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, 2009 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 PORTFOLIO GROUP, 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 has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files).

Yes o   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 21, 2009, there
were 894,799 shares of the Companys common stock outstanding.

---



VELOCITY PORTFOLIO GROUP, INC.

TABLE OF CONTENTS

FORM 10-Q

March 31, 2009

|                                                                                               |                                                                                                     |  | 
|---------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- |  | 
|                                                                                               | Page                                                                                               
|                                                                                               |                                                                                                    
|PART I -
 FINANCIAL INFORMATION                                                                |                                                                                                     | 
|                                                                                               |                                                                                                     |  | 
|Item 1. Condensed Consolidated Financial Statements                                            |                                                                                                     | 
|Condensed Consolidated Balance Sheets (unaudited)                                              | 1                                                                                                   | 
|Condensed Consolidated Statements of Operations (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 (unaudited)                          | 5-13                                                                                                | 
|Item 2. Managements Discussion and Analysis of
 Financial Condition and Results of Operations | 14                                                                                                  | 
|Item 3. Quantitative and Qualitative Disclosure About
 Market Risks                            | 25                                                                                                  | 
|Item 4. Controls and Procedures                                                                | 25                                                                                                  | 
|                                                                                               |                                                                                                     |  | 
|PART II -
 OTHER INFORMATION                                                                   |                                                                                                     | 
|                                                                                               |                                                                                                     |  | 
|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. Consolidated Financial Statements

VELOCITY PORTFOLIO GROUP, INC. AND
SUBSIDIARIES

CONDENSED
CONSOLIDATED BALANCE SHEETS(Unaudited)

|                                                                                                                                                                            |  |                |            |                   |   |            |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ---------- | ----------------- | - | ---------- | -
|                                                                                                                                                                            |  | March 31, 2009 |            | December 31, 2008 |  
|                                                                                                                                                                            |  |                |            |                   |  
|                                                                                                                                                                            |  | (Unaudited)    |            |                   |  
|ASSETS                                                                                                                                                                      |  |                |            |                   |   |            |  
|                                                                                                                                                                            |  |                |            |                   |   |            |  
|Cash and cash equivalents                                                                                                                                                   |  | $              | 148,979    |                   | $ | 7,869      |  
|Consumer receivables, net                                                                                                                                                   |  |                | 35,512,165 |                   |   | 37,592,634 |  
|Income taxes receivable                                                                                                                                                     |  |                | 162,543    |                   |   | 177,208    |  
|Property and equipment, net of accumulated
 depreciation                                                                                                                    |  |                | 42,220     |                   |   | 44,980     |  
|Deferred income tax asset, net                                                                                                                                              |  |                | 1,555,800  |                   |   | 1,158,500  |  
|Security deposits                                                                                                                                                           |  |                | 30,224     |                   |   | 30,224     |  
|Other assets                                                                                                                                                                |  |                | 405,432    |                   |   | 337,964    |  
|Assets of discontinued operations
 (including $14,694 and $0 accounts receivable from a related party at March
 31, 2009 and December 31, 2008, respectively)               |  |                | 5,702,593  |                   |   | 5,759,478  |  
|                                                                                                                                                                            |  |                |            |                   |   |            |  
|                                                                                                                                                                            |  |                |            |                   |   |            |  
|Total assets                                                                                                                                                                |  | $              | 43,559,956 |                   | $ | 45,108,857 |  
|                                                                                                                                                                            |  |                |            |                   |   |            |  
|                                                                                                                                                                            |  |                |            |                   |   |            |  
|LIABILITIES
 AND STOCKHOLDERS EQUITY                                                                                                                                       |  |                |            |                   |   |            |  
|                                                                                                                                                                            |  |                |            |                   |   |            |  
|LIABILITIES                                                                                                                                                                 |  |                |            |                   |   |            |  
|                                                                                                                                                                            |  |                |            |                   |   |            |  
|Accounts payable and accrued expenses                                                                                                                                       |  | $              | 1,213,123  |                   | $ | 1,186,536  |  
|Estimated court and media costs                                                                                                                                             |  |                | 4,765,094  |                   |   | 5,195,437  |  
|Line of credit                                                                                                                                                              |  |                | 8,054,701  |                   |   | 8,400,067  |  
|Notes payable                                                                                                                                                               |  |                | 400,000    |                   |   | 400,000    |  
|Notes
payable to related parties                                                                                                                                            |  |                | 1,100,000  |                   |   | 1,100,000  |  
|Accrued preferred dividends                                                                                                                                                 |  |                | 230,000    |                   |   |           |  
|Convertible subordinated notes                                                                                                                                              |  |                | 2,350,000  |                   |   | 2,350,000  |  
|Other liabilities - warrants                                                                                                                                                |  |                | 96,142     |                   |   |           |  
|Liabilities from discontinued operations
 (including notes payable to related parties of $2,300,000)                                                                        |  |                | 5,641,295  |                   |   | 5,566,279  |  
|                                                                                                                                                                            |  |                |            |                   |   |            |  
|                                                                                                                                                                            |  |                |            |                   |   |            |  
|Total liabilities                                                                                                                                                           |  |                | 23,850,355 |                   |   | 24,198,319 |  
|                                                                                                                                                                            |  |                |            |                   |   |            |  
|                                                                                                                                                                            |  |                |            |                   |   |            |  
|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, 894,799 and 853,341 shares issued and outstanding,
 respectively                                             |  |                | 895        |                   |   | 895        |  
|Additional paid-in-capital                                                                                                                                                  |  |                | 25,855,869 |                   |   | 25,943,069 |  
|Accumulated deficit                                                                                                                                                         |  |                | (6,148,543 | )                 |   | (5,034,806 | )
|                                                                                                                                                                            |  |                |            |                   |   |            |  
|                                                                                                                                                                            |  |                |            |                   |   |            |  
|Total stockholders equity                                                                                                                                                  |  |                | 19,709,601 |                   |   | 20,910,538 |  
|                                                                                                                                                                            |  |                |            |                   |   |            |  
|                                                                                                                                                                            |  |                |            |                   |   |            |  
|Total liabilities and stockholders
equity                                                                                                                                  |  | $              | 43,559,956 |                   | $ | 45,108,857 |  
|                                                                                                                                                                            |  |                |            |                   |   |            |  

See accompanying notes to the condensed consolidated financial
statements.

1

---



VELOCITY PORTFOLIO GROUP, INC. AND
SUBSIDIARIES

CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ---------- | ---- | - | --------- | -
|                                                                                                                                                                                                                                                                                                |  | For the Three Months Ended
 March 31, |           
|                                                                                                                                                                                                                                                                                                |  |                                       |           
|                                                                                                                                                                                                                                                                                                |  | 2009                                  |            | 2008 |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |  
|REVENUES                                                                                                                                                                                                                                                                                        |  |                                       |            |      |   |           |  
|Income on consumer receivables                                                                                                                                                                                                                                                                  |  | $                                     | 1,679,869  |      | $ | 3,834,853 |  
|Other income                                                                                                                                                                                                                                                                                    |  |                                       | 3          |      |   | 1,356     |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|Total revenues                                                                                                                                                                                                                                                                                  |  |                                       | 1,679,872  |      |   | 3,836,209 |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|OPERATING EXPENSES                                                                                                                                                                                                                                                                              |  |                                       |            |      |   |           |  
|Professional fees (including fees paid to
 related parties of $190,152 and $210,541 for the three months ended March 31,
 2009 and 2008, respectively)                                                                                                                                          |  |                                       | 1,097,039  |      |   | 1,169,544 |  
|General and administrative expenses                                                                                                                                                                                                                                                             |  |                                       | 555,289    |      |   | 541,427   |  
|Impairment of consumer receivables                                                                                                                                                                                                                                                              |  |                                       | 710,008    |      |   |          |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|Total operating expenses                                                                                                                                                                                                                                                                        |  |                                       | 2,362,336  |      |   | 1,710,971 |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|(Loss) income from operations                                                                                                                                                                                                                                                                   |  |                                       | (682,464   | )    |   | 2,125,238 |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|Other income (expense)                                                                                                                                                                                                                                                                          |  |                                       |            |      |   |           |  
|Change in fair value of warrants                                                                                                                                                                                                                                                                |  |                                       | 68,884     |      |   |          |  
|Interest expense (including interest
 incurred to related parties of $34,568 and $3,500 for the three months ended
 March 31, 2009 and 2008, respectively)                                                                                                                                      |  |                                       | (232,129   | )    |   | (335,070  | )
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|Total other expense                                                                                                                                                                                                                                                                             |  |                                       | (163,245   | )    |   | (335,070  | )
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|(Loss) income from continuing operations
 before (benefit from) provision for income taxes                                                                                                                                                                                                      |  |                                       | (845,709   | )    |   | 1,790,168 |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|(Benefit from) provision for income taxes                                                                                                                                                                                                                                                       |  |                                       | (383,703   | )    |   | 742,250   |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|(Loss) income from continuing operations                                                                                                                                                                                                                                                        |  |                                       | (462,006   | )    |   | 1,047,918 |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|Loss from discontinued operations
 (including interest incurred to related parties of $57,500 and $58,139 for
 the three months ended March 31, 2009 and 2008, respectively and net of tax
 benefits of $133,960 and $64,164 for the three months ended March 31, 2009
 and 2008, respectively) |  |                                       | (228,905   | )    |   | (391,202  | )
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|Net (loss) income                                                                                                                                                                                                                                                                               |  |                                       | (690,911   | )    |   | 656,716   |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|Preferred stock dividends                                                                                                                                                                                                                                                                       |  |                                       | (345,000   | )    |   | (345,000  | )
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|Net (loss) income attributable to common
 stockholders                                                                                                                                                                                                                                          |  | $                                     | (1,035,911 | )    | $ | 311,716   |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|(Loss) income per common share:                                                                                                                                                                                                                                                                 |  |                                       |            |      |   |           |  
|(Loss) income from continuing operations:                                                                                                                                                                                                                                                       |  |                                       |            |      |   |           |  
|Basic                                                                                                                                                                                                                                                                                           |  | $                                     | (0.90      | )    | $ | 0.82      |  
|Diluted                                                                                                                                                                                                                                                                                         |  | $                                     | (0.90      | )    | $ | 0.82      |  
|Loss from discontinued operations:                                                                                                                                                                                                                                                              |  |                                       |            |      |   |           |  
|Basic                                                                                                                                                                                                                                                                                           |  | $                                     | (0.26      | )    | $ | (0.46     | )
|Diluted                                                                                                                                                                                                                                                                                         |  | $                                     | (0.26      | )    | $ | (0.46     | )
|Net (loss) income attributable to common stockholders:                                                                                                                                                                                                                                          |  |                                       |            |      |   |           |  
|Basic                                                                                                                                                                                                                                                                                           |  | $                                     | (1.16      | )    | $ | 0.37      |  
|Diluted                                                                                                                                                                                                                                                                                         |  | $                                     | (1.16      | )    | $ | 0.36      |  
|                                                                                                                                                                                                                                                                                                |  |                                       |            |      |   |           |  
|Average common shares - basic                                                                                                                                                                                                                                                                   |  |                                       | 894,799    |      |   | 852,370   |  
|Average common shares - diluted                                                                                                                                                                                                                                                                 |  |                                       | 894,799    |      |   | 855,288   |  

