UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D. C.
20549

FORM 10-Q

|                                                 |                                                                                     
|------------------------------------------------ | ------------------------------------------------------------------------------------
|x                                                | Quarterly report under Section 13 or 15(d) of the
  Securities Exchange Act of 1934 
|For the quarterly period ended March 31, 2008 or
|                                                 |                                                                                     
|o                                                | Transition report under Section 13 or 15(d) of the
  Securities Exchange Act of 1934
|For the transition period from ______ to ______ 

000-161570(Commission
file No.)

VELOCITY ASSET MANAGEMENT, INC.(Exact name of Smaller Reporting Company as specified in its charter)

|                                                                  |  |                                     
|----------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                          |  | 65-0008442                          
|(State or other jurisdiction of incorporation or 
  organization) |  | (I.R.S. employer identification no.)

1800 Route 34N, Suite 404A, Wall, NJ
07719(Address of principal executive offices)

(732)
556-9090(Issuers telephone number, including area code)

Check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes x  No o.

Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):

Large
Accelerated filer o      Accelerated filer o
     Non-Accelerated filer o      Smaller reporting company x

Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of May 20, 2008, there were 17,730,824 shares of the
Companys common stock outstanding.

---



VELOCITY
ASSET MANAGEMENT, INC.

TABLE OF CONTENTS

FORM 10-Q

March 31, 2008

|                                                                                                  |   
|------------------------------------------------------------------------------------------------- | --
|PART I -
  FINANCIAL INFORMATION                                                                  | 1 
|                                                                                                 
|Item
  1. Condensed Consolidated Financial Statements (Unaudited)                                 | 1 
|Condensed
  Consolidated Balance Sheets
  (Unaudited)                                             | 1 
|Condensed
  Consolidated Statements of Income
  (Unaudited)                                       | 2 
|Condensed Consolidated Statements of Changes
in Stockholders Equity (Unaudited)                  | 3 
|Condensed
  Consolidated Statements of Cash Flows (Unaudited)                                     | 4 
|Notes
  to the Condensed Consolidated Financial Statements                                        | 5 
|Item 2.
  Managements Discussion and Analysis of Financial Condition and
  Results of Operations | 12
|Item
  3. Quantitative and Qualitative Disclosure About Market Risks                              | 23
|Item
  4. Controls and Procedures                                                                 | 23
|                                                                                                 
|PART II - OTHER INFORMATION                                                                       | 25

|             |  |                                                                                                        | 
|------------ |  | ------------------------------------------------------------------------------------------------------ | 
|Exhibit 31.1 |  | Certification
  of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act
  of 2002 | 
|             |  |                                                                                                        | 
|Exhibit 31.2 |  | Certification
  of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act
  of 2002 | 
|             |  |                                                                                                        | 
|Exhibit 32.1 |  | Certification of Chief Executive Officer pursuant to section
  906 of the Sarbanes-Oxley Act of 2002   | 
|             |  |                                                                                                        | 
|Exhibit 32.2 |  | Certification of Chief Financial Officer pursuant
  to section 906 of the Sarbanes-Oxley Act of 2002   | 

i

---



PART I -
FINANCIAL INFORMATION

Item 1. Condensed
Consolidated Financial Statements

VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

|                                                                                                                                                                              |  |                  |            |                     |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ---------- | ------------------- | - | ---------- | -
|                                                                                                                                                                              |  | March 31,
  2008 |            | December 31,
  2007 |  
|                                                                                                                                                                              |  |                  |            |                     |  
|                                                                                                                                                                              |  | (Unaudited)      |            |                     |  
|ASSETS                                                                                                                                                                        |  |                  |            |                     |   |            |  
|                                                                                                                                                                              |  |                  |            |                     |   |            |  
|Cash and cash equivalents                                                                                                                                                     |  | $                | 99,688     |                     | $ | 162,180    |  
|Consumer receivables, net                                                                                                                                                     |  |                  | 46,606,524 |                     |   | 46,971,014 |  
|Property and equipment, net of accumulated
  depreciation                                                                                                                     |  |                  | 58,191     |                     |   | 64,420     |  
|Deferred income tax asset, net                                                                                                                                                |  |                  | 80,100     |                     |   | 98,600     |  
|Security deposits                                                                                                                                                             |  |                  | 30,224     |                     |   | 30,224     |  
|Other assets (including $0 and $115,146
  employee loan to a related party at March 31, 2008 and December 31, 2007,
  respectively)                                           |  |                  | 438,523    |                     |   | 487,071    |  
|Assets of discontinued operations                                                                                                                                             |  |                  | 6,501,582  |                     |   | 6,793,319  |  
|                                                                                                                                                                              |  |                  |            |                     |   |            |  
|                                                                                                                                                                              |  |                  |            |                     |   |            |  
|Total assets                                                                                                                                                                  |  | $                | 53,814,832 |                     | $ | 54,606,828 |  
|                                                                                                                                                                              |  |                  |            |                     |   |            |  
|                                                                                                                                                                              |  |                  |            |                     |   |            |  
|LIABILITIES
  AND STOCKHOLDERS EQUITY                                                                                                                                        |  |                  |            |                     |   |            |  
|                                                                                                                                                                              |  |                  |            |                     |   |            |  
|LIABILITIES                                                                                                                                                                   |  |                  |            |                     |   |            |  
|                                                                                                                                                                              |  |                  |            |                     |   |            |  
|Accounts payable and accrued expenses                                                                                                                                         |  | $                | 506,241    |                     | $ | 552,269    |  
|Estimated court and media costs                                                                                                                                               |  |                  | 6,492,813  |                     |   | 7,374,212  |  
|Line of credit                                                                                                                                                                |  |                  | 12,922,838 |                     |   | 14,429,138 |  
|                                                                                                                                                                              |  |                  |            |                     |   |            |  
|Notes payable to related parties                                                                                                                                              |  |                  | 200,000    |                     |   | 200,000    |  
|Convertible subordinated notes                                                                                                                                                |  |                  | 2,350,000  |                     |   | 2,350,000  |  
|Income taxes payable                                                                                                                                                          |  |                  | 1,100,160  |                     |   | 820,222    |  
|Liabilities from discontinued
  operations (including notes payable to related parties of $2,300,000 at March
  31, 2008 and December 31, 2007)                               |  |                  | 5,539,664  |                     |   | 4,374,441  |  
|                                                                                                                                                                              |  |                  |            |                     |   |            |  
|                                                                                                                                                                              |  |                  |            |                     |   |            |  
|Total liabilities                                                                                                                                                             |  |                  | 29,111,716 |                     |   | 30,100,282 |  
|                                                                                                                                                                              |  |                  |            |                     |   |            |  
|                                                                                                                                                                              |  |                  |            |                     |   |            |  
|STOCKHOLDERS EQUITY                                                                                                                                                          |  |                  |            |                     |   |            |  
|                                                                                                                                                                              |  |                  |            |                     |   |            |  
|Series A 10% convertible preferred stock,
  $0.001 par value, 10,000,000 shares authorized, 1,380,000 shares issued and
  outstanding (liquidation preference of $13,800,000) |  |                  | 1,380      |                     |   | 1,380      |  
|Common stock, $0.001 par value, 40,000,000
  shares authorized, 16,930,821 and 17,066,821 shares issued and outstanding, respectively                                         |  |                  | 16,930     |                     |   | 17,066     |  
|Additional paid-in-capital                                                                                                                                                    |  |                  | 25,128,934 |                     |   | 25,243,944 |  
|Accumulated deficit                                                                                                                                                           |  |                  | (444,128   | )                   |   | (755,844   | )
|                                                                                                                                                                              |  |                  |            |                     |   |            |  
|                                                                                                                                                                              |  |                  |            |                     |   |            |  
|Total stockholders equity                                                                                                                                                    |  |                  | 24,703,116 |                     |   | 24,506,546 |  
|                                                                                                                                                                              |  |                  |            |                     |   |            |  
|                                                                                                                                                                              |  |                  |            |                     |   |            |  
|Total liabilities and stockholders
equity                                                                                                                                    |  | $                | 53,814,832 |                     | $ | 54,606,828 |  
|                                                                                                                                                                              |  |                  |            |                     |   |            |  

See accompanying notes to the condensed consolidated financial statements.

1

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME(Unaudited)

|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ---------- | ---- | - | ---------- | -
|                                                                                                                                                                                                                                                                     |  | For the Three Months Ended |           
|                                                                                                                                                                                                                                                                     |  | March 31,                  |           
|                                                                                                                                                                                                                                                                     |  |                            |           
|                                                                                                                                                                                                                                                                     |  | 2008                       |            | 2007 |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |  
|REVENUES                                                                                                                                                                                                                                                             |  |                            |            |      |   |            |  
|Income on consumer receivables                                                                                                                                                                                                                                       |  | $                          | 3,834,853  |      | $ | 3,056,043  |  
|Other income                                                                                                                                                                                                                                                         |  |                            | 1,356      |      |   | 18,832     |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|Total revenues                                                                                                                                                                                                                                                       |  |                            | 3,836,209  |      |   | 3,074,875  |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|OPERATING EXPENSES                                                                                                                                                                                                                                                   |  |                            |            |      |   |            |  
|Professional fees (including fees paid to
  related parties of $210,541 and $337,584 for the periods ended March 31, 2008
  and 2007, respectively)                                                                                                                  |  |                            | 1,169,544  |      |   | 915,724    |  
|General and administrative expenses                                                                                                                                                                                                                                  |  |                            | 541,427    |      |   | 820,603    |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|Total operating expenses                                                                                                                                                                                                                                             |  |                            | 1,710,971  |      |   | 1,736,327  |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|Income from operations                                                                                                                                                                                                                                               |  |                            | 2,125,238  |      |   | 1,338,548  |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|OTHER EXPENSE                                                                                                                                                                                                                                                        |  |                            |            |      |   |            |  
|Interest expense (including interest
  incurred to related parties of $3,500 and $3,500 for the periods ended March
  31, 2008 and 2007, respectively)                                                                                                               |  |                            | (335,070   | )    |   | (345,318   | )
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|Income from continuing operations before
  provision for income taxes                                                                                                                                                                                                |  |                            | 1,790,168  |      |   | 993,230    |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|Provision for income taxes                                                                                                                                                                                                                                           |  |                            | 742,250    |      |   | 426,953    |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|Income from continuing operations                                                                                                                                                                                                                                    |  |                            | 1,047,918  |      |   | 566,277    |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|Loss from discontinued operations
  (including fees paid and interest incurred to related parties of $-0- and
  $167 and $58,139 and $54,250, respectively, at March 31, 2008 and 2007,
  respectively, and net of tax benefit of $64,164 and $45,827, respectively) |  |                            | (391,202   | )    |   | (36,469    | )
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|Net income                                                                                                                                                                                                                                                           |  |                            | 656,716    |      |   | 529,808    |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|Preferred dividends                                                                                                                                                                                                                                                  |  |                            | (345,000   | )    |   | (345,000   | )
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|Net income attributable to common
  shareholders                                                                                                                                                                                                                     |  | $                          | 311,716    |      | $ | 184,808    |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|Earnings (Loss) Per Share:                                                                                                                                                                                                                                           |  |                            |            |      |   |            |  
|Income from continuing operations:                                                                                                                                                                                                                                   |  |                            |            |      |   |            |  
|Basic                                                                                                                                                                                                                                                                |  | $                          | 0.04       |      | $ | 0.01       |  
|Diluted                                                                                                                                                                                                                                                              |  | $                          | 0.04       |      | $ | 0.01       |  
|Discontinued operations:                                                                                                                                                                                                                                             |  |                            |            |      |   |            |  
|Basic                                                                                                                                                                                                                                                                |  | $                          | (0.02      | )    | $ | 0.00       |  
|Diluted                                                                                                                                                                                                                                                              |  | $                          | (0.02      | )    | $ | 0.00       |  
|Net income:                                                                                                                                                                                                                                                          |  |                            |            |      |   |            |  
|Basic                                                                                                                                                                                                                                                                |  | $                          | 0.02       |      | $ | 0.01       |  
|Diluted                                                                                                                                                                                                                                                              |  | $                          | 0.02       |      | $ | 0.01       |  
|                                                                                                                                                                                                                                                                     |  |                            |            |      |   |            |  
|Average Common Shares - Basic                                                                                                                                                                                                                                        |  |                            | 17,047,392 |      |   | 16,138,210 |  
|Average Common Shares - Diluted                                                                                                                                                                                                                                      |  |                            | 17,105,751 |      |   | 17,885,494 |  

