---

|                                  
|----------------------------------
|SECURITIES AND EXCHANGE COMMISSION
|WASHINGTON,
 D.C. 20549           
|                                  
|FORM 10-K                         

|                                                
|------------------------------------------------
|xANNUAL
 REPORT PURSUANT TO SECTION 13 OR 15 (d)
|OF THE SECURITIES EXCHANGE ACT OF 1934          

For the year ended December 31, 2007

|                                                      
|------------------------------------------------------
|ORoTRANSITION REPORT
 PURSUANT TO SECTION 13 OR 15 (d)
|OF THE SECURITIES EXCHANGE ACT OF 1934                

Commission File Number 001-32879

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

|                                                      |  |                                      
|----------------------------------------------------- |  | -------------------------------------
|Delaware                                              |  | 65-0008442                           
|                                                      |  |                                      
|(State
 or Other Jurisdiction of Incorporation or     |  |                                      
|Organization)                                         |  | (I.R.S.
 Employer Identification No.)
|                                                      |  |                                      
|1800 Route 34 North, Building 4, Suite 404A, Wall, NJ |  | 07719                                
|(Address
 of Principal Executive Offices)             |  | (Zip
 Code)                          

|                                                 
|-------------------------------------------------
|(732) 556-9090                                   
|                                                 
|(Issuers
 Telephone Number, Including Area Code)

Securities Registered under Section 12(b) of the Exchange Act:

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

American Stock Exchange(Name of exchange on
which registered)

|                             
|-----------------------------
|Common Stock, $.001 Par Value
|                             
|(Title
 of Class)            

American Stock Exchange(Name of exchange on
which registered)

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

Check whether the Company:
(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
Company was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No o

Check if there is no
disclosure of delinquent filers in response to Item 405 of Regulation S-K
contained in this form, and no disclosure will be contained, to the best of
Companys knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

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

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

The issuers revenues for
the year ended December 31, 2007 were $15,367,047.

As of March 10, 2008, the
aggregate market value of the common stock held by non-affiliates of the issuer
was approximately $3,744,683. This amount is based on the closing price of
$0.86 per share for the Companys common stock as of such date.

On March 10, 2008, there
were 17,066,821 shares of the Companys common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

NONE

---



|            |  |                                                                                                               |  |   
|----------- |  | ------------------------------------------------------------------------------------------------------------- |  | --
|            |  | PART I                                                                                                        |  |   
|Item 1.     |  | Business                                                                                                      |  | 04
|Item 1A.    |  | Risk Factors                                                                                                  |  | 14
|Item 1B.    |  | Unresolved Staff Comments                                                                                     |  | 23
|Item 2.     |  | 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, Related Stockholder
 Matters and Issuer Purchases of Equity Securities |  | 24
|Item 6.     |  | Selected Financial Data                                                                                       |  | 25
|Item 7.     |  | Managements Discussion and Analysis of Financial Condition
 and Results of Operations                        |  | 26
|Item 7A.    |  | Quantitative and Qualitative Disclosures About Market Risk                                                    |  | 35
|Item 8.     |  | Financial Statements and Supplementary Data                                                                   |  | 36
|Item 9.     |  | Changes in and Disagreements with Accountants on Accounting
 and Financial Disclosure                         |  | 36
|Item 9A(T). |  | Controls and Procedures                                                                                       |  | 36
|Item 9B.    |  | Other Information                                                                                             |  | 37
|            |  |                                                                                                               |  |   
|            |  | PART III                                                                                                      |  |   
|Item 10.    |  | Directors and Executive Officers of the Registrant                                                            |  | 38
|Item 11.    |  | Executive Compensation                                                                                        |  | 41
|Item 12.    |  | Security Ownership of Certain Beneficial Owners and Management
 and Related Stockholder Matters               |  | 42
|Item 13.    |  | Certain Relationships and Related Transactions                                                                |  | 44
|Item 14.    |  | Principal Accountant Fees and Services                                                                        |  | 45
|           
|            |  | PART IV                                                                                                       |  |   
|Item 15.    |  | Exhibits and Financial Statement Schedules                                                                    |  | 46

2

---



FORWARD LOOKING STATEMENTS

This
Annual Report on Form 10-K 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 15 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:

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

3

---



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 to 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 Corp., LLC and its wholly owned subsidiaries J. Holder, Inc., VOM, LLC and
Velocity Investments, LLC.

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, LLC (VI), 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, 2007, VI held approximately
$47,000,000 in distressed consumer receivables.

J.
Holder, Inc. (JHI), 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 JHIs
properties is six months. As of December 31, 2007, JHI held approximately
$5,563,000 in real property inventory and $400,000 in assignments and judgments
of real property interests.

VOM,
LLC (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, 2007, VOM
held approximately $325,000 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. After careful consideration of trends in revenues and
future opportunities for growth, management has made the determination that the
consumer receivables business will be the sole operating focus of the Company
in 2008. The strategy for the allocation of capital among one or more 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 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 2004 or (approximately 39.6% of our total revenues
for 2004), to $3,633,945 in 2005 (approximately 44.9% of our total revenues) to
$8,431,259 in 2006 (approximately 82.0% of our total revenues) and to
$13,863,568 (approximately 90.2% of our total revenues) in 2007. During the
same years, our gross cash collections in our consumer receivables business
were $2,100,000, $5,400,000, $10,800,000 and $17,960,000, respectively. Revenues
from our distressed real property assets were $2,369,564 in 2004 (approximately
54.4% of our total revenues), $3,685,338 in 2005 (approximately 45.5% of our
total revenues) and $1,585,175 in 2006 (approximately 15.4% of our total
revenues), and $1,403,944 in 2007 (approximately 9.1% of our revenues). We
anticipate increasing growth in our consumer receivables portfolios as a result
of the $22.5 million line of credit that our VI subsidiary entered into with
Wells Fargo in 2005, as amended in February 2006, December 2006, February
2007 and February 2008. Such line of credit can be, and has been, used exclusively to purchase
additional consumer receivable portfolios.

4

---



|                                                   |  |                     |             |                    |   |             |  
|-------------------------------------------------- |  | ------------------- | ----------- | ------------------ | - | ----------- | -
|                                                   |  | For the Years Ended |            
|                                                   |  |                     |            
|                                                   |  | December 31,
 2007  |             | December 31,
 2006 |  
|                                                   |  |                     |             |                    |  
|Balance at beginning of period                     |  | $                   | 38,327,926  |                    | $ | 17,758,661  |  
|                                                   |  |                     |             |                    |   |             |  
|                                                   |  |                     |             |                    |   |             |  
|Acquisitions and capitalized costs, net of returns |  |                     | 12,799,459  |                    |   | 22,915,748  |  
|Amortization of capitalized costs                  |  |                     | (59,196     | )                  |   |            |  
|                                                   |  |                     |             |                    |   |             |  
|                                                   |  |                     | 12,740,263  |                    |   | 22,915,748  |  
|                                                   |  |                     |             |                    |   |             |  
|                                                   |  |                     |             |                    |   |             |  
|Cash collections                                   |  |                     | (17,960,713 | )                  |   | (10,777,742 | )
|Income recognized on consumer receivables          |  |                     | 13,863,538  |                    |   | 8,431,259   |  
|                                                   |  |                     |             |                    |   |             |  
|Cash collections applied to principal              |  |                     | (4,097,175  | )                  |   | (2,346,483  | )
|                                                   |  |                     |             |                    |   |             |  
|                                                   |  |                     |             |                    |   |             |  
|Balance at end of period                           |  | $                   | 46,971,014  |                    | $ | 38,327,926  |  
|                                                   |  |                     |             |                    |   |             |  

History

We
were originally incorporated for the purpose of acquiring all of the common
stock of Lenzar Optics, Inc. (Lenzar). Lenzar 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, we had virtually no active business operations. On November 21,
1997, new investors, including our management immediately prior to the
effective date, purchased approximately 62% 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 investments 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, 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, 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 were 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.

5

---



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, which maintains
its executive offices and business offices at 1800 Route 34 North, Building 4,
Suite 404A, Wall, NJ 07719.

Corporate Information

Our
principal executive offices are located at 1800 Route 34 North, Building 4,
Suite 404A, Wall, NJ 07719 and our telephone number is (732) 556-9090. 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:

| |   |                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | increasing levels of
 debt;                                                                                                               
| |   |                                                                                                                                           
| |  | increasing defaults of the
 underlying receivables;                                                                                       
| |   |                                                                                                                                           
| |  | increasing utilization of
 third-party providers to collect such receivables;                                                             
| |   |                                                                                                                                           
| |  | fluctuating employment
 environment exacerbated by overseas outsourcing;                                                                  
| |   |                                                                                                                                           
| |  | challenged municipal
 governments raising property taxes to bridge budgetary gaps;                                                        
| |   |                                                                                                                                           
| |  | challenges presented by
 the subprime mortgage crisis and decreasing home values; and                                                     
| |   |                                                                                                                                           
| |  | mounting debt and pressure
 on banks and financial institutions to remove nonperforming or unattractive
 assets from their balance sheets.

According
to a U.S. Federal Reserve release dated February 2008, consumer debt was $944
billion as of December 2007, 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
unsecured consumer receivable portfolios, and maximizing the return on such
assets in a cost efficient manner. We then outsource all of the legal
collection process of our receivables to third party servicers based on
specific guidelines established by senior management and set forth in a third
party servicing contract.

Since certain of our
receivables are unsecured, under certain personal bankruptcy proceedings, we
would not be able to collect on those receivables.

6

---



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 2008, we intend to continue to grow our business generally while emphasizing
the expansion of the business of VI 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 VI 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,
VI 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 per $1.00 of such face amounts.

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

|                               |  |                                                               |         |                      |  |                                   |  |   |        |  |   |        | 
|------------------------------ |  | ------------------------------------------------------------- | ------- | -------------------- |  | --------------------------------- |  | - | ------ |  | - | ------ | 
|                               |  |                                                               |         |                      |  |                                   | 
|                               |  |                                                               |         |                      |  |                                   | 
|                               |  | Portfolio
Purchases/Collections
(dollar amounts in thousands) |         |                      |  | Gross
Cash
Collections
Per Period | 
|Reporting Period               |  | Outstanding
Amount                                            |         | Portfolios
Purchased |  | Purchase
Price                    |  |  
|                               |  |                                                               |         |                      |  |                                   |  |   |       
|Period Ended December 31, 2006 |  | $                                                             | 199,042 |                      |  | 26                                |  | $ | 15,368 |  | $ | 10,778 | 
|                               |  |                                                               |         |                      |  |                                   |  |   |        |  |   |        | 
|Period Ended December 31, 2007 |  | $                                                             | 129,893 |                      |  | 19                                |  | $ | 9,317  |  | $ | 17,960 | 

|     |  |                    |  |                                     |             |                    |   |                            |  |                                           |            |                                          |        |   |   |        | 
|---- |  | ------------------ |  | ----------------------------------- | ----------- | ------------------ | - | -------------------------- |  | ----------------------------------------- | ---------- | ---------------------------------------- | ------ | - | - | ------ | 
|     |  |                    |  | Portfolio
Purchases and Performance |             |                    |   |                            |  |                                          
|Year |  | Total
#
Portfolios |  | Initial
Outstanding
Amount (1)      |             | Purchase
Price (2) |   | Gross
Cash
Collections (3) |  | Gross
Cash
Collections
as a % of
Cost (4) |            | Average Price Per
Dollar Outstanding (5) |       
|     |  |                    |  |                                     |             |                    |   |                            |  |                                           |            |                                          |       
|2003 |  | 5                  |  | $                                   | 11,497,833  |                    | $ | 2,038,950                  |  | $                                         | 8,285,000  |                                          | 406.34 | % | $ | 0.1773 | 
|2004 |  | 10                 |  | $                                   | 9,511,088   |                    | $ | 1,450,115                  |  | $                                         | 3,126,842  |                                          | 215.63 | % | $ | 0.1525 | 
|2005 |  | 22                 |  | $                                   | 133,103,213 |                    | $ | 11,449,557                 |  | $                                         | 14,699,375 |                                          | 128.38 | % | $ | 0.0860 | 
|2006 |  | 26                 |  | $                                   | 199,042,032 |                    | $ | 15,367,940                 |  | $                                         | 9,334,207  |                                          | 60.74  | % | $ | 0.0772 | 
|2007 |  | 19                 |  | $                                   | 129,892,667 |                    | $ | 9,316,779                  |  | $                                         | 1,293,468  |                                          | 13.88  | % | $ | 0.0717 | 

7

---



|    |                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Initial Outstanding Amount
 represents the original face amount purchased from sellers and has not been
 decremented by any adjustments including payments and returns. (Returns are
 defined as purchase price refunded by the seller due to the return of
 non-compliant accounts, such as deceased and bankrupt accounts.)
|    |                                                                                                                                                                                                                                                                                                                                
|(2) | Purchase Price represents
 the cash paid to sellers to acquire portfolios of defaulted consumer
 receivables, and does not include certain capitalized acquisition costs.                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                
|(3) | Gross Cash Collections
 include gross cash collections on portfolios of consumer receivables as of
 December 31, 2007.                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                
|(4) | Gross Cash Collections as
 a Percentage of Cost represents the gross cash collections on portfolios of
 consumer receivables as of December 31, 2007 divided by the purchase price
 such portfolios in the related calendar year.                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                
|(5) | Average Price Per Dollar
 Outstanding represents the Purchase Price of portfolios of consumer
 receivables divided by the Initial Outstanding Amount of such portfolios
 purchased in the related calendar year.                                                                                                               

Under
our policies, procedures and purchase criteria, we only purchase portfolios of
consumer receivables which the accounts in such portfolios are collectible
under the applicable states statute of limitations. Our long-term legal
approach to collecting consumer receivables is to collect the face amount,
which is generally the outstanding amount at the time of charge-off of such
receivable, although certain originators capitalize interest at accrued
subsequent charge-off. In such case, the face amount that we attempt to collect
will include such interest.

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:

| |   |                                                                                            
| | - | -------------------------------------------------------------------------------------------
| |  | coordinating due
 diligence, including in some cases on-site visits to the sellers office;
| |   |                                                                                            
| |  | stratifying and analyzing
 the portfolio characteristics;                                  
| |   |                                                                                            
| |  | valuing the portfolio;                                                                     
| |   |                                                                                            
| |  | preparing bid proposals;                                                                   
| |   |                                                                                            
| |  | negotiating pricing and
 terms;                                                            
| |   |                                                                                            
| |  | closing the purchase;
 and                                                                 
| |   |                                                                                            
| |  | 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.

