SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

                   For the fiscal year ended December 31, 2006

            OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                        Commission File Number 000-161570


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


                 DELAWARE                              65-0008442
     (State or other jurisdiction of                 (IRS Employer
      incorporation or organization)               Identification No.)


              48 S. Franklin Turnpike, 3rd Floor, Ramsey, NJ 07446
                    (Address of principal executive offices)


                                 (201) 760-6306
              (Registrant's telephone number, including area code)


          Securities registered pursuant to Section 12 (b) of the Act:

         Series A Convertible Preferred Stock, par value $.001 per share
                                (Title of Class)

                             American Stock Exchange
                     (Name of exchange on which registered)

          Securities registered pursuant to Section 12 (g) of the Act:
                     Common Stock, par value $.001 per share
                                (Title of Class)

Check whether the issuer is not required to file reports pursuant to Section 13
                        or 15(d) of the Exchange Act [ ]

Check whether the issuer: (1) 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 [ ]

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in the form, and no disclosure will be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-KSB. [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
<PAGE>

State issuer's revenues for its most recent fiscal year: $10,284,482

The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the average bid and asked price of such
common equity, as of March 1, 2007 ($2.47 per share) was $9,396,360.

State the number of shares outstanding of each of the issuer's classes of common
equity: As of March 1, 2007: 16,154,321 shares of common stock, par value $.001
per share, were outstanding.

Transitional Small Business Disclosure Format (check one): YES [ ] NO [X]

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      NONE

<PAGE>

                                TABLE OF CONTENTS

PART I

   ITEM 1:  DESCRIPTION OF BUSINESS                                          5

   ITEM 2:  DESCRIPTION OF PROPERTIES                                       23

   ITEM 3:  LEGAL PROCEEDINGS                                               23

   ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS             23

PART II

   ITEM 5:  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
            MATTERS                                                         24

   ITEM 6:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
            AND RESULTS OF OPERATIONS.                                      26

   ITEM 7:  FINANCIAL STATEMENTS                                            34

   ITEM 8:  CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING
            AND FINANCIAL DISCLOSURE                                        34

   ITEM 8A: CONTROLS AND PROCEDURES                                         34

   ITEM 8B: OTHER INFORMATION                                               34

PART III

   ITEM 9:  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
            PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT OF
            THE REGISTRANT                                                  35

   ITEM 10: EXECUTIVE COMPENSATION                                          38

   ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
            MANAGEMENT                                                      41

   ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                  42

PART IV

   ITEM 13: EXHIBITS                                                        44

   ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES                          46

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<PAGE>

                           FORWARD LOOKING STATEMENTS

This Form 10-KSB and other reports we file from time to time with the Securities
and Exchange Commission (collectively, the "Filings") contain or may contain
forward looking statements and information that are based upon beliefs of, and
information currently available to, our management as well as estimates and
assumptions made by our management. When used in the Filings the words
"anticipate", "believe", "estimate", "expect", "future", "intend", "plan" or the
negative of these terms and similar expressions as they relate to us or our
management identify forward looking statements. Such statements reflect our
current view with respect to future events and are subject to risks,
uncertainties, assumptions and other factors (including the risks contained in
the section of this report entitled "Risk Factors") relating to our industry and
our operations and results of operations. Should one or more of these risks or
uncertainties materialize, or should the underlying assumptions prove incorrect,
actual results may differ significantly from those anticipated, believed,
estimated, expected, intended or planned.

Although we believe that the expectations reflected in the forward looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results. The following discussion should be read in conjunction with our
financial statements and the related notes that appear elsewhere in this report.

We cannot give any guarantee that these plans, intentions or expectations will
be achieved. 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 factors described in
the "Risk Factors" section beginning on page [17] of this Annual Report. Listed
below and discussed elsewhere in this Annual 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 Annual Report. These risks, uncertainties and
contingencies include, but are not limited to, the following:

o    the availability for purchase of consumer receivable portfolios, interests
     in distressed real property and tax lien certificates that satisfy our
     criteria;

o    competition in the industry;

o    the availability of debt and equity financing;

o    future acquisitions;

o    the availability of qualified personnel;

o    international, national, regional and local economic and political changes;

o    general economic and market conditions;

o    changes in applicable laws;

o    trends affecting our industry, our financial condition or results of
     operations;

o    the timing and amount of collections on our consumer receivable portfolios;

o    the timing of sales of interests in distressed real property and redemption
     of tax lien certificates; and

o    increases in operating expenses associated with the growth of our
     operations.

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<PAGE>

PART I
------

ITEM 1. DESCRIPTION OF BUSINESS

BACKGROUND

We were incorporated in Delaware under the name Tele-Optics, Inc. in December
1986. Effective April 8, 2004 we changed our corporate name from Tele-Optics,
Inc. to Velocity Asset Management, Inc., and effected a one for thirteen reverse
split of our then issued and outstanding shares of common stock. Except as
otherwise noted, all share and per share data set forth in this annual report
gives effect of the one for thirteen reverse split.

Unless the context otherwise requires, the terms "we," "us" or "our" as used
hereinafter refer to Velocity Asset Management, Inc. and our subsidiaries,
including TLOP Acquisition and its subsidiaries J. Holder, Inc., ("J. Holder")
VOM, LLC ("VOM") and Velocity Investments, LLC ("Velocity Investments") for
periods after February 3, 2004 and Tele-Optics, Inc. for periods before February
3, 2004.

Overview

Since February 3, 2004, when we acquired STB, Inc., a New Jersey corporation, we
have engaged in acquiring, managing, collecting and servicing distressed assets,
consisting of consumer receivable portfolios, interests in distressed real
property and tax lien certificates, through three wholly-owned subsidiaries:

Velocity Investments which was formed in 2002, invests in consumer receivable
portfolios purchased in the secondary market at a discount from face value and
then seeks to liquidate interests contained within these portfolios through
legal collection means. As of December 31, 2006, Velocity Investments, LLC held
approximately $38,000,000 in distressed consumer receivables.

J. Holder, which was formed in 1998, invests in interests in distressed real
property, 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, with the goal of re-selling the
property or perfecting the partial interest and/or clouded title for resale.
These investments are made following an extensive due diligence analysis of the
legal status of the property and a market analysis of the property's value. The
average holding period for J. Holder's properties is six months. As of December
31, 2006, J. Holder, Inc. held approximately $6,245,000 in real property
inventory and $25,000 in assignments and judgments of real property interests.

VOM, which was formed in 2002, invests in New Jersey municipal tax lien
certificates. VOM purchases tax lien certificates in the secondary market which
allows VOM to perform its due diligence on a static pool of assets to determine
what discount to par VOM is willing to offer as a purchase price. The average
purchase price paid for a tax lien certificate in the secondary market is at a
95% discount to the assessed value of the individual property. VOM creates
returns by liquidating the portfolio while capitalizing upon opportunities
presented by the current tax lien environment to acquire the underlying real
properties that are the subject of the tax liens. As of December 31, 2006, VOM,
LLC held approximately $472,000 in tax certificates and accrued interest.

Our objective is to maximize our return on investment in distressed assets. Our
overall capital base is allocated primarily to the purchase of consumer
receivable portfolios, although we are continuing to evaluate market
opportunities in connection with interests in distressed real property and tax
lien certificates based on the conditions of the particular market, the
price/cost of the specific asset within such market and our internal risk/return
analysis. The strategy for the allocation of capital among different types of
distressed assets is determined solely by our senior management.

Prior to 2004, the majority of our revenues had been derived from the
realization of our distressed real property assets, which accounted for
approximately 85% of our revenues during fiscal 2003, as compared to 7.5% of our
revenues during such year for each of our consumer receivables and our tax lien
certificates. Revenues generated by the realization or sale of our consumer
receivables business increased to $1,726,356 in fiscal 2004, or approximately
39.6% of our total revenues for fiscal 2004, to $3,633,945, or approximately
44.9% of our total revenues in fiscal 2005 and to $8,431,259, or approximately
82.1% of our total revenues in fiscal 2006, while revenues from our distressed
real property assets were $2,369,564, or approximately 54.4% of our total
revenues in fiscal 2004, $3,685,338, or approximately 45.5% of our total
revenues in fiscal 2005 and $1,585,175 or approximately 15.4% of our total
revenues in fiscal 2006. We anticipate increasing growth in our consumer
receivables portfolios as a result of the $17.5 million line of credit that our

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<PAGE>

Velocity Investments, LLC subsidiary entered into with Wells Fargo Foothill,
Inc. in 2005, as amended in February 2006, December 2006 and February 2007. Such
line of credit can be, and has been, used exclusively to purchase additional
consumer receivable portfolios.

We acquire consumer receivable portfolios at a significant discount to the
amount actually owed by the obligors. 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 offers us an
adequate return on our acquisition costs and servicing expenses. After
purchasing a consumer receivable portfolio, we actively monitor its performance
and review and adjust our collection and servicing strategies accordingly.
Although we perform some collection activities, we outsource the legal
collection process to third parties to keep actual overhead at a minimum.
Historically, all of our consumer receivables have been from obligors in New
Jersey but, since December 2004, we have acquired obligors in other states and
intend to continue to expand our operations geographically.

We were originally incorporated for the purpose of acquiring all of the common
stock of Lenzar Optics, Inc. That company was then engaged in the development,
manufacture and marketing of a variety of optical, electronic and
electro-optical products for use in the medical and defense industries. In
September 1991, we sold all of our assets related to Lenzar's operations to a
third party. From the date of that sale and until February 3, 2004, when we
acquired STB, Inc., a New Jersey corporation ("STB"), we had virtually no active
business operations. On November 21, 1997, new investors, including our
management immediately prior to the effective date, purchased approximately
sixty-two (62%) percent of our then issued and outstanding common stock. Between
November 21, 1997 and February 3, 2004, those investors and others provided
additional funds in the form of equity investment and loans that ensured our
viability and permitted us to continue our limited operations and pursue
business opportunities.

On February 3, 2004, we entered into and consummated an agreement and plan of
merger by and among our wholly-owned subsidiary, TLOP Acquisition Company,
L.L.C., a New Jersey limited liability company, STB and the stockholders of STB,
John C. Kleinert, W. Peter Ragan, Sr. and W. Peter Ragan, Jr. In accordance with
the terms of the merger agreement, on that date, STB was merged with and into
TLOP Acquisition, and we issued to the stockholders of STB, in exchange for all
of the common stock of STB issued and outstanding, (a) an aggregate of 6,129,424
shares of our common stock, (b) the right to receive an aggregate of 1,808,077
additional shares of our common stock upon amendment of our certificate of
incorporation to increase the total number of shares of capital stock that we
are authorized to issue, and (c) warrants to purchase during a period of five
years an aggregate of 2,437,000 shares of our common stock at an exercise price
of $1.04 per share. The 6,129,424 shares of our common stock issued to the
former stockholders of STB represented approximately 80% of the then total
issued and outstanding shares of our common stock. The merger agreement also
provided that upon amendment of our certificate of incorporation to authorize us
to issue a series of preferred stock having certain terms and conditions, John
C. Kleinert would convert all of the debt owed by us to him, including debt
under a line of credit and other secured loans, into shares of such preferred
stock. Mr. Kleinert has since converted all of the debt owed by us to him into
shares of our common stock. Except as may be otherwise noted, all share and per
share data set forth is this filing give effect to the one for thirteen reverse
split of our common stock effected on April 8, 2004.

In connection with the merger with STB, we completed a private placement to an
accredited investor of 562,500 shares of our common stock and a warrant
exercisable for a period of five years to purchase an aggregate of 562,500
shares of our common stock at an exercise price of $1.04 per share in exchange
for an aggregate cash consideration of $500,000.

As a result of the merger, we now carry on business through our wholly-owned
subsidiary TLOP Acquisition, which maintains its executive offices at 48
Franklin Turnpike, 3rd Floor, Ramsey, NJ 07746 and its business offices at 3100
Route 138 West, Wall, New Jersey 07719.

We acquire interests in distressed real property following due diligence
analysis of the legal status of each property and a market analysis of the value
of such property.

We acquire tax lien certificates in the secondary market at a discount to par
following due diligence analysis on the underlying properties.

We purchase consumer receivables from creditors and others through privately
negotiated direct sales and auctions in which sellers of consumer receivables
seek bids from several pre-qualified debt purchasers. We pursue new acquisitions
of consumer receivable portfolios, interests in distressed real property and tax
lien certificates on an ongoing basis through our relationships with industry

                                       6
<PAGE>

participants, collection agencies, investors and our financing sources, brokers
who specialize in the sale of consumer receivable portfolios and other sources.

Our distressed assets are purchased through internally generated cash flow,
seller financed credit lines/leases and through traditional leverage methods.

Preferred Stock Offering

On May 18, 2006, we consummated a public offering of 1,200,000 shares of Series
A Convertible Preferred Stock resulting in gross proceeds of $12 million to us
(the "Offering"). The Offering was underwritten by Anderson & Strudwick,
Incorporated (the "Underwriter"). After deducting underwriting commissions,
approximately $11.040 million of such proceeds were received by us. The
Underwriter was granted an option to purchase up to an additional 180,000 shares
of Series A Convertible Preferred Stock to cover over-allotments (the
"Over-Allotment Shares"). On May 31, 2006, the Underwriters exercised the
over-allotment. The Over-Allotment Shares were sold at an offering price of
$10.00 per Over-Allotment Share, generating gross proceeds of $1.8 million.
After deducting underwriting commissions, we received approximately $1.656
million of such additional proceeds. In addition, the Company incurred
approximately $300,000 in additional offering related costs. Our Series A
Convertible Preferred Stock is traded on the American Stock Exchange under the
symbol JVI.PR.

Corporate Information

Our principal executive offices are located at 48 S. Franklin Turnpike, 3rd
Floor, Ramsey, New Jersey 07446 and our telephone number is (201) 760-6306. Our
corporate website is www.velocitycollect.com. The information on our website is
not incorporated by reference in this annual report.

Industry Overview

The purchase and liquidation of distressed assets consisting of consumer
receivable portfolio, interests in distressed real property and tax lien
certificates is a growing industry that is driven by many factors including:

o        increasing levels of debt;

o        increasing defaults of the underlying receivables;

o        increasing utilization of third-party providers to collect such
         receivables;

o        fluctuating employment environment exacerbated by overseas outsourcing;

o        challenged municipal governments raising property taxes to bridge
         budgetary gaps;

o        increasing values in a real estate market driven by high refinancing
         activity as a means to maintain lifestyles; and

o        mounting debt and pressure on banks and financial institutions to
         remove nonperforming or unattractive assets from their balance sheets.

According to a US Federal Reserve release dated February 2007, consumer debt was
$2.4 trillion as of December 2006, and increasing at an annual rate of 3.0%. We
believe that as a result of the difficulty in collecting these receivables and
the desire of originating institutions to focus on their core businesses and to
generate revenue from these receivables, originating institutions are
increasingly electing to sell these portfolios.

Strategy

Our primary objective is to utilize our management's experience and expertise to
effectively grow our business by identifying, evaluating, pricing and acquiring
distressed assets consisting of consumer receivable portfolios, interests in
distressed real property and tax lien certificates, and maximizing the return on
such assets in a cost efficient manner. Our strategy includes:

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o        managing the legal collection and servicing of our receivable
         portfolios;

o        managing the acquisition and disposal of interest in distressed real
         property and tax lien certificates;

o        conducting extensive internal due diligence to ensure our third party
         services are provided with the most complete available information on a
         portfolio in order to maximize collections;

o        outsourcing the legal collection processes;

o        expanding geographically while maintaining the same management of the
         legal collection and servicing of receivable portfolios;

o        increasing and expanding financial flexibility and leverage through
         increased capital lines of credit;

o        capitalizing on our strategic relationships to identify and acquire
         consumer receivable portfolios, interests in distressed real property
         and tax lien certificates; and

o        expanding our business through the purchase of consumer receivables,
         interests in distressed real property and tax lien certificates from
         new and existing sources.

We believe that as a result of our management's experience and expertise, and
the fragmented yet growing market in which we operate, we are well-positioned to
successfully implement our strategy.

Additionally, in 2007, we intend to continue to grow our business generally
while emphasizing the expansion of the business of Velocity Investments, LLC by
acquiring additional consumer receivable portfolios, including multi-state
consumer receivables. Until December 2004, when we acquired our first
multi-state portfolio, all receivables owned by Velocity Investments, LLC were
from obligors in New Jersey. Since December 2004, we have purchased portfolios
with receivables from obligors in all 50 states, although we concentrate on
acquiring receivables from obligors in New York, Massachusetts, Delaware,
Maryland, Georgia, Alabama, Arkansas, Connecticut, Indiana, Ohio, Tennessee,
Michigan, Colorado, Oregon, Wisconsin, Illinois, Kentucky, Minnesota, Rhode
Island, Virginia, Hawaii, Wyoming, Florida, Pennsylvania, California and
Missouri.

Consumer Receivables Purchase Program

We purchase consumer receivable portfolios that include charged-off receivables
and semi-performing receivables. We identify potential portfolio acquisitions on
an ongoing basis through our relationships with industry participants,
collection agencies, investors and our financing sources, brokers who specialize
in the sale of receivable portfolios and other sources.

Historically, Velocity Investments, LLC has acquired consumer receivable
portfolios with face amounts ranging from $225,000 to approximately $43 million
at purchase prices ranging from $0.043 to $0.25 of such face amounts.

The following table summarizes our cumulative historical portfolio purchase
price and cash collections as of December 31, 2004, 2005 and 2006. (All dollar
amounts in thousands.)
<TABLE>
<CAPTION>

                   Aggregate Initial   Total no. of                                        Gross Cash
                      Outstanding       Portfolios    Cumulative      Cumulative Gross     Collections
Reporting Period   Principal Amount     Purchased   Purchase Price      Collections        Per Period
----------------   ----------------    ----------- ----------------  ------------------  ---------------
<S>                 <C>                     <C>      <C>                <C>               <C>
   12/31/2004       $     21,008            15       $      3,489       $      2,596      $      2,150
   12/31/2005       $    154,112            37       $     14,939       $      8,001      $      5,405
   12/31/2006       $    353,154            63       $     30,306       $     18,779      $     10,778
</TABLE>

We utilize our relationships with brokers, servicers and sellers of consumer
receivable portfolios to locate consumer receivable portfolios for purchase. Our
senior management is responsible for:

o        coordinating due diligence, including in some cases on-site visits to
         the seller's office;

o        stratifying and analyzing the portfolio characteristics;

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o        valuing the portfolio;

o        preparing bid proposals;

o        negotiating pricing and terms;

o        closing the purchase; and

o        coordinating the receipt of account documentation for the acquired
         portfolios.

The seller or broker typically supplies us with either a sample listing or the
actual portfolio being sold on a compact disk, a diskette or other form of
media. We analyze each consumer receivable portfolio to determine if it meets
our purchasing criteria. We may then prepare a bid or negotiate a purchase
price. If a purchase is completed, senior management monitors the portfolio's
performance and uses this information in determining future buying criteria and
pricing.

We purchase consumer receivables at substantial discounts from the balance
actually owed by the obligors. We determine how much to bid on a portfolio and a
purchase price by evaluating many different variables, such as:

o        the number of collection agencies previously attempting to collect the
         receivables in the portfolio;

o        the average balance of the receivables;

o        the age of the receivables;

o        number of days since charge-off;

o        payments made since charge-off; and

o        the locations of the obligors.

Once a consumer receivable portfolio has been identified for potential purchase,
we prepare quantitative analyses to analyze the potential collectibility of the
portfolio. We also analyze the portfolio by comparing it to similar portfolios
previously acquired by us. In addition, we perform qualitative analyses of other
matters affecting the value of portfolios, including a review of the
delinquency, charge off, placement and recovery policies of the originator as
well as the collection authority granted by the originator to any third party
collection agencies and, if possible, by reviewing their recovery efforts on the
particular portfolio. After these evaluations are completed, members of our
senior management discuss the findings, decide whether to make the purchase and
finalize the price at which we are willing to purchase the portfolio.

We purchase most of our consumer receivable portfolios directly from originators
and other sellers including, from time to time, auction type sales in which
sellers of consumer receivables seek bids from several pre-qualified debt
purchasers. In order for us to consider a potential seller as a source of
receivables, a variety of factors are considered. Sellers must demonstrate that
they have:

o        adequate internal controls to detect fraud;

o        the ability to provide post sale support; and

o        the capacity to honor buy-back and return warranty requests.

Generally, our portfolio purchase agreements provide that we can return certain
accounts to the seller. In some transactions, however, we may acquire a
portfolio with few, if any, rights to return accounts to the seller. After
acquiring a portfolio, we conduct a detailed analysis to determine which
accounts in the portfolio should be returned to the seller. Although the terms
of each portfolio purchase agreement differ, examples of accounts that may be
returned to the seller include:

o        debts paid prior to the cutoff date;

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o        debts in which the obligor filed bankruptcy prior to the cutoff date;
         and

o        debts in which the obligor was deceased prior to cutoff date.

We generally use third-party electronic public record searches to determine
bankrupt and deceased obligors, which allows us to focus our resources on
portfolio collections. Under a typical portfolio purchase agreement, the seller
refunds the portion of the purchase price attributable to the returned accounts
or delivers replacement receivables to us. Occasionally, we will acquire a well
seasoned portfolio at a reduced price from a seller that is unable to meet all
of our purchasing criteria. When we acquire such portfolios, the purchase price
is discounted beyond the typical discounts we receive on the portfolios we
purchase that meet our purchasing criteria.

Consumer Receivables Servicing

Our objective is to maximize our return on investment on acquired consumer
receivable portfolios. Consequently, before acquiring a portfolio, we analyze
the various assets contained in the portfolio to determine how to best maximize
collections in a cost efficient manner. If we acquire the portfolio, we can then
promptly process the receivables that were purchased and commence the collection
process. Unlike collection agencies that typically have only a specified period
of time to recover a receivable, as the portfolio owners we have significantly
more flexibility in establishing payment programs and establishing customized
policies and procedures.

Once a portfolio has been acquired, we download all receivable information
provided by the seller into our account management system and reconcile certain
information with the information provided by the seller in the purchase
contract. We then conduct additional due diligence on the portfolio to augment
the information provided by the seller and download such information into our
account management system. We send notification letters to obligors of each
acquired account explaining, among other matters, our new ownership and asking
that the obligor contact us or our servicers to make payment arrangements.

We outsource all of the legal collection process of our receivables to third
party law firms, historically only Ragan & Ragan, P.C., based on specific
guidelines established by senior management and set forth in a third-party
servicing contract. Each third-party law firm to whom we might outsource
receivable servicing is selected from an industry law list with an accredited
bond, has compatible information technology systems and meets certain other
specific criteria. Our standard form of servicing contract provides for the
payment to the law firm of a contingency fee equal to 25% of all amounts
collected and paid by the debtors. Once a group of receivables is sent to a
third-party servicer, our management actively monitors and reviews the
servicer's performance on an ongoing basis. Our management receives detailed
analyses, including collection activity and portfolio performance, from our
internal servicing department to assist it in evaluating the results of the
efforts of the third-party law firm. Based on portfolio performance guidelines,
our management may move certain receivables from one third-party servicer to
another if it anticipates that this will result in an increase in collections.
Until December 2004, all of our receivables were from obligors in New Jersey and
we employed the law firm of Ragan & Ragan, P.C. to service those receivables. We
expect to continue to use Ragan & Ragan, P.C. with respect to our receivables in
New Jersey until such time either (i) our agreement with Ragan & Ragan, P.C.
terminates; or (ii) the consumer receivable portfolios in New Jersey increase
beyond the capacity of Ragan & Ragan, P.C. Our current agreement with respect to
consumer receivables portfolios with Ragan & Ragan P.C. is for a one year period
commencing January 1, 2005, and automatically extends for additional periods of
one year each unless terminated by us. The agreement provides for the payment to
such firm of a contingency fee equal to 25% of all amounts collected and paid by
the obligors. The shareholders of Ragan & Ragan, P.C. are W. Peter Ragan, Sr.,
our Vice President and a Director, and W. Peter Ragan Jr., President of our
wholly-owned subsidiary, Velocity Investments LLC.

