UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                           --------------------------
                                    FORM 10-K
                           --------------------------

(Mark One)
    [X]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2008

                                       OR

    [ ]         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                           (I.R.S. Employer
  of incorporation or organization)                     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 registered
----------------------------------   -------------------------------------------
   Common Stock $0.01 par value                American Stock Exchange

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

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[ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes [X] No[ ]

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: [ ]        Accelerated filer: [ ]
       Non-accelerated filer: [ ]          Smaller reporting company: [X]

As of June 30, 2008, the aggregate market value of the registrant's outstanding
stock held by non-affiliates of the registrant was approximately $1,621,066. As
of June 30, 2008, approximately 380,532 shares of the registrant's common stock
are outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Proxy Statement for the 2009 Annual Meeting of
Shareholders to be held on June 5, 2009 are incorporated by reference into Part
III of this Form 10-K.

<PAGE>

                                TABLE OF CONTENTS

PART I ...................................................................    1

FORWARD LOOKING STATEMENTS ...............................................    1

ITEM 1. BUSINESS .........................................................    1
   General ...............................................................    1

MORTGAGE INVESTMENT BUSINESS .............................................    1
   General ...............................................................    1
   Mortgage Loan Portfolio ...............................................    1
   Financing .............................................................    2

MORTGAGE BANKING BUSINESS ................................................    2
   General ...............................................................    2

HEDGING ..................................................................    2

SERVICING ................................................................    3
   Servicing Portfolio ...................................................    3
   Geographical Distribution .............................................    3
   Interest ..............................................................    3
   Maturity ..............................................................    3
   Delinquencies .........................................................    4

REGULATION ...............................................................    4

STRATEGY AND COMPETITION .................................................    4

EMPLOYEES ................................................................    4

ITEM 1A. RISK FACTORS ....................................................    5

ITEM 1B. UNRESOLVED STAFF COMMENTS .......................................    5

ITEM 2. PROPERTIES .......................................................    5

ITEM 3. LEGAL PROCEEDINGS ................................................    5

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ..............    5

PART II ..................................................................    5

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ........................    5

ITEM 6. SELECTED FINANCIAL DATA ..........................................    6

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ....................................................    7

OVERVIEW .................................................................    7

RECENT ACCOUNTING PRONOUNCEMENTS .........................................    7

CRITICAL ACCOUNTING POLICIES .............................................    7
   Operating Strategy ....................................................    8
   Loan Origination ......................................................    9
   Asset Management ......................................................    9
   Contingencies and Commitments .........................................    9

RESULTS OF OPERATIONS ....................................................    9

YEAR ENDED DECEMBER 31, 2008 COMPARED TO YEAR ENDED DECEMBER 31, 2007 ....    9

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES ..........................................   10

LIQUIDITY AND CAPITAL RESOURCES FOR THE YEAR ENDED DECEMBER 31, 2008 .....   10

LIQUIDITY AND CAPITAL RESOURCES FOR THE YEAR ENDED DECEMBER 31, 2007 .....   10

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ......   11
   Market Risk ...........................................................   11
   Asset and Liability Management.........................................   12

ITEM 8. FINANCIAL STATEMENTS .............................................   12

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE .....................................................   12

ITEM 9A(T). CONTROLS AND PROCEDURES ......................................   12
   Evaluation of Disclosure Controls and Procedures ......................   12
   Management's Report on Internal Control Over Financial Reporting ......   12

ITEM 9B. OTHER INFORMATION ...............................................   13

PART III .................................................................   13

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ..........   13

DIRECTORS ................................................................   13

EXECUTIVE OFFICERS .......................................................   13

ITEM 11. EXECUTIVE COMPENSATION ..........................................   14

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS ..........................................   14

ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE .............................................................   14

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES ..........................   14

PART IV ..................................................................   14

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES ......................   14
   (a)   Financial Statements ............................................   14
   (b)   Financial Statement Schedules ...................................   14
   (d)   Reports on Form 8-K .............................................   15
   (e)   Miscellaneous Exhibits ..........................................   15

SIGNATURES ...............................................................   16

<PAGE>

--------------------------------------------------------------------------------
                                     PART I
--------------------------------------------------------------------------------

FORWARD LOOKING STATEMENTS

      Certain statements made in this Annual Report on Form 10-K 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 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 Annual
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.

ITEM 1. BUSINESS

General
-------

      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. (the "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 mortgage finance company organized as a Real
Estate Investment Trust ("REIT"). Historically the Trust has emphasized the
Mortgage Investments Business and CAFC has emphasized the Mortgage Banking
Business. On March 31, 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. By 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 traded exchange listed
marketable securities.

MORTGAGE INVESTMENT BUSINESS

General
-------

      The Trust's Mortgage Investment Business, principally acquired
non-conforming residential mortgage loans, which at the time of investment had a
maximum 75% combined loan-to-value ratio. Both first and second mortgage loans
were acquired. Income is primarily earned from mortgage interest and mortgage
fees. These investments are financed with shareholders' equity and institutional
borrowings.

Mortgage Loan Portfolio
-----------------------

      As a matter of investment policy, all loans originated or purchased for
the Trust's portfolio had a combined loan-to-value, at the time of acquisition,
of not more than 75% of the collateral's value. Mortgage loans that defer part
of the interest payment (negative amortization) are not acquired if the maximum
deferred payment balance, when added to the original mortgage balance, exceeds
75% of the collateral's value at the time of origination. The collateral's value
is verified by independent appraisal. During 2006, CAFC transferred 12 loans to
the Trust with a total nominal value of $6,108,330 that did not satisfy the
Trust's standard underwriting criteria.

                                        1

<PAGE>

      As of December 31, 2008, the Mortgage Investment Business loan portfolio
totaled $5,460,948 with an average loan size of $287,418, an average weighted
yield of 10.00%, a weighted average adjusted maturity of 19 months and a
weighted average combined loan-to-value ratio of 80%. First deeds of trust
comprised 42% of the portfolio's dollar value and second deeds of trust
comprised 58%. As of December 31, 2007, the Mortgage Investment Business loan
portfolio totaled $11,144,365 with an average loan size of $359,496, an average
weighted yield of 11.06%, a weighted average adjusted maturity of 23 months and
a weighted average combined loan-to-value ratio of 70%. First deeds of trust
comprised 40% of the portfolio's dollar value and second deeds of trust
comprised 60%. The mortgage loans are concentrated in California.

Financing
---------

      The Mortgage Investment Business is financed by the shareholders' equity
and institutional borrowings. The Company's Bylaws restrict the encumbrance of
the Company's assets to four (4) times its total shareholders' equity after
excluding lines of credit and other financing obtained by WCFC. Additional lines
of credit consistent with the financing objectives described herein may be
sought.

MORTGAGE BANKING BUSINESS

General
-------

      The Mortgage Banking Business consisted of the origination and the
purchase and sale of conforming and non-conforming mortgage loans secured by
first liens and second liens on single (one-to-four) family residential
properties. The Mortgage Banking Business provided a conduit between the
originators of such mortgage loans and permanent investors in such loans. On
March 31, 2006, the Company's Board of Directors suspended its Mortgage Banking
Business. Until December 29, 2006, CAAI contracted with CAFC to provide
management, mortgage origination, loan processing, underwriting, and secondary
sales services.

      CAFC purchased or originated each loan from mortgage bankers, mortgage
brokers or existing borrower relationships. The Mortgage Banking Business
assumed the potential risk of delinquency and/or credit losses as well as
interest rate risk in the event of a delay in the sale of such loans. Such
on-going risks, upon the sale of a loan will pass to the purchaser without
recourse to CAFC. CAFC's origination risk was minimized by the relatively short
period that such loans were held prior to sale. Loans not purchased by for the
Mortgage Investment Business were sold in the secondary market through whole
loan sales or to an affiliate of the Former Manager. However, during 2006,
twelve (12) loans with a total nominal value of $6,108,330 were transferred to
the Trust that did not satisfy the Trust's standard underwriting criteria or
investment objectives. These loans had a lower yield and/or a cumulative
loan-to-value ratio greater than seventy-five percent.

      The Mortgage Banking Business acquired all of the servicing rights on
loans it originated or purchased and such servicing rights were relinquished
when loans were sold into the secondary market. The Mortgage Banking Business
generally had no on-going risk of loss after a whole loan sale other than
liability with respect to normal warranties and representations given in such
sales, fraud in the origination process or early default on such mortgage loan.

      Although the Company has suspended its mortgage banking operations, the
licenses to originate residential, multi-family and commercial mortgage loans in
California remains active.

HEDGING

      Most of the Trust's mortgage investments have relatively short maturities.
Therefore, the Trust has not implemented hedging strategies to protect against
interest rate risks. However, hedging strategies and transactions may in the
future be implemented by the Company based on various factors, including market
condition, the expected volume of mortgage loan originations and purchases for
investment and the mortgage volume and period of time required to accumulate and
to sell mortgage loans.

      Hedging is complex and no hedging strategy or combination of hedging
strategies can completely insulate the Company from interest rate risks. In
addition, hedging involves transaction and other costs, and such costs could
increase as the period covered by the hedging protection increases or in a
period of rising and fluctuating interest rates. Therefore, the Company may
incur significant costs, remain ineffectively hedged from interest rate risks,
and obtain reduced return on equity than otherwise achievable without hedging.

                                        2

<PAGE>

SERVICING

      The Company acquires mortgage loans with mortgage servicing rights. Any
mortgage loan sold by the Company is sold with the loan's mortgage servicing
rights released. The Company does not separately acquire or maintain servicing
rights. Loan servicing includes collecting and remitting loan payments, making
required advances, accounting for principal and interest, holding escrow or
impound funds for payment of improvement holdbacks, interest, taxes and
insurance, if applicable, making required inspections of the mortgaged property,
contacting delinquent borrowers and supervising foreclosures and property
dispositions in the event of unremedied defaults. The Company uses an
unaffiliated third party to service its loan portfolio.

Servicing Portfolio
-------------------

      The following tables set forth certain information regarding the Trust's
Mortgage Investment Business servicing portfolio of loans for the years ended
December 31.

<TABLE>
<CAPTION>
                                                               2008           2007
                                                            -----------   -----------
<S>                                                         <C>           <C>
Beginning servicing portfolio                               $11,144,365   $17,121,939
Loans added to the servicing portfolio                               --            --
Loans sold, servicing released and principal paydowns (1)     5,683,417     5,977,574
                                                            -----------   -----------
Ending servicing portfolio                                  $ 5,460,948   $11,144,365
                                                            ===========   ===========
Number of loans serviced                                             19            31
Average loan size                                           $   287,418   $   359,496
</TABLE>

      (1)   Includes normal loan payoffs, prepayments, principal amortization
            and foreclosures.

Geographical Distribution
-------------------------

      The following table sets forth the geographic distribution of the Trust's
Mortgage Investment Business servicing portfolio for the years ended December
31.

                                2008                      2007
                       ----------------------   ------------------------
                        Number of    $-% of       Number of     $-% of
      State               loans     Portfolio       loans      Portfolio
      --------         ----------   ---------   ------------   ---------
      CA                       16          90%            27          95%
      Other                     3          10%             4           5%
      --------         ----------   ---------   ------------   ---------
      Totals:                  19         100%            31         100%
                       ==========   =========   ============   =========

Interest
--------

      The weighted average interest for the Trust's Mortgage Investment Business
portfolio of loans at December 31, 2008 was 10.00% and at December 31, 2007 was
11.06%.

Maturity
--------

      The weighted average adjusted maturity of the Trust's Mortgage Investment
Business portfolio of loans at December 31, 2008 was 19 months and at December
31, 2007 was 23 months. The following table shows the Trust's maximum scheduled
loan maturities for the years ended December 31.