8

---



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:

|  |                                                                                                       
|- | ------------------------------------------------------------------------------------------------------
| | the number
 of collection agencies previously attempting to collect the receivables in
 the portfolio;
|  |                                                                                                       
| | the average
 balance of the receivables;                                                              
|  |                                                                                                       
| | the age of
 the receivables;                                                                          
|  |                                                                                                       
| | number of
 days since charge-off;                                                                     
|  |                                                                                                       
| | payments
 made since charge-off; and                                                                  
|  |                                                                                                       
| | 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:

|  |                                                              
|- | -------------------------------------------------------------
| | adequate
 internal controls to detect fraud;                 
|  |                                                              
| | the ability
 to provide post-sale support; and               
|  |                                                              
| | 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:

|  |                                                                           
|- | --------------------------------------------------------------------------
| | debts paid
 prior to the cutoff date;                                     
|  |                                                                           
| | debts in
 which the obligor filed bankruptcy prior to the cutoff date; and
|  |                                                                           
| | 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 allow 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.

9

---



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 based on specific guidelines established by senior management and set
forth in a third-party servicing contract. Prior to January 1, 2005
substantially all legal work was outsourced to Ragan & Ragan, P.C., a related party.  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 as 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 one calendar
year and automatically extends for additional periods of one calendar 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, VI.

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 sheriffs 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. Our
subsidiary, JHI, 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 JHI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 JHI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.

10

---



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, JHI acquired a residential property in Melbourne, Florida through
a joint venture with Groveland Estates, LLC (Groveland), 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 JHI,
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 JHI upon the sale of the property. Under the
terms of the joint venture agreement with Groveland, the investor group,
including JHI, will be entitled to receive 100% return of all capital,
including acquisition and carrying costs, plus the cost of funds. In addition,
JHI 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 JHI), and Groveland 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, JHI 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% 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. JHI was required to
make monthly interest only payments of $10,000 until October 21, 2007, at which
time all principal, accrued interest and other charges were to be due and
payable. This note was redeemed and paid in full on August 4, 2006. The Company
has also recorded a $220,948 impairment of a property held for sale in
connection with an estate property owned by its JHI subsidiary in Melbourne,
Florida. 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.

After
careful consideration of trends in revenues and future opportunities for
growth, management has made the determination that the consumer receivables
business will be the sole operating focus of the Company in 2008. There are no
plans to procure additional assets for JHI. On December 31, 2007, our Board of
Directors unanimously approved managements plan to discontinue the operations
of JHI and to sell and dispose the assets or membership interests/capital stock
of such subsidiary. Accordingly, this operation will be shown as discontinued
operations in 2008.

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 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.

After
careful consideration of trends in revenues and future opportunities for
growth, management has made the determination that the consumer receivables
business will be the sole operating focus of the Company in 2008. There are no
plans to procure additional assets for VOM. On December 31, 2007, our Board of
Directors unanimously approved managements plan to discontinue the operations
of VOM and to sell and dispose the assets or membership interests/capital stock
of such subsidiary. Accordingly, this operation will be shown as discontinued
operations in 2008.

11

---



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:

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

|  |                                                        
|- | -------------------------------------------------------
| | purchase
 price;                                       
|  |                                                        
| | representations,
 warranties and indemnities requested;
|  |                                                        
| | speed in
 making purchase decisions; and               
|  |                                                        
| | 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 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
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.

12

---



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, 2007, we had a total of twelve employees, of which ten 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 is covered by a collective bargaining
agreement. We consider our relationship with our employees to be good.

13

---



RISK FACTORS

An investment in our securities involves a
high degree of risk and many uncertainties. You should carefully consider the
specific factors listed below, together with the cautionary statement that
follows this section and the other information included in this prospectus
before purchasing our units in this offering. If any of the possibilities
described as risks below actually occurs, our operating results and financial
condition would likely suffer and the trading price of our securities could
fall, causing you to lose some or all of your investment in the securities we
are offering. The following is a description of what we consider the key
challenges and material risks to our business and an investment in our
securities.

Risks Related to Our Business

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

Prior
to our acquisition of STB (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 distressed asset management and liquidation company
specifically.

We may not be able to purchase consumer
receivable portfolios 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 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:

|  |                                                                                                        
|- | -------------------------------------------------------------------------------------------------------
| | the
  continuation of the current growth trend in debt;                                                
|  |                                                                                                        
| | the
  continued volume of consumer receivable portfolios available for sale;                           
|  |                                                                                                        
| | competitive factors affecting potential purchasers and sellers
  of consumer receivable portfolios; and
|  |                                                                                                        
| | fluctuation in interest rates.                                                                         

The
market for acquiring consumer receivable portfolios is becoming more
competitive, thereby possibly diminishing our ability to acquire such
portfolios at attractive prices in future periods.

|  |                                                                        
|- | -----------------------------------------------------------------------
| | The
  growth in debt may also be affected by:                          
|  |                                                                        
| | a
  slowdown in the economy;                                           
|  |                                                                        
| | reductions in consumer spending;                                       
|  |                                                                        
| | changes in the underwriting criteria by originators;                   
|  |                                                                        
| | changes in laws and regulations governing lending and
  bankruptcy; and
|  |                                                                        
| | 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 that could affect
the purchase prices of such portfolios. Any increase in the prices we are required
to pay for such assets in turn will reduce the possible profit, if any, we
generate from such assets.

14

---



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:

|  |                                                                                                                                                  
|- | -------------------------------------------------------------------------------------------------------------------------------------------------
| | made numerous attempts to collect on these obligations, often
  using both their in-house collection staff and third-party collection
  agencies;
|  |                                                                                                                                                  
| | subsequently deemed these obligations as uncollectible; and                                                                                      
|  |                                                                                                                                                  
| | 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 are subject to intense competition for the
purchase of distressed assets that may affect our ability to purchase
distressed assets at acceptable prices or at all.

We
compete with other purchasers of consumer receivable portfolios with
third-party collection agencies and with financial services companies that
manage their own portfolios of these portfolios. 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. 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 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, VI, 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
85 law firms under which such attorneys service and collect our consumer receivables.

15

---



It is 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 third party servicers in the State
of New Jersey.

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, VI, and Ragan
& Ragan P.C. is for one calendar year, and automatically extends for
additional periods of one calendar 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, VI.
During 2007 and 2006, we paid Ragan & Ragan, P.C an aggregate of $1,134,345
and $1,241,244 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, JHI and VOM. 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, VI.

Our
subsidiary, JHI, 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
JHI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 JHI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.

Each
of Messrs. Ragan and Ragan beneficially own approximately 13.7% of our issued
and outstanding shares of common stock.

Our
subsidiary, VOM 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.

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

John
C. Kleinert, our president and chief executive officer, W. Peter Ragan, Sr.,
our vice president, W. Peter Ragan, Jr., president of our wholly-owned
subsidiary, VI,, 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.

16

---



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.

Our
agreement with Wells Fargo, our credit facility, is limited to $17,500,000. As
of December 31, 2007, we have approximately $3,100,000 of credit remaining
available. As such, we may have insufficient credit lines available to purchase
additional receivables, unless we successfully obtain additional credit.

We
also consider raising additional capital from time to time which financings may
take the forms of private placement offerings, pipes or public offerings of
equity or debt securities, or a combination thereof. Although we have no
specific capital raising transactions currently under negotiation, we may
determine to undertake such transactions at any time. Such transactions could
include the sale of equity at less than the market price of our common stock at
the time of such transaction, although we have no present intention to
undertake below market transactions, and could be for gross proceeds of as low
as $1,000,000 to approximately $10,000,000 or more. The terms of any such
capital raising transaction would be considered by the Board of Directors at
the time it is proposed by management.

We may incur substantial indebtedness from
time to time in connection with our operations.

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. In
particular,

|  |                                                                                                                                                                                                                                                                                                                                
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | we could 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;
|  |                                                                                                                                                                                                                                                                                                                                
| | it
  may be more difficult and expensive to obtain additional funding through
  financings, if available at all;                                                                                                                                                                                                               
|  |                                                                                                                                                                                                                                                                                                                                
| | 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                                                                                         
|  |                                                                                                                                                                                                                                                                                                                                
| | 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, VI entered into a Loan and Security Agreement with Wells
Fargo, through which Wells Fargo agreed to provide VI with a three year
$12,500,000 senior credit facility (the Initial 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 Wells Fargo under specific
eligibility criteria set forth in the Loan and Security Agreement. On February
27, 2006, VI entered into a First Amendment to the Loan and Security Agreement
with Wells Fargo (the Amended and Restated Loan Agreement). Pursuant to the
Amended and Restated Loan Agreement, Wells Fargo extended the Initial Credit
Facility until January 27, 2009 (formerly January 27, 2008) and agreed to
increase the advance rate under the credit facility to 75% (up from 60%) of the
purchase price of individual pools of unsecured consumer receivables that are
approved by Wells Fargo. Wells Fargo also agreed to reduce the interest rate on
the loan from 3.5% above the prime rate of Wells Fargo Bank, N.A. to 1.5% above
such prime rate. In addition, the amortization schedule for each portfolio has
been extended from twenty-four to thirty months. Wells Fargo also agreed to
reduce the personal guarantees associated with the line from $1,000,000 to
$250,000. On February 23, 2007, Wells Fargo increased the line to $17,500,000
pursuant to the Third Amendment to the Loan and Security Agreement. On February
29, 2008, Wells Fargo increased the line to $22,500,000
and extended the maturity date of the facility to January 2011, pursuant to the Fourth Amendment
 to the Loan and Security Agreement.

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.

17

---



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

VI
has agreed to maintain certain ratios with respect to outstanding advances on the
Credit Facility against the estimated remaining return value on Wells Fargo
financed portfolios. As of December 31, 2007, VI has agreed to maintain at
least $6,500,000 in VIs members equity and subordinated debt plus 50% of VIs
net income for each calendar quarter. We have also agreed to maintain at least
$21,000,000 in stockholders equity and subordinated debt for the duration of
the facility plus 50% of our net income for each calendar quarter.

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:

|  |                                                                                                                                                                                                                 
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | cause our indebtedness to become immediately payable;                                                                                                                                                           
|  |                                                                                                                                                                                                                 
| | preclude us from further borrowings from these existing sources;
  and                                                                                                                                          
|  |                                                                                                                                                                                                                 
| | 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 implement 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:

|  |                                                                                                                                   
|- | ----------------------------------------------------------------------------------------------------------------------------------
| | the
  effective and timely initiation and development of relationships with sellers
  of distressed assets and strategic partners;
|  |                                                                                                                                   
| | our
  ability to efficiently collect consumer receivables; and                                                                    
|  |                                                                                                                                   
| | the
  recruitment, motivation and retention of qualified personnel.                                                               

18

---



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
servicers 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.

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:

|  |                                          
|- | -----------------------------------------
| | the Fair
  Debt Collection Practices Act;
|  |                                          
| | the
  Federal Trade Commission Act;      
|  |                                          
| | the
  Truth-In-Lending Act;              
|  |                                          
| | the
  Fair Credit Billing Act;           
|  |                                          
| | the
  Equal Credit Opportunity Act;      
|  |                                          
| | the Fair Credit Reporting Act; and       
|  |                                          
| | the Fair Foreclosure Act.                

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.

19

---



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:

|  |                                                                                                          
|- | ---------------------------------------------------------------------------------------------------------
| | the
  timing and amount of collections on our consumer receivable portfolios;                            
|  |                                                                                                          
| | our
  inability to identify and acquire additional consumer receivable portfolios;                       
|  |                                                                                                          
| | a decline in
  the estimated value of our consumer receivable portfolio recoveries;                      
|  |                                                                                                          
| | the
  timing of sales of interests in distressed real property and redemption of
  tax lien certificates;
|  |                                                                                                          
| | increases in
  operating expenses associated with the growth of our operations; and                      
|  |                                                                                                          
| | 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 December 31, 2007, John C. Kleinert, W. Peter Ragan, Sr. and W. Peter Ragan,
Jr., three of our executive officers, beneficially owned or controlled
approximately 81.9% (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 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.

20

---



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 10,000,000 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.

As
of December 31, 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 December 31, 2007, there were 17,066,821
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, convertible debt or convertible preferred shares exercisable for
10,109,410 of shares of common stock. As of December 31, 2007, we have reserved
up to 10,109,410 shares of our common stock for issuance upon exercise of
outstanding stock options, warrants, convertible debt and convertible preferred
stock. We have reserved a total of 1,000,000 shares of common stock under our
2004 Equity Incentive Program. As of December 31, 2007, 232,000 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.

Any
of (i) the exercise of the outstanding options and warrants, (ii) the
conversion of the preferred stock, or (iii) the conversion by the convertible
debenture holder of 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 December 31, 2007, there were 17,066,821 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 Securities Act, subject to certain
limitations. 3,100,063 shares, 1,364,005 shares and 1,076,250 shares may be
sold pursuant to current registration statements effective on August 12, 2005,
December 29, 2005 and December 18, 2007, respectively. In general, pursuant to
Rule 144, after satisfying a six month holding period: (i) affiliated
stockholder (or stockholders whose shares are aggregated) may, under certain
circumstances, sell within any three month period a number of securities which
does not exceed the greater of 1% of the then outstanding shares of common
stock or the average weekly trading volume of the class during the four
calendar weeks prior to such sale and (ii) non-affiliated stockholders may sell
without such limitations, provided we are current in our public reporting
obligations. Rule 144 also permits the sale of securities by non-affiliates
that have satisfied a one year holding period without any limitation or
restriction. 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. The sale of such a large number of shares may cause the price of our
common stock to decline.

The limited prior public market and trading
market may cause possible volatility in the price of our securities.

