865
            
            
            
            95,792
            
            
            
            332,177
            
            
            
            290,623Depreciation
            
            
            11,895
            
            
            
            ---
            
            
            
            35,686
            
            
            
            ---General
      and administrative
            
            
            93,041
            
            
            
            91,120
            
            
            
            291,627
            
            
            
            272,404Total
      expenses
            
            
            425,751
            
            
            
            184,168
            
            
            
            1,081,723
            
            
            
            537,435LOSS
      FROM OPERATIONS
            
            
            (311,366
            )
            
            
            (24,981
            )
            
            
            (760,380
            )
            
            
            (12,194
            )Gain
      from retirement of debt
            
            
            ---
            
            
            
            ---
            
            
            
            400,000
            
            
            
            ---Gain
      (loss) on real estate owned
            
            
            (173,402
            )
            
            
            16,423
            
            
            
            (173,400
            )
            
            
            72,793Gain
      (loss) on securities transaction
            
            
            (44,234
            )
            
            
            13,802
            
            
            
            10,923
            
            
            
            (43,989
            )Gain
      on investments
            
            
            58,400
            
            
            
            ---
            
            
            
            126,721
            
            
            
            ---Total
      other income (expenses), net
            
            
            (159,236
            )
            
            
            30,325
            
            
            
            364,244
            
            
            
            28,904NET
      INCOME (LOSS)
            
            $
            (470,602
            )
            
            $
            5,344
            
            
            $
            (396,136
            )
            
            $
            16,710PREFERRED
      DIVIDENDS
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---NET
      INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
            
            $
            (470,602
            )
            
            $
            5,344
            
            
            $
            (396,136
            )
            
            $
            16,710BASIC
      EARNINGS PER COMMON SHARE
            
            $
            (1.33
            )
            
            $
            0.01
            
            
            $
            (1.10
            )
            
            $
            0.04DILUTED
      EARNINGS PER COMMON SHARE
            
            $
            (1.33
            )
            
            $
            0.01
            
            
            $
            (1.10
            )
            
            $
            0.04DIVIDENDS
      PAID PER PREFERRED SHARE
            
            $
            ---
            
            
            $
            ---
            
            
            $
            ---
            
            
            $
            ---DIVIDENDS
      PAID PER COMMON SHARE
            
            $
            ---
            
            
            $
            ---
            
            
            $
            ---
            
            
            $
            ---BASIC
      COMMON SHARES
            
            
            353,390
            
            
            
            377,115
            
            
            
            360,221
            
            
            
            379,393DILUTED
      COMMON SHARES
            
            
            364,051
            
            
            
            384,752
            
            
            
            369,490
            
            
            
            383,180










EASTERN LIGHT
CAPITAL, INCORPORATED
  Condensed
Consolidated Statements of Cash Flows(unaudited)





Nine
      Months EndedSeptember
      302009
            
            
            2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income (loss)
            
            $
            (396,136
            )
            
            $
            16,610Adjustments
      to reconcile net income (loss) to net cash (used in) operating
      activities:Depreciation
            
            
            35,686
            
            
            
            ---Gain
      from retirement of debt
            
            
            (400,000
            )
            
            
            ---Stock-based
      compensation expense
            
            
            4,507
            
            
            
            9,796Provision
      for loan losses
            
            
            54,794
            
            
            
            12,693Change
      in allowance for doubtful accounts
            
            
            (101,527
            )
            
            
            (132,033
            )Realized
      loss on sale of marketable securities
            
            
            137,883
            
            
            
            51,074Impairment
      loss in real estate owned
            
            
            200,000
            
            
            
            ---Change
      in accounts receivable
            
            
            184,268
            
            
            
            (90,540
            )Change
      in other assets
            
            
            (7,105
            )
            
            
            23,317Change
      in in other liabilities
            
            
            4,141
            
            
            
            (424,452
            )Net
      cash (used in) operating activities
            
            
            (283,489
            )
            
            
            (533,535
            )CASH
      FLOWS FROM INVESTING ACTIVITIESProceeds
      from marketable securities
            
            
            585,706
            
            
            
            (13,853
            )Investment
      in marketable securities
            
            
            (510,812
            )
            
            
            ---Change
      in real estate owned
            
            
            148,311
            
            
            
            ---(Investment
      in) proceeds from real estate owned, net
            
            
            (71,900
            )
            
            
            1,764,050Proceeds
      from mortgage notes receivable
            
            
            187,070
            
            
            
            1,340,701Net
      cash provided by investing activities
            
            
            338,375
            
            
            
            3,090,898CASH
      FLOWS FROM FINANCING ACTIVITIESPayments
      for bank loans, net
            
            
            (1,605,184
            )
            
            
            (1,620,000
            )Purchase
      of treasury stock
            
            
            (63,080
            )
            
            
            (25,119
            )Preferred
      dividends paid
            
            
            ---
            
            
            
            ---Common
      dividends paid
            
            
            ---
            
            
            
            ---Net
      cash used in financing activities
            
            
            (1,668,264
            )
            
            
            (1,645,119
            )NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
            
            
            (1,613,378
            )
            
            
            912,244CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
            
            
            1,974,687
            
            
            
            962,190CASH
      AND CASH EQUIVALENTS, END OF PERIOD
            
            $
            361,309
            
            
            $
            1,874,434SUPPLEMENTAL
      CASH FLOW INFORMATION:Cash
      paid for interest
            
            $
            29,353
            
            
            $
            117,923Cash
      paid for taxes
            
            $
            13,238
            
            
            $
            22,371NON-CASH
      INVESTING AND FINANCING ACTIVITIESForeclosures,
      net of reserves
            
            $
            2,568,120
            
            
            $
            2,051,365








EASTERN
LIGHT CAPITAL, INCORPORATED
 
 Notes
to Condensed Consolidated Financial Statements
 (unaudited)


1.      Organization





References
to the “Company” refer to Eastern Light Capital, Incorporated (the “Trust”) – a
Real Estate Investment Trust (“REIT”) – and WrenCap Funding Corporation
(“WCFC”), collectively.  The Trust was incorporated in Delaware on
December 12, 1995. On July 2, 2008, the Trust – formerly known as Capital
Alliance Income Trust, Ltd – was renamed Eastern Light Capital,
Incorporated.