See accompanying notes to the condensed consolidated financial
statements.

2

---



VELOCITY PORTFOLIO GROUP, INC. AND
SUBSIDIARIES

CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(Unaudited)

|                                           |  |                    |           |               |   |                    |  |            |         |                   |   |                      |  |                       |            |   |   |            |   |   |            |  
|------------------------------------------ |  | ------------------ | --------- | ------------- | - | ------------------ |  | ---------- | ------- | ----------------- | - | -------------------- |  | --------------------- | ---------- | - | - | ---------- | - | - | ---------- | -
|                                           |  | Preferred
 Stock   |           | Common
 Stock |   | Additional         |  |            |         | Total             |  
|                                           |  |                    |           |               |   |                    |  |            |         |                   |  
|                                           |  | Number
 of
 Shares |           | Par
 Value    |   | Number
 of
 Shares |  | Par
 Value |         | Paid
 in
 Capital |   | Accumulated
 Deficit |  | Stockholders
 Equity |           
|                                           |  |                    |           |               |   |                    |  |            |         |                   |   |                      |  |                       |           
|                                           |  |                    |           |               |   |                    |  |            |         |                   |   |                      |  |                       |            |   |   |            |   |   |            |  
|BALANCES, December 31, 2008                |  |                    | 1,380,000 |               | $ | 1,380              |  |            | 894,799 |                   | $ | 895                  |  | $                     | 25,943,069 |   | $ | (5,034,806 | ) | $ | 20,910,538 |  
|                                           |  |                    |           |               |   |                    |  |            |         |                   |   |                      |  |                       |            |   |   |            |   |   |            |  
|Cumulative effect of EITF 07-5 application |  |                    |          |               |   |                   |  |            |        |                   |   |                     |  |                       | (87,200    | ) |   | (77,826    | ) |   | (165,026   | )
|                                           |  |                    |           |               |   |                    |  |            |         |                   |   |                      |  |                       |            |   |   |            |   |   |            |  
|Dividends on preferred stock               |  |                    |          |               |   |                   |  |            |        |                   |   |                     |  |                       |           |   |   | (345,000   | ) |   | (345,000   | )
|                                           |  |                    |           |               |   |                    |  |            |         |                   |   |                      |  |                       |            |   |   |            |   |   |            |  
|Net loss                                   |  |                    |          |               |   |                   |  |            |        |                   |   |                     |  |                       |           |   |   | (690,911   | ) |   | (690,911   | )
|                                           |  |                    |           |               |   |                    |  |            |         |                   |   |                      |  |                       |            |   |   |            |   |   |            |  
|                                           |  |                    |           |               |   |                    |  |            |         |                   |   |                      |  |                       |            |   |   |            |   |   |            |  
|BALANCES, March 31, 2009                   |  |                    | 1,380,000 |               | $ | 1,380              |  |            | 894,799 |                   | $ | 895                  |  | $                     | 25,855,869 |   | $ | (6,148,543 | ) | $ | 19,709,601 |  
|                                           |  |                    |           |               |   |                    |  |            |         |                   |   |                      |  |                       |            |   |   |            |   |   |            |  

See accompanying notes to the condensed
consolidated financial statements.

3

---



VELOCITY PORTFOLIO GROUP, INC. AND
SUBSIDIARIES
(Formerly Velocity Asset Management, Inc. and Subsidiaries)

CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                                                                                               |  |                                       |           |      |   |            |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------- | --------- | ---- | - | ---------- | -
|                                                                                                                               |  | For the Three Months Ended
 March 31, |          
|                                                                                                                               |  |                                       |          
|                                                                                                                               |  | 2009                                  |           | 2008 |  
|                                                                                                                               |  |                                       |           |      |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                                           |  |                                       |           |      |   |            |  
|Net (loss) income                                                                                                              |  | $                                     | (690,911  | )    | $ | 656,716    |  
|Loss from discontinued operations                                                                                              |  |                                       | 228,905   |      |   | 391,202    |  
|                                                                                                                               |  |                                       |           |      |   |            |  
|(Loss) income from continuing operations                                                                                       |  |                                       | (462,006  | )    |   | 1,047,918  |  
|Adjustments to reconcile net (loss) income
 from continuing operations to net cash (used in) provided by operating
 activities |  |                                       |           |      |   |            |  
|Depreciation and amortization                                                                                                  |  |                                       | 37,192    |      |   | 45,390     |  
|Deferred income tax (benefit) expense                                                                                          |  |                                       | (397,300  | )    |   | 18,500     |  
|Change in fair value of warrants                                                                                               |  |                                       | (68,884   | )    |   |           |  
|Impairment of consumer receivables                                                                                             |  |                                       | 710,008   |      |   |           |  
|                                                                                                                               |  |                                       |           |      |   |            |  
|Increase (decrease) in cash attributable to
 changes in operating assets and liabilities:                                      |  |                                       |           |      |   |            |  
|Income taxes receivable                                                                                                        |  |                                       | 14,665    |      |   |           |  
|Other assets                                                                                                                   |  |                                       | (87,101   | )    |   | (40,958    | )
|Accounts payable and accrued expenses                                                                                          |  |                                       | 26,587    |      |   | (46,030    | )
|Estimated court and media costs                                                                                                |  |                                       | (430,342  | )    |   | (881,399   | )
|Income taxes payable                                                                                                           |  |                                       |          |      |   | 279,938    |  
|                                                                                                                               |  |                                       |           |      |   |            |  
|Net cash (used in) provided by operating
 activities                                                                           |  |                                       | (657,181  | )    |   | 423,359    |  
|                                                                                                                               |  |                                       |           |      |   |            |  
|                                                                                                                               |  |                                       |           |      |   |            |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                                                                           |  |                                       |           |      |   |            |  
|Acquisition of consumer receivables                                                                                            |  |                                       | (499,958  | )    |   | (265,181   | )
|Collections applied to principal on
 consumer receivables                                                                      |  |                                       | 1,855,619 |      |   | 614,872    |  
|                                                                                                                               |  |                                       |           |      |   |            |  
|Net cash provided by investing activities                                                                                      |  |                                       | 1,355,661 |      |   | 349,691    |  
|                                                                                                                               |  |                                       |           |      |   |            |  
|                                                                                                                               |  |                                       |           |      |   |            |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                                           |  |                                       |           |      |   |            |  
|(Repayments) borrowings under lines of
 credit, net                                                                            |  |                                       | (345,366  | )    |   | (1,556,300 | )
|Payment of preferred dividends                                                                                                 |  |                                       | (115,000  | )    |   | (345,000   | )
|                                                                                                                               |  |                                       |           |      |   |            |  
|Net cash used in financing activities                                                                                          |  |                                       | (460,366  | )    |   | (1,901,300 | )
|                                                                                                                               |  |                                       |           |      |   |            |  
|                                                                                                                               |  |                                       |           |      |   |            |  
|CASH FLOWS FROM DISCONTINUED OPERATIONS,
 NET                                                                                  |  |                                       |           |      |   |            |  
|Operating activities                                                                                                           |  |                                       | (97,004   | )    |   | (131,060   | )
|Investing activities                                                                                                           |  |                                       |          |      |   | 100,000    |  
|Financing activities                                                                                                           |  |                                       |          |      |   | 1,096,818  |  
|                                                                                                                               |  |                                       |           |      |   |            |  
|Net cash (used in) provided by discontinued
 operations                                                                        |  |                                       | (97,004   | )    |   | 1,065,758  |  
|                                                                                                                               |  |                                       |           |      |   |            |  
|                                                                                                                               |  |                                       |           |      |   |            |  
|Net increase (decrease) in cash and cash
 equivalents                                                                          |  |                                       | 141,110   |      |   | (62,492    | )
|                                                                                                                               |  |                                       |           |      |   |            |  
|Cash and cash equivalents, beginning of
 period                                                                                |  |                                       | 7,869     |      |   | 162,180    |  
|                                                                                                                               |  |                                       |           |      |   |            |  
|                                                                                                                               |  |                                       |           |      |   |            |  
|Cash and cash equivalents, end of period                                                                                       |  | $                                     | 148,979   |      | $ | 99,688     |  
|                                                                                                                               |  |                                       |           |      |   |            |  
|                                                                                                                               |  |                                       |           |      |   |            |  
|Supplemental disclosure of cash flow
 information:                                                                             |  |                                       |           |      |   |            |  
|Cash paid for interest                                                                                                         |  | $                                     | 221,708   |      | $ | 333,071    |  
|Cash paid for income taxes                                                                                                     |  | $                                     | 1,068     |      | $ | 330,712    |  
|                                                                                                                               |  |                                       |           |      |   |            |  
|Non-cash investing and financing
 activities:                                                                                  |  |                                       |           |      |   |            |  
|Accrual of preferred dividends                                                                                                 |  | $                                     | 230,000   |      |   |           |  
|Retirement of common stock in satisfaction
 of employee receivable                                                             |  | $                                     |          |      | $ | 115,146    |  
|                                                                                                                               |  |                                       |           |      |   |            |  