There
has only been a limited public market for our securities and there can be no
assurance that an active trading market in our securities will be maintained.
In addition, the overall market for securities 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 common stock
is expected to be subject to significant fluctuations including, but not
limited to, the following:

21

---



|  |                                                                                                                                 
|- | --------------------------------------------------------------------------------------------------------------------------------
| | quarterly variations in operating results
  and achievement of key business metrics;                                            
|  |                                                                                                                                 
| | changes
  in earnings estimates by securities analysts, if any;                                                                 
|  |                                                                                                                                 
| | any
  differences between reported results and securities analysts published or
  unpublished expectations;                    
|  |                                                                                                                                 
| | announcements of new contracts or service offerings by us or our
  competitors;                                                 
|  |                                                                                                                                 
| | market reaction to any acquisitions, divestitures, joint
  ventures or strategic investments announced by us or our competitors;
|  |                                                                                                                                 
| | demand for our services and products;                                                                                           
|  |                                                                                                                                 
| | shares being sold pursuant to Rule 144 or upon exercise of
  warrants; and                                                      
|  |                                                                                                                                 
| | general economic or stock market conditions unrelated to our
  operating performance.                                           

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, if any.

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 purchase our common stock and/or convert their warrants into
common stock may only realize a return on their investment if the value of our
common stock appreciates. 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 be de-listed from the AMEX if we do
not meet continued listing requirements.

If
we do not meet the continued listing requirements of the AMEX and our common
stock is delisted by the AMEX, trading of our common stock would thereafter
likely be conducted on the OTC Bulletin Board. In such case, the market
liquidity for our common stock would likely be negatively affected, which may
make it more difficult for holders of our common stock and preferred stock to
sell their securities in the open market and we could face difficulty raising
capital necessary for our continued operations.

As
set forth in AMEX Company Guide Section 1002:

The
Board of Governors of AMEX may, in its discretion, at any time, and without
notice, suspend dealings in, or may remove any security from, listing or
unlisted trading privileges.

AMEX,
as a matter of policy, will consider the suspension of trading in, or removal
from listing or unlisted trading of, any security when, in their opinion:

(a)
the financial condition and/or operating results of the issuer appear to be
unsatisfactory; or

(b)
it appears that the extent of public distribution or the aggregate market value
of the security has become so reduced as to make further dealings on the AMEX
inadvisable; or

(c)
the issuer has sold or otherwise disposed of its principal operating assets, or
has ceased to be an operating company; or

(d)
the issuer has failed to comply with its listing agreements with the AMEX; or

(e)
any other event shall occur or any condition shall exist which makes further
dealings on the AMEX unwarranted.

22

---



ITEM 1B. UNRESOLVED STAFF COMMENTS

None

ITEM 2. DESCRIPTION OF PROPERTIES

Prior to the
merger with STB, we did not lease any premises for our executive or corporate
offices. Following the merger, both our executive/corporate offices at 48
Franklin Turnpike, 3rd Floor, Ramsey, NJ 07746 and our business office at 1800
Route 34 North, Building 4, Suite 404A, Wall, NJ, 07719 are located in leased
space. The business office is approximately 2,450 square feet, is subject to a
five year lease from an unrelated third party (expiring on July 1, 2012) and
has an annual lease payment of $43,750. The Company also maintains office space
of approximately 500 square feet, which is subject to a renewable two year lease
(expiring on January 1, 2009) from an unrelated third party and has an annual lease
payment of $8,400.

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 year ended
December 31, 2007.

23

---



PART II

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

MARKET INFORMATION

From
April 12, 2004 through August 8, 2007, our common stock traded on the OTC
Bulletin Board under the symbol VCYA. Since August 9, 2007, our common stock
has been trading on AMEX under the symbol JVI.

The
following chart sets forth the high and low close prices for each quarter from
January 1, 2006 through December 31, 2007.

|                              |  |   |      |  |     |      |  | 
|----------------------------- |  | - | ---- |  | --- | ---- |  | 
|Period                        |  |   | High |  | Low |     
|                              |  |   |      |  |     |     
|Year Ended
 December 31, 2006 |  |   |      |  |     |      | 
|First                         |  | $ | 2.09 |  |     | 1.70 | 
|Second                        |  |   | 2.05 |  |     | 1.60 | 
|Third                         |  |   | 1.90 |  |     | 1.25 | 
|Fourth                        |  |   | 2.10 |  |     | 1.20 | 
|                              |  |   |      |  |     |      | 
|Year Ended
 December 31, 2007 |  |   |      |  |     |      | 
|First                         |  | $ | 2.57 |  |     | 2.00 | 
|Second                        |  |   | 2.40 |  |     | 1.75 | 
|Third                         |  |   | 2.92 |  |     | 2.00 | 
|Fourth                        |  |   | 2.50 |  |     | 1.25 | 

On December
31, 2007, the closing price of our common stock as reported on AMEX was $1.40
per share and on March 10, 2008 it was $0.86.

HOLDERS OF RECORD

As of March
10, 2008, there were approximately 246 holders of record of our common stock.

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.

The first
dividend on the Series A Convertible Preferred Stock was 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 were paid in
the amount of $0.0833 per share with respect to the years ended December 31,
2006 and December 31, 2007.

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 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 dividends on the preferred stock, we may
not have sufficient cash to pay dividends on our preferred stock.

24

---



EQUITY COMPENSATION PLAN INFORMATION

|                                                            |  |                                                                                              |  |                                                                              |  |                                                                                                                                              |  | 
|----------------------------------------------------------- |  | -------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|                                                            |  | Number of securities to be issued upon exercise of outstanding
 options, warrants and rights |  | Weighted average exercise price of outstanding options, warrants and
 rights |  | Number of securities remaining available for future issuance under
 equity compensation plans (excluding securities reflected in column (a)) | 
|                                                            |  | (a)                                                                                          |  | (b)                                                                          |  | (c)                                                                                                                                          | 
|                                                            |  |                                                                                              |  |                                                                              |  |                                                                                                                                              | 
|Equity
 compensation plans approved by security holders     |  | 0 (1)                                                                                        |  |                                                                              |  | 768,000                                                                                                                                      |  | 
|Equity
 compensation plans not approved by security holders |  |                                                                                              |  |                                                                              |  |                                                                                                                                              |  | 
|Total                                                       |  | 0 (1)                                                                                        |  |                                                                              |  | 768,000                                                                                                                                      |  | 

(1) 232,000
shares of restricted stock have been issued under the 2004 Equity Incentive
Plan.

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.

ITEM 6. SELECTED FINANCIAL DATA

We are a
smaller reporting company as defined by Regulation S-K and as such, are not
providing the information contained in this item pursuant to Regulation S-K.

25

---



ITEM 7. 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 report.

Overview

We
were organized in the State of Delaware in December 1986 as Tele-Optics, Inc.
We were inactive until February 3, 2004, when we acquired STB. 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: VI, 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; JHI, 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, 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.

After
careful consideration of trends in revenues and future opportunities for
growth, management has made the determination that the consumer receivables
business will be the sole operating focus of the Company in 2008. As a result,
the Company is currently considering all strategic alternatives for JHI and
VOM, including, but not limited to, the sale of some or all of each entitys
assets, partnering or other collaboration agreements, or a merger, spin-off or
other strategic transaction. On December 31, 2007, the Board of Directors of
the Company unanimously approved managements plan to discontinue the operation
of the Companys JHI and VOM subsidiaries and to sell and dispose of the assets
or membership interests/capital stock of such subsidiaries. Accordingly, these operations
 will be shown as discontinued operations in 2008.

Critical Accounting
Policies

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

Purchased Consumer
Receivable Portfolios and Revenue Recognition

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

26

---



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

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

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

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

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

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

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

27

---



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, 2007 and 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 operations. Consumer receivable activity for the 12 month
periods ending December 31, 2007 and 2006 consists of the following:

|                                                    |  |                     |             |                    |   |             |  
|--------------------------------------------------- |  | ------------------- | ----------- | ------------------ | - | ----------- | -
|                                                    |  | For the Years Ended |            
|                                                    |  |                     |            
|                                                    |  | December 31,
 2007  |             | December 31,
 2006 |  
|                                                    |  |                     |             |                    |  
|Balance at
 beginning of period                     |  | $                   | 38,327,926  |                    | $ | 17,758,661  |  
|                                                    |  |                     |             |                    |   |             |  
|Acquisitions
 and capitalized costs, net of returns |  |                     | 12,799,459  |                    |   | 22,915,748  |  
|Amortization
 of capitalized costs                  |  |                     | (59,196     | )                  |   |            |  
|                                                    |  |                     |             |                    |   |             |  
|                                                    |  |                     | 12,740,263  |                    |   | 22,915,748  |  
|                                                    |  |                     |             |                    |   |             |  
|                                                    |  |                     |             |                    |   |             |  
|Cash
 collections                                   |  |                     | (17,960,713 | )                  |   | (10,777,742 | )
|Income
 recognized on consumer receivables          |  |                     | 13,863,538  |                    |   | 8,431,259   |  
|                                                    |  |                     |             |                    |   |             |  
|Cash
 collections applied to principal              |  |                     | (4,097,175  | )                  |   | (2,346,483  | )
|                                                    |  |                     |             |                    |   |             |  
|Balance at
 end of period                           |  | $                   | 46,971,014  |                    | $ | 38,327,926  |  
|                                                    |  |                     |             |                    |   |             |  

28

---



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
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities - Including an Amendment of FASB
Statement No. 115 (SFAS No. 159). This statement permits entities to choose to
measure many financial instruments and certain other items at fair value. Most
of the provisions of SFAS No. 159 apply only to entities that elect the fair
value option. However, the amendment to SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, applies to all entities with
available-for-sale and trading securities. SFAS No. 159 is effective as of the
beginning of an entitys first year that begins after November 15, 2007. Early
adoption is permitted as of the beginning of a year that begins on or before
November 15, 2007, provided the entity also elects to apply the provision of
SFAS No. 157, Fair Value Measurements. Management has not determined whether
the Company will voluntarily choose to measure any of its financial assets and
financial liabilities at fair value. Management also has not determined whether
the adoption of this statement will affect its reported results of operations
or financial condition.

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 years beginning after November
15, 2007, and will be adopted by us beginning in the first quarter of 2008. We
are currently evaluating the potential impact this standard may have on our
financial position and results of operations.

Results of Operations

Comparison of the
Year Ended December 31, 2007 to the Year Ended December 31, 2006

Gross Revenues

Revenues
in the year ended December 31, 2007 were approximately $15,367,000 as compared to $10,284,000
in the year ended December 31, 2006, representing a 49.4% increase. The
increase in revenues was primarily attributable to an increase in collections
on consumer receivables at our VI 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 held by us represented approximately
9.1%, 90.2% and 0.7% respectively, during 2007 as compared to 15.4%, 82.0%, and
2.6% during 2006. Although management believes that the mix of revenues on a
comparative basis may 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 2007 is
reflective of the continued growth in our consumer receivables business. After
careful consideration of trends in revenues and future opportunities for
growth, management has made the determination that the consumer receivables
business will be the sole operating focus of the Company in 2008.

29

---



Operating Expenses

Total
operating expenses for the year ended December 31, 2007 were approximately $8,996,000 as
compared to $6,631,000 in the year ended December 31, 2006, representing a
35.7% increase. The increase in total operating expenses was primarily
attributable to increased professional fees incurred as a result of an increase
in collections and a corresponding increase in legal commission expense as a
result of the expansion of operations at our VI subsidiary. The Company has
also recorded a $220,948 impairment of a property held for sale in connection
with an estate property owned by its JHI subsidiary in Melbourne, Florida.
General and administrative expenses also increased in the 2007 Period as a
result of our increasing due diligence expenses and electronic search fees for
VI and an increase in payroll expense.

Other Expenses

Interest
expense in the year ended December 31, 2007 was approximately $1,954,000, as compared to
$1,363,000 in the year ended December 2006, representing a 43.3% increase. The
increase in interest expense was primarily attributable to expansion of the
senior credit facility with Wells Fargo.

Net Income

Net
income for the year ended December 31, 2007 was approximately $2,572,000, as compared to net
income of $1,319,000 for the year ended December 31, 2006, an increase of
95.0%. The increase in net income in year 2007 is primarily attributable to an
increase in interest income from consumer receivables as a result of expansion
of operations and increased collections at our VI subsidiary.

Liquidity and
Capital Resources

At
December 31, 2007, the Company had approximately $162,000 in cash and cash
equivalents, approximately $3,100,000 in credit available from our credit
facility and trade accounts payable of approximately $1,425,000. Management
believes that the revenues expected to be generated from operations and the
Companys line of credit will be sufficient to finance operations for 2008.
However, in order to expand operations by, among other things, purchasing additional
portfolios of distressed consumer receivables, the Company has been seeking to
raise additional capital by way of the sale of equity securities or debt
instruments. Currently, there are no ongoing offerings of equity securities or
debt instruments. If, for any reason, our available cash otherwise proves to be
insufficient to fund operations (because of future changes in the industry,
general economic conditions, unanticipated increases in expenses, or other
factors, including acquisitions), we will be required to seek additional
funding.

Net
cash provided by operating activities was approximately $2,853,000 during 2007,
compared to net cash provided by operating activities of approximately
$7,175,000 in 2006. The decrease in net cash provided by operating activities
was primarily related to estimated court and media costs offset by an increase
in net income. Net cash used in investing activities was approximately
$8,674,000 in 2007, compared to net cash used in investing activities of $20,583,000
in 2006. The decrease in net cash used in investing activities was primarily
due to a decrease in acquisition of consumer receivables portfolios offset by
an increase in cash collections applied to principal on consumer receivables.
Net cash provided by financing activities was approximately $3,538,000 during
2007, compared to net cash provided by financing activities of approximately
$15,762,000 in 2006. The decrease in net cash provided by financing activities
was primarily due to the $12,000,000 preferred stock offering in May 2006
partially offset by proceeds from equity transactions and convertible
subordinated notes.

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

30

---



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

On
February 27, 2006, VI entered into a First Amendment to the Loan and Security
Agreement pursuant to which Wells Fargo extended the credit facility until
January 27, 2009 and agreed to increase the advance rate under the facility to
75% (up from 60%) of the purchase price of individual pools of unsecured
consumer receivables that are approved by the lender. Under the First Amendment
to the Loan and Security Agreement, Wells Fargo also agreed to reduce the
interest rate on the loan from 3.5% above the prime rate of Wells Fargo Bank,
N.A. to 1.5% above such prime rate. In addition, the amortization schedule for
each portfolio has been extended from twenty-four to thirty months. Wells Fargo
also agreed to reduce each of the personal limited guarantees from $1,000,000
to $250,000.