On April
15, 1997, the Trust formed a taxable REIT subsidiary, Capital Alliance Funding
Corporation (“CAFC”). On April 20, 2007, the subsidiary was renamed to WrenCap
Funding Corporation. Both the Trust and WCFC are incorporated in Delaware. The
Trust owns all of WCFC’s common and preferred shares and the Trust and WCFC are
consolidated in the Company’s financial statements. Prior to December 29, 2006,
the Company was externally advised by Capital Alliance Advisors, Inc. (“Former
Manager”, “CAAI”). On December 29, 2006, the Former Manager was terminated and
the Company became self-administered and self-advised.





The Trust
is a specialty finance company organized as a REIT. Historically the Trust has
emphasized the Mortgage Investments Business and CAFC has emphasized the
Mortgage Banking Business.  On June 30, 2006, CAFC suspended the
origination of new investment mortgages for the Trust and the origination of new
mortgages for subsequent sale into the secondary mortgage market. At year end
2006, CAFC’s unsold mortgages originated for secondary market sale were sold to
the Trust.  The Trust’s investments are primarily high-yielding,
collateral-oriented, non-conforming residential mortgage loans. Since May 1,
2007, WCFC has only invested and traded in exchange listed marketable
securities.





2.
            Basis of presentation
      and summary of significant accounting
  policies




These financial statements should be read in
      conjunction with the audited financial statements and notes thereto for
      the year ended December 31, 2008 as reported in the Company’s Form 10-K
      filed pursuant to 15d-2 with the Securities and Exchange
      Commission.





Principles of
consolidation. The condensed consolidated financial statements include
the accounts of the Trust and its wholly owned subsidiary, WCFC. All significant
intercompany balances and transactions have been eliminated in
consolidation.




Basis of
      accounting.The
      Company prepares its condensed consolidated financial statements in
      accordance with accounting principles generally accepted in the United
      States of America and pursuant to the rules and regulations of the
      Securities and Exchange Commission.The financial
      information herein reflects all adjustments (consisting of normal,
      recurring adjustments) which are, in the opinion of management, necessary
      for a fair statement of results for the interim period. The results of
      operations for the three and nine months ended September 30, 2009, are not
      necessarily indicative of the results to be expected for the full year.


In June
2009, the Financial Accounting Standards Board (“FASB”) approved the FASB
Accounting Standards Codification (“ASC”) as the single source of authoritative
nongovernmental GAAP.  ASC does not change current GAAP, but
simplifies user access to all authoritative GAAP by providing all the
authoritative literature related to a particular topic in one
place.  All existing accounting standard documents have been
superseded and all other accounting literature not included in the ASC is
considered non-authoritative.  ASC is effective for interim and annual
periods ending after September 15, 2009.  The Company adopted the
standard on July 1, 2009 and discloses the ASC prescribed topic numbering
references on a primary basis.





Use of
estimates.  The preparation of condensed consolidated financial
statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the condensed consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.







EASTERN
LIGHT CAPITAL, INCORPORATED
 
 Notes
to Condensed Consolidated Financial Statements
 (unaudited)


2.
            Basis of presentation
      and summary of significant accounting policies
      (continued)





Cash and cash
equivalents.  Cash and cash equivalents include cash and highly
liquid investments with maturities of three months or less when
purchased.  The Company deposits cash in financial institutions
insured by the Federal Deposit Insurance Corporation.  At times, the
Company’s account balances may exceed the insured limits. The Company has not
experienced losses on these accounts and management believes the Company is not
exposed to significant risks on such accounts.





Marketable
Securities. Marketable securities are classified as either trading or
available-for-sale securities.  Trading securities represent
investments in exchange listed securities that are bought and held principally
for the purpose of selling them in the near term.  Available-for-sale
securities represent investments in exchange listed securities which the Trust
intends to hold for an indefinite period of time.





Revenue
recognition.Interest income is
recorded on the accrual basis of accounting in accordance with the terms of the
loans.  Management reviews the likelihood that a loan will be repaid
when the payment of principal or interest is delinquent over two
payments.  For these delinquent loans, Management may establish a loan
loss reserve to protect against principal losses in the loan portfolio and an
allowance for doubtful accounts to protect against losses from accrued
interest.  If the mortgage’s collateral is considered insufficient to
satisfy the outstanding balance, after estimated foreclosure and selling costs,
additional interest is not accrued.  Loan origination income and
extension fees are deferred and recognized over the remaining life of the loan
as interest income on the interest method. Rental income is recognized as it is
earned.





Fair Value
Measurements.      The Company has adopted
ASC Topic 820, Fair Value
Measurements.  ASC Topic 820 establishes a framework for measuring
fair value and expands disclosure requirements for fair value measurements. In
April 2009, the FASB issued guidance now codified as part of ASC Topic 820,
Determining Fair Value When
the Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions that Are
Not Orderly, which provides additional authoritative guidance to assist
both issuers and users of financial statements in determining whether a market
is active or inactive, and whether a transaction is distressed.   The
adoption of these ASC Topics did not have a material effect on the Company’s
financial position and results of operations.





The
Company determines the fair values of its financial assets and financial
liabilities based on the fair value hierarchy established in ASC Topic
820.  The standard describes three levels of inputs that may be used to
measure fair value (Level 1, Level 2 and Level 3).  Level 1 inputs are
quoted prices (unadjusted) in active markets for identical assets or liabilities
that the Company has the ability to access at the measurement date.  An
active market is a market in which transactions occur with sufficient frequency
and volume to provide pricing information on an ongoing basis.  Level 2
inputs are inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly.  Level 3 inputs are unobservable
inputs for the asset or liability.  Unobservable inputs reflect the
Company’s own assumptions about the assumptions market participants would use in
pricing the asset or liability (including assumptions about risk). 
Unobservable inputs are developed based on the best information available in the
circumstances and may include the Company’s own data.





