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, 2010
 
 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, 2010, the registrant has approximately 351,482 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
4-11ITEM 2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
12-15ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
15ITEM 4
CONTROLS AND PROCEDURES
15PART II – OTHER INFORMATIONITEM 1
LEGAL PROCEEDINGS
16ITEM 1A
RISK FACTORS
16ITEM 1B
UNRESOLVED STAFF COMMENTS
16ITEM 2
CHANGES IN SECURITIES
16ITEM 3
DEFAULTS UPON SENIOR SECURITIES
17ITEM 4
SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
17ITEM 5
OTHER INFORMATION
17ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
17SIGNATURES
18





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.
















September 30,

2010

December 31,

2009ASSETSCash and cash equivalents

$
375,053


$
227,944Marketable securities


181



147Accounts receivable


271,697



524,717Allowance for doubtful accounts


-



(453,974
)Net accounts receivable


271,697



70,743Notes receivable:Mortgage notes receivable


1,054,832



2,690,737Allowance for loan losses


(20,000
)


(310,000
)Net notes receivable


1,034,832



2,380,737Real estate owned


4,248,486



6,714,174Other assets


28,383



37,987Total assets

$
5,958,632


$
9,431,732LIABILITIES AND STOCKHOLDERS’ EQUITYLiabilitiesSenior mortgage debt

$
2,112,947


$
4,487,940Other liabilities


90,289



232,032Total liabilities


2,203,236



4,719,972Stockholders’ equityPreferred stock, $.01 par value;1,600,000 shares authorized;213,820 shares issued and outstanding at June 30, 2010and December 31, 2009


2,138



2,138Additional paid in capital - preferred stock


5,509,728



5,509,728Less treasury stock: 16,919 preferred shares atJune 30, 2010 and December 31, 2009 at cost


(229,179
)


(229,179
)Common stock, $.01 par value; 2,000,000 shares authorized;500,432 shares issued and outstanding at June 30, 2010and December 31, 2009


5,005



5,005Additional paid in capital - common stock


9,415,696



9,408,747Less treasury stock: 148,950 and 148,550 common shares atJune 30, 2010 and December 31, 2009 at cost


(1,829,141
)


(1,827,698
)Accumulated other comprehensive loss


(542
)


(576
)Accumulated deficit


(9,118,309
)


(8,156,405
)Total stockholders’ equity


3,755,396



4,711,760Total liabilities and stockholders’ equity

$
5,958,632


$
9,431,732

















Three Months Ended


Nine Months EndedSeptember 30


September 302010


2009


2010


2009REVENUESInterest income

$
32,816


$
65,298


$
93,610


$
187,827Rental income


12,500



38,800



31,950



104,281Other income


2



10,287



5,297



29,235Total revenues


45,318



114,385



130,857



321,343EXPENSESInterest expense on loans


-



2,746



-



24,169Senior mortgage expense


20,533



41,693



86,822



128,494Provision for loan losses


-



-



12,710



54,794Provision for (recovery of) doubtful accounts


-



1,062



-



17,297Expenses of real estate owned


1,513



168,449



36,844



197,479Impairment of real estate owned


-



-



257,645



-Wages and salaries


95,122



106,865



287,766



332,177General and administrative


117,947



104,936



281,797



327,313Total expenses


235,116



425,751



963,583



1,081,723LOSS FROM OPERATIONS


(189,798
)


(311,366
)


(832,726
)


(760,380
)Gain (loss) from retirement of debt


-



-



-



400,000Gain (loss) on sale of real estate owned


(120,426
)


(173,402
)


(93,048
)


(173,400
)Gain (loss) on securities transactions


-



(44,234
)


(36,131
)


10,923Gain (loss) on investments


-



58,400



-



126,721Total other income (loss), net


(120,426
)


(159,236
)


(129,179
)


364,244NET INCOME (LOSS)

$
(310,224
)

$
(470,602
)

$
(961,905
)

$
(396,136
)PREFERRED DIVIDENDS


-



-



-



-NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS

$
(310,224
)

$
(470,602
)

$
(961,905
)

$
(396,136
)NET INCOME (LOSS) PER COMMON SHARE - BASIC

$
(0.88
)