From time to time, we may resell certain accounts in our pool of consumer
receivables that we have deemed uncollectible in order to generate revenue.

Distressed Real Property Program

We acquire interests in distressed real property, namely real property being
sold at sheriff's foreclosure and judgment execution sales, defaulted mortgages,
partial interests in real property and real property with clouded title.
Properties and property interests are purchased mainly at publicly advertised
judicial and non-judicial auction sales. Purchases of real property are mainly
in New Jersey. However, we have also purchased six properties in Indiana through
a Bankruptcy Court auction sale conducted in Atlanta, Georgia. It is anticipated

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that as we expand, we will acquire properties in other geographic locations.
Some property interests are purchased through referrals from independent
contractor finders who are paid a varying commission of the net profit, if any,
at the time of the disposal of the asset to a third party transferee (not upon
acquisition). Our subsidiary, J. Holder, Inc., has entered into a retainer
agreement with the law firm of Ragan & Ragan P.C. and such firm has agreed to
provide legal services at varying hourly rates in connection with the purchase
and sale of J. Holder's interests in distressed real property with a minimum fee
of $1,500 per each purchase and sale. In addition, such firm is entitled to
receive a finder's fee equal to 15% of J. Holder's net profit, if any, at the
time of sale of any property interest referred to us by Ragan & Ragan, P.C. The
retainer agreement is for a one year period commencing January 1, 2005, and
renews for successive periods of one year each unless terminated by our
subsidiary.

Senior management conducts extensive due diligence on the status of any property
or property interest proposed to be acquired by us and a market analysis of the
property's value before making any investment decision.

Our average holding period for an interest in distressed real property prior to
disposal has been six months, which has allowed for the wind-up of any
litigation, possession and rehabilitation of the property to the degree
necessary for resale. To the extent possible, any rehabilitation has been
limited to clean up of the premises. Sales of properties are generally made
through local, but nationally affiliated, realtors using multiple listing
sources. From time to time, we sell interests in distressed real property to
generate revenue and to dispose of unwanted properties. Typically, at closing,
we pay a commission of 5% of the sales price, although incentives may be offered
from time to time to expedite a particular sale.

On June 2, 2005, J. Holder acquired a residential property in Melbourne, Florida
through a joint venture with Groveland Estates, LLC, an unrelated party. The
property was purchased for $3.25 million from Detroit-based Comerica Bank, which
had acquired the property through a foreclosure. Acquisition financing of
approximately $3.3 million was provided by a group of investors, including J.
Holder, which invested approximately $125,000, that will be entitled to receive
10% per annum and 2.0% of the loaned amount along with a pro rata share of 20%
of the net profit, if any, realized by J. Holder upon the sale of the property.
Under the terms of the joint venture agreement with Groveland Estates, LLC, the
investor group, including J. Holder, will be entitled to receive 100% return of
all capital, including acquisition and carrying costs, plus the cost of funds.
In addition, J. Holder will be entitled to receive 60% of the net profit, if
any, of the proceeds of the sale of the property, 20% of which will be shared
pro rata with the investor group (including J. Holder), and Groveland Estates,
LLC will be entitled to receive 40% of the net profit, if any, from the sale of
the property, plus 20% of the actual cost, if any, of the property's renovation,
as a project management fee. In the opinion of management, the property is
adequately covered by insurance. On September 21, 2005, J. Holder entered into a
$1,000,000 mortgage and security agreement, the proceeds of which are being used
to renovate the property. Estimated renovations are expected to cost
approximately $900,000. All principal accrues interest at a fixed annual rate of
12.0% per annum and payments of accrued interest are due and payable in arrears
in equal monthly payments on the outstanding principal balance of the promissory
note. J. Holder is required to make monthly interest only payments of $10,000.00
until October 21, 2007 at which time all principal, accrued interest and other
charges are due and payable. This note was redeemed and paid in full on August
4, 2006. Although the property was appraised in February 2007 at $4.8 million,
there can be no assurance that the sale of the property will result in a profit.

Tax Lien Certificate Program

We acquire tax lien certificates at a discount to par. We acquire these in the
secondary market which allows senior management to perform its due diligence on
the underlying property which is the subject of the tax lien before the
determination is made regarding what discount to par we are willing to offer as
a purchase price. Historically, all of the tax lien certificates we have
purchased were related to properties located in the State of New Jersey, and
were purchased in two separate portfolio pools in 2002. Our subsidiary, VOM, LLC
has entered into a retainer agreement with the law firm of Ragan & Ragan, P.C.,
in which such firm has agreed to provide legal services at varying hourly rates
in connection with the foreclosure of tax lien certificates. The Company has
also agreed to pay Ragan & Ragan a minimum fee of $1,500 per tax lien
certificate that is foreclosed upon and a commission equal to 15% of VOM's net
profit, if any, at the time of the sale of real properties acquired by VOM upon
foreclosure of a tax lien certificate.

From time to time we sell properties acquired by foreclosure of a tax lien
certificate. Sales of such properties are through local, but nationally
affiliated, realtors using multiple listing services. Typically, at closing we
pay a commission of 5% of the sales price, although incentives may be offered
from time to time to expedite a particular sale.

                                       11
<PAGE>

Competition

Our business of purchasing consumer receivables, interests in distressed real
property and tax lien certificates is highly competitive and fragmented, and we
expect that competition from new and existing companies will increase. We
compete with:

o        other purchasers of consumer receivables, interests in distressed real
         property and tax lien certificates, including third-party collection
         companies; and

o        other financial services companies who purchase consumer receivables,
         interests in distressed real property and tax lien certificates.

Some of our competitors are larger and more established and may have
substantially greater financial, technological, personnel and other resources
than we have, including greater access to capital markets. We believe that no
individual competitor or group of competitors has a dominant presence in the
market.

We compete with our competitors for consumer receivable portfolios, interests in
distressed real property and tax lien certificates based on many factors,
including:

o        purchase price;

o        representations, warranties and indemnities requested;

o        speed in making purchase decisions; and

o        our reputation.

Our strategy is designed to capitalize on the market's lack of a dominant
industry player. We believe that our management's experience and expertise in
identifying, evaluating, pricing and acquiring receivable portfolios, interests
in distressed real property and tax lien certificates and managing collections
coupled with our strategic alliances with third-party servicers and our sources
of financing give us a competitive advantage. However, we cannot assure that we
will be able to compete successfully against current or future competitors or
that competition will not increase in the future.

Management Information Systems

We believe that a high degree of automation is necessary to enable us to grow
and successfully compete with other financial services companies. Accordingly,
we continually upgrade our computer software and, when necessary, our hardware
to support the servicing and recovery of consumer receivables that we acquire.
Our telecommunications and computer systems allow us to quickly and accurately
process the large amount of data necessary to purchase and service consumer
receivable portfolios. Due to our desire to increase productivity through
automation, we periodically review our systems for possible upgrades and
enhancements.

Government Regulation

The relationship of obligors and a creditor is extensively regulated by Federal,
state and municipal laws, rules, regulations and ordinances. These laws include,
but are not limited to, the following statutes and regulations: the Fair Debt
Collection Practices Act, the Federal Truth-In-Lending Act, the Fair Credit
Billing Act, the Equal Opportunity Act, the Fair Foreclosure Act and the Fair
Credit Reporting Act, as well as comparable statutes in states where obligors
reside and/or where creditors are located. Among other things, the laws and
regulations applicable to various creditors impose disclosure requirements
regarding the advertisement, application, establishment and operation of credit
accounts or other types of credit programs. Federal law requires a creditor to
disclose to an obligor, among other things, the interest rates, fees, grace
periods and balance calculations methods associated with their accounts. In
addition, obligors are entitled to have payments and credits applied to their
accounts promptly, to receive prescribed notices and to require billing errors
to be resolved promptly. In addition, some laws prohibit certain discriminatory
practices in connection with the extension of credit. Further, state laws may
limit the interest rate and the fees that a creditor may impose on obligors.
Failure by a creditor to comply with applicable laws could create claims and
rights of offset that would reduce or eliminate an obligor's obligations, which
could have a material adverse effect on our operations. Pursuant to agreements

                                       12
<PAGE>

under which we purchase receivables, we are typically indemnified against losses
resulting from the failure of the creditor to have complied with applicable laws
relating to the receivables prior to our purchase of such receivables.

Certain laws, including the laws described above, may limit our ability to
collect amounts owing with respect to the receivables regardless of any act or
omission on our part. For example, under the Federal Fair Credit Billing Act, a
credit card issuer may be subject to certain claims and defenses arising out of
certain transactions in which a credit card is used if the consumer has made a
good faith attempt to obtain satisfactory resolution of a problem relative to
the transaction and, except in cases where there is a specified relationship
between the person honoring the card and the credit card issuer, the amount of
the initial transaction exceeds $50 and the place where the initial transaction
occurred was in the same state as the consumer's billing address or within 100
miles of that address. Accordingly, as a purchaser of defaulted receivables, we
may purchase receivables subject to valid defenses on the part of the obligor.
Other laws provide that, in certain instances, obligors cannot be held liable
for, or their liability is limited to $50 with respect to, charges to the credit
card account that were a result of an unauthorized use of the credit card
account. No assurances can be given that certain of our receivables were not
established as a result of unauthorized use of a credit card account, and,
accordingly, the amount of such receivables may not be collectible by us.

Several Federal, state and municipal laws, rules, regulations and ordinances,
including, but not limited to, the Federal Fair Debt Collection Practices Act
and the Federal Trade Commission Act and comparable state statutes regulate debt
collection activity. Although, for a variety of reasons, we may not be
specifically subject to the Federal Fair Debt Collection Practices Act and
certain state statutes specifically addressing third-party debt collectors, it
is our policy to comply with applicable laws in our collection activities. To
the extent that some or all of these laws apply to our collection activities,
failure to comply with such laws could have a materially adverse effect on us.

Additional laws may be enacted that could impose additional restrictions on the
servicing and collection of consumer receivables. Such new laws may adversely
affect the ability to collect such receivables.

Because the receivables were originated and serviced pursuant to a variety of
Federal laws by a variety of entities there can be no assurance that all
original servicing entities have at all times been in substantial compliance
with applicable law. Additionally, there can be no assurance that we or our
servicers have been or will continue to be at all times in substantial
compliance with applicable law. The failure to comply with applicable law could
materially adversely affect our ability to collect our receivables and could
subject us to increased costs, fines and penalties.

We currently hold a number of licenses issued under applicable credit laws.
Certain of our current licenses and any licenses that we may be required to
obtain in the future may be subject to periodic renewal provisions and/or other
requirements. Our inability to renew licenses or to take any other required
action with respect to such licenses could have a material adverse effect upon
our results of operation and financial condition.

EMPLOYEES

As of December 31, 2006, we had a total of ten employees, of which eight are
full time employees. Most of our collection activities are outsourced and
managed by corporate officers. Each of our employees has signed a standard
employee agreement. None of our employees are covered by a collective bargaining
agreement. We consider our relationship with our employees to be good.


                                       13
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RISK FACTORS

You should carefully consider the risks described below and the other
information in this report in evaluating the Company. If any of the following
risks or uncertainties actually occurs, our business, financial condition and
operating results would likely suffer. In that event, the market price of our
common stock could decline and you could lose all or part of your investment.

Risk Factors Relating to Our Operations

We have a limited operating history and our business and future prospects are
difficult to evaluate.

Prior to our acquisition of STB, Inc. (the former parent of our current
subsidiaries) on February 3, 2004, our Company had been inactive since 1991. STB
was organized in 2003, and none of its subsidiaries has conducted business for
more than five years. Due to our limited operating history, our ability to
execute our business strategy is materially uncertain and our operations and
prospects are subject to all risks inherent in a developing business enterprise.
Our limited operating history also makes it difficult to evaluate our long term
commercial viability. Our ability to execute our business strategy must be
evaluated in light of the problems, expenses and difficulties frequently
encountered by new businesses in general and a collection service specifically.

We may not be able to purchase consumer receivable portfolios, interests in
distressed real property or tax lien certificates at favorable prices or on
sufficiently favorable terms or at all.

Our ability to execute our business strategy depends upon the continued
availability of consumer receivable portfolios, interests in distressed real
property and tax lien certificates that meet our purchasing criteria and our
ability to identify and finance the purchases of such assets. The availability
of consumer receivable portfolios, interests in distressed real property and tax
lien certificates at favorable prices and on terms acceptable to us depends on a
number of factors outside of our control, including:

o        the continuation of the current growth trend in debt;

o        the continued volume of consumer receivable portfolios, interests in
         distressed real property and tax lien certificates available for sale;

o        competitive factors affecting potential purchasers and sellers of
         consumer receivable portfolios, interests in distressed real property
         and tax lien certificates; and

o        fluctuation in interest rates.

The market for acquiring consumer receivable portfolios, interests in distressed
real property and tax lien certificates is becoming more competitive, thereby
possibly diminishing our ability to acquire such assets at attractive prices in
future periods.

The growth in debt may also be affected by:

o        a slowdown in the economy;

o        reductions in consumer spending;

o        changes in the underwriting criteria by originators;

o        changes in laws and regulations governing lending and bankruptcy; and

o        fluctuation in interest rates.

Any slowing of the consumer debt growth trend could result in a decrease in the
availability for purchase of consumer receivable portfolios, interests in
distressed real property and tax lien certificates that could affect the
purchase prices of such assets. Any increase in the prices we are required to

                                       14
<PAGE>

pay for such assets in turn will reduce the possible profit, if any, we generate
from such assets.

We may not be able to recover sufficient amounts from the assets we acquire to
recover the costs associated with the purchase and servicing of those assets and
to fund our operations.

We acquire and collect on consumer receivable portfolios that contain
charged-off and semi-performing receivables. In order to operate profitably over
the long term, we must continually purchase and collect on a sufficient volume
of receivables to generate revenue that exceeds our costs. Our inability to
realize value from our receivable portfolios in excess of our expenses may
compromise our ability to remain as a going concern. For accounts that are
charged-off or semi-performing, the originators or interim owners of the
receivables generally have:

o        made numerous attempts to collect on these obligations, often using
         both their in-house collection staff and third-party collection
         agencies;

o        subsequently deemed these obligations as uncollectible; and

o        charged-off these obligations.

These receivable portfolios are purchased at significant discounts to the actual
amounts the obligors owe. These receivables are difficult to collect and actual
recoveries may vary and be less than the amount expected. In addition, our
collections may worsen in a weak economic cycle. We may not recover amounts in
excess of our acquisition and servicing costs.

Our ability to recover on our consumer receivable portfolios and produce
sufficient returns can be negatively impacted by the quality of the purchased
receivables. In the normal course of our portfolio acquisitions, some
receivables may be included in the portfolios that fail to conform to certain
terms of the purchase agreements and we may seek to return these receivables to
the seller for payment or replacement receivables. However, we cannot guarantee
that any of such sellers will be able to meet their payment obligations to us.
Accounts that we are unable to return to sellers may yield no return. If cash
flows from operations are less than anticipated as a result of our inability to
collect sufficient amounts on our receivables, our ability to satisfy our debt
obligations, purchase new portfolios and our future growth and profitability may
be materially adversely affected.

We acquire and seek to liquidate interests in distressed real property that
include real property being sold at sheriff's foreclosure and judgment execution
sales and defaulted mortgages. In order to operate profitably over the long
term, we must continually purchase and sell a sufficient volume of distressed
real property interests to generate revenue that exceeds our costs. Our ability
to produce sufficient returns can be negatively impacted by the quality of the
distressed real estate assets that we purchase. No assurance can be given that
we will be successful in purchasing a sufficient number of suitable interests in
distressed real property at acceptable prices or that, even if a sufficient
number of such real property interests are purchased, our investment objectives
will be achieved. If cash flows from operations are less than anticipated as a
result of our inability to collect sufficient amounts on distressed real
property assets, our ability to satisfy our debt obligations, purchase new
interests in distressed real property and our future growth and profitability
may be materially adversely affected.

We are subject to intense competition for the purchase of distressed assets that
may effect our ability to purchase distressed assets at acceptable prices or at
all.

We compete with other purchasers of consumer receivable portfolios, interests in
distressed real property and tax lien certificates, with third-party collection
agencies and with financial services companies that manage their own portfolios
of these assets. We compete on the basis of reputation, industry experience and
performance. Some of our competitors have greater capital, personnel and other
resources than we have. The possible entry of new competitors, including
competitors that historically have focused on the acquisition of different asset
types, and the expected increase in competition from current market
participants, may reduce our access to consumer receivable portfolios, interests
in distressed real property and tax lien certificates. Aggressive pricing by our
competitors could raise the price of such distressed assets above levels that we
are willing to pay, which could reduce the amount of such assets suitable for us
to purchase or, if purchased by us, reduce the profits, if any, generated by
such assets. If we are unable to purchase distressed assets at favorable prices

                                       15
<PAGE>

or at all, our revenues and our ability to cover operating expenses may be
negatively impacted and our earnings could be materially reduced.

We are dependent upon third parties, in particular, the law firm of Ragan &
Ragan, P.C., to service the legal collection process of our consumer receivable
portfolios.

We are dependent upon the efforts of our third party servicers, in particular
the law firm of Ragan & Ragan, P.C., to service and collect our consumer
receivables. Any failure by our third party servicers to adequately perform
collection services for us or remit such collections to us could materially
reduce our revenues and possibly our profitability. In addition, our revenues
and profitability could be materially adversely affected if we are not able to
secure replacement servicers. Until December 2004, our sole servicers had been
the law firm of Ragan & Ragan, P.C., the principals of which are W. Peter Ragan,
Sr. and W. Peter Ragan, Jr. our vice president and a director, and president of
our wholly-owned subsidiary, Velocity Investments, LLC, respectively. Since
December 2004, we have purchased portfolios with receivables from obligors in
all 50 states, and entered into third party servicing arrangements with
approximately 65 attorneys under which such attorneys service and collect our
consumer receivables.

It may be a conflict of interest for W. Peter Ragan, Sr. to serve as a director
and officer of our Company and for W. Peter Ragan, Jr. to serve as an officer of
our Company, while also being the principals of Ragan & Ragan, P.C., our primary
third party servicers.

As officers and, in the case of W. Peter Ragan, Sr., also as a director, of our
Company, Messrs. Ragan and Ragan have a fiduciary duty to our stockholders.
However, their position as the principals of the law firm Ragan & Ragan, P.C.,
the primary third party servicers of our consumer receivable portfolios,
interests in distressed real property and tax lien certificates, may compromise
their ability to make decisions in the best interests of our stockholders.

Each of Messrs. Ragan and Ragan devotes approximately 50% of his business time
to our affairs in accordance with the terms of his respective employment
agreement and the balance of his business time to his law practice which
includes the representation of companies that may be deemed our competitors.
Accordingly, there are potential conflicts of interest inherent in such
relationship. The current agreement by and between our wholly-owned subsidiary,
Velocity Investments, LLC, and Ragan & Ragan P.C. is for a one year period
commencing January 1, 2005, and automatically extends for additional periods of
one year each unless terminated by us. The agreement provides for the payment to
such firm of a contingency fee equal to 25% of all amounts collected and paid by
the obligors. The shareholders of Ragan & Ragan, P.C. are W. Peter Ragan, Sr.,
our vice president and a director, and W. Peter Ragan Jr., president of our
wholly-owned subsidiary, Velocity Investments, LLC. During 2006 and 2005, we
paid Ragan & Ragan, P.C an aggregate of $1,241,244 and $1,140,793 respectively,
for services rendered in accordance with the terms of the agreements between our
subsidiaries and Ragan & Ragan, P.C. Pursuant to an employment agreement dated
January 1, 2004, by and between W. Peter Ragan, Sr. and us, Mr. Ragan, Sr. is
entitled to an annual salary of $100,000 in consideration for his position as
our Vice President and president of our wholly-owned subsidiaries' J. Holder,
Inc. and VOM, LLC. In addition, pursuant to an employment agreement dated
January 1, 2004, by and between W. Peter Ragan, Jr. and us, Mr. Ragan, Jr. is
entitled to an annual salary of $100,000 per year in consideration for his
position as president of our wholly owned subsidiary, Velocity Investments, LLC.

Our subsidiary, J. Holder, Inc., has entered into a one-year retainer agreement
with the law firm of Ragan & Ragan, P.C. and such firm has agreed to provide
legal services at varying hourly rates in connection with the purchase and sale
of J. Holder's interests in distressed real property with a minimum fee of
$1,500 per each purchase and sale. In addition, such firm is entitled to receive
a finder's fee equal to 15% of J. Holder's net profit, if any, at the time of
sale of any property interest referred to us by Ragan & Ragan, P.C. The retainer
agreement is for a one year period commencing January 1, 2005, and renews for
successive periods of one year each unless terminated by our subsidiary.

Our subsidiary, VOM, LLC, has entered into a retainer agreement with the law
firm of Ragan & Ragan, P.C., in which such firm has agreed to provide legal
services at varying hourly rates in connection with the foreclosure of tax lien
certificates with a minimum fee of $1,500 per foreclosed tax lien certificate
and a commission equal to 15% of VOM's net profit, if any, at the time of sale
of any real property acquired by VOM upon foreclosure of a tax lien certificate.

Ragan & Ragan, P.C. is currently our third party servicer for collections in the
State of New Jersey. Our third party servicing agreements with Ragan & Ragan,
P.C. have terms no more favorable than our third party servicing agreements with
other third party servicers in other states.

                                       16
<PAGE>

Each of W. Peter Ragan, Sr. and W. Peter Ragan, Jr. owns approximately 14.5% of
our total outstanding shares of common stock as of March 1, 2007.

The loss of any of our executive officers may adversely affect our operations
and our ability to successfully acquire distressed assets.

Mr. John C. Kleinert, our president and chief executive officer, Mr. W. Peter
Ragan, Sr., our vice president, Mr. W. Peter Ragan, Jr., president of our
wholly-owned subsidiary Velocity Investments, LLC, and Mr. James J. Mastriani,
our chief financial officer, chief legal officer, treasurer and secretary, are
responsible for making substantially all management decisions, including
determining which distressed assets to purchase, the purchase price and other
material terms of such acquisitions. Although we have entered into employment
agreements with each of such individuals, the loss of any of their services
could disrupt our operations and adversely affect our ability to successfully
acquire consumer receivable portfolios, interests in distressed real property
and tax lien certificates. In addition, we have not obtained "key man" life
insurance on the lives of Mr. Kleinert, Mr. Ragan, Sr., Mr. Ragan, Jr. and Mr.
Mastriani.

If we are unable to access external sources of financing we may not be able to
fund and grow our operations.

We depend on loans from our credit facility and other external sources to fund
and expand our operations. Our ability to grow our business is dependent on our
access to additional financing and capital resources at acceptable rates. The
failure to obtain financing and capital on acceptable financing terms as needed
would limit our ability to purchase consumer receivable portfolios, interests in
distressed real property and tax lien certificates and achieve our growth plans.

We may incur substantial debt from time to time in connection with our purchase
of consumer receivable portfolios which could affect our ability to obtain
additional funds and may increase our vulnerability to economic downturns.

We may incur substantial indebtedness from time to time in connection with the
purchase of consumer receivable portfolios in particular and would be subject to
the risks associated with incurring such indebtedness, including:

o        we would be required to dedicate a portion of our cash flows from
         operations to pay debt service costs and, as a result, we would have
         less funds available for operations, future acquisitions of consumer
         receivable portfolios, interests in distressed real property and tax
         lien certificates, and other purposes;

o        it may be more difficult and expensive to obtain additional funding
         through financings, if available at all;

o        we would be more vulnerable to economic downturns and fluctuations in
         interest rates, less able to withstand competitive pressures and less
         flexible in reacting to changes in our industry and general economic
         conditions; and

o        if we defaulted under our existing senior credit facility or other
         indebtedness or if our lenders demanded payment of a portion or all of
         our indebtedness, we may not have sufficient funds to make such
         payments.

If an event of default occurs under our secured financing arrangements, it could
seriously harm our operations.