See accompanying notes to the condensed
consolidated financial statements.

4

---



VELOCITY PORTFOLIO GROUP, INC. AND
SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2009

(UNAUDITED)

NOTE 1  ORGANIZATION AND BUSINESS

The condensed
consolidated financial statements of Velocity Portfolio Group, 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 Portfolio Group, Inc., the Company) included herein have been
prepared by the Company and are unaudited; however, such information has been
prepared 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, 2009 and 2008 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 the annual 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 Annual Report on Form 10-K for the year
ended December 31, 2008.

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

Going Concern

The
accompanying condensed consolidated financial statements have been prepared on
a going concern basis, which contemplates the realization of assets and
liquidation of liabilities in the ordinary course of business. As a result of
the impairment charge related to the consumer receivables portfolio at March
31, 2009 and December 31, 2008, the Company did not meet certain financial
covenants contained in their Credit Facility with Wells Fargo Foothill, Inc.
(Lender) and has requested but not obtained a waiver. Until we obtain waivers
of the breaches of these covenants, there is substantial doubt of our ability
to continue as a going concern. As a result, the Lender has the right to call
the loan at any time. The Company is currently working with its Lender to
obtain a waiver and to amend the Credit Facility to restructure these financial
covenants. The Company anticipates completion of this waiver and amendment to
the Credit Facility by the end of the second quarter, however, there is no assurance that
the waiver or the amendment will be obtained. The condensed consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

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 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 impairments.

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 PORTFOLIO GROUP, INC. AND
SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2009

(UNAUDITED)

Effective
December 31, 2008 (using collection data up to March 31, 2009), the Company
revised its expected estimated cash collection forecast methodology by
extending the collection forecast useful life of its pools from 60 months to 84
months and adjusted the timing of expected future cash collections. The Company
has observed that receivable portfolios purchased in 2003 have experienced cash
collections beyond 60 months from the date of purchase. When the Company first
developed its cash forecasting models in 2004, limited historical collection
data was available with which to accurately model projected future cash flows
beyond 60 months. During the quarter ended December 31, 2008, the Company
determined there was enough additional collection data accumulated over the
previous several years to extend this forecast to 84 months and more accurately
forecast the estimated timing of such collections. The increase in collection
forecast from 60 to 84 months was applied effective December 31, 2008, to each
portfolio for which the Company could accurately forecast through such term and
resulted in an increase in the aggregate total estimated remaining collections
for the receivable portfolios  of 9.3% or $4.8 million, as of December 31,
2008. The Company reported a net loss for the three months ended March 31, 2009
of $690,911, as compared to net income of $656,716 for the three months ended
March 31, 2008.
As a result of the Companys quarterly review of its projected and actual
collections, it recognized an
 impairment expense of $710,008 on its consumer receivable
portfolios. This impairment was primarily due to a shortfall in collections in
certain pool groups against our forecast, primarily our 2005 and 2006 vintages. The extension of the collection
forecast was being treated as a change in estimate and, in accordance with
Statement of Financial Accounting Standard No. 154, Accounting Changes and
Error Corrections  a replacement of APB Opinion No. 20 and FASB Statement No.
3, will be recognized prospectively in the consolidated financial statements.
During the year ended December 31, 2008, we recorded an impairment of
approximately $8.36 million on our consumer receivables portfolios. This
impairment was primarily due to a shortfall in collections in certain pool
groups against our forecast, primarily our 2005 and 2006 vintages.

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, 2009 and December 31,
2008, the Company had $9.07 million and $8.36 million in valuation allowances
on its consumer receivables, respectively.

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 timing and amount of future cash
flows from the 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 reporting period. On a quarterly basis,
management reviews, and will revise, as necessary, 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, including
the current economic crisis, which could lead to future impairments.

Properties
held for sale as discontinued operations are carried at fair value less costs
to sell. The Company utilizes the appraisals of third party experts in determining
fair value; however, the current economic and housing crisis may have a
material impact on the ultimate amount realized on the sale of the property.

6

---



VELOCITY PORTFOLIO GROUP, INC. AND
SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2009

(UNAUDITED)

Fair Value

The Company
maintains policies and procedures to measure instruments at fair value using
the best and most relevant data available. Effective January 1, 2008, the
Company adopted 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. In the absence of active markets for identical
assets or liabilities, such measurements involve developing assumptions based
on market observable data and, in the absence of such data, internal
information that is consistent with what market participants would use in a
hypothetical transaction that occurs at the measurement date (the exit price).
Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect the Companys market assumptions. Preference is
given to observable inputs. SFAS No. 157 establishes a three-level valuation
hierarchy based upon observable and unobservable inputs:

| |                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Level 1 
 Quoted prices for identical instruments in active markets                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                              
| | Level 2 
 Quoted prices for similar instruments in active markets; quoted prices for
 identical or similar instruments in markets that are not active; and
 model-derived valuations whose inputs are observable or whose significant
 value drivers are observable.                        
| |                                                                                                                                                                                                                                                                                              
| | Level 3 
 Instruments that have little or no pricing observability as of the
 measurement date. These instruments are measured using managements best
 estimate of fair value, where the inputs into the determination of fair value
 require significant management judgment or estimates.

Recently Issued Accounting Pronouncements

In April 2009,
the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair
Value of Financial Instruments. The FSP amends SFAS No. 107, Disclosures
about Fair Value of Financial Instruments, to require disclosures about fair
value of financial instruments for interim reporting periods of publicly traded
companies as well as in annual financial statements. The FSP also amends APB
Opinion No. 28, Interim Financial Reporting, to require those disclosures in
summarized financial information at interim reporting periods. The effective
date of the pronouncement is for interim reporting periods ending after June
15, 2009, with early adoption permitted for periods ending after March 15,
2009. The Company will adopt this pronouncement for the period ended June 30,
2009.

In April 2009,
the FASB issued FSP No. FAS 157-4, Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly. The FSP provides additional
guidance for estimating fair value in accordance with SFAS 157, Fair Value
Measurement, when the volume and level of activity for the asset or liability
have significantly decreased. The FSP also amends statement 157 to require
reporting entities to disclose in interim and annual periods the inputs and
valuation technique(s) used to measure fair value and a discussion of changes
in valuation techniques, if any, as well as requiring reporting entities to
define major categories for equity and debt securities in accordance with the
major security types as described in SFAS 115, Accounting for Certain
Investments in Debt and Equity Securities. The effective date of the
pronouncement is for interim and annual reporting periods ending after June 15,
2009, with early adoption permitted for periods ending after March 15, 2009.
The Company will adopt this pronouncement for the period ended June 30, 2009.

