Certain statements contained herein are not based on historical information and certain statements contained in future filings by the Company with the SEC, in the Company's press releases or in the Company's public and stockholder communications may not be based on historical facts and are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by reference to a future period or periods, or by the use of forward-looking terms such as "may", "will", "expect", "anticipate", or similar terms. Actual results could materially differ from those in the forward-looking statements due to a variety of factors.

Preparation of the Company's consolidated financial statements is based upon the operating results of the Trust and WCFC. Management's discussion and analysis of the results of operations for the three and nine months ended September 30, 2008 and 2007 follows:

OVERVIEW

In May of 1997, the Trust registered its common shares with the Securities and Exchange Commission under the Securities Act of 1933. On September 30, 1998, the initial public offering of Common Shares was completed. Since October 1, 1998, the common shares have been listed on the American Stock Exchange ("AMEX"). During the fourth quarter of 2006, the Company's shareholders voted to terminate the outside manager ("Former Manager" or "CAAI") and initiate internal management. On December 29, 2006, the Former Manager's management and advisory contracts were terminated and the Company commenced self-management. On July 2, 2008, the shareholder approved a new corporate name, Eastern Light Capital, Incorporated. The common shares trade on the AMEX with the ticker symbol ELC.

Since the onset of 2007, the mortgage industry has experienced and is continuing to experience tumultuous change. Many industry participants have announced significant workforce reductions, delayed earnings reports and experienced precipitous drops in their share price. The most unfortunate companies have sought bankruptcy protection or have been forced into regulatory supervised mergers with better capitalized companies. The trends which precipitated these changes include the absence of credit, increasing residential mortgage delinquencies, loan foreclosures and the protracted withdrawal of investor interest in mortgage securities and whole loans.

The Company's residential loan portfolio continues to contain unacceptable levels of non-performing assets. These delinquencies reduce current revenues until the non-performing loans are monetized and their proceeds re-invested. During 2007, significant loan loss reserves were taken to recognize the embedded losses in non-performing loans and the general decline in residential mortgage loan values. In response to these problems and to maximize shareholder value, Management has continued to focus on efficient asset management as the strategic alternative to selling loans at depressed valuations. As mortgage loans are monetized, the Company's investment focus will expand to provide a source of future profitability and increased shareholder value. Due to the distress of California residential properties, foreclosed loans, also known as Other Real Estate Owned or "REO" are requiring additional time to monetize. These REO's may require additional unreserved write-downs, if the values of residential real estate continue to decline.

The Trust is a real estate investment trust ("REIT") and REIT's are generally required to distribute at least 90% of their annual taxable income as dividend payments. During 2005, 2006 and 2007, the Trust incurred taxable losses. On account of these losses, dividend payments were curtailed during 2005. These taxable losses, also known as Net Operating Losses ("NOL"), allow the Trust to retain future taxable income equal to the cumulative amount of its NOL balance. The Internal Revenue Code waives mandatory dividend payments until prior years taxable losses are recovered. As of December 31, 2007, the Company's total NOL carryforward is approximately $3,195,480.

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

The Company has a $2,000,000 credit facility with a Bank scheduled to mature on November 14, 2008. On November 7, 2008, the FDIC seized the Bank and approval of the line of credit has been suspended until the FDIC completes its review of the Company's extension request. If the FDIC does not approve the extension, the Company may not have adequate liquidity to satisfy the credit facility's outstanding balance.

CRITICAL ACCOUNTING POLICIES

The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of America. The Company's significant accounting policies are described in the notes to the consolidated financial statements. 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.

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 concern exists as to the ultimate collectability 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 security of the claim, the payee's ability and willingness to pay the claim in full and the costs associated with collection.

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 options. Stock options granted prior to December 15, 2005 were issued with exercise prices no less than 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 are issued with exercise prices not less than 110% of the market price of the Trust's common stock on the award dates and are subject to a mandatory expense calculation at the award dates and recognized upon vesting.

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. The Company is reviewing its current investment policies to include other REIT permissible assets in addition to residential mortgage loans.

Loan Origination. During 2007 and the nine months ended September 30, 2008, the Company did not make or acquire any new loans. Prospectively, portfolio loans may be internally originated or acquired from unaffiliated third parties.

Asset Management. Asset management is mortgage loan servicing and real estate owned ("REO") dispositions. Loan servicing consists of collecting payments from borrowers making required advances, accounting for principal and interest payments, holding borrowed proceeds in escrow until fulfillment of mortgage loan requirements, monitoring insurance coverage and real property tax payments, contacting delinquent borrowers, and in the event of unremedied defaults performing other administrative duties including supervising foreclosures. In assessing a delinquent mortgage loan, management reviews the likelihood that a net gain will be recognized from foreclosing on the delinquent mortgage loan. Estimates are based on an anticipated sales price of the foreclosed property that includes a discount from the latest appraised value of the property, less the sum of pre-existing liens, costs of disposition, the face amount of the mortgage loan and accrued interest receivable.

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.