                                2008                      2007
                       ----------------------   ------------------------
                        Amount of     $-% of     Amount of       $-% of
      Terms of Loans      loans     Portfolio      loans       Portfolio
      --------------   ----------   ---------   ------------   ---------
      0-12 months       3,004,856          55%     6,642,963          60%
      13-24 months        856,539          16%       464,727           4%
      25-36 months        347,813           6%     1,326,546          12%
      37-48 months             --           0%       415,806           4%
      Over 48           1,251,740          23%     2,294,323          21%
      --------------   ----------   ---------   ------------   ---------
      Totals:          $5,460,948         100%  $ 11,144,365         100%
                       ==========   =========   ============   =========

                                        3

<PAGE>

Delinquencies
-------------

      The following table shows the Trust's Mortgage Investment Business
delinquency statistics for its servicing portfolio for the years ended December
31.

                                  2008                       2007
                        ------------------------   -----------------------
     Loans Delinquent   Number of        $-% of    Number of       $-% of
     For:                 loans        Portfolio     loans       Portfolio
     ----------------   ---------      ---------   ---------     ---------
     31-60 days                 2              5%          6            29%
     61-90 days                 2             14%          2             6%
     91 days +                  6(1)          47%          8(2)         31%
                        ---------      ---------   ---------     ---------
     Totals:                   10             66%         16            66%
                        =========      =========   =========     =========

      (1)   Two of the 91 days+ delinquent loans were was satisfied or brought
            current by February 28, 2008.

      (2)   One of the 91 days+ delinquent loans were was satisfied or brought
            current by February 27, 2009.

REGULATION

      The Company conducts its business so as not to become regulated as an
investment trust under the Investment Company Act. The Company Trust Act exempts
entities that are "primarily engaged in the business of purchasing or otherwise
acquiring mortgages and other liens on and interests in real estate"
("Qualifying Interest"). Under the current interpretation of the staff of the
Commission, in order to qualify for this exemption, the Trust must maintain at
least 55% of its assets directly in mortgage loans, and certain other Qualifying
Interests in real estate. If the Trust fails to qualify for exemption from
registration as an investment trust, its ability to use leverage in its Mortgage
Investment Business would be substantially reduced, and it would be unable to
conduct its business as described herein. The Company has not requested a legal
opinion from counsel indicating that, it will be exempt from the Investment
Trust Act.

      Because the Company's business is highly regulated, the laws, rules and
regulations applicable to the Company are subject to regular modifications and
change. There are currently proposed various laws, rules and regulations which,
if adopted, could impact the Company. There can be no assurance that these
proposed laws, rules and regulations, or other such laws, rules or regulations,
will not be adopted in the future which could make compliance much more
difficult or expensive, restrict the Company's ability to originate, broker,
purchase or sell loans, further limit or restrict the amount of commissions,
interest and other charges earned on loans originated, brokered, purchased or
sold by the Company, or otherwise affect the business or prospects of the
Company. Also, members of Congress and government officials have from time to
time suggested the elimination of the mortgage interest deduction for federal
income tax purposes, either entirely or in part, based on borrower income, type
of loan or principal amount. Because many of the Company's loans are made to
borrowers for the purpose of consolidating consumer debt or financing other
consumer needs, the competitive advantages of tax deductible interest, when
compared with alternative sources of financing, could be eliminated or seriously
impaired by such government action. Accordingly, the reduction or elimination of
these tax benefits could have a material adverse effect on the demand for loans
of the kind offered by the Company.

      Additionally, there are various state and local laws and regulations
affecting the Company. Mortgage operations also may be subject to applicable
state usury statutes. The Company believes that it is in compliance with all
rules and regulations to which it is subject.

STRATEGY AND COMPETITION

      The Company's management is reassessing its ability to successfully
compete in the high yielding Mortgage Investment Business. The Mortgage
Investment Business faces competition from other financial institutions,
including but not limited to banks, specialty finance companies and private
mortgage investors. Many of the institutions with which the Company competes
have significantly greater financial resources. The appropriate diversification
of the Company's assets into other real estate investment trust permissible
assets will be considered.

EMPLOYEES

      At December 31, 2008, the Company has three employees. At December 31,
2007, the Company had four employees. The Company's employees are not subject to
a collective bargaining agreement and the relationship with its employees is
good.

                                        4

<PAGE>

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

      Not applicable.

ITEM 2. PROPERTIES

      The Company's principal office is located at 100 Pine Street, Suite 560,
San Francisco, California, 94111 where it leases approximately 1,100 square feet
under a lease that expires in July 2011. The existing facilities are adequate
for the Company's current needs.

ITEM 3. LEGAL PROCEEDINGS

      Legal Proceedings are described in Note 18 to the Financial Statements
which is included in the Form 10-K under the caption "Contingencies".

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      None

--------------------------------------------------------------------------------
                                     PART II
--------------------------------------------------------------------------------

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

The quarterly high and low sale prices of the Common Stock as quoted on the
American Stock Exchange for the two most recent fiscal years and the first two
months of the current year follows:

   --------------------------------------------------------------------------
                                                                 Dividend per
     Year         Quarter          High           Low            Common Share
   --------------------------------------------------------------------------
                   1st             10.50          8.03               0.00
              ---------------------------------------------------------------
                   2nd              9.84          7.65               0.00
     2007     ---------------------------------------------------------------
                   3rd              7.95          4.90               0.00
              ---------------------------------------------------------------
                   4th              6.60          4.05               0.00
   --------------------------------------------------------------------------
                   1st              4.04          2.56               0.00
              ---------------------------------------------------------------
                   2nd              4.56          3.60               0.00
     2008     ---------------------------------------------------------------
                   3rd              4.95          4.13               0.00
              ---------------------------------------------------------------
                   4th              6.18          4.08               0.00
   --------------------------------------------------------------------------
    2009      Jan.1 - Feb 27        4.65          4.12               0.00
   --------------------------------------------------------------------------

      On April 14, 2008, there were approximately 70 holders of record
(including holders who are nominees for an undetermined number of beneficial
owners) of the Common Stock and approximately 135 holders of record (including
holders who are nominees for an undetermined number of beneficial owners) of the
Preferred Stock, which is not publicly traded. The Company believes that its
Preferred and Common Stock is beneficially held by in excess of 500
shareholders.

      To maintain its qualification as a REIT, annual distributions to
stockholders of at least 90% of its taxable income (which may not necessarily
equal net income as calculated in accordance with GAAP), determined after the
application of any net operating loss carry forward, without regard to the
deduction for dividends paid and excluding any net capital gains or loan loss
reserves, are required. The Board of Directors meets to determine Common and
Preferred shared dividend distributions. Any taxable income remaining after the
distribution of the dividends will be distributed annually on or prior to the
date of the first regular Common dividends payment date of the following taxable
year. The dividend policy is subject to revision at the discretion of the Board
of Directors. Any distributions in excess of those required to maintain REIT
status will be made at the discretion of the Board of Directors and will depend
on the financial condition of the Company and such other factors as the Board of
Directors deems relevant.

                                        5

<PAGE>

      The Board of Directors has not established a minimum distribution level
for the Common Stock. During 2008 and 2007, no dividends per share on Preferred
and Common Stock were declared and paid. Distributions to stockholders are
generally taxable as ordinary income, although a portion of such distributions
may be designated as capital gain or may constitute a tax-free return of
capital. During 2005, 2006 and 2007, the Company incurred taxable losses, also
known as Net Operating Losses ("NOL"). NOL's may allow the Company to retain
future taxable income equal to the cumulative amount of its NOL balance. The
Internal Revenue Service waives mandatory dividend payments until prior year's
allowable NOLs are recovered. As of December 31, 2007, the Company had
cumulative federal NOLs of approximately $2,219,652. As of December 31, 2008,
the Company's cumulative NOL is undetermined, but is expected to increase.

      Holders of the Preferred Shares 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.
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 not cumulative.

      After declaring dividends for a given year to the Preferred Shares in the
amount of the dividend preference, no further distributions 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 Distributions associated with a payment date that is
declared after the Directors have declared Distributions on Common Shares in the
amount of the additional dividend generally will be allocated such that the
amount of dividends per share to the Preferred Shares and Common Shares for the
subject year is equal. The Preferred Shares additional dividend is not
cumulative.

ITEM 6. SELECTED FINANCIAL DATA

The following table presents selected historical financial data derived from the
audited financial statements of the Company.

      The historical financial information is not necessarily indicative of
future operations and should not be so construed. The selected financial data
should be read in conjunction with "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS."

<TABLE>
<CAPTION>
                                                            Year Ended December 31
                                    ----------------------------------------------------------------------
Financial Summary                      2008           2007           2006           2005          2004
                                    -----------   ------------   ------------   -----------   ------------
<S>                                 <C>           <C>            <C>            <C>           <C>
Operations:
-----------
Revenue                             $   656,578   $  1,114,958   $  2,478,609   $ 3,797,885   $  3,903,488
Net income (loss)                      (619,718)    (2,939,689)    (1,631,428)     (307,308)       669,871

Per Share Data:
---------------
Weighted average basic earnings    ($      1.64) ($       7.73) ($       4.28) ($      1.13)  $       0.80
Weighted average diluted earnings  ($      1.64) ($       7.73) ($       4.28) ($      1.13)  $       0.69

Consolidated Balance Sheet Data:
--------------------------------
Mortgage notes receivable           $ 5,460,948   $ 11,144,365   $ 17,121,939   $26,318,616   $ 19,053,474
Total assets                         12,371,206     12,169,179     18,204,100    30,956,866     25,769,248
Total liabilities                     4,828,663      3,955,164      7,049,874    18,023,873     11,694,078
Stockholders' equity                  7,542,543      8,214,015     11,154,226    12,932,993     14,075,170
Common share equity                   2,259,856      2,931,328      5,871,539     7,522,516      8,490,853
Common shares                           366,532        380,532        380,532       390,032        442,325
Common share book value             $      6.17   $       7.70   $      15.43   $     19.29   $      19.20
</TABLE>

                                        6

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

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, its common shares have been listed on the American Stock Exchange.

      During the first quarter of 2006, the Trust announced its intent to
suspend mortgage banking loan originations and to monetize its mortgage banking
loan portfolio. By year end 2006, mortgage banking loans (mortgages originally
originated for sale into the secondary market) were transferred to the Trust.
Prior to December 29, 2006, the Company was externally advised by Capital
Alliance Advisors, Inc. (the "Former Manager", "CAAI"). On December 29, 2006,
the Former Manager was terminated and the Company became self-administered and
self-advised.

      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 is reviewing its current investment policies to
include other REIT permissible assets.

      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.

      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"). 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. Since May 1, 2007, WCFC has
traded exchange listed marketable securities.

      Mortgage investment loans are reported as mortgage notes receivable and
held until prepayment, maturity or foreclosure. As of December 31, 2008, the
Mortgage Investment Business portfolio totaled $5,460,948, consisting of 19
loans, of which 8 loans totaling $3,353,673 or 61% of the portfolio loan value
were delinquent over 60 days. As of February 27, 2009, two of the delinquent
loans were brought current, one loan was modified, one loan was foreclosed upon
by the senior lien holder, one loan became real owned and three loans totaling
$1,624,933 or 30% of the December 31, 2008 portfolio balance remained
delinquent. As of December 31, 2008, the Trust held five properties as real
estate for sale or investment.

      As of December 31, 2007, the Mortgage Investment Business portfolio
totaled $11,144,365, consisting of 31 loans, of which 10 loans totaling
$4,182,117 or 37% of the portfolio loan value were delinquent over 60 days. As
of February 28, 2008, one of the delinquent loans was brought current or paid
off and seven loans totaling $3,882,188 or 35% of the December 31, 2007
portfolio balance remained delinquent. As of December 31, 2007, the Trust held
two properties as real estate for sale.

RECENT ACCOUNTING PRONOUNCEMENTS

      Please refer to Financial Statement Footnote 2 for more information.

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
financial statements. 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.