Use
of the senior credit facility is subject to VI 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 VI; a restriction on entering into transactions with
affiliates outside the course of VIs ordinary business; and a restriction on
making payments to us in compliance with the Subordination Agreement. In
addition, VI has agreed to maintain certain ratios with respect to outstanding
advances on the credit facility against the estimated remaining return value on
Wells Fargo financed portfolios.

On
February 23, 2007, we entered into a Third Amendment to the Loan Agreement
dated January 27, 2005. Pursuant to the Amended and Restated Loan Agreement,
the Lender agreed to permanently increase our credit facility up to
$17,500,000. In addition, we have agreed to maintain certain ratios with
respect to outstanding advances on the credit facility against the estimated
remaining return value on Wells Fargo financed portfolios, and has agreed to
maintain at least $6,500,000 in VIs members equity plus 50% of VIs net
income for each calendar quarter that ends on or after March 31, 2007. We have
also agreed to maintain at least $21,000,000 in stockholders equity plus 50%
of our net income of the Company for each calendar quarter that ends on or
after March 31, 2007. The Company had $14,429,000 outstanding on the credit line
as of December 31, 2007.

On
March 3, 2008, VI entered into a Fourth Amendment to the Loan and Security
Agreement (the Fourth Amendment to the Loan Agreement) with Lender, pursuant
to which the Lender agreed to amend the Loan and Security Agreement dated
January 27, 2005 (the Original Loan Agreement). The Original Loan Agreement
provided for a two year $12,500,000 senior credit facility (the Credit
Facility) to finance the acquisition of individual pools of unsecured consumer
receivables that are approved by the Lender under specific eligibility
criteria. The Fourth Amendment to the Loan Agreement had an effective date of
February 29, 2008. Pursuant to the Fourth Amendment to the Loan Agreement, the
Lender increased the amount of credit available under the Credit Facility from
$17,500,000 to $22,500,000 and extended the maturity date until January 27,
2011. The Lender has agreed to eliminate the requirement that certain executive
officers of VI and the Company provide the Lender with joint and several
limited guarantees of VIs obligations under the Original Loan Agreement.

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

On
May 18, 2006, we consummated a public offering of 1,200,000 shares of our
Series A Convertible Preferred Stock. The offering was underwritten by Anderson
& Strudwick, Incorporated. 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 which they exercised on May 31, 2006. The public
price per share for the offering was $10. Net proceeds of the offering amounted
to approximately $12.4 million. As of December 31, 2007, approximately $6.5
million of the proceeds of the offering have been used for the purchase and
servicing 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, $2.5 million has been used for
general corporate expenses and approximately $810,000 has been used to redeem
certain short term notes.

31

---



On
June 29, 2007, we consummated an initial closing (final closing July 27, 2007)
of our private placement offering of 10.0% Convertible Subordinated Notes (the
Notes) due 2017 (theNotes Offering) to accredited investors (Accredited
Investors). The Notes were offered and sold pursuant to exemption from
registration under Section 4(2) of the Securities Act. The Notes were sold by
the Company through an NASD member firm which is serving as placement agent. In
connection with the Notes Offering, the Company issued the Notes and also
entered into a Subscription Agreement with each of the Note holders.

On
June 29, 2007 and July 27, 2007, the Company issued Notes in the aggregate
principal amount of $2,350,000. Interest on the Notes is payable monthly in
arrears commencing on September 30, 2007. The Notes are subordinated in
liquidation preference and in right of payment to all of the Companys existing
debt. The Notes will be senior in right of payment and in liquidation
preference to any future long term debt of the Company. To the extent the
Company were to complete a subsequent financing with the placement agent on or
before March 29, 2008 (Subsequent Financing), the Notes will automatically
convert into the underlying securities (either convertible debt or preferred
stock) sold in the Subsequent Financing (the Underlying Securities). To the
extent the new issue in the Subsequent Financing contains an interest rate less
than 10.0% per annum; the exchange ratio of the Notes will automatically adjust
to maintain a 10.0% yield. To the extent the Company does not complete a
Subsequent Financing; the Notes may be converted, at the option of the holder,
into shares of the Companys common stock at a price of $2.50 per share,
subject to certain adjustments within. The Company intends to use the net
proceeds from the Notes Offering primarily for the purchase of portfolios of
consumer receivables and for general corporate purposes, including working
capital.

For
its services in connection with the Notes Offering, the placement agent
received a placement fee computed at the rate of seven percent (7.0%) of the
aggregate principal amount of the Notes sold. In addition, the Company paid an
accountable expense allowance of one percent (1%) of the aggregate principal
amount of the Notes sold. As a result, after other Notes Offering expenses of
approximately $75,000, the Company received net proceeds of approximately
$2,125,500. Costs of $224,500 related to this offering have been capitalized
and are being amortized over the life of the notes.

The
Notes provide that, to the extent the Company completes a Subsequent Financing,
the Company will register the underlying securities in connection with the
Subsequent Financing. To the extent the Company does not complete a Subsequent
Financing, the Company will register the common stock underlying the Notes for
resale by the Noteholders.

On
June 14, 2007, the Companys JHI subsidiary entered into an agreement for a
revolving credit line in the maximum principal sum of $800,000 with Northern
State Bank. During the term of the note, interest accrues on the outstanding
principal balance of the note at a rate of the lenders prime rate plus
one-half percent per annum. The Company can draw upon the note, during the
twelve month period commencing on June 14, 2007. Any sums loaned under the note
may be repaid at any time, without premium or penalty, and reborrowed from time
to time, until July 1, 2008. Payments of interest only are due on the 1st day
of each and every month until the payment due July 1, 2008, on which date the
entire balance of principal, interest and fees then unpaid shall become due and
payable. The note is secured by various mortgages of real property held and
owned by the Companys subsidiary, JHI. The Company had $316,000 outstanding on
the credit line as of December 31, 2007.

On
September 26, 2007, the Company consummated an initial closing of its private
placement offering (the 2007 Private Offering) of shares of common stock (the
Shares) and warrants to purchase shares of common stock (together with the Shares,
theSecurities) to Accredited Investors. The Securities were offered and sold
pursuant to an exemption from registration under Section 4(2) of the Securities
Act, as amended (the Securities Act). In connection with the 2007 Private
Offering, the Company issued the Securities and also entered into a Securities
Purchase Agreement and a Registration Rights Agreement with the Accredited
Investors. On October 11, 2007, the Company consummated its second and final
closing of the 2007 Private Offering. Together with the first closing, the
Registrant sold an aggregate of 862,500 shares of common stock at a purchase
price of $2.00 per Share and delivered warrants to purchase an aggregate of
172,500 shares of the Companys common stock. Net proceeds from the financing
were used primarily for working capital purposes including, but not limited to,
the purchase of distressed consumer receivable portfolios.

32

---



The
warrants entitle the holders to purchase shares of the Companys common stock
reserved for a period of three years from the date which is six months after
the date of issuance at an exercise price of $2.50 per share. These warrants
contain certain anti-dilution rights on terms specified in the warrants. In
addition, pursuant to the Securities Purchase Agreement, the Accredited
Investors will be entitled to additional shares of common stock if, during the
six month period after the Closing, the Company sells or issues additional
shares of common stock, or securities (debt and/or equity) convertible into
common stock, with a purchase, exercise or conversion price of less than $2.00.

Pursuant
to the Registration Rights Agreement, the Company agreed to file with the
Securities and Exchange Commission a registration statement providing for the
resale by the investors of the Shares and the shares underlying the warrants.
The Company agreed to file a registration statement within 45 days of the
Initial Closing. If the Registration Statement was not filed within the
required timeframe, or did not become effective within the required timeframe,
or did not remain effective for any thirty (30) consecutive days, the Company
had agreed to pay to the investors liquidated damages for each thirty (30) day
period in which the Registrant failed to comply with these requirements. The
registration statement for the 2007 Private Offering was filed on November 9,
2007 and declared effective on November 21, 2007 and no liquidated damages were
paid.

The
Company received aggregate net proceeds of $1,632,500 from the placement, after
payment of offering expenses of approximately $25,000 and commissions of
approximately $82,500. The Company retained a registered FINRA broker dealer to
act as placement agent. In addition, the placement agent is entitled to receive
2 year warrants to acquire 41,250 shares of the Companys common stock.

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

Supplementary Information on Consumer
Receivables Portfolios:

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

|                                |  |                                                               |         |                       |  |                                      |  |   |        |  |   |        | 
|------------------------------- |  | ------------------------------------------------------------- | ------- | --------------------- |  | ------------------------------------ |  | - | ------ |  | - | ------ | 
|                                |  | Portfolio Purchases/Collections
(dollar amounts in thousands) |         | Purchase Price        |  | Gross 
Cash 
Collections 
Per Period | 
|Reporting
Period                |  | Outstanding 
Amount                                           |         | Portfolios 
Purchased |  |                                      | 
|                                |  |                                                               |         |                       |  |                                      |  |   |       
|                                |  |                                                               |         |                       |  |                                      |  |   |        |  |   |        | 
|Period Ended
 December 31, 2006 |  | $                                                             | 199,042 |                       |  | 26                                   |  | $ | 15,368 |  | $ | 10,778 | 
|                                |  |                                                               |         |                       |  |                                      |  |   |        |  |   |        | 
|Period Ended
 December 31, 2007 |  | $                                                             | 129,893 |                       |  | 19                                   |  | $ | 9,317  |  | $ | 17,960 | 
|                                |  |                                                               |         |                       |  |                                      |  |   |        |  |   |        | 

33

---



|                                    |  |                    |  |                                |   |                    |  |                            |            |                                           |   |                                          |  |  |        |   |   |        | 
|----------------------------------- |  | ------------------ |  | ------------------------------ | - | ------------------ |  | -------------------------- | ---------- | ----------------------------------------- | - | ---------------------------------------- |  |  | ------ | - | - | ------ | 
|Portfolio Purchases and Performance
|Year                                |  | Total #
Portfolios |  | Initial
Outstanding
Amount (1) |   | Purchase
Price (2) |  | Gross Cash
Collections (3) |            | Gross Cash
Collections
as a % of
Cost (4) |   | Average Price Per
Dollar Outstanding (5) | 
|                                    |  |                    |  |                                |   |                    |  |                            |            |                                           |   |                                          | 
|2003                                |  | 5                  |  |                                | $ | 11,497,833         |  | $                          | 2,038,950  |                                           | $ | 8,285,000                                |  |  | 406.34 | % | $ | 0.1773 | 
|2004                                |  | 10                 |  |                                | $ | 9,511,088          |  | $                          | 1,450,115  |                                           | $ | 3,126,842                                |  |  | 215.63 | % | $ | 0.1525 | 
|2005                                |  | 22                 |  |                                | $ | 133,103,213        |  | $                          | 11,449,557 |                                           | $ | 14,699,375                               |  |  | 128.38 | % | $ | 0.0860 | 
|2006                                |  | 26                 |  |                                | $ | 199,042,032        |  | $                          | 15,367,940 |                                           | $ | 9,334,207                                |  |  | 60.74  | % | $ | 0.0772 | 
|2007                                |  | 19                 |  |                                | $ | 129,892,667        |  | $                          | 9,316,779  |                                           | $ | 1,293,468                                |  |  | 13.88  | % | $ | 0.0717 | 

|    |                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Initial
 Outstanding Amount represents the original face amount purchased from sellers
 and has not been reduced by any adjustments including payments and returns.
 (Returns are defined as purchase price refunded by the seller due to the
 return of non-compliant accounts, such as deceased and bankrupt accounts.)
|    |                                                                                                                                                                                                                                                                                                                            
|(2) | Purchase
 Price represents the cash paid to sellers to acquire portfolios of defaulted
 consumer receivables, and does not include certain capitalized acquisition
 costs.                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                            
|(3) | Gross Cash
 Collections include gross cash collections on portfolios of consumer
 receivables as of December 31, 2007.                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                            
|(4) | Gross Cash
 Collections as a Percentage of Cost represents the gross cash collections on
 portfolios of consumer receivables as of December 31, 2007 divided by the
 purchase price such portfolios in the related calendar year.                                                                                          
|    |                                                                                                                                                                                                                                                                                                                            
|(5) | Average
 Price Per Dollar Outstanding represents the Purchase Price of portfolios of
 consumer receivables divided by the Initial Outstanding Amount of such
 portfolios purchased in the related calendar year.                                                                                                           

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

During
the twelve months ended December 31, 2007, we acquired 19 portfolios of
consumer receivables aggregating approximately $130 million in initial
outstanding amount at a purchase price of approximately $9.3 million, bringing
the aggregate initial outstanding amount of consumer receivables under
management as of December 31, 2007 to approximately $485 million, an increase
of 36.7% as compared to approximately $263 million as of December 31, 2006. For
the twelve month period ended December 31, 2007, we posted gross collections of
approximately $18.0 million, compared to gross collections of $10.8 million in
the twelve month period ended December 31, 2006, representing a 66.7% increase.

34

---



Trends

As
a result of our increased borrowings under our lines of credit and our
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. No assurance can be given that the
expected revenues from such purchased portfolios will exceed the additional
interest expense and dividend payments. While we are not presently aware of any
other known trends that may have a material impact on our revenues, we are
continuing to monitor our collections to assess whether the current housing
crisis will have a long term impact on collections. We do not believe that the
recent decreases in interest rates, and the anticipated continuing gradual
decreases in interest rates, has had or will have a material adverse effect
upon our business.

ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK.

We are a
smaller reporting company as defined by Regulation S-K and as such, are not
providing the information contained in this item pursuant to Regulation S-K.

[remainder of page intentionally left blank]

35

---



ITEM 8. FINANCIAL STATEMENTS

Our financial
statements listed on the Index to the Financial Statements are included
beginning at F-1 following Item 15 of this Report.

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

None.

ITEM 9A(T). CONTROLS AND PROCEDURES

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

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

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

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

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

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

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

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

As
a result of an evaluation of the effectiveness of our disclosure controls and
procedures as of the end of the period covered by our Annual Report on Form 10-K
for the year ended December 31, 2007, with the participation of our Chief
Executive Officer and Chief Financial Officer, we identified a material
weakness in our internal controls over financial reporting relating to the
compliance of certain related party transactions to the Sarbanes-Oxley Act.