See accompanying notes to the condensed consolidated financial
statements.

2

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS EQUITY
For the Three Months Ended March 31, 2008
(Unaudited)

|                                          |  |                    |           |              |   |                                |  |           |            |                                |                       |        |   |   |            |   |   |          |   |   |            |  
|----------------------------------------- |  | ------------------ | --------- | ------------ | - | ------------------------------ |  | --------- | ---------- | ------------------------------ | --------------------- | ------ | - | - | ---------- | - | - | -------- | - | - | ---------- | -
|                                          |  | Preferred Stock    |           | Common Stock |   | Additional
  Paid in
  Capital |  |           |            | Total
  Stockholders
  Equity |                      
|                                          |  |                    |           |              |   |                                |  |           |           
|                                          |  | Number of
  Shares |           | Par Value    |   | Number of
  Shares             |  | Par Value |            |                                | Accumulated
  Deficit |        |  
|                                          |  |                    |           |              |   |                                |  |           |            |                                |                       |        |   |   |           
|                                          |  |                    |           |              |   |                                |  |           |            |                                |                       |        |   |   |            |   |   |          |   |   |            |  
|BALANCES,
  December 31, 2007             |  |                    | 1,380,000 |              | $ | 1,380                          |  |           | 17,066,821 |                                | $                     | 17,066 |   | $ | 25,243,944 |   | $ | (755,844 | ) | $ | 24,506,546 |  
|                                          |  |                    |           |              |   |                                |  |           |            |                                |                       |        |   |   |            |   |   |          |   |   |            |  
|Dividends
  paid on preferred stock       |  |                    |          |              |   |                               |  |           |           |                                |                       |       |   |   |           |   |   | (345,000 | ) |   | (345,000   | )
|                                          |  |                    |           |              |   |                                |  |           |            |                                |                       |        |   |   |            |   |   |          |   |   |            |  
|Purchase and retirement of
  common stock |  |                    |          |              |   |                               |  |           | (136,000   | )                              |                       | (136   | ) |   | (115,010   | ) |   |         |   |   | (115,146   | )
|                                          |  |                    |           |              |   |                                |  |           |            |                                |                       |        |   |   |            |   |   |          |   |   |            |  
|Net income                                |  |                    |          |              |   |                               |  |           |           |                                |                       |       |   |   |           |   |   | 656,716  |   |   | 656,716    |  
|                                          |  |                    |           |              |   |                                |  |           |            |                                |                       |        |   |   |            |   |   |          |   |   |            |  
|                                          |  |                    |           |              |   |                                |  |           |            |                                |                       |        |   |   |            |   |   |          |   |   |            |  
|BALANCES,
  March 31, 2008                |  |                    | 1,380,000 |              | $ | 1,380                          |  |           | 16,930,821 |                                | $                     | 16,930 |   | $ | 25,128,934 |   | $ | (444,128 | ) | $ | 24,703,116 |  
|                                          |  |                    |           |              |   |                                |  |           |            |                                |                       |        |   |   |            |   |   |          |   |   |            |  

See accompanying notes to the
condensed consolidated financial statements.

3

---



VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                                                   |  |      |                                      |      |   |            |  
|---------------------------------------------------------------------------------- |  | ---- | ------------------------------------ | ---- | - | ---------- | -
|                                                                                   |  |      | For the Three Months Ended March 31, |     
|                                                                                   |  |      |                                      |     
|                                                                                   |  | 2008 |                                      | 2007 |  
|                                                                                   |  |      |                                      |      |  
|CASH FLOWS FROM OPERATING
  ACTIVITIES                                             |  |      |                                      |      |   |            |  
|Net income                                                                         |  | $    | 656,716                              |      | $ | 529,808    |  
|Loss from discontinued operations                                                  |  |      | 391,202                              |      |   | 36,469     |  
|                                                                                   |  |      |                                      |      |  
|Income from continuing operations                                                  |  |      | 1,047,918                            |      |   | 566,277    |  
|Adjustments to reconcile
  net income to net cash provided by operating activities |  |      |                                      |      |   |            |  
|Non-cash expenses related to stock
compensation                                    |  |      |                                     |      |   | 55,000     |  
|Depreciation and amortization                                                      |  |      | 45,390                               |      |   | 44,440     |  
|Deferred income tax                                                                |  |      | 18,500                               |      |   | 700        |  
|Increase in:                                                                       |  |      |                                      |      |   |            |  
|Other assets                                                                       |  |      | (40,958                              | )    |   | (70,357    | )
|Increase (decrease) in:                                                            |  |      |                                      |      |   |            |  
|Accounts payable and accrued expenses                                              |  |      | (46,030                              | )    |   | 181,317    |  
|Estimated court and media costs                                                    |  |      | (881,399                             | )    |   | (329,600   | )
|Income taxes payable                                                               |  |      | 279,938                              |      |   | (85,215    | )
|                                                                                   |  |      |                                      |      |   |            |  
|Net cash provided by
  operating activities                                        |  |      | 423,359                              |      |   | 362,562    |  
|                                                                                   |  |      |                                      |      |   |            |  
|                                                                                   |  |      |                                      |      |   |            |  
|CASH FLOWS FROM INVESTING
  ACTIVITIES                                             |  |      |                                      |      |   |            |  
|Acquisition of property and equipment                                              |  |      |                                     |      |   | (9,377     | )
|Acquisition of consumer receivables                                                |  |      | (265,181                             | )    |   | (2,850,623 | )
|Collections applied to principal on consumer
receivables                           |  |      | 614,872                              |      |   | 625,760    |  
|                                                                                   |  |      |                                      |      |   |            |  
|Net cash provided by (used
  in) investing activities                              |  |      | 349,691                              |      |   | (2,234,240 | )
|                                                                                   |  |      |                                      |      |   |            |  
|                                                                                   |  |      |                                      |      |   |            |  
|CASH FLOWS FROM FINANCING
  ACTIVITIES                                             |  |      |                                      |      |   |            |  
|(Repayments) borrowings under lines of credit,
net                                 |  |      | (1,556,300                           | )    |   | 767,533    |  
|Payment of preferred dividends                                                     |  |      | (345,000                             | )    |   | (345,000   | )
|                                                                                   |  |      |                                      |      |   |            |  
|Net cash (used in)
  provided by financing activities                              |  |      | (1,901,300                           | )    |   | 422,533    |  
|                                                                                   |  |      |                                      |      |   |            |  
|                                                                                   |  |      |                                      |      |   |            |  
|CASH FLOWS FROM
  DISCONTINUED OPERATIONS, NET                                     |  |      |                                      |      |   |            |  
|Operating activities                                                               |  |      | (131,060                             | )    |   | (397,185   | )
|Investing activities                                                               |  |      | 100,000                              |      |   |           |  
|Financing activities                                                               |  |      | 1,096,818                            |      |   |           |  
|                                                                                   |  |      |                                      |      |   |            |  
|Net cash  provided by (used in) discontinued operations                            |  |      | 1,065,758                            |      |   | (397,185   | )
|                                                                                   |  |      |                                      |      |   |            |  
|                                                                                   |  |      |                                      |      |   |            |  
|Net decrease in cash and
  cash equivalents                                        |  |      | (62,492                              | )    |   | (1,846,330 | )
|                                                                                   |  |      |                                      |      |   |            |  
|Cash and cash equivalents,
  beginning of period                                   |  |      | 162,180                              |      |   | 2,444,356  |  
|                                                                                   |  |      |                                      |      |   |            |  
|                                                                                   |  |      |                                      |      |   |            |  
|Cash and cash equivalents,
  end of period                                         |  | $    | 99,688                               |      | $ | 598,026    |  
|                                                                                   |  |      |                                      |      |   |            |  
|                                                                                   |  |      |                                      |      |   |            |  
|Supplemental disclosure of
  cash flow information:                                |  |      |                                      |      |   |            |  
|Cash paid for interest - continuing operations                                     |  | $    | 333,071                              |      | $ | 345,317    |  
|Cash paid for income taxes - continuing operations                                 |  | $    | 330,712                              |      | $ | 451,361    |  
|                                                                                   |  |      |                                      |      |   |            |  
|Non-cash item:                                                                     |  |      |                                      |      |   |            |  
|Purchase and retirement of common stock                                            |  | $    | 115,146                              |      | $ |           |  

See accompanying notes to the condensed consolidated financial
statements.