On January 27, 2005, Velocity Investments, LLC entered into a Loan and Security
Agreement with Wells Fargo Foothill, Inc. (the "Lender"), through which the
Lender agreed to provide Velocity Investments, LLC with a three year $12,500,000
senior credit facility (the "Credit Facility") to finance up to 60% of the
purchase price of the acquisition of individual pools of unsecured consumer
receivables that are approved by the Lender under specific eligibility criteria
set forth in the Loan and Security Agreement. On February 27, 2006, Velocity
Investments, LLC entered into a First Amendment to the Loan and Security
Agreement with Wells Fargo Foothill, Inc. (the "Amended and Restated Loan
Agreement"). Pursuant to the Amended and Restated Loan Agreement, the Lender
extended the Credit Facility until January 27, 2009 (formerly January 27, 2008)
and agreed to increase the advance rate under the credit facility to 75.0% (up
from 60%) of the purchase price of individual pools of unsecured consumer
receivables that are approved by the Lender. The Lender also agreed to reduce
the interest rate on the loan from 3.50% above the prime rate of Wells Fargo
Bank, N.A. to 1.50% above such prime rate. In addition, the amortization
schedule for each portfolio has been extended from twenty-four to thirty months.
The Lender also agreed to reduce the personal guarantees from $1,000,000 to
$250,000. On February 23, 2007, the line was increased to $17,500,000 pursuant
to the Third Amendment to the Loan and Security Agreement.

                                       17
<PAGE>

Any indebtedness that we incur under such line of credit is secured by a first
lien upon all of our assets, including all of our portfolios of consumer
receivables acquired for liquidation. If we default under the indebtedness
secured by our assets, those assets would be available to the secured creditor
to satisfy our obligations to the secured creditor. Any of these consequences
could adversely affect our ability to acquire consumer receivable portfolios,
interests in distressed real property and tax lien certificates, and operate our
business.

The restrictions contained in the secured financings could negatively impact our
ability to obtain financing from other sources and to operate our business.

Velocity Investments, LLC has agreed to maintain certain ratios with respect to
outstanding advances on the credit facility against the estimated remaining
return value on Wells Fargo Foothill financed portfolios, and Velocity
Investments, LLC has agreed to maintain at least $6,000,000 in members' equity
and subordinated debt. We have also agreed to maintain at least $21,000,000 in
stockholders' equity and subordinated debt for the duration of the facility.

Our loan and security agreement contains certain restrictive covenants that may
restrict our ability to operate our business. Furthermore, the failure to
satisfy any of these covenants could:

o        cause our indebtedness to become immediately payable;

o        preclude us from further borrowings from these existing sources; and

o        prevent us from securing alternative sources of financing necessary to
         purchase consumer receivable portfolios, interests in distressed real
         property and tax lien certificates and to operate our business.

As a result of our line of credit with Wells Fargo, we anticipate that we will
incur significant increases in interest expense offset, over time, by expected
increased revenues from consumer receivable portfolios purchased utilizing funds
under such line of credit. No assurance can be given that the expected revenues
from such purchased portfolios will exceed the additional interest expense.

Our collections on unsecured consumer receivables may decrease if bankruptcy
filings increase.

During times of economic recession, the amount of defaulted consumer receivables
generally increases, which contributes to an increase in the amount of personal
bankruptcy filings. Under certain bankruptcy filings an obligor's assets are
sold to repay credit originators, but since certain of the receivables we
purchase are unsecured, we often would not be able to collect on those
receivables. We cannot assure you that our collection experience would not
decline with an increase in bankruptcy filings. If our actual collection
experience with respect to our unsecured receivable portfolios is significantly
lower than we projected when we purchased the portfolios, our realization on
those assets may decline and our earnings could be negatively affected. We use
estimates for recognizing revenue on a majority of our receivable portfolio
investments and our earnings would be reduced if actual results are less than
estimated.

We may not be able to acquire consumer receivables of new asset types or
implementing a new pricing structure.

We may pursue the acquisition of consumer receivable portfolios of asset types
in which we have little current experience. We may not be able to complete any
acquisitions of receivables of these asset types and our limited experience in
these asset types may impair our ability to collect on these receivables. This
may cause us to pay too much for these receivables, and consequently, we may not
generate a profit from these receivable portfolio acquisitions.

If we fail to manage our growth effectively, we may not be able to execute our
business strategy.

We have experienced rapid growth over the past several years and intend to
maintain our growth. However, our growth will place demands on our resources and
we cannot be sure that we will be able to manage our growth effectively. Future
internal growth will depend on a number of factors, including:

o        the effective and timely initiation and development of relationships
         with sellers of distressed assets and strategic partners;

o        our ability to efficiently collect consumer receivables; and

o        the recruitment, motivation and retention of qualified personnel.

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<PAGE>

Sustaining growth will also require the implementation of enhancements to our
operational and financial systems and will require additional management,
operational and financial resources. There can be no assurance that we will be
able to manage our expanding operations effectively or that we will be able to
maintain or accelerate our growth and any failure to do so could adversely
affect our ability to generate revenues and control our expenses.

Our operations could suffer from telecommunications or technology downtime,
disruption or increased costs.

Our ability to execute our business strategy depends in part on sophisticated
telecommunications and computer systems. The temporary loss of our computer and
telecommunications systems, through casualty, operating malfunction or servicers
failure, could disrupt our operations. In addition, we must record and process
significant amounts of data quickly and accurately to properly bid on
prospective acquisitions of consumer receivable portfolios and to access,
maintain and expand the databases we use for our collection and monitoring
activities. Any failure of our information systems and their backup systems
would interrupt our operations. We may not have adequate backup arrangements for
all of our operations and we may incur significant losses if an outage occurs.
Any interruption in our operations could have an adverse effect on our results
of operations and financial condition.

Until recently all of our consumer receivables have been from obligors in one
state and we face the uncertainties inherent in acquiring receivables from
obligors in other states.

Historically, all of our consumer receivables have been from obligors in New
Jersey. Accordingly, we have been dependent on the economic conditions in such
state. Since December 2004, we have acquired consumer receivables from obligors
in other states and we intend to continue to expand our operations
geographically. Therefore, we face the uncertainties inherent in operating in
states other than New Jersey, including lack of familiarity with local laws,
identifying new servicers and obtaining and maintaining licenses in such states.

Our inability to obtain or renew required licenses could have a material adverse
effect upon our results of operations and financial condition.

We currently hold a number of licenses issued under applicable consumer credit
laws. Certain of our current licenses and any licenses that we may be required
to obtain in the future may be subject to periodic renewal provisions and/or
other requirements. Our inability to renew such licenses or take any other
required action with respect to such licenses could limit our ability to collect
on some of our receivables and otherwise have a material adverse effect upon our
results of operations and financial condition.

Risk Factors Relating to Our Industry

Government regulations may limit our ability to recover and enforce the
collection of our consumer receivables.

Federal, state and municipal laws, rules, regulations and ordinances may limit
our ability to recover and enforce our rights with respect to the consumer
receivables acquired by us. These laws include, but are not limited to, the
following Federal statutes and related regulations and comparable statutes in
states where obligors reside and/or where creditors are located:

o        the Fair Debt Collection Practices Act;

o        the Federal Trade Commission Act;

o        the Truth-In-Lending Act;

o        the Fair Credit Billing Act;

o        the Equal Credit Opportunity Act;

o        the Fair Credit Reporting Act; and

o        the Fair Foreclosure Act.

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<PAGE>

We may be precluded from collecting consumer receivables we purchase where the
creditors or other previous owners or servicers failed to comply with applicable
law in originating or servicing such acquired receivables. Laws relating to the
collection of consumer debt also directly apply to our business. Our failure to
comply with any laws applicable to us, including state licensing laws, could
limit our ability to recover on our receivables and could subject us to fines
and penalties, which could reduce our earnings and result in a default under our
loan arrangements.

Additional laws may be enacted that could impose additional restrictions on the
servicing and collection of consumer receivables. Such new laws may adversely
affect the ability to collect on our receivables which could also adversely
affect our revenues and earnings.

Class action suits and other litigation in our industry could divert our
management's attention from operating our business and increase our expenses.

Certain originators and servicers in the consumer credit industry have been
subject to class actions and other litigation. Claims have included failure to
comply with applicable laws and regulations and improper or deceptive
origination and servicing practices. If we become a party to any such class
action suit or other litigation, our results of operations and financial
condition could be materially adversely affected.

Risk Factors Relating to Our Securities

Our quarterly operating results may fluctuate and cause our stock price to
decline.

Because of the nature of our business, our quarterly operating results may
fluctuate, which may adversely affect the market price of our common stock. Our
results may fluctuate as a result of any of the following:

o        the timing and amount of collections on our consumer receivable
         portfolios;

o        our inability to identify and acquire additional consumer receivable
         portfolios;

o        a decline in the estimated value of our consumer receivable portfolio
         recoveries;

o        the timing of sales of interests in distressed real property and
         redemption of tax lien certificates;

o        increases in operating expenses associated with the growth of our
         operations; and

o        general and economic market conditions.

Because three stockholders own a large percentage of our voting stock, other
stockholders' voting power may be limited.

As of March 1, 2007, John C. Kleinert, W. Peter Ragan, Sr. and W. Peter Ragan,
Jr., three of our executive officers, beneficially own or control approximately
81.1% (including shares issuable upon exercise of warrants owned by such
stockholders) of our shares. If those stockholders act together, they will have
the ability to control matters submitted to our stockholders for approval,
including the election and removal of directors and the approval of any merger,
consolidation or sale of all or substantially all of our assets. As a result,
our other stockholders may have little or no influence over matters submitted
for stockholder approval. In addition, the ownership of such three stockholders
could preclude any unsolicited acquisition of us, and consequently, materially
adversely affect the price of our common stock. These stockholders may make
decisions that are adverse to your interests.

Our Organizational Documents And Delaware Law Make It More Difficult For Us To
Be Acquired Without The Consent And Cooperation Of Our Board Of Directors And
Management.

Provisions of our organizational documents and Delaware law may deter or prevent
a takeover attempt, including a takeover attempt in which the potential
purchaser offers to pay a per share price greater than the current market price
of our common stock. Under the terms of our certificate of incorporation, our

                                       20
<PAGE>

board of directors has the authority, without further action by the
stockholders, to issue shares of preferred stock in one or more series and to
fix the rights, preferences, privileges and restrictions of such shares. The
ability to issue shares of preferred stock could tend to discourage takeover or
acquisition proposals not supported by our current board of directors. In
addition, we are subject to Section 203 of the Delaware General Corporation Law,
which restricts business combinations with some stockholders once the
stockholder acquires 15% or more of our common stock.

Penny Stock Regulations May Impose Certain Restrictions On Marketability Of Our
Common Stock.

The Securities and Exchange Commission has adopted regulations which generally
define a "penny stock" to be any equity security that has a market price (as
defined) of less than $5.00 per share or an exercise price of less than $5.00
per share, subject to certain exceptions. As a result, our common stock and
preferred stock are subject to rules that impose additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally those with assets in
excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse). For transactions covered by these rules, the broker-dealer
must make a special suitability determination for the purchase of such
securities and have received the purchaser's written consent to the transaction
prior to the purchase. Additionally, for any transaction involving a penny
stock, unless exempt, the rules require the delivery, prior to the transaction,
of a risk disclosure document mandated by the Securities and Exchange Commission
relating to the penny stock market. The broker-dealer must also disclose the
commission payable to both the broker-dealer and the registered representative,
current quotations for the securities and, if the broker-dealer is the sole
market maker, the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market. Finally, monthly statements must be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks. Consequently, the "penny
stock" rules may restrict the ability of broker-dealers to sell our securities
and may affect the ability of investors to sell our securities in the secondary
market and the price at which such purchasers can sell any such securities.

Investors should be aware that, according to the Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include:

o        control of the market for the security by one or a few broker-dealers
         that are often related to the promoter or issuer;

o        manipulation of prices through prearranged matching of purchases and
         sales and false and misleading press releases;

o        "boiler room" practices involving high pressure sales tactics and
         unrealistic price projections by inexperienced sales persons;

o        excessive and undisclosed bid-ask differentials and markups by selling
         broker-dealers; and

o        the wholesale dumping of the same securities by promoters and
         broker-dealers after prices have been manipulated to a desired level,
         along with the inevitable collapse of those prices with consequent
         investor losses.

Our management is aware of the abuses that have occurred historically in the
penny stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to our common stock
or preferred stock.

The issuance of authorized shares of preferred stock and additional common stock
may result in dilution to existing stockholders, adversely affect the rights of
existing stockholders and depress the price of our common stock.

We have 8,500,000 shares of authorized "blank check" preferred stock, the terms
of which may be fixed by our board of directors. Our board of directors has the
authority, without stockholder approval, to create and issue one or more series
of such preferred stock and to determine the voting, dividend and other rights
of the holders of such preferred stock. Depending on the rights, preferences and
privileges granted when the preferred stock is issued, it may have the effect of
delaying, deferring or preventing a change in control without further action by
the stockholders, may discourage bids for our common stock at a premium over the
market price of the common stock and may adversely affect the market price of
and voting and other rights of the holders of our common stock.

                                       21
<PAGE>

As of March 1, 2007, there are 1,380,000 shares of preferred stock outstanding.
In addition to the preferred stock, we are authorized to issue 40,000,000 shares
of our common stock. As of March 1, 2007, there were 16,154,321 shares of our
common stock issued and outstanding. However, the total number of shares of
common stock issued and outstanding does not include outstanding unexercised
options, warrants or convertible preferred shares exercisable for 9,896,660 of
shares of common stock. As of March 1, 2007, we have reserved up to 9,896,660
shares of our common stock for issuance upon exercise of outstanding stock
options, warrants and convertible preferred stock. A total of 1,200,000 shares
of common stock have been reserved under our 2004 Equity Incentive Program. As
of the date of this Annual Report, 182,000 shares have been issued.

Under most circumstances, our board of directors has the right, without
stockholder approval, to issue authorized but unissued and nonreserved shares of
our common stock. If all of these shares were issued, it would dilute the
existing stockholders and may depress the price of our common stock.

Exercise of the outstanding options and warrants (and conversion of the
preferred stock and if the convertible debenture holder converts such debenture
into shares of our common stock) will reduce the percentage of common stock held
by the public stockholders. Further, the terms on which we could obtain
additional capital during the life of the options and warrants may be adversely
affected, and it should be expected that the holders of the options and the
warrants would exercise them at a time when we would be able to obtain equity
capital on terms more favorable than those provided for by such options and
warrants. As a result, any issuance of additional shares of common stock may
cause our current stockholders to suffer significant dilution and depress the
price of our common stock.

Common stock eligible for future sale may depress the price of our common stock
in the market.

As of March 1, 2007, there were 16,154,321 shares of common stock held by our
present stockholders, and approximately 14,247,720 shares may be available for
public sale by means of ordinary brokerage transactions in the open market
pursuant to Rule 144, promulgated under the Act, subject to certain limitations.
3,100,063 shares and 1,364,005 shares may be sold pursuant to current
registration statements, respectively. In general, under Rule 144, a person (or
persons whose shares are aggregated) who has satisfied a one-year holding period
may, under certain circumstances, sell within any three-month period a number of
securities which does not exceed 1% of the then outstanding shares of common
stock. Based on the number of shares of common stock outstanding, approximately
3,100,000 shares could be sold under Rule 144 during the next 90 days. Rule 144
also permits, under certain circumstances, the sale of securities, without any
limitation, by a person who is not our affiliate and who has satisfied a
two-year holding period. The sale of such a large number of shares may cause the
price of our common stock to decline.

The limited trading activity in our common stock may cause possible volatility
in our stock price.

There has only been a limited public market for our common stock and there can
be no assurance that an active trading market in our securities will develop,
and, if developed, maintained. The OTC Bulletin Board is an unorganized,
inter-dealer, over-the-counter market which provides significantly less
liquidity than The Nasdaq Stock Market, and quotes for stocks included on the
OTC Bulletin Board are not listed in the financial sections of newspapers as are
those for The Nasdaq Stock Market. In addition, the stock market in recent years
has experienced extreme price and volume fluctuations that have particularly
affected the market prices of many smaller companies. The trading price of our
securities is expected to be subject to significant fluctuations in response to
variations in quarterly operating results, changes in analysts' earnings
estimates, announcements of innovations by us or our competitors, general
conditions in the industry in which we operate and other factors. These
fluctuations, as well as general economic and market conditions, may have a
material or adverse effect on the market price of our securities.

We have never paid dividends on our common stock and do not anticipate paying
dividends on our common stock for the foreseeable future; therefore, returns on
your investment may only be realized by the appreciation in value of our
securities.

We have never paid any cash dividends on our common stock and do not anticipate
paying any cash dividends on our common stock in the foreseeable future. We plan
to retain any future earnings to finance growth. Because of this, investors who
convert their shares of preferred stock into shares of common stock may only
realize a return on their investment if the value of our common stock
appreciates.

                                       22
<PAGE>

If we determine that we will pay dividends to the holders of our common stock,
there is no assurance or guarantee that such dividends will be paid on a timely
basis.

We may not be able to pay cash dividends on our preferred stock.

Under Delaware law, cash dividends on capital stock may only be paid from
"surplus" or, if there is no "surplus," from the corporation's net profits for
the then current or the preceding fiscal year. Unless we continue to operate
profitably, our ability to pay cash dividends on our preferred stock would
require the availability of adequate "surplus," which is defined as the excess,
if any, of our net assets (total assets less total liabilities) over our
capital. Further, even if adequate surplus is available to pay cash dividends on
the preferred stock, we may not have sufficient cash to pay dividends on our
preferred stock.

The price of our common stock has been subject to significant fluctuations and
the price of our common stock may be volatile which may result in litigation
that could be costly and divert our resources.

The trading price of our common stock in the past has been, and in the future
may be, highly volatile. The trading price could be subject to wide fluctuations
in response to quarter-to-quarter variations in our operating results,
announcements of technological innovations or new acquisitions by us or our
competitors, changes in financial estimates by securities analysts or other
events or factors. When the market price of a company's stock drops
significantly, stockholders often institute securities class action lawsuits
against that company. A lawsuit against us could cause us to incur substantial
costs and could divert the time and attention of our management and other
resources.

ITEM 2. DESCRIPTION OF PROPERTIES

Both our executive/corporate offices at 48 Franklin Turnpike, 3rd Floor, Ramsey,
NJ 07746 and our business office at 3100 Route 138 West, Wall, New Jersey 07719
are located in leased space. The executive/corporate office is approximately 500
square feet and is subject to a one year lease from an unrelated third party
(expiring on December 31, 2007) and has an annual lease payment of $12,000. The
business office is approximately 1750 square feet and is subject to two
renewable two year leases from unrelated third parties which expire on June 1,
2007 and January 1, 2008, respectively. Each have an annual lease payment of
$18,000.

ITEM 3. LEGAL PROCEEDINGS

In the ordinary course of our business we are involved in numerous legal
proceedings, usually as the plaintiff. 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 the date of this filing, there are presently no material pending legal
proceedings to which the Company or any of its subsidiaries is a part or to
which any of its property is the subject and, to the best of its knowledge, no
such actions against the Company are contemplated or threatened.

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

No matters were submitted to security holders during the fourth quarter of the
fiscal year ended December 31, 2006. We anticipate holding our annual meeting of
Stockholders late in the second quarter of 2007.

                                       23
<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

Our common stock has traded on the Over-the-Counter Bulletin Board (OTC: BB)
under the symbol "TLOP" since May 9, 2002 and since April 12, 2004 under the
symbol "VCYA". The following table sets forth the reported high and low bid
quotations of our common stock for the periods indicated. Such quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not necessarily represent actual transactions.

          Period Ended                                 High Bid       Low Bid
          ------------                                ----------    ----------
    Fiscal Year Ending December 31, 2005
          First Quarter                               $     4.45    $     2.10
          Second Quarter                              $     3.03    $     2.10
          Third Quarter                               $     2.65    $     1.65
          Fourth Quarter                              $     2.75    $     1.70
    Fiscal Year Ending December 31, 2006
          First Quarter                               $     2.09    $     1.70
          Second Quarter                              $     2.05    $     1.60
          Third Quarter                               $     1.90    $     1.25
          Fourth Quarter                              $     2.15    $     1.20

On March 12, 2007, the closing bid price of our common stock as reported on the
OTC Bulletin Board was $2.50 per share.

Our preferred stock is traded on the American Stock Exchange under the symbol
"JVI.PR". The following table sets forth the reported high and low bid
quotations of our preferred stock for the periods indicated. Such quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not necessarily represent actual transactions.

          Period Ended                                 High Bid       Low Bid
          ------------                                ----------    ----------
    Fiscal Year Ending December 31, 2006
          First Quarter                               $       --    $       --
          Second Quarter                              $    11.19    $    10.10
          Third Quarter                               $    10.90    $     9.89
          Fourth Quarter                              $    11.90    $    10.08


HOLDERS OF RECORD

As of March 8, 2007, there were approximately 240 holders of record of our
common stock for which there were approximately 246 beneficial owners, and
approximately one holder of record of our Series A Convertible Preferred Stock,
for which there were approximately 746 beneficial owners.

DIVIDENDS

We have not paid any cash dividends on our common stock to date, and do not
anticipate declaring or paying any dividends in the foreseeable future. We
anticipate that for the foreseeable future we will follow a policy of retaining
earnings, if any, in order to finance the expansion and development of our
business. Payment of dividends is within the discretion of our board of
directors and will depend upon our earnings, capital requirements and operating
and financial condition, among other factors.

                                       24
<PAGE>

The first dividend on the Series A Convertible Preferred Stock were paid on June
30, 2006 with respect to the period beginning on the date of issue and ending on
June 30, 2006. The dividend paid was $0.1167 per share. Subsequently, dividends
in the amount of $0.0833 per share with respect to the period ended September
30, 2006, and $0.0833 per share with respect to the period ending December 31,
2006.

Under Delaware law, cash dividends on capital stock may only be paid from
"surplus" or, if there is no "surplus," from the corporation's net profits for
the then current or the preceding fiscal year. Unless we continue to operate
profitably, our ability to pay cash dividends on our preferred stock would
require the availability of adequate "surplus," which is defined as the excess,
if any, of our net assets (total assets less total liabilities) over our
capital. Further, even if adequate surplus is available to pay cash dividends on
the preferred stock, we may not have sufficient cash to pay dividends on our
preferred stock.

RECENT SALES OF UNREGISTERED SECURITIES

During the period covered by this Report, we did not issue any securities that
were not registered under the Securities Act of 1933, as amended, except as
previously included in a quarterly report on Form 10-QSB or a current report on
Form 8-K.



                                       25
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT

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 annual
report.

Overview

Velocity Asset Management, Inc., previously 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,
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

                                       26
<PAGE>

an on-going basis, we evaluate our estimates, including those related to the
recognition of revenue, future estimated cash flows and income taxes. We base
our estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results could differ
from those estimates. We believe the following critical accounting policies
affect the significant judgment and estimates used in the preparation of our
consolidated financial statements.

Purchased Consumer Receivable Portfolios and Revenue Recognition

We purchase pools of consumer receivable accounts at a substantial discount from
their face amounts, usually discounted at 75% to 97% from face value and are
recorded by us at our acquisition cost, including the estimated cost of court
filing fees and account media. The pools 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 pool 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 if 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 loan is to be accounted for individually or whether such
receivables 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 accounts. 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.

Prior to January 1, 2005, we accounted for our investment in consumer
receivables using the interest method under the guidance of Practice Bulletin 6,
"Amortization of Discounts on Certain Acquired Loans." In accordance with
Practice Bulletin 6, revenue was recognized based on our anticipated cash
collections and the estimated rate of return over the useful life of the pool.
Effective January 1, 2005, we adopted and began to 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." For
portfolios of consumer receivables acquired in fiscal years beginning prior to
December 15, 2004, Practice Bulletin 6 is still effective; however, Practice
Bulletin 6 was amended by Statement of Position 03-3. For portfolios of consumer
receivables acquired in fiscal years beginning after December 15, 2004,
Statement of Position 03-3 is effective. In accordance with Statement of
Position 03-03 (and the amended Practice Bulletin 6), revenue is recognized
based on our anticipated gross cash collections and the estimated rate of return
over the useful life of the pool.