$
(1.33
)

$
(2.74
)

$
(1.10
)NET INCOME (LOSS) PER COMMON SHARE - DILUTED

$
(0.88
)

$
(1.33
)

$
(2.74
)

$
(1.10
)DIVIDENDS PAID PER PREFERRED SHARE

$
-


$
-


$
-


$
-DIVIDENDS PAID PER COMMON SHARE

$
-


$
-


$
-


$
-





















Nine Months EndedSeptember 302010


2009CASH FLOWS FROM OPERATING ACTIVITIESNet loss

$
(961,905
)

$
(396,136
)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation


69,280



35,686Realized gain on sale of REO


(84,656
)


-Retirement of debt


-



(400,000
)Stock based compensation expense


6,950



4,507Provision for loan losses


12,710



54,794Change in allowance for doubtful accounts


(453,974
)


(101,527
)Impairment of real estate owned


1,032,645



200,000Realized loss on sale of marketable securities


-



137,644Change in accounts receivable


253,020



184,507Change in other assets


9,604



(7,105
)Change in in other liabilities


(141,743
)


4,141Net cash used in operating activities


(258,069
)


(283,489
)CASH FLOWS FROM INVESTING ACTIVITIESProceeds from marketable securities


-



74,894Proceeds from sale of real estate owned


4,011,176



76,411Capital improvements on REO


(12,015
)


-Principal collected on mortgage notes receivable


359,461



187,070Net cash provided by investing activities


4,358,622



338,375CASH FLOWS FROM FINANCING ACTIVITIESPayments of senior mortgage loans payable


(3,952,001
)


-Payments of Company loans payable


-



(1,605,184
)Purchase of treasury stock


(1,443
)


(63,080
)Net cash used in financing activities


(3,953,444
)


(1,668,264
)NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


147,109



(1,613,378
)CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD


227,944



1,974,687CASH AND CASH EQUIVALENTS, END OF PERIOD

$
375,053


$
361,309SUPPLEMENTAL CASH FLOW INFORMATION:Cash paid for interest and Senior mortgage expense

$
87,377


$
29,353Cash paid for taxes

$
1,782


$
13,238NON-CASH INVESTING AND FINANCING ACTIVITIESForeclosures, net of reserves

$
2,381,286


$
2,568,120












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. 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”). On December 29, 2006, the Former Manager was terminated and the Company became self-administered and self-advised.





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, 2009 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 presentation of results for the interim period. The results of operations for the three and nine months ended September 30, 2010, are not necessarily indicative of the results to be expected for the full year.





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. The most significant estimates are the allowance for loan losses and the valuation of real estate owned.





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.






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


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





Foreclosure accounting.The Company has adopted ASC 360-10-35-37 through 35 – 43 to account for real estate assets acquired by foreclosure (“Real Estate Owned” or “REO”).  The REO is recorded at the lesser of its fair value reduced by estimated disposal costs (brokerage, title and other dispositions costs) or actual costs.  Actual costs include the Company’s mortgage note receivable balance, accrued interest, the estimated senior mortgage obligation and unpaid interest at the time of foreclosure.





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.





The Company determines the fair values of its assets and 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, 2010 and 2009, no option awards were issued.





Reclassifications.  Certain 2009 amounts may have been reclassified to conform to the 2010 presentation. Such reclassifications had no effect on reported net income (loss) or income (loss) per share.





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.





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 (loss) 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 of which 90% 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.





Recently issued accounting pronouncements. In July 2010, the FASB issued ASU 2010-20, “Disclosures about the Credit Quality of Financing Receivables and the Allowance of Credit Losses.” This ASU requires significant new disclosures about the allowance for credit losses and the credit quality of financing receivables. The requirements are intended to enhance transparency regarding credit losses and the credit quality of loan and lease receivables by disclosing an evaluation of (i) the nature of credit risk inherent in the entity’s portfolio of financing receivables, (ii) how that risk is analyzed and assessed in arriving at the allowance for credit losses and (iii) the changes and reasons for those changes in the allowance for credit losses. Under this statement, allowance for credit losses and fair value are to be disclosed by portfolio segment, while credit quality information, impairment receivables and nonaccrual status are to be presented by class of financing receivable. Disclosure of the nature and extent, the financial impact and segment information of trouble debt restructurings will also be required. The disclosures are to be presented at the level of disaggregation that management uses when assessing and monitoring the portfolio’s risk and performance. ASU 2010-20 will be effective for the Company’s consolidated financial statements as of December 31, 2010, as it relates to disclosures required as of the end of a reporting period. Disclosures that relate to activity during a reporting period will be required for the Company’s consolidated financial statements that include periods beginning on or after January 1, 2011.