                                        7

<PAGE>

      The following are critical accounting policies that require the most
significant estimates and assumptions that are particularly susceptible to a
significant change in the preparation of the financial statements and are not
presented in their relative order of importance.

Revenue recognition. Interest income accrues as it is earned. Loans are placed
on a nonaccrual status when any portion of the principal or interest is past due
by four scheduled payments or earlier when concern exists as to the ultimate
collectibility of principal or interest. Nonaccrual status loans are returned to
an accrual status when principal and interest become current and are anticipated
to be fully collectible.

Allowance for Loan Losses. A provision for loan losses is based on management's
evaluation of an amount that is adequate to absorb losses inherent in the
existing loan portfolio. The evaluation, which includes a review of all loans on
which full collection may not be reasonably assumed, considers among other
matters, general economic conditions, the fair market value or the estimated net
realizable value of the underlying collateral, past loan loss experience, trends
in loan delinquency and other factors that warrant recognition in providing for
an adequate loan loss allowance.

Allowance for Doubtful Accounts. An allowance for accounts receivable claims is
based on management's evaluation of the likelihood of collection. The evaluation
is based on the payee's ability and willingness to pay the claim in full as well
as the costs associated with possible legal action.

Real estate owned. Real estate owned represents property acquired in foreclosure
of mortgage notes receivable. The real estate is carried at the lower of the
value of the mortgage note receivable less selling costs on the real estate or
fair market value. Certain estimates and assumptions are required in determining
the cost to sell or in estimating the fair market value of the real estate.

Stock option. Stock options granted prior to December 15, 2005 were issued with
exercise prices equal to the market price of the Trust's common stock on the
dates of grant. Because the exercise price is fixed at or above market price and
other key terms are fixed, use of the intrinsic-value method was utilized and
the Trust did not recognize an expense for these options. If the terms of these
options were changed, variable accounting might need to be used, and the Trust
might then need to begin recognizing compensation expense for the options.
Options granted after December 15, 2005 were issued with exercise prices of 110%
of the market price of the Trust's common stock on the dates of grant. These
options are subject to a mandatory expense calculation.

      The Audit Committee of the Trust's Board of Directors has discussed and
approved the critical accounting policies and the development, selection and
disclosure of the estimates and alternatives prior to filing this report with
the Securities and Exchange Commission.

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 2007, the repayment of mortgage notes receivable and the
monetization of non-performing assets reduced institutional borrowings by
$3,125,993 to $3,641,828. During 2008, the Company reduced its institutional
borrowings by $1,620,000 to $2,000,000. The $7,000,000 credit facility had a
scheduled maturity of November 14, 2008. Negotiations to extend the credit
facility are continuing.

      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 marketable securities. The Company may
consider de-REITing to enhance shareholder value.

                                        8

<PAGE>

Loan Origination
----------------

      Until March 31, 2006, the Company's mortgage banking subsidiary originated
loans in excess of the Trust's 75% CLTV investment standard for subsequent sale
into the secondary mortgage market. During 2006, the Former Manager was unable
to sell $6,108,330 of these mortgage banking loans at an acceptable price.
Although these loans did not satisfy the Trust's investment standards, during
2006 these loans were transferred to the Trust and are reported as mortgage
notes receivable.

      On December 29, 2006, the Board of Directors terminated the Former
Manager. The Former Manager and the Company's mortgage banking operations
accounted for 100% of the loans acquired by the Trust in 2006. During 2007 and
2008, the Company did not acquire any loans from unaffiliated third parties or
the Former Manager. Prospectively, portfolio loans may be acquired from
unaffiliated third parties or the Former Manager.

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. On June 30, 2007 the Loan Servicing Agreement with the Former
Manager was cancelled. On July 1, 2007 the Company engaged a subservicer to
provide loan servicing and actively works with the subservicer to maximize the
loan portfolio's value.

      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.

Contingencies and Commitments
-----------------------------

      Loan loss reserves are estimates based on the anticipated sales price of
the foreclosed property that includes a discount from the latest appraised value
of the property, less the sum of priority liens, costs of disposition, the face
amount of the Company's mortgage loan and accrued interest receivable. As of
December 31, 2008 and 2007, the Company reserved an allowance for loan losses of
$720,000 and $2,155,000, respectively.

      Allowances for doubtful accounts are estimated reserves for the
collectability of other receivables. As of December 31, 2008 and 2007, the
Company reserved an allowance for doubtful accounts of $550,808 and $910,000,
respectively.

      As of December 31, 2008, the following table summarizes the Trust's
outstanding repayment obligations.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                                                          Amount of Commitment Expiration Per Period
       Maximum Other                               ----------------------------------------------------------
 Commercial Commitments (a)      Total Amounts      Less than                                      After 5
  as of December 31, 2008          Committed          1 year       1 - 3 years     3 - 5 years      years
------------------------------------------------------------------------------------------------------------
<S>                              <C>                <C>            <C>             <C>             <C>
Bank loans payable (b)            $2,005,184        $2,005,184          0               0             0
------------------------------------------------------------------------------------------------------------
Warehousing facilities                     0                 0          0               0             0
------------------------------------------------------------------------------------------------------------
Total Commercial Commitments      $2,005,184        $2,005,184          0               0             0
------------------------------------------------------------------------------------------------------------
</TABLE>

(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.

(b)   The Mortgage Investment Business' outstanding obligations as of December
      31, 2008 due in less than one year were $2,005,184.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2008 COMPARED TO YEAR ENDED DECEMBER 31, 2007

      Revenues for the year ended December 31, 2008 decreased to $656,578 as
compared to $1,114,958 for 2007. During 2008, interest income declined $473,307
due to the Trust's smaller loan portfolio as well as lower interest yields. Due
to the suspension of mortgage banking operations in 2006, there was no loan
origination income and service release premiums in 2008 and 2007.

                                        9

<PAGE>

      Expenses for the year ended December 31, 2008 decreased to $1,153,882 as
compared to $3,946,152 for the previous year. The decrease in 2008 compared to
2007 is due to operational efficiencies and the Company's anticipation of the
deteriorating conditions in the mortgage market in 2007. The provision for loan
losses decreased $1,447,964 while the provision for doubtful accounts decreased
$742,599. Total interest expenses decreased $192,228 and the transition to
self-management resulted in a total decrease in general and administrative
expenses of $226,615.

      During 2008, there was a gain from real estate owned $168,240 and real
estate expenses of $272,237. During 2007, there was a loss from real estate
owned of $63,229 and real estate expenses of $15,598. The gain on sales reflects
management's improved ability to accurately foreclose on and sell non-performing
assets.

      Net Loss for the year ended December 31, 2008 was $619,718. Net Loss for
the year ended December 31, 2007 was $2,939,689.

      At year ended December 31, 2008, the Company's mortgage notes receivable
balance was $5,683,417 less than the mortgage notes receivable balance for the
year ended December 31, 2007. At year ended December 31, 2008, the real estate
owned balance was $791,668 greater than the year ended December 31, 2007
balance.

LIQUIDITY AND CAPITAL RESOURCES

      During 2005, the Trust secured a $7,000,000 term facility, with a two year
maturity and a one year extension option. The option to extend was exercised and
the facilities scheduled maturity was November 14, 2008. Management believes
that existing cash balances, cash flow from operations, the mortgage loans that
are paid off, the net proceeds of REO sales, additional 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.

LIQUIDITY AND CAPITAL RESOURCES FOR THE YEAR ENDED DECEMBER 31, 2008

      As of January 1, 2008, the Trust had $962,190 of cash and cash
equivalents. After taking into effect the various transactions discussed below,
cash and cash equivalents at December 31, 2008 were $1,974,687. The following
summarizes the changes in net cash provided by operating activities, net cash
used for investing activities and net cash provided by financing activities.

      The principal source of the Trust's increased liquidity was from investing
activities. The primary use of cash was operating and financing activities. The
increase in cash reflects the Company's continued focus on converting
non-performing assets into cash or performing assets. This is reflected by cash
provided from investing activities.

      Net cash used by the operating activities during the year ended December
31, 2008 was $773,872. The change in accounts receivable of $123,133 and the
change in allowance for loan losses of $404,230 were the primary sources of
cash. Net loss of $619,718, the gain on sale of real estate owned of $168,240
and the change in other liabilities of $453,566 were the primary uses of cash.

      Net cash of $3,485,154 was provided by investing activities. Decreased
mortgage notes receivable provided $1,352,345 and a change in real estate owned
provided $2,378,334. The investment in marketable securities used $116,598.

      Net cash used in financing activities during the year ended December 31,
2008 was $1,698,785. Paying down bank lines of credit of $1,636,644 and treasury
stock purchases of $62,141 were the largest uses of cash from financing
activities.

LIQUIDITY AND CAPITAL RESOURCES FOR THE YEAR ENDED DECEMBER 31, 2007

      As of January 1, 2007, the Trust had $599,943 of cash and cash
equivalents. After taking into effect the various transactions discussed below,
cash and cash equivalents at December 31, 2007 were $962,190. The following
summarizes the changes in net cash provided by operating activities, net cash
used for investing activities and net cash provided by financing activities.

                                       10

<PAGE>

      The principal source of the Trust's increased liquidity was from investing
activities. The primary use of cash was operating and financing activities. One
of the Company's major goals for 2007 was to convert non-performing assets into
either cash or a performing asset. The increase in cash from investing
activities reflects this.

      Net cash used by the operating activities during the year ended December
31, 2007 was $553,508. The increased non-cash provision for loan losses of
$1,852,194, the increased non-cash allowance for doubtful accounts of $680,000
and the increase in other liabilities of $154,320 were the primary sources of
cash. A net loss of $2,939,689 and the increase in accounts receivable of
$467,594 were the primary uses of cash.

      Net cash of $4,021,748 was provided by investing activities. Decreased
mortgage notes receivable provided $3,912,389 and the sale of real estate owned
provided $241,819.

      Net cash used in financing activities during the year ended December 31,
2007 was $3,125,993. Reducing outstanding bank lines of credit by $3,125,993 was
the only use of cash from financing activities.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk
-----------

      Market risk is the exposure to loss resulting from changes in interest
rates, credit spreads, foreign exchange rates, commodity prices, and equity
prices. The Company's primary market risks are interest rate risk and credit
risk of the Mortgage Investment Business.

      Interest Risk. Interest rate risk is highly sensitive to many factors,
including governmental, monetary and tax policies, domestic and international
economic and political considerations and other factors beyond the control of
the Company. Changes in the general level of the U.S. Treasury yield curve can
have significant effects on the market value of the Trust's portfolio. The
majority of the Company's assets are fixed-rate loans. The Company's loans are
valued on the December 31, 2008 balance sheet at the lower of cost or market.

      As U.S. Treasury securities are priced to a lower yield and/or the spread
to U.S. Treasuries used to price the Company's assets are decreased, the market
value of its mortgage loans may increase. Conversely, as U.S. Treasury
securities are priced to a higher yield and/or the spread to U.S. Treasuries
used to price the Company's assets is increased, the market value of its
mortgage loans may decline. Changes in the level of the U.S. Treasury yield
curve can also affect, among other things, the prepayment assumptions used to
value certain loans. In addition, changes in the general level of the United
States Prime Rate can affect the Company's net interest income. The majority of
the Trust's liabilities are floating rate based on a spread over the daily 1
Month London Inter Bank Offered Rate ("LIBOR"). As the level of LIBOR increases
or decreases, the Company's interest expense will move in the same direction.

      On account of the relatively short adjusted weighted average maturity of
the mortgage investment portfolio (19 months), a variety of financial
instruments available to limit the effects of interest rate fluctuations on its
operations have not been utilized. The use of these types of derivatives (such
as interest rate swaps, caps, floors and other interest rate exchange contracts)
to hedge interest-earnings assets and/or interest-bearing liabilities carry
risks, including the risk that the net losses on a hedge position may exceed the
amount invested in such instruments. As the level of variable rate mortgage
financing of the portfolio increases or the weighted average maturity of the
portfolio increases, the Company may utilize a variety of financial instruments
to limit the effects of interest rate fluctuations.