Stock-based
compensation.     During the nine months ended
September 30, 2009, no option awards were issued.  During the nine
months ended September 30, 2008, 84,655 options were re-issued. As the options
were re-issued, no further disclosure is required pursuant to ASC Topic
718.





Reclassifications.  Certain
2008 amounts have been reclassified to conform to the 2009
presentation.  For the period ended September 30, 2009, there were no
such reclassifications.





Taxes.  The
Trust has elected to be taxed as a REIT under the Internal Revenue Code of 1986,
as amended (the "Code"). A REIT is generally not subject to federal income tax
on taxable income which is distributed to its stockholders, provided that at
least 90% of taxable income is distributed and provided that certain other
requirements are met. Certain assets of the Company that produce non-qualifying
income are held in taxable REIT subsidiaries. Unlike other subsidiaries of a
REIT, the income of a taxable REIT subsidiary is subject to federal and state
income taxes. Even as a REIT, the Company may be subject to certain state and
local taxes on its income and property, and to federal income and excise taxes
on its undistributable taxable income.







EASTERN
LIGHT CAPITAL, INCORPORATED
 
 Notes
to Condensed Consolidated Financial Statements
 (unaudited)


2.
            Basis of presentation
      and summary of significant accounting policies
      (continued)





Earnings Per Share.
The Company presents both basic and diluted earnings per share. Basic earnings
per share excludes dilution and is computed by dividing net income available to
common stockholders by the weighted average number of shares outstanding for the
period. Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock, where such exercise or conversion would result in a
lower earnings per share amount.





Concentration of credit
risk.  The Company holds mortgage notes receivable that are
secured by deeds of trust on residential properties, 89% of which are located in
California. This concentration of credit may pose a risk to the value of the
loan portfolio due to changes in the economy or other conditions of the
geographical area.





3.
            Marketable
      securities





Available-for-sale
securities are reported at fair value with unrealized gains and losses excluded
from earnings and reported in accumulated other comprehensive income (loss). For
the three and nine month periods ended September 30, 2009, the loss in
accumulated other comprehensive income was $13,476 and $913, respectively.
Trading securities are reported at fair value with unrealized gains and losses
reported in the statements of operations.  Available-for-sale
securities consist of exchange traded REIT securities whereas trading securities
consist of exchange traded non-REIT securities. Both accounts utilize exchange
listed derivative securities to enhance performance and to hedge against risk.
The trading account also shorts exchange listed securities, including derivative
securities.





As of
September 30, 2009 and December 31, 2008, the trading securities account balance
was $0 and $205,870, respectively. As of September 30, 2009 and December 31,
2008, the available for sale securities account balance was $149 and $7,969,
respectively. Realized gains and losses on sales of both trading and
available-for-sale securities are determined on an average cost basis and are
reported in the statements of operations.





The
accounts utilize margin borrowings and are separately maintained. The equity
balance in the account is sufficient to offset the risk from a potential margin
call. As of September 30, 2009 and December 31, 2008, the trading securities
account had no borrowings while the available-for-sale securities account also
had no borrowings. The interest in the available-for-sale margin account is
charged at an annual rate of Prime and 4.00% and is payable monthly. As of
September 30, 2009 and December 31, 2008, interest of $6,425 and $0 was charged
and is reported in the statements of operations.





4.
            Mortgage notes
      receivable





Reconciliation
of the mortgage notes receivable balances follows:





Sep 30, 2009
            
            
            Dec 31, 2008Balance,
      beginning of period
            
            $
            5,460,948
            
            
            $
            11,144,365Additions
      during period:Originations
            
            
            ---
            
            
            
            ---Deductions
      during period:Collections
      of principal
            
            
            (40,210
            )
            
            
            (89,949
            )Repayments
            
            
            (146,860
            )
            
            
            (1,262,396
            )Write-offs
      of uncollectible loans
            
            
            (55,844
            )
            
            
            ---Foreclosures
            
            
            (2,089,257
            )
            
            
            (4,331,072
            )Balance,
      end of period
            
            $
            3,128,777
            
            
            $
            5,460,948





Mortgage
notes receivable are stated at the principal outstanding.  Interest on
the mortgages is due monthly and principal is usually due as a balloon payment
at loan maturity. As of September 30, 2009, there were four (4) loans totaling
$756,941 of principal and $4,360 of interest that were delinquent over 60 days.
These loans do not accrue interest in agreement with the Company’s policy on
revenue recognition.





Mortgage
notes that have been modified from their original terms are evaluated to
determine if the loan meets the definition of Troubled Debt Restructuring. For
the period ended September 30, 2009, there were no loan modifications that
affected the recognition of revenue or required the Company to recognize
impairment of a mortgage note receivable.









EASTERN
LIGHT CAPITAL, INCORPORATED
 
 Notes
to Condensed Consolidated Financial Statements
 (unaudited)


5.
            Allowance for loan
      losses





The
allowance for loan losses is based on the fair value of the related collateral,
since all loans subject to this measurement are collateral
dependent.  Management believes a $200,000 and $720,000 allowance for
loan losses are adequate to protect against potential losses inherent in
mortgage notes receivables as of September 30, 2009 and December 31, 2008,
respectively. Actual losses may differ from the estimate.