A
material weakness is a control deficiency, or a combination of control
deficiencies, that results in a more than remote likelihood that a material
misstatement of the Companys annual or interim financial statements will not
be prevented or detected. Management has concluded that material weaknesses
existed in the following areas with respect to Compliance with Section 402 of
the Sarbanes Oxley Act as of December 31, 2007:

36

---



| |                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | --------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                | The Company
 received a note receivable in the amount of $205,000 in partial payment of the $455,000 purchase price
from an officer and related party, John C. Kleinert,
for the assignment of membership interests in Ridgedale Avenue Commons, LLC,
 and Morris Avenue Commons, LLC, previously owned by J. Holder, Inc. As of December 31, 2007, the note had a balance
 of $100,000, along with
 interest at the rate of 12% which shall accrue only on and after December 26,
 2007, and is payable by means of one lump sum payment of principal and accrued interest on
 August 25, 2008. As of March 14, 2008, Mr. Kleinert made a $100,000 lump sum
 payment to the Company and the promissory note was retired.
| |                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                | On December
 28, 2007, the Company paid $115,146 in withholding taxes in connection with
 the vesting of 175,000 shares of restricted stock granted to James J.
 Mastriani. As of March 14, 2008, Mr. Mastriani has returned 136,000 of such
 shares for cancellation and retirement in order to offset such payment.                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | The
 following remedial actions will be undertaken immediately.
| |                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                | The Company
 has engaged BDO Seidman, LLP as Sarbanes-Oxley consultant to advise and
 assist the Company in its compliance with internal controls over financial
 reporting in the future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                | Prior to presenting any related party transaction to the Board
 of Directors for approval, management of the Company will submit any such transition to
 securities law counsel for review to ensure compliance with applicable securities law.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

Velocity
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 as a smaller reporting company
will be contained in our Form 10-K for the period ended December 31, 2009.

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

ITEM 9B. OTHER INFORMATION

None

37

---



PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
ACT OF THE REGISTRANT

EXECUTIVE OFFICERS AND DIRECTORS

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

|                     |  |     |  |                                               |  |                                                                       
|-------------------- |  | --- |  | --------------------------------------------- |  | ----------------------------------------------------------------------
|Name                 |  | Age |  | Year Became An Executive
 Officer or Director |  | Positions                                                             
|                     |  |     |  |                                               |  |                                                                       
|John C.
 Kleinert    |  | 49  |  | 2004                                          |  | President,
 Chief Executive Officer and Director                      
|                     |  |     |  |                                               |  |                                                                       
|James J.
 Mastriani  |  | 37  |  | 2004                                          |  | Chief
 Financial Officer, Chief Legal Officer, Treasurer and Secretary
|                     |  |     |  |                                               |  |                                                                       
|W. Peter
 Ragan, Sr. |  | 60  |  | 2004                                          |  | Vice
 President and Director                                          
|                     |  |     |  |                                               |  |                                                                       
|W. Peter
 Ragan, Jr. |  | 37  |  | 2004                                          |  | President of
 VI, our wholly-owned subsidiary                         
|                     |  |     |  |                                               |  |                                                                       
|Steven
 Marcus       |  | 48  |  | 2005                                          |  | Independent
 Director(1)                                              
|                     |  |     |  |                                               |  |                                                                       
|Dr. Michael
 Kelly   |  | 55  |  | 2005                                          |  | Independent
 Director(1)                                              
|                     |  |     |  |                                               |  |                                                                       
|David
 Granatell     |  | 50  |  | 2005                                          |  | Independent
 Director(1)                                              

| | (1)
      Member of Audit Committee and Nominating
 Committee                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 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 invested 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.

38

---



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 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 Exchange, 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 year ended December 31, 2005 and incorporated
 by reference herein. The Audit and Nominating Committee Charters are also
 available on our web site at www.velocitycollect.com.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Audit Committee                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Our
 board of directors, established an Audit Committee in September 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

39

---



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The
 Audit Committee was formed in September 2005 and conducted formal meetings on
 August 8, 2007 and December 7, 2007. 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 and engages, our independent registered
 public accountants. 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 registered public accountants. The Audit Committee monitors the
 rotation of partners of the independent registered public accountants 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-K and reviews with
 management and the independent registered public accountants the results of
 the annual audit and our quarterly financial statements. In addition, the
 Audit Committee oversees all aspects 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 August 8, 2007 and December 7, 2007. 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 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 2007, we did not pay any fees to
 any third parties to assist in the identification of nominees. During 2007,
 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-K for the
year ended December 31, 2005. Additionally, a copy of our Code of Ethics is
available on our website, www.velocitycollect.com. 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-K for the 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 year ended December 31, 2007 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 year ended December 2007, 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

40

---



| |                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ITEM 11. EXECUTIVE COMPENSATION                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Summary Compensation Table                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | The
 following table sets forth all compensation paid to our named executive
 officers for the years ended December 31, 2007 and 2006. Individuals we refer
 to as our named executive officers both or none, include our Chief Executive Officer and
 our most highly compensated executive officers whose salary and bonus for
 services rendered in all capacities exceeded $100,000 during the year ended
 December 31, 2007.

|                                                 |  |      |  |            |         |           |  |                  |  |           |         |     |  |         | 
|------------------------------------------------ |  | ---- |  | ---------- | ------- | --------- |  | ---------------- |  | --------- | ------- | --- |  | ------- | 
|SUMMARY COMPENSATION TABLE                      
|                                                 |  |      |  |            |         |           |  |                  |  |           |         |     |  |         | 
|Name and
principal position                      |  | Year |  | Salary ($) |         | Bonus ($) |  | Stock Awards ($) |  | Total ($) |        
|                                                 |  |      |  |            |         |           |  |                  |  |           |        
|John C.
 Kleinert                                |  | 2007 |  |            | 225,000 |           |  | 70,000           |  |           |         |     |  | 295,000 | 
|Chief
 Executive Officer                         |  | 2006 |  |            | 215,000 |           |  | 25,000           |  |           | -       |     |  | 240,000 | 
|                                                 |  |      |  |            |         |           |  |                  |  |           |         |     |  |         | 
|James J.
 Mastriani                              |  | 2007 |  |            | 200,000 |           |  | 65,000           |  | $         | 110,000 | (1) |  | 375,000 | 
|Chief
 Financial Officer and Chief Legal Officer |  | 2006 |  |            | 175,000 |           |  | 60,000           |  | $         | 200,000 | (1) |  | 435,000 | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | On August
 26, 2006, the Board of Directors approved a grant to Mr. Mastriani for
 200,000 restricted shares of common stock in our company. Of those shares,
 75,000 shares were unvested as of December 31, 2006. As of September 30,
 2007, all of such shares have vested. The $110,000 sum reflects the value of
 the 75,000 restricted shares that have vested as of December 31, 2007. The
 $200,000 sum reflects the value of the 125,000 restricted shares that have
 vested as of December 31, 2006.

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Narrative Disclosure to Summary Compensation Table                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | 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, which was increased to $225,000 for the year ended
 December 31, 2007. 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, Jr.
 in which we agreed to employ Mr. Ragan, Jr. as President of our wholly-owned
 subsidiary VI, 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 VI 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. Mr. Mastrianis
 employment agreement has been extended on a month to month
 basis while the Company and Mr. Mastriani negotiate an extension to his
 employment agreement. In 2006, we agreed to grant Mr. Mastriani equity
 securities pursuant to our 2004 Equity Incentive Program. During 2006, Mr. Mastriani
 received stock awards for 200,000 restricted shares, all of which have vested
 to date. Mr. Mastriani devotes all of his business time to our affairs as
 provided under his employment contract.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | Outstanding Equity Awards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | The
 following table summarizes outstanding equity incentive plan awards held by
 each of our named executive officers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

|                                      |  |                                                                                                         |  |                                                                                                                        
|------------------------------------- |  | ------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------
|OUTSTANDING EQUITY AWARDS AT YEAR-END
|                                     
|Name                                  |  | Equity Incentive Plan Awards: Number of
Unearned Shares, Units or Other Rights
That Have Not Vested (#) |  | Equity Incentive Plan Awards: Market or Payout
Value of Unearned Shares, Units or Other Rights
That Have Not Vested (#)
|                                      |  |                                                                                                         |  |                                                                                                                        
|John C.
 Kleinert                     |  | -                                                                                                       |  | -                                                                                                                      
|James J.
 Mastriani                   |  | -                                                                                                       |  | -                                                                                                                      

41

---



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Outstanding Equity Awards Narrative Disclosure                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Incentive
 Program. On August 26, 2006, the Board of Directors
 approved a grant to Mr. Mastriani for 200,000 restricted shares of common
 stock in our company. 125,000 of such shares vested during 2006, and the
 remaining 75,000 shares have vested as of September 30, 2007.                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Our
 board of directors presently consists of two of our executive officers and
 three independent directors. We are not currently providing any compensation
 to our two executive officers for serving on the board of directors.                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 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 shall be available for issuance
 under nonqualified stock options, restricted stock awards and/or unrestricted
 stock awards. A total of 232,000 shares have been issued under the Program.                                       

Compensation of Directors Summary Table

DIRECTOR COMPENSATION

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

Narrative
to Director Compensation

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Fees
 earned or paid in cash represent a standard $1,000 per day meeting fee
 received for attendance at the August 2, 2007 and December 5, 2007 Board of
 Directors meetings. No compensation is paid to our officers who are directors
 and attend board meetings. We expect to implement a director incentive plan
 in 2008. No compensation is paid to our directors with respect to their
 attendance to Audit and Compensation Committtee meetings.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ITEM 12. SECURITY OWNERSHIP OF CERTAIN
 BENEFICIAL OWNERS AND MANAGEMENT                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | The
 following table sets forth information available to us, as of December 31,
 2007 with respect to the beneficial ownership of the outstanding shares of
 common stock by any holder of more than five percent (5%) of our outstanding
 shares; and the outstanding shares of any class of equity securities by our
 (i) our officers and directors; and (ii) our officers and directors as a
 group:                                                 

42

---



|                                                                                     |  |                |  |                                                |  |                     |  
|------------------------------------------------------------------------------------ |  | -------------- |  | ---------------------------------------------- |  | ------------------- | -
|Name and Address of Beneficial
 Owner(1)                                             |  | Title of Class |  | Amount and Nature
 of Beneficial
 Ownership(1) |  | Percentage of Class |  
|John C.
 Kleinert(2)(3)(6)(8)                                                        |  | Common Stock   |  | 9,295,323                                      |  | 54.5                | %
|James J.
 Mastriani(2)                                                               |  | Common Stock   |  | 200,000                                        |  | 1.2                 | %
|W. Peter
 Ragan, Sr.(4)                                                              |  | Common Stock   |  | 2,343,652                                      |  | 13.7                | %
|W. Peter
 Ragan, Jr.(4)(7)(9)                                                        |  | Common Stock   |  | 2,344,912                                      |  | 13.7                | %
|Steven
 Marcus                                                                       |  | Common Stock   |  | 0                                              |  | *                   |  
|Dr. Michael
 Kelly                                                                   |  | Common Stock   |  | 344,412                                        |  | 2.0                 | %
|David
 Granatell(2)                                                                  |  | Common Stock   |  | 1,125,000                                      |  | 6.6                 | %
|All
 directors and executive officers as a group (seven individuals) (4)(5)(6)(7)(8) |  | Common Stock   |  | 15,653,299                                     |  | 91.7                | %

|    |                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 Exchange Act.        
|    |                                                                                                                                                                            
|(2) | The business
 address of Mr. Kleinert and Mr. Mastriani is 1800 Route 34 North, Building 4, Suite 404A, Wall,
 NJ, 07719.                                                  
|    |                                                                                                                                                                            
|(3) | 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.                          
|    |                                                                                                                                                                            
|(4) | 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.
|    |                                                                                                                                                                            
|(5) | Includes
 562,500 shares of common stock issuable upon the exercise of warrants at
 $1.04 per share which expire on February 3, 2009.                                      
|    |                                                                                                                                                                            
|(6) | Includes
 40,000 shares of common stock which are convertible from the 10,000 shares of
 Series A Preferred Stock that Mr. Kleinert owns.                                  
|    |                                                                                                                                                                            
|(7) | Includes
 1,260 shares of common stock which are convertible from the 315 shares of
 Series A Preferred Stock that Mr. Ragan Jr. owns.                                     
|    |                                                                                                                                                                            
|(8) | Includes
 40,000 shares of common stock issuable upon conversion of 10,000 shares of
 Series A Preferred Stock.                                                            

43

---



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS

Except
as set forth below, no transactions have occurred since the beginning of the
Companys last two 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 years 2007 and
2006, our subsidiary, VI, paid Ragan & Ragan, P.C. an aggregate of
$1,128,107 and $1,225,577, respectively, our subsidiary, JHI, paid Ragan &
Ragan, P.C. an aggregate of $6,000 and $10,139, respectively, and our
subsidiary, VOM, paid Ragan & Ragan, P.C. an aggregate of $238 and $5,528,
respectively.

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

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

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 or directors is related.

44

---



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND
SERVICES

(a) Audit Fees

The aggregate
fees billed for each of 2007 and 2006 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 in connection with statutory and regulatory filings
or engagements for those years was $172,070 and $135,000, respectively.

(b)
Audit-Related Fees

The aggregate
fees billed in each of 2007 and 2006 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 $63,730 and $0,
respectively.

(c) Tax Fees

The aggregate
fees billed in 2007 or 2006 for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning was $0 and $55,534,
respectively.

(d) All Other
Fees

No fees were
billed in each of 2007 and 2006 for products and services provided by the
principal accountant.

(e) The Audit
Committee meets with the independent registered public accounting firm prior to
the audit and discusses the planning and staffing of the audit, approves in
advance the engagement of the independent registered public accounting firm 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).