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


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, 2010, the gain and (loss) in accumulated other comprehensive (loss) was $(7) and $(8), 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, 2010 and December 31, 2009, the trading securities accounts balance were $0, and the available for sale securities account balance was $181 and $147, 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, 2010 and December 31, 2009, both the trading securities account and the available-for-sale securities account had no borrowings. The interest rate in the trading account is the current Federal Funds rate plus 1.50% and is payable monthly. The interest in the available-for-sale margin account is the current Prime Rate plus 4.00% and is payable monthly.





4.      Accounts receivable





Accounts receivable consist of accrued interest on mortgage notes receivable and other amounts due from borrowers. As of September 30, 2010 and December 31, 2009, the accounts receivable balance was $271,697 and $524,717, respectively. In September, a fully reserved account receivable and related reserve were written off. As of September 30, 2010 and December 31, 2009, Management believes that an allowance for doubtful accounts of $0 and $453,974, respectively is adequate protection against the collectability of the receivable, as well as the costs associated with possible legal action.





5.
Mortgage notes receivable




Reconciliation of the mortgage notes receivable balances follows:





Nine months

Sept 30, 2010


Twelve months

Dec. 31, 2009Balance, beginning of period

$
2,690,737


$
5,460,948Additions during period:Originations


---



---Deductions during period:Collections of principal


(27,377
)


(53,252
)Repayments


(332,084
)


(146,860
)Write-offs of uncollectible loans


---



---Foreclosures


(1,276,444
)


(2,570,099
)Balance, as reported in Consolidated Balance Sheet

$
1,054,832


$
2,690,737







6
 EASTERN LIGHT CAPITAL, INCORPORATED
 
 Notes to Condensed Consolidated Financial Statements
 (unaudited)


5.
Mortgage notes receivable




Mortgage notes receivable are stated at their outstanding principal balance.  Interest on the mortgages is due monthly and principal is usually due as a balloon payment at loan maturity. As of September 30, 2010, there were two (2) loans totaling $23,318 of principal and $0 of interest that were delinquent over 60 days. As of December 31, 2009, there were three (3) loans totaling $1,064,984 of principal and $5,016 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. As of September 30, 2010 and December 31, 2009, there were no loan modifications that affected the recognition of revenue or required the Company to recognize impairment of a mortgage note receivable.





As of September 30, 2010 and December 31, 2009, the Company had no impaired loans and one loan with a carrying value of $302,710 which was considered impaired, respectively. Management has reserved a loan loss allowance sufficient to absorb losses that may result from mortgage note receivable foreclosures.





6.
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 $20,000 and $310,000 allowance for loan losses are adequate to protect against potential losses inherent in mortgage notes receivables as of September 30, 2010 and December 31, 2009, respectively. Actual losses may differ from the estimate.




A reconciliation of the allowance for loan losses follows:




Nine months

Sept. 30, 2010


Twelve months

Dec. 31, 2009Provision for loan losses

$
12,710


$
164,794Write-offs of uncollectible loans (net)


(302,710
)


(574,794
)Total adjustments to allowance


(290,000
)


(410,000
)Balance, beginning of period


310,000



720,000Balance, as reported in Consolidated Balance Sheet

$
20,000


$
310,000








7.
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 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 2009, the Company foreclosed on four properties. As of December 31, 2009, the Company owned nine properties with a reported value of $6,714,174 and senior liens of $4,487,940. Six properties were held for sale with a reported value of $3,861,755 and senior mortgage liens of $2,489,563. Three properties were held for investment with a reported value of $2,852,419 and senior mortgage liens of $1,998,377. During the nine months ended September 30, 2010, the Company foreclosed on three properties, wrote off one property, and had five properties sell. The Company’s six properties are held for sale and have a reported value of $4,248,486 and senior liens of $2,112,947.