A
reconciliation of the allowance for loan losses follows:




Sep 30, 2009
            
            
            Dec 31, 2008Provision
      for loan losses
            
            $
            54,794
            
            
            $
            404,230Allowance
      transfer (non-cash)
            
            
            (4,691
            )
            
            
            ---Write-downs
      of existing collateral
            
            
            (514,259
            )
            
            
            (1,839,230
            )Write-offs
      of uncollectible collateral
            
            
            (55,844
            )
            
            
            ---Total
      adjustments to allowance
            
            
            (520,000
            )
            
            
            (1,435,000
            )Balance,
      beginning of period
            
            
            720,000
            
            
            
            2,155,000Balance,
      end of period
            
            $
            200,000
            
            
            $
            720,000





6.      Real estate
owned





Real
estate owned includes real estate acquired through foreclosure and is stated at
the lower of the recorded investment in the loan, net of any senior
indebtedness, or at the property's estimated fair value, less estimated costs to
sell, as applicable.  Costs relating to the development and
improvement of real estate owned are capitalized, whereas costs relating to
holding the property are expensed. Real estate owned is either held for sale or
for investment. As a property's status changes, reclassifications may
occur.





As of
January 1, 2009, the Company owned five properties. During the nine months ended
September 30, 2009, the Company foreclosed on three properties. As of September
30, 2009, the Company owned eight properties, of which five properties were held
for sale with a gross value of $4,662,592 and three properties were held for
investment with a gross value of $3,348,928. Two of the investment properties
rent month-to-month while the third is leased until January 31, 2010. Four of
the properties have senior liens in the amount of approximately $1,998,370,
$950,000, $633,326 and $191,430.





A
reconciliation of the real estate owned follows:





Sep 30, 2009
            
            
            Dec 31, 2008Balance,
      beginning of period
            
            $
            5,228,190
            
            
            $
            1,804,826Add:
      Foreclosed mortgage notes, (net of reserve)
            
            
            2,568,120
            
            
            
            5,785,524Add:
      Investments
            
            
            71,900
            
            
            
            128,927Less:
      Write-downs of property (non-cash)
            
            
            (200,000
            )
            
            
            (281,000
            )Add:
      Gain on sale
            
            
            ---
            
            
            
            168,240Less:
      Depreciation of real estate held for
      investment                        .
            
            
            (35,687
            )
            
            
            ---Less: Proceeds from sale
      of real estate owned  (net of closing
    costs)
            
            
            ---
            
            
            
            (2,378,327
            )Balance,
      end of period
            
            $
            7,632,523
            
            
            $
            5,228,190





7.      Fair Value
Measurements





The
following table presents information about the Company’s assets and liabilities
that are measured at fair value on a recurring basis as of September 30,
2009:





Sep 30, 2009
            
            
            Level 1
            
            
            Level 2
            
            
            Level 3Asset:Marketable
      securities – Available for sale
            
            $
            149
            
            
            $
            149
            
            
            
            ---
            
            
            
            ---Marketable
      securities – Trading
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---Mortgage
      notes receivable (non-recurring)
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---Real
      estate owned (non-recurring)
            
            $
            1,000,000
            
            
            
            ---
            
            
            
            ---
            
            
            $
            1,000,000Liability:Other
      liability – None
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---Total
            
            $
            1,000,149
            
            
            $
            149
            
            
            $
            ---
            
            
            $
            1,000,000






8








EASTERN
LIGHT CAPITAL, INCORPORATED
 
 Notes
to Condensed Consolidated Financial Statements
 (unaudited)


7.      Fair Value Measurements
(continued)





The
following methods and assumptions were used to estimate the fair value of
financial instruments:





Cash and cash
equivalents.  The carrying amounts reported in the balance
sheets approximate fair value due to the short term nature of these
accounts.





Available-for-sale and trading
securities (included in marketable securities).  These investments
are reported on the balance sheets based on quoted market prices.





Mortgage notes receivable.
The fair value of non-impaired loans is estimated based upon projected cash
flows discounted at the estimated current interest rates at which similar loans
would be made. The applicable amount of the allowance for loan losses along with
accrued interest and advances related thereto should also be considered in
evaluating the fair value versus the carrying value. For loans in which a
specific allowance is established based on the fair value of the collateral, the
Company records the loan as nonrecurring Level 2 if the fair value of the
collateral is based on an observable market price or a current appraised
value.  If an appraised value is not available or the fair value of
the collateral is considered impaired below the appraised value and there is no
observable market price, the Company records the loan as nonrecurring Level
3.





Real estate
owned.   At the time of foreclosure, real estate owned is
recorded at the lower of the recorded investment in the loan, plus any senior
indebtedness, or at the property’s estimated fair value, less estimated costs to
sell, as applicable. The Company periodically compares the carrying value of
real estate to expected undiscounted future cash flows for the purpose of
assessing the recoverability of the recorded amounts.  If the carrying
value exceeds future undiscounted cash flows, the assets are reduced to
estimated fair value.





Line of credit and loan
commitments.  The carrying amount equals fair
value.  All amounts, including interest payable, are subject to
immediate repayment.”





8.      Preferred, common and
treasury stock





The
Preferred Shareholders are entitled to a dividend preference in an amount equal
to an annualized return on the adjusted net capital contribution of Preferred
Shares at each dividend record date during such year (or, if the Directors do
not set a record date, as of the first day of the month). The annualized return
is the lesser of: (a) 10.25%, (b) 1.50% over the Prime Rate (determined on a not
less than quarterly basis) or (c) the rate set by the Board of Directors. The
preferred dividend preference is non-cumulative.





After
declaring dividends for a given year to the Preferred Shareholders in the amount
of the dividend preference, no further dividends may be declared on the
Preferred Shares for the subject year, until the dividends declared on each
Common Share for that year equals the dividend preference for each Preferred
Share for such year.  Any additional dividends generally will be
allocated such that the amounts of dividends per share to the Preferred
Shareholders and Common Shareholders for the subject year are
equal.  The Preferred Shareholder’s additional dividends, if any,
are  non-cumulative. Preferred Shareholders are entitled to receive
all liquidating distributions until they have received an amount equal to their
aggregate adjusted net capital contribution.  Thereafter, Common
Shareholders are entitled to all liquidation distributions until the aggregate
adjusted net capital contributions of all Common Shares have been reduced to
zero.  Any subsequent liquidating distributions will be allocated
among Common Shareholders and Preferred Shareholders pro rata.