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

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

                                       27
<PAGE>
Under Statement of Position 03-3, to the extent that there are differences in
actual performance versus expected performance, increases in expected cash flows
are recognized prospectively through adjustment of internal rate of return while
decreases in expected cash flows are recognized as impairment. Under both the
guidance of Statement of Position 03-3 and the amended Practice Bulletin 6, when
expected cash flows are higher than prior projections, the increase in expected
cash flows results in an increase in the internal rate of return and therefore,
the effect of the cash flow increase is recognized as increased revenue
prospectively over the remaining life of the affected pool. However, when
expected cash flows are lower than prior projections, Statement of Position 03-3
requires that the expected decrease be recognized as an impairment by decreasing
the carrying value of the affected pool (rather than lowering the internal rate
of return) so that the pool will amortize over its expected life using the
original internal rate of return.

Generally, these portfolios are expected to amortize over a five year period
based on our estimated future cash flows. Historically, a majority of the cash
we ultimately collect on a portfolio is received during the first 36 months
after acquiring the portfolio, although additional amounts are collected over
the remaining period. The estimated future cash flows of the portfolios are
re-evaluated quarterly.

The internal rate of return is estimated and periodically recalculated based on
the timing and amount of anticipated cash flows using our proprietary collection
models. A pool can become fully amortized (zero carrying balance on the balance
sheet) while still generating cash collections. In this case, all cash
collections are recognized as revenue when received. Additionally, we 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
December 31, 2006, we had no valuation allowance on our consumer receivables.
Prior to January 1, 2005, if estimated future cash collections would be
inadequate to amortize the carrying balance, an impairment charge would be taken
with a corresponding write-off of the receivable balance.

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 internal rate of return and revenues.

The following table shows the changes in consumer receivables, including amounts
paid to acquire new portfolios of consumer receivables:
<TABLE>
<CAPTION>


                                                            2006               2005
                                                        ------------       ------------
<S>                                                     <C>                <C>
Balance at beginning of period                          $ 17,758,661       $  3,237,852
Acquisitions and capitalized costs, net of returns        22,915,748         16,291,794

Cash collections                                         (10,777,742)        (5,404,930)
Income recognized on consumer receivables                  8,431,259          3,633,945
                                                        ------------       ------------
Cash collections applied to principal                     (2,346,483)        (1,770,985)
                                                        ------------       ------------

Balance at end of period                                $ 38,327,926       $ 17,758,661
                                                        ============       ============
</TABLE>


                                       28
<PAGE>

Stock Based Compensation

We have adopted the fair value recognition provisions of SFAS No. 123 (revised
2004), "Share-Based Payment" (SFAS No. 123R), which supersedes Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees." The revised statement addresses the accounting for share-based
payment transactions with employees and other third parties, eliminates the
ability to account for share-based transactions using APB No. 25 and requires
that the compensation costs relating to such transactions be recognized in the
consolidated financial statements. SFAS No. 123R requires additional disclosures
relating to the income tax and cash flow effects resulting from share-based
payments. We have adopted the modified prospective application method of SFAS
No.123(R), effective January 1, 2006, and the adoption of SFAS No. 123(R) has
had an immaterial impact on our consolidated results of operations and earnings
per share. Additionally, regarding the treatment of non-employee stock based
compensation, we have followed the guidance of EITF 96-18, "Accounting for
Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services".

New Accounting Pronouncements

In June 2006, the FASB issued FASB Interpretation (FIN) No. 48, "Accounting for
Uncertainty in Income Taxes--An Interpretation of FASB Statement No. 109" (FIN
48). This Interpretation clarifies the accounting for uncertainty in income
taxes recognized in a company's financial statements. FIN 48 requires companies
to determine whether it is "more likely than not" that a tax position will be
sustained upon examination by the appropriate taxing authorities before any part
of the benefit can be recorded in the financial statements. It also provides
guidance on the recognition, measurement and classification of income tax
uncertainties, along with any related interest and penalties. FIN 48 will also
require significant additional disclosures. This Interpretation will be
effective for fiscal years beginning after December 15, 2006. The Company will
implement this Interpretation in the first quarter of 2007 with the cumulative
effect of the change in accounting principle recorded as an adjustment to
opening retained earnings. The Company is currently evaluating the potential
impact this Interpretation will have on its financial position and results of
operations, but does not believe the impact of the adoption will be material.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS
157), which provides guidance on how to measure assets and liabilities that use
fair value. SFAS 157 will apply whenever another US GAAP standard requires (or
permits) assets or liabilities to be measured at fair value but does not expand
the use of fair value to any new circumstances. This standard also will require
additional disclosures in both annual and quarterly reports. SFAS 157 will be
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and will be adopted by us beginning in the first quarter of
2008. The Company is currently evaluating the potential impact this standard may
have on its financial position and results of operations.

In September 2006, the SEC staff issued Staff Accounting Bulletin (SAB) No. 108,
"Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements" (SAB 108). SAB 108 was
issued in order to eliminate the diversity of practice in how public companies
quantify misstatements of financial statements, including misstatements that
were not material to prior years' financial statements. The Company will
initially apply the provisions of SAB 108 in connection with the preparation of
its annual financial statements for the year ending December 31, 2006. The
Company has evaluated the potential impact SAB 108 may have on its financial
position and results of operations and does not believe the impact of the
application of this guidance will be material.

Results of Operations

Comparison of the Fiscal Year Ended December 31, 2006 to the Fiscal Year Ended
December 31, 2005.

Revenues in the fiscal year ended December 31, 2006 were $10,284,482 as compared
to $8,101,744 in the fiscal year ended December 31, 2005, representing a 26.9%
increase. The increase in revenues was primarily attributable to an increase in
collections on consumer receivables at our Velocity Investments, LLC subsidiary.
Revenues from the sale of real property, the collection of consumer receivables
and the collection of taxes and interest derived from tax lien certificates
owned by us represented approximately 15.4%, 82.0%, and 2.6%, respectively,
during fiscal 2006 as compared to 45.5%, 44.8%, and 9.7% during fiscal 2005.
Although management believes that the mix of revenues on a comparative basis
will vary from reporting period to reporting period partly as a result of
factors beyond its control, such as maturity dates, court decisions and other
similar events that affect the timing of revenue recognition, it also believes
that the increase in consumer receivables revenues in fiscal 2006 is reflective
of the continued growth in its consumer receivables business. It is anticipated
that such growth will be accelerated over time as a result of the increase in
February 2007 to $17.5 million in the credit facility that Velocity Investments,
LLC obtained in 2005 which will and can be used exclusively to purchase
additional consumer receivable portfolios.

Comparison of the Fiscal Year Ended December 31, 2005 to the Fiscal Year Ended
December 31, 2004.

Revenues in the fiscal year ended December 31, 2005 were $8,101,744 as compared
to $4,356,189 in the fiscal year ended December 31, 2004, representing an 86.0%
increase. The increase in revenues was primarily attributable to an increase in
collections on consumer receivables at our Velocity Investments subsidiary.
Revenues from the sale of real property, the collection of consumer receivables
and the collection of taxes and interest derived from tax lien certificates
owned by us represented approximately 44.5%, 44.9% and 9.6%, respectively,
during fiscal 2005 as compared to 54.4%, 39.6%, and 6.0% during fiscal 2004.
Although management believes that the mix of revenues on a comparative basis
will vary from reporting period to reporting period partly as a result of
factors beyond its control, such as maturity dates, court decisions and other
similar events that affect the timing of revenue recognition, it also believes
that the increase in consumer receivables revenues in fiscal 2005 is reflective
of the continued growth in its consumer receivables business.

                                       29
<PAGE>

Operating Expenses

Comparison of the Fiscal Year Ended December 31, 2006 to the Fiscal Year Ended
December 31, 2005.


Total operating expenses for the fiscal year ended December 31, 2006 were
$6,630,333 as compared to $6,465,620 during the fiscal year ended December 31,
2005, representing an increase of 2.5%. The increase in total operating expenses
was primarily attributable to an increase in professional fees as a result of
increasing collections by Velocity Investments, LLC' third party legal
collection network, each of which generally receive a 25% commission fee on
gross cash collections. General and administrative expenses increased in fiscal
2006 as a result of increasing due diligence expense for Velocity Investments,
LLC and the expansion of operations, including the hiring of additional
employees.


Comparison of the Fiscal Year Ended December 31, 2005 to the Fiscal Year Ended
December 31, 2004.

Total operating expenses for the fiscal year ended December 31, 2005 were
$6,465,620 as compared to $6,914,517 during the fiscal year ended December 31,
2004. The decrease in total operating expenses was primarily attributable to a
non-cash loss on early extinguishment of debt of $2,859,307 in the three month
period ended September 30, 2004. General and administrative expenses increased
in fiscal 2005 as a result of our increasing collection fees and lien searches
for Velocity Investments and the expansion of operations.

Other Expense

Comparison of the Fiscal Year Ended December 31, 2006 to the Fiscal Year Ended
December 31, 2005.

Interest expense in the fiscal year ended December 31, 2006 was $1,363,418 as
compared to $760,674 in the fiscal year ended December 2005, representing a
79.2% increase. The increase in interest expense was primarily attributable to
accrued interest in connection with certain long term notes in connection with a
residential property owned by J. Holder in Melbourne Florida and an increased
usage of the senior credit facility with Wells Fargo Foothill.

Comparison of the Fiscal Year Ended December 31, 2005 to the Fiscal Year Ended
December 31, 2004.

Interest expense in the fiscal year ended December 31, 2005 was $760,674 as
compared to $338,525 in the fiscal year ended December 2004, representing a
124.7% increase. The increase in interest expense was primarily attributable to
increases in long term borrowings, specifically with respect to the acquisition
of a single property in Melbourne, Florida. During fiscal 2004 and fiscal 2005
we recognized no other income.

Net Income (Loss)

Comparison of the Fiscal Year Ended December 31, 2006 to the Fiscal Year Ended
December 31, 2005.


Net income for the year ended December 31, 2006 was $1,318,690 as compared to
net income of $473,867 for the year ended December 31, 2005, an increase of
178.3%. The increase in net income in year 2006 is primarily attributable to an
increase in interest income from consumer receivables as a result of expansion
of operations and increased collections at our Velocity Investments, LLC
subsidiary.


Comparison of the Fiscal Year Ended December 31, 2005 to the Fiscal Year Ended
December 31, 2004.

Net income for the fiscal year ended December 31, 2005 was $473,867 as compared
to net loss for the fiscal year ended December 31, 2004 of $2,705,155. The net
loss in fiscal year 2004 was primarily attributable to a non-cash loss on early
extinguishment of debt of $2,859,307 in the three month period ended September
30, 2004. The increase in net income in fiscal year 2005 is primarily
attributable to the expansion of operations at the Velocity Investments
subsidiary.

Liquidity and Capital Resources


At December 31, 2006, the Company had approximately $2,445,000 in cash and cash
equivalents and trade accounts payable of approximately $875,000. Management
believes that the revenues expected to be generated from operations, the
Company's line of credit and the remaining proceeds of the preferred stock


                                       30
<PAGE>

financing discussed below, will be sufficient to finance operations for the
foreseeable future.

In order to expand operations by, among other things, purchasing additional
portfolios of distressed consumer receivables, we have been seeking to raise
additional capital by way of the sale of equity securities, debt instruments and
obtaining a bank line of credit. 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 may be required to seek
additional funding.

Net cash used in operating activities was approximately $13,400,000 during 2006,
compared to approximately $13,100,000 in the 2005 period. The increase in net
cash used in operating activities was primarily due to a significant increase in
the purchase of portfolios of consumer receivables, partially offset by a
decrease in the purchases of properties held for sale during fiscal 2006. Net
cash used in investing activities was approximately $14,000 during 2006,
compared to approximately $66,000 in 2005. The decrease in net cash used by
investing activities was due to a decrease in the acquisition of property and
equipment. Net cash provided by financing activities was approximately
$15,800,000 during 2006, compared to approximately $11,800,000 in 2005. The
increase in net cash provided by financing activities was primarily due to the
proceeds received from the May 2006 preferred stock offering discussed below.

On January 27, 2005, Velocity Investments, LLC entered into a Loan and Security
Agreement with Wells Fargo Foothill, Inc., a California corporation, in which
Wells Fargo Foothill agreed to provide Velocity Investments, LLC 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
Foothill 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 Foothill: a Continuing Guaranty, in which we
unconditionally and irrevocably guaranteed Velocity's 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 J. Holder and all our membership interests in Velocity
Investments, LLC and VOM; and a Subordination Agreement, in which all sums owing
to us by Velocity Investments, LLC as an intercompany payable for advances or
loans made or property transferred to Velocity Investments, LLC will be
subordinated to the credit facility to the extent that such sums, when added to
Velocity Investments, LLC 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 Velocity Investment's obligations under the Loan and Security
Agreement.

On February 27, 2006, Velocity Investments, LLC entered into a First Amendment
to the Loan and Security Agreement pursuant to which Wells Fargo Foothill
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 Foothill also agreed to reduce the interest rate on the loan from 3.50%
above the prime rate of Wells Fargo Bank, N.A. to 1.50% above such prime rate.
In addition, the amortization schedule for each portfolio has been extended from
twenty-four to thirty months. Wells Fargo Foothill also agreed to reduce the
personal limited guarantees from $1,000,000 to $250,000. On February 23, 2007,
Velocity Investments, LLC entered into a Third Amendment to the Loan and
Security Agreement pursuant to which the size of the facility was increased to
$17,500,000.

Use of the senior credit facility is subject to Velocity Investments, LLC
complying with certain restrictive covenants under the Loan and Security
Agreement, including but not limited to: a restriction on incurring additional
indebtedness or liens; a change of control of Velocity Investments, LLC; a
restriction on entering into transactions with affiliates outside the course of
Velocity Investment's ordinary business; and a restriction on making payments to
us in compliance with the Subordination Agreement. In addition, Velocity
Investments, LLC has agreed to maintain certain ratios with respect to
outstanding advances on the credit facility against the estimated remaining
return value on Wells Fargo Foothill financed portfolios, and, Velocity
Investments, LLC has agreed to maintain at least $6,000,000 in member's equity
and subordinated debt. We have also agreed to maintain at least $21,000,000 in
stockholder's equity and subordinated debt for the duration of the facility.

On October 27, 2005, we and our wholly owned subsidiary, J. Holder, Inc.,
entered into a Securities Purchase Agreement with an institutional investor
relating to a sale of a 10% Secured Convertible Debenture, due April 27, 2007,
in the principal amount of $1.8 million, and an associated common stock purchase

                                       31
<PAGE>

warrant to purchase 200,000 shares of our common stock at an exercise price of
$3.10 per share. Proceeds from the financing ($1,780,000) were used primarily
for working capital purposes including, but not limited to, the purchase of
distressed real property interests and distressed consumer receivable
portfolios. On May 19, 2006, we entered into an amendment to the Securities
Purchase Agreement pursuant to which we extended the initial maturity date of
the Convertible Debenture and issued an additional warrant to purchase 50,000
shares of our common stock at a purchase price of $3.10. On May 19, 2006, we
used $1,823,000 from proceeds of the preferred offering of our Series A stock
(as described in the next paragraph) to repay in full interest and principal
under the Convertible Debenture.

On May 18, 2006, we consummated our public offering of 1,200,000 shares of our
Series A Convertible Preferred Stock. The offering was underwritten by Anderson
& Strudwick, Incorporated. The underwriters were granted an option to purchase
up to an additional 180,000 shares of Series A Convertible Preferred Stock to
cover over-allotments which they exercised on May 31, 2006. The public price per
share for the offering was $10.00. Net proceeds of the offering amounted to
approximately $12.4 million. As of December 31, 2006, approximately $5 million
of the proceeds of the offering have been used for the purchase of distressed
consumer receivable portfolios, $1.823 million has been used to repay the
convertible debenture, $1.0 million has been used to redeem a mortgage on an
investment property in Florida, $2.0 million has been used for general corporate
expenses and approximately $810,000 has been used to redeem certain short term
notes. The remaining proceeds of approximately $2.4 million have been placed in
an interest bearing account at Commerce Bank, N.A.
<TABLE>
<CAPTION>

Supplementary Information on Consumer Receivables Portfolios:

                         Portfolio Purchases/Collections

                          (dollar amounts in thousands)
                                                                                             Gross
                      Outstanding       Portfolios    Cumulative      Cumulative Gross   Cash Collections
Reporting Period   Principal Amount     Purchased   Purchase Price       Collections       Per Period
----------------   ----------------    ----------- ----------------  ------------------  ---------------
<S>                   <C>                   <C>      <C>                <C>                 <C>
   12/31/2004         $    21,008           15       $    3,489         $    2,596          $    2,150
   12/31/2005         $   154,112           37       $   14,939         $    8,001          $    5,405
   12/31/2006         $   353,154           63       $   30,306         $   18,779          $   10,778
</TABLE>

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 which 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 overall mix of the types of portfolios we are purchasing.

During the fiscal year ended December 31, 2006, we acquired 26 portfolios of
consumer receivables aggregating approximately $199 million in initial
outstanding principal amount at a purchase price of approximately $15.4 million
dollars, bringing the aggregate initial outstanding principal amount of consumer
receivables under management as of December 31, 2006 to approximately $353
million, an increase of 129% as compared to approximately $154 million as of
December 31, 2005. For the fiscal year ended December 31, 2006, we posted gross
collections of approximately $10,778,000 a 99.4% increase as compared to gross
collections of $5,405,000 in the fiscal year ended December 31, 2005.

Trends

         As a result of our line of credit we anticipate that we will incur
significant increases in interest expense offset, over time, by expected
increased revenues from consumer receivable portfolios purchased utilizing funds
under such line of credit. No assurance can be given that the expected revenues
from such purchased portfolios will exceed the additional interest expense. As a
result of our line of credit and Preferred Stock offering, we anticipate that we
will incur significant increases in interest expense and dividend payments
offset, over time, by expected increased revenues from consumer receivable
portfolios purchased utilizing funds under such line of credit 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 or dividends. We are not presently aware of any other known trends that

                                       32
<PAGE>

may have a material impact on our revenues. We do not believe that the recent
increases in interest rates, and the anticipated continuing gradual increases in
interest rates, has had or will have a material adverse effect upon our
business.

                  [remainder of page intentionally left blank]



                                       33
<PAGE>

ITEM 7. FINANCIAL STATEMENTS

Our financial statements listed on the Index to the Financial Statements are
included beginning at F-1 following Item 14 of this Report.

ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
        DISCLOSURE

On June 8, 2006, Velocity, with the approval of the Audit Committee of our Board
of Directors (the "Audit Committee") and the full Board of Directors, dismissed
its independent accountants, Cowan Gunteski & Co., P.A ("Cowan"). During the
years ended December 31, 2005 and 2004 and the subsequent interim period through
March 31, 2006, Cowan acted as the independent accountants for the Company and
its subsidiaries, and, during such period there were no disagreements with Cowan
on any matters of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Cowan, would have caused Cowan to make a reference to the
subject matter of the disagreements in connection with its reports in the
financial statements for such years.

The independent accountant's reports of Cowan on the Company's consolidated
financial statements for the years ended December 31, 2005 and 2004 contained no
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles. The Company has provided a
copy of this disclosure to its former accountants, and the Company requested
that the former accountants furnish the Company with a letter addressed to the
Securities and Exchange Commission stating whether they agree with the
statements made by the Company. A copy of that letter is attached as Exhibit
16.1 to the Company's Form 8-K filed June 13, 2006.

On June 16, 2006, with the approval of the Audit Committee and the full Board of
Directors of the Company, the firm of Weiser LLP ("Weiser") was appointed as the
Company's independent accountants. During the Company's two most recent fiscal
years or subsequent interim period, the Company has not consulted with Weiser
regarding the application of accounting principles to a specific transaction,
either completed or proposed, or the type of audit opinion that might be
rendered on the Company's financial statements, nor did Weiser provide advice to
the Company, either written or oral, that was an important factor considered by
the Company in reaching a decision as to the accounting, auditing or financial
reporting issue. Further, during the Company's two most recent fiscal years or
subsequent interim periods, the Company has not consulted with Weiser on any
matter that was the subject of a disagreement or a reportable event.

ITEM 8A. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, with the participation of
our Chief Executive Officer and Chief Financial Officer, referred to in this
context as our certifying officers, we evaluated the effectiveness of the design
and operation of our disclosure controls and procedures (as defined in Rule
13a-15(e) of the Securities Exchange Act of 1934). Based upon that evaluation,
our Chief Executive Officer and our Chief Financial Officer concluded that as of
the end of such period, our disclosure controls and procedures were effective as
of the end of period covered by this report in timely alerting them to material
information relating to Velocity Asset Management, Inc. required to be disclosed
in our periodic reports with the Securities and Exchange Commission.

The certifying officers also have indicated that there were no significant
changes in our internal controls or other factors that could significantly
affect such controls subsequent to the date of their evaluation, and there were
no corrective actions with regard to significant deficiencies and material
weaknesses.

Velocity Asset Management, Inc. continues the process to complete a thorough
review of its internal controls as part of its preparation for compliance with
the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Section 404
requires our management to report on, and our external auditors to attest to,
the effectiveness of our internal control structure and procedures for financial
reporting. As a non-accelerated filer under Rule 12b-2 of the Exchange Act, our
first report under Section 404 will be contained in our Form 10-KSB for the
period ended December 31, 2007.

ITEM 8B. OTHER INFORMATION

None

                                       34
<PAGE>

PART III
--------

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE ACT OF THE REGISTRANT

EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>

Our executive officers and directors are identified in the table below.

                                    YEAR BECAME AN
                                 EXECUTIVE OFFICER OR
      NAME                AGE         DIRECTOR                      POSITIONS
-----------------------------------------------------------------------------------------------------------
<S>                        <C>          <C>            <C>
John C. Kleinert           48           2004            President, Chief Executive Officer and Director (1)
-----------------------------------------------------------------------------------------------------------
                                                        Chief Financial Officer, Chief Legal Officer,
James J. Mastriani         36           2004            Treasurer and Secretary
-----------------------------------------------------------------------------------------------------------
W. Peter Ragan, Sr.        59           2004            Vice President and Director (1)
-----------------------------------------------------------------------------------------------------------
W. Peter Ragan, Jr.        36           2004            President of Velocity Investments, LLC, our wholly-
                                                        owned subsidiary
-----------------------------------------------------------------------------------------------------------
Steven Marcus              47           2005            Independent Director (2)
-----------------------------------------------------------------------------------------------------------
Dr. Michael Kelly          54           2005            Independent Director (2)
-----------------------------------------------------------------------------------------------------------
David Granatell            49           2005            Independent Director (2)
-----------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Such person is also a member of our board of directors.

(2)  Member of Audit Committee and Nominating Committee


                                       35
<PAGE>

There are no material proceedings known to us to which any of our directors,
officers or affiliates, or any owner of record or beneficially of more than 5%
of any class of our voting securities, or any affiliate of such persons is a
party adverse to us or has a material interest adverse to our interests. None of
our directors received any additional compensation for his services as a
director.

The following brief biographies contain information about our directors and our
executive officers. The information includes each person's principal occupation
and business experience for at least the past five years. This information has
been furnished to us by the individuals named. Except for the relationship of
Mr. Ragan, Sr. and Mr. Ragan, Jr., who are father and son, there are no family
relationships known to us between the directors and executive officers. We do
not know of any legal proceedings that are material to the evaluation of the
ability or integrity of any of the directors or executive officers.

JOHN C. KLEINERT earned a Bachelor of Science degree in Chemical Engineering
from Princeton University in 1981. In 1982 Mr. Kleinert was hired by Goldman
Sachs in New York and from 1982-1990 he traded various municipal products and
was appointed head of the Municipal Trading Desk in 1991. In 1994 Mr. Kleinert
was elected a general partner of the firm and served in that capacity until the
end of 1997 when he retired and became a limited partner. Since retiring from
Goldman Sachs and prior to his full time employment by us as president and chief
executive officer, Mr. Kleinert pursued several business ventures, including
managing a trading operation, JCK Investments, which invests in equities, bonds,
commodities and options. He is also a co-founder or our company.