      Credit Risk. Credit risk is the exposure to loss from loan defaults and
foreclosures. Default and foreclosure rates are subject to a wide variety of
factors, including, but not limited to, property values, supply/demand factors,
construction trends, consumer behavior, regional economics, interest rates, the
strength of the American economy and other factors beyond the control of the
Trust.

      All loans are subject to a certain probability of default and foreclosure.
An increase in the Company's default rates may reduce the book value of the
Company's assets, earnings and cash flow available to fund operations or pay
dividends. The Company manages credit risk through the underwriting process,
limiting loans in the mortgage investment portfolio (including the maximum
deferral of interest), establishing loss assumptions and carefully monitoring
loan performance. Nevertheless, the Company assumes that a certain portion of
its loan originations will default and adjusts the allowance for loan losses
based on that assumption.

                                       11

<PAGE>

      Concentration Risk. Concentration risk is the exposure to loss associated
with declines in assets that are geographically homogenous. As 90% of the
Company's real estate is located in California, the Company is subject to
economic risks associated with their physical concentration within the state of
California as well as risks associated with the state's economy.

Asset and Liability Management
------------------------------

      Asset and liability management is concerned with the timing and magnitude
of the maturity of assets and liabilities. In general, management's strategy is
to approximately match the term of the mortgage investment portfolio's
liabilities to the portfolio's adjusted weighted average maturity (19 months).

      The majority of the investment mortgage loans pay a fixed rate and the
income from such assets are relatively unaffected by interest rate changes. The
associated liabilities are currently under variable rate lines of credit that
reset monthly. Given this relationship between assets and liabilities, the
interest rate sensitivity gap is highly negative. This implies that a period of
falling short term interest rates will tend to increase net interest income,
while a period of rising short term rates will tend to reduce the net interest
income.

ITEM 8. FINANCIAL STATEMENTS

      The audited Financial Statements and their accompanying notes are
presented with the Report of Independent Registered Public Accounting Firm found
on FS-1. The unaudited 2008 and 2007 fourth quarter statements of operations are
presented before Item 15.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

      None

ITEM 9A(T). CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures
------------------------------------------------

Under the supervision and with the participation of our Company's management,
including our Chief Executive Officer and Principal Accounting Officer, we
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934) as of the end of the period covered by this
report. Our management has concluded that our disclosures controls and
procedures as of the end of the period covered by this report are effective.
Effective disclosure controls and procedures means that the material information
required to be included in our Securities and Exchange Commission reports is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and regulations for the period of
time covered by this report.

Management's Report on Internal Control Over Financial Reporting
----------------------------------------------------------------

Our management is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act). Our internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of our Company's assets; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted in the United States of America
and that receipts and expenditures of the Company are being made only in
accordance with the authorization of the Company's management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our Company's assets that could
have a material effect on the financial statements.

Because of the inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can provide only reasonable assurance of achieving
their control objectives. Further, the evaluation of the effectiveness of
internal control over financial reporting was made as of a specific date, and
continued effectiveness in future periods is subject to the risks that
controls may become inadequate because of changes in conditions or that the
degree of compliance with the policies and procedures may decline.

                                       12

<PAGE>

Under the supervision and with the participation of our Company's management,
including our Chief Executive Officer and Principal Accounting Officer, we
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO"). Based on our evaluation under the framework, management has
concluded that our internal control over financial reporting is effective as of
December 31, 2008.

Our management, with the participation of the Chief Executive Officer and
Principal Accounting Officer, have implemented internal procedures to
continually improve the effectiveness of the Company's internal control over
financial reporting. Based on these policy changes, our management, with the
participation of the Chief Executive Officer and Principal Accounting Officer,
expects that our internal control over financial reporting will continue to be
effective.

This annual report does not include an attestation report of the Company's
independent registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by our
independent registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit us to provide only management's
report in this annual report.

Changes in Internal Control Over Financial Reporting
----------------------------------------------------

There were no changes in our internal control over financial reporting during
the fourth quarter of fiscal 2008 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

ITEM 9B. OTHER INFORMATION

      None
--------------------------------------------------------------------------------
                                    PART III
--------------------------------------------------------------------------------

Certain information required by Part III is omitted from this Annual Report in
that the registrant will file its definitive Proxy Statement for the Annual
Meeting of Shareholders to be held on June 5, 2009 pursuant to Regulation 14A of
the Exchange Act (the Proxy Statement) not later than 120 days after the end of
the fiscal year covered by this Annual Report, and certain information included
in the Proxy Statement is incorporated herein by reference.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

DIRECTORS

The information required by this Item is incorporated herein by reference to the
section entitled "Election of Directors" in the Proxy Statement.

AUDIT COMMITTEE - FINANCIAL EXPERTS

Certain information required by this Item is incorporated herein by reference to
the section entitled "Report of the Audit Committee" in the Proxy Statement. The
board of directors has determined that Mr. James L. Grainer is an "audit
committee financial expert" and "independent" as defined under applicable SEC
and exchange rules.

EXECUTIVE OFFICERS

The information required by this Item is incorporated herein by reference to the
section entitled "Executive Officers" in the Proxy Statement.

We adopted our "Code of Ethics," that applies to all employees, including our
executive officers. A copy of the Code of Ethics is posted on our website at
www.caitreit.com. In the event that we make any amendment to, or grant any
waivers of, a provision of the Code of Ethics that applies to the principal
executive officer, principal financial officer, or principal accounting officer
that requires disclosure under applicable SEC rules, we intend to disclose such
amendment or waiver and the reasons for it on our website.

                                       13

<PAGE>

Section 16(a) Beneficial Ownership Reporting Compliance - The information
required by this Item is incorporated herein by reference to the section
entitled "Other Matters - Section 16(a) Beneficial Ownership Reporting
Compliance" in the Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference to the
sections entitled "Executive Compensation" and "Directors' Compensation" in the
Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The information required by this Item is incorporated herein by reference to the
sections entitled "Security Ownership of Certain Beneficial Owners and
Management" and "Equity Compensation Plan Information" in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated herein by reference to the
section entitled "Certain Relationships and Related Transactions" in the Proxy
Statement.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item is incorporated herein by reference to the
section entitled "Principal Accounting Fees and Services" in the Proxy
Statement.

--------------------------------------------------------------------------------
                                     PART IV
--------------------------------------------------------------------------------

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)   Financial Statements
      --------------------

      The following financial statements of the Company included in Appendix F
      are incorporated by reference in Item 8 of this report:

       Report of Independent Registered Public Accounting Firm .....   FS-1
       Consolidated Balance Sheets .................................   FS-2
       Consolidated Statements of Operations .......................   FS-3
       Consolidated Statements of Changes in Stockholders' Equity ..   FS-4
       Consolidated Statements of Cash Flows .......................   FS-5
       Notes to Consolidated Financial Statements ..................   FS-6 - 20

(b)   Financial Statement Schedules
      -----------------------------

      Not applicable

                                       14

<PAGE>

(c)   Exhibits

        Exhibit No.                         Description
        -----------                         -----------
            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)

            3.4      Certificate of Amendment of Certificate of Incorporation

            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.

(d)   Reports on Form 8-K
      -------------------

      Form  8-K was filed on:

         o  November 17, 2008 due to the press release regarding earnings
            for the third quarter of 2008.

(e)   Miscellaneous Exhibits
      ----------------------

      None

                                       15

<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) 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: April 15, 2009

By: /s/ Richard J. Wrensen               By: /s/ Andrea Barney
    --------------------------------         -----------------------------------
    Richard J. Wrensen                       Andrea Barney
    Chairman and                             Principal Accounting Officer and
    Chief Executive Officer                  Controller

                                       16

<PAGE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.

/s/ Richard J. Wrensen                            Dated: April 15, 2009
----------------------------------------
Richard J. Wrensen
Chairman, Chief Executive Officer
President and Chief Financial Officer

/s/ James L. Grainer                              Dated: April 15, 2009
----------------------------------------
James L. Grainer
Director

/s/ Alan R. Jones                                 Dated: April 15, 2009
----------------------------------------
Alan R. Jones
Director

/s/ Ace J. Blackburn                              Dated: April 15, 2009
----------------------------------------
Ace J. Blackburn
Director

                                       17

<PAGE>



             Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
   Eastern Light Capital, Incorporated:

We have audited the accompanying consolidated balance sheets of Eastern Light
Capital, Incorporated and subsidiary (the "Company"), as of December 31, 2008
and 2007 and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the years in the two-year period
ended December 31, 2008. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of December 31, 2008 and 2007 and the consolidated results of their
operations and their cash flows for each of the years in the two-year period
ended December 31, 2008 in conformity with accounting principles generally
accepted in the United States of America.

/s/ Rothstein, Kass & Company, P.C.
-----------------------------------

Roseland, New Jersey
April 15, 2009

                                      FS-1

<PAGE>

                           EASTERN LIGHT CAPITAL, INC.
                           Consolidated Balance Sheets
                           December 31, 2008 and 2007

<TABLE>
<CAPTION>
                                                                                        December 31,      December 31,
                                                                                            2008              2007
                                                                                      ---------------   ---------------
<S>                                                                                   <C>               <C>
ASSETS

   Cash and cash equivalents                                                          $     1,974,687   $       962,190
   Marketable securities                                                                      213,839           133,459
   Accounts receivable                                                                        734,193         1,189,339
   Allowance for doubtful accounts                                                           (550,808)         (910,000)
                                                                                      ---------------   ---------------
      Net accounts receivable                                                                 183,385           279,339
   Notes receivable:
      Mortgage notes receivable                                                             5,460,948        11,144,365
      Allowance for loan losses                                                              (720,000)       (2,155,000)
                                                                                      ---------------   ---------------
         Net notes receivable                                                               4,740,948         8,989,365
      Real estate owned, net                                                                2,596,494         1,804,826
   Other assets (net of accumulated depreciation of $3,070)                                    30,157                --
                                                                                      ---------------   ---------------
   Total assets                                                                       $     9,739,510   $    12,169,179
                                                                                      ===============   ===============

LIABILITIES AND STOCKHOLDERS' EQUITY

   Liabilities
      Bank loans payable                                                              $     2,005,184   $     3,641,828
      Other liabilities                                                                       191,783           313,336
                                                                                      ---------------   ---------------
   Total liabilities                                                                        2,196,967         3,955,164

   Stockholders' equity
      Preferred stock, $.01 par value;1,600,000 shares authorized; 213,820 shares
         issued and outstanding at December 31, 2008 and 2007                                   2,138             2,138
      Additional paid in capital - preferred stock                                          5,509,728         5,509,728
      Less treasury stock: 16,919 preferred shares at December 31, 2008 and
         2007 at cost                                                                        (229,179)         (229,179)

      Common stock, $.01 par value; 2,000,000 shares authorized; 500,032 shares
         issued and outstanding at December 31, 2008 and 2007                                   5,000             5,000
      Additional paid in capital - common stock                                             9,404,245         9,394,577
      Less treasury stock: 133,500 and 119,500 common shares at
         December 31, 2008 and 2007 at cost                                                (1,761,912)       (1,699,771)
      Accumulated other comprehensive income (loss)                                               334              (385)
   Accumulated deficit                                                                     (5,387,811)       (4,768,093)
                                                                                      ---------------   ---------------
   Total stockholders' equity                                                               7,542,543         8,214,015
                                                                                      ---------------   ---------------
   Total liabilities and stockholders' equity                                         $     9,739,510   $    12,169,179
                                                                                      ===============   ===============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                      FS-2

<PAGE>

                           EASTERN LIGHT CAPITAL, INC.
                      Consolidated Statements of Operations
                 For the years ended December 31, 2008 and 2007