4

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTSMarch 31, 2008

(UNAUDITED)

NOTE 1  ORGANIZATION AND BUSINESS

The condensed
consolidated financial statements of Velocity Asset Management, Inc. (VAMI)
and its wholly-owned subsidiaries, Velocity Investments, LLC (Velocity), J.
Holder, Inc. (J. Holder), VOM, LLC, (VOM), TLOP Acquisition Company, LLC
(TLOP) and SH Sales, Inc. (SH) (the Subsidiaries, and together with
Velocity Asset Management, Inc., the Company) included herein have been
prepared by the Company and are unaudited; however, such information is in
accordance with Securities and Exchange Commission regulations and reflects all
adjustments (consisting solely of normal recurring adjustments) which are, in
the opinion of management, necessary for a fair presentation of the financial
position, results of operations, and cash flows for the interim periods to
which the report relates. The results of operations for the periods ended March
31, 2008 and 2007 are not necessarily indicative of the operating results that
may be achieved for the full year. The assets, liabilities and results of
operations of J. Holder and VOM, have been presented as discontinued
operations of these entities in these financial statements.

Certain
information and footnote disclosures, normally included in consolidated
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America, have been condensed or
omitted. It is suggested that these condensed consolidated financial statements
be read in conjunction with the audited, consolidated financial statements and
notes thereto included in the Companys Form 10-K for the year ended December
31, 2007.

The Company
has one continuing industry segment - the acquisition, management, collection,
and servicing of consumer receivables.

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

Properties Held for Sale

Properties
held for sale consists of real property purchased by the Company for resale and
are carried at the lower of cost or market value. This includes the cost to
purchase the property and repairs or other costs required to present the
property ready for resale. The Company recognizes income and related expenses
from the sale of real property at the date the sale closes. These properties
are maintained by the Companys subsidiary, J. Holder and are reflected as
discontinued operations.

Tax Certificates Held and Accrued Interest
Receivable

The Company
records its New Jersey municipal tax liens at cost plus accrued interest.
Interest income is recognized using the effective interest method (interest
method). These assets are maintained by the Companys subsidiary, VOM and are
reflected as discontinued operations.

Consumer Receivables

The Company
purchases consumer receivable portfolios at a substantial discount from their
face amount due to a deterioration of credit quality between the time of
origination and the Companys acquisition of the portfolios. Income is
recognized using either the interest method or cost recovery method. Upon
acquisition, the Company reviews each consumer receivable portfolio to
determine whether each such portfolio is to be accounted for individually or
whether such portfolio will be assembled into static pools of consumer
receivable portfolios based on common risk characteristics. Once the static
portfolio pools are created, management estimates the future anticipated cash
flows for each pool. If management can reasonably estimate the expected timing
and amount of future cash flows, the interest method is applied. However, if
the expected future cash flows cannot be reasonably estimated, the Company uses
the cost recovery method.

The Company
accounts for its investment in consumer receivable portfolios using the
interest method under the guidance of American Institute of Certified Public
Accountants (AICPA) Statement of Position (SOP) 03-3, Accounting for Loans
or Certain Securities Acquired in a Transfer. SOP 03-3 addresses accounting
for differences between contractual cash flows and cash flows expected to be
collected from an investors initial investment in loans or debt if those
differences are attributable, at least in part, to credit quality. Increases in
expected cash flows are recognized prospectively through adjustment of the
internal rate of return (IRR) while decreases in expected cash flows are
recognized as an impairment.

Under the
guidance of SOP 03-3, when expected cash flows are higher than prior
projections, the increase in expected cash flows results in an increase in the
IRR and therefore, the effect of the cash flow increase is recognized as
increased revenue prospectively over the remaining life of the affected pool.
However, when expected cash flows are lower than prior projections, SOP 03-3
requires that the expected decrease be recognized as an impairment by
decreasing the carrying value of the affected pool (rather than lowering the
IRR) so that the pool will amortize over its expected life using the original
IRR. A pool can become fully amortized (zero carrying balance on the balance
sheet) while still generating cash collections. In this case, all cash
collections are recognized as revenue when received.

5

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTSMarch 31, 2008

(UNAUDITED)

Under the cost
recovery method, no revenue is recognized until the Company has fully collected
the cost of the portfolio, or until such time that the Company considers the
collections to be probable and estimable and begins to recognize income based
on the interest method as described above. The Company currently has no
consumer receivable portfolios accounted for under the cost recovery method.

The Company
estimates and capitalizes certain fees paid and to be paid to third parties
related to the direct acquisition and collection of a portfolio of accounts.
These fees are added to the cost of the individual portfolio and amortized over
the life of the portfolio using the interest method. An offsetting liability is
included as Estimated court and media costs on the balance sheet.

The Company
establishes valuation allowances for all acquired loans subject to SOP 03-3 to
reflect only those losses incurred after acquisition (that is, the present
value of cash flows initially expected at acquisition that are no longer
expected to be collected). Valuation allowances are established only subsequent
to acquisition of the loans, if necessary. At March 31, 2008 and December 31,
2007, the Company had no valuation allowances on its consumer receivables.

Use of Estimates

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

With respect
to income recognition under the interest method, significant estimates have
been made by management with respect to the collectability of future cash flows
of portfolios. The Company takes into consideration the relative credit quality
of the underlying receivables constituting the portfolio acquired, the strategy
implemented to maximize collections thereof as well as other factors to
estimate the anticipated cash flows. Actual results could differ from these
estimates making it reasonably possible that a change in these estimates could
occur within one year. On a quarterly basis, management reviews the estimate of
future cash collections, and whether it is reasonably possible that its
assessment of collectability may change based on actual results and other
factors.

Reclassifications

Certain
reclassifications, which have no effect on net income, have been made to the
prior period financial statements to conform to the current presentation. The
operations of J. Holder and VOM, LLC have been reclassified as discontinued
operations for all periods presented.

Fair Value

In September
2006, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No.157, Fair Value
Measurements (SFAS 157). SFAS 157 defines fair value to be the
price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date
and emphasizes that fair value is a market-based measurement, not an
entity-specific measurement. It establishes a fair value hierarchy and expands
disclosures about fair value measurements in both interim and annual periods.
SFAS 157 is effective for fiscal years beginning after November 15, 2007 and
interim periods within those fiscal years. The Company adopted SFAS 157 on
January 1, 2008 which did not have an impact on its consolidated
financial position and results of operations.

6

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTSMarch 31, 2008

(UNAUDITED)

Recently Issued Accounting Pronouncements

In February
2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities - Including an Amendment of FASB Statement No. 115
(SFAS No. 159). This statement permits entities to choose to measure many
financial instruments and certain other items at fair value. Most of the
provisions of SFAS No. 159 apply only to entities that elect the fair value
option. However, the amendment to SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, applies to all entities with
available-for-sale and trading securities SFAS No. 159 is effective as of the
beginning of an entitys first fiscal year that begins after November 15, 2007.
Management has not made an election to adopt this pronouncement.

In December 2007,
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 141R, Business
Combinations, and Statement of Financial Accounting Standards No.
160, Noncontrolling Interests in
Consolidated Financial Statements, an
amendment of ARB No. 51. These new standards significantly change
the accounting for and reporting of business combination transactions and
noncontrolling interests (previously referred to as minority interests) in
consolidated financial statements. Both standards are effective for fiscal
years beginning on or after December 15, 2008, with early adoption prohibited.
These Statements are effective for the Company beginning on January 1, 2009.
The Company is currently evaluating the provisions of FAS 141(R) and FAS 160.

In March 2008,
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 161, Disclosures
About Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133.
This new standard enhances the disclosure requirements related to derivative
instruments and hedging activities required by FASB
Statement No. 133. This standard is effective for fiscal years and
interim periods beginning after November 15, 2008, with early adoption
encouraged. The Company is currently evaluating the potential impact, if any, of the adoption of SFAS 161  and does not believe that it will  have a significant impact on its consolidated
financial position and results of operations.

In
May 2008, the FASB issued FAS No. 162 The Hierarchy of Generally Accepted
Accounting Principles (FAS 162). FAS 162 identifies the sources of
accounting generally accepted accounting principles in the United States. FAS
162 is effective sixty days following the SECs approval of PCAOB amendments to
AU Section 411, The Meaning of Present Fairly in Conformity With Generally
Accepted Accounting Principles. The Company is currently evaluating the
potential impact, if any, of the adoption of FAS 162 on its condensed
consolidated financial statements.

7

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTSMarch 31, 2008

(UNAUDITED)

NOTE 3  CONSUMER RECEIVABLES

Consumer
receivable activity for the three months ended March 31, 2008 and 2007 was as
follows:

|                                                     |  |                                       |            |                                       |   |            |  
|---------------------------------------------------- |  | ------------------------------------- | ---------- | ------------------------------------- | - | ---------- | -
|                                                     |  | Three Months
  Ended
  March 31, 2008 |            | Three Months
  Ended
  March 31, 2007 |  
|                                                     |  |                                       |            |                                       |  
|Balance at
  beginning of period                     |  | $                                     | 46,971,014 |                                       | $ | 38,327,926 |  
|                                                     |  |                                       |            |                                       |   |            |  
|                                                     |  |                                       |            |                                       |   |            |  
|Acquisitions
  and capitalized costs, net of returns |  |                                       | 265,181    |                                       |   | 2,850,623  |  
|Amortization
  of capitalized costs                  |  |                                       | (14,799    | )                                     |   | (14,799    | )
|                                                     |  |                                       |            |                                       |   |            |  
|                                                     |  |                                       | 250,382    |                                       |   | 2,835,824  |  
|                                                     |  |                                       |            |                                       |   |            |  
|                                                     |  |                                       |            |                                       |   |            |  
|Cash
  collections (1)                               |  |                                       | (4,421,118 | )                                     |   | (3,681,803 | )
|                                                     |  |                                       |            |                                       |   |            |  
|Income
  recognized on consumer receivables (1)      |  |                                       | 3,806,246  |                                       |   | 3,056,043  |  
|                                                     |  |                                       |            |                                       |   |            |  
|Cash collections applied to principal                |  |                                       | (614,872   | )                                     |   | (625,760   | )
|                                                     |  |                                       |            |                                       |   |            |  
|                                                     |  |                                       |            |                                       |   |            |  
|Balance at end of period                             |  | $                                     | 46,606,524 |                                       | $ | 40,537,990 |  
|                                                     |  |                                       |            |                                       |   |            |  

(1) Excludes $28,607 derived from fully
amortized interest method pools for the three months ended March 31, 2008.