7

---



VELOCITY PORTFOLIO GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2009

(UNAUDITED)

NOTE 3  FAIR VALUE MEASUREMENTS

Fair values of
assets and liabilities measured on a recurring and nonrecurring basis during
the three month period ended March 31, 2009 are as follows:

|                           |  |                                                    |           |                                                                   |   |                                                 |  |                                                   |        |                       |   |           |  |   |          |  
|-------------------------- |  | -------------------------------------------------- | --------- | ----------------------------------------------------------------- | - | ----------------------------------------------- |  | ------------------------------------------------- | ------ | --------------------- | - | --------- |  | - | -------- | -
|                           |  | Fair Value at
 Three Months
 Ended
 March 31, 2009 |           | Quoted Prices in
 Active Markets
 for Identical
 Assets (Level 1) |   | Significant Other
 Observable
 Inputs (Level 2) |  | Significant Other
 Unobservable
 Inputs (Level 3) |        | Total Gains
 (Losses) |  
|                           |  |                                                    |           |                                                                   |   |                                                 |  |                                                   |        |                       |  
|Properties held for sale   |  | $                                                  | 4,179,505 |                                                                   | $ |                                                |  | $                                                 |       |                       | $ | 4,179,505 |  | $ | (197,346 | )
|Other liabilities-warrants |  | $                                                  | 96,142    |                                                                   | $ |                                                |  | $                                                 | 96,142 |                       | $ |          |  |   | 68,884   |  

In accordance
with the provisions of SFAS No. 144, properties held for sale with a carrying
amount of $4,376,851 at December 31, 2008 were written down to their fair value
of $4,179,505, resulting in an impairment charge of $197,346 for the three months
ended March 31, 2009.

|                                                                 |  |                                    |           |  
|---------------------------------------------------------------- |  | ---------------------------------- | --------- | -
|                                                                 |  | Level 3 - Properties held for sale |          
|                                                                 |  |                                    |          
|Balance, December 31, 2008                                       |  | $                                  | 4,376,851 |  
|Impairment during the period                                     |  | $                                  | (197,346  | )
|                                                                 |  |                                    |           |  
|Balance, March 31, 2009                                          |  | $                                  | 4,179,505 |  
|                                                                 |  |                                    |           |  
|                                                                 |  |                                    |           |  
|Total amount of losses for the period attributable to impairment |  | $                                  | (197,346  | )
|                                                                 |  |                                    |           |  

The fair value
of other liabilities-warrants was derived using the Black-Scholes model. The
change in the fair value of $68,884 was recorded in the statement of operations
for the three months ended March 31, 2009.

NOTE 4  CONSUMER RECEIVABLES

Consumer
receivable activity for the three months ended March 31, 2009 and 2008 consists of the following:

|                                                    |  |                                     |            |                                     |   |            |  
|--------------------------------------------------- |  | ----------------------------------- | ---------- | ----------------------------------- | - | ---------- | -
|                                                    |  | Three Months
 Ended
 March 31, 2009 |            | Three Months
 Ended
 March 31, 2008 |  
|                                                    |  |                                     |            |                                     |  
|Balance at beginning of year                        |  | $                                   | 37,592,634 |                                     | $ | 46,971,014 |  
|                                                    |  |                                     |            |                                     |   |            |  
|                                                    |  |                                     |            |                                     |   |            |  
|                                                    |  |                                     |            |                                     |   |            |  
|Acquisitions and capitalized costs, net of
 returns |  |                                     | 499,957    |                                     |   | 265,181    |  
|Amortization of capitalized costs                   |  |                                     | (14,799    | )                                   |   | (14,799    | )
|                                                    |  |                                     |            |                                     |   |            |  
|                                                    |  |                                     | 485,158    |                                     |   | 250,382    |  
|                                                    |  |                                     |            |                                     |   |            |  
|                                                    |  |                                     |            |                                     |   |            |  
|Cash collections (1)                                |  |                                     | (3,535,488 | )                                   |   | (4,449,725 | )
|Income recognized on consumer receivables
 (1)      |  |                                     | 1,679,869  |                                     |   | 3,834,853  |  
|                                                    |  |                                     |            |                                     |   |            |  
|Cash collections applied to principal               |  |                                     | (1,855,619 | )                                   |   | (614,872   | )
|                                                    |  |                                     |            |                                     |   |            |  
|                                                    |  |                                     |            |                                     |   |            |  
|Impairment                                          |  |                                     | (710,008   | )                                   |   |           |  
|                                                    |  |                                     |            |                                     |   |            |  
|                                                    |  |                                     |            |                                     |   |            |  
|Balance at end of period                            |  | $                                   | 35,512,165 |                                     | $ | 46,606,524 |  
|                                                    |  |                                     |            |                                     |   |            |  

8

---



VELOCITY PORTFOLIO GROUP, INC. AND
SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2009

(UNAUDITED)

|    |                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes $85,471
 and $28,607 derived from fully amortized pools for the three months ended
 March 31, 2009 and 2008, respectively.

As of March
31, 2009, managements current estimate of future collections applied to
principal are as follows:

|           |  |                |            | 
|---------- |  | -------------- | ---------- | 
|           |  | March 31, 2009 |           
|           |  |                |           
|2010       |  | $              | 6,696,521  | 
|2011       |  |                | 7,759,407  | 
|2012       |  |                | 7,728,100  | 
|2013       |  |                | 6,700,359  | 
|2014       |  |                | 4,357,759  | 
|Thereafter |  |                | 2,270,019  | 
|           |  |                |            | 
|           |  |                |            | 
|           |  | $              | 35,512,165 | 
|           |  |                |            | 

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, 2009 and 2008. Changes in the accretable yield are as follows:

|                                                 |  |                                    |            |                                     |   |            |  
|------------------------------------------------ |  | ---------------------------------- | ---------- | ----------------------------------- | - | ---------- | -
|                                                 |  | Three Months
 Ended March 31, 2009 |            | Three Months
 Ended
 March 31, 2008 |  
|                                                 |  |                                    |            |                                     |  
|Balance at beginning of period                   |  | $                                  | 32,529,809 |                                     | $ | 31,442,803 |  
|Income recognized on consumer receivables        |  |                                    | (1,679,869 | )                                   |   | (3,834,853 | )
|Reclassifications from nonaccretable
 difference |  |                                    | 85,471     |                                     |   | 28,607     |  
|Additions from current purchases                 |  |                                    | 1,330,091  |                                     |   | 235,339    |  
|                                                 |  |                                    |            |                                     |   |            |  
|                                                 |  |                                    |            |                                     |   |            |  
|Balance at end of period                         |  | $                                  | 32,265,502 |                                     | $ | 27,871,896 |  
|                                                 |  |                                    |            |                                     |   |            |  

NOTE 5  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.
The Company is currently liquidating all of VOMs tax certificates and is
accepting proposals for the sale of VOM, including the sale of individual tax
certificates. The Company expects the liquidation or sale to be completed
within the next twelve months.

The
divestiture of the businesses is consistent with the Companys strategy of
concentrating its resources on consumer receivables.

Revenues and
loss for the discontinued operations were as follows:

|                                                             |  |                                     |          |                                     |   |          |  
|------------------------------------------------------------ |  | ----------------------------------- | -------- | ----------------------------------- | - | -------- | -
|                                                             |  | Three Months
 Ended
 March 31, 2009 |          | Three Months
 Ended
 March 31, 2008 |  
|                                                             |  |                                     |          |                                     |  
|Revenues                                                     |  | $                                   | 5,982    |                                     | $ | 41,426   |  
|                                                             |  |                                     |          |                                     |   |          |  
|                                                             |  |                                     |          |                                     |   |          |  
|Loss from discontinued operations, before
 income tax effect |  | $                                   | (362,865 | )                                   | $ | (455,366 | )
|                                                             |  |                                     |          |                                     |   |          |  

9

---



VELOCITY PORTFOLIO GROUP, INC. AND
SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2009

(UNAUDITED)

Assets and
liabilities of the discontinued businesses were as follows:

|                                                           |  |                 |           |                    |   |           | 
|---------------------------------------------------------- |  | --------------- | --------- | ------------------ | - | --------- | 
|                                                           |  | March
 31, 2009 |           | December
 31, 2008 |  
|                                                           |  |                 |           |                    |  
|                                                           |  |                 |           |                    |   |           | 
|Notes receivable                                           |  | $               | 25,000    |                    | $ | 25,000    | 
|Notes receivable from related party                        |  |                 |          |                    |   |          | 
|Deposits on properties                                     |  |                 | 10,000    |                    |   | 10,000    | 
|Properties held for sale                                   |  |                 | 4,179,505 |                    |   | 4,376,851 | 
|Tax certificates held and accrued interest receivable, net |  |                 | 249,991   |                    |   | 258,704   | 
|Deferred income tax asset, net                             |  |                 | 1,222,000 |                    |   | 1,087,000 | 
|Other assets                                               |  |                 | 16,097    |                    |   | 1,923     | 
|                                                           |  |                 |           |                    |   |           | 
|Total assets                                               |  | $               | 5,702,593 |                    | $ | 5,759,478 | 
|                                                           |  |                 |           |                    |   |           | 
|                                                           |  |                 |           |                    |   |           | 
|Accounts payable and accrued expenses                      |  | $               | 1,242,783 |                    | $ | 1,168,287 | 
|Income tax payable                                         |  |                 | 520       |                    |   |          | 
|Line of credit                                             |  |                 | 212,992   |                    |   | 212,992   | 
|Notes payable                                              |  |                 | 1,885,000 |                    |   | 1,885,000 | 
|Notes payable to related parties                           |  |                 | 2,300,000 |                    |   | 2,300,000 | 
|                                                           |  |                 |           |                    |   |           | 
|Total liabilities                                          |  | $               | 5,641,295 |                    | $ | 5,566,279 | 
|                                                           |  |                 |           |                    |   |           | 