                                                          2008          2007
                                                      -----------   -----------
REVENUES
   Interest income                                    $   613,665   $ 1,086,972
   Other income                                            42,913        27,986
                                                      -----------   -----------
      Total revenues                                      656,578     1,114,958

EXPENSES
   Loan servicing fees to related parties                      --        15,500
   Interest expense on loans                              126,287       318,515
   Provision (recovery) for loan losses                   404,230     1,852,194
   Provision (recovery) of doubtful accounts              (62,599)      680,000
   Wages and salaries                                     385,396       426,754
   Non-income taxes                                        37,934        39,286
   Loan origination costs                                      --       124,654
   General and administrative                             262,634       489,249
                                                      -----------   -----------
      Total expenses                                    1,153,882     3,946,152
                                                      -----------   -----------

LOSS FROM OPERATIONS                                     (497,304)   (2,831,194)

OTHER INCOME (EXPENSE)
   Operating expenses of real estate owned               (272,237)      (15,598)
   Gain (loss) on sale of real estate owned               168,240       (63,229)
   Gain on sale of marketable securities                   36,937           622
   Commission expense                                     (55,354)      (30,290)
                                                      -----------   -----------
      Other income (expense), net                        (122,414)     (108,495)
                                                      -----------   -----------

NET INCOME (LOSS)                                     $  (619,718)  $(2,939,689)
                                                      ===========   ===========

PREFERRED DIVIDENDS                                            --            --
                                                      -----------   -----------

NET INCOME (LOSS)                                     $  (619,718)  $(2,939,689)
                                                      ===========   ===========

LOSS PER COMMON SHARE, BASIC AND DILUTED              $     (1.64)  $     (7.73)
                                                      ===========   ===========

DIVIDENDS PAID PER PREFERRED SHARE                    $        --   $        --
                                                      ===========   ===========

DIVIDENDS PAID PER COMMON SHARE                       $        --   $        --
                                                      ===========   ===========

COMMON SHARES, BASIC AND DILUTED                          377,014       380,532
                                                      ===========   ===========

     See accompanying notes to condensed consolidated financial statements.

                                      FS-3

<PAGE>

                           EASTERN LIGHT CAPITAL, INC.
      Condensed Consolidated Statements of Changes in Stockholders' Equity
                 For the years ended December 31, 2008 and 2007

<TABLE>
<CAPTION>
                                                               Preferred                         Common
                                                              Additional                       Additional
                                      Preferred   Preferred     Paid in     Common    Common     Paid in
                                       Shares       Stock       Capital     Shares     Stock     Capital
                                      ---------   ---------   ----------   -------   -------   ----------
<S>                                   <C>         <C>         <C>          <C>       <C>       <C>
BALANCE, JANUARY 1, 2007                196,901   $   2,138   $5,509,728   380,532   $ 5,000   $9,394,577

Acquisition of treasury stock                --          --           --        --        --           --
Net income (loss)                            --          --           --        --        --           --
Issuance of common stock options             --          --           --        --        --           --
Dividends                                    --          --           --        --        --           --
Unrealized gain (loss)                       --          --           --        --        --           --
                                      ---------   ---------   ----------   -------   -------   ----------

BALANCE, DECEMBER 31, 2007              196,901       2,138    5,509,728   380,532     5,000    9,394,577

Acquisition of treasury stock                --          --           --   (14,000)       --           --
Net income (loss)                            --          --           --        --        --           --
Re-issuance of common stock options          --          --           --        --        --        9,668
Dividends                                    --          --           --        --        --           --
Unrealized gain (loss)                       --          --           --        --        --           --
                                      ---------   ---------   ----------   -------   -------   ----------

BALANCE, DECEMBER 31, 2008              196,901   $   2,138   $5,509,728   366,532   $ 5,000   $9,404,245
                                      =========   =========   ==========   =======   =======   ==========

<CAPTION>
                                                     Accumulated
                                                        Other
                                        Treasury    Comprehensive   Accumulated                 Comprehensive
                                         Stock      Income (Loss)     Deficit        Total      Income (Loss)
                                      -----------   -------------   -----------   -----------   -------------
<S>                                   <C>           <C>             <C>           <C>           <C>
BALANCE, JANUARY 1, 2007              $(1,928,950)  $         137   $(1,828,404)  $11,154,226

Acquisition of treasury stock                  --              --            --            --
Net income (loss)                              --              --    (2,939,689)   (2,939,689)     (2,939,689)
Issuance of common stock options               --              --            --            --              --
Dividends                                      --              --            --            --              --
Unrealized gain (loss)                         --            (522)           --          (522)           (522)
                                      -----------   -------------   -----------   -----------   -------------
                                                                                                $  (2,940,211)
                                                                                                =============
BALANCE, DECEMBER 31, 2007             (1,928,950)           (385)   (4,768,093)    8,214,015

Acquisition of treasury stock             (62,141)             --            --       (62,141)
Net income (loss)                              --              --      (619,718)     (619,718)       (619,718)
Re-issuance of common stock options            --              --            --         9,668              --
Dividends                                      --              --            --            --              --
Unrealized gain (loss)                         --             719            --           719             719
                                      -----------   -------------   -----------   -----------   -------------
                                                                                                $    (618,999)
                                                                                                =============
BALANCE, DECEMBER 31, 2008            $(1,991,091)  $         334   $(5,387,811)  $ 7,542,543
                                      ===========   =============   ===========   ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      FS-4

<PAGE>

                           EASTERN LIGHT CAPITAL, INC.
                      Consolidated Statements of Cash Flows
                 For the years ended December 31, 2008 and 2007

                                                         2008          2007
                                                      -----------   -----------
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                           $  (619,718)  $(2,939,689)
   Adjustments to reconcile net loss to net cash
      used in operating activities:
      Stock-based compensation expense                      9,668            --
      (Gain) on marketable securities                     (36,937)         (622)
      Change in allowance for loan losses                 404,230     1,852,194
      Change in allowance for doubtful accounts           (62,599)      680,000
      (Gain) loss on sale of real estate                 (168,240)       63,229
      Change in accounts receivable                       123,133      (467,594)
      Amortization of origination costs                        --       124,654
      Change in other assets, net                          30,157            --
      Change in other liabilities, net                   (453,566)      154,320
                                                      -----------   -----------
         Net cash used in operating activities           (773,872)     (533,508)

CASH FLOWS FROM INVESTING ACTIVITIES
   Investment in marketable securities                   (116,598)     (132,460)
   Investments in real estate owned                      (128,927)           --
   Proceeds from sale of real estate owned, net         2,378,334       241,819
   Principal proceeds from mortgage notes
      receivable                                        1,352,345     3,912,389
                                                      -----------   -----------
         Net cash provided by investing activities      3,485,154     4,021,748

CASH FLOWS FROM FINANCING ACTIVITIES
   Payments for bank loans, net                        (1,636,644)   (3,125,993)
   Purchase of treasury stock, common shares              (62,141)           --
   Preferred dividends paid                                    --            --
   Common dividends paid                                       --            --
                                                      -----------   -----------
         Net cash used in financing activities         (1,698,785)   (3,125,993)
                                                      -----------   -----------

NET INCREASE (DECREASE) IN CASH AND CASH
   EQUIVALENTS                                          1,012,497       362,247

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD            962,190       599,943
                                                      -----------   -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD              $ 1,974,687   $   962,190
                                                      ===========   ===========

SUPPLEMENTAL CASH FLOW INFORMATION:

   Cash paid for interest                             $   142,463   $   336,293
                                                      ===========   ===========
   Cash paid for taxes                                $    22,621   $    28,353
                                                      ===========   ===========

NON-CASH INVESTING AND FINANCING ACTIVITIES
   Foreclosures, net of reserves                      $ 4,331,072   $ 1,973,738
                                                      ===========   ===========

     See accompanying notes to condensed consolidated financial statements.

                                      FS-5

<PAGE>

                           EASTERN LIGHT CAPITAL, INC.
                   Notes to Consolidated Financial Statements
                 For the years ended December 31, 2008 and 2007

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. (the "Former
      Manager", "CAAI"). 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
      --------------------------------------------------------------------

      Principles of consolidation. The 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 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. All significant inter-company
      amounts have been eliminated in consolidation.

      Use of estimates. The preparation of 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 consolidated
      financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.

      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 as defined by SFAS 115, "Accounting for
      Certain Investments in Debt and Equity Securities." The securities
      classified as trading represent investments in debt and equity securities
      that are bought and held principally for the purpose of selling them in
      the near term. The securities classified as available-for-sale represent
      investments in debt and equity securities which the Trust intends to hold
      for an indefinite period of time. Trading securities are reported at fair
      value with unrealized gains and losses reported in the statement of
      operations. Available-for-sale securities are reported at fair value with
      unrealized gains and losses excluded from earnings and reported in
      accumulated other comprehensive loss. 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 statement of operations.

      Concentration of credit risk. The Company holds numerous mortgage notes
      receivable. These notes are secured by deeds of trust on residential
      properties located primarily in California, which results in a
      concentration of credit risk. The value of the loan portfolio may be
      affected by changes in the economy or other conditions of the geographical
      area. Three loans representing approximately 10% of the loan portfolio are
      deeds of trust on residential properties not in California.

                                      FS-6

<PAGE>

                           EASTERN LIGHT CAPITAL, INC.
                   Notes to Consolidated Financial Statements
                 For the years ended December 31, 2008 and 2007

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

      Allowance for loan loss reserve. Management reviews its loan loss
      provision regularly and the Company maintains an allowance for losses on
      mortgage notes receivable at an amount that management believes is
      sufficient to protect against potential losses inherent in the loan
      portfolio. The Company's actual losses may differ from the estimate. Notes
      receivable deemed uncollectible are written off. The Company does not
      accrue interest income on impaired loans.

      Allowance for doubtful accounts. Management reviews its accounts
      receivable periodically and the Company has established an allowance for a
      receivable that may not be collectible. Management exercises judgment in
      establishing the allowance and the Company's actual losses may differ from
      the estimate.

      Real estate owned. Real estate owned results from foreclosure of mortgage
      notes receivable and at time of foreclosure is recorded at the lower of
      carrying amount or fair value of the property, less any superior liens and
      estimated costs to sell. Subsequent to foreclosure, the foreclosed asset
      value is periodically reviewed and adjusted to fair value. No depreciation
      is taken on the real estate owned. Income and expenses related to real
      estate owned are recorded as rental income, interest expense and operating
      expenses of real estate owned in the consolidated statements of
      operations.

      Origination costs. Due to the general decline in residential mortgage
      values, all previously capitalized origination costs were expensed in
      2007. Prior to 2007, origination costs relating to investment mortgage
      notes receivable was capitalized and amortized over the term of the
      mortgage notes receivable.

      Fair value of assets and liabilities. The Trust adopted the provisions of
      SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"), effective
      January 1, 2008. Under SFAS No. 157, fair value is defined as the price
      that would be received to sell an asset or paid to transfer a liability
      (i.e., the "exit price") in an orderly transaction between market
      participants at the measurement date.

      In determining fair value, the Trust uses various valuation approaches.
      SFAS No. 157 establishes a fair value hierarchy for inputs used in
      measuring fair value that maximizes the use of observable inputs and
      minimizes the use of unobservable inputs by requiring that the most
      observable inputs be used when available. Observable inputs are those that
      market participants would use in pricing the asset or liability based on
      market data obtained from sources independent of the Trust. Unobservable
      inputs reflect the Trust's assumptions about the inputs market
      participants would use in pricing the asset or liability developed based
      on the best information available in the circumstances. The fair value
      hierarchy is categorized into three levels based on the inputs as follows:

            Level 1 - Valuations based on unadjusted quoted prices in active
            markets for identical assets or liabilities that the Trust has the
            ability to access. Valuation adjustments and block discounts are not
            applied to Level 1 securities. Since valuations are based on quoted
            prices that are readily and regularly available in an active market,
            valuation of these securities does not entail a significant degree
            of judgment.