JAMES J. MASTRIANI earned a Bachelor of Arts degree in 1992 from Georgetown
University and earned his juris doctorate from the Seton Hall University School
of Law in 1997. After graduating from law school, Mr. Mastriani was in-house
counsel for SBC Warburg Dillon Read Inc., providing legal advice and
transactional support to the broker-dealer subsidiary of Swiss Bank Corporation.
From 1998 to 2004, Mr. Mastriani practiced at the New York office of
international law firm Skadden, Arps, Slate, Meagher and Flom LLP, where he was
responsible for providing legal and regulatory advice to clients in the
financial services and consumer finance industries.

W. PETER RAGAN, SR. received a Bachelor of Science in Marketing from LaSalle
University in 1968 and earned his law degree from the Seton Hall University
School of Law in 1974. Since his graduation he has practiced primarily in the
area of creditor's rights. Mr. Ragan practiced with the firm of Schaefer and
Crawford in Ocean Township, New Jersey, from 1974 to 1979 where he specialized
in municipal law and creditor's rights. From 1979 through May of 1998, Mr. Ragan
was a principal of Blankenhorn & Ragan, P.C., and its predecessor partnership.
In May of 1998, the firm of Ragan & Ragan, P.C. was created where Mr. Ragan is
presently senior partner and continues with his focus upon creditor's rights.
Mr. Ragan has been a member of the New Jersey State Bar since 1974 and is also
admitted to practice before the United States District Court for the District of
New Jersey, United States Third Circuit Court of Appeals and the United States
Supreme Court. Mr. Ragan is also a co-founder of our company.

W. PETER RAGAN, JR. earned a Bachelor of Science in Management and Marketing
from Manhattan College 1992 and graduated, cum laude, from the Seton Hall
University School of Law in May of 1996. In 2001, Mr. Ragan received a Masters
Degree in Business Administration from Monmouth University. After Mr. Ragan's
graduation from Seton Hall he was employed by Blankenhorn & Ragan, PC as a
litigation associate. He has handled cases involving creditor's rights,
collection and bankruptcy litigation practice. In May of 1998, Mr. Ragan became
a partner in the firm Ragan & Ragan, P.C. and now manages Ragan & Ragan, P.C.'s
volume collection practice. Mr. Ragan is a member of the New York and New Jersey
State Bars and is also admitted to practice before the United States District of
New Jersey, the United States District Court for the Southern District of New
York, and the United States Third Circuit Court of Appeals. Mr. Ragan is also a
co-founder of our company.

STEVEN MARCUS joined our board of directors in September 2005. Mr. Marcus is the
founder and President of Rainbow Capital, LLC, a private equity firm that
sponsors private equity transactions of mature middle market companies. He
founded the firm in 2001. From 1999 through 2001, Mr. Marcus was a private
equity investor, sourcing and evaluating investment opportunities in primarily
internet start-ups. For the previous 14 years, Mr. Marcus worked in the high
yield bond market for Donaldson, Lufkin & Jenrette, Smith Barney, Inc. and
PaineWebber, Inc. Mr. Marcus has an M.B.A. in finance from the University of
Duke and a B.S. in accounting from Syracuse University. Mr. Marcus is the
Chairman of our Audit Committee.

DR. MICHAEL KELLY joined our board of directors in September 2005. Mr. Kelly has
been a Director of the Insal, Scott Kelly Institute of Orthopedic and Sports
Medicine in New York, New York since 1991. In 2004 Dr. Kelly was named Chairman

                                       36
<PAGE>

of the Department of Orthopedic Surgery at Hackensack University Medical Center.
He is also Vice President of the U.S. Knee Society, an attending orthopedic
surgeon at Lenox Hill Hospital in New York, New York and has served as team
physician for the New Jersey Nets franchise of the National Basketball
Association for the last 5 years. Mr. Kelly is a member of our Audit Committee.

DAVID GRANATELL joined our board of directors in September 2005. Mr. Granatell
is an Executive Director of the privately-owned Elmwood Park, NJ based Grant
Industries, Inc., a specialty manufacturer of textile chemicals and personal
care raw materials, with locations in Mexico, Romania, England, China and Korea.
Mr. Granatell has worked for Grant Industries since graduating from Rutgers
University in 1979 and became a Partner in 1982. Mr. Granatell is a member of
our Audit Committee.

Director Independence

We believe that Steven Marcus, Dr. Michael Kelly and David Granatell qualify as
independent directors in accordance with the standards set by American Stock
Exchange and also as defined in Section 301 of the Sarbanes-Oxley Act of 2002
and Rule 10A(3)(b)(1) of the Securities Exchange Act, as amended. Accordingly,
as required by the American Stock Exhcnage, our board of directors is comprised
of a majority of independent directors.

Board Committees

The Board of Directors has established two standing committees -- Audit, and
Nominating. The Audit and Nominating Committees each operate under a charter
that has been approved by the Board each of which are attached to the Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2005 and
incorporated by reference herein.

Audit Committee

Our board of directors established an Audit Committee in December 2005,
comprised of Steven Marcus, Dr. Michael Kelly and David Granatell, all of whom
are independent directors as defined in Section 301 of the Sarbanes-Oxley Act of
2002 and Rule 10A(3)(b)(1) of the Securities Exchange Act, as amended. Mr.
Marcus serves as chairman of the committee. The board of directors has
determined that Mr. Marcus is an "audit committee financial expert" as defined
in Item 401(e) of Regulation S-B.

The Audit Committee was formed in September 2005 and conducted formal meetings
on June 8, 2006 and December 19, 2006. The Audit Committee oversees our
corporate accounting, financial reporting practices and the audits of financial
statements. For this purpose, the Audit Committee performs several functions.
The Audit Committee evaluates the independence and performance of, and assesses
the qualifications of, our independent auditors, and engages such independent
auditors. The Audit Committee approves the plan and fees for the annual audit,
review of quarterly reports, tax and other audit-related services, and approves
in advance any non-audit service to be provided by the independent auditors. The
Audit Committee monitors the rotation of partners of the independent auditors on
our engagement team as required by law. The Audit Committee reviews the
financial statements to be included in our Annual Report on Form 10-KSB and
reviews with management and the independent auditors the results of the annual
audit and our quarterly financial statements. In addition, the Audit Committee
oversees all aspects of our systems of internal accounting control and corporate
governance functions on behalf of the board. The Audit Committee provides
oversight assistance in connection with legal and ethical compliance programs
established by management and the board, including Sarbanes-Oxley
implementation, and makes recommendations to the Board of Directors regarding
corporate governance issues and policy decisions.

Nominating Committee

The Board of Directors has a Nominating Committee, comprised of Steven Marcus,
Dr. Michael Kelly and David Granatell. Mr. Marcus serves as the chairman of the
committee. The Nominating Committee is charged with the responsibility of
reviewing the Company's corporate governance policies and with proposing
potential director nominees to the Board of Directors for consideration. The
Nominating Committee was formed in September 2005 and conducted formal meetings
on June 8, 2006 and December 19, 2006. The Nominating Committee has a charter.
All members of the Nominating Committee are independent directors as defined by
the rules of the AMEX. The Nominating Committee will consider director nominees
recommended by security holders. To recommend a nominee please write to the
Nominating Committee c/o the Company Attn: James J. Mastriani. There are no
minimum qualifications for consideration for nomination to be a director of the

                                       37
<PAGE>

Company. The nominating committee will assess all director nominees using the
same criteria. All of the current nominees to serve as directors on the Board of
Directors of the Company have previously served in such capacity. During 2005,
we did not pay any fees to any third parties to assist in the identification of
nominees. During 2005, we did not receive any director nominee suggestions from
stockholders.

There are no other Board of Directors committees at this time.

Code of Ethics

On January 20, 2006, our Board of Directors adopted a code of ethics that
applies to our principal executive and financial officers. A copy of the Code of
Ethics is attached as an exhibit to the Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2005. We intend to file amendments, changes or
waivers to the code of ethics as required by SEC rules.

The Company's Audit Committee Charter and Nominating Committee Charter are
attached as an exhibit to the Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2005 and incorporated by reference herein. This information
is also available in print to any shareholder who requests it.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities (collectively
the "Reporting Persons") to file reports and changes in ownership of such
securities with the Securities and Exchange Commission and the Company.

Based solely upon a review of (i) Forms 3 and 4 and amendments thereto furnished
to the Company pursuant to Rule 16a-3(e), promulgated under the Exchange Act,
during the Company's fiscal year ended December 31, 2006 and (ii) Forms 5 and
any amendments thereto and/or written representations furnished to the Company
by any Reporting Persons stating that such person was not required to file a
Form 5 during the Company's fiscal year ended December 2005, it has been
determined that no Reporting Persons were delinquent with respect to such
person's reporting obligations set forth in Section 16(a) of the Exchange Act.

ITEM 10. EXECUTIVE COMPENSATION

COMPENSATION

On January 1, 2006, we extended our employment contract with our President, John
C. Kleinert, for a period of four years commencing from January 1, 2004 and
renewable annually subject to the terms and conditions of the contract, at an
annual salary of $215,000. Mr. Kleinert devotes all of his business time to our
affairs in accordance with the terms of his employment contract.

On January 1, 2006, we extended our employment contract with W. Peter Ragan, Sr.
in which we agreed to employ Mr. Ragan, Sr. as our Vice President and President
of our wholly owned subsidiaries, J. Holder, Inc. and VOM, LLC, for a period of
four years, commencing from January 1, 2004 and renewable annually subject to
the terms and conditions of the contract at an annual salary of $100,000. Mr.
Ragan, Sr. devotes approximately 50% of his business time to our affairs and the
affairs of J. Holder and VOM in accordance with the terms of his employment
contract.

On January 1, 2006, extended our employment contract with W. Peter Ragan, Jr. in
which we agreed to employ Mr. Ragan, Jr. as President of our wholly owned
subsidiary Velocity Investments, LLC, for a period of four years, commencing
from January 1, 2004 and renewable annually subject to the terms and conditions
of the contract, at an annual salary of $100,000. Mr. Ragan, Jr. devotes
approximately 50% of his business time to the affairs of Velocity Investments,
LLC in accordance with the terms of his employment contract.

On September 8, 2004, we entered into an employment contract with James J.
Mastriani in which we agreed to employ Mr. Mastriani as our Chief Financial
Officer and our Chief Legal Officer for a period of three years ending September
1, 2007 at an annual base salary of not less than $150,000, with annual
increases and annual bonuses determined at the discretion of our board of
directors and calculated in same manner as other executives. Additionally, we
agreed to grant Mr. Mastriani equity securities pursuant to our 2004 Equity

                                       38
<PAGE>

Incentive Program. The amount, type and terms of the equity securities to be
granted to Mr. Mastriani will be determined by our board of directors and Mr.
Mastriani from time to time. During the 2006 fiscal year, Mr. Mastriani received
stock awards for 200,000, 125,000 of which vested during the 2006 fiscal year,
and the remaining 75,000 shares will vest in 25,000 increments on February 27,
2007; May 27, 2007; and August 27, 2007. Mr. Mastriani devotes all of his
business time to our affairs as provided under his employment contract.

Our board of directors presently consists of two of our executive officers and
three independent directors. We are not currently providing any compensation to
such members for serving in such capacity.

Compensation Pursuant to Plans

In March 2004, we approved the 2004 Equity Incentive Program. The Program
provides for the grant of incentive stock options, nonqualified stock options,
restricted stock grants, including, but not limited to, unrestricted stock
grants, as approved by the Board or a committee of the board. Incentive stock
options granted under the Program are intended to qualify as "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended. Nonqualified stock options granted under the Program are intended
not to qualify as incentive stock options under the Internal Revenue Code.

The total number of shares of the Company's common stock that may be issued
under the Program upon the exercise of all option granted under the Program or
the satisfaction by all recipients of all conditions necessary for the receipt
of restricted stock awards and/or unrestricted stock awards may not exceed
1,000,000, of which 500,000 shares shall be available for issuance under
incentive stock options and 500,000 shares hall be available for issuance
under nonqualified stock options, restricted stock awards and/or unrestricted
stock awards. A total of 157,000 shares have been issued under the Program.

                                       39
<PAGE>






                  Compensation Summary Table


          The following table sets forth a summary of the compensation earned by
our officers and directors in 2006, 2005, and 2004:
<TABLE>
<CAPTION>

                           SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------------------------------------------------------------------
                                                                        Long Term Compensation
------------------------------------------------------------------------------------------------------------------------------------
                                Annual Compensation                                Awards                  Payouts
------------------------------------------------------------------------------------------------------------------------------------
     (a)             (b)        (c)         (d)            (e)               (f)              (g)             (h)            (i)
------------------------------------------------------------------------------------------------------------------------------------
                                                       Other Annual      Restricted        Securities                    All Other
Name and                                               Compensation        Stock           Underlying        LTIP       Compensation
Principal Position   Year    Salary($)    Bonus($)         ($)          Award(s)($)      Options/SARs(#)    Payouts($)       ($)
------------------------------------------------------------------------------------------------------------------------------------
<S>                  <C>     <C>          <C>            <C>             <C>                <C>            <C>         <C>
John C. Kleinert,    2006    $215,000     $25,000          --                                  --              --            --
CEO                  2005     175,000           0
                     2004(1)   37,500           0

James J. Mastriani,  2006     175,000      60,000          --             200,000              --              --            --
CFO, CLO             2005     150,000      30,000          --                  --              --              --            --
                     2004(1)   37,500       5,000          --                  --              --              --            --
</TABLE>

(1) Compensation for 2004 commenced September 2004.

2006 Director Compensation

         The following table sets forth a summary of the compensation earned by
our non-employee directors in 2006: This is our standard director compensation
arrangement and no other compensation arrangements were made.

                                   Fees Earned
                                   or Paid in       Option
Name                               Cash ($)(1)     Awards($)      Total ($)
                                  ------------   ------------   ------------
Steven Marcus                            2,000             --          2,000
David Granatell                          2,000             --          2,000
Dr. Michael Kelly                        2,000             --          2,000


(1)  Fees earned or paid in cash represent a standard $1,000 per day meeting fee
     received for attendance at the June 8, 2006 and December 19, 2006 Board of
     Directors meetings. The Company expects to implement a director incentive
     plan in Fiscal 2007.

                                       40
<PAGE>

Outstanding Equity Awards at Fiscal 2006 Year-End

         The following table shows grants of stock outstanding on December 31,
2006, the last day of the fiscal year, held by each of the executive officers
named in the Summary Compensation Table above. The Company does not currently
have any outstanding option awards.
<TABLE>
<CAPTION>

                                Number         Market Value        Date
                               of Shares        of Shares        Of Board          Weighted
                               That Have        That Have       of Directors        Average
Employee                       Not Vested       Not Vested        Approval           Life
-----------------------       ------------     ------------     ------------     ------------
<S>                               <C>        <C>                  <C>   <C>            <C>
John C. Kleinert                       --               --               --               --
James J. Mastriani (1)             75,000     $    142,500         08/27/06             0.65
W. Peter Ragan, Sr                     --               --               --               --
W. Peter Ragan, Jr                     --               --               --               --
</TABLE>


(1)  Mr. Mastriani's remaining shares will vest in increments of 25,000 shares
     on February 27, 2007, May 27, 2007 and August 27, 2007, provided that he is
     employed by the Company on each date.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth information available to us, as of March
1, 2007 with respect to the beneficial ownership of the outstanding shares of
common stock by (i) any holder of more than five percent (5%) of the outstanding
shares; (ii) our officers and directors; and (iii) our officers and directors as
a group:
<TABLE>
<CAPTION>

                                                                 SHARES OF        PERCENTAGE
                                                               COMMON STOCK           OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1)                           OWNED         COMMON STOCK
----------------------------------------                        ------------     ------------
<S>                                                               <C>                    <C>
John C. Kleinert(2)(5)                                             9,255,323             51.9%
James J. Mastriani (4)                                               200,000              1.2%
W. Peter Ragan, Sr.(3)(4)                                          2,343,652             14.3%
W. Peter Ragan, Jr.(3)(4)                                          2,343,652             14.3%
Steven Marcus (4)                                                          0               --
Dr. Michael Kelly (4)                                                344,412              2.1%
David Granatell (4)(6)                                             1,125,000              6.7%
All officers and directors as a group
(seven persons)                                                   15,612,039             90.5%
</TABLE>


(1)  Beneficial ownership as reported in the table above has been determined in
     accordance with Instruction (1) to Item 403 (b) of Regulation S-B of the
     Securities Exchange Act of 1934.

(2)  The business address of Mr. Kleinert is 48 Franklin Turnpike, 3rd Fl,
     Ramsey, NJ.

(3)  Includes 309,250 shares of common stock issuable upon the exercise of
     warrants issued to each of Mr. Ragan Sr. and Mr. Ragan Jr. in connection
     with the merger with STB.

(4)  The business address of the stockholder, director or officer, as the case
     may be, noted above is 3100 Rt. 138, Wall, NJ.

(5)  Includes 1,718,500 shares of common stock issuable upon the exercise of
     warrants issued to Mr. Kleinert in connection with the merger with STB.

(6)  Includes 562,500 shares of common stock issuable upon the exercise of
     warrants at $1.04 per share which expire on February 3, 2009.

                                       41
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Except as set forth below, no transactions have occurred since the beginning of
the Company's last three fiscal years or are proposed with respect to which a
director, executive officer, security holder owning of record or beneficially
more than 5% of any class of the Company's securities or any member of the
immediate families of the foregoing persons had or will have a direct or
indirect material interest:

We engage Ragan & Ragan, P.C. to pursue legal collection of our receivable
portfolios, interests in distressed real property and tax lien certificates.
Both Messrs. Ragan, Sr. and Ragan, Jr. are partners of Ragan & Ragan, P.C. The
fee arrangements between our subsidiaries and Ragan & Ragan, P.C. have been
reviewed and approved by all of the members of a committee appointed by our
board of directors other than Mr. Ragan, Sr. who abstained. John C. Kleinert and
James J. Mastriani comprised the committee. During fiscal years 2005 and 2006,
our subsidiary Velocity Investments, LLC, paid Ragan & Ragan, P.C. an aggregate
of $1,062,196 and $1,225,577, respectively, our subsidiary J. Holder, paid Ragan
& Ragan, P.C. an aggregate of $63,574 and $10,139, respectively, and our
subsidiary, VOM, paid Ragan & Ragan, P.C. an aggregate of $15,013 and $5,528,
respectively.

On October 5, 2005, we sold an unsecured promissory note in the principal amount
of $60,000 to Ragan & Ragan, PC, a related entity, in a private placement. The
note bears interest at the rate of 7% per annum. The entire principal and
accrued interest of the note is payable in one lump sum payment on October 5,
2006 unless the holder thereof gives written notice to us 30 days prior to
October 5, 2006 that it elects to extend its note, in which event the entire
principal thereof is payable on October 5, 2007. The note was redeemed and paid
in full on October 5, 2006.

On October 5, 2005, our J. Holder subsidiary sold an unsecured promissory note
in the principal amount of $70,000 to YouBit, Inc. a related entity owned by
Ragan & Ragan, PC in a private placement. The note bears interest at the rate of
7% per annum. The entire principal and accrued interest of the note is payable
in one lump sum payment on October 5, 2006 unless the holder thereof gives
written notice to us 30 days prior to October 5, 2006 that it elects to extend
its note, in which event the entire principal thereof is payable on October 5,
2007. The note was redeemed and paid in full on October 5, 2006.

It is our policy, with respect to insider transactions, that all transactions
between us, our officers, directors and principal stockholders and our
affiliates be on terms no less favorable to us than could be obtained from an
unrelated third parties in arms-length transactions, and that all such
transactions shall be approved by a majority of the disinterested members of the
Board of Directors. We believe that the transactions described above comply with
such policy.

Except for the relationship of W. Peter Ragan, Sr. and W. Peter Ragan, Jr. who
are father and son none of our officers and directors are related.



                                       42
<PAGE>

PART IV
-------

ITEM 13. EXHIBITS

<TABLE>
<CAPTION>

Exhibits

Exhibit
Number     Title                                                                   Reference
------     -----                                                                   ---------
<S>        <C>                                                                  <C>
  2.1      Agreement and Plan of Merger dated as of February 3, 2004, by and          A*
           among Tele-Optics, Inc., TLOP Acquisition Company, L.L.C.,
           STB,Inc., John C. Kleinert, W. Peter Ragan, Sr. and W. Peter Ragan,
           Jr.
  3.1(2)   Certificate of Incorporation                                               B*
  3.1(3)   Amendment to Certificate of Incorporation                                  C*
  3.2(2)   By-laws                                                                    B*
  3.3      Amended and Restated By-laws                                               O*
  3.4      Certificate of Designation                                                 U
  4.1      Specimen Common Stock Certificate                                          D*
  4.2      Form of Subscription Agreement                                             E*
  4.3      Loan and Security Agreement, dated as of January 27, 2005, by and          F*
           between Velocity Investments, LLC and Wells Fargo Foothill, Inc.
  4.4      General Continuing Guaranty, dated January 27, 2005, executed by           F*
           Registrant in favor of Wells Fargo Foothill, Inc.
  4.5      Security and Pledge Agreement, dated as of January 27, 2005, by and        F*
           between Registrant and Wells Fargo Foothill, Inc.
  4.6      Subordination Agreement, dated as of January 27, 2005, by and between      F*
           Registrant and Wells Fargo Foothill, Inc.
  4.7      Form of promissory note issued on April 15, 2005                           L*
  4.8      10% Convertible Debenture due April 27, 2005                               O*
  4.9      Common Stock Purchase Warrant                                              O*
  4.10     Warrant to Purchase 100,000 Shares of Series A Convertible Preferred       T
           Stock
  4.11     Specimen Series A Convertible Preferred Stock Certificate                  T
  4.12     Common Stock Purchase Warrant                                              V
  4.13     Amended 10% Convertible Secured Debenture                                  V
  10.1     Business Advisory Agreement, dated as of February 5, 2004, by and          G*
           between Lomond International, Inc. and Registrant
  10.2     Employment Contract, dated as of September 8, 2004, by and between         H*
           Registrant and James J. Mastriani
  10.3     Independent Consulting Agreement, dated December 16, 2004, between         I*
           Registrant and The Del Mar Consulting Group, Inc.
  10.4     Non-qualified Stock Option Agreement, dated December 16, 2004,             I*
           Between Registrant and The Del Mar Consulting Group, Inc.
  10.5     Employment Agreement, dated as of January 1, 2004, between John C.         J*
           Kleinert and STB, Inc. (n/k/a Velocity Asset Management, Inc.)
  10.6     Addendum, dated September 1, 2004, to Employment Agreement, dated as       J*
           of January 1, 2004, between John C. Kleinert and Registrant
  10.7     Employment Agreement, dated as of January 1, 2004, between John C.         J*
           Kleinert and J. Holder, Inc.
  10.8     Addendum, dated September 1, 2004, to Employment Agreement, dated As       J*
           of January 1, 2004, between John C. Kleinert and J. Holder, Inc.
  10.9     Employment Agreement, dated as of January 1, 2004, between Velocity        J*
           Investments, LLC and W. Peter Ragan, Jr.
  10.10    Addendum, dated September 1, 2004, to Employment Agreement, dated As       J*
           of January 1, 2004, between W. Peter Ragan, Jr. and Velocity
           Investments, LLC
  10.11    Employment Agreement, dated as of January 1, 2004, between VOM, LLC        J*
           and W. Peter Ragan, Sr.
  10.12    Addendum, dated September 1, 2004, to Employment Agreement, dated As       J*
           of January 1, 2004, between W. Peter Ragan, Sr. and VOM, LLC
  10.13    Retainer Agreement, dated as of January 1, 2005, between Ragan &           J*
           Ragan, P.C. and Velocity Investments, LLC
  10.14    Retainer Agreement, dated as of January 1, 2005, between Ragan &           J*
           Ragan, P.C. and VOM, LLC
  10.15    Retainer Agreement, dated as of January 1, 2005, between Ragan &           J*
           Ragan, P.C. and J. Holder, Inc.
  10.16    Addendum, dated January 1, 2006, to Employment Agreement, dated as of
           January 1, 2004, between John C. Kleinert and Registrant
  10.17    Addendum, dated January 1, 2006, to Employment Agreement, dated As of
           January 1, 2004, between John C. Kleinert and J. Holder, Inc.
  10.18    Addendum, dated January 1, 2006, to Employment Agreement, dated As of
           January 1, 2004, between W. Peter Ragan, Jr. and Velocity
           Investments, LLC
  10.19    Addendum, dated January 1, 2006, to Employment Agreement, dated As of
           January 1, 2004, between W. Peter Ragan, Sr. and VOM, LLC
</TABLE>

                                       43
<PAGE>
<TABLE>
<CAPTION>

Exhibit
Number     Title                                                                   Reference
------     -----                                                                   ---------
<S>        <C>                                                                  <C>
  10.20    Form of Legal Collection Agreement                                         J*
  10.21    Real Estate Joint Venture Agreement dated June 2, 2005                     M*
  10.22    Business Advisory Agreement dated September 1, 2005                        N*
  10.23    Securities Purchase Agreement dated October 27, 2005                       O*
  10.24    Registration Rights Agreement dated October 27, 2005                       O*
  10.25    Security Agreement dated October 27, 2005                                  O*
  10.26    Subsidiary Guarantee dated October 27, 2005                                O*
  10.27    Amendment No. 1 to Business Advisory Agreement dated as of November        Q*
           11, 2005
  10.28    Director Indemnification Agreement                                         Q*
  10.29    First Amendment to Loan and Security Agreement by and between Wells        R*
           Fargo Foothill, Inc. and Velocity Investments, L.L.C. dated as of
           February 27, 2006
  10.30    Second Amendment to Loan and Security Agreement by and between Wells
           Fargo Foothill, Inc. and Velocity Investments, LLC dated as of
           December 8, 2006.
  10.31    Third Amendment to Loan and Security Agreement by and between Wells
           Fargo Foothill, Inc. and Velocity Investments, LLC dated as of
           February 23, 2007.
  14.1     Code of Ethics                                                             S
  16.1     Letter of Robert C. Seiwell, Jr. CPA                                       K*
  21.1     Subsidiaries of the Registrant                                             P*
  23.1     Consent of Cowan, Gunteski & Co. P.A.                                      S
  23.2     Consent of Weiser LLP
  31.1     Certification of the Chief Executive Officer pursuant to Section 302       S
           of the Sarbanes-Oxley Act of 2002
  31.2     Certification of the Chief Financial Officer pursuant to Section 302       S
           of the Sarbanes-Oxley Act of 2002
  32.1     Certification of the Chief Executive Officer pursuant to 18 U.S.C.         S
           Section 1350, as adopted pursuant to Section 906 of the
           Sarbanes-Oxley Act of 2002
  32.2     Certification of the Chief Financial Officer pursuant to 18 U.S.C.         S
           Section 1350, as adopted pursuant to Section 906 of the
           Sarbanes-Oxley Act of 2002
  99.1     Audit Committee Charter                                                    S
  99.2     Nominating Committee Charter                                               S
</TABLE>

A    Incorporated by reference to Registrant's Current Report on Form 8-K filed
     with the Securities and Exchange Commission on February 18, 2004.