10

---



VELOCITY PORTFOLIO GROUP, INC. AND
SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2009

(UNAUDITED)

NOTE 6  LINES OF CREDIT

On November 1,
2008, Velocity entered into a Fifth Amendment to the Loan and Security
Agreement (the Fifth Amendment to the Loan Agreement) with the Lender.
Pursuant to the Fifth Amendment to the Loan Agreement, the applicable interest
rate on loans to Velocity changed from the prime rate plus 1.5% to the rate
equal to the three-month LIBOR plus 4%. Also pursuant to the Fifth Amendment to
the Loan Agreement, the Loan Sub-Account Amortization Schedule which sets forth
the maximum principal loan amount Velocity may have outstanding during a
three-month period, has been extended from 36 months to 42 months.

Use of the
credit facility is subject to certain restrictive covenants 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 have agreed that net income for each
subsequent quarter shall not be less than $375,000 and $200,000, respectively.

As of March 31, 2009 and December
31, 2008, the Company has not met the required minimum stockholders equity
under the Credit Facility. In addition, both the Company and Velocity have not
met the minimum net income covenant for the
1st quarter ended March 31, 2009 and the
 4th quarter ended December 31,
2008.  The Company has requested but not
obtained a waiver for these financial covenants. As a result, the Lender has
the right to call the loan at any time. The Company is currently working with
its Lender to obtain a waiver and to amend the Credit Facility to restructure
these financial covenants. The Company anticipates completion of this waiver
and amendment to the Credit Facility by the end of the second quarter.

As of March
31, 2009 and December 31, 2008, the Company had $8,054,701 and $8,400,067
outstanding on the credit facility, respectively. The rate of interest at March
31, 2009 was 5.26%.

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 is equal to the banks prime rate plus one-half percent per annum.
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 was 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 $212,992 and $212,992 outstanding on the credit line as of March
31, 2009 and December 31, 2008, respectively, which is reported in net liabilities of
discontinued operations. On July 1, 2008, the Company extended the maturity
date of the line until January 1, 2009 and reduced the maximum principal amount
of the line to $212,992. On January 1, 2009, the Company extended the maturity
date of the line until July 1, 2009.

NOTE 7  NOTES PAYABLE

On April 25,
2007, the Company issued two promissory notes of $35,000 and $200,000 to
investors in a private placement. The notes bear interest at 10% per annum plus
15% of the net profit related to the sale of specified real property owned by
the Companys subsidiary, J. Holder. All amounts owed were due no later than
April 25, 2008, which was extended
through April 25, 2010.

On January 25,
2008, the Company issued a promissory note for $1,000,000 to 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 which was due April 24, 2009. The Company is currently
negotiating an extension of the note and mortgage with the financial
institution. The note is collateralized by specified real property owned by the
Companys subsidiary, J. Holder. The note is guaranteed by certain executive
officers of the Company. J. Holder has agreed to maintain a loan to value ratio
of 33% at all times. This is reported in net liabilities of discontinued
operations.

NOTE 8  RELATED PARTY TRANSACTIONS

The Company
has notes payable to various related parties. Total interest expense to related
parties for the three month periods ended March 31, 2009 and 2008 was $92,068
and $61,639, respectively. For the three months ended March 31, 2009 and 2008,
$57,500 and $58,139, respectively, is included in the results of operations of
discontinued operations.

The Company
engages Ragan & Ragan, PC, an entity owned by Messrs. Ragan & Ragan, 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. In May 2007, the fee arrangements were approved by
Unanimous Written Consent of the board of directors other than Mr. Ragan, Sr.
who abstained.

11

---



VELOCITY PORTFOLIO GROUP, INC. AND
SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2009

(UNAUDITED)

Ragan and
Ragan, P.C. routinely advances court costs associated with their legal
collections 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, 2009 |         | Three Months
 Ended
 March 31, 2008 |  
|                           |  |                                     |         |                                     |  
|Velocity
 Investments, LLC |  | $                                   | 190,152 |                                     | $ | 210,541 | 
|                           |  |                                     |         |                                     |   |         | 

Additionally,
Ragan and Ragan, P.C. held $14,694 in trust for VOM, LLC on the assignment of a
tax certificate as of March 31, 2009, which is included in assets of
discontinued operations.

NOTE 9  PREFERRED STOCK

On February
26, 2009, the Company temporarily suspended the payment of monthly dividends on
its Series A Preferred Stock beginning February 28, 2009 in order to preserve
capital. As a result the Company has recorded accrued preferred dividends in
the amount of $230,000 as of March 31, 2009.

NOTE 10  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
convertible into 103,417 and 69,546 shares of common stock; convertible
preferred stock, convertible into 276,000 shares of common stock; and
convertible notes, convertible into 47,000 and 47,000 shares for the three
months ended March 31, 2009 and 2008, respectively, were not included in the
dilutive per share calculations because their effect would have been
anti-dilutive.

|                                                                           |  |                                     |            |                                     |   |           |  
|-------------------------------------------------------------------------- |  | ----------------------------------- | ---------- | ----------------------------------- | - | --------- | -
|                                                                           |  | Three Months
 Ended
 March 31, 2009 |            | Three Months
 Ended
 March 31, 2008 |  
|                                                                           |  |                                     |            |                                     |  
|Numerator:                                                                 |  |                                     |            |                                     |   |           |  
|(Loss) income from continuing operations                                   |  | $                                   | (462,006   | )                                   | $ | 1,047,918 |  
|Preferred stock dividends                                                  |  |                                     | (345,000   | )                                   |   | (345,000  | )
|                                                                           |  |                                     |            |                                     |   |           |  
|(Loss) income from continuing operations
 available to common stockholders |  |                                     | (807,006   | )                                   |   | 702,918   |  
|Discontinued operations, net of tax                                        |  |                                     | (228,905   | )                                   |   | (391,202  | )
|                                                                           |  |                                     |            |                                     |   |           |  
|                                                                           |  |                                     |            |                                     |   |           |  
|Net (loss) income attributable to common
 stockholders - Basic and Diluted |  | $                                   | (1,035,911 | )                                   | $ | 311,716   |  
|                                                                           |  |                                     |            |                                     |   |           |  
|                                                                           |  |                                     |            |                                     |   |           |  
|Denominator:                                                               |  |                                     |            |                                     |   |           |  
|Average shares of common stock outstanding
 - Basic                        |  |                                     | 894,799    |                                     |   | 852,370   |  
|Effect of dilutive instruments:                                            |  |                                     |            |                                     |   |           |  
|Stock options                                                              |  |                                     |           |                                     |   | 2,918     |  
|                                                                           |  |                                     |            |                                     |   |           |  
|                                                                           |  |                                     |            |                                     |   |           |  
|Weighted average shares - Diluted                                          |  |                                     | 894,799    |                                     |   | 855,288   |  
|                                                                           |  |                                     |            |                                     |   |           |  

12

---



VELOCITY PORTFOLIO GROUP, INC. AND
SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2009

(UNAUDITED)

NOTE 11  OUTSTANDING OPTIONS AND WARRANTS

In June 2008,
the FASB ratified the consensus reached on Emerging Issues Task Force (EITF)
Issue No. 07-05, Determining Whether an Instrument (or Embedded Feature) Is
Indexed to an Entitys Own Stock. EITF Issue No. 07-05 clarifies the
determination of whether an instrument (or an embedded feature) is indexed to
an entitys own stock, which would qualify as a scope exception under SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. We adopted
EITF Issue No. 07-05 as of January 1, 2009. In October 2005 and April 2006, we
issued warrants for 10,000 and 2,500 shares of our Common Stock, respectively,
at an exercise price of $62 per share in a private placement to an
institutional investor. These warrants were reassessed under EITF 07-5 and due
to a price adjustment clause included in these warrants, such warrants are no
longer deemed to be indexed to our stock and therefore, no longer meet the
scope exception of FAS 133. Therefore, these warrants were reclassified to a
liability and will be adjusted to fair value on a quarterly basis going
forward. As a result, we recorded a cumulative catch up adjustment of $77,826
to accumulated deficit and an adjustment of $87,200 to additional paid in
capital on January 1, 2009.

The fair value of these warrants decreased to
$96,142 as of March 31, 2009. As such, the $68,884 change in fair value was
recorded in the statement of operations for the three months ended March 31,
2009.