            Level 2 - Valuations based on quoted prices in markets that are not
            active or for which all significant inputs are observable, either
            directly or indirectly.

            Level 3 - Valuations based on inputs that are unobservable and
            significant to the overall fair value measurement.

      The availability of valuation techniques and observable inputs can vary
      from security to security and is affected by a wide variety of factors
      including, the type of security, whether the security is new and not yet
      established in the marketplace, and other characteristics particular to
      the transaction. To the extent that valuation is based on models or inputs
      that are less observable or unobservable in the market, the determination
      of fair value requires more judgment. Those estimated values do not
      necessarily represent the amounts that may be ultimately realized due to
      the occurrence of future circumstances that cannot be reasonably
      determined.

                                      FS-7

<PAGE>

                           EASTERN LIGHT CAPITAL, INC.
                   Notes to Consolidated Financial Statements
                 For the years ended December 31, 2008 and 2007

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

      Because of the inherent uncertainty of valuation, those estimated values
      may be materially higher or lower than the values that would have been
      used had a ready market for the securities existed. Accordingly, the
      degree of judgment exercised by the Trust in determining fair value is
      greatest for securities categorized in Level 3. In certain cases, the
      inputs used to measure fair value may fall into different levels of the
      fair value hierarchy. In such cases, for disclosure purposes, the level in
      the fair value hierarchy within which the fair value measurement in its
      entirety falls, is determined based on the lowest level input that is
      significant to the fair value measurement.

      Fair value is a market-based measure considered from the perspective of a
      market participant rather than an entity-specific measure. Therefore, even
      when market assumptions are not readily available, the Trust's own
      assumptions are set to reflect those that market participants would use in
      pricing the asset or liability at the measurement date. The Trust uses
      prices and inputs that are current as of the measurement date, including
      periods of market dislocation. In periods of market dislocation, the
      observability of prices and inputs may be reduced for many securities.
      This condition could cause a security to be reclassified to a lower level
      within the fair value hierarchy.

      As of December 31, 2008, the carrying amount of the Company's assets and
      liabilities which qualify as financial instruments under SFAS No. 107
      approximate their fair value reflected in the consolidated financial
      statements due to their short term maturities.

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

      Cash and cash equivalents, accounts payable and accrued liabilities
      (included in Other liabilities): 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
      upon quoted market prices.

      Mortgage interest receivable (included in Accounts receivable): The
      carrying amount reported on the balance sheets represents interest income
      pursuant to the Company's policy of Revenue recognition.

      Mortgage notes receivable: The carrying amount reported on the balance
      sheets represents the outstanding principal balance of performing notes.
      For non-performing mortgage notes receivable, the Company has established
      a loan loss reserve.

      Real estate owned: The carrying amount reported on the balance sheets
      represents the outstanding principal balance net of any reserves and
      inclusive of any loans senior to the Company.

      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.

      In July 2006, the FASB released Interpretation No. 48, "Accounting for
      Uncertainty in Income Taxes -- an interpretation of FASB Statement No.
      109" ("FIN 48"). This interpretation clarifies the accounting for
      uncertainty in income taxes recognized in an enterprise's financial
      statements in accordance with FAS 109. This interpretation prescribes a
      recognition threshold and measurement attribute for the financial
      statement recognition and measurement of a tax position taken or expected
      to be taken in a tax return. FIN 48 also provides guidance on
      derecognition, classification, interest and penalties, accounting in
      interim periods, disclosure, and transition. This interpretation was
      effective January 1, 2007. The adoption of FIN 48 did not have a material
      impact on the Company's financial results.

                                      FS-8

<PAGE>

                           EASTERN LIGHT CAPITAL, INC.
                   Notes to Consolidated Financial Statements
                 For the years ended December 31, 2008 and 2007

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

      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. During 2008 and 2007, the Company
      expensed $14,990 and $21,600, respectively, for payment of such taxes.

      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.

      Other Comprehensive Income. SFAS No. 130 "Reporting Comprehensive Income,"
      divides comprehensive income into net income and other comprehensive
      income (loss), which includes unrealized gains and losses on
      available-for-sale securities. There were $719 of unrealized gains related
      to available-for-sale securities at December 31, 2008. At December 31,
      2008, accumulated other comprehensive loss was $618,999 and consisted of
      unrealized losses related to available for sale securities.

      Stock-Based Compensation. The Company complies with SFAS No. 123R,
      "Share-Based Payment," issued in December 2004. SFAS No. 123R is a
      revision of SFAS No. 123, "Accounting for Stock-Based Compensation," and
      supersedes APB Opinion No. 25 ("APB No. 25"). Among other items, SFAS No.
      123R eliminates the use of APB No. 25 and the intrinsic value method of
      accounting, and requires companies to recognize the cost of employee
      services received in exchange for awards of equity instruments, based on
      the fair value of those awards as of the vested date in the financial
      statements. The effective date of SFAS No. 123R for the Company was the
      first quarter of 2006. SFAS No. 123R permits companies to adopt its
      requirements using either a "modified prospective" method, or a "modified
      retrospective" method. Under the "modified prospective" method,
      compensation cost is recognized in the financial statements beginning with
      the effective date, based on the requirements of SFAS No. 123R for all
      share-based payments vested after that date, and based on the requirements
      of SFAS No. 123 for all unvested awards granted prior to the effective
      date of SFAS No. 123R. Under the "modified retrospective" method, the
      requirements are the same as under the "modified prospective" method, but
      also permit entities to restate financial statements of previous periods,
      either for all prior periods presented or to the beginning of the fiscal
      year in which the statement is adopted, based on previous pro forma
      disclosures made in accordance with SFAS No. 123.

      Accordingly, the Company has adopted the modified prospective method of
      recognition, and began applying the valuation and other criteria to stock
      options granted beginning January 1, 2006. The Company is recognizing the
      expense for the unvested portion of previously issued grants based on the
      valuation and attribution methods used previously to calculate the pro
      forma disclosures. The Company did not recognize the expense for employee
      stock options prior to January 1, 2006.

      The Company currently utilizes the Black-Scholes option pricing model to
      measure the fair value of stock options granted to certain key employees.
      While SFAS No. 123R permits entities to continue to use such a model, it
      also permits the use of a "lattice" model. The Company expects to continue
      using the Black-Scholes option pricing model in connection with its
      adoption of SFAS No. 123R to measure the fair value of stock options
      granted.

      For the year ended December 31, 2007, no option awards were issued. For
      the year ended December 31, 2008, 84,655 options were re-issued. As the
      options were re-issued, no further disclosure is required pursuant to FASB
      Statement No. 123 (revised 2004) ("FAS 123(R)"), "Share-Based Payment,"
      which is a revision of FASB Statement No. 123 ("FAS 123"), "Accounting for
      Stock-Based Compensation."

                                      FS-9

<PAGE>

                           EASTERN LIGHT CAPITAL, INC.
                   Notes to Consolidated Financial Statements
                 For the years ended December 31, 2008 and 2007

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

      Earnings Per Share. In accordance with SFAS No. 128 "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. At December 31, 2008, options to purchase 88,940 shares of common
      stock are not considered in the diluted earnings per share calculation due
      to anti-dilution. This is disclosed in Note 16.

      Recent accounting pronouncements. In October 2008, the FASB issued FSP
      SFAS No. 157-3, "Determining the Fair Value of a Financial Asset When the
      Market for That Asset Is Not Active", ("FSP 157-3"), to clarify the
      application of the provisions of SFAS 157 in an inactive market and how an
      entity would determine fair value in an inactive market. FSP 157-3 was
      effective upon issuance and applies to Financial Assets within the scope
      of accounting pronouncements that require or permit fair value
      measurements in accordance with statement 157. The Company does not expect
      the adoption of FSP No. 157-3 to have a material impact on its
      consolidated financial statements.

      In June 2008, the FASB issued FSP EITF 03-6-1, "Determining Whether
      Instruments Granted in Share-Based Payment Transactions Are Participating
      Securities," to clarify that all outstanding unvested share-based payment
      awards that contain no forfeitable rights to dividends or dividend
      equivalents, whether paid or unpaid, are participating securities. An
      entity must include participating securities in its calculation of basic
      and diluted earnings per share (EPS) pursuant to the two-class method, as
      described in FASB Statement 128, Earnings per Share. FSP EITF 03-6-1 is
      effective for fiscal years beginning after December 15, 2008 and interim
      periods within those fiscal years. The Company is evaluating the impact
      that the adoption of FSP EITF 03-6-1, if any, will have on its
      consolidated financial statements.

      In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
      Instruments and Hedging Activities - an amendment to FASB Statement No.
      133." SFAS No. 161 is intended to improve financial standards for
      derivative instruments and hedging activities by requiring enhanced
      disclosures to enable investors to better understand their efforts on an
      entity's financial position, financial performance, and cash flows.
      Entities are required to provide enhanced disclosures about: (a) how and
      why entity uses derivative instruments; (b) how derivative instruments and
      related hedged items are accounted for under Statement 133 and its related
      interpretations; and (c) how derivative instruments and related hedged
      items affect an entity's financial position, financial performance, and
      cash flows. It is effective for financial statements issued for fiscal
      years beginning after November 15, 2008, with early adoption encouraged.
      The adoption of this statement, which is expected to occur in the first
      quarter of 2009, is not expected to have a material effect on the
      Company's consolidated financial statements.

      In December 2007, the FASB issued SFAS No. 141 (R), "Business
      Combinations" ("SFAS 141 (R)") which replaces SFAS No. 141, "Business
      Combinations" and requires a company to recognize the assets acquired, the
      liabilities assumed, and any non-controlling interest in the acquired
      entity to be measured at their fair values as of the acquisition date.
      SFAS 141 (R) also requires acquisition costs to be expensed as incurred
      and does not permit certain restructuring activities previously allowed
      under Emerging Issues Task Force Issue No. 95-3 to be recorded as a
      component of purchase accounting. SFAS 141 (R) applies prospectively to
      business combinations for which the acquisition date is on or after the
      beginning of the first annual reporting period beginning on or after
      December 15, 2008. The Company is currently evaluating the effect the
      adoption of SFAS 141 (R) may have on the Company's consolidated financial
      statements.

      In December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests
      in Consolidated Financial Statements and amendment of ARB No. 51" ("SFAS
      160"). Among other items, SFAS 160 requires all entities to report
      non-controlling (minority) interests in subsidiaries in the same way as
      equity in the consolidated financial statements. SFAS 160 is effective for
      the first annual reporting period beginning after December 15, 2008. The
      Company is evaluating the effect of this recently issued standard on its
      consolidated financial statements.

                                      FS-10

<PAGE>

                           EASTERN LIGHT CAPITAL, INC.
                   Notes to Consolidated Financial Statements
                 For the years ended December 31, 2008 and 2007

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

      In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
      Financial Assets and Financial Liabilities" (SFAS 159). SFAS 159 permits
      entities to choose to measure many financial instruments and certain other
      items at fair value that are not currently required to be measured at fair
      value. SFAS 159 also establishes presentation and disclosure requirements
      designed to facilitate comparison between entities that choose different
      measurement attributes for similar types of assets and liabilities.
      Effective January 1, 2008, the Trust adopted SFAS 159. The Trust's
      adoption of SFAS 159 did not have a material impact on the consolidated
      financial statements.