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





7.
Real estate owned (continued)





A reconciliation of the real estate owned follows:





Nine months

Sept. 30, 2010


Twelve months

Dec. 31, 2009Balance, beginning of period

$
6,714,174


$
5,086,781Add: Foreclosed mortgage notes, (net of reserve)


2,381,286



4,135,468Add: Investments


12,015



71,900Less: Write-downs of property (non-cash)


(1,032,645
)


(2,269,128
)Less: REO Sold


(3,926,520
)


---Less: Depreciation of real estate held for investment                        .


(69,280
)


(47,581
)Change in deferred carrying costs.


169,456



(263,266
)Balance, as reported in Consolidated Balance Sheet

$
4,248,486


$
6,714,174








8.
Senior Mortgage Debt





Senior mortgage debt is the estimated financing liability attached to a real estate asset acquired by the foreclosure of the Company’s junior financing. The senior mortgage debt’s balance and terms are often unavailable at the time of foreclosure.  Because the Company is not the legal borrower, the senior mortgage debt’s agents assert that this information can not be disclosed on account of the borrower’s privacy rights. Different jurisdictions often have different privacy regulations and disclosure of the legal borrower’s obligations is complicated by competing, if not conflicting jurisdictional claims of the note, property, borrower, servicing agent, senior debt owner, new property owner and federal regulations.





The Company must also proceed cautiously in disclosing its position as the new property owner to the senior mortgage debt’s owner or agents.  Many notes have acceleration clauses that may be activated by transfer, sale or foreclosure on the property. Although California law is generally written to prevent a senior mortgage debt from acceleration on account of foreclosure, every situation is different and the costs of defending the notes accelerated maturity could easily exceed the potential recovery from monetizing the foreclosed asset’s estimated residual equity. Due to the frequency of senior loan modifications and the frequency of misleading or inaccurate information provided by former owners or agents, the Company does not provide the individual terms or balances of its REO senior mortgage debt.




9.
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, 2010:





Sept. 30, 2010


Level 1


Level 2


Level 3Asset:Marketable securities – Available for sale

$
181


$
181



---



---Mortgage notes receivable (non-recurring)


---



---



---



---Real estate owned (non-recurring)

$
1,903,437



---



---


$
1,903,437Total

$
1,903,618


$
181


$
---


$
1,903,437





The following methods and assumptions were used to estimate the fair value of assets and liabilities:





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.







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


9.
Fair Value Measurements (continued)





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 reports the REO as nonrecurring Level 2, if during the reporting period the fair value of the collateral is reduced based upon on an observable market price or a current appraised value.  If during the reporting period there is no observable market price, the Company reports the REO as nonrecurring Level 3. 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.





10.
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.





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.








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





10.
Preferred, common and treasury stock (continued)





As of January 1, 2010, the Trust’s net Preferred Stock outstanding shares were 196,901. During the first nine months of 2010, no Preferred Stock shares were purchased. As of September30, 2010, the Trust’s net Preferred Stock outstanding shares were 196,901.





As of January 1, 2010, the Trust’s net Common Stock outstanding shares were 351,882. During the first nine months of 2010, 400 shares of Common Stock were purchased and no options were exercised. As of September 30, 2010, the Trust’s net Common Stock outstanding shares were 351,482.





11.
Related party transactions





On March 26, 2010, the Company’s Chairman and Chief Executive Officer provided the Company a $50,000 loan. The loan had a simple interest rate of 9.99% per annum, was pre-payable at any time, and had a term of 55 days. The loan was paid in full on May 4, 2010.








12.
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 nine months ended September 30, 2010 and 2009:





2010


2009Numerator:Net income (loss)

$
(961,905
)

$
(396,136
)Preferred dividends


-



-Net income (loss) available to common stockholders

$
(961,905
)

$
(396,136
)Denominator:

Basic weighted average shares


351,482



360,221Dilutive effect of options


-



-Diluted weighted average shares


351,482



360,221Basic earnings per common share

$
(2.74
)

$
(1.10
)Diluted earnings per common share

$
(2.74
)

$
(1.10
)







13.
Wages and Benefits







14.
Legal Proceedings





During January 2010, a former mortgage holder filed an appeal of a previously dismissed case. The former mortgage holder continues to allege that the Company made a fraudulent loan to him by cross collateralizing two separate properties. The cross collateralization was necessary to grant the borrower the desired loan, since there was insufficient equity in the primary property used as collateral for the loan. The Company believes the former mortgage holder’s action is without merit and is seeking a dismissal.