45

---



PART IV

ITEM 15. EXHIBITS

|              |  |       |                                                                                                                                                                                                             |           |   
|------------- |  | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------- | --
|ExhibitNumber |  | Title |                                                                                                                                                                                                             | Reference
|              |  |       |                                                                                                                                                                                                             |          
|              |  |       |                                                                                                                                                                                                             |           |   
|1.1           |  |       | Form of Underwriting
  Agreement by and between the Company and Anderson & Strudwick, Inc.                                                                                                                  |           | **
|2.1           |  |       | Agreement and Plan of
  Merger dated as of February 3, 2004, by and among Tele-Optics, Inc., TLOP
  Acquisition Company, L.L.C., STB, Inc., John C. Kleinert, W. Peter Ragan, Sr.
  and W. Peter Ragan, Jr. |           | A 
|3.1           |  |       | Certificate of
  Incorporation                                                                                                                                                                              |           | B 
|3.2           |  |       | Amendment to Certificate of
  Incorporation                                                                                                                                                                 |           | C 
|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 between Velocity Investments,
  LLC and Wells Fargo Inc.                                                                                |           | F 
|4.4           |  |       | General Continuing
  Guaranty, dated January 27, 2005, executed by Registrant in favor of Wells
  Fargo Inc.                                                                                                |           | F 
|4.5           |  |       | Security and Pledge
  Agreement, dated as of January 27, 2005, by and between Registrant and Wells
  Fargo Inc.                                                                                             |           | F 
|4.6           |  |       | Subordination Agreement,
  dated as of January 27, 2005, by and between Registrant and Wells Fargo Inc.                                                                                                     |           | F 
|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 Stock                                                                                                                                |           | T 
|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 
|4.14          |  |       | Form of Common Stock
  Warrant                                                                                                                                                                              |           | Z 
|4.15          |  |       | Fourth Amendment to the
  Loan and Security Agreement, dated as of February 29, 2008, by and between
  Velocity Investments, LLC and Wells Fargo Foothill, Inc.                                             |           | AA
|5.1           |  |       | Opinion of Ellenoff
  Grossman & Schole LLP                                                                                                                                                                 |           | BB
|10.1          |  |       | Business Advisory
  Agreement, dated as of February 5, 2004, by and between Lomond International,
  Inc. and Registrant                                                                                     |           | G 
|10.2          |  |       | Employment Contract, dated
  as of September 8, 2004, by and between Registrant and James J. Mastriani                                                                                                      |           | H 
|10.3          |  |       | Independent Consulting
  Agreement, dated December 16, 2004, between Registrant and The Del Mar
  Consulting Group, Inc.                                                                                    |           | I 
|10.4          |  |       | Non-qualified Stock Option
  Agreement, dated December 16, 2004, Between Registrant and The Del Mar
  Consulting Group, Inc.                                                                                |           | I 
|10.5          |  |       | Employment Agreement, dated
  as of January 1, 2004, between John C. Kleinert and STB, Inc. (n/k/a Velocity
  Asset Management, Inc.)                                                                       |           | J 
|10.6          |  |       | Addendum, dated September
  1, 2004, to Employment Agreement, dated as of January 1, 2004, between John
  C. Kleinert and Registrant                                                                        |           | J 
|10.7          |  |       | Employment Agreement, dated
  as of January 1, 2004, between John C. Kleinert and J. Holder, Inc.                                                                                                           |           | J 
|10.8          |  |       | Addendum, dated September
  1, 2004, to Employment Agreement, dated As of January 1, 2004, between John
  C. Kleinert and J. Holder, Inc.                                                                   |           | J 
|10.9          |  |       | Employment Agreement, dated
  as of January 1, 2004, between Velocity Investments, LLC and W. Peter Ragan,
  Jr.                                                                                            |           | J 
|10.10         |  |       | Addendum, dated September
  1, 2004, to Employment Agreement, dated As of January 1, 2004, between W.
  Peter Ragan, Jr. and Velocity Investments, LLC                                                      |           | J 

46

---



|      |  |  |                                                                                                                                                      |  |   
|----- |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------- |  | --
|10.11 |  |  | Employment Agreement, dated
  as of January 1, 2004, between VOM, LLC and W. Peter Ragan, Sr.                                                        |  | J 
|10.12 |  |  | Addendum, dated September
  1, 2004, to Employment Agreement, dated As of January 1, 2004, between W.
  Peter Ragan, Sr. and VOM, LLC                |  | J 
|10.13 |  |  | Retainer Agreement, dated
  as of January 1, 2005, between Ragan & Ragan, P.C. and Velocity
  Investments, LLC                                       |  | J 
|10.14 |  |  | Retainer Agreement, dated
  as of January 1, 2005, between Ragan & Ragan, P.C. and VOM, LLC                                                          |  | J 
|10.15 |  |  | Retainer Agreement, dated
  as of January 1, 2005, between Ragan & Ragan, P.C. and J. Holder, Inc.                                                   |  | J 
|10.16 |  |  | Addendum, dated January 1,
  2006, to Employment Agreement, dated as of January 1, 2004, between John C.
  Kleinert and Registrant                   |  | J 
|10.17 |  |  | Addendum, dated January 1,
  2006, to Employment Agreement, dated As of January 1, 2004, between John C.
  Kleinert and J. Holder, Inc.              |  | J 
|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 |  | J 
|10.19 |  |  | Addendum, dated January 1,
  2006, to Employment Agreement, dated As of January 1, 2004, between W. Peter
  Ragan, Sr. and VOM, LLC                  |  | J 
|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 11, 2005                                                                       |  | Q 
|10.28 |  |  | Form of Director
  Indemnification Agreement                                                                                                         |  | Q 
|10.29 |  |  | First Amendment to Loan and
  Security Agreement by and between Wells Fargo Inc. and Velocity Investments,
  L.L.C. dated as of February 27, 2006    |  | R 
|10.30 |  |  | Addendum, dated January 1,
  2006, to Employment Agreement, dated as of January 1, 2004, between John C.
  Kleinert and Registrant                   |  | S 
|10.31 |  |  | Addendum, dated January 1,
  2006, to Employment Agreement, dated As of January 1, 2004, between W. Peter
  Ragan, Jr. and Velocity Investments, LLC |  | S 
|10.32 |  |  | Addendum, dated January 1,
  2006, to Employment Agreement, dated As of January 1, 2004, between W. Peter
  Ragan, Sr. and VOM, LLC                  |  | S 
|10.33 |  |  | Amendment Agreement                                                                                                                                  |  | V 
|10.34 |  |  | Second Amendment to Loan
  and Security Agreement, dated December 8, 2006                                                                            |  | X 
|10.35 |  |  | Third Amendment to Loan and
  Security Agreement, dated December 8, 2006                                                                             |  | X 
|10.36 |  |  | Agreement of Lease, dated
  May 2, 2007                                                                                                              |  | Y 
|10.37 |  |  | Registration Rights
  Agreement, dated September 26, 2007                                                                                            |  | Z 
|14.1  |  |  | Code of Ethics                                                                                                                                       |  | S 
|16.1  |  |  | Letter of Robert C.
  Seiwell, Jr. CPA                                                                                                               |  | K 
|16.2  |  |  | Letter of Robert C.
  Seiwell, Jr. CPA                                                                                                               |  | W 
|21.1  |  |  | Subsidiaries of the
  Registrant                                                                                                                     |  | P 
|23.1  |  |  | Consent of Ellenoff
  Grossman & Schole LLP (contained in Exhibit 5.1)                                                                               |  | BB

47

---



|     |  |  |                                                                                                                                                           |  |   
|---- |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --
|23.2 |  |  | Consent of Weiser LLP                                                                                                                                     |  | **
|31.1 |  |  | Certification of the Chief
  Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                  |  | S 
|31.2 |  |  | Certification of the Chief
  Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                  |  | S 
|32.1 |  |  | Certification of the Chief
  Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
  Section 906 of the Sarbanes-Oxley Act of 2002 |  | S 
|32.2 |  |  | Certification of the Chief
  Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
  Section 906 of the Sarbanes-Oxley Act of 2002 |  | S 
|99.1 |  |  | Audit Committee Charter                                                                                                                                   |  | S 

| |  |  |                                                                                                                                                                          
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 
| |  |  | **filed herewith                                                                                                                                                         
| |  |  |                                                                                                                                                                          
| |  |  | 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 Commission on March 10, 2004.                      
| |  |  |                                                                                                                                                                          
| |  |  | 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.                      

48

---



| |  |  |                                                                                                                                                                                                                                                   
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | 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.                                                                                                    
| |  |  |                                                                                                                                                                                                                                                   
| |  |  | W. Incorporated by
  reference to Registrants Current Report on Form 8-K filed with the
  Securities and Exchange Commission on June 13, 2006.                                                                                                   
| |  |  |                                                                                                                                                                                                                                                   
| |  |  | X. Incorporated by
  reference to Registrants Annual Report on Form 10-KSB filed with the
  Securities and Exchange Commission on April 5, 2007.                                                                                                 
| |  |  |                                                                                                                                                                                                                                                   
| |  |  | Y. Incorporated by
  reference to Registrants Current Report on Form 8-K filed with the
  Securities and Exchange Commission on May 8, 2007.                                                                                                     
| |  |  |                                                                                                                                                                                                                                                   
| |  |  | Z. Incorporated by
  reference to Registrants Current Report on Form 8-K filed with the
  Securities and Exchange Commission on September 27, 2007.                                                                                              
| |  |  |                                                                                                                                                                                                                                                   
| |  |  | AA. Incorporated by
  reference to Registrants Current Report on Form 8-K filed with the
  Securities and Exchange Commission on March 6, 2008.                                                                                                  
| |  |  |                                                                                                                                                                                                                                                   
| |  |  | BB. Incorporated by
  reference to Registrants registration Statement on Form SB-2, filed May 15, 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.

49

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007 and 2006

50

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007 and 2006

|                                                           |  |           
|---------------------------------------------------------- |  | ----------
|                                                           |  | Page      
|                                                           |  |           
|Report of Independent Registered Public Accounting Firm    |  | F-1       
|                                                           |  |           
|Consolidated Balance Sheets                                |  | F-2 - F-3 
|                                                           |  |           
|Consolidated Statements of Income                          |  | F-4       
|                                                           |  |           
|Consolidated Statements of Changes in Stockholders Equity |  | F-5       
|                                                           |  |           
|Consolidated Statements of Cash Flows                      |  | F-6       
|                                                           |  |           
|Notes to the Consolidated Financial Statements             |  | F-7 - F-23

---



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

Board of
Directors and Stockholders 
Velocity Asset Management, Inc.

We have
audited the accompanying consolidated balance sheets of Velocity Asset
Management, Inc. and subsidiaries as of December 31, 2007 and 2006 and the
related consolidated statements of income, changes in stockholders equity, and
cash flows for the years 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 audits.

We conducted
our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform
the 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 consolidated financial position of
Velocity Asset Management, Inc. and subsidiaries as of December 31, 2007
and 2006, and the consolidated results of their operations and cash flows for
the years then ended in conformity with U.S. generally accepted accounting
principles.

As discussed
in note 2 to the notes to the consolidated financial statements, the Company
changed its method of presenting the change in consumer receivables in the
consolidated statements of cash flows.

|               
|---------------
|/s/ Weiser
 LLP
|New York, NY   
|March 17,
 2008

F-1

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
December 31, 2007 and 2006

|                                                                             |  |      |            |      |   |            | 
|---------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | 
|                                                                             |  | 2007 |            | 2006 |  
|                                                                             |  |      |            |      |  
|ASSETS                                                                       |  |      |            |      |   |            | 
|                                                                            
|Cash and
  cash equivalents                                                  |  | $    | 162,180    |      | $ | 2,444,356  | 
|Notes
  receivable                                                           |  |      | 25,000     |      |   | 180,641    | 
|Note
  receivable from related party                                         |  |      | 100,000    |      |   |           | 
|Deposits on
  properties                                                     |  |      | 10,000     |      |   | 240,000    | 
|Properties
  held for sale                                                   |  |      | 5,962,739  |      |   | 6,133,705  | 
|Tax
  certificates held and accrued interest receivable, net                 |  |      | 325,339    |      |   | 472,071    | 
|Consumer
  receivables, net                                                  |  |      | 46,971,014 |      |   | 38,327,926 | 
|Property and
  equipment, net of accumulated depreciation                    |  |      | 64,420     |      |   | 68,619     | 
|Deferred
  income tax asset, net                                             |  |      | 423,600    |      |   | 306,900    | 
|Security
  deposits                                                          |  |      | 30,224     |      |   | 30,100     | 
|Other assets
  (including $115,146 employee loan to a related party in 2007) |  |      | 532,312    |      |   | 229,841    | 
|                                                                             |  |      |            |      |   |            | 
|                                                                            
|Total assets                                                                 |  | $    | 54,606,828 |      | $ | 48,434,159 | 
|                                                                             |  |      |            |      |   |            | 

See accompanying notes to the consolidated
financial statements.

F-2

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
December 31, 2007 and 2006

|                                                                                                                                                                              |  |      |            |      |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|                                                                                                                                                                              |  | 2007 |            | 2006 |  
|                                                                                                                                                                              |  |      |            |      |  
|LIABILITIES
  AND STOCKHOLDERS EQUITY                                                                                                                                        |  |      |            |      |   |            |  
|                                                                                                                                                                              |  |      |            |      |   |            |  
|LIABILITIES                                                                                                                                                                   |  |      |            |      |   |            |  
|                                                                                                                                                                              |  |      |            |      |   |            |  
|Accounts payable and accrued expenses                                                                                                                                         |  | $    | 1,425,710  |      | $ | 873,507    |  
|Estimated court and media costs                                                                                                                                               |  |      | 7,374,212  |      |   | 8,446,319  |  
|Lines of credit                                                                                                                                                               |  |      | 14,745,138 |      |   | 13,791,388 |  
|Notes payable                                                                                                                                                                 |  |      | 885,000    |      |   | 780,000    |  
|Notes payable to related parties                                                                                                                                              |  |      | 2,500,000  |      |   | 2,370,000  |  
|Convertible subordinated notes                                                                                                                                                |  |      | 2,350,000  |      |   |           |  
|Income taxes payable                                                                                                                                                          |  |      | 820,222    |      |   | 600,974    |  
|                                                                                                                                                                              |  |      |            |      |   |            |  
|                                                                                                                                                                              |  |      |            |      |   |            |  
|Total liabilities                                                                                                                                                             |  |      | 30,100,282 |      |   | 26,862,188 |  
|                                                                                                                                                                              |  |      |            |      |   |            |  
|                                                                                                                                                                              |  |      |            |      |   |            |  
|STOCKHOLDERS EQUITY                                                                                                                                                          |  |      |            |      |   |            |  
|                                                                                                                                                                              |  |      |            |      |   |            |  
|Series A 10% convertible preferred stock,
  $0.001 par value, 10,000,000 shares authorized, 1,380,000 shares issued and
  outstanding (liquidation preference of $13,800,000) |  |      | 1,380      |      |   | 1,380      |  
|Common stock, $0.001 par value, 40,000,000
  shares authorized, 17,066,821 and 16,129,321 shares issued and outstanding,
  respectively                                       |  |      | 17,066     |      |   | 16,129     |  
|Additional paid-in-capital                                                                                                                                                    |  |      | 25,243,944 |      |   | 23,502,381 |  
|Accumulated deficit                                                                                                                                                           |  |      | (755,844   | )    |   | (1,947,919 | )
|                                                                                                                                                                              |  |      |            |      |   |            |  
|                                                                                                                                                                              |  |      |            |      |   |            |  
|Total stockholders equity                                                                                                                                                    |  |      | 24,506,546 |      |   | 21,571,971 |  
|                                                                                                                                                                              |  |      |            |      |   |            |  
|                                                                                                                                                                              |  |      |            |      |   |            |  
|Total liabilities and stockholders
equity                                                                                                                                    |  | $    | 54,606,828 |      | $ | 48,434,159 |  
|                                                                                                                                                                              |  |      |            |      |   |            |  

See accompanying notes to the consolidated
financial statements.