      In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements,
      which defines fair value, establishes a framework for consistently
      measuring fair value under generally accepted accounting principles, and
      expands disclosures about fair value measurements. In February 2008, the
      FASB issued Staff Position (FSP) FAS 157-2, Effective Date of FASB
      Statement No. 157, which defers the implementation for the non-recurring
      nonfinancial assets and liabilities from fiscal years beginning after
      November 15, 2007 to fiscal years beginning after November 15, 2008. The
      provisions of SFAS No. 157 will be applied prospectively. The statement
      provisions effective as of January 1, 2008, do not have a material effect
      on the company's consolidated financial position, results of operations
      and cash flows. Management does not believe that the remaining provisions
      will have a material effect on the company's consolidated financial
      position and results of operations and cash flows when they become
      effective on January 1, 2009.

      Reclassifications. Certain 2007 amounts have been reclassified to conform
      to the 2008 presentation. Such reclassifications had no effect on reported
      net income or earnings per share.

3.    Marketable securities
      ---------------------

      Marketable securities consist of exchange listed equity securities which
      are classified as trading securities or available-for-sale securities by
      the Company. As of December 31, 2008, trading securities totaled $205,870,
      net of a short position of $14,791, which in the aggregate includes an
      unrealized loss of $14,416. During 2008, the Company recorded a realized
      loss of $5,927. As of December 31, 2007, trading securities totaled
      $133,082, net of a short position of $8,634, which in the aggregate
      included an unrealized loss of $386.

      As of December 31, 2008, available-for-sale securities totaled $7,969
      which included an unrealized gain of $719 recorded in accumulated other
      comprehensive income. During 2008, the Company recorded a realized gain of
      $42,864. As of December 31, 2007, available-for-sale securities totaled
      $377 which included an unrealized loss of $522 recorded in accumulated
      other comprehensive income. During 2007, the Company recorded a realized
      gain of $622,

4.    Accounts receivable
      -------------------

      Accounts receivable consists of accrued interest on mortgage notes
      receivable, other amounts due from borrowers and a receivable from a
      custodial account. As of December 31, 2008 and 2007, accrued interest,
      other amounts due from borrowers and the custodial account receivable were
      $734,193 and $1,189,339, respectively. As of December 31, 2008 and 2007,
      Management believes that an allowance for doubtful accounts of $550,808
      and $910,000, respectively, is adequate protection against the
      collectability of the receivable as well as the costs associated with
      possible legal action.

                                      FS-11

<PAGE>

                           EASTERN LIGHT CAPITAL, INC.
                   Notes to Consolidated Financial Statements
                 For the years ended December 31, 2008 and 2007

5.    Mortgage notes receivable
      -------------------------

      Reconciliation  of the mortgage  notes  receivable  balances for the years
      ended December 31, 2008 and 2007 follows:

<TABLE>
<CAPTION>
                                                                2008           2007
                                                            ------------   ------------
<S>                                                         <C>            <C>
         Balance, beginning of year
         Additions during period:                           $ 11,144,365   $ 17,121,939
            Originations                                              --             --
         Deductions during period:
            Collections of principal                             (89,949)      (162,099)
            Repayments                                        (1,262,396)    (3,750,290)
            Sales                                                     --             --
            Write-offs of uncollectible principal                     --        (91,447)
            Foreclosures, net of reserve                      (4,331,072)    (1,973,738)
                                                            ------------   ------------
         Balance, end of year                               $  5,460,948   $ 11,144,365
                                                            ============   ============
</TABLE>

      The mortgage notes receivable represent home equity loans primarily
      secured by deeds of trust on one-to-four unit residential real estate. The
      Company is subject to the risks inherent in finance lending including the
      risk of borrower default and bankruptcy. Mortgage notes receivable are
      stated at the principal outstanding. Interest on the mortgages is due
      monthly and unamortized principal is usually due as a balloon payment at
      loan maturity.

                 [ REMAINDER OF PAGE INTENTIONALLY LEFT BLANK ]

                                      FS-12

<PAGE>

                           EASTERN LIGHT CAPITAL, INC.
                   Notes to Consolidated Financial Statements
                 For the years ended December 31, 2008 and 2007

5.    Mortgage notes receivable (continued)
      -------------------------------------

The following is a summary of the Trust's mortgage notes receivable balance at
December 31, 2008:

<TABLE>
<CAPTION>
                                                                                                    Carrying         Amount of
                                               Final       Monthly                 Face amount of   amount of   delinquent principal
Principal outstanding   Interest rate      maturity date   payment  Lien Priority    mortgage(s)   mortgage(s)        (Note A)
---------------------  ----------------  ----------------  -------  -------------  --------------  -----------  --------------------
<S>                    <C>               <C>               <C>      <C>            <C>             <C>          <C>
Individual loans
   greater than
   $499,999:                9.50%            10/01/08      $ 7,813     Second      $    1,500,000  $ 1,500,000  $          1,500,000
                            11.50%           10/01/10        7,187      First             750,000      750,000                    --
Loans from
   $400,000-$499,999   12.00% to 12.75%   16 to 23 months                                 905,000      904,998               904,999
Loans from
   $300,000-$399,999    6.38% to 7.50%   25 to 309 months                               1,381,443    1,257,562                    --
Loans from
   $200,000-$299,999   12.00% to 13.50%   8 to 37 months                                  460,000      458,752                    --
Loans from
   $100,000- 199,999   7.75% to 11.00%    8 to 295 months                                 337,038      259,762               109,259
Loans up to $99,999    7.00% to 17.75%   22 to 203 months                                 505,676      329,874                71,517
                                                                                   --------------  -----------  --------------------
Total Mortgage Notes Receivable at December 31, 2008                               $    5,839,157  $ 5,460,948  $          2,585,774
                                                                                   ==============  ===========  ====================
</TABLE>

(A) Delinquent loans are loans where the monthly interest payments in arrears
are 90 or more days overdue. As of December 31, 2008, there were eight (8) loans
totaling $3,353,673 of principal and $85,482 of interest that were 61 to 180
days delinquent on interest payments. There were six loans that were delinquent
for over 180 days. Management has reviewed all of the delinquent loans and
believes that the fair value (estimated selling price less cost to dispose) of
the collateral is equal to or greater than the carrying value of the loan
including any accrued interest.

                                      FS-13

<PAGE>

                           EASTERN LIGHT CAPITAL, INC.
                   Notes to Consolidated Financial Statements
                 For the years ended December 31, 2008 and 2007

5.    Mortgage notes receivable (continued)
      -------------------------------------

The following is a summary of the Trust's mortgage notes receivable balance at
December 31, 2007:

<TABLE>
<CAPTION>
                                                                                                    Carrying         Amount of
                                               Final       Monthly                 Face amount of   amount of   delinquent principal
Principal outstanding   Interest rate      maturity date   payment  Lien Priority    mortgage(s)   mortgage(s)        (Note A)
---------------------  ----------------  ----------------  -------  -------------  --------------  -----------  --------------------
<S>                    <C>               <C>               <C>      <C>            <C>             <C>          <C>
Individual loans
   greater than
   $499,999:                 12.50%          10/01/08      $15,625     Second      $    1,500,000  $ 1,500,000  $                 --
                             12.50%          12/01/06       10,157     Second             995,000      995,000               995,000
                             12.50%          01/01/21        9,343     Second             800,000      896,975               896,975
                             11.00%          10/01/08        6,875      First             750,000      750,000                    --
                             11.00%          10/01/07        6,645      First             725,000      724,985               724,985
                             13.00%          11/01/08        7,580      First             700,000      699,715                    --
Loans from
   $400,000-$499,999    6.95% to 12.75%  12 to 154 months                               1,905,000    1,893,630               480,000
Loans from
   $300,000-$399,999    6.38% to 11.00%   8 to 321 months                               1,681,443    1,589,133                    --
Loans from
   $200,000-$299,999   10.00% to 13.50%   1 to 27 months                                1,340,000    1,338,606               823,719
Loans from
   $100,000- 199,999    7.75% to 11.75%  20 to 307 months                                 487,038      405,663               244,176
Loans up to $99,999     7.00% to 17.75%  20 to 215 months                                 519,787      350,658                17,262
                                                                                   --------------  -----------  --------------------
Total Mortgage Notes Receivable at December 31, 2007                               $   11,403,268  $11,144,365  $          4,182,117
                                                                                   ==============  ===========  ====================
</TABLE>

(A) Delinquent loans are loans where the monthly interest payments in arrears
are 90 or more days overdue. As of December 31, 2007, there were ten (10) loans
totaling $4,182,117 of principal and $132,821 of interest that were 61 to 180
days delinquent on interest payments. There were five loans that were delinquent
for over 180 days. Management has reviewed all of the delinquent loans and
believes that the fair value (estimated selling price less cost to dispose) of
the collateral is equal to or greater than the carrying value of the loan
including any accrued interest.

                                      FS-14

<PAGE>

                           EASTERN LIGHT CAPITAL, INC.
                   Notes to Consolidated Financial Statements
                 For the years ended December 31, 2008 and 2007

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 estimate are collateral
      dependent. Management believes a $720,000 and $2,155,000 loan loss reserve
      is adequate protection against potential losses inherent in the mortgage
      notes receivable balances as of December 31, 2008 and 2007, respectively.
      Actual losses may differ from the estimate.

      A reconciliation of the allowance for loan losses for the years ended
      December 31, 2008 and 2007 follows:

                                                         2008           2007
                                                     -----------    -----------
      Provision for loan losses                      $   404,230    $ 1,852,194
      Write-offs of uncollectible loans (net)         (1,839,230)      (479,503)
                                                     -----------    -----------
         Total adjustments to allowance               (1,435,000)     1,372,691
      Balance, beginning of year                       2,155,000        782,309
                                                     -----------    -----------
      Balance, end of year                           $   720,000    $ 2,155,000
                                                     ===========    ===========

7.    Real estate owned
      -----------------

      As of January 1, 2007, the Company owned one property. During 2007, the
      Company foreclosed on three properties, did not assume any mortgage note
      payables and sold one property providing for three properties as of
      December 31, 2007. During 2008, the company foreclosed on eight
      properties, sold four properties, wrote off one property and one property
      reverted to the senior lien holder. Two of the foreclosed properties had
      senior liens in the amounts of $1,998,370 and $633,319. As of December 31,
      2008, the Company owned five properties. As of December 31, 2008 and 2007,
      the senior mortgage's principal balances were $2,631,689 and $0,
      respectively. Management may elect to lease real estate assets in lieu of
      immediately marketing real estate owned assets for sale.

      A reconciliation of the real estate owned account shows its cash and
      non-cash activities for the years ended December 31, 2008 and 2007:

                                                         2008           2007
                                                     -----------    -----------
      Balance, beginning of year                     $ 1,804,826    $   245,000
         Foreclosed mortgage notes, (non-cash)         5,785,524      1,973,738
         Repayment of senior debt                             --             --
         Recognition of senior debt (non-cash)        (2,631,689)            --
         Investments                                     128,927             --
         Write-downs of property (non-cash)             (281,000)      (108,864)
         Gain (loss) on sale                             168,240        (63,229)
                                                     -----------    -----------
                                                       4,974,828      2,046,645
      Less: Proceeds from sale of real estate owned
         (net of closing costs)                       (2,378,334)      (241,819)
                                                     -----------    -----------
      Balance, end of year                           $ 2,596,494    $ 1,804,826
                                                     ===========    ===========

8.    Bank loans payable
      ------------------

      As of November 15, 2005, the Trust obtained a two-year term $7,000,000
      credit facility with a one year extension. The Trust extended the facility
      in November of 2007. The Company has a line of credit with a Bank in which
      the Company pledges qualified mortgage notes and receives advances of up
      to 80% of the value of the note. Interest is payable monthly at the daily
      one month LIBOR rate and a spread of 2.00%. During the year ended December
      31, 2008, the Company reduced its institutional borrowings from $3,641,828
      to $2,000,000. As of December 31, 2008, the Company had an accrued
      interest payable of $5,184. The Company was actively negotiating an
      extension of the line of credit and had received a commitment to extend it
      one year to November 14, 2009. However, on November 7, 2008, the Federal
      Deposit Insurance Company ("FDIC") seized the Bank. Documentation of the
      extension has been suspended until the FDIC reviews the Company's
      extension request in further detail. The FDIC extension remains pending.