As of March
31, 2008, based upon managements current estimation of projected future
collections, principal reductions will be as follows:

|           |  |           |            | 
|---------- |  | --------- | ---------- | 
|           |  | March 31, |           
|           |  |           |           
|2009       |  | $         | 10,012,304 | 
|2010       |  |           | 12,092,327 | 
|2011       |  |           | 11,110,269 | 
|2012       |  |           | 9,580,292  | 
|2013       |  |           | 3,584,132  | 
|Thereafter |  |           | 227,200    | 
|           |  |           |            | 
|           |  |           |            | 
|           |  | $         | 46,606,524 | 
|           |  |           |            | 

8

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTSMarch 31, 2008

(UNAUDITED)

The accretable
yield represents the amount of income the Company can expect to generate over
the remaining lives of its existing portfolios based on estimated cash flows as
of March 31, 2008 and 2007. Changes in the accretable yield are as follows:

|                                                |  |                                       |            |                                       |   |            |  
|----------------------------------------------- |  | ------------------------------------- | ---------- | ------------------------------------- | - | ---------- | -
|                                                |  | Three Months
  Ended
  March 31, 2008 |            | Three Months
  Ended
  March 31, 2007 |  
|                                                |  |                                       |            |                                       |  
|Balance at beginning of period                  |  | $                                     | 31,442,803 |                                       | $ | 29,643,803 |  
|Income recognized on consumer receivables
  (1) |  |                                       | (3,806,246 | )                                     |   | (3,056,043 | )
|Additions                                       |  |                                       | 235,339    |                                       |   | 2,405,503  |  
|                                                |  |                                       |            |                                       |   |            |  
|                                                |  |                                       |            |                                       |   |            |  
|Balance at end of period                        |  | $                                     | 27,871,896 |                                       | $ | 28,993,263 |  
|                                                |  |                                       |            |                                       |   |            |  

(1) Excludes
$28,607 derived from fully amortized interest method pools for the three months ended March 31, 2008.

NOTE 4  DISCONTINUED OPERATIONS

On December
31, 2007, the Board of Directors voted to discontinue operations of its
wholly-owned subsidiaries J. Holder and VOM. The operations of J. Holder will
cease upon the liquidation of all real properties, assignments and judgments.
This is expected to occur before December 31, 2008. The Company is currently
liquidating all of VOMs tax certificates and is accepting proposals for the
sale of VOM. The Company expects the liquidation or sale to be completed prior
to December 31, 2008.

The
divestiture of the businesses is consistent with the Companys strategy of
concentrating resources in the core product area of consumer receivables.

Revenues and
net loss for the discontinued operations were as follows:

|                                                      |  |                                       |          |                                       |   |         |  
|----------------------------------------------------- |  | ------------------------------------- | -------- | ------------------------------------- | - | ------- | -
|                                                      |  | Three Months
  Ended
  March 31, 2008 |          | Three Months
  Ended
  March 31, 2007 |  
|                                                      |  |                                       |          |                                       |  
|Revenues                                              |  | $                                     | 41,426   |                                       | $ | 95,865  |  
|                                                      |  |                                       |          |                                       |  
|Loss from discontinued operations before income taxes |  |                                       | (455,366 | )                                     |   | (82,296 | )
|                                                      |  |                                       |          |                                       |  

Assets and
liabilities of the discontinued businesses were as follows:

|                                                             |  |                  |           |                     |   |           | 
|------------------------------------------------------------ |  | ---------------- | --------- | ------------------- | - | --------- | 
|                                                             |  | March 31,
  2008 |           | December 31,
  2007 |  
|                                                             |  |                  |           |                     |  
|Notes
  receivable                                           |  | $                | 25,000    |                     | $ | 25,000    | 
|Notes
  receivable from related party                        |  |                  |          |                     |   | 100,000   | 
|Deposits
  on properties                                     |  |                  | 10,000    |                     |   | 10,000    | 
|Properties
  held for sale                                   |  |                  | 5,926,119 |                     |   | 5,962,739 | 
|Tax
  certificates held and accrued interest receivable, net |  |                  | 247,659   |                     |   | 325,339   | 
|Deferred
  income tax asset, net                             |  |                  | 280,600   |                     |   | 325,000   | 
|Other
  assets                                               |  |                  | 12,204    |                     |   | 45,241    | 
|                                                             |  |                  |           |                     |   |           | 
|Total
assets                                                 |  | $                | 6,501,582 |                     | $ | 6,793,319 | 
|                                                             |  |                  |           |                     |   |           | 
|                                                             |  |                  |           |                     |   |           | 
|Accounts
  payable and accrued expenses                      |  | $                | 941,846   |                     | $ | 873,441   | 
|Line
  of credit                                             |  |                  | 412,818   |                     |   | 316,000   | 
|Notes
  payable                                              |  |                  | 1,885,000 |                     |   | 885,000   | 
|Notes
  payable to related parties                           |  |                  | 2,300,000 |                     |   | 2,300,000 | 
|                                                             |  |                  |           |                     |   |           | 
|Total
liabilities                                            |  | $                | 5,539,664 |                     | $ | 4,374,441 | 
|                                                             |  |                  |           |                     |   |           | 

9

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTSMarch 31, 2008

(UNAUDITED)

NOTE 5  LINES OF CREDIT

In February
2008, Velocity entered into a Fourth Amendment to the Loan and Security
Agreement (the Fourth Amendment to the Loan Agreement) with the Lender
pursuant to amend the Loan and Security Agreement dated January 27, 2005 (the
Original Loan Agreement). Pursuant to the Fourth Amendment to the Loan
Agreement, the Lender increased the amount of credit available under the credit
facility from $17,500,000 to $22,500,000 and extended the maturity date until
January 27, 2011. The Lender has agreed to eliminate the requirement that
certain executive officers of the Company provide the Lender with joint and
several limited guarantees of Velocitys obligations under the Original Loan
Agreement.

Use of the
credit facility is subject to certain restrictive covenants under the Fourth
Amendment to the Loan Agreement including but not limited to: a restriction on
incurring additional indebtedness or liens; a change of control of Velocity;
and a restriction on entering into transactions with affiliates outside the
course of Velocitys ordinary business. Velocity has agreed to maintain at
least $14,000,000 in members equity and subordinated debt. The Company has
also agreed to maintain at least $25,000,000 in stockholders equity and
subordinated debt for the duration of the facility. In addition, Velocity and
the Company covenant that net income for each subsequent quarter shall not be
less than $375,000 and $200,000, respectively.

As of March
31, 2008 and December 31, 2007, the Company had $12,922,838 and $14,429,138
outstanding on the credit facility, respectively. The rate of interest at March
31, 2008 was 6.75%.

On June 14,
2007, the Company entered into an agreement for a revolving credit line for
$800,000 with Northern State Bank. Interest on the outstanding principal
balance will be the banks prime rate plus one-half percent per annum. Any sums
loaned under the note may be repaid at any time, without premium or penalty,
and reborrowed from time to time, until July 1, 2008. Payments of interest only
are due on the 1st day of each and every month until July 1, 2008, on which
date the entire balance or principal, interest and fees then unpaid shall be
due and payable. The credit line is secured by various mortgages of real
property held by the Companys subsidiary, J. Holder. The Company had $412,818
and $316,000 outstanding on the credit line as of March 31, 2008 and December
31, 2007, respectively, which is reported in net liabilities of discontinued
operations.

NOTE 6  NOTE PAYABLE

On January 25,
2008, the Company issued a promissory note for $1,000,000 with a financial
institution. The note bears interest at a rate of 7% per annum, payable monthly
in arrears, on the first day of each month with the original principal amount
plus accrued interest due October 25, 2008. The note is collateralized by
specified real property owned by the Companys subsidiary, J. Holder.
The note is guaranteed by the Company and personally by certain executive officers of
the Company. J. Holder has agreed to maintain a loan to value ratio of 33% at all times.

NOTE 7  RELATED PARTY TRANSACTIONS

The Company
received a note receivable in the amount of $205,000 in partial payment of the
$455,000 purchase price from an officer and related party, John C. Kleinert for
the assignment of membership interests in Ridgedale Avenue Commons, LLC, and
Morris Avenue Commons, LLC, previously owned by J. Holder, Inc. As of December
31, 2007, the note had a balance of $100,000 which is included in the assets
 of discontinued operations, along with interest at the rate of 12%
which shall accrue only on and after December 26, 2007, and is payable by means
of one lump sum payment of principal and accrued interest on August 25, 2008.
As of March 14, 2008, Mr. Kleinert made a $100,000 lump sum payment to the Company
and the promissory note was retired. The Company waived $2,630 in accrued
interest on the prepayment.

On December
28, 2007, the Company paid $115,146 in withholding taxes in connection with the
vesting of 175,000 shares of restricted stock granted to James J. Mastriani. On
March 14, 2008, Mr. Mastriani has returned 136,000 of such shares for
cancellation and retirement to offset this payment.

The Company
has notes payable with various related parties. Total interest expense to
related parties for the three months ended March 31, 2008 and 2007 was $61,639
and $57,750, respectively. For the three months ended March 31, 2008 and March 31, 2007, $58,139
and $54,250, respectively, is included in the results of operations of
discontinued operations.

The Company
engages Ragan & Ragan, PC, an entity owned by Messrs. Ragan & Ragan, a
director and officer of the Company, respectively, to pursue legal collection
of its receivable portfolios with respect to obligors and properties located in
the State of New Jersey. The fee arrangements between the Companys
subsidiaries Velocity, J. Holder and VOM and Ragan & Ragan, P.C., each
dated as of January 1, 2005, have been reviewed and approved by all the members
of a committee appointed by the Board of Directors other than Mr. Ragan, Sr. who
abstained. John C. Kleinert and James J. Mastriani comprised the committee. In
May 2007, the fee arrangements were approved by Unanimous Written Consent of
the Board of Directors other than Mr. Ragan, Sr. who abstained.

10

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTSMarch 31, 2008

(UNAUDITED)

Ragan and
Ragan, P.C. routinely advances court costs associated with their servicing of
consumer receivable portfolios, which are subsequently reimbursed by the
Company. These costs are included in the estimated court and media costs in the
consolidated balance sheets.