During May 2010 the Company was named as a defendant in a complaint alleging fraudulent transfer of mortgage loans and aiding and abetting fraud.  The Company believes that the plaintiff’s actions are without merit and will seek dismissal of all complaints and reimbursement for reasonable legal costs and fees.





During June 2010 the Company was named as a defendant in a complaint alleging damages for multiple violations associated with ELC foreclosure on a parcel adjacent to and encapsulating the plaintiff’s interest in a Deed of Trust.






10
 EASTERN LIGHT CAPITAL, INCORPORATED
 
 Notes to Condensed Consolidated Financial Statements
 (unaudited)


14.
Legal Proceedings (continued)


The Company believes that the plaintiff’s actions are without merit and will seek dismissal of all complaints and reimbursement for reasonable legal costs and fees.









15.
Subsequent Events























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 Eastern Light Capital, Incorporated (the “Trust”) and WrenCap Funding Corporation (“WCFC”). Management’s discussion and analysis of the results of operations for the three and nine months ended September 30, 2010 and 2009 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”) and initiate internal management.





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 the Trust’s taxable subsidiary’s name by April 30, 2007. On April 20, 2007, the subsidiary changed its name to WrenCap Funding Corporation. On July 2, 2008, the Trust changed its name to Eastern Light Capital, Incorporated.





The current real estate market is characterized by uncertainty in the availability of credit and the expected trend in residential property valuations.  Due to these uncertainties the Company has focused on debt reduction in lieu of new investments in residential mortgages.  The current conditions are expected to remain in place for an undetermined period.  On occasion the Company may make investments in marketable securities, REIT permissible assets, and other income producing investments.





The recent financial crisis has affected the Company’s business by diminishing the credit quality of existing borrowers, lowering residential property values and increasing borrower delinquencies.  These factors have led to increased foreclosures and real estate owned (“REO”) balances.





Mortgage investments are reported as mortgage notes receivable and held until prepayment, maturity, sale, or foreclosure. As of September 30, 2010 the mortgage portfolio totaled $1,054,832 consisting of 8 loans of which $23,318 or 2% of the portfolio loan value were delinquent. As of September 30, 2010, the Trust held six properties totaling $4,248,486 as REO. A residential equity value of $2,135,539 is attributable to four REO’s. Residual equity value is the recorded asset value in excess of the REO’s senior mortgage debt. Two REO’s are recorded at their senior mortgage debt balance of $1,427,849, have no residual equity value and are not expected to produce a gain or a loss upon disposition.










As of December 31, 2009, the mortgage portfolio totaled $2,690,737 consisting of 13 loans, of which 3 loans totaling 1,064,984 or 39% of the portfolio loan value were delinquent. As of December 31, 2009, the Trust held nine properties totaling 6,714,174 as REO.





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.  Since 2006, the Trust has 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. Although the Board of Directors is inclined to retain future taxable income until the cumulative NOL is fully utilized, this issue will require additional review and analysis.





During December 2010 the Trust plans to hold a special shareholder meeting to vote upon the conversion of Series A Preferred Stock into Common Stock. The purpose of the Preferred Stock to Common Stock conversion is to simplify the Company’s capital structure. The Company does not believe that it can maintain consistent profitability as a publicly listed entity without additional equity capital. A simpler capital structure may allow the Company to raise additional equity capital. Additional information is provided in the Preliminary Schedule 14A filed with the Securities and Exchange Commission (“SEC”). The Company is working to finalize a Definitive Schedule 14A for the special shareholder meeting.





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 2009 Form 10-K as filed with the SEC on April 14, 2010.  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 to the critical accounting policies as disclosed in 2009 Form 10-K.





Operating Strategy.