                                      FS-15

<PAGE>

                           EASTERN LIGHT CAPITAL, INC.
                   Notes to Consolidated Financial Statements
                 For the years ended December 31, 2008 and 2007

9.    Related party transactions
      --------------------------

      The Former Manager, which is owned by Messrs. Swartz (a former director)
      and Konczal (a former director) provided management and advisory services
      and received fees for these services from the Trust. The Former Manager
      was also entitled to reimbursement from the Trust for clerical and
      administrative services at cost based on relative utilization of
      facilities and personnel. The Former Manager was also reimbursed by CAFC
      for direct expenses and administrative services. On December 29, 2006, the
      Former Manager's management and advisory service contracts were terminated
      and the Trust paid the Former Manager a one time termination fee of
      $500,000 which is reported in General and administrative expenses in the
      consolidated statements of operations for the year ended December 31,
      2006.

      During 2001, CAFC paid a $5,000 deposit for an option to purchase Sierra
      Capital Corporate Advisors ("SCCA"). SCCA is owned by Messrs. Swartz and
      Konczal. On December 29, 2006 the option was transferred to the Former
      Manager for $5,000.

      During the first quarter of 2006, Mr. Wrensen, the Trust's Chief Financial
      Officer, oversaw the purchase of 8,520 Preferred Shares by the Trust and
      the purchase of 4,260 Preferred Shares by other investors at a price of
      ten dollars per share. Subsequent to the transaction, the Trust's Board of
      Directors requested that Mr. Wrensen repurchase the 4,260 Preferred Shares
      from the other investors. Mr. Wrensen was unable to reacquire these
      shares. During the fourth quarter of 2006, the Trust acquired 4,260
      Preferred Shares from Mr. Wrensen at a price of ten dollars per share.

      During 2007, Mr. Wrensen independently engaged legal counsel on a
      shareholder matter. Subsequently, the Board approved the expenditure and
      as of December 31, 2007, the Company accrued a legal expense of $13,264
      which was paid in 2008.

      During 2007, Messrs. Swartz and Konczal served as Non-Independent
      Directors on the Trust's Board of Directors and were paid $5,000 and
      $5,000, respectively, in meeting fees. During 2007, Mr. Swartz also
      received a retainer of $15,600 as Chairman of the Board. Mr. Konczal's
      term as director expired in 2007 and he was not nominated to the Board for
      re-election. 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 their scheduled maturity or June 3, 2009, whichever date occurs
      earlier.

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.

                                      FS-16

<PAGE>

                           EASTERN LIGHT CAPITAL, INC.
                   Notes to Consolidated Financial Statements
                 For the years ended December 31, 2008 and 2007

10.   Preferred, common and treasury stock (continued)
      ------------------------------------------------

      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.

      As of January 1, 2007, the Trust's net Preferred Stock balance was
      196,901. During 2007 and 2008, no Preferred Stock shares were purchased.
      As of December 31, 2008, the Trust's net Preferred Stock balance was
      196,901.

      As of January 1, 2007, the Trust's net Common Stock balance was 380,532.
      During 2007, no Common Stock was purchased and no options were exercised
      or awarded. As of December 31, 2007, the Trust's net Common Stock balance
      was 380,532. During 2008, the Trust's cumulative Common Stock purchases
      totaled 14,000 shares and 84,655 options were re-awarded. As December 31,
      2008, the Trust's net Common Stock balance was 366,532.

11.   Fair Value Measurements.
      ------------------------

      The adoption of SFAS 157 to the Company's financial assets and liabilities
      that are re-measured and reported at fair value at least annually did not
      have an impact on the Company's financial results.

      The following table presents information about the Company's assets and
      liabilities that are measured at fair value on a recurring basis as of
      December 31, 2008 and indicates the fair value hierarchy of the valuation
      techniques the Company utilized to determine such fair value. In general,
      fair values determined by Level 1 inputs utilize quoted prices
      (unadjusted) in active markets for identical assets or liabilities. Fair
      values determined by Level 2 inputs utilize data points that are
      observable such as quoted prices, interest rates and yield curves. Fair
      values determined by Level 3 inputs are unobservable data points for the
      asset or liability and includes situations where there is little, if any,
      market activity for the asset or liability.

                                  Dec. 31, 2008   Level 1     Level 2   Level 3
                                  -------------   ---------   -------   -------
      Asset:
         Cash equivalents         $     304,897   $ 304,897   $    --   $    --
         Marketable securities          213,839     213,839        --        --
                                  -------------   ---------   -------   -------
      Total                       $     518,736   $ 518,736   $    --   $    --
                                  =============   =========   =======   =======

      The fair values of the Company's cash equivalents and marketable
      securities are determined through market observable and corroborated
      sources. The carrying amounts reflected in the balance sheets for other
      current assets and accrued expenses approximate fair value due to their
      short-term maturities.

                                      FS-17

<PAGE>

                           EASTERN LIGHT CAPITAL, INC.
                   Notes to Consolidated Financial Statements
                 For the years ended December 31, 2008 and 2007

12.   Common stock options
      --------------------

      The 1998 Incentive Stock Option Plan ("Plan") adopted by the Board of
      Directors and approved by stockholders, provide qualified and
      non-qualified Common Stock options for the purchase of 247,500 Common
      Shares of the Trust. Company officers, employees, agents, contractors and
      Directors of the board are the eligible recipients of the options. The
      options may have a term of up to 10 years with a first exercise date
      generally within twelve (12) months after the date of the grant. Under the
      terms of the Plan, the exercise price of each option cannot be less than
      100% of the Common Shares closing stock price on the date of grant. In
      February of 2008, the Board of Directors approved the reissuance of 84,655
      options at 110% of the Common Shares closing stock price. The Plan expired
      on April 16, 2008. Therefore, the Company can no longer re-issue or
      re-price the outstanding options.

      The activity in the Plan for the years ended December 31, 2008 and 2007
      are as follows:

                                                                Weighted average
                                                     Options     exercise price
                                                     -------    ----------------
      Outstanding at January 1, 2007                 161,220        $  10.69
         Granted                                          --              --
         Exercised                                        --              --
         Forfeited                                   (42,960)         (10.85)
                                                     -------        --------
      Outstanding at December 31, 2007               118,260        $  10.64
                                                     -------        --------
         Granted                                      84,655        $   3.63
         Exercised                                        --              --
         Forfeited                                   (56,820)       ($ 13.50)
      Outstanding at December 31, 2008               146,095        $   5.90
                                                     =======        ========
      Outstanding options exercisable as of
         January 1, 2007                             161,220        $  10.69
         December 31, 2007                           118,260        $  10.64
         December 31, 2008                           146,095        $   5.90
                                                     =======        ========

      The following table summarizes information with respect to stock options
      outstanding at December 31, 2008:

<TABLE>
<CAPTION>
                                                               Options outstanding
                                            ---------------------------------------------------------
                                                                  Weighted-average       Weighted-
                                                               remaining contractual      average
      Range of exercise prices              Number of shares        life (years)       exercise price
                                            ---------------------------------------------------------
<S>                                         <C>                <C>                     <C>
         $3.63                                    84,655                6.88              $  3.63
         $9.00 - $9.06                            61,440                1.58              $  9.03
                                                 -------                ----              -------
                                                 146,095                4.65              $  5.90
                                                 =======                ====              =======
</TABLE>

      For the years ending December 31, 2008 and 2007, no stock options were
      exercised. As of December 31, 2008, a stock option expense of $9,668 was
      recognized for options that had vested. The outstanding stock option
      expense from future vesting is approximately $3,054 and $6,948 for the
      years ending December 31, 2009 and 2010, respectively.

                                      FS-18

<PAGE>

                           EASTERN LIGHT CAPITAL, INC.
                   Notes to Consolidated Financial Statements
                 For the years ended December 31, 2008 and 2007

13.   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
      years ended December 31, 2008 and 2007:

<TABLE>
<CAPTION>
                                                                                2008           2007
                                                                            -----------    -----------
<S>                                                                         <C>            <C>
         Numerator:
         Net loss                                                           $  (619,718)   $(2,939,689)
         Preferred dividends attributable to income                                  --             --
                                                                            -----------    -----------
         Numerator for basic and diluted Earnings per share
            income available to common stockholders                         $  (619,718)   $(2,939,689)
                                                                            ===========    ===========
         Denominator:
            Basic weighted average shares                                       377,014        380,532
            Dilutive effect of options                                               --             --
                                                                            -----------    -----------
            Diluted weighted average shares                                     377,014        380,532
                                                                            ===========    ===========
         Basic loss per common share                                        $     (1.64)   $     (7.73)
                                                                            ===========    ===========
         Diluted loss per common share                                      $     (1.64)   $     (7.73)
                                                                            ===========    ===========
</TABLE>

14.   Selected quarterly financial data - unaudited
      ---------------------------------------------

      Selected quarterly financial data is presented below by quarter for the
      year ended December 31, 2008:

<TABLE>
<CAPTION>
                                                                       For the year ended December 31, 2008
                                                                       ------------------------------------
                                                 Total         4th Qtr        3rd Qtr        2nd Qtr        1st Qtr
                                              -----------    -----------    -----------    -----------    -----------
<S>                                           <C>            <C>            <C>            <C>            <C>
      Revenue                                 $   656,578    $   131,337    $   159,187    $   125,048    $   241,610
      Gain (loss) from other items               (122,414)      (158,597)        30,225        (17,803)        23,761
         Net income (loss)                       (619,718)      (636,328)         5,244          2,098          9,268
         Preferred dividends                           --             --             --             --             --
                                              -----------    -----------    -----------    -----------    -----------
         Net income (loss) applicable
            to common stock                   $  (619,718)   $  (636,328)   $     5,244    $     2,098    $     9,268
                                              ===========    ===========    ===========    ===========    ===========
      Gain (loss) per share,
         basic and diluted                    ($     1.64)   ($     1.68)   $      0.01    $      0.01    $      0.02
</TABLE>

      Selected quarterly financial data is presented below by quarter for the
      year ended December 31, 2007:

<TABLE>
<CAPTION>
                                                                       For the year ended December 31, 2007
                                                                       ------------------------------------
                                                 Total         4th Qtr        3rd Qtr        2nd Qtr        1st Qtr
                                              -----------    -----------    -----------    -----------    -----------
<S>                                           <C>            <C>            <C>            <C>            <C>
      Revenue                                 $ 1,114,958    $   212,183    $   252,494    $   309,245    $   341,036
      Loss from other items                       (78,205)       (63,768)        (1,599)        (9,656)        (3,182)
         Net loss                              (2,939,689)    (1,902,361)      (764,368)      (135,964)      (136,996)
         Preferred dividends                           --             --             --             --             --
                                              -----------    -----------    -----------    -----------    -----------
         Net loss applicable to
            common stock                      $(2,939,689)   $(1,902,361)   $  (764,368)   $  (135,964)   $  (136,996)
                                              ===========    ===========    ===========    ===========    ===========
      Loss per share,
         basic and diluted                    $     (7.73)   $     (5.00)   $     (2.01)   $     (0.36)   $     (0.36)
</TABLE>

                                      FS-19

<PAGE>

                           EASTERN LIGHT CAPITAL, INC.
                   Notes to Consolidated Financial Statements
                 For the years ended December 31, 2008 and 2007

15.   Contingencies
      -------------

      The Company is involved in three legal proceedings as of December 31,
      2008.

      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.

16.   Subsequent Event
      ----------------

      In the first quarter of 2009, the Trust foreclosed on a property without a
      senior lien. The property was originally secured by a mortgage note with a
      face value of $480,000 and a carrying amount of $453,352 and was reported
      as real estate owned with a full carrying amount of $453,552.

                                      FS-20