Legal fees
paid to Ragan & Ragan, P.C., by the Companys subsidiaries were as follows:

|                          |  |                                       |         |                                       |   |         | 
|------------------------- |  | ------------------------------------- | ------- | ------------------------------------- | - | ------- | 
|                          |  | Three Months
  Ended
  March 31, 2008 |         | Three Months
  Ended
  March 31, 2007 |  
|                          |  |                                       |         |                                       |  
|Velocity Investments, LLC |  | $                                     | 210,541 |                                       | $ | 337,584 | 
|VOM, LLC                  |  |                                       |        |                                       |   | 167     | 
|                          |  |                                       |         |                                       |   |         | 
|                          |  |                                       |         |                                       |   |         | 
|                          |  | $                                     | 210,541 |                                       | $ | 337,751 | 
|                          |  |                                       |         |                                       |   |         | 

NOTE 8  EARNINGS PER SHARE

Basic earnings
per share are computed using the weighted average number of shares outstanding
during each period. Diluted earnings per share are computed using the weighted
average number of shares outstanding during each period, plus the dilutive
effects of potential convertible securities related to preferred stock,
convertible notes, options and warrants. Outstanding options and warrants to
non-employees convertible into 1,390,910 and 1,177,160 shares of common stock,
convertible preferred stock, convertible into 5,520,000 shares of common stock
and convertible notes, convertible into 940,000 and -0- shares for the three
months ended March 31, 2008 and 2007, respectively, were not included in the
dilutive per share calculations because their effect would have been
anti-dilutive.

The following table
sets forth the computation of basic and diluted earnings per share:

|                                                                     |  |                                       |            |                                       |   |            |  
|-------------------------------------------------------------------- |  | ------------------------------------- | ---------- | ------------------------------------- | - | ---------- | -
|                                                                     |  | Three Months
  Ended
  March 31, 2008 |            | Three Months
  Ended
  March 31, 2007 |  
|                                                                     |  |                                       |            |                                       |  
|Numerator:                                                           |  |                                       |            |                                       |   |            |  
|Income from continuing operations                                    |  | $                                     | 1,047,918  |                                       | $ | 566,277    |  
|Preferred stock dividends                                            |  |                                       | (345,000   | )                                     |   | (345,000   | )
|                                                                     |  |                                       |            |                                       |   |            |  
|Income from continuing operations available to common shareholders   |  |                                       | 702,918    |                                       |   | 221,277    |  
|Discontinued operations, net of tax                                  |  |                                       | (391,202   | )                                     |   | (36,469    | )
|                                                                     |  |                                       |            |                                       |   |            |  
|Net income attributable to common
  shareholders - Basic and Diluted |  | $                                     | 311,716    |                                       | $ | 184,808    |  
|                                                                     |  |                                       |            |                                       |   |            |  
|                                                                     |  |                                       |            |                                       |   |            |  
|Denominator:                                                         |  |                                       |            |                                       |   |            |  
|Average shares of common stock outstanding
  - Basic                 |  |                                       | 17,047,392 |                                       |   | 16,138,210 |  
|Effect of dilutive instruments:                                      |  |                                       |            |                                       |   |            |  
|Stock options                                                        |  |                                       | 58,359     |                                       |   | 1,747,284  |  
|                                                                     |  |                                       |            |                                       |   |            |  
|                                                                     |  |                                       |            |                                       |   |            |  
|Weighted average shares - Diluted                                    |  |                                       | 17,105,751 |                                       |   | 17,885,494 |  
|                                                                     |  |                                       |            |                                       |   |            |  

NOTE 9  SUBSEQUENT EVENTS

On May 6,
2008, the Company consummated an initial closing of its private placement
offering of units comprised of shares of common stock (the Shares) and
warrants to purchase shares of common stock to accredited investors. The
Company sold an aggregate of 800,003 shares at a purchase price of $0.90 per
Share with three year warrants to purchase an aggregate of 200,001
shares of the Companys common stock at an exercise price of $1.125 per share.
The Company intends to use the net proceeds from the offering primarily for the
purchase of portfolios of unsecured consumer receivables and for general
corporate purposes, including working capital.

The Company
received net proceeds of $599,600 from the placement, after payment of offering
expenses of approximately $70,000 and commissions of approximately $50,400. The
Company retained a registered FINRA broker dealer to act as placement agent. In
addition, the placement agent will receive three-year warrants to
acquire 80,000 shares of the Companys common stock at an exercise price of
$1.125 per share.

11

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Item 2. Managements Discussion and
Analysis of Financial Condition and Results of Operations

The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our financial statements and
notes thereto and the other financial information included elsewhere in this
report.

NOTE ON
FORWARD LOOKING STATEMENTS

This
quarterly report on Form 10-Q includes and incorporates by reference
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934 with respect to our financial condition, results of operations,
plans, objectives, future performance and business, which are usually
identified by the use of words such as will, may, anticipates,
believes, estimates, expects, projects, plans, predicts,
continues, intends, should, would, or similar expressions. We intend
for these forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995, and are including this statement for purposes of
complying with these safe harbor provisions.

These
forward-looking statements reflect our current views and expectations about our
plans, strategies and prospects, which are based on the information currently
available and on current assumptions.

We
cannot give any guarantee that these plans, intentions or expectations will be
achieved. Investors are cautioned that all forward-looking statements involve
risks and uncertainties, and actual results may differ materially from those
discussed in the forward-looking statements as a result of various factors,
including those Risk Factors set forth in our Form 10-K for the year ended
December 31, 2007. Listed below and discussed elsewhere in this prospectus are
some important risks, uncertainties and contingencies that could cause our
actual results, performances or achievements to be materially different from
the forward-looking statements included or incorporated by reference in this
prospectus. These risks, uncertainties and contingencies include, but are not
limited to, the following:

| |   |                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the
  availability for purchase of consumer receivable portfolios, interests in
  distressed real property and tax lien certificates that satisfy our criteria;
| |   |                                                                                                                                                                
| |  | competition
  in the industry;                                                                                                                                 
| |   |                                                                                                                                                                
| |  | the
  availability of debt and equity financing;                                                                                                               
| |   |                                                                                                                                                                
| |  | future
  acquisitions;                                                                                                                                         
| |   |                                                                                                                                                                
| |  | the
  availability of qualified personnel;                                                                                                                     
| |   |                                                                                                                                                                
| |  | international,
  national, regional and local economic and political changes;                                                                                  
| |   |                                                                                                                                                                
| |  | general
  economic and market conditions, including the current economic and housing
  crisis;                                                                 
| |   |                                                                                                                                                                
| |  | changes in
  applicable state and federal laws;                                                                                                                
| |   |                                                                                                                                                                
| |  | trends
  affecting our industry, our financial condition or results of operations;                                                                             
| |   |                                                                                                                                                                
| |  | the timing
  and amount of collections on our consumer receivable portfolios; and                                                                              
| |   |                                                                                                                                                                
| |  | increases in
  operating expenses associated with the growth of our operations.                                                                                

You
should read this document
with the understanding that our actual future
results may be materially different from what we expect. We may not update
these forward-looking statements, even though our situation may change in the
future. We qualify all of our forward-looking statements by these cautionary
statements.

Overview

We
were organized in the State of Delaware in December 1986 as Tele-Optics, Inc.
We were inactive until February 3, 2004, when we acquired STB, Inc. Since that
acquisition, we have engaged in the business of acquiring, managing and
servicing distressed assets, consisting of consumer receivable portfolios,
interests in distressed real property and tax lien certificates. Historically,
the business had been carried on by our three wholly-owned subsidiaries:
Velocity Investments, LLC, which invests in non-performing consumer debt
purchased in the secondary market at a discount from face value and then seeks
to liquidate these debt portfolios through legal collection means; J. Holder,
Inc. (JHI), which invested in distressed real property interests, namely real
property being sold at sheriffs foreclosure and judgment execution sales,
defaulted mortgages, partial interests in real property and the acquisition of
real property with clouded title; and VOM, LLC (VOM), which invested in New Jersey
municipal tax liens with the focus on realization of value through legal
collection and owned real estate opportunities presented by the current tax
environment.  On December 31, 2007, the
Board of Directors of the Company unanimously approved managements plan to
discontinue the operation of the Companys JHI and VOM subsidiaries and to sell
and dispose of the assets or membership interests/capital stock of such
subsidiaries. Accordingly, these operations are shown as discontinued
operations  in the accompanying financial statements.

12

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Our
consumer receivable portfolios are purchased at a discount from the amount
actually owed by the obligor. Our interests in distressed real property were
purchased following an extensive due diligence process concerning the legal
status of each property and a market analysis of the value of the property or
underlying property. Our tax lien certificates were purchased at a discount from
par following a due diligence analysis similar to that performed in connection
with the purchase of interests in distressed real property. Our profitability
as a company depends upon our ability to purchase and collect on a sufficient
volume of our consumer receivables to generate revenue that exceeds our cost.

After
careful consideration of trends in revenues and future opportunities for
growth, management has made the determination that the consumer receivables
business will be the sole operating focus of the Company in 2008. As a result,
the Company is currently considering all strategic alternatives for JHI and
VOM, including, but not limited to, the sale of some or all of each entitys
assets, partnering or other collaboration agreements, or a merger, spin-off or
other strategic transaction. On December 31, 2007, the Board of Directors of
the Company unanimously approved managements plan to discontinue the operation
of the Companys JHI and VOM subsidiaries and to sell and dispose of the assets
or membership interests/capital stock of such subsidiaries. The operations of JHI
will cease upon the liquidation of all real properties, assignments and
judgments. This is expected to occur before December 31, 2008. The Company is
currently liquidating all of VOMs tax certificates and is accepting
proposals for the sale of VOM. The Company expects the liquidation or sale
to be completed prior to December 31, 2008.

The divestiture of the
businesses is consistent with the Companys strategy of concentrating resources
in the core product area of consumer receivables. The Company does not expect
managements plan with respect to the disposal of the assets of the
discontinued operations to have a material effect on reported results
of operations.

Critical Accounting Policies

Our
discussion and analysis of financial condition and results of operations is
based upon our consolidated financial statements which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the fair value of consumer receivables, the fair value of
properties held for sale and the reported amounts of revenues and expenses. On
an on-going basis, we evaluate our estimates, including those related to the
recognition of revenue, future estimated cash flows and income taxes. We base
our estimates on historical experience and on various other assumptions that
are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results
could differ from those estimates. We believe the following critical accounting
policies affect the significant judgment and estimates used in the preparation
of our consolidated financial statements.