F-3

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

For the Years Ended December 31, 2007 and 2006

|                                                                                                                                                         |  |      |            |      |   |            |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|                                                                                                                                                         |  | 2007 |            | 2006 |  
|                                                                                                                                                         |  |      |            |      |  
|REVENUES                                                                                                                                                 |  |      |            |      |   |            |  
|Sales of real property                                                                                                                                   |  | $    | 1,403,944  |      | $ | 1,585,175  |  
|Income on consumer receivables                                                                                                                           |  |      | 13,863,538 |      |   | 8,431,259  |  
|Interest income on tax certificates held                                                                                                                 |  |      | 99,565     |      |   | 268,048    |  
|                                                                                                                                                         |  |      |            |      |   |            |  
|Total revenues                                                                                                                                           |  |      | 15,367,047 |      |   | 10,284,482 |  
|                                                                                                                                                         |  |      |            |      |   |            |  
|                                                                                                                                                        
|OPERATING EXPENSES                                                                                                                                       |  |      |            |      |   |            |  
|Cost of real property sold                                                                                                                               |  |      | 1,302,746  |      |   | 1,041,588  |  
|Impairment of property held for sale                                                                                                                     |  |      | 220,948    |      |   |           |  
|Professional fees (including fees paid to
  related parties of $1,134,345 and $1,241,244 for the years ended December 31,
  2007 and 2006, respectively) |  |      | 4,968,935  |      |   | 3,355,899  |  
|General and administrative expenses                                                                                                                      |  |      | 2,503,478  |      |   | 2,232,846  |  
|                                                                                                                                                         |  |      |            |      |   |            |  
|Total operating expenses                                                                                                                                 |  |      | 8,996,107  |      |   | 6,630,333  |  
|                                                                                                                                                         |  |      |            |      |   |            |  
|Income from operations                                                                                                                                   |  |      | 6,370,940  |      |   | 3,654,149  |  
|                                                                                                                                                        
|INTEREST EXPENSE                                                                                                                                         |  |      |            |      |   |            |  
|Interest expense (including interest
  incurred to related parties $234,014 and $234,797 for the years ended
  December 31, 2007 and 2006, respectively) |  |      | (1,953,530 | )    |   | (1,363,418 | )
|                                                                                                                                                         |  |      |            |      |   |            |  
|Income before provision for income taxes                                                                                                                 |  |      | 4,417,410  |      |   | 2,290,731  |  
|Provision for income taxes                                                                                                                               |  |      | 1,845,335  |      |   | 972,041    |  
|                                                                                                                                                         |  |      |            |      |   |            |  
|Net income                                                                                                                                               |  |      | 2,572,075  |      |   | 1,318,690  |  
|Preferred dividend                                                                                                                                       |  |      | (1,380,000 | )    |   | (851,005   | )
|                                                                                                                                                         |  |      |            |      |   |            |  
|Net income attributable to common
  shareholders                                                                                                         |  | $    | 1,192,075  |      | $ | 467,685    |  
|                                                                                                                                                         |  |      |            |      |   |            |  
|Weighted average common shares outstanding
  - basic                                                                                                     |  |      | 16,395,040 |      |   | 16,008,653 |  
|                                                                                                                                                         |  |      |            |      |   |            |  
|Net income per common share - basic                                                                                                                      |  | $    | 0.07       |      | $ | 0.03       |  
|                                                                                                                                                         |  |      |            |      |   |            |  
|Weighted average common shares outstanding-
  diluted                                                                                                    |  |      | 18,075,746 |      |   | 17,276,877 |  
|                                                                                                                                                         |  |      |            |      |   |            |  
|Net income per common share - diluted                                                                                                                    |  | $    | 0.07       |      | $ | 0.03       |  
|                                                                                                                                                         |  |      |            |      |   |            |  

See accompanying notes to the consolidated
financial statements.

F-4

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES
IN
STOCKHOLDERS EQUITY
For the Years Ended December 31, 2007 and 2006

|                                                                                                                                                          |  |                   |           |              |   |                               |  |                       |            |                              |   |        |  |   |            |   |   |            |   |   |            |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | --------- | ------------ | - | ----------------------------- |  | --------------------- | ---------- | ---------------------------- | - | ------ |  | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                                                                                                                                                          |  | Preferred Stock   |           | Common Stock |   |                               |  |                       |            |                              |   |        |  |  
|                                                                                                                                                          |  |                   |           |              |   | Additional 
 Paid in
 Capital |  | Accumulated 
 Deficit |            | Total
 Stockholders
 Equity |  
|                                                                                                                                                          |  | Number of
 Shares |           | Par Value    |   | Number of
 Shares             |  | Par Value             |            |                              |   |       
|                                                                                                                                                          |  |                   |           |              |   |                               |  |                       |            |                              |   |        |  |   |           
|                                                                                                                                                          |  |                   |           |              |   |                               |  |                       |            |                              |   |        |  |   |            |   |   |            |   |   |            |  
|BALANCES, December 31, 2005                                                                                                                               |  |                   |          |              | $ |                              |  |                       | 15,972,321 |                              | $ | 15,972 |  | $ | 10,838,651 |   | $ | (2,415,604 | ) | $ | 8,439,019  |  
|                                                                                                                                                          |  |                   |           |              |   |                               |  |                       |            |                              |   |        |  |   |            |   |   |            |   |   |            |  
|Preferred stock offering of 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     |  
|                                                                                                                                                          |  |                   |           |              |   |                               |  |                       |            |                              |   |        |  |   |            |   |   |            |   |   |            |  
|Stock-based compensation                                                                                                                                  |  |                   |           |              |   |                               |  |                       | 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 |  
|                                                                                                                                                          |  |                   |           |              |   |                               |  |                       |            |                              |   |        |  |   |            |   |   |            |   |   |            |  
|Dividends paid on preferred stock                                                                                                                         |  |                   |          |              |   |                              |  |                       |           |                              |   |       |  |   |           |   |   | (1,380,000 | ) |   | (1,380,000 | )
|                                                                                                                                                          |  |                   |           |              |   |                               |  |                       |            |                              |   |        |  |   |            |   |   |            |   |   |            |  
|Stock-based compensation                                                                                                                                  |  |                   |          |              |   |                              |  |                       | 75,000     |                              |   | 75     |  |   | 109,925    |   |   |           |   |   | 110,000    |  
|                                                                                                                                                          |  |                   |           |              |   |                               |  |                       |            |                              |   |        |  |   |            |   |   |            |   |   |            |  
|Private placement offering of 675,000 shares of common stock and
 warrants to purchase 165,000 shares of common stock (net of issuance costs of
 $60,000) |  |                   |          |              |   |                              |  |                       | 675,000    |                              |   | 675    |  |   | 1,289,325  |   |   |           |   |   | 1,290,000  |  
|                                                                                                                                                          |  |                   |           |              |   |                               |  |                       |            |                              |   |        |  |   |            |   |   |            |   |   |            |  
|Private placement offering of 187,500 shares of common stock and
 warrants to purchase 48,750 shares of common stock (net of issuance costs of
 $32,500)  |  |                   |          |              |   |                              |  |                       | 187,500    |                              |   | 187    |  |   | 342,313    |   |   |           |   |   | 342,500    |  
|                                                                                                                                                          |  |                   |           |              |   |                               |  |                       |            |                              |   |        |  |   |            |   |   |            |   |   |            |  
|Net income                                                                                                                                                |  |                   |          |              |   |                              |  |                       |           |                              |   |       |  |   |           |   |   | 2,572,075  |   |   | 2,572,075  |  
|                                                                                                                                                          |  |                   |           |              |   |                               |  |                       |            |                              |   |        |  |   |            |   |   |            |   |   |            |  
|                                                                                                                                                          |  |                   |           |              |   |                               |  |                       |            |                              |   |        |  |   |            |   |   |            |   |   |            |  
|BALANCES, December 31, 2007                                                                                                                               |  |                   | 1,380,000 |              | $ | 1,380                         |  |                       | 17,066,821 |                              | $ | 17,066 |  | $ | 25,243,944 |   | $ | (755,844   | ) | $ | 24,506,546 |  
|                                                                                                                                                          |  |                   |           |              |   |                               |  |                       |            |                              |   |        |  |   |            |   |   |            |   |   |            |  

See accompanying notes to the consolidated
financial statements.

F-5

---



VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS
For the Years Ended December 31, 2007 and 2006

|                                                                                  |  |      |             |      |   |             |  
|--------------------------------------------------------------------------------- |  | ---- | ----------- | ---- | - | ----------- | -
|                                                                                  |  | 2007 |             | 2006 |  
|                                                                                  |  |      |             |      |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                              |  |      |             |      |   |             |  
|Net income                                                                        |  | $    | 2,572,075   |      | $ | 1,318,690   |  
|Adjustments to reconcile net income to net cash provided by operating
 activities |  |      |             |      |   |             |  
|Depreciation and amortization                                                     |  |      | 190,556     |      |   | 44,865      |  
|Stock-based compensation expense                                                  |  |      | 110,000     |      |   | 256,800     |  
|Deferred income tax benefit                                                       |  |      | (116,700    | )    |   | (159,100    | )
|Impairment of property held for sale                                              |  |      | 220,948     |      |   |            |  
|(Increase) decrease in:                                                           |  |      |             |      |   |             |  
|Properties held for sale                                                          |  |      | (49,982     | )    |   | 124,894     |  
|Deposits on properties                                                            |  |      | 230,000     |      |   | 1,000       |  
|Tax certificates held and accrued interest
receivable                             |  |      | 146,732     |      |   | 66,855      |  
|Security deposits                                                                 |  |      | (124        | )    |   | 57,400      |  
|Other assets                                                                      |  |      | (149,566    | )    |   | (76,584     | )
|Increase (decrease) in:                                                           |  |      |             |      |   |             |  
|Accounts payable and accrued expenses                                             |  |      | 552,203     |      |   | 425,536     |  
|Estimated court and media costs                                                   |  |      | (1,072,107  | )    |   | 4,646,673   |  
|Income taxes payable                                                              |  |      | 219,248     |      |   | 467,842     |  
|                                                                                  |  |      |             |      |   |             |  
|Net cash provided by operating activities                                         |  |      | 2,853,283   |      |   | 7,174,871   |  
|                                                                                  |  |      |             |      |   |             |  
|                                                                                  |  |      |             |      |   |             |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                              |  |      |             |      |   |             |  
|Acquisition of property and equipment                                             |  |      | (27,309     | )    |   | (13,915     | )
|Acquisition of consumer receivables                                               |  |      | (12,799,459 | )    |   | (22,915,748 | )
|Notes receivable                                                                  |  |      | 155,641     |      |   |            |  
|Note receivable from related party                                                |  |      | (100,000    | )    |   |            |  
|Collections applied to principal on consumer
receivables                          |  |      | 4,097,175   |      |   | 2,346,483   |  
|                                                                                  |  |      |             |      |   |             |  
|Net cash used in investing activities                                             |  |      | (8,673,952  | )    |   | (20,583,180 | )
|                                                                                  |  |      |             |      |   |             |  
|                                                                                  |  |      |             |      |   |             |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                              |  |      |             |      |   |             |  
|Borrowings under lines of credit, net                                             |  |      | 1,160,493   |      |   | 7,696,926   |  
|Proceeds received from stock and warrants                                         |  |      | 1,632,500   |      |   | 13,800,120  |  
|Proceeds from convertible subordinated notes,
net                                 |  |      | 2,125,500   |      |   |            |  
|Redemption of convertible secured
debenture                                       |  |      |            |      |   | (1,800,000  | )
|Payment of notes payable                                                          |  |      |            |      |   | (1,680,000  | )
|Commissions and related expenses paid on stock offering                           |  |      |            |      |   | (1,404,000  | )
|Payment of preferred dividends                                                    |  |      | (1,380,000  | )    |   | (851,005    | )
|                                                                                  |  |      |             |      |   |             |  
|Net cash provided by financing activities                                         |  |      | 3,538,493   |      |   | 15,762,041  |  
|                                                                                  |  |      |             |      |   |             |  
|                                                                                  |  |      |             |      |   |             |  
|Net (decrease) increase in cash and cash equivalents                              |  |      | (2,282,176  | )    |   | 2,353,732   |  
|                                                                                  |  |      |             |      |   |             |  
|Cash and cash equivalents, beginning of period                                    |  |      | 2,444,356   |      |   | 90,624      |  
|                                                                                  |  |      |             |      |   |             |  
|                                                                                  |  |      |             |      |   |             |  
|Cash and cash equivalents, end of period                                          |  | $    | 162,180     |      | $ | 2,444,356   |  
|                                                                                  |  |      |             |      |   |             |  
|                                                                                  |  |      |             |      |   |             |  
|Supplemental disclosure of cash flow information:                                 |  |      |             |      |   |             |  
|Cash paid for interest                                                            |  | $    | 1,636,437   |      | $ | 1,018,573   |  
|Cash paid for income taxes                                                        |  | $    | 1,333,958   |      | $ | 680,836     |  

See accompanying notes to the consolidated financial
statements.