Mortgage investment loans are reported as mortgage notes receivable and are held until prepayment, maturity, sale, 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. The Company seeks to maximize the value of its loan portfolio through active asset management.





The Company is reviewing its current investment policies to include other REIT permissible assets, instead of focusing on residential mortgage loans. The Company may also consider relinquishing its REIT status to enhance shareholder value.





Loan Origination. During 2009 and the nine months ended September 30, 2010, the Company did not make or acquire any new loans. Prospectively, loans may be internally originated or acquired from unaffiliated third parties.





Asset Management. Asset management is mortgage loan servicing and 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, 2010, the Company’s loan portfolio included 8 loans totaling $1,054,832 of which two loans totaling $23,318 representing 2% 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 $20,000, if it is necessary to foreclose upon the mortgage loans.





As of December 31, 2009, the Company’s loan portfolio included 13 loans totaling $2,690,737 of which 3 loans totaling $1,064,984 representing 39% of the loan portfolio were delinquent over two payments.  In assessing the collectibility of these delinquent mortgage loans, management had established a loan loss reserve of $310,000, if it is necessary to foreclose upon the mortgage loans.





The Company may issue loan commitments on a conditional basis and will fund such loans upon removal of all conditions.  The Trust did not have any commitments to fund loans as of September 30, 2010 and December 31, 2009.





As of September 30, 2010, the following table summarizes the Company’s outstanding repayment obligations:


Maximum Other

Commercial Commitments (a)

As of September 30, 2010
Total

Amounts

Committed
Amount of Commitment Expiration Per PeriodLess than

1 year
1 - 3 years
4 - 5

years
After 5

yearsMargin Loan
-
-
-
-
-Lease Commitment
$77,813
$71,192
$6,621
-
-Standby Repurchase Obligations
-
-
-
-
-Total Commercial Commitments
$77,813
$71,192
$6,621
-
-


(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, 2010 and 2009.  Revenues for the third quarter decreased to $45,318 as compared to $114,385 for the same period in the prior year. The decrease in revenue was due to a decrease in interest income of $32,482 and a decrease in rental income of $26,300. The decrease in interest income was the result of a smaller loan portfolio. The decrease in rental income was the result of increased vacancies to facilitate REO sales. During the three months ended September 30, 2010 one REO sold. During the three months ended September 30, 2009 no REO sold.





Expenses for the third quarter decreased $190,635 to $235,116 as compared to $425,751 for the same period in the prior year. The decrease in expenses primarily resulted from a decrease of $166,936 in REO expenses. Wages and salaries decreased $11,743 from $106,865 to $95,122 in the current period due to fewer employees and reduced bonuses.





Nine months ended September 30, 2010 and 2009.  Revenues for the first nine months decreased $190,486 to $130,857 as compared to $321,343 for the same period in the prior year. The decrease in revenue is due to the decrease in interest income of $94,217 due to a smaller loan portfolio and a lower weighted average interest rate. The decrease in rental income of $72,331 from $104,281 to $31,950 is due to increased vacancies to facilitate REO sales. During the nine months ended September 30, 2010, six REOs sold. During the nine months ended September 30, 2009, no REOs sold.





Expenses for the nine months ended September 30, 2010 decreased $118,140 to $963,583 compared to $1,081,723 for the same period in the prior year. During the first nine months of 2010, there was an increase in REO impairment costs of $257,645. Approximately $250,000 of the REO impairment expenses is attributable to the estimated decline in the fair market value of a luxury REO.  The rest of the 2010 nine month expenses declined resulting in a net decrease. Expenses of real estate owned declined $160,635 due to reduced maintenance, interest expenses declined $24,169 due to the repayment of all Company borrowings in 2009 (the Company has senior mortgage debt from foreclosures that is being served), provisions for loan losses declined $42,084 from due to generally more stable market conditions in non-luxury residential home prices,  wages and salaries declined $44,411 due to fewer employees and reduced bonuses, and general and administrative expenses declined $45,516 due to normal expenditure fluctuation.













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 2010 and the sale of investment mortgages will be sufficient to meet the liquidity needs of the Company’s business for the next twelve months.