The
Preferred Shares are redeemable by a shareholder, subject to the consent of the
Board of Directors, annually on June 30 for written redemption requests received
by May 15 of such year.  The Board of Directors may in its sole
discretion deny, delay, postpone or consent to any or all requests for
redemption.  The redemption amount to be paid for redemption of such
Preferred Shares is the adjusted net capital contribution plus unpaid accrued
dividends, divided by the aggregate net capital contributions plus accrued but
unpaid dividends attributable to all Preferred Shares outstanding, multiplied by
the net asset value of the Trust attributable to the Preferred Shares which
shall be that percentage of the Trust’s net asset value that the aggregate
adjusted net capital contributions of all Preferred Shares bears to the adjusted
net capital contributions of all Shares outstanding.









EASTERN
LIGHT CAPITAL, INCORPORATED
 
 Notes
to Condensed Consolidated Financial Statements
 (unaudited)


8.      Preferred, common and
treasury stock (continued)





The Trust
has the power to redeem or prohibit the transfer of a sufficient number of
Common and/or Preferred Shares or the exercise of warrants and/or options and to
prohibit the transfer of shares to persons that would result in a violation of
the Trust’s shareholding requirements.  The Bylaws provide that only
with the explicit approval of the Trust’s Board of Directors may a shareholder
own more than 9.8% of the total outstanding shares.





As of
January 1, 2009, the Trust’s net Preferred Stock outstanding shares were
196,901. During the first nine months of 2009, no Preferred Stock shares were
purchased. As of September30, 2009,
the Trust’s net Preferred Stock outstanding shares were 196,901.





As of
January 1, 2009, the Trust’s net Common Stock outstanding shares were 366,532.
During the first nine months of 2009, 14,405 shares of Common Stock were
purchased and 400 options were exercised. As of September 30, 2009, the Trust’s
net Common Stock outstanding shares were 352,527.





9.
            Related party
      transactions





On
January 1, 2007, the Trust entered into a sub-lease agreement for office space
with the Former Manager. The Former Manager terminated the sub-lease agreement
effective July 4, 2008 and the Trust entered into a lease with an independent
third party.





On March
8, 2008, Thomas B. Swartz, a Non-Independent Director, resigned from the Trust’s
Board of Directors. Mr. Swartz received $21,100 in cash and his stock options
were allowed to continue until maturity or June 3, 2009, whichever came first.
On June 3, 2009, Mr. Swartz’s options expired, unexercised.





10.
            Earnings per
      share





The
following table represents a reconciliation of the numerators and denominators
of the basic and diluted earnings per common share for the three and nine months
ended September 30, 2009 and 2008:





Three
      months ended
              Sep
      30,
            
            
            Nine
      months ended
              Sep
      30,2009
            
            
            2008
            
            
            2009
            
            
            2008Numerator:Net
      income (loss)
            
            $
            (470,602
            )
            
            $
            5,244
            
            
            $
            (396,136
            )
            
            $
            16,610Preferred
      dividends
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---Net
      income (loss) available to common stockholders
            
            $
            (470,602
            )
            
            $
            5,244
            
            
            $
            (396,136
            )
            
            $
            16,610Denominator:
              Basic
      weighted average shares
            
            
            353,390
            
            
            
            377,115
            
            
            
            360,221
            
            
            
            379,393Dilutive
      effect of options
            
            
            ---
            
            
            
            7,637
            
            
            
            ---
            
            
            
            3,787Diluted
      weighted average shares
            
            
            353,390
            
            
            
            384,752
            
            
            
            360,221
            
            
            
            383,180Basic
      earnings per common share
            
            $
            ( 1.33
            )
            
            $
            0.01
            
            
            $
            ( 1.10
            )
            
            $
            0.04Diluted
      earnings per common share
            
            $
            ( 1.33
            )
            
            $
            0.01
            
            
            $
            ( 1.10
            )
            
            $
            0.04





At
      September 30, 2009 and 2008, options to purchase 24,374 and 88,940 shares
      of common stock are not considered in the diluted earnings per share
      calculation.





11.
            Wages and
      Benefits





Every
      January 1, full time employees with at least 12 months of full time
      employment qualify for a Company sponsored Simple IRA. Employee
      contributions are governed by Internal Revenue Code limitations. The
      Company contributes up to 3.0% of the employee’s annual compensation, but
      not in excess of the lesser of the employee’s contribution or the maximum
      IRS employer’s contribution. Employer contributions vest upon
      funding.





12.
            Subsequent
      Events





The
      Company has evaluated subsequent events through November 13, 2009, the
      date of issuance of the financial statements. No subsequent events have
      occurred that would have a material impact on the presentation of the
      Company’s financial statements.













PART
I – ITEM 2





MANAGEMENT’S
DISCUSSION AND ANALYSIS


OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS





FORWARD
LOOKING STATEMENTS





Certain
statements made in this Report on Form 10-Q are "forward-looking statements"
(within the meaning of the Private Securities Litigation Reform Act of 1995)
regarding the plans and objectives of management for future operations. Such
statements involve known and unknown risks, uncertainties and other factors that
may cause actual results, performance or achievements of Eastern Light Capital,
Incorporated (the "Company") to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. The forward-looking statements included herein are based on current
expectations that involve numerous risks and uncertainties. The Company's plans
and objectives are based, in part, on assumptions relating to the foregoing and
involve judgments with respect to, among other things, future economic,
competitive and market conditions and future business decisions, all of which
are difficult or impossible to predict accurately and many of which are beyond
the control of the Company. Although the Company believes its assumptions
underlying the forward-looking statements are reasonable, any of the assumptions
could prove inaccurate and, therefore, there can be no assurance the
forward-looking statements included in this Quarterly Report will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved.