NOTE 12 
INCOME TAXES

The Company
accounts for income taxes in accordance with SFAS No. 109, Accounting for
Income Taxes (SFAS 109). SFAS 109 requires the recognition of deferred tax
assets and liabilities based on differences between financial reporting and the
tax bases of the assets and liabilities, measured using the enacted tax rates
and laws that will be in effect when the differences are expected to be
reversed. An allowance against deferred tax assets is recorded when it is more
likely than not that such tax benefits will not be realized.

The Company
accounts for uncertain tax positions in accordance with SFAS Interpretation No.
48, Accounting for Uncertainty in Income Taxes  an interpretation of FASB
Statement No. 109 (FIN 48). FIN 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement
of a tax position taken in a tax return.

The Company
recorded an income tax (benefit) provision of ($517,663) and $678,086 for the
three months ended March 31, 2009 and 2008, respectively. For the three months
ended March 31, 2009 and 2008, income tax benefits of $133,960 and $64,164,
respectively has been reported in the results of discontinued operations.

The Companys
liability for income taxes associated with uncertain tax positions, which are
recorded in accounts payable and accrued expenses, includes estimated interest
and penalties. Interest and penalties related to the Companys uncertain tax
positions are included in income tax expense and administrative expense,
respectively, in the consolidated statements of operations. At March 31, 2009
and December 31, 2008, $41,656 and $35,471 had been recorded as a liability for
uncertain tax provisions.

The corporate federal income
tax returns of the Company for 2006 through 2008 are subject to examination by
the IRS, generally for three years after they are filed. The state income tax
returns and other state tax filings of the Company are subject to examination
by the state taxing authorities, for various periods generally up to four years
after they are filed.

13

---



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
quarterly 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, 2008. Listed below and discussed elsewhere in this quarterly
report 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 in this quarterly
report. 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;                                                                                                                     
| |   |                                                                                                                                                              
| | · | changes in applicable
 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
quarterly report and the documents that we incorporate by reference in this
quarterly report completely and 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.

14

---



Overview

Velocity
Portfolio Group, Inc., previously known as Velocity Asset Management, Inc.
until November 19, 2008, and prior to that name was known as Tele-Optics, Inc.
was organized in the State of Delaware in December 1986. We were inactive until
February 3, 2004, when we acquired STB, Inc., a New Jersey corporation. 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. The business
is carried on by our three wholly-owned subsidiaries: Velocity Investments, LLC
(Velocity), 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., which
invests 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, which invests 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.

Our
consumer receivable portfolios are purchased at a discount from the amount
actually owed by the obligor. Our interests in distressed real property are
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 are 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, the sale of our interests in distressed
real property and the collection of taxes and accrued interest on our tax lien certificates
to generate revenue that exceeds our cost. Most of our revenue is derived from
the consumer receivables business and it is our primary operating focus.

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.

Recent Developments

On
February 26, 2009, we announced that we have temporarily suspended the payment
of dividends on our Series A Preferred Stock in order to preserve capital. On
February 27, 2009, we withdrew our registration statement for our proposed
public offering of stock and warrants and our board of directors authorized us
to begin a process of exploring strategic alternatives to enhance stockholder
value.

As
of March 31, 2009 and
December 31, 2008, we did not satisfy the required minimum stockholders
equity covenant under the Credit Facility. In addition, we and Velocity each
failed to satisfy the minimum net income covenant for the 1st
quarter of 2009 and the
 4th
quarter of 2008.  We are currently working closely with
 Wells Fargo on obtaining a waiver of the breach of these December 31, 2008
and March 31, 2009 covenants and amending the Credit Facility to restructure
these covenants. Wells Fargo has the right to call the loan at anytime. We
anticipate completion of this waiver and amendment to the Credit Facility by
the end of the second quarter. However, Wells Fargo is not obligated to waive these
covenants. If we are unable to obtain a waiver and amendment of the Credit
Facility, Wells Fargo could exercise certain remedies under the Loan Agreement,
including but not limited to foreclosure on the loan.

15

---



As a result of our failure
to satisfy these covenants or obtain a waiver as of December 31, 2008 and March
31, 2009, and until we obtain waivers of the breaches of these covenants, there
is substantial doubt about our ability to continue as a going concern. The
report of our independent registered public accounting firm for our December 31,
2008 financial statements, which are included as part of our annual report for
the year ending December 31, 2008, contains a statement concerning this matter.

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.

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.

16

---



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 have no consumer
receivable portfolios that are accounted for under the cost recovery method.

Under
Statement of Position 03-3, 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.

Historically,
these portfolios had been expected to amortize over a five year period based on
our estimated future cash flows. A majority of the cash we ultimately collect
on a portfolio has generally been received during the first 48 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.

On
an ongoing basis, we compare the historical trends of each portfolio, or
aggregated portfolios, to project collections. Future projected collections are
then increased or decreased based on the actual cumulative performance of each
portfolio. Management reviewed each portfolios adjusted projected collections
to determine if further upward or downward adjustment is warranted. Management
regularly reviews the trends in collection patterns and uses its reasonable
best efforts to improve the collections of under-performing portfolios.
However, actual results will differ from these estimates and a material change
in the estimates could occur within one reporting period.

Effective
December 31, 2008, we revised our expected estimated cash collection forecast
methodology by extending the collection forecast useful life of its pools from
60 months to 84 months and adjusting the timing of expected future collections.
We have observed that receivable portfolios purchased in 2003 have experienced
cash collections beyond 60 months from the date of purchase. When we first
developed our cash forecasting models in 2004, limited historical collection
data was available with which to accurately model projected cash flows beyond
60 months. During the quarter ended March 31, 2009 we determined there was
enough additional collection data accumulated over the previous several years
to extend this forecast to 84 months and more accurately forecast the estimated
timing of such collections. Additional factors that we have taken into
consideration in extending the collection forecast from 60 to 84 months and
adjusting the estimated timing are as follows:

| |   |                                                                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | variability of timing of
 the legal process. As a result of geographic expansion from our original core
 states of New Jersey, Maryland, Delaware and New York, we are now able to
 more accurately forecast the state by state variance in the timing of awards
 of default judgments and the enforcement of such judgments;
| |   |                                                                                                                                                                                                                                                                                                                              
| |  | current macroeconomic
 conditions have resulted in less PIF/SIF (payments in full and settlements in
 full) and a greater percentage of debtors entering into settlement plans,
 effectively extending the collection curve; and                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                              
| |  | current macroeconomic
 conditions have caused deterioration with respect to certain purchase
 assumptions regarding homeownership and employment resulting in a longer than
 expected collection curve with respect to each category of debtor.                                                                              

The increase in the
collection forecast from 60 to 84 months was applied effective December 31,
2008, to each portfolio for which we could accurately forecast through such
term and will result in an increase in the aggregate total estimated remaining
collections for the receivable portfolios by an increase of 9.3% or $4.8
million, as of December 31, 2008. The extension of the collection forecast is
being treated as a change in estimate and, in accordance with Statement of
Financial Accounting Standard No. 154, Accounting Changes and Error
Corrections  a replacement of APB Opinion No. 20 and FASB Statement No. 3,
will be recognized prospectively in the consolidated financial statements.
As a result of our quarterly review of our projected and actual collections,
 we recorded an impairment
of approximately $710,000 on our consumer receivables portfolios. This
impairment was primarily due to a shortfall in collections in certain pool
groups against our forecast, primarily our 2005 through 2006 vintages.

17

---



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. Under the cost recovery method, no revenue is
recognized until we have fully collected the cost of the portfolio, or until
such time that we consider the collections to be probable and estimable and
begin to recognize income based on the interest method as described above. We
have no consumer receivable portfolios that are accounted for under the cost
recovery method.

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, 2009 and December 31, 2008, we had $9.07 million and $8.36 of
valuation allowances on our consumer receivables, respectively.

On
a quarterly basis, if our management came to a different conclusion as to the
future estimated collections, it could have had a significant impact on the
amount of revenue that was recorded from the purchased accounts receivable. A
five percent increase in the amount of future expected collections would have
resulted in additional income, largely as a result of lower allowances since
increases in future expected collections are recognized to the extent
sufficient to recover any allowances or to increase the expected IRR. A five
percent decrease in the amount of future expected collections would have
resulted in an additional impairment of approximately $3.5 million for the
period ended March 31, 2009, largely as a result of higher allowances.