B    Incorporated by reference to Registrant's Registration Statement on Form
     S-18 (File No. 33.13609A) filed with the Securities and Exchange
     Commission.

C    Incorporated by reference to Registrant's Definitive Information Statement
     filed with the Securities and Exchange Commission on March 19, 2004.

D.   Previously filed with Registrant's Annual Report on Form 10-KSB for the
     year ended December 31, 2004.

E    Incorporated by reference to Registrant's Current Report on Form 8-K filed
     with the Securities and Exchange Commission on October 7, 2004.

F    Incorporated by reference to Registrant's Current Report on Form 8-K filed
     with the Securities and Exchange Commission on February 2, 2005.

G    Incorporated by reference to Schedule 13D filed by Lomond International,
     Inc. with the Securities and Exchange

                                       44
<PAGE>
H    Incorporated by reference to Registrant's Current Report on Form 8-K filed
     with the Securities and Exchange Commission on September 14, 2004.

I    Incorporated by reference to Registrant's Current Report on Form 8-K filed
     with the Securities and Exchange Commission on January 5, 2005.

J    Filed as part of Amendment No. 1 to the Registration Statement on Form
     SB-2, File No. 333-122062, filed with the Securities Exchange Commission on
     March 16, 2005.

K    Incorporated by reference to Registrant's Current Report on Form 8-K filed
     with the Securities and Exchange Commission on January 16, 2004.

L    Incorporated by reference to Registrant's Current Report on Form 8-K filed
     with the Securities and Exchange Commission on April 19, 2005.

M    Incorporated by reference to Registrant's Current Report on Form 8-K filed
     with the Securities and Exchange Commission on June 22, 2005.

N    Incorporated by reference to Registrant's Current Report on Form 8-K filed
     with the Securities and Exchange Commission on September 7, 2005.

O    Incorporated by reference to Registrant's Current Report on Form 8-K filed
     with the Securities and Exchange Commission on October 31, 2005.

P    Filed as part of Amendment No. 1 to the Registration Statement on Form
     SB-2, File No. 333-130234, filed with the Securities Exchange Commission on
     December 29, 2005.

Q    Incorporated by reference to Registrant's Quarterly Report on Form 10-QSB/A
     for the quarter ended September 30, 2005 filed with the Securities and
     Exchange Commission on December 2, 2005

R    Incorporated by reference to Registrant's Current Report on Form 8-K filed
     with the Securities and Exchange Commission on February 28, 2006.

S    Incorporated by reference to Registrant's Annual Report on Form 10-KSB
     filed with the Securities and Exchange Commission on March 31, 2006.

T.   Incorporated by reference to Registrant's Current Report on Form 8-K filed
     with the Securities and Exchange Commission on April 18, 2006.

U.   Incorporated by reference to Registrant's Current Report on Form 8-K filed
     with the Securities and Exchange Commission on May 15, 2006.

V.   Incorporated by reference to Registrant's Current Report on Form 8-K filed
     with the Securities and Exchange Commission on May 22, 2006.

*    In accordance with Rule 12b-32 under the Securities Exchange Act of 1934,
     as amended, reference is made to the documents previously filed with the
     Securities and Exchange Commission, which documents are hereby incorporated
     by reference.

                                       45
<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

(a) Audit Fees

    The aggregate fees billed for each of fiscal 2006 and fiscal 2005 for
    professional services rendered by the principal accountant for the audit of
    the Company's annual financial statements and review of financial statements
    included in the Company's Form 10-QSB or services that are normally provided
    by the accountant in connection with statutory and regulatory filings or
    engagements for those fiscal years was $135,000 and $100,092, respectively.

(b) Audit-Related Fees

    The aggregate fees billed in each of fiscal 2006 and fiscal 2005 for
    assurance and related services by the principal accountant that were
    reasonably related to the performance of the audit or review of the
    Company's financial statements was $0 and $23,586, respectively.

(c) Tax Fees

    The aggregate fees billed in fiscal 2006 or fiscal 2005 for professional
    services rendered by the principal accountant for tax compliance, tax
    advice, and tax planning was $55,534 and $43,981, respectively.

(d) All Other Fees

    No fees were billed in each of fiscal 2006 and fiscal 2005 for products and
    services provided by the principal accountant.

(e) In 2005, the Company formed the Audit Committee. The Audit Committee meets
    with the independent auditor prior to the audit and discusses the planning
    and staffing of the audit, approves in advance the engagement of the
    independent auditor for all audit services and non-audit services and
    approves the fees and other terms of any such engagement, and obtains
    periodically from the independent auditor a formal verbal communication of
    the matters required to be discussed by Statements of Auditing Standards No.
    61 and SEC Rule 10(a). In addition, the Company obtains a letter describing
    all relationships between the auditor and the Company and discusses with the
    auditor any disclosed relationships or services that may impact auditor
    objectivity and independence.

                                       46
<PAGE>


                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004


                                                                         Page
                                                                         ----
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS             F-1 - F-2

FINANCIAL STATEMENTS

Consolidated Balance Sheets                                           F-3 - F-4

Consolidated Statements of Operations                                    F-5

Consolidated Statements of Changes in Stockholders' Equity               F-6

Consolidated Statements of Cash Flows                                    F-7

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        F-8 - F-30


<PAGE>

            Report of Independent Registered Public Accounting Firm
            -------------------------------------------------------



To the Board of Directors and Stockholders of
Velocity Asset Management, Inc.
Ramsey, NJ



We have audited the accompanying consolidated balance sheet of Velocity Asset
Management, Inc. and Subsidiaries as of December 31, 2006 and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Velocity Asset Management, Inc. and Subsidiaries as of December 31, 2006, and
the consolidated results of their operations and their cash flows for the year
then ended in conformity with U.S. generally accepted accounting principles.

As discussed in Note 2 of the notes to the consolidated financial statements,
the Company adopted the provisions of Statement of Financial Accounting
Standards No. 123 (Revised 2004), "Share-based Payment" applying the modified
prospective method at the beginning of the year ended December 31, 2006. As also
discussed in Note 2, during 2006 the Company elected to present its balance
sheets on an unclassified basis to better conform to industry practice.


Weiser LLP
New York, New York

April 2, 2007



                                      F-1
<PAGE>

            Report of Independent Registered Public Accounting Firm
            -------------------------------------------------------


To the Board of Directors and Stockholders of
Velocity Asset Management, Inc. and Subsidiaries
Ramsey, New Jersey

We have audited the accompanying consolidated balance sheets of Velocity Asset
Management, Inc. and Subsidiaries, as of December 31, 2005 and the related
consolidated statements of operations, consolidated statements of changes in
equity and the consolidated statements of cash flows for Velocity Asset
Management, Inc. and Subsidiaries for the years ended December 31, 2005 and
2004. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Velocity Asset
Management, Inc. and Subsidiaries as of December 31, 2005, and the results of
its operations and its cash flows for the years ended December 31, 2005 and
2004, in conformity with accounting principles generally accepted in the United
States of America.


/s/ Cowan, Gunteski & Co., P.A.


Toms River, New Jersey
March 17, 2006




                                      F-2
<PAGE>
<TABLE>
<CAPTION>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2006 and 2005


                                                                   2006             2005
                                                                -----------      -----------
<S>                                                             <C>              <C>
                                     ASSETS
Cash and cash equivalents                                       $ 2,444,356      $    90,624
Properties held for sale                                          6,314,346        6,439,240
Deposits on properties                                              240,000          241,000
Tax certificates held and accrued interest receivable, net          472,071          538,926
Consumer receivables, net                                        38,327,926       17,758,661
Property and equipment, net of accumulated depreciation              68,619           87,222
Deferred income tax asset, net                                      306,900          147,800
Security deposit                                                     30,100           87,500
Other assets                                                        229,841          153,257
                                                                -----------      -----------

Total assets                                                    $48,434,159      $25,544,230
                                                                ===========      ===========
</TABLE>


        See accompanying notes to the consolidated financial statements.

                                       F-3

<PAGE>
<TABLE>
<CAPTION>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2006 and 2005

                                                                    2006             2005
                                                                ------------     ------------
<S>                                                             <C>              <C>
                      LIABILITIES AND STOCKHOLDERS' EQUITY


Accounts payable and accrued expenses                           $    873,507     $    447,971
Estimated court and media costs                                    8,446,319        3,799,646
Line of credit                                                    13,791,388        6,094,462
Notes payable to related parties                                   2,370,000        2,430,000
Notes payable and mortgage                                           780,000        2,400,000
Convertible secured debenture                                             --        1,800,000
Income taxes payable                                                 600,974          133,132


                                                                ------------     ------------


  Total liabilities                                               26,862,188       17,105,211
                                                                ------------     ------------


COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY


Preferred stock, $0.001 par value, 10,000,000 shares
  authorized, 1,380,000 and -0- shares issued and
  outstanding, respectively (liquidation value of
  preferred stock of $13,800,000 at December 31, 2006)                 1,380               --
Common stock, $0.001 par value, 40,000,000 shares
   authorized, 16,129,321 and 15,972,321 shares
   issued and outstanding, respectively                               16,129           15,972
Additional paid-in-capital                                        23,502,381       10,838,651
Accumulated deficit                                               (1,947,919)      (2,415,604)
                                                                ------------     ------------

Total stockholders' equity                                        21,571,971        8,439,019
                                                                ------------     ------------

  Total liabilities and stockholders' equity                    $ 48,434,159     $ 25,544,230
                                                                ============     ============
</TABLE>


        See accompanying notes to the consolidated financial statements.

                                      F-4
<PAGE>

<TABLE>
<CAPTION>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
              For the Years Ended December 31, 2006, 2005 and 2004

                                                                       2006               2005               2004
                                                                   ------------       ------------       ------------
<S>                                                                <C>                <C>                <C>
REVENUES
  Sale of real property                                            $  1,585,175       $  3,685,338       $  2,369,564
  Income on consumer receivables                                      8,431,259          3,633,945          1,726,356
  Interest income on tax certificates held                              268,048            782,461            260,269
                                                                   ------------       ------------       ------------

Total revenues                                                       10,284,482          8,101,744          4,356,189
                                                                   ------------       ------------       ------------


OPERATING EXPENSES
  Cost of real property                                               1,041,588          3,326,021          2,278,592
  Professional fees (including fees paid to related
   parties of $1,241,244, $1,140,783 and $632,684 for
   the years ended 2006, 2005 and 2004, respectively)                 3,355,899          2,017,875          1,422,624
  Loss on extinguishment of debt                                             --                 --          2,859,307
  General and administrative expenses                                 2,232,846          1,121,724            353,994
                                                                   ------------       ------------       ------------

      Total operating expenses                                        6,630,333          6,465,620          6,914,517
                                                                   ------------       ------------       ------------

Income (loss) from operations                                         3,654,149          1,636,124         (2,558,328)


OTHER EXPENSE
Interest expense (including interest paid to related
 parties of $234,797, $181,314 and $124,859 for the
 years ended 2006, 2005 and 2004, respectively)                      (1,363,418)          (760,674)          (338,525)
                                                                   ------------       ------------       ------------


Income (loss) before provision (benefit) for income taxes             2,290,731            875,450         (2,896,853)

Provision (benefit) for income taxes                                    972,041            401,583           (191,698)
                                                                   ------------       ------------       ------------

Net income (loss)                                                     1,318,690            473,867         (2,705,155)


Preferred dividend                                                     (851,005)                --                 --
                                                                   ------------       ------------       ------------


Net income (loss) attributable to common stockholders              $    467,685       $    473,867       $ (2,705,155)
                                                                   ============       ============       ============


Weighted average common shares - basic                               16,008,653         15,937,002         27,047,005
                                                                   ============       ============       ============


Net income per common share - basic                                $       0.03       $       0.03       $      (0.10)
                                                                   ============       ============       ============


Weighted average common shares - diluted                             17,276,877         17,740,110         27,047,005
                                                                   ============       ============       ============


Net income per common share - diluted                              $       0.03       $       0.03       $      (0.10)
                                                                   ============       ============       ============
</TABLE>


        See accompanying notes to the consolidated financial statements.

                                      F-5
<PAGE>
<TABLE>
<CAPTION>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
              For the Years Ended December 31, 2006, 2005 and 2004


                                       Preferred Stock              Common Stock
                                   -----------------------    -------------------------
                                                                                           Additional                     Total
                                    Number of                   Number of                    Paid in     Accumulated   Stockholders'
                                     Shares      Par Value       Shares      Par Value       Capital       Deficit        Equity
                                   ----------    ---------    ------------   ----------    -----------   -----------    -----------
<S>                <C> <C>          <C>          <C>            <C>          <C>           <C>           <C>            <C>
BALANCES, December 31, 2003                --    $      --      13,005,000   $   13,005    $        --   $  (105,085)   $   (92,080)

February 3, 2004 -
 Reverse Acquisition:
--------------------
   Issuance of Stock Pursuant
   to the Reverse Acquisition
   (See Note 15)                           --           --      79,682,500       79,683             --            --         79,683

   Net Income of Subsidiary
   (i.e. Tele-Optics, Inc.)
   through February 3, 2004
   (Date of Acquisition) and
   the prior years' accumulated
   deficit                                 --           --              --           --         90,499       (79,231)        11,268

   Sale of Stock Pursuant to
   the Private Placement
   (See Note 15)                           --           --       7,312,500        7,312        492,688            --        500,000

April 8, 2004 -
 Reverse Stock Split:
--------------------
   Issuance of Stock Pursuant
   to Right to Receive Clause              --           --      23,505,000       23,505             --            --         23,505

   Reverse Stock Split (13:1)
   (See Note 16)                           --           --    (114,004,379)    (114,004)            --            --       (114,004)

August 12, 2004 - Debt
Conversion for Stock
(See Note 18)                              --           --       4,084,724        4,085      6,531,474            --      6,535,559

Private Offering of up to
3,500,000 Units. Each Unit is
comprised of one share of
common stock and a warrant
to purchase one-fifth
of one share of common stock
for $2.50 per share within
the next five years:
   October 4, 2004 -
     First Tranche Closing                 --           --         620,333          620        929,880            --        930,500
   December 22, 2004 -
     Second Tranche Closing                --           --         928,503          929      1,391,826            --      1,392,755
   December 31, 2004 -
     Third Tranche Closing                 --           --         560,167          560        839,690            --        840,250

December 16, 2004 - Commencement
bonus - issued to a consultant
with a non-qualified option to
purchase 250,000 additional
shares of common stock for $2.50
per share within the next five years       --           --         100,000          100        149,900            --        150,000

December 28, 2004 - Issuance
of warrants for services
rendered by two unrelated
corporations pursuant to a
business advisory agreement
dated February 5, 2004 and
an independent consulting
agreement dated December 16, 2004
(See Note 9)                               --           --              --           --        254,176            --        254,176

Net loss                                   --           --              --           --             --    (2,705,155)    (2,705,155)
                                   ----------    ---------    ------------   ----------    -----------   -----------    -----------

BALANCES, December 31, 2004                --           --      15,794,348       15,795     10,680,133    (2,889,471)     7,806,457

Private Offering of up to
3,500,000 Units. Each unit is
 comprised of one share of
common stock and a warrant
to purchase one-fifth
of one share of common stock
for $2.50 per share within
the next five years:
   January 5, 2005 -
     Fourth Tranche Closing                --           --         133,350          133        199,891            --        200,024

Commissions Paid in Conjunction
with Private Offering                      --           --              --           --       (135,268)           --       (135,268)

Issuance of stock pursuant
to right to receive clause                 --           --          44,623           44            (44)           --             --

Issuance of warrants for
services rendered by an
independent consultant                     --           --              --           --         21,088            --         21,088

Issuance of warrants
pursuant to secured debenture              --           --              --           --         72,851            --         72,851

Net income                                 --           --              --           --             --       473,867        473,867
                                   ----------    ---------    ------------   ----------    -----------   -----------    -----------

BALANCES, December 31, 2005                --           --      15,972,321       15,972     10,838,651    (2,415,604)     8,439,019

Preferred stock offering of
up to 1,200,000 shares
of Series A convertible
preferred stock                     1,200,000        1,200              --           --     11,998,800            --     12,000,000

Preferred stock sale to
underwriter in conjunction
with preferred stock offering
of 180,000 shares of
Series A convertible preferred
stock                                 180,000          180              --           --      1,799,820            --      1,800,000

Commissions and expenses related
to preferred stock offering                --           --              --           --     (1,404,000)           --     (1,404,000)

Sale of warrants pursuant
to preferred stock offering                --           --              --           --            120            --            120

Dividends paid on preferred stock          --           --              --           --             --      (851,005)      (851,005)

Issuance of warrants pursuant
to secured debenture                       --           --              --           --         12,347            --         12,347

Issuance of common stock to
employees                                                          157,000          157        256,643            --        256,800


Net Income                                 --           --              --           --             --     1,318,690      1,318,690
                                   ----------    ---------    ------------   ----------    -----------   -----------    -----------

BALANCES, December 31, 2006         1,380,000    $   1,380      16,129,321   $   16,129    $23,502,381   $(1,947,919)   $21,571,971
                                   ==========    =========    ============   ==========    ===========   ===========    ===========
</TABLE>


        See accompanying notes to the consolidated financial statements.

                                      F-6
<PAGE>
<TABLE>
<CAPTION>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Years Ended December 31, 2006, 2005 and 2004


                                                                         2006               2005               2004
                                                                     ------------       ------------       ------------
<S>                                                                  <C>                <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                                                    $  1,318,690       $    473,867       $ (2,705,155)
Adjustments to reconcile net income (loss) to net cash
 used in operating activities
  Depreciation                                                             32,518             26,287              5,147
  Loss on extinguishment of debt                                               --                 --          2,859,307
  Non cash expenses relating to stock compensation                        269,147             93,941            404,176
  Deferred income tax benefit                                            (159,100)            61,900           (209,700)
  (Increase) decrease in:
    Accounts receivable                                                        --            785,251           (607,280)
    Properties held for sale                                              124,894         (4,288,380)        (1,011,190)
    Deposits on properties                                                  1,000           (121,000)             7,500
    Tax certificates held and accrued interest receivable, net             66,855            163,191            306,956
    Consumer receivables                                              (20,569,265)       (14,520,809)        (1,470,686)
    Security deposit                                                       57,400            (87,500)
    Other assets                                                          (76,584)           (48,257)           (75,000)
  Increase (decrease) in:
    Accounts payable and accrued expenses                                 425,536            446,034           (189,685)
    Estimated court and media costs                                     4,646,673          3,799,646                 --
    Income taxes payable                                                  467,842            119,582             10,983
                                                                     ------------       ------------       ------------
Net cash used in operating activities                                 (13,394,394)       (13,096,247)        (2,674,627)
                                                                     ------------       ------------       ------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Acquisition of property and equipment                                   (13,915)           (66,311)           (52,345)
  Cash received from reverse acquisition                                       --                 --                452
                                                                     ------------       ------------       ------------
Net cash used in investing activities                                     (13,915)           (66,311)           (51,893)
                                                                     ------------       ------------       ------------


CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from borrowings                                              7,696,926         10,674,460            500,000
  Repayments of borrowings                                             (3,480,000)          (709,157)          (554,289)
  Proceeds received from stock and warrants sales and offerings        13,800,120            200,024          3,663,505
  Proceeds from Secured Debenture                                              --          1,800,000                 --
  Commissions and related expenses paid on stock offering              (1,404,000)          (135,268)                --
  Payment of dividends                                                   (851,005)                --                 --
                                                                     ------------       ------------       ------------
Net cash provided by financing activities                              15,762,041         11,830,059          3,609,216
                                                                     ------------       ------------       ------------

Net increase (decrease) in cash and cash equivalents                    2,353,732         (1,332,499)           882,696

Cash and cash equivalents, beginning of year                               90,624          1,423,123            540,427
                                                                     ------------       ------------       ------------

Cash and cash equivalents, end of year                               $  2,444,356       $     90,624       $  1,423,123
                                                                     ============       ============       ============

Supplemental disclosure of cash flow information:
  Cash paid for interest                                             $  1,018,573       $    730,674       $    338,525
  Cash paid for taxes                                                $    680,836       $    510,141       $      7,568
Non-Cash investing and financing activities
  Issuance of warrants                                               $     12,347       $    138,562       $    254,126
</TABLE>

        See accompanying notes to the consolidated financial statements.

                                      F-7
<PAGE>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004


NOTE 1 - ORGANIZATION AND BUSINESS

Nature of Operations
--------------------

On February 3, 2004, Velocity Asset Management, Inc. (formerly known as
Tele-Optics, Inc), the "Company"), through its wholly owned subsidiary TLOP
Acquisition Company, L.L.C. ("TLOP"), entered into a reverse acquisition (the
"Reverse Merger") with STB, Inc. and its subsidiaries. On February 3, 2004, STB,
Inc. became a wholly owned subsidiary of TLOP. As a result of the Reverse
Merger, the Company operates all of its current business activities through its
wholly-owned subsidiary TLOP.