Forward-looking
statements may be identified by reference to a future period or periods, or by
the use of forward-looking terms such as “may”, “will”, “expect”, “anticipate”,
or similar terms.  Actual results could materially differ from those
in the forward-looking statements due to a variety of factors.





Preparation
of the Company’s condensed consolidated financial statements is based upon the
operating results of the Trust and WCFC. Management’s discussion and analysis of
the results of operations for the three and nine months ended September 30, 2009
and 2008 follows:





OVERVIEW





In May of
1997, the Trust registered its common shares with the Securities and Exchange
Commission under the Securities Act of 1933. On September 30, 1998, the initial
public offering of Common Shares was completed. Since October 1, 1998, the
common shares have been listed on the NYSE Amex (formerly known as the American
Stock Exchange).





During
the fourth quarter of 2006, the Company’s shareholders voted to terminate the
outside manager (“Former Manager” or “CAAI”) and initiate internal management.
On December 29, 2006, the Former Manager’s management and advisory contracts
were terminated and the Company became self-administered and
self-advised.





The
transition agreement with the Former Manager required the Company to remove the
name “Capital Alliance” from the Trust’s name by June 30, 2008 and from CAFC’s
name by April 30, 2007. On April 20, 2007, the Company’s 100% owned taxable
subsidiary changed its name from Capital Alliance Funding Corporation (“CAFC”)
to WrenCap Funding Corporation (“WCFC”). On July 2, 2008, the Trust changed its
name from Capital Alliance Income Trust, Ltd (“CAIT”) to Eastern Light Capital,
Incorporated (the “Trust”).





The
current real estate market is characterized by both credit uncertainty and
expected declines in residential property valuations.  Due to these
conditions the Company has focused on debt reduction in lieu of new investments
in residential mortgages.  The current conditions are expected to
extend through calendar year 2009.  The Company has made additional
investments in marketable securities and is reviewing its current investment
policies to include other REIT permissible assets. Since May 1, 2007, WCFC has
traded exchange listed marketable securities.





The
recent financial crisis has affected the Company’s business by diminishing the
credit quality of existing borrowers and lowering existing property values. The
Company has actively managed the risk inherent from these conditions by
modifying existing notes so as to avoid foreclosing on properties in a declining
market. The Company expects that these efforts will help maintain the
performance of the portfolio as borrowers will be more capable and motivated to
satisfy their obligations.








11





The
Company’s residential loan portfolio continues to harbor unacceptable levels of
non-performing assets. Loan delinquencies reduce current revenues until the
non-performing loans are monetized and their proceeds re-invested. In response
to these problems and to maximize shareholder value, Management has continued to
focus on efficient asset management as the strategic alternative to selling
loans at depressed valuations. As mortgage loans are monetized, the Company’s
investment focus will expand to provide a source of future profitability and
increased shareholder value.





As of
January 1, 2009, the Trust had REO of $2,596,494 and approximately 61% of the
mortgage loan portfolio were non-performing assets (as measured by mortgage
payments delinquencies in excess of 60 days). Due to the partial financing of
the mortgage loan portfolio with debt, REO and non-performing mortgage loans
were approximately 61% of total shareholder equity and approximately 134% of
common shareholder equity. As of September 30, 2009, the Trust has REO for sale
and investment of $3,859,397 and approximately 24% of the mortgage loan
portfolio is non-performing assets. REO and non-performing mortgage loans were
approximately 65% of total shareholder equity and approximately 256% of common
shareholder equity.





The Trust
is a real estate investment trust (“REIT”) and REIT’s are generally required to
distribute at least 90% of their annual taxable income as dividend
payments.  During 2006, 2007 and 2008, the Trust incurred taxable
losses.  On account of these losses, dividend payments were curtailed.
These taxable losses, also known as Net Operating Losses (“NOL”), allow the
Trust to retain future taxable income equal to the cumulative amount of its NOL
balance. The Internal Revenue Code waives mandatory dividend payments until
prior years taxable losses are recovered.





When the
Trust produces pre-NOL taxable income, the Trust’s Board of Directors will need
to reconcile the competing opportunities of strengthening the Company’s balance
sheet and the priority of restoring dividend payments. This issue will require
additional review and analysis by the Board of Directors.





CRITICAL
ACCOUNTING POLICIES





The
accounting and reporting policies of the Company are in accordance with
accounting principles generally accepted in the United States of
America.  The Company’s significant accounting policies are described
in the notes to the consolidated financial statements as contained in the
Company’s 2008 Form 10-K as filed with the SEC on April 15,
2009.  Certain accounting policies require management to make
significant estimates and assumptions, which have a material impact on the
carrying value of certain assets and liabilities, and the Company considers
these to be critical accounting policies.  The estimates and
assumptions used are based on historical experience and other factors, which
management believes to be reasonable under the circumstances.  Actual
results could differ significantly from these estimates and assumptions, which
could have a material impact on the carrying value of assets and liabilities at
the balance sheet dates and results of operations for the reporting periods.
There have been no material changes in our critical accounting policies as
disclosed in our 2008 Form 10-K.





Operating
Strategy.





Mortgage
investment loans are reported as mortgage notes receivable and are held until
prepayment, maturity or foreclosure. The Company owns non-conforming mortgage
loans on one-to-four unit residential properties secured by first and second
deeds of trust.  These loans are primarily secured by California real
estate. Historically, the Trust limited its mortgage investments to a cumulative
loan to value ratio (“CLTV”) that did not exceed 75% of the underlying
collateral at the time of investment.  The Company seeks to maximize
the value of its loan portfolio through active asset management.