18

---



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 quarter
ended March 31, 2009 and 2008 consisted of the following:

|                                                   |  |   |                                      |   |   |                                      |  
|-------------------------------------------------- |  | - | ------------------------------------ | - | - | ------------------------------------ | -
|                                                   |  |   | Three
 Months
 Ended
 March 31, 2009 |   |   | Three
 Months
 Ended
 March 31, 2008 |  
|                                                   |  |   |                                      |   |  
|Balance at beginning of year                       |  | $ | 37,592,634                           |   | $ | 46,971,014                           |  
|                                                   |  |   |                                      |   |   |                                      |  
|                                                   |  |   |                                      |   |   |                                      |  
|Acquisitions and capitalized costs, net of returns |  |   | 499,957                              |   |   | 265,181                              |  
|Amortization of capitalized costs                  |  |   | (14,799                              | ) |   | (14,799                              | )
|                                                   |  |   |                                      |   |   |                                      |  
|                                                   |  |   | 485,158                              |   |   | 250,382                              |  
|                                                   |  |   |                                      |   |   |                                      |  
|                                                   |  |   |                                      |   |   |                                      |  
|Cash collections (1)                               |  |   | (3,535,488                           | ) |   | (4,449,725                           | )
|Income recognized on consumer receivables (1)      |  |   | 1,679,869                            |   |   | 3,834,853                            |  
|                                                   |  |   |                                      |   |   |                                      |  
|Cash collections applied to principal              |  |   | (1,855,619                           | ) |   | (614,872                             | )
|                                                   |  |   |                                      |   |   |                                      |  
|                                                   |  |   |                                      |   |   |                                      |  
|Impairment                                         |  |   | (710,008                             | ) |   |                                     |  
|                                                   |  |   |                                      |   |   |                                      |  
|                                                   |  |   |                                      |   |   |                                      |  
|Balance at end of period                           |  | $ | 35,512,165                           |   | $ | 46,606,524                           |  
|                                                   |  |   |                                      |   |   |                                      |  

(1) Includes $85,471 and
$28,607 in income derived from fully amortized pools as of March 31, 2009 and
March 31, 2008, respectively.

Stock
Based Compensation

We utilize the fair value
recognition provisions of Share-Based Payment (SFAS No. 123R). The statement
addresses the accounting for share-based payment transactions with employees
and other third parties and requires that the compensation costs relating to
such transactions be recognized in the condensed consolidated financial statements. SFAS
No. 123R also requires 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 follow 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
April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments. The FSP amends SFAS No.
107, Disclosures about Fair Value of Financial Instruments, to require
disclosures about fair value of financial instruments for interim reporting periods
of publicly traded companies as well as in annual financial statements. The FSP
also amends APB Opinion No. 28, Interim Financial Reporting, to require those
disclosures in summarized financial information at interim reporting periods.
The effective date of the pronouncement is for interim reporting periods ending
after June 15, 2009, with early adoption permitted for periods ending after
March 15, 2009. We will adopt this pronouncement for the period ended
June 30, 2009.

In
April 2009, the FASB issued FSP No. FAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly. The FSP provides
additional guidance for estimating fair value in accordance with SFAS 157,
Fair Value Measurement, when the volume and level of activity for the asset
or liability have significantly decreased. The FSP also amends statement 157 to
require reporting entities to disclose in interim and annual periods the inputs
and valuation technique(s) used to measure fair value and a discussion of
changes in valuation techniques, if any, as well as requiring reporting
entities to define major categories for equity and debt securities in accordance
with the major security types as described in SFAS 115, Accounting for Certain
Investments in Debt and Equity Securities. The effective date of the
pronouncement is for interim and annual reporting periods ending after June 15,
2009, with early adoption permitted for periods ending after March 15, 2009.
We will adopt this pronouncement for the period ended June 30, 2009.

19

---



Results
of Operations

Total
revenues for continuing operations for the three month period ended March 31,
2009 (the 2009 First Quarter) were $1,679,872 as compared to $3,836,209
during the three month period ended March 31, 2008 (the 2008 First Quarter),
representing a 56.21% decrease. The decrease in revenues was primarily
attributable to reduced revenues from collections on consumer receivable as a
result of the extension in the collection curve from 60 to 84 months.

Total
Operating Expenses

Total
operating expenses for continuing operations for the 2009 First Quarter were
$2,362,336 as compared to $1,710,970 during the 2008 First Quarter,
representing a 38.07% increase. The increase in total operating expenses was
primarily attributable to an impairment of approximately $710,000 on our
consumer receivables portfolio.

Interest
Expense

Interest
expense in the 2009 First Quarter was $232,129 as compared to $335,070 in the
2008 First Quarter, representing a 30.72% decrease. The decrease in interest
expense was primarily attributable to declining interest rates and a reduction
in amounts outstanding on Velocity Investments line of credit with Wells Fargo
Foothill, Inc.

Net
Income (Loss)

Net
loss for the 2009 First Quarter was ($690,911) as compared to net income for
the 2008 First Quarter of $656,716. The decrease in net income is attributable
to approximately $710,000 in impairment on our consumer receivable portfolio
and a decrease in revenues as discussed above, partially offset by the tax
effect of these transactions. Loss from continuing operations for the 2009
First Quarter was ($462,006) as compared to income from continuing operations
for the 2008 First Quarter of $1,047,918. The Company had a ($228,905) loss
from discontinued operations in the 2009 First Quarter compared to a loss of
($391,202) in the 2008 First Quarter.

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, 2009, we had
approximately $150,000 in cash and cash equivalents, approximately $14.5
million in credit available from our credit facility and trade accounts payable
of approximately $1.2 million. Management believes that the revenues expected
to be generated from operations and our line of credit will be
sufficient to finance operations through March 2010. However,
in order to continue to execute our business plan and grow our consumer receivables
portfolio, we 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 February 26, 2009, we temporarily suspended the
payment of dividends on our Series A Preferred Stock in order to preserve
capital. On February 27, 2009, we withdrew our registration statement for our
proposed public offering of stock and warrants and our board of directors
authorized us to begin a process of exploring strategic alternatives to enhance
stockholder value.

20

---



Net
cash used in operating activities was approximately $657,000 during the three
months ended March 31, 2009, compared to net cash provided by operating
activities of approximately $423,000 during the three months ended March 31,
2008. The increase in net cash used in operating activities was primarily due
to loss from continuing operations before the impairment on our consumer
receivables portfolio and a increase in payment of estimated court and media
costs partially offset by a decrease in deferred income taxes and income taxes
payable. Net cash provided by investing activities was approximately $1,356,000
during the three months ended March 31, 2009, compared to net cash provided by
investing activities of approximately $350,000 during the three months ended
March 31, 2008. The increase in net cash provided by investing activities was
primarily due to an increase in collections applied to principal on our
consumer receivables portfolio. Net cash used in financing activities was
approximately $460,000 during the three months ended March 31, 2009, compared
to net cash used in financing activities of approximately $1,901,000 during the
three months ended March 31, 2008. The decrease in net cash used in financing
activities was primarily due to a decrease in collections of consumer
receivables at Velocity Investments paying down the principal amount
outstanding on the Wells Fargo Loan. Net cash used in discontinued operations
was approximately $97,000 during the three months ended March 31, 2009 as
compared to net cash provided by discontinued operations of approximately
$1,066,000 during the three months ended March 31, 2008. The decrease in cash
provided by discontinued operations was primarily due to a $1,000,000 promissory
note issued by J. Holder collateralized by an investment property in Melbourne,
Florida issued in the 1st quarter of 2008.

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 us 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 us 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 we covenant
that net income for each subsequent quarter shall not be less than $375,000 and
$200,000, respectively. We had approximately $8,055,000 outstanding on
the credit line as of March 31, 2009. As a result of the impairment charge
related to the consumer receivables portfolio at March 31, 2009 and December
31, 2008, we did not meet certain financial covenants contained in our
Credit Facility with Wells Fargo and has requested but not obtained a waiver.
As a result, Wells Fargo has the right to call the loan at any time. We are
 currently working with Wells Fargo to obtain a waiver and to amend
the Credit Facility to restructure these financial covenants. We
anticipate completion of this waiver and amendment to the Credit Facility by
the end of the second quarter, however, there is no assurance that the waiver or the
amendment will be obtained.

21

---



On
January 25, 2008, we issued a promissory note for $1,000,000 to 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 April 24, 2009. We are currently
negotiating an extension of this promissory note with the financial
institution. 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 30, 2008, June 10, 2008 and October 29, 2008, our VI subsidiary consummated
closings of a private placement offering of 14% subordinated notes due in 2011
to accredited investors. The notes were offered and sold pursuant to an
exemption from registration under Section 4(2) of the Securities Act of 1933,
as amended. VI has issued notes in the aggregate principal amount of $1,300,000
in the offering. Interest is payable quarterly in arrears beginning on the last
day of the month that is four months from the date of the notes. VI is
obligated to pay the principal amount of the notes upon the earlier of maturity
or redemption. The notes are subordinated to all of our existing debt. The
notes are senior to any future long term debt of VI. Upon an event of
default, VI is obligated to pay the note holder a late charge computed at the
rate of 18% per annum of the amount not paid. Of the $1,300,000 principal
amount of notes that were issued, $900,000 in principal amount are held by
related parties to us, including a note in the amount of $150,000 payable to
our chief executive officer, John C. Kleinert, and notes in the aggregate of
$750,000 to immediate family members of John C. Kleinert. VI used the net
proceeds from the offering primarily for the purchase of portfolios of
unsecured consumer receivables and for general corporate purposes, including
working capital.