The Company was incorporated in the state of Delaware on December 31, 1986. In
1987, the Company issued shares of its common stock pursuant to a public
offering. The Company was engaged in the manufacture of optical products until
1991 when all assets and operations were sold.

Effective April 8, 2004, the Company changed its name from Tele-Optics, Inc. to
Velocity Asset Management, Inc. The entities that are included in these
consolidated financial statements are as follows:

TLOP Acquisition Company, L.L.C. - TLOP Acquisition Company, LLC ("TLOP") was
incorporated in New Jersey as a limited liability company. TLOP is a
wholly-owned subsidiary of the Company and pursuant to the Reverse Merger owns
100% of STB, Inc.

STB, INC. - STB, Inc. ("STB") was incorporated in New Jersey in 2003. Its
primary purpose was to act as a holding company for three subsidiaries, namely,
J. Holder, Inc., VOM, LLC and Velocity Investments, LLC.

J. Holder, Inc. - J. Holder, Inc. ("J. Holder") was formed in 1998 to invest in,
and maximize the return on real property being sold at sheriff's foreclosure
sales and judgment execution sales, defaulted mortgages, partial interests in
real property and the acquisition of real property with clouded title.

VOM, L.L.C. - VOM, LLC ("VOM") was formed in 2002 to invest in and maximize the
return on New Jersey municipal tax liens. VOM focuses on maximization of profit
through legal collections and owned real estate opportunities presented by the
current tax lien environment.

Velocity Investments, L.L.C. - Velocity Investments, LLC ("Velocity") was
established in 2002 to invest in, and maximize the return on, consumer debt
purchased on the secondary market. Velocity purchases consumer receivable
portfolios at a discount and then liquidates these portfolios through legal
collection means.

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

                                      F-8
<PAGE>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation
---------------------------

The consolidated financial statements of the Company are prepared in accordance
with accounting principles generally accepted in the United States of America.
The statement of operations includes the income and expenses of STB, Inc. and
its subsidiaries for the year ended December 31, 2004 and the income and
expenses of the Company for the period from February 3, 2004 through December
31, 2004. All significant intercompany payables, receivables, revenues and
expenses have been eliminated for purposes of this consolidation.

Cash and Cash Equivalents
-------------------------

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

Concentrations of Credit Risk
-----------------------------

Financial instruments, which potentially expose the Company to concentrations of
credit risk, consist primarily of cash and cash equivalents and consumer
receivables. The Company places its cash and cash equivalents with high quality
financial institutions. At times, cash balances may be in excess of the amounts
insured by the Federal Deposit Insurance Corporation.

Properties Held for Sale
------------------------

Properties held for sale consist of real property purchased by the Company for
resale and are carried at the lower of cost or market value. This includes the
cost to purchase the property and repairs or other costs required to present the
property ready for resale. The Company recognizes income and related expenses
from the sale of real property at the date the sale closes.

                                      F-9
<PAGE>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Tax Certificates Held and Accrued Interest Receivable
-----------------------------------------------------

The Company records its New Jersey municipal tax liens at cost plus accrued
interest. Interest income is recognized using the effective interest method
("interest method").

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.

Prior to January 1, 2005, the Company accounted for its investment in consumer
receivables portfolios using the interest method under the guidance of Practice
Bulletin 6, "Amortization of Discounts on Certain Acquired Loans ("PB-6")."
Effective January 1, 2005, the Company adopted and began to account for its
investment in consumer receivable portfolios using the interest method under the
guidance of American Institute of

                                      F-10
<PAGE>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Consumer Receivables (Continued)
--------------------------------

Certified Public Accountants ("AICPA") Statement of Position ("SOP") 03-3,
"Accounting for Loans or Certain Securities Acquired in a Transfer." SOP 03-3
addresses accounting for differences between contractual cash flows and cash
flows expected to be collected from an investor's initial investment in loans or
debt if those differences are attributable, at least in part, to credit quality.
Increases in expected cash flows are recognized prospectively through adjustment
of the internal rate of return ("IRR") while decreases in expected cash flows
are recognized as impairment.

Under both the guidance of SOP 03-3 and PB-6, as amended, 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
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.

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. At December 31, 2006 and
2005, the Company had no consumer receivable portfolios accounted for under the
cost recovery method.

The Company estimates and capitalizes certain fees paid to third parties related
to the direct acquisition 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 balance of these
estimated costs at December 31, 2006 and 2005 was $8,446,319, and $3,799,646,
respectively.

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 receivables. At December 31, 2006 and 2005, the Company
had no valuation allowance on its consumer receivables.

Property and Equipment
----------------------

Property and equipment, including improvements that significantly add to the
productive capacity or extend useful life, are recorded at cost, while
maintenance and repairs are expensed currently. Property and equipment are
depreciated over their estimated useful lives using the straight-line method of
depreciation. Software and computer equipment are depreciated over three to five
years. Furniture and fixtures are depreciated over five years.

                                      F-11
<PAGE>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property and Equipment (Continued)
----------------------------------

Office equipment is depreciated over five to seven years. Leasehold improvements
are depreciated over the lesser of the estimated useful life or the remaining
life of the lease, which ranges from three to ten years. When property is sold
or retired, the cost and related accumulated depreciation are removed from the
balance sheet and any gain or loss is included in the statement of operations.

Income Taxes
------------

The Company follows the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109). SFAS 109 requires
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.

Stock Based Compensation
------------------------

The Company adopted SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS
No. 123R"), which supersedes Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB No. 25"). The revised statement
addresses the accounting for share-based payment transactions with employees and
other third parties, eliminates the ability to account for share-based
transactions using APB No. 25 and requires that the compensation costs relating
to such transactions be recognized in the consolidated financial statements.
SFAS No. 123R requires additional disclosures relating to the income tax and
cash flow effects resulting from share-based payments. The Company adopted the
modified prospective application method of SFAS No.123R, effective January 1,
2006, and the adoption of SFAS No. 123R had an immaterial impact on its
consolidated results of operations and earnings per share. There were no
outstanding awards at the date of adoption.

Additionally, regarding the treatment of non-employee stock based compensation,
the Company follows the guidance of the Emerging Issues Task Force ("EITF")
96-18, "Accounting for Equity Instruments That Are Issued to Other Than
Employees for acquiring, or in Conjunction with Selling, Goods or Services".


                                      F-12
<PAGE>
                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Change in Presentation and Reclassifications
--------------------------------------------

The Company has elected to present its balance sheets on an unclassified basis
to better conform to industry practice. The balance sheet for December 31, 2005
has been reclassified for comparative purposes in order to conform to the
presentation in the current financial statement.

Certain amounts in previously issued financial statements were reclassified to
conform to 2006 presentations. These reclassifications had no effect on retained
earnings.

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

Fair Value of Financial Instruments
-----------------------------------

SFAS No. 107, "Disclosures About Fair Value of Financial Instruments," requires
that the Company disclose estimated fair values for its financial instruments.
The fair value of consumer receivables, tax certificates held, accounts payable,
accrued expenses, borrowings and other assets are considered to approximate
their carrying amount because they are (i) short term in nature and/or (ii)
carry interest rates which are comparable to market based rates.

Recent Accounting Pronouncements
--------------------------------

In June 2006, the FASB issued FASB Interpretation (FIN) No. 48, "Accounting for
Uncertainty in Income Taxes--An Interpretation of FASB Statement No. 109" (FIN
48). This Interpretation clarifies the accounting for uncertainty in income
taxes recognized in a company's financial statements. FIN 48 requires companies
to determine whether it is "more likely than not" that a tax position will be
sustained upon examination by the appropriate taxing authorities before any part
of the benefit can be recorded in the financial statements. It also provides
guidance on the recognition, measurement and classification of income tax
uncertainties, along with any related interest and penalties. FIN 48 will also
require significant additional disclosures. This Interpretation will be
effective for fiscal years beginning after December 15, 2006. The Company will
implement this Interpretation in the first quarter of 2007, with the cumulative
effect of the change in accounting principle recorded as an adjustment to
opening retained earnings. The Company is currently evaluating the potential
impact this Interpretation will have on its financial position and results of
operations, but does not believe the impact of the adoption will be material.

                                      F-13
<PAGE>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements (Continued)
--------------------------------------------

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS
157), which provides guidance on how to measure assets and liabilities that use
fair value. SFAS 157 will apply whenever another US GAAP standard requires (or
permits) assets or liabilities to be measured at fair value but does not expand
the use of fair value to any new circumstances. This standard also will require
additional disclosures in both annual and quarterly reports. SFAS 157 will be
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and will be adopted by us beginning in the first quarter of
2008. The Company is currently evaluating the potential impact this standard may
have on its financial position and results of operations.

In September 2006, the SEC staff issued Staff Accounting Bulletin (SAB) No. 108,
"Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements" (SAB 108). SAB 108 was
issued in order to eliminate the diversity of practice in how public companies
quantify misstatements of financial statements, including misstatements that
were not material to prior years' financial statements. The Company will
initially apply the provisions of SAB 108 in connection with the preparation of
its annual financial statements for the year ending December 31, 2006. The
Company has evaluated the potential impact SAB 108 may have on its financial
position and results of operations and does not believe the impact of the
application of this guidance will be material.

NOTE 3 - INVESTMENTS

Properties Held for Sale
------------------------

Properties held for sale consist of the following:

                                                     2006           2005
                                                 ------------   ------------
Real property inventory                          $  6,289,649   $  6,024,038
Assignments and judgments                              24,697        415,202
                                                 ------------   ------------

Total properties held for sale                   $  6,314,346   $  6,439,240
                                                 ============   ============

                                      F-14
<PAGE>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004

NOTE 3 - INVESTMENTS (Continued)

Tax Certificates Held and Accrued Interest Receivable
-----------------------------------------------------
<TABLE>
<CAPTION>

Municipal tax liens consist of the following:

                                                               2006            2005
                                                           ------------    ------------
<S>                                                        <C>             <C>
Tax certificates held                                      $    243,796    $    302,228
Accrued interest                                                228,275         236,698
                                                           ------------    ------------

  Total tax certificates held and accrued interest         $    472,071    $    538,926
                                                           ============    ============
</TABLE>

NOTE 4 -CONSUMER RECEIVABLES

Consumer receivable activity for years ending December 31, 2006 and December 31,
2005 were as follows:

<TABLE>
<CAPTION>


                                                               2006            2005
                                                           ------------    ------------
<S>                                                        <C>             <C>
Balance at beginning of period                             $ 17,758,661    $  3,237,852
Acquisitions and capitalized costs, net of returns           22,915,748      16,291,794


Cash collections                                            (10,777,742)     (5,404,930)
Income recognized on consumer receivables                     8,431,259       3,633,945
                                                           ------------    ------------
Cash collections applied to principal                        (2,346,483)     (1,770,985)
                                                           ------------    ------------


Balance at end of period                                   $ 38,327,926    $ 17,758,661
                                                           ============    ============
</TABLE>



As of December 31, 2006, the Company had $38,327,926 in consumer receivables.
Based upon management's current estimation of projected future collections,
principal reductions will be as follows:

                                                            December 31,
                                                           --------------
    2007                                                   $    6,136,832
    2008                                                        7,991,264
    2009                                                        9,642,643
    2010                                                        9,002,646
    2011                                                        5,554,541
                                                           --------------

Total                                                      $   38,327,926
                                                           ==============


                                      F-15
<PAGE>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004

NOTE 4 -CONSUMER RECEIVABLES (Continued)

The accretable yield represents the amount of income the Company can expect to
generate over the remaining life of its existing portfolios based on estimated
cash flows as of December 31, 2006 and 2005. Changes in the accretable yield are
as follows:

                                                     2006            2005
                                                 ------------    ------------
Balance at beginning of year                     $ 15,618,641    $  2,879,823
Income recognized on consumer receivables          (8,431,259)     (3,633,945)
Additions                                          22,456,421      16,372,763
                                                 ------------    ------------

Balance at end of year                           $ 29,643,803    $ 15,618,641
                                                 ============    ============

NOTE 5 - PROPERTY AND EQUIPMENT

                                                     2006            2005
                                                 ------------    ------------
Office Equipment                                 $    103,889    $     92,820
Furniture and Fixtures                                 12,587           9,740
Leasehold Improvements                                 16,095          16,095
                                                 ------------    ------------
                                                      132,571         118,655
Less:  Accumulated Depreciation                       (63,952)        (31,433)
                                                 ------------    ------------

                                                 $     68,619    $     87,222
                                                 ============    ============

Depreciation expense for the years ended December 31, 2006, 2005 and 2004 was
$32,518, $26,287 and $5,147, respectively.

NOTE 6 - LINE OF CREDIT

On January 27, 2005 (the "Closing Date"), Velocity entered into a Loan and
Security Agreement (the "Loan Agreement") with Wells Fargo Foothill, Inc., a
California corporation (the "Lender"), pursuant to which the Lender agreed to
provide Velocity with a $12,500,000 credit facility to finance the acquisition
of individual pools of unsecured consumer receivables that are approved by the
Lender under specific eligibility criteria set forth in the Loan Agreement.

On the Closing Date, the following agreements were also entered into with the
Lender: a Continuing Guaranty, under which the Company provides a secure
guaranty of Velocity's obligations under the Loan Agreement; a Security and
Pledge Agreement, by and among the Company and the Lender, under which the
Company pledged all of the Company's assets to secure the credit facility; and a
Subordination Agreement, by and among the Company and the Lender. In addition,
three of our executive officers provided joint and several limited guarantees
of Velocity Investment's obligations under the Loan and Security Agreement.

Use of the senior credit facility is subject to Velocity complying with certain
restrictive covenants under the Loan and Security Agreement, including but not
limited to: a restriction on incurring additional indebtedness or liens; a
change of control; a restriction on entering into transactions with affiliates
outside the course of Velocity Investments ordinary business; and a restriction
on making payments to Velocity Asset Management, Inc. in compliance with the
Subordination Agreement. In addition, Velocity has agreed to maintain certain
ratios with respect to outstanding advances on the credit facility against the
estimated remaining return value on Wells Fargo Foothill financed portfolios,
and, Velocity has agreed to maintain at least $6,000,000 in member's equity and
subordinated debt. The Company has also agreed to maintain at least $21,000,000
in stockholder's equity and subordinated debt for the duration of the facility.

                                      F-16
<PAGE>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004

NOTE 6 - LINE OF CREDIT (Continued)

Pursuant to the Loan Agreement, the Lender has agreed to advance to Velocity up
to $12,500,000 to be used to finance up to 60% of the purchase price of
individual pools of unsecured consumer receivables that are approved by the
Lender under specific eligibility criteria set forth in the Loan Agreement. The
interest rate on the loan was 3.50% above the prime rate of Wells Fargo Bank,
N.A. Amounts borrowed under the credit facility had been due and payable ratably
over a twenty-four month period.

On February 27, 2006, Velocity entered into a First Amendment to the Loan
Agreement with the Lender, pursuant to which the Lender agreed to amend the Loan
Agreement dated January 27, 2005. Pursuant to the Amended and Restated Loan
Agreement, the Lender extended the Credit Facility until January 27, 2009 and
agreed to increase the advance rate under the credit facility to 67.5% of the
purchase price of individual pools of unsecured consumer receivables that are
approved by the Lender. The Lender also agreed to reduce the interest rate on
the loan from 3.50% above the prime rate of Wells Fargo Bank, N.A. to 2.50%
above such prime rate. In addition, repayment terms under the credit facility
were extended to thirty months.

On May 19, 2006, as a result of the Series A 10% Convertible Preferred Stock
Offering (the "offering") discussed in NOTE 11 - PREFERRED STOCK OFFERING, the
Lender agreed to reduce the interest rate on Velocity's credit facility from
2.50% to 1.50% above the prime rate of Wells Fargo Bank, N.A. immediately and
increase the advance rate on the credit facility to 75.0% effective June 1,
2006. The rate of interest at December 31, 2006 was 9.75%.

On December 8, 2006, Velocity entered into a Second Amendment to the Loan
Agreement with the Lender, pursuant to which the Lender agreed to amend the Loan
Agreement dated January 27, 2005. Pursuant to the Amended and Restated Loan
Agreement, the Lender agreed to temporarily increase the credit facility up to
$14,500,000 until March 8, 2007.

As of December 31, 2006 and 2005, the Company had $13,791,388 and $6,094,462
outstanding on the credit facility, respectively. The maturity date of the
credit facility is January 27, 2009.

Annual minimum principal payments due as of December 31, 2006 are as follows:

                2007                 $  7,340,924
                2008                    5,512,260
                2009                      938,204
                                     ------------
                                     $ 13,791,388
                                     ============


                                      F-17
<PAGE>
<TABLE>
<CAPTION>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004

NOTE 7 - NOTES PAYABLE AND MORTGAGE
                                                                                             2006           2005
                                                                                         ------------   ------------
<S>                                                                                      <C>            <C>
On June 2, 2005, J. Holder, Inc. acquired a residential property in Melbourne,
Florida (the "Melbourne Property"). Acquisition financing of $3,350,000 which is
payable on demand, was provided by a group of investors ("Investors Group"),
including J. Holder, Inc. The investors group will receive 2% of the loaned
amount and 10% per annum as interest along with a pro rata share of 20% of the
net profit realized by J. Holder, Inc. upon the sale of the property. Of the
$3,350,000 in financing, $2,170,000 was obtained from related parties -- See
NOTE 8 - RELATED PARTY TRANSACTIONS. On September 19, 2006, $400,000 of the
outstanding note was redeemed by J. Holder, Inc. As part of the redemption,
$51,222 of accrued interest was forgiven, but not the pro-rata share of the
profits.                                                                                 $  2,950,000   $  3,350,000


On September 21, 2005, J. Holder, Inc. entered into a $1,000,000 mortgage and
security agreement, the proceeds of which were utilized to renovate the
Melbourne Property. Renovations on the property were approximately $1,000,000.
All principal accrues interest at a fixed annual rate of 12% per annum. J
Holder, Inc. is required to make monthly interest only payments of $10,000 until
October 21, 2007 at which time all principal and accrued interest and other
charges are due and payable. This note was redeemed and paid in full on August
4, 2006.                                                                                           --      1,000,000


On April 15, 2005, the Company issued three promissory notes in the principal
amounts of $100,000, $150,000 and $100,000 to accredited investors -- See NOTE 8
- RELATED PARTY TRANSACTIONS in a private placement. Each of the notes bore
interest at the rate of 7% per annum and interest was payable in quarterly
installments commencing September 30, 2005. The entire principal for each note
was initially due and payable on April 15, 2006 unless the holder thereof
provided written notice 90 days prior to April 15, 2006 that it elected to
extend the note, in which event, the entire principal amount would become due
and payable on April 15, 2007. On May 14, 2006, the $150,000 promissory note was
redeemed at the Company's option. The remaining notes were extended. As of
December 31, 2006, the remaining notes in the aggregate amount of $200,000 were
held by a related party to the president and CEO. These notes are due and
payable on April 15, 2007.                                                                    200,000        350,000
                                                                                         ------------   ------------

Subtotal                                                                                    3,150,000      4,700,000
                                                                                         ------------   ------------
</TABLE>

                                      F-18
<PAGE>
<TABLE>
<CAPTION>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004


NOTE 7 - NOTES PAYABLE AND MORTGAGE (Continued)
                                                                                             2006           2005
                                                                                         ------------   ------------
<S>                                                                                      <C>            <C>
Subtotal from previous page                                                              $  3,150,000   $  4,700,000

On October 5, 2005, the Company issued a promissory note in the principal amount
of $60,000 to Ragan & Ragan, PC, a related entity, in a private placement (See
NOTE 8 - RELATED PARTY TRANSACTIONS). The note bears interest at the rate of 7%
per annum. The entire principal and accrued interest of the note is due and
payable on October 5, 2006 unless the holder thereof provides written notice 30
days prior to October 5, 2006 that it elects to extend its note, in which event;
the entire principal amount is due and payable on October 5, 2007. The Company
redeemed the note on October 5, 2006.                                                              --         60,000

On October 5, 2005, the Company issued a promissory note in the principal amount
of $70,000 to an accredited investor in a private placement. The note bore
interest at the rate of 7% per annum. The entire principal and accrued interest
of the note was due and payable on October 5, 2006 unless the holder thereof
provided written notice to the Company 30 days prior to October 5, 2006 that it
elected to extend its note, in which event the entire principal amount was due
and payable on October 5, 2007. The Company redeemed this note on October 5,
2006.                                                                                              --         70,000
                                                                                         ------------   ------------
Total notes payable                                                                      $  3,150,000   $  4,830,000
                                                                                         ------------   ------------

</TABLE>

                                      F-19
<PAGE>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004

NOTE 8 - RELATED PARTY TRANSACTIONS

Interest payments on the line of credit converted to equity on August 12,
2004 were made to an officer and shareholder of the Company in the amounts of
$0, $0, and $124,859 for the years ended December 31, 2006, 2005 and 2004. In
addition, the Company paid the officer and shareholder consulting fees of $0,
$0, and $8,312 for the years ended December 31, 2006, 2005 and 2004.

Of the $3,350,000 in acquisition financing on the Melbourne Property referenced
in NOTE 7, $1,270,000 was provided by Dr. Michael Kelly and Mr. David Granatell,
who subsequently became members of the Board of Directors. Additionally, Mr.
Robert Kleinert and Ms. Cornelia Yoke, related parties of the President and CEO
of the Company, provided an additional $900,000 of financing in connection with
the financing. Interest was expensed in the amounts of $216,528, $171,397 and $0
for the years ended December 31, 2006, 2005 and 2004, respectively, and made
payable to these related parties. Interest paid to other related parties as
referenced in NOTE 7 totaled $18,269, $9,917, and $0 for the years ended
December 31, 2006, 2005 and 2004.

Total interest expense to related parties for the years ended December 31, 2006,
2005 and 2004 was $234,797, $181,314 and $124,859, respectively.

In connection with the Company's independent consulting agreement with The Del
Mar Consulting Group Inc., two of the Company's executive officers, W. Peter
Ragan, Sr. and W. Peter Ragan, Jr. granted an option to RB & AJ Associated
Holdings, Inc., a corporation majority owned by the president of the consulting
group, to purchase 13,600 warrants owned by the executive officers to purchase
an aggregate of 85,000 (42,500 from each) shares of common stock at $1.04 per
share. In addition, the executive officers granted an employee of the Consultant
an option to purchase 2,400 warrants owned by the executive officers to purchase
an aggregate of 15,000 (7,500 from each) shares of common stock at $1.04 per
share. Both of these options were exercised on March 15, 2005.

Until June 1, 2005, the Company's business office at 3100 Route 138 West, Wall,
NJ 07719 had been leased for a two year period from a company owned by Messrs.
Ragan & Ragan. Respectively, total payments under the lease amounted to $0,
$3,750 and $9,000 for the years ended December 31, 2006, 2005 and 2004.

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. John C. Kleinert and James J. Mastriani comprised the
committee.

                                      F-20
<PAGE>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004

NOTE 8 - RELATED PARTY TRANSACTIONS (Continued)

Legal fees paid to Ragan & Ragan, P.C., by the individual subsidiaries were as
follows:
<TABLE>
<CAPTION>

                                                2006           2005           2004
                                            ------------   ------------   ------------
<S>                                         <C>            <C>            <C>
Velocity Investments, LLC                   $  1,225,577   $  1,062,196   $    554,770
J. Holder, Inc.                                   10,139         63,574         71,689
VOM, LLC                                           5,528         15,013          6,225
                                            ------------   ------------   ------------

                                            $  1,241,244   $  1,140,783   $    632,684
                                            ============   ============   ============
</TABLE>

NOTE 9 - STOCK BASED COMPENSATION

Stock Based Consideration to Employees
--------------------------------------

The 2004 Equity Incentive Program of the Company, (the "Employee Plan")
authorizes the issuance of up to 1,000,000 shares of common stock in connection
with the grant of options or issuance of restricted stock awards.