During
2008, the repayment of mortgage notes receivable and the monetization of
non-performing assets reduced institutional borrowings by $1,636,644 to
approximately $2,000,000.  The existing $7,000,000 credit facility had
a scheduled maturity of November 14, 2008 but the lending institution was taken
over by the FDIC on November 7, 2008. On May 12, 2009, the Company successfully
completed its negotiations with the FDIC for $1,600,000, resulting in a gain of
approximately $400,000 in the second quarter ending June 30, 2009.





The
Company is reviewing its current investment policies to include other REIT
permissible assets in addition to residential mortgage loans. Since May 1, 2007,
WCFC has traded exchange listed securities. The Company may consider
relinquishing its REIT status to enhance shareholder value.




Loan
Origination. During 2008 and the nine months ended September 30, 2009,
the Company did not make or acquire any new loans. Prospectively, portfolio
loans may be internally originated or acquired from unaffiliated third
parties.












Asset
Management.
Asset management is mortgage loan servicing and real estate owned (“REO”)
dispositions.  Loan servicing consists of collecting payments from
borrowers, making required advances, accounting for principal and interest
payments, holding borrowed proceeds in escrow until fulfillment of mortgage loan
requirements, contacting delinquent borrowers, and in the event of unremedied
defaults performing other administrative duties including supervising
foreclosures.





Only
mortgage loans owned by the Company are serviced. The Company does not acquire
loan servicing rights or maintain a loan’s servicing rights at disposition. REO
dispositions include all of the supervisory and administrative processes of
preparing a foreclosed asset for sale.




Loan
Portfolio and Allowance for Loan Losses.As of September 30,
2009, the Company’s loan portfolio included 14 loans totaling $3,128,777 of
which four loans totaling $756,941 representing 24% of the loan portfolio were
delinquent over two payments.  In assessing the collectibility of
these delinquent mortgage loans, management has established a loan loss reserve
of $200,000, if it is necessary to foreclose upon the mortgage
loans.





As of
December 31, 2008, the Company’s loan portfolio included 19 loans totaling
$5,460,948 of which 10 loans totaling $3,353,673 representing 61% of the loan
portfolio were delinquent over two payments.  In assessing the
collectibility of these delinquent mortgage loans, management has established a
loan loss reserve of $720,000, if it is necessary to foreclose upon the mortgage
loans.





The
Company has only issued loan commitments on a conditional basis and generally
funds such loans promptly upon removal of any conditions.  The Trust
did not have any commitments to fund loans as of September 30, 2009 and December
31, 2008.





As of
September 30, 2009, the following table summarizes the Company’s outstanding
repayment obligations:





Maximum
      Other
                Commercial
      Commitments (a)
                As
      of September 30, 2009
              Total
      Amounts
                Committed
              Amount
      of Commitment Expiration Per PeriodLess
      than
                1
      year
              1
      - 3 years
              4
      - 5
                years
              After
      5
                yearsMargin
      Loan
              0
              0
              0
              0
              0Lease
      Commitment
              $118,800
              $66,000
              $52,800
              0
              0Standby
      Repurchase Obligations
              0
              0
              0
              0
              0Total
      Commercial Commitments
              $118,800
              $66,000
              $52,800
              0
              0


(a)
            Commercial
      commitments are funding commitments that could potentially require
      registrant performance in the event of demands by third parties or
      contingent events, such as under lines of credit extended or under
      guarantees of debt.




RESULTS
OF OPERATIONS





The
historical information presented herein is not necessarily indicative of future
operations.





Three months ended September 30,
2009 and 2008.  Revenues for the third quarter decreased to
$114,385 as compared to $159,187 for the same period in the prior year. The
decrease in revenue was due to a decrease in interest income of $76,797 which
was partially offset by an increase in rental income of $38,800. The decrease in
interest income was the result of a smaller loan portfolio while the increase in
rental income was the result of an increase in real estate
investments.





Expenses
for the three months ended September 30, 2009 increased to $425,751 as compared
to $184,168 for the same period in the prior year. The increase in expenses
during the third three months of 2009 resulted primarily from an increase in
operating expenses of REO of $210,142. The increase is due to rising REO costs
and an increased number of foreclosed assets.
















Nine months ended September 30, 2009
and 2008.  Revenues for the first nine months decreased to
$321,343 as compared to $525,241 for the same period in the prior year. The
decrease in revenue is due to the decrease in interest income of $313,969 which
was partially offset by an increase in rental income of $104,281. The decrease
in interest income was the result of a smaller loan portfolio while the increase
in rental income was the result of an increase in real estate
investments.





Expenses
for the nine months ended September 30, 2009 increased to $1,081,723 as compared
to $537,435 for the same period in the prior year. The increase in expenses
during the first nine months of 2009 resulted from an increase in operating
expenses of REO of $333,352 and the provision for loan losses of $111,303. These
increases are the result of the prior year’s downward adjustments to loan loss
reserves whereas the REO increase is due to rising costs and an increase in the
number of foreclosed assets.





LIQUIDITY
AND CAPITAL RESOURCES





Management
believes that the cash flows from operations, mortgage loans that are paid off,
real estate owned that is sold, credit facilities that may be obtained during
2009 and, if necessary, the limited sale of investment mortgages will be
sufficient to meet the liquidity needs of the Company’s businesses for the next
twelve months.





Nine months ended September 30, 2009
and 2008. As of January 1, 2009 and 2008, the Trust had $1,974,687 and
$962,190 of cash and cash equivalents, respectively. During the nine month
period ended September 30, 2009, cash and cash equivalents decreased by
$1,613,378.  During the nine month period ended September 30, 2008,
cash and cash equivalents increased by $912,244. After taking into effect the
various transactions discussed below, cash and cash equivalents at September 30,
2009 and 2008 were $361,309 and $1,874,434, respectively.





The
following summarizes the changes in net cash (used in) operating activities, net
cash provided by investing activities, and net cash (used in) financing
activities.