Purchased Consumer Receivable Portfolios
and Revenue Recognition

We
purchase portfolios of consumer receivable accounts at a substantial discount
from their face amounts, usually discounted at 75% to 98% from face value. We
record these accounts at our acquisition cost, plus the estimated cost of
court filing fees and account media. The portfolios of consumer receivables
contain accounts that have experienced deterioration of credit quality between
origination and our acquisition of the consumer receivable portfolios. The
discounted amount paid for a portfolio of consumer receivable accounts reflects
our determination that it is probable we will be unable to collect all amounts
due according to the contractual terms of the accounts. At acquisition, we
review the consumer receivable accounts in the portfolio to determine whether
there is evidence of deterioration of credit quality since origination and
whether it is probable that we will be unable to collect all amounts due
according to the contractual terms of the accounts. If both conditions exist,
we determine whether each such portfolio is to be accounted for individually or
whether such portfolios will be assembled into static pools based on common
risk characteristics. We consider expected prepayments and estimate the amount
and timing of undiscounted expected principal, interest and other cash flows
for each acquired portfolio of consumer receivable accounts and subsequently
aggregated pools of consumer receivable portfolios. We determine the excess of
the pools scheduled contractual principal and contractual interest payments
over all cash flows expected at acquisition as an amount that should not be
accreted based on our proprietary acquisition models. The remaining amount,
representing the excess of the loans cash flows expected to be collected over
the amount paid, is accreted into income recognized on consumer receivables
over the remaining life of the loan or pool using the interest method.

13

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We
acquire these consumer receivable portfolios at a significant discount to the
amount actually owed by the borrowers. We acquire these portfolios after a
qualitative and quantitative analysis of the underlying receivables and calculate
the purchase price so that our estimated cash flow provides us with a
sufficient return on our acquisition costs and servicing expenses. After
purchasing a portfolio, we actively monitor its performance and review and
adjust our collection and servicing strategies accordingly.

We
account for our investment in consumer receivables using the interest method
under the guidance of American Institute of Certified Public Accountants
Statement of Position 03-3, Accounting for Loans or Certain Securities Acquired
in a Transfer. In accordance with Statement of Position 03-03 (and the amended
Practice Bulletin 6), revenue is recognized based on our anticipated gross cash
collections and the estimated rate of return over the useful life of the pool.

We
believe that the amounts and timing of cash collections for our purchased
receivables can be reasonably estimated and, therefore, we utilize the interest
method of accounting for our purchased consumer receivables prescribed by
Statement of Position 03-3. Such belief is predicated on our historical results
and our knowledge of the industry. Each static pool of receivables is
statistically modeled to determine its projected cash flows based on historical
cash collections for pools with similar risk characteristics. Statement of
Position 03-3 requires that the accrual basis of accounting be used at the time
the amount and timing of cash flows from an acquired portfolio can be
reasonably estimated and collection is probable.

Where
the future cash collections of a portfolio cannot be reasonably estimated, we
use the cost recovery method as prescribed under Statement of Position 03-3.
Under the cost recovery method, no revenue is recognized until we have fully
collected the initial acquisition cost of the portfolio. We currently have no consumer
receivable portfolios that are accounted for under the cost recovery method.

Under
Statement of Position 03-3, to the extent that there are differences in actual
performance versus expected performance, increases in expected cash flows are
recognized prospectively through adjustment of the internal rate of return
while decreases in expected cash flows are recognized as an impairment. Under
both the guidance of Statement of Position 03-3 and the amended Practice
Bulletin 6, when expected cash flows are higher than prior projections, the
increase in expected cash flows results in an increase in the internal rate of
return and therefore, the effect of the cash flow increase is recognized as
increased revenue prospectively over the remaining life of the affected pool.
However, when expected cash flows are lower than prior projections, Statement
of Position 03-3 requires that the expected decrease be recognized as an
impairment by decreasing the carrying value of the affected pool (rather than
lowering the internal rate of return) so that the pool will amortize over its
expected life using the original internal rate of return.

Generally,
these portfolios are expected to amortize over a five year period based on our
estimated future cash flows. Historically, a majority of the cash we ultimately
collect on a portfolio is received during the first 40 months after acquiring
the portfolio, although additional amounts are collected over the remaining period.
The estimated future cash flows of the portfolios are re-evaluated quarterly.

The
internal rate of return is estimated and periodically recalculated based on the
timing and amount of anticipated cash flows using our proprietary collection
models. A pool can become fully amortized (zero carrying balance on the balance
sheet) while still generating cash collections. In this case, all cash
collections are recognized as revenue when received. Additionally, we would use
the cost recovery method when collections on a particular pool of accounts
cannot be reasonably predicted.

14

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We
establish valuation allowances for all acquired consumer receivable portfolios
subject to Statement of Position 03-3 to reflect only those losses incurred
after acquisition (that is, the present value of cash flows initially expected
at acquisition that are no longer expected to be collected). Valuation
allowances are established only subsequent to acquisition of the loans. At
March 31, 2008 and March 31, 2007, we had no valuation allowance on our
consumer receivables.

Application
of Statement of Position 03-3 requires the use of estimates to calculate a
projected internal rate of return for each pool. These estimates are based on
historical cash collections. If future cash collections are materially
different in amount or timing than projected cash collections, earnings could
be affected either positively or negatively. Higher collection amounts or cash
collections that occur sooner than projected cash collections will have a
favorable impact on yield and revenues. Lower collection amounts or cash
collections that occur later than projected cash collections will have an
unfavorable impact on operations. Consumer receivable activity for the three
month periods ended March 31, 2008 and 2007 consisted of the following:

|                                                     |  |                            |            |                  |   |            |  
|---------------------------------------------------- |  | -------------------------- | ---------- | ---------------- | - | ---------- | -
|                                                     |  | For the Three Months Ended |           
|                                                     |  |                            |           
|                                                     |  | March 31,
  2008           |            | March 31,
  2007 |  
|                                                     |  |                            |            |                  |  
|Balance at
  beginning of period                     |  | $                          | 46,971,014 |                  | $ | 38,327,926 |  
|                                                     |  |                            |            |                  |   |            |  
|Acquisitions and
  capitalized costs, net of returns |  |                            | 265,181    |                  |   | 2,850,623  |  
|Amortization of
  capitalized costs                  |  |                            | (14,799    | )                |   | (14,799    | )
|                                                     |  |                            |            |                  |   |            |  
|                                                     |  |                            | 250,382    |                  |   | 2,835,824  |  
|                                                     |  |                            |            |                  |   |            |  
|                                                     |  |                            |            |                  |   |            |  
|Cash collections (1)                                 |  |                            | (4,421,118 | )                |   | (3,681,803 | )
|Income
  recognized on consumer receivables (1)      |  |                            | 3,806,246  |                  |   | 3,056,043  |  
|                                                     |  |                            |            |                  |   |            |  
|Cash collections
  applied to principal              |  |                            | (614,872   | )                |   | (625,760   | )
|                                                     |  |                            |            |                  |   |            |  
|Balance at end
  of period                           |  | $                          | 46,606,524 |                  | $ | 40,537,990 |  
|                                                     |  |                            |            |                  |   |            |  

(1) Excludes $28,607 derived from fully amortized interest method pools for the three months ended March 31, 2008.

15

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Stock Based Compensation

We
have adopted the fair value recognition provisions of Share-Based Payment (SFAS No. 123R), which supersedes Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees. The revised statement addresses the accounting for share-based
payment transactions with employees and other third parties, eliminates the
ability to account for share-based transactions using APB No. 25 and requires
that the compensation costs relating to such transactions be recognized in the
consolidated financial statements. SFAS No. 123R requires additional
disclosures relating to the income tax and cash flow effects resulting from
share-based payments. Additionally, regarding the treatment of non-employee
stock based compensation, we have followed the guidance of EITF 96-18,
Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services.

New Accounting Pronouncements

In February
2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities - Including an Amendment of FASB Statement No. 115
(SFAS No. 159). This statement permits entities to choose to measure many
financial instruments and certain other items at fair value. Most of the
provisions of SFAS No. 159 apply only to entities that elect the fair value
option. However, the amendment to SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, applies to all entities with
available-for-sale and trading securities SFAS No. 159 is effective as of the
beginning of an entitys first fiscal year that begins after November 15, 2007.
Management has not made an election to adopt this pronouncement.

In December
2007, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 141R, Business Combinations, and Statement of
Financial Accounting Standards No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51.   These new
standards significantly change the accounting for and reporting of business
combination transactions and noncontrolling interests (previously referred to
as minority interests) in consolidated financial statements.  Both standards
are effective for fiscal years beginning on or after December 15, 2008, with
early adoption prohibited. These Statements are effective for the Company
beginning on January 1, 2009.  The Company is currently evaluating the
provisions of FAS 141(R) and FAS 160.

In March 2008,
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 161, Disclosures About Derivative Instruments and
Hedging Activities, an amendment of FASB Statement No. 133.   This new
standard enhances the disclosure requirements related to derivative instruments
and hedging activities required by FASB Statement No. 133.   This standard
is effective for fiscal years and interim periods beginning after November 15,
2008, with early adoption encouraged. The Company is currently evaluating the potential impact, if any, of the adoption of
 SFAS 161  and does not believe that it will have any impact on its consolidated financial position and results of
operations.

In
May 2008, the FASB issued FAS No. 162 The Hierarchy of Generally Accepted
Accounting Principles (FAS 162). FAS 162 identifies the sources of
accounting generally accepted accounting principles in the United States. FAS
162 is effective sixty days following the SECs approval of PCAOB amendments to
AU Section 411, The Meaning of Present Fairly in Conformity With Generally
Accepted Accounting Principles. The Company is currently evaluating the
potential impact, if any, of the adoption of FAS 162 on its condensed
consolidated financial statements.

16

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Results of Operations

Total
Revenues

Comparison
of the 2008 First Quarter to the 2007 First Quarter

Total
revenues from continuing operations for the three month period ended March 31,
2008 (the 2008 First Quarter) were $3,836,209 as compared to $3,074,875
during the three month period ended March 31, 2007 (the 2007 First Quarter),
representing a  24.8% increase.  The increase in revenues was primarily
attributable to a significant increase in interest income related to
collections on consumer receivables at our Velocity Investments
subsidiary.

Total
Operating Expenses

Comparison
of the 2008 First Quarter to the 2007 First Quarter

Total
operating expenses in the 2008 First Quarter were
$1,710,971 as compared to $1,736,237 during the 2007 First Quarter, representing
a 1.5% decrease.  The decrease in total
operating expenses was primarily attributable to a  decrease in general and administrative expenses slightly offset
by an increase in professional fees.

Other
Income (Expense)

Comparison
of the 2008 First Quarter to the 2007 First Quarter

Interest
expense in the 2008 First Quarter was $335,070 as compared to $345,318 in the
2007 First Quarter, representing a 3.0% decrease. The decrease in interest
expense was primarily attributable to a decline in the Wells Fargo Prime Rate
in connection with Velocity Investments line of credit with Wells Fargo
Foothill, Inc.