On
February 26, 2009, we temporarily suspended the payment of dividends on our
Series A Preferred Stock in order to preserve capital. On February 27, 2009, we
withdrew our registration statement for our proposed public offering of stock
and warrants and that our board of directors has authorized us to begin a
process of exploring strategic alternatives to enhance stockholder value. To this
end, the board of directors expects to form a special committee comprised of
independent board members which will assist management in this effort. In
making the announcement, we stated that our board of directors has not approved
placing us or any of our assets up for sale, and we do not have any commitments
or agreements with respect to any particular transaction. We also stated that
there can be no assurance that the exploration of strategic alternatives will
result in a transaction. Subject to regulatory requirements, we do not intend
to disclose developments with respect to the exploration of strategic
alternatives unless and until our board of directors has approved a specific
transaction. Such strategic alternatives may be in the form of private placement
or public offerings, and may include common stock, debt securities or other
equity based securities. 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 our board of directors at the time it is proposed by management.

22

---



Supplementary Information on Consumer Receivables Portfolios:

The
following tables show certain data related to our entire owned portfolio. 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. Effective December 31, 2008, we revised its
expected estimated cash collection forecast methodology by extending the
collection forecast useful life of its pools from 60 months to 84 months and
adjusting the timing of expected future collections. We have observed
that receivable portfolios purchased in 2003 have experienced cash collections
beyond 60 months from the date of purchase. When we first developed
our cash forecasting models in 2004, limited historical collection data was
available with which to accurately model projected cash flows beyond 60 months.
During the quarter ended December 31, 2008 we determined there was
enough additional collection data accumulated over the previous several years
to extend this forecast to 84 months and more accurately forecast the estimated
timing of such collections. In addition, we have concluded that there would
likely be shortfalls in certain pools as a result of the current economic
crisis. As a result, on December 31, 2008, and March 31, 2009, we recorded
impairments of approximately $8.36 million and $710 thousand on our consumer
receivables portfolios, respectively. These impairments were primarily due to a
combination of an extension of the collection curve from 60 to 84 months and a
shortfall in collections in certain pool groups against our forecast, primarily
our 2005 and 2006 vintages. 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.

The
following table shows the changes in consumer receivables, including amounts
paid to acquire new portfolios of consumer receivables for the three months
ended March 31, 2009 and 2008.

|                                        |  |                                 |            |                       |   |                 |  |                                     |         |  |   |           | 
|--------------------------------------- |  | ------------------------------- | ---------- | --------------------- | - | --------------- |  | ----------------------------------- | ------- |  | - | --------- | 
|                                        |  | Portfolio Purchases/Collections |           
|                                        |  |                                 |           
|Reporting Period                        |  | Initial
 Outstanding
 Amount    |            | Portfolios
 Purchased |   | Purchase
 Price |  | Gross Cash
 Collections
 Per Period |        
|                                        |  |                                 |            |                       |   |                 |  |                                     |        
|                                        |  |                                 |            |                       |   |                 |  |                                     |         |  |   |           | 
|Three Month Period Ended March 31, 2009 |  | $                               | 17,119,199 |                       | 3 |                 |  | $                                   | 448,998 |  | $ | 3,535,488 | 
|                                        |  |                                 |            |                       |   |                 |  |                                     |         |  |   |           | 
|Three Month Period Ended March 31, 2008 |  | $                               | 1,960,656  |                       | 2 |                 |  | $                                   | 168,621 |  | $ | 4,449,725 | 

23

---



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  |                                             | $ | 8,755,742                                  |  | 429.42 | % |  | $ | 0.1773 | 
|     |  |                     |  |                                  |   |                     |  |                             |            |                                             |   |                                            |  |        |   |  |   |        | 
|2004 |  | 10                  |  |                                  | $ | 9,511,088           |  | $                           | 1,450,115  |                                             | $ | 3,606,960                                  |  | 248.74 | % |  | $ | 0.1525 | 
|     |  |                     |  |                                  |   |                     |  |                             |            |                                             |   |                                            |  |        |   |  |   |        | 
|2005 |  | 22                  |  |                                  | $ | 133,103,213         |  | $                           | 11,449,557 |                                             | $ | 19,019,133                                 |  | 166.11 | % |  | $ | 0.0860 | 
|     |  |                     |  |                                  |   |                     |  |                             |            |                                             |   |                                            |  |        |   |  |   |        | 
|2006 |  | 26                  |  |                                  | $ | 199,042,032         |  | $                           | 15,367,940 |                                             | $ | 18,399,857                                 |  | 119.73 | % |  | $ | 0.0772 | 
|     |  |                     |  |                                  |   |                     |  |                             |            |                                             |   |                                            |  |        |   |  |   |        | 
|2007 |  | 19                  |  |                                  | $ | 129,892,667         |  | $                           | 9,316,779  |                                             | $ | 7,531,674                                  |  | 80.94  | % |  | $ | 0.0717 | 
|     |  |                     |  |                                  |   |                     |  |                             |            |                                             |   |                                            |  |        |   |  |   |        | 
|2008 |  | 8                   |  |                                  | $ | 17,920,530          |  | $                           | 1,115,983  |                                             | $ | 674,835                                    |  | 60.47  | % |  | $ | 0.0623 | 
|     |  |                     |  |                                  |   |                     |  |                             |            |                                             |   |                                            |  |        |   |  |   |        | 
|2009 |  | 3                   |  |                                  | $ | 17,199,119          |  | $                           | 448,998    |                                             | $ | 4,287                                      |  | .95    | % |  | $ | 0.0262 | 

|    |                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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, 2009.                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                            
|(4) | Gross Cash Collections as
 a Percentage of Cost represents the gross cash collections on portfolios of
 consumer receivables as of March 31, 2009 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, 2009, we acquired 3 portfolios of consumer
receivables aggregating approximately $17 million in initial outstanding amount
at a purchase price of approximately $449,000, bringing the aggregate initial
outstanding amount of consumer receivables under management as of March 3, 2009
to approximately $518 million, an increase of 6.8% as compared to approximately
$485 million as of March 31, 2008. For the three months ended March 31, 2009,
we posted gross collections of approximately $3.54 million, compared to gross
collections of $4.45 million in the three month period ended March 31, 2008,
representing a 25.88% decrease.

24

---



Trends

As
a result of our line of credit, notes payable, Preferred Stock offering and other
potential capital markets transaction, we anticipate that we may incur
significant increases in interest expense and preferred dividend payments
offset, over time, by expected increased revenues from consumer receivable
portfolios purchased utilizing funds under such line of credit and the proceeds
from the Preferred Stock offering. No assurance can be given that the expected
revenues from such purchased portfolios will exceed the additional interest
expense and preferred dividends. 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 the collection environment and revenues
from collections on consumer receivables. We believe that the short term effect
of the current economic crisis has been a decrease in lump some payments from
obligors and an increase in court enforced settlement plans. This has resulted
in a change in the timing of expected collections and a resulting extension in
our expected collection. We do not believe that the recent decreases in
interest rates, nor the anticipated gradual increases in interest rates, has
had or will have a material adverse effect upon our business.

Item 3. Quantitative and Qualitative Disclosure About Market
Risks

Not applicable.

Item 4(T). Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under
the supervision and with the participation of our management, including our
Chief Executive Officer and our Chief Financial Officer, we carried out an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures as defined in Rules 13a-15(e) and 15d- 15(e) under the Securities
Exchange Act of 1934, as amended (the Exchange Act). Based on that
evaluation, our Chief Executive Officer and our Chief Financial Officer have
concluded that, at March 31, 2009, such disclosure controls and procedures were
not effective due to the fact that we were unable to complete our Annual Report
on Form 10-K by April 15, 2009, the extended due date for such Annual Report,
and our Quarterly Report on Form 10-Q by May 20, 2009, the extended due date
for such Quarterly Report.

Effective
December 31, 2008, as a result of the current economic crisis, we revised our
expected cash collection forecast methodology by extending the collection
forecast of our pools from 60 months to 84 months and adjusting the timing of
expected future collections. This resulted in impairment of approximately $8.36
million on our consumer receivables portfolios. This impairment was primarily
due to a combination of an extension of the collection curve from 60 to 84
months and a shortfall in collections in certain pool groups against our
forecast, primarily our 2005 through 2006 vintages. The increase in the
collection forecast from 60 to 84 months was applied effective December 31,
2008, to each portfolio for which we could forecast through such term. This analysis
required additional time to prepare our quarterly financial statements.

Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SECs rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed or submitted under the Exchange Act is accumulated and
communicated to management, including our Chief Executive Officer and Chief
Financial Officer, or persons performing similar functions, as appropriate, to
allow timely decisions regarding required disclosure.

25

---



Changes
in Internal Control over Financial Reporting

There
were no changes in the Companys internal control over financial reporting
during the Companys first fiscal quarter of 2009 that materially affected, or
are reasonably likely to materially affect, the Companys internal control over
financial reporting.

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 ordinary course matters are material to our business and financial
condition.

As
of March 31, 2009, 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.                       

26

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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 PORTFOLIO GROUP,
 INC.
|                    |                                 |                                       
|Dated: May 26, 2009 | By:                             | /s/ John C. Kleinert                  
|                    |                                 |                                       
|                    |                                 | John C. Kleinert                      
|                    |                                 | Chief Executive Officer
 and President

27

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