Nine months ended September 30, 2010 and 2009. As of January 1, 2010 and 2009, the Trust had $227,944 and $1,974,687 of cash and cash equivalents, respectively. During the nine month period ended September 30, 2010, cash and cash equivalents increased by $147,109.  During the nine month period ended September 30, 2009, cash and cash equivalents decreased by $1,613,378. After taking into effect the various transactions discussed below, cash and cash equivalents at September 30, 2010 and 2009 were $375,053 and $361,309, respectively.





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





Net cash (used in) operating activities during the nine months ended September 30, 2010 and 2009 was ($258,069) and ($283489), respectively. During the first nine months of 2010, net cash used from operating activities was primarily the result of the ($961,905) net loss for the period, but offset by $1,032,645 of non cash REO impairment expenses and a 253,020 decline in accounts receivable, while a decrease in allowance for doubtful accounts used $453,974. During the first nine months of 2009, the net cash provided by operating activities came from a number of sources.  Net income used ($396,136), provision for loan losses provided $54,794, realized marketable securities transactions provided $137,883, reduced accounts receivable provided $184,268 and the primary use of cash was a ($400,000) non cash gain from the retirement of Company debt at a discount.




Net cash provided from investing activities for the nine months ended September 30, 2010 and 2009 was $4,358,622 and $338,375, respectively. During the first nine months of 2010, the proceeds from REO transactions provided $4,011,176 and proceeds from mortgage notes receivable principal payments provided $359,461. During the first nine months of 2009, investments in marketable securities provided $74,894, REO proceeds provided $76,411, while principal collected from mortgage notes receivable generated $187,070.





Net cash (used in) financing activities during the nine months ended September 30, 2010 and 2009 was ($3,953,444) and ($1,668,264) respectively.  During the first nine months of 2010, the senior mortgage debt payable used ($3,952,001). During the first nine months of 2009, the repayment of Company bank loans used ($1,605,184).




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





During January 2010, a former mortgage holder filed an appeal of a previously dismissed case. The former mortgage holder continues to allege that the Company made a fraudulent loan to him by cross collateralizing two separate properties. The cross collateralization was necessary to grant the borrower the desired loan, since there was insufficient equity in the primary property used as collateral for the loan. The Company believes the former mortgage holder’s action is without merit and is seeking a dismissal of all complaints and reimbursement for reasonable costs and fees.





During May 2010 the Company was named as a defendant in a complaint alleging fraudulent transfer of mortgage loans and aiding and abetting fraud.  The Company believes that the plaintiff’s actions are without merit and will seek dismal of all complaints and reimbursement for reasonable legal costs and fees.





During June 2010 the Company was named as a defendant in a complaint alleging damages for multiple violations associated with ELC foreclosure on a parcel adjacent to and encapsulating the plaintiff’s interest in a Deed of Trust.  The Company believes that the plaintiff’s actions are without merit and will seek dismal of all complaints and reimbursement for reasonable legal costs and fees.





During the third quarter of 2010, a former officer of the Company alleged wrongful termination. The Board of Directors has reviewed the veracity of these allegations and determined them to be unfounded.








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





During the second quarter of 2010 the Company received a Securities and Exchange Commission (“SEC”) comment letter after a review of its Form 10-K for the year end December 31, 2009.  The Company provided an initial response.  The SEC had additional comments on Form 10-Q for the three months ended March 31, 2010 and the Company responded. The Company is awaiting the SEC’s response.








ITEM 2       CHANGES IN SECURITIES





No common shares were purchased for treasury stock during the three month period ended September 30, 2010. No preferred shares were purchased for treasury stock during the three month period ended September 30, 2010.

















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:


·
July 1, 2010 due to the press release announcing results of the annual shareholder meeting held on June 30, 2010.




·
August 2, 2010 due to the Company receiving a letter from the NYSE Amex Accepting Eastern Light's Plan to Meet Continued Listing Standards on July 30, 2010.




·
August 25, 2010 due to the press release of August 24, 2010 announcing financial results for the second quarter of 2010.












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





Date:  November 29, 2010
/s/ Richard J. WrensenRichard J. WrensenPresident, Chief Executive Officer and Chief Financial Officer




/s/ Andrea BarneyAndrea BarneyPrincipal Accounting Officer and Controller