Net
Income (Loss)

Comparison
of the 2008 First Quarter to the 2007 First Quarter

Net
income for the 2008 First Quarter was $656,716 as compared to net income
of $529,808 for the 2007 First Quarter, a 24.0% increase.
Income from continuing operations for the 2008 First Quarter was $1,047,918 as compared to income from continuing operations
for the 2007 First Quarter of $566,277, an 85.1% increase. The Company had a $391,202 loss from discontinued operations in the 2008 First Quarter compared to $36,469 in the 2007 First Quarter. The loss
in the 2008 First Quarter was primarily attributable to the payment of approximately $230,000 in
property taxes in connection with an investment property in Melbourne, Florida.

Liquidity and Capital Resources

Liquidity and Capital Resources

The
term liquidity refers to our ability to generate adequate amounts of cash to
fund our operations, including portfolio purchases, operating expenses, tax
payments and dividend payments, if any.
Historically, we have generated working capital primarily from cash
collections on our portfolios of consumer receivables in excess of the cash
collections required to make principal and interest payments on our senior
credit facility, and from offerings of equity securities and debt instruments.
At March 31, 2008, the Company had approximately $100,000 in cash and cash
equivalents, approximately $9,600,000 in credit available from our credit
facility and trade accounts payable of approximately $506,000. Management
believes that the revenues expected to be generated from operations, the May
2008 equity offering discussed below and the Companys line of credit will be
sufficient to finance operations through the first quarter of 2009.  However, in order to continue to execute our
business plan, the Company will need to raise additional capital by way of the
sale of equity securities or debt instruments.
If, for any reason, our available cash otherwise proves to be
insufficient to fund operations (because of future changes in the industry,
general economic conditions, unanticipated increases in expenses, or other
factors, including acquisitions), we will be required to seek additional
funding.

On December 31, 2007, the Board of
Directors of the Company unanimously approved managements plan to discontinue the
operation of the Companys JHI and VOM subsidiaries. The Company does not
expect managements plan with respect to the disposal of assets of the discontinued
operations to have a material effect on the Companys liquidity. The discontinued
operations have no employees and management believes that it will require an immaterial amount of general and
administrative expense to execute managements plan.

17

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Net
cash provided by operating activities was approximately $423,000 during the
three months ended March 31, 2008, compared to net cash provided by operating
activities of approximately $363,000 during the three months ended March 31, 2007.
The increase in net cash provided by operating activities was primarily related to
an increase in net income partially offset by  estimated court and
media costs. Net cash provided by investing activities was approximately $350,000
during the three months ended March 31, 2008, compared to net cash used in
investing activities of $2,234,000 during the three months ended March 31,
2007. The decrease in net cash used in investing activities was primarily due
to a decrease in acquisition of consumer receivables portfolios. Net cash used
in financing activities was approximately $1,900,000 during the three months
ended March 31, 2008, compared to net cash provided by financing activities of
approximately $423,000 during the three months ended March 31, 2007. The decrease in net cash provided by financing
activities was primarily due to collections of consumer receivables at
Velocity Investments paying down the principal amount outstanding on the Wells Fargo Loan.
Net cash provided by discontinued operations was approximately $1,066,000 during the three months ended March 31, 2008 as compared to net cash
used by discontinued operations of approximately $397,000 during the three months ended March 31, 2007. The increase in cash provided by discontinued
operations was primarily due to a $1,000,000 promissory note issued by J. Holder collateralized by a specified real property.

On
January 27, 2005, VI entered into a Loan and Security Agreement with Wells
Fargo, Inc., a California corporation, in which Wells Fargo agreed to provide
VI with a three year $12,500,000 senior credit facility to finance the
acquisition of individual pools of unsecured consumer receivables that are
approved by Wells Fargo under specific eligibility criteria set forth in the
Loan and Security Agreement.

Simultaneous
with the Loan and Security Agreement, the following agreements were also
entered into with Wells Fargo, a Continuing Guaranty, in which we
unconditionally and irrevocably guaranteed our obligations under the Loan and
Security Agreement; a Security and Pledge Agreement, in which we pledged all of
our assets to secure the credit facility, including, but not limited to, all of
our stock ownership of JHI and all our membership interests in VI and VOM; and
a Subordination Agreement, in which all sums owing to us by VI as an
intercompany payable for advances or loans made or property transferred to VI
will be subordinated to the credit facility to the extent that their sums, when
added to VI membership interest in the parent does not exceed $3,250,000. In
addition, three of our executive officers, John C. Kleinert, W. Peter Ragan,
Sr. and W. Peter Ragan, Jr., provided joint and several limited guarantees of
VIs obligations under the Loan and Security Agreement.

On
February 27, 2006, VI entered into a First Amendment to the Loan and Security
Agreement pursuant to which Wells Fargo extended the credit facility until
January 27, 2009 and agreed to increase the advance rate under the facility to
75% (up from 60%) of the purchase price of individual pools of unsecured
consumer receivables that are approved by the lender. Under the First Amendment
to the Loan and Security Agreement, Wells Fargo also agreed to reduce the
interest rate on the loan from 3.5% above the prime rate of Wells Fargo Bank,
N.A. to 1.5% above such prime rate. On
February 23, 2007, we entered into a Third Amendment to the Loan Agreement
dated January 27, 2005. Pursuant to the Amended and Restated Loan Agreement,
the Lender agreed to permanently increase our credit facility up to
$17,500,000. On
March 3, 2008 (effective February 29, 2008), the Lender increased the amount of
credit available under the Credit Facility from $17,500,000 to $22,500,000 and
extended the maturity date until January 27, 2011. The Lender also agreed to
eliminate the requirement that certain executive officers of VI and the Company
provide the Lender with joint and several limited guarantees of VIs
obligations under the Original Loan Agreement.

Use
of the Credit Facility is subject to VI meeting certain restrictive
covenants under the Fourth Amendment to the Loan Agreement including but not
limited to: a restriction on incurring additional indebtedness or liens; a
change of control of Velocity; a restriction on entering into transactions with
affiliates outside the course of Velocitys ordinary business; and a
restriction on making payments to the Company in compliance with the
Subordination Agreement. Velocity has agreed to maintain at least $14,000,000
in members equity and subordinated debt. The Company has also agreed to
maintain at least $25,000,000 in stockholders equity and subordinated debt for
the duration of the facility. In addition, Velocity and the Company covenant
that net income for each subsequent quarter shall not be less than $375,000 and
$200,000, respectively. The Company had $12,923,000 outstanding on the credit line as of March
31, 2008.

18

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On January 25, 2008,
 the Company issued a promissory
note for $1,000,000 with a financial institution. The note bears interest at a
rate of 7% per annum, payable monthly in arrears, on the first day of each
month with the original principal amount plus accrued interest due October 25,
2008. The note is collateralized with specified real property owned by the
Companys subsidiary, J. Holder. The Note is guaranteed by the Company and personally by certain executive officers of the Company. J. Holder has agreed to maintain a loan to value ratio
of 33% at all times.

On
May 6, 2008, the Company consummated an initial closing  of its private placement offering of units
comprised of shares of common stock  and warrants to purchase
shares of common stock  to accredited
investors. The Company sold an aggregate of 800,003 shares at a purchase price
of $0.90 per share and delivered three-year warrants to purchase  200,001
shares of the Companys common stock at an exercise price of $1.125 per share. The Company intends to use the net
proceeds from the offering primarily for the purchase of portfolios of
unsecured consumer receivables and for general corporate purposes, including
working capital.

The
Company received net proceeds of $599,600 from the placement, after payment of
offering expenses of approximately $70,000 and commissions of approximately
$50,400. The Company retained a registered FINRA broker dealer to act as
placement agent. In addition, the placement agent is entitled to receive
three-year warrants to acquire 80,000 shares of the Companys common stock at
an exercise price of $1.125 per share.

The
Company anticipates that it will be undertaking additional financing from time
to time to increase its working capital and to increase its ability to purchase
additional pools of consumer receivables. Such financings may be private
placement or public offerings, and may include common stock, debt securities or
other equity based securities. Although we have no specific capital raising
transactions currently under negotiation, we may determine to undertake such
transactions at any time. Such transactions could include the sale of equity at
less than the market price of our common stock at the time of such transaction,
although we have no present intention to undertake below market transactions,
and could be for gross proceeds of as low as $1,000,000 to approximately
$10,000,000 or more. The terms of any such capital raising transaction would be
considered by the Board of Directors at the time it is proposed by management.

19

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Supplementary Information on Consumer Receivables Portfolios:

The
following tables show certain data related to our entire owned portfolios.
These tables describe the purchase price, cash collections and related multiples.
We utilize a long-term legal approach to collecting our portfolios of consumer
receivables. This approach has historically caused us to realize significant
cash collections from pools of consumer receivables years after they are
initially acquired. When we acquire a new pool of consumer receivables, our
estimates typically result in a 60 month projection of cash collections.

|                              |  |                      |         |                                                                 |  |                |  |   |       |  |   |       | 
|----------------------------- |  | -------------------- | ------- | --------------------------------------------------------------- |  | -------------- |  | - | ----- |  | - | ----- | 
|                              |  |                      |         | Portfolio Purchases/Collections
  (dollar amounts in thousands) | 
|                              |  |                      |         | Gross Cash
  Collections
  Per Period                           | 
|Reporting
  Period            |  | Outstanding
  Amount |         | Portfolios
  Purchased                                          |  | Purchase Price |  |  
|                              |  |                      |         |                                                                 |  |                |  |   |      
|                             
|Period Ended March 31,
  2007 |  | $                    | 41,860  |                                                                 |  | 6              |  | $ | 1,763 |  | $ | 3,682 | 
|                              |  |                      |         |                                                                 |  |                |  |   |       |  |   |       | 
|Period Ended March 31, 2008   |  | $                    | 129,893 |                                                                 |  | 2              |  | $ | 169   |  | $ | 4,450 | 