Net cash
used in operating activities during the nine months ended September 30, 2009 and
2008 was ($283,489) and ($533,535), respectively. During the first nine months
of 2009, net income used ($396,136), the retirement of debt used ($400,000) and
an impairment loss in real estate owned provided $200,000. During the first nine
months of 2008, net income provided $16,610, a change in other liabilities used
($424,452) and a change in the allowance for doubtful accounts used ($132,033).





Net cash
provided by investing activities for the nine months ended September 30, 2009
and 2008 was $338,375 and $3,090,898 respectively. During the first nine months
of 2009, net investments in marketable securities provided $74,894, a change in
real estate owned provided $148,311 and proceeds from mortgage notes receivable
provided $187,070. During the first nine months of 2008, proceeds from real
estate owned provided $1,764,050 and proceeds from mortgage notes receivable
provided $1,340,701.





Net cash
(used in) financing activities during the nine months ended September 30, 2009
and 2008 was ($1,668,264) and ($1,645,119), respectively.  During the
first nine months of 2009, the repayment of bank loans used ($1,605,184). During
the first nine months of 2008, net payments of bank loans used cash of
($1,620,000).








PART
I – ITEM 3





QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK





The
Company is not required to provide the information required by this item as it
is a smaller reporting company.





PART
I – ITEM 4





CONTROLS
AND PROCEDURES





(A)Evaluation of Disclosure Controls and
Procedures.  Based on management's evaluation (with the
participation of our CEO and Principal Accounting Officer), as of the end of the
period covered by this report, our CEO and Principal Accounting Officer have
concluded that our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(“Exchange Act”)), are effective to provide reasonable assurance that
information required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized, and reported within
the time periods specified in SEC rules and forms, and is accumulated and
communicated to management, including our principal executive officer and
principal financial officer, as appropriate, to allow timely decisions regarding
required disclosure.












(B) Changes in Internal Control over
Financial Reporting.  There have been no changes in the
Company’s internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period
covered by this report that have materially affected, or are reasonably likely
to materially affect, our internal control over financial
reporting.








PART
II





OTHER
INFORMATION





ITEM
1                      LEGAL
PROCEEDINGS





The
Company is involved in three legal proceedings as of September 30,
2009.





On April
14, 2006, the Trust and WCFC were served a summons alleging that the Company was
involved with misleading a former mortgage holder. Upon the satisfaction of
their mortgage claim from the proceeds of a Company provided mortgage, the
former mortgage holder released their escrow settlement to the new purchaser
without re-recording their subordinate mortgage claim. On July 14, 2006, the
property was sold at a Trustee sale and the Company’s loan was paid in full. The
former mortgage holder’s unrecorded claim was not satisfied at the
aforementioned Trustee sale. The Company believes the former mortgage holder’s
action is without merit and is seeking dismissal.





On
November 1, 2007, WCFC was served a summons dated September 5, 2007 from a
former borrower alleging that the Company assisted the replacement lender to
unlawfully and illegally foreclose on the former borrower’s property. The
Company believes the former mortgage holder’s action is without merit and is
seeking dismissal.





In March
2008, the Trust was named as a defendant in a complaint alleging breach of
contract, fraud and negligence relating to two foreclosed properties. The
Company believes the former mortgage holder’s action is without merit and is
seeking dismissal.





ITEM
1A                      RISK
FACTORS





The
Company is not required to provide the information required by this item as it
is a smaller reporting company.





ITEM
1B                      UNRESOLVED
STAFF COMMENTS





None





ITEM
2                      CHANGES
IN SECURITIES





1,345
common shares were purchased for treasury stock during the three month period
ended September 30, 2009. No preferred shares were purchased for treasury stock
during the three month period ended September 30, 2009.





ITEM
3                      DEFAULTS
UPON SENIOR SECURITIES





None





ITEM
4                      SUBMISSION
OF MATTERS TO VOTE OF SECURITY HOLDERS





None





ITEM
5                      OTHER
INFORMATION





None













ITEM
6                      EXHIBITS
AND REPORTS ON FORM 8-K





(a)           Exhibits





Exhibit
No.





3.1
            Certificate
      of Incorporation and Amendment No. 1
(1)


3.2
            Bylaws
      of the Registrant (1)


3.3
            Certificate
      of Amendment of Certificate of Incorporation
(3)


4.1
            Form
      of Stock Certificate of Common Shares of the Registrant
  (2)


10.2
            Form
      of Indemnity Agreement between the Registrant and its Directors and
      Officers (1)


24.7
            Power
      of Attorney of Richard J. Wrensen
(4)


31.1
            Sarbanes
      Certification of Richard J. Wrensen


31.2
            Sarbanes
      Certification of Andrea Barney


32.1
            Sarbanes
      Certification





(1)
            These
      exhibits were previously contained in Registrant’s Registration Statement
      filed on Form S-11 with the Commission on September 9, 1996, and are
      incorporated by reference herein.





(2)
            These
      exhibits were previously contained in Amendment No. 1 to the Registrant’s
      Registration Statement filed on Form S-11 with the Commission on January
      15, 1997, and are incorporated by reference
  herein.





(3)
            These
      exhibits were previously contained in Form 10-Q for the period ending June
      30, 1997 filed with the Commission on August 14, 1997, and are
      incorporated by reference herein.





(4)
            This
      exhibit was previously contained in Form 10-K for the period ending
      December 31, 1998 filed with the Commission on April 10, 1999, and is
      incorporated by reference herein.








(b)           Reports on Form
8-K.





Form
8-K was filed on:




·
            August
      11, 2009 due to the press release of August 11, 2009 announcing financial
      results for the second quarter of
2009.
















SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.






EASTERN
LIGHT CAPITAL, INCORPORATED






Dated: 
      November 13, 2009
              By:
              /s/ Richard
      J. WrensenRichard
      J. WrensenPresident,
      Chief Executive Officer and Chief Financial Officer
 By:
              /s/
      Andrea BarneyAndrea
      BarneyPrincipal
      Accounting Officer and Controller