F-6

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2007 and 2006

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

After careful consideration
of trends in revenues and future opportunities for growth, management has made
the determination that the consumer receivables business will be the sole
operating focus of the Company in fiscal 2008. As a result, the Company is
currently considering all strategic alternatives for J. Holder and VOM,
including, but not limited to, the sale of some or all of each entitys assets,
partnering or other collaboration agreements, or a merger, spin-off or other
strategic transaction. On December 31, 2007, the Board of Directors of the
Company unanimously approved managements plan to discontinue the operations of
the Companys J. Holder and VOM subsidiaries and to sell and dispose of the
assets or membership interests/capital stock of such subsidiaries. Accordingly,
these operations will be shown as discontinued operations in 2008.

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

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. All significant
intercompany payables, receivables, revenues and expenses have been eliminated
in 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.

F-7

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS 
December 31, 2007 and 2006

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

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 principally with one financial
institution. At times, cash balances may be in excess of the amounts insured by
the Federal Deposit Insurance Corporation. As of December 31, 2007, the Company
had cash deposits in excess of federally insured amounts totaling $21,558.
Management considers the risk of loss to be minimal.

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.

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.

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

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

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

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

F-8

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS 
December 31, 2007 and 2006

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

Consumer Receivables (Continued)

The Company establishes
valuation allowances for all acquired loans subject to SOP 03-3 to reflect only
those losses incurred after acquisition (that is, the present value of cash
flows initially expected at acquisition that are no longer expected to be
collected). Valuation allowances are established only subsequent to acquisition
of the loans, if necessary. At December 31, 2007 and 2006, 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. 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 consolidated statement of income.

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.

The Company records a
valuation allowance against any portion of the deferred income tax asset when
it believes, based upon the weight of available evidence, it is more likely than
not that some portion of the deferred asset will not be realized.

Stock Based Compensation

The Company follows the
provisions of SFAS No. 123 (revised 2004), Share-Based Payment (SFAS No.
123R), which addresses the accounting for share-based payment transactions
with employees and other third parties and requires that the compensation costs
relating to such transactions be recognized in the consolidated financial
statements. SFAS No. 123R requires additional disclosures relating to the
income tax and cash flow effects resulting from share-based payments.
Additionally, regarding the treatment of non-employee stock based compensation,
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.

Change in Presentation and Reclassifications

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

Acquisitions of and
collections applied to principal of consumer receivables were previously
reflected at net as adjustments to reconcile net income to net cash provided by
operating activities. To conform with industry practices and to provide a more
meaningful presentation, these items are reflected as cash flows from investing
activities at gross. This change had no effect on net income or retained
earnings.

F-9

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS 
December 31, 2007 and 2006

Use of Estimates

The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

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

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 September 2006, the FASB
issued SFAS No. 157, Fair Value Measurements (SFAS No. 157), which provides
guidance on how to measure assets and liabilities that use fair value. SFAS No.
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 No. 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 February
2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities - Including an Amendment of FASB Statement No. 115
(SFAS No. 159). This statement permits entities to choose to measure many
financial instruments and certain other items at fair value. Most of the
provisions of SFAS No. 159 apply only to entities that elect the fair value
option. However, the amendment to SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, applies to all entities with
available-for-sale and trading securities. SFAS No. 159 is effective as of the
beginning of an entitys first fiscal year that begins

F-10

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS 
December 31, 2007 and 2006

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

Recent Accounting Pronouncements (Continued)

after November 15, 2007.
Management has not determined whether the adoption of this statement will
affect its reported results of operations or financial condition.

NOTE 3 - INVESTMENTS

Properties Held for Sale

Properties held for sale
consist of the following:

|                               |  |                   |           |                     |   |           | 
|------------------------------ |  | ----------------- | --------- | ------------------- | - | --------- | 
|                               |  | December
31,
2007 |           | December
 31,
 2006 |  
|                               |  |                   |           |                     |  
|Real property inventory        |  | $                 | 5,564,234 |                     | $ | 6,109,008 | 
|Assignments and judgments      |  |                   | 398,505   |                     |   | 24,697    | 
|                               |  |                   |           |                     |   |           | 
|                               |  |                   |           |                     |   |           | 
|Total properties held for sale |  | $                 | 5,962,739 |                     | $ | 6,133,705 | 
|                               |  |                   |           |                     |   |           | 

Tax Certificates Held and Accrued Interest Receivable

|                                                 |  |                     |         |                     |   |         | 
|------------------------------------------------ |  | ------------------- | ------- | ------------------- | - | ------- | 
|                                                 |  |                     |         |                     |   |         | 
|                                                 |  | December
 31,
 2007 |         | December
 31,
 2006 |  
|                                                 |  |                     |         |                     |  
|Tax certificates held                            |  | $                   | 132,619 |                     | $ | 243,796 | 
|Accrued interest                                 |  |                     | 192,720 |                     |   | 228,275 | 
|                                                 |  |                     |         |                     |   |         | 
|                                                 |  |                     |         |                     |   |         | 
|Total tax certificates held and accrued
interest |  | $                   | 325,339 |                     | $ | 472,071 | 
|                                                 |  |                     |         |                     |   |         | 

F-11

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS 
December 31, 2007 and 2006

NOTE 4 -CONSUMER RECEIVABLES

Consumer receivable activity
consists of the following:

|                                                    |  |                    |             |                    |   |             |  
|--------------------------------------------------- |  | ------------------ | ----------- | ------------------ | - | ----------- | -
|                                                    |  | December 31,
 2007 |             | December 31,
 2006 |  
|                                                    |  |                    |             |                    |  
|Balance at beginning of period                      |  | $                  | 38,327,926  |                    | $ | 17,758,661  |  
|                                                    |  |                    |             |                    |   |             |  
|                                                    |  |                    |             |                    |   |             |  
|Acquisitions and capitalized costs, net of
 returns |  |                    | 12,799,459  |                    |   | 22,915,748  |  
|Amortization of capitalized costs                   |  |                    | (59,196     | )                  |   |            |  
|                                                    |  |                    |             |                    |   |             |  
|                                                    |  |                    | 12,740,263  |                    |   | 22,915,748  |  
|                                                    |  |                    |             |                    |   |             |  
|                                                    |  |                    |             |                    |   |             |  
|Cash collections                                    |  |                    | (17,960,713 | )                  |   | (10,777,742 | )
|Income recognized on consumer receivables           |  |                    | 13,863,538  |                    |   | 8,431,259   |  
|                                                    |  |                    |             |                    |   |             |  
|Cash collections applied to principal               |  |                    | (4,097,175  | )                  |   | (2,346,483  | )
|                                                    |  |                    |             |                    |   |             |  
|                                                    |  |                    |             |                    |   |             |  
|Balance at end of period                            |  | $                  | 46,971,014  |                    | $ | 38,327,926  |  
|                                                    |  |                    |             |                    |   |             |  

As of December 31, 2007,
based upon managements current estimation of projected future collections,
principal reductions will be as follows:

|           |  |              |            |  | 
|---------- |  | ------------ | ---------- |  | 
|           |  | December
31, |            | 
|           |  |              |            | 
|2008       |  | $            | 9,543,836  |  | 
|2009       |  |              | 11,534,414 |  | 
|2010       |  |              | 14,443,248 |  | 
|2011       |  |              | 8,382,696  |  | 
|2012       |  |              | 3,048,566  |  | 
|Thereafter |  |              | 18,254     |  | 
|           |  |              |            |  | 
|           |  |              |            |  | 
|           |  | $            | 46,971,014 |  | 
|           |  |              |            |  | 

The accretable yield
represents the amount of income the Company can expect to generate over the
remaining lives of its existing portfolios based on estimated cash flows as of
December 31, 2007 and 2006. Changes in the accretable yield are as follows:

|                                         |  |                   |             |                     |   |            |  
|---------------------------------------- |  | ----------------- | ----------- | ------------------- | - | ---------- | -
|                                         |  |                   |             |                     |   |            |  
|                                         |  | December
31,
2007 |             | December
 31,
 2006 |  
|                                         |  |                   |             |                     |  
|Balance at beginning of period           |  | $                 | 29,343,803  |                     | $ | 15,618,641 |  
|Income recognized on finance receivables |  |                   | (13,863,538 | )                   |   | (8,431,259 | )
|Additions                                |  |                   | 15,662,538  |                     |   | 22,456,421 |  
|                                         |  |                   |             |                     |   |            |  
|                                         |  |                   |             |                     |   |            |  
|Balance at end of period                 |  | $                 | 31,142,803  |                     | $ | 29,643,803 |  
|                                         |  |                   |             |                     |   |            |  

NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment
consist of the following:

|                                                |  |                     |         |                     |   |         |  
|----------------------------------------------- |  | ------------------- | ------- | ------------------- | - | ------- | -
|                                                |  | December
 31,
 2007 |         | December
 31,
 2006 |  
|                                                |  |                     |         |                     |  
|Office Equipment                                |  | $                   | 111,444 |                     | $ | 103,889 |  
|Furniture and Fixtures                          |  |                     | 28,163  |                     |   | 12,587  |  
|Leasehold Improvements                          |  |                     | 20,273  |                     |   | 16,095  |  
|                                                |  |                     |         |                     |   |         |  
|                                                |  |                     | 159,880 |                     |   | 132,571 |  
|Less: Accumulated Depreciation and
amortization |  |                     | (95,460 | )                   |   | (63,952 | )
|                                                |  |                     |         |                     |   |         |  
|                                                |  |                     |         |                     |   |         |  
|                                                |  | $                   | 64,420  |                     | $ | 68,619  |  
|                                                |  |                     |         |                     |   |         |  

Depreciation and
amortization expense for the years ended December 31, 2007 and 2006 was $31,508
and $32,518, respectively.

F-12

---



VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS 
December 31, 2007 and 2006

NOTE 6 - LINES OF CREDIT

On January 27, 2005 (the
Closing Date), Velocity entered into a Loan and Security Agreement (the Loan
Agreement) with Wells Fargo, 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 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.

Pursuant to the Loan
Agreement, the Lender 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.

In February 2006, Velocity
entered into a First Amendment to the Loan Agreement with the Lender which
amended 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 increased 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 interest rate on the loan was
reduced 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.

In May 2006, as a result of
the Series A 10% Convertible Preferred Stock Offering (the 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.

In December 2006, Velocity
entered into a Second Amendment to the Loan Agreement with the Lender which the
amended 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.

On February
23, 2007, Velocity entered into a Third Amendment to the Loan Agreement with
the Lender, dated January 27, 2005. Pursuant to the Loan Agreement, as amended
and restated, the Lender agreed to permanently increase the credit facility up
to $17,500,000 which matures on January 27, 2009. In addition, Velocity agreed
to maintain certain ratios with respect to outstanding advances on the credit
facility against the estimated remaining return value on the Lenders financed
portfolios, and 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 September
30, 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 June 30, 2007.

F-13

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTSDecember 31, 2007 and 2006

NOTE 6 - LINES OF CREDIT (Continued)

As of December 31, 2007 and
December 31, 2006, the Company had $14,429,138 and $13,791,388 outstanding on
the credit facility, respectively. The rate of interest at December 31, 2007
was 8.75%.

As of February 29, 2008, the
maturity of the credit facility was extended through January 27, 2011. See NOTE
17  SUBSEQUENT EVENTS.

On June 14, 2007, the
Company entered into an agreement for a revolving credit line for $800,000 with
Northern State Bank. Interest on the outstanding principal balance will be the
banks prime rate plus one-half percent per annum. Any sums loaned under the
note may be repaid at any time, without premium or penalty, and reborrowed from
time to time, until July 1, 2008. Payments of interest only are due on the 1st
day of each and every month until July 1, 2008, on which date the entire
balance or principal, interest and fees then unpaid shall be due and payable.
The credit line is secured by various mortgages of real property held by the
Companys subsidiary, J. Holder. The Company had $316,000 outstanding on the
credit line with interest at 7.75% as of December 31, 2007.

NOTE 7 - NOTES PAYABLE

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                   |           |                   |   |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | --------- | ----------------- | - | --------- | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | December
31,
2007 |           | December
31,
2006 |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                   |           |                   |  
|On June 2, 2005, J.
 Holder, Inc. acquired a residential property in Melbourne, Florida (the
 Melbourne Property). Acquisition financing of $3,350,000 was provided by a
 group of investors (Investors Group) that receive 10% per annum and 2%
 of the loaned amount 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, $2,300,000 was obtained from related parties. See NOTE 9 
 RELATED PARTY TRANSACTIONS |  | $                 | 2,950,000 |                   | $ | 2,950,000 | 

F-14

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTSDecember 31, 2007 and 2006

NOTE 7 - NOTES PAYABLE (Continued)

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                   |           |                   |   |           | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | --------- | ----------------- | - | --------- | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | December
31,
2007 |           | December
31,
2006 |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                   |           |                   |  
|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 which are related parties in a
 private placement. The notes with interest at 7% per annum were payable in
 quarterly installments commencing September 30, 2005. On May 14, 2006, the
 $150,000 promissory note was redeemed at the Companys option. As of December
 31, 2006, the remaining notes in the aggregate amount of $200,000 were held
 by a related party to the president/CEO. These notes were extended through
 April 15, 2008. |  |                   | 200,000   |                   |   | 200,000   | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                   |           |                   |   |           | 
|On April 25, 2007, the
 Company issued two promissory notes of $35,000 and $200,000 to investors in a
 private placement. The notes bear interest at 10% per annum plus 15% of the
 net profit related to the sale of specified real property owned by the
 Companys subsidiary, J. Holder, Inc. All amounts owed are due no later than
 April 25, 2008 and may be redeemed at any time before the due date.                                                                                                                                                                                      |  |                   | 235,000   |                   |   |          | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                   |           |                   |   |           | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                   |           |                   |   |           | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                   |           |                   |   |           | 
|Total notes payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | $                 | 3,385,000 |                   | $ | 3,150,000 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                   |           |                   |   |           | 

NOTE 8 - CONVERTIBLE SECURED DEBENTURES AND NOTES

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) and a warrant to
purchase 200,000 shares of the Companys common stock at an exercise price of
$3.10 per share which expires in October 2008.

The Debenture was
convertible at $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 that 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 the Company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.

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 which expires in April 2009. On May 19, 2006, the Company used $1,823,000
of the proceeds from its preferred stock offering to repay the interest and
principal under the Debenture.

On June 29, 2007, and July
27, 2007, the Company closed on its private placement offering of 10%
Convertible Subordinated Notes (the Notes) due 2017 (the Offering) to
accredited investors (Investors). The Notes were offered and sold pursuant to
exemption from registration under Section