20

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|                                    |  |                      |  |                                    |   |                      |  |                              |            |                                                 |   |                                                |  |        |   |  |   |        | 
|----------------------------------- |  | -------------------- |  | ---------------------------------- | - | -------------------- |  | ---------------------------- | ---------- | ----------------------------------------------- | - | ---------------------------------------------- |  | ------ | - |  | - | ------ | 
|Portfolio Purchases and Performance | 
|Year                                |  | Total #
  Portfolios |  | Initial
  Outstanding
  Amount (1) |   | Purchase
  Price (2) |  | Gross Cash
  Collections (3) |            | Gross Cash
  Collections
  as a % of
  Cost (4) |   | Average Price 
  Per Dollar 
  Outstanding (5) | 
|                                    |  |                      |  |                                    |   |                      |  |                              |            |                                                 |   |                                                | 
|2003                                |  | 5                    |  |                                    | $ | 11,497,833           |  | $                            | 2,038,950  |                                                 | $ | 8,409,543                                      |  | 412.44 | % |  | $ | 0.1773 | 
|2004                                |  | 10                   |  |                                    | $ | 9,511,088            |  | $                            | 1,450,115  |                                                 | $ | 3,251,611                                      |  | 224.23 | % |  | $ | 0.1525 | 
|2005                                |  | 22                   |  |                                    | $ | 133,103,213          |  | $                            | 11,449,557 |                                                 | $ | 15,741,075                                     |  | 137.48 | % |  | $ | 0.0860 | 
|2006                                |  | 26                   |  |                                    | $ | 199,042,032          |  | $                            | 15,367,940 |                                                 | $ | 11,218,057                                     |  | 73.00  | % |  | $ | 0.0772 | 
|2007                                |  | 19                   |  |                                    | $ | 129,892,667          |  | $                            | 9,316,779  |                                                 | $ | 2,565,948                                      |  | 27.54  | % |  | $ | 0.0717 | 
|2008                                |  | 2                    |  |                                    | $ | 1,960,656            |  | $                            | 168,621    |                                                 | $ | 2,383                                          |  | 1.41   | % |  | $ | 0.0860 | 

|    |                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Initial Outstanding Amount represents the original
  face amount purchased from sellers and has not been reduced by any
  adjustments including payments and returns. (Returns are defined as
  purchase price refunded by the seller due to the return of non-compliant
  accounts, such as deceased and bankrupt accounts.)
|    |                                                                                                                                                                                                                                                                                                                                
|(2) | Purchase Price represents the cash paid to sellers
  to acquire portfolios of defaulted consumer receivables, and does not include
  certain capitalized acquisition costs.                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                
|(3) | Gross Cash Collections include gross cash
  collections on portfolios of consumer receivables as of March 31, 2008.                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                
|(4) | Gross Cash Collections as a Percentage of Cost
  represents the gross cash collections on portfolios of consumer receivables
  as of March 31, 2008 divided by the purchase price such portfolios in the
  related calendar year.                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                
|(5) | Average Price Per Dollar Outstanding represents the
  Purchase Price of portfolios of consumer receivables divided by the Initial
  Outstanding Amount of such portfolios purchased in the related calendar year.                                                                                                              

The
prices we pay for our consumer receivable portfolios are dependent on many
criteria including the age of the portfolio, the type of receivable, our
analysis of the percentage of obligors who owe debt that is collectible through
legal collection means and the geographical distribution of the portfolio. When
we pay higher prices for portfolios that may have a higher percentage of
obligors whose debt we believe is collectible through legal collection means,
we believe it is not at the sacrifice of our expected returns. Price
fluctuations for portfolio purchases from quarter to quarter or year over year
are indicative of the economy or overall mix of the types of portfolios we are purchasing.

During
the three months ended March 31, 2008, we acquired 2 portfolios of consumer
receivables aggregating approximately $2 million in initial outstanding amount
at a purchase price of approximately $169,000, bringing the aggregate
initial outstanding amount of consumer receivables under management as of March
31, 2008 to approximately $487 million, an increase of 23.3% as compared to
approximately $395 million as of March 31, 2007. For the three months period
ended March 31, 2008, we posted gross collections of approximately $4.45
million, compared to gross collections of $3.68 million in the three month
period ended March 31, 2007, representing a 20.1% increase.  Additionally, in April 2008, we acquired two
portfolios of consumer receivables aggregating approximately $9.65 million in
initial outstanding amount at a purchase price of approximately $581,000.

21

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Trends

As
a result of the March 2008 increase in our senior line of credit and our
outstanding preferred stock, we anticipate that we will incur significant
increases in interest expense and dividend payments, offset over time, by
expected increased revenues from consumer receivable portfolios purchased
utilizing funds under such line of credit. No assurance can be given that the
expected revenues from such purchased portfolios will exceed the additional
interest expense and dividend payments. While we are not presently aware of any
other known trends that may have a material impact on our revenues, we are
continuing to monitor our collections to assess whether the current economic and housing
crisis will have a long term impact on collections. We do not believe that the
recent decreases in interest rates  has
had or will have a material adverse effect upon our business.

22

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Item 3. Quantitative and Qualitative Disclosure About
Market Risks

Not
applicable.

Item 4. Controls and Procedures

Evaluation
of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial
Officer, are responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rule 13a-15(f) of
the Securities Exchange Act of 1934, as amended (the Exchange Act).

Internal
control over financial reporting is promulgated under the Exchange Act as a
process designed by, or under the supervision of, our CEO and CFO and effected
by our board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and
procedures that:

        Pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of our assets;

        Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting principles
generally accepted in the United States and that our receipts and expenditures
are being made only in accordance with authorizations of our management and
directors; and

        Provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition or disposition of our assets that could have a material effect on
the financial statements.

Readers
are cautioned that internal control over financial reporting, no matter how
well designed, has inherent limitations and may not prevent or detect
misstatements. Therefore, even effective internal control over financial
reporting can only provide reasonable assurance with respect to the financial
statement preparation and presentation.

Our
management, under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of our disclosure controls and procedures as defined in Exchange Act Rules
13a-15(e) and15d-15(e) as of the end of the period covered by this Report based
upon the framework in Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based
upon that evaluation and for the reasons discussed below, our Chief Executive Officer
and our Chief Financial Officer concluded that as of the end of such period,
our disclosure controls and procedures were not effective as of the end of
period covered by this report in timely alerting them to material information
relating to Velocity Asset Management, Inc. required to be disclosed in our
periodic reports with the Securities and Exchange Commission. As a result of
this conclusion, we have initiated the remedial actions disclosed below.

As
a result of an evaluation of the effectiveness of our disclosure controls and
procedures as of the end of the period covered by our periodic report on Form
10-Q for the period ended March 31, 2008, with the participation of our Chief
Executive Officer and Chief Financial Officer, we identified a material
weakness in our internal controls over financial reporting relating to the
compliance of certain related party transactions with the Sarbanes-Oxley Act.

23

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A
material weakness is a control deficiency, or a combination of control deficiencies,
that results in a more than remote likelihood that a material misstatement of
the Companys annual or interim financial statements will not be prevented or
detected. Management has concluded that material weaknesses existed in the
following areas with respect to Compliance with Section 402 of the Sarbanes
Oxley Act as of March 31, 2008:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company received a note receivable in the amount
  of $205,000 in partial payment of the $455,000 purchase price from an officer
  and related party, John C. Kleinert, for the assignment of membership
  interests in Ridgedale Avenue Commons, LLC, and Morris Avenue Commons, LLC,
  previously owned by J. Holder, Inc. As of December 31, 2007, the note had a
  balance of $100,000, along with interest at the rate of 12% which
  accrued only on and after December 26, 2007, and was payable by means of one
  lump sum payment of principal and accrued interest on August 25, 2008. As of
  March 14, 2008, Mr. Kleinert made a $100,000 lump sum payment to the Company
  and the promissory note was retired. The Company waived approximately $2,600 in accrued interest.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | On December 28, 2007, the Company paid $115,146 in
  withholding taxes in connection with the vesting of 175,000 shares of
  restricted stock granted to James J. Mastriani. As of March 14, 2008, Mr.
  Mastriani returned 136,000 of such shares for cancellation and retirement in
  order to offset such payment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

The
following remedial actions were undertaken immediately.

| |   |                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company has engaged BDO Seidman, LLP as its
  Sarbanes-Oxley consultant to advise and assist the Company in its compliance
  with internal controls over financial reporting in the future.                                                    
| |   |                                                                                                                                                                                                                                                    
| |  | Prior to presenting any related party transaction to
  the Board of Directors for approval, management of the Company will submit
  any such transition to securities law counsel for review to ensure compliance
  with applicable securities law.

Velocity
continues the process to complete a thorough review of its internal controls as
part of its preparation for compliance with the requirements of Section 404 of
the Sarbanes-Oxley Act of 2002. Section 404 requires our management to report
on, and our external auditors to attest to, the effectiveness of our internal
control structure and procedures for financial reporting. As a non-accelerated
filer under Rule 12b-2 of the Exchange Act, our first report under Section 404
as a smaller reporting company will be contained in our Form 10-K for the
period ended December 31, 2009.

Changes
in Internal Control over Financial Reporting

Further, other than the above,
there were no changes in the Companys internal control over financial
reporting during the first quarter that materially affected, or are reasonably
likely to materially affect, the Companys internal control over financial
reporting.

24

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PART II - OTHER INFORMATION

Item 1 Legal Proceedings

In
the ordinary course of our business we are involved in numerous legal
proceedings. We regularly initiate collection lawsuits against consumers using
our network of third party law firms. Also, consumers may occasionally initiate
litigation against us in which they allege that we have violated a Federal or
state law in the process of collecting on their account. We do not believe that
these  matters are material to our business and financial
condition.

As of March 31, 2008,
 there are presently no material
pending legal proceedings to which we or any of our subsidiaries is a party or
to which any of our property is the subject and, to the best of our knowledge,
no such actions against us is contemplated or threatened.

Item 2 Unregistered Sales of Securities and Use of Proceeds

None.

Item 3 Defaults Upon Senior Securities

None.

Item 4 Submission of Matters to a Vote of Security Holders

None.

Item 5 Other Information

None.

Item 6 Exhibits

|     |                                                                                                          
|---- | ---------------------------------------------------------------------------------------------------------
|31.1 | Certification of Principal Executive Officer
  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 
|     |                                                                                                          
|31.2 | Certification of Principal financial Officer
  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|     |                                                                                                          
|32.1 | Certification of Principal Executive Officer
  pursuant to 18 U.S.C. Section 1350                        
|     |                                                                                                          
|32.2 | Certification of Principal Financial Officer
  pursuant to 18 U.S.C. Section 1350.                       

25

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

|                    |                                   |                                      
|------------------- | --------------------------------- | -------------------------------------
|                    | VELOCITY ASSET MANAGEMENT,
  INC.
|                    |                                  
|Dated: May 23, 2008 | By:                               | /s/ John C. Kleinert                 
|                    |                                   |                                      
|                    |                                   | John C. Kleinert                     
|                    |                                   | Chief Executive Officer and President

26

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