To the extent that the Company derives a tax benefit from options exercised by
employees, if any, such benefit will be credited to additional paid-in capital
when realized on our income tax return. There were no tax benefits realized by
the Company during the year ended December 31, 2006. No options have been
granted to date.

During the year ended December 31, 2006, the Company has issued restricted stock
awards. Prior to the year ended December 31, 2006, the Company had not issued
any restricted stock awards. The following summarizes the transactions of shares
of common stock under the Employee Plan during the year ended December 31, 2006:
<TABLE>
<CAPTION>

                                   Number         Number
                                of Shares      of Shares                  Compensation
Employee                          Granted         Vested   Market Value        Expense
------------------           ------------   ------------   ------------   ------------
<S>                               <C>            <C>       <C>            <C>
James J. Mastriani                200,000        125,000   1.55 to 1.80   $    200,000
Craig Buckley                      25,000         25,000   1.50 to 1.90         44,300
Adam Atkinson                       3,000          3,000   1.50 to 1.90          5,300
Lisa Cullen                         3,000          3,000   1.50 to 1.90          5,300
Kristina Vingara                    1,000          1,000           1.90          1,900
                                                                          ------------
                                                                          $    256,800
                                                                          ============
</TABLE>

Mr. Mastriani's remaining shares will vest in increments of 25,000 shares on
February 27, 2007, May 27, 2007 and August 27, 2007, provided that he is
employed by the Company on each date.


                                      F-21
<PAGE>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004

NOTE 9 - STOCK BASED COMPENSATION (Continued)

Stock Based Consideration to Employees (Continued)
--------------------------------------------------

In accordance with SFAS 123(R), the Company recorded approximately $256,800 of
expense related to grants of common stock which vested during the year ended
December 31, 2006.

The intrinsic value for restricted stock is calculated based on the market price
of our Common Stock as of the end of the period. As of December 31, 2006,
approximately $142,500 of unrecognized stock compensation expense on 75,000
shares of Common Stock related to unvested restricted stock awards (net of
estimated forfeitures) is expected to be recognized through August 2007.

Stock Based Consideration to Non-employees
------------------------------------------

On January 30, 2004, the Company entered into a Business Advisory Agreement with
Lomond International, Inc., ("Lomond") an unrelated corporation, pursuant to
which we issued a warrant exercisable for a five year period to purchase an
aggregate of 200,000 shares of common stock at an exercise price of $1.04 per
share in exchange for business advisory services for a period of one year. The
principal service of which was our acquisition of Tele - Optics, Inc. on
February 3, 2004. As required by EITF 96-18, the warrant was valued as of the
date in which significant performance required by the contract was completed.
The fair value of the common stock at the date of issuance to Lomond was $0.08
per share, the closing bid price of Tele-Optics, Inc.'s common stock as reported
by the OTC Bulletin Board on February 3, 2004. Using the Black-Scholes model,
the total compensation charge for the service contract with Lomond was $5,134
and the fair value of each equity instrument at the February 3, 2004 measurement
date is $0.03. The expense recorded for this contract is $5,134 and is included
in professional fees expense for the year ended December 31, 2004.

On December 16, 2004, the Company entered into an independent consulting
agreement with The Del Mar Consulting Group, Inc., an unrelated California
corporation ("Del Mar"). The Consultant agreed to provide specified public
relations services for a period of one year. As compensation for such services
the Company agreed to issue as a commencement bonus, 100,000 shares of common
stock and a non-qualified stock option exercisable for five years to purchase
250,000 shares of common stock at a price of $2.50 per share. The total
compensation charge for the common stock issued to Del Mar was $150,000 and the
fair value of the common stock at the December 16, 2004 measurement date was
$1.50 per share, the closing bid price of Velocity Asset Management, Inc.'s
common stock reported by the OTC Bulletin Board on December 16, 2004. As
required by EITF 96-18, the non-qualified stock option was valued as of the
inception of the contract. Using the Black-Scholes model, the total compensation
charge for the non-qualified stock option issued under the service contract with
Del Mar was $249,041 and the fair value of each share subject to the option at
the December 16, 2004 measurement date is $1.00. The expense recorded for this
contract is $399,041 and is included in professional fees expense for the year
ended December 31, 2004.

                                      F-22
<PAGE>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004


NOTE 9 - STOCK BASED COMPENSATION (Continued)

Stock Based Consideration to Non-employees (Continued)
------------------------------------------------------

Neither contract contains substantial incentives for non-performance as defined
under EITF 96-18, Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,
or provisions for the forfeiture of the warrants/option in the event of
non-performance.

On September 1, 2005, the Company entered into an Independent Consulting
Agreement (the "Agreement") with Lomond International, Inc., an unrelated
corporation (the "Consultant"), pursuant to which the Consultant agreed to
provide certain specified business advisory services for a period of one year.
As compensation for such services, the Company agreed to sell to the Consultant,
as a commencement bonus, a warrant to purchase 50,000 shares of the Company's
common stock with an exercise price of $2.50 per share, and an expiration date
of March 31, 2009, for an aggregate purchase price of $2,500. The warrant will
participate in all forward and reverse stock splits and stock dividends and will
have a one-time piggy-back registration right on the warrant and the shares of
common stock underlying the warrant. On November 11, 2005, the Business Advisory
Agreement, dated September 1, 2005, between the Company and Lomond
International, Inc. was amended, retroactive to the date of the agreement, to
eliminate any compensation payable by the Company to Lomond International Inc.
in connection with any debt or equity investment of any kind. As consideration
for such amendment, Lomond was paid a fee of $25,000.

NOTE 10 - CONVERTIBLE SECURED DEBENTURE

On October 27, 2005, the Company issued a 10% Secured Convertible Debenture, due
April 27, 2007, in the aggregate principal amount of $1.8 million (the
"Debenture"). In addition, the Company issued a warrant to purchase 200,000
shares of the Company's common stock at an exercise price of $3.10 per share.

The Debenture was issued with an initial conversion price of $4.00 per share.
The Debenture bore interest at 10% per annum, payable monthly on the first day
of each calendar month, beginning on November 1, 2005. Interest was payable in
cash or, at the Company's option, in shares of common stock provided certain
conditions were satisfied. The holder of the Debenture was granted (i) a
security interest in the assets of the Company, and (ii) a pledge of VAMI's
ownership of its subsidiaries, which is subject to existing liens, existing
indebtedness, permitted liens and permitted indebtedness. Additionally, the
subsidiaries guaranteed the obligations of the Company under the Debenture. The
Debenture was also guaranteed personally by John C. Kleinert, the Company's
President and Chief Executive Officer, W. Peter Ragan, Sr., the Company's Vice
President and W. Peter Ragan, Jr., President of Velocity.

The holder may not exercise the warrant to the extent that, after giving effect
to exercise, as the case may be, the holder would beneficially own in excess of
4.99% of the outstanding common stock of the Company.

                                      F-23
<PAGE>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004

NOTE 10 - CONVERTIBLE SECURED DEBENTURE (Continued)

On April 1, 2006, the holder extended the initial payment due date of the
Debenture to June 1, 2006, and in consideration thereof, the Company issued an
additional warrant to purchase 50,000 shares of the Company's common stock at an
exercise price of $3.10 per share. On May 19, 2006, the Company used $1,823,000
of the proceeds related to a preferred stock offering to repay in full the
interest and principal under the Debenture.

NOTE 11 - PREFERRED STOCK OFFERING

On May 18, 2006, the Company consummated its public offering (the "offering") of
1,200,000 shares of Series A 10% Convertible Preferred Stock ("Preferred Stock")
resulting in gross proceeds of $12,000,000 to the Company. The underwriters were
granted an over allotment option to purchase up to an additional 180,000 shares
of Preferred Stock with an exercise price of $10.00 per share. The underwriters
were also issued a warrant to purchase 120,000 shares of Preferred Stock with an
exercise price of $10.00 per share. The public price per share for the offering
was $10.00. The shares of Series A Convertible Preferred Stock are listed on the
American Stock Exchange under the symbol JVI.PR.

Each share of Preferred Stock is convertible into four (4) shares of Common
Stock. If after May 18, 2009, the Company's common stock exceeds the conversion
price of the Preferred Stock by more than 35% and is traded on a national
exchange, the Company may terminate the conversion right. If the Company issues
a conversion cancellation notice, the Company will have the right to redeem the
stock after May 18, 2008 for cash, at the Company's option, at $10.00 per share,
plus accrued and unpaid dividends to the redemption date. On May 31, 2006, the
underwriters exercised their over allotment option to purchase 180,000 shares of
the Preferred Stock at $10.00 per share.

NOTE 12 - 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 incremental shares outstanding assuming the conversion of preferred shares
and convertible debt to common shares and the exercise of dilutive stock
options. Outstanding options and warrants to non-employees convertible into
1,177,160 shares of common stock for the year ended December 31, 2006 and
1,127,160 shares of common stock for the year ended December 31, 2005
respectively, were not included in the income per share calculation because
their effect would have been anti-dilutive. Convertible preferred stock,
convertible into 5,520,000 shares of common stock for the year ended December
31, 2006 were not included in the income per share because their effects would
have been anti-dilutive. Convertible notes, convertible into 208,463 shares of
common stock for the year ended December 31, 2006 were not included in the
income per share calculation because their effect would have been anti-dilutive.

                                      F-24
<PAGE>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004


NOTE 12- EARNINGS PER SHARE (Continued)

The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>


                                                                         2006           2005           2004
                                                                     ------------   ------------   ------------
<S>                                                                  <C>            <C>            <C>
Numerator:
 Net income (loss)                                                   $  1,318,690   $    473,867   $ (2,705,155)
 Preferred dividend                                                      (851,005)            --             --
                                                                     ------------   ------------   ------------
  Net income (loss) attributable to common stockholders              $    467,685   $    473,867   $ (2,705,155)
                                                                     ============   ============   ============


Denominator:
 Weighted average shares - Basic                                       16,008,653     15,937,002     27,047,005
 Effect of dilutive instruments:
  Stock options                                                         1,268,224      1,803,108            -0-
                                                                     ------------   ------------   ------------

Weighted average shares - Diluted                                      17,276,877     17,740,110     27,047,005
                                                                     ============   ============   ============


Net income per common share - Basic                                  $       0.03   $       0.03   $      (0.10)
                                                                     ============   ============   ============

Net income per common share - Diluted                                $       0.03   $       0.03   $      (0.10)
                                                                     ============   ============   ============
</TABLE>


NOTE 13 - INCOME TAXES


The provision for corporate income taxes for the years ended December 31, 2006,
2005 and 2004 consist of the following:
<TABLE>
<CAPTION>
                                                                         2006           2005           2004
                                                                     ------------   ------------   ------------
<S>                                                                  <C>            <C>            <C>
Current:
 Federal                                                             $    765,072   $    274,666   $         --
 State                                                                    366,069         65,017         18,002
                                                                     ------------   ------------   ------------

Total                                                                   1,131,141        339,683         18,002
                                                                     ------------   ------------   ------------


Deferred tax (benefit) expense
 Federal                                                                 (103,000)        49,820       (221,500)
 State                                                                    (56,100)        12,080         11,800
                                                                     ------------   ------------   ------------

   Total deferred tax (benefit) expense                                  (159,100)        61,900       (209,700)
                                                                     ------------   ------------   ------------


Total current and deferred tax (benefit) expense                     $    972,041   $    401,583   $   (191,698)
                                                                     ============   ============   ============
</TABLE>


                                      F-25
<PAGE>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004

NOTE 13 - INCOME TAXES (Continued)

The tax effect of temporary differences that make up the significant components
of the deferred tax asset and liability for financial reporting purposes at
December 31, 2006 and 2005 are as follows:

                                                     2006           2005
                                                 ------------   ------------
Deferred tax asset
 Net operating loss carryforwards                $    176,100   $    506,600
 Stock compensation                                   110,400             --
 Accrued interest                                      30,000             --
 Section 263(a)                                        38,700             --
                                                 ------------   ------------
                                                      355,200        506,600
Deferred tax liability
 Depreciation and amortization                        (23,100)       (30,200)
                                                 ------------   ------------

Net deferred income taxes                             332,100        476,400

Valuation allowance                                   (25,200)      (328,600)
                                                 ------------   ------------

Total                                            $    306,900   $    147,800
                                                 ============   ============

Velocity Asset Management, Inc. (formerly Tele-Optics, Inc.) generated net
operating losses prior to its acquisition of STB. As a result of the reverse
acquisition, the ownership change of Velocity Asset Management, Inc. as of
February 3, 2004 limits and reduces the future utilization of the Company's net
operating loss carry forwards. These pre-reverse acquisition net operating loss
carry forwards will be limited and reduced based upon the applicable Federal and
New Jersey rules. Any net operating loss carry forwards for future tax years
will be available to offset future taxable income of the consolidated group
subject to an annual limit per the Internal Revenue Code Section 382.

At December 31, 2006, the Company had unused net operating loss carry forwards
of approximately $464,100 for Federal purposes and $203,600 for New Jersey
purposes. These net operating losses may provide future income tax benefits of
approximately $150,900, which will expire between the years 2007 and 2023. The
ability to utilize such losses is dependent upon the Company's ability to
generate taxable future income as well as the annual limit per the Internal
Revenue Code Section 382 versus the expiration dates of the losses. Because some
of the losses are due to expire prior to fully utilizing the carry forwards, a
valuation reserve has been established equal to the amount expected to expire
unused.

                                      F-26
<PAGE>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004


NOTE 13 - INCOME TAXES (Continued)

A reconciliation of the provision for income taxes attributable to income (loss)
on continuing operations computed at the Federal statutory rate to the reported
provision for income taxes follows:


<TABLE>
<CAPTION>
                                                              ------------------------------------------
                                                                      2006        2005          2004
                                                              ------------------------------------------
<S>                                                                    <C>         <C>           <C>
Tax provision at Federal statutory rate                                34.00%      34.00%        34.00%
Utilization of net operating loss                                      -2.49%      -2.26%       -34.00%
State income taxes                                                      9.00%       9.00%         9.00%
Change in valuation allowance for deferred tax assets                  -8.24%      -8.03%        -7.84%
Non-deductable expenses                                                12.37%      10.73%       -13.95%
Other                                                                  -2.21%       2.43%         6.17%
                                                              ------------------------------------------
Total                                                                  42.43%      45.87%        -6.62%
                                                              ------------------------------------------


</TABLE>

NOTE 14 - RECAPITALIZATION

As detailed in Note 1, the merger of STB, Inc. into Velocity Asset Management,
Inc.'s wholly-owned subsidiary TLOP Acquisition Company, LLC was treated as a
reverse acquisition resulting in a recapitalization. The details of the
recapitalization are as follows:
<TABLE>
<CAPTION>

                                                                                February 3, 2004
                                                           ----------------------------------------------------------------
                                                                Balance              Adjustments               Balance
                                                                Prior to             Pursuant to                After
                             Equity Account                 Recapitalization      Recapitalization         Recapitalization
                                                           -----------------     -----------------        -----------------
<S>                                                                      <C>                  <C>          <C>
Common Stock                                               $             100     $          12,905 (A)    $          13,005
Additional Paid-in-Capital                                               900                  (900)(A)                   --
Retained Deficit                                                    (122,748)              (12,005)(A)             (134,753)
                                                           -----------------     -----------------        -----------------

Totals                                                     $        (121,748)    $              --        $        (121,748)
                                                           =================     =================        =================
</TABLE>

(A)  A recapitalization adjustment was required to convert the equity section of
     STB, Inc. (the accounting acquirer in the reverse merger) immediately prior
     to the reverse merger to the equity section of the newly acquired public
     shell immediately following the reverse merger.

                                      F-27
<PAGE>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004


NOTE 14 - RECAPITALIZATION (Continued)

This recapitalization adjustment increased the common stock of STB, Inc. from
its former value of $100 to the par value of Velocity Asset Management, Inc.
(the former public shell entity) of $13,005 (which equals the 13,005,000 shares
of outstanding stock times a stated par value of $0.001). The offset of this
$12,905 adjustment eliminated the additional paid in capital of $900 and the
balance of $12,005 was an adjustment to the entity's retained deficit.

NOTE 15 - COMMON STOCK TRANSACTIONS

Concurrent with and pursuant to the reverse merger between Velocity Asset
Management, Inc (formerly Tele-Optics, Inc.) and STB, Inc. (See NOTE 1 -
ORGANIZATION AND BUSINESS), the Company issued the following shares of common
stock to the executive officers of the Company:

                                                    Number
         Name of Executive Officers                of Shares       Par Value
         --------------------------              ------------    ------------
         Jack C. Kleinert                           3,064,712    $      3,065
         W. Peter Ragan, Sr                         1,532,356           1,532
         W. Peter Ragan, Jr                         1,532,356           1,532
                                                 ------------    ------------

                                                    6,129,424    $      6,129
                                                 ============    ============

Additionally, concurrent with the reverse merger, the Company sold the following
shares of common stock pursuant to a private placement to the following
shareholder for $500,000:

                                                  Number of
         Name of Shareholder                       Shares          Par Value
         -------------------                     ------------    ------------

         David Grantatell                             562,500    $        563
                                                 ============    ============

*    The number of shares represents the post reverse stock split quantities and
     have been adjusted to reflect the 13:1 reverse stock split, as detailed in
     Note 16.

                                      F-28
<PAGE>

                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004

NOTE 16 - REVERSE STOCK SPLIT AND CHANGE IN NUMBER OF SHARES OF CAPITAL STOCK
          AUTHORIZED

On April 8, 2004, the Company amended its certificate of incorporation to (a)
effect a 13-for-1 reverse split of the Company's then issued and outstanding
shares of common stock and (b) change the total authorized shares of capital
stock to 50,000,000 shares, of which 40,000,000 are classified as common stock,
par value $.001 per share and 10,000,000 are classified as preferred stock, par
value $.001 per share. As of December 31, 2004, the total common stock issued
and outstanding was 15,794,164 with a par value of $15,794 and there was no
preferred stock issued or outstanding. All references to share numbers or
earnings or loss per share contained in the financial statements to which these
notes relate give effect to the Reverse Split.

NOTE 17 - OUTSTANDING WARRANTS AND OPTIONS

At December 31, 2004, the Company had issued and outstanding warrants to
purchase 5,358,503 shares of its common stock at a price ranging from $1.04 to
$2.50 per share. A portion of the warrants (2,999,500, as adjusted for the 13:1
reverse stock split) were granted pursuant to the Merger Agreement effective
February 3, 2004 and expire after a period of five years. The balance of the
warrants (2,359,003) were granted pursuant to private offerings and/or in lieu
of services rendered and expire after a period of five years.

At December 31, 2005, the Company had outstanding warrants to purchase 3,965,839
shares of its common stock at prices ranging from $1.04 to $2.50 per share. The
first warrants (3,199,500 shares of common stock, as adjusted for the 13:1
reverse stock split) were granted pursuant to the Merger Agreement effective
February 3, 2004 and expire after a period of five years. The second warrants
(716,339 shares of common stock) were granted pursuant to private offerings
and/or in lieu of services rendered and expire after a period of five years. The
remaining warrants (50,000 shares of common stock) were granted as compensation
to an independent consultant in lieu of services rendered and have an expiration
date of March 31, 2009. The remaining warrant (200,000 shares of common stock)
was granted in connection with the October 2005 convertible debt financing and
has an expiration date of October 10, 2010.

At December 31, 2006, the Company had outstanding warrants to purchase 4,376,660
shares of its common stock at prices ranging from $1.04 to $3.10 per share. The
first warrants (3,199,500 shares of common stock, as adjusted for the 13:1
reverse stock split in April 2004) were granted pursuant to the Merger Agreement
effective February 3, 2004 and expire after a period of five years. The second
warrants (677,160 shares of common stock) were granted pursuant to a private
offering as compensation for services rendered and expire on March 31, 2009. The
remaining warrant (200,000 shares of common stock) was granted in connection
with the October 2005 convertible debt financing and has an expiration date of
October 10, 2010. On May 19, 2006, the Company entered into an amendment to the
Securities Purchase Agreement, effective April 1, 2006, for the October 2005
convertible debt financing, pursuant to which it extended the initial payment
due date of its outstanding Convertible Secured Debenture ("Debenture") and
issued to the holder thereof an additional warrant to purchase 50,000 shares of
the Company's common stock at an exercise price of $3.10 per share. The warrants
became effective as of April 1, 2006.

At December 31, 2006, the Company had an option outstanding to an independent
consultant (issued in 2005) in exchange for services rendered for 250,000 shares
of common stock at an exercise price per share of $2.50.

                                      F-29
<PAGE>
                VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2006, 2005 and 2004

NOTE 18 - SUPPLEMENTAL CASH FLOW INFORMATION

On August 12, 2004, the Company entered into agreements with an officer and
other creditors in satisfaction of their outstanding loans under which the
Company exchanged $3,676,252 of its existing indebtedness (the "Obligations")
for 4,084,724 shares of the Company's common stock, par value $.001 per share at
a rate of one share per $0.90 of the obligation. The effective date of this
conversion of debt to equity is retroactive to July 1, 2004, which reflects the
agreement of the parties that no interest would be accrued or paid on the debt
exchanged since the last interest payment date, June 30, 2004. On August 12,
2004, the Company's stock as traded on the OTCBB had a market price of $1.60.
Paragraph 20 of APB 26 requires that any difference between the reacquisition
price and the net carrying amount of the extinguished debt should be recognized
currently in income of the period of extinguishment as losses or gains and
identified as a separate item. In connection with this debt exchange, the
Company has recorded a non-cash loss on early extinguishment of debt of
$2,859,307. The non-cash transaction was as follows:

  Number of shares issued                                       $  4,084,724
  Times: corresponding stock valuation                                  1.60
                                                                ------------

    Total stock value issued in exchange                        $  6,535,559
                                                                ============

  Total common stock issued                                     $      4,085
  Total additional-paid-in-capital                                 6,531,474
                                                                ------------
    Total                                                       $  6,535,559
                                                                ============

  Total debt extinguished
  Short-term borrowings under line of credit                    $    905,476
    Notes payable                                                  2,455,056
    Accrued interest payable                                         229,221
    Accrued interest expense                                          86,499
                                                                ------------
    Total debt extinguished                                        3,676,252
    Loss on extinguishment of debt                                 2,859,307
                                                                ------------
      Total                                                     $  6,535,559
                                                                ============

NOTE 19 - COMMITMENTS

The Company has entered into employment agreements with several officers with
terms expiring through December 31, 2009.

NOTE 20 - SUBSEQUENT EVENTS


On February 23, 2007, Velocity 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 the credit facility up to
$17,500,000. In addition, Velocity has agreed to maintain certain ratios with
respect to outstanding advances on the credit facility against the estimated
remaining return value on Wells Fargo Foothill financed portfolios, and has
agreed to maintain at least $6,500,000 in member's equity plus 50% of Velocity's
net income for each calendar quarter that ends on or after March 31, 2007.
The Company has also agreed to maintain at least $21,000,000 in stockholder's
equity plus 50% of the net income of the Company for each calendar quarter that
ends on or after March 31, 2007.


                                      F-30
<PAGE>
                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:   April 5, 2007

                                       VELOCITY ASSET MANAGEMENT, INC.

                                       By: /s/ JOHN C. KLEINERT
                                           -------------------------------
                                       Name:  John C. Kleinert
                                       Title: President and Chief
                                              Executive Officer

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

SIGNATURE                    TITLE                                DATE
---------                    -----                                ----

/s/ JOHN C. KLEINERT         President, Chief Executive           April 5, 2007
--------------------------      Officer and Director
John C. Kleinert


/s/ W. PETER RAGAN SR.       Vice President and Director          April 5, 2007
--------------------------
W. Peter Ragan, Sr.


/s/ JAMES J. MASTRIANI       Chief Financial Officer              April 5, 2007
--------------------------   and Chief Legal Officer,
James J. Mastriani           Treasurer and Secretary


/s/ STEVEN MARCUS                   Director                      April 5, 2007
--------------------------
Steven Marcus


/s/ DR. MICHAEL KELLY               Director                      April 5, 2007
--------------------------
Dr. Michael Kelly


/s/ DAVID GRANATELL                 Director                      April 5, 2007
--------------------------
David Granatell

                                       47