Commitments and Contingencies. The Company only issues loan commitments on a conditional basis and generally funds such loans promptly upon removal of any conditions. The Trust did not have any commitments to fund loans as of September 30, 2008 and 2007. On December 14, 2005, the Trust unconditionally guaranteed CAFC's sale of mortgage loans to Lehman Brothers Bank. During 2005, no loans were sold to Lehman Brothers Bank pursuant to this guarantee. During the first quarter of 2006, two loans for $2,500,000 were sold to Lehman Brothers Bank pursuant to this guarantee. Since the first quarter of 2006, the Company has not sold any loans to Lehman Brothers Bank or its affiliates. The Company is unaware of any liabilities to Lehman Brothers Bank pursuant to this guarantee.

As of September 30, 2008, the Company owned five properties. Three of these properties included senior liens of $1,998,377, $511,939 and $633,319. These claims are non-recourse to the Company if the underlying collateral value is insufficient to satisfy the senior lien.

As of September 30, 2008, the following table summarizes the Company's outstanding repayment obligations:

             Maximum Other
      Commercial Commitments (a)         Total Amounts        Amount of Commitment Expiration Per Period
       as of September 30, 2008            Committed     --------------------------------------------------------
                                                          Less than     1 - 3 years       4 - 5          After 5
                                                           1 year                         years           years
-----------------------------------------------------------------------------------------------------------------
Lines of Credit (b)                        $2,008,258    $2,000,258         $0              0               0
-----------------------------------------------------------------------------------------------------------------
Standby Repurchase Obligations                 0             $0             $0              0               0
-----------------------------------------------------------------------------------------------------------------
Total Commercial Commitments              $2,008,258     $2,000,258         $0              0               0
-----------------------------------------------------------------------------------------------------------------

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

(b) Unless extended, outstanding obligations as of September 30, 2008 are payable on or before November 14, 2008.

RESULTS OF OPERATIONS

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

Three months ended September 30, 2008 and 2007. Revenues for the third quarter decreased to $159,187 as compared to $252,494 for the same period in the prior year. The decrease in revenue, during the third quarter of 2008 was due to decreases in interest income of $92,925. Interest income declines on account of a reduction in the mortgage notes receivable balance.

Expenses for the third quarter of 2008 decreased to $184,168 as compared to $1,007,225 for the same period in the prior year. The decrease in expenses during the third quarter of 2008 was primarily due to the decreases in the provision for loan losses of $545,545, in interest expenses of $45,820, and general and administrative of $180,535.

Nine months ended September 30, 2008 and 2007. Revenues for the nine months of 2008 decreased to $525,241 as compared to $902,775 for the same period in the prior year. The decrease in revenue, during the first nine months of 2008 was due to decreases in interest income of $376,277. Interest income declines on account of a reduction in the mortgage notes receivable balance.

Expenses for the nine months ended September 30, 2008 decreased to $544,814 as compared to $1,916,617 for the same period in the prior year. The decrease in expenses during the first nine months of 2008 was primarily due to the decreases in the provision for loan losses of $823,703, in interest expenses of $149,702 and general and administrative of $220,147.

LIQUIDITY AND CAPITAL RESOURCES

The Trust's $2,000,000 Bank borrowing is scheduled to mature on November 14, 2008. On November 7, 2008, the FDIC seized the Bank and approval of the line of credit has been suspended until the FDIC completes its review of the Company's extension request. If the FDIC does not approve the extension, the Company may not have adequate liquidity to satisfy the credit facility's outstanding balance. The Company's cash and near cash investments are not sufficient to retire the facility's outstanding balance of approximately $2,000,000. Management believes that the FDIC will extend the facility's scheduled maturity and that the cash flows from operations, mortgage principal payments and the sales proceeds of REO will be sufficient to meet the liquidity needs of the company's businesses for the next twelve months.

Nine months ended September 30, 2008 and 2007. As of January 1, 2008 and 2007, the Trust had $962,190 and $599,943 of cash and cash equivalents, respectively. During the nine month period ended September 30, 2008, cash and cash equivalents increased by $912,244. During the nine month period ended September 30, 2007, cash and cash equivalents increased by $731,946. After taking into effect the various transactions discussed below, cash and cash equivalents at September 30, 2008 and 2007 were $1,874,434 and $1,331,889.

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.

Net cash used in operating activities during the nine months ended September 30, 2008 and 2007 was $533,535 and $594,462, respectively. During the first nine months of 2008, net income provided $16,610, a change in accounts receivable used $90,540, a change in other liabilities used $424,452 and a change in allowance for doubtful accounts used $132,033. During the first nine months of 2007, net loss used $1,037,328, a change in allowance for doubtful accounts provided $170,000 and a change in allowance for loan losses provided $287,691.

Net cash provided by investing activities for the nine months ended September 30, 2008 and 2007 was $3,090,898 and $4,452,314, respectively. During the first nine months of 2008, proceeds from mortgage notes receivable provided $1,340,701 and the change in REO provided $1,764,050. During the first nine months of 2007, proceeds from mortgage notes receivable provided $5,964,156 and the change in REO used $1,594,825.

Net cash used in financing activities during the nine months ended September 30, 2008 and 2007 was $1,645,119 and $3,125,906, respectively. During the first nine months of 2008, net payments of bank loans used cash of $1,620,000 and the purchase of treasury stock used $25,119. During the first nine months of 2007, net payments of bank loans used cash of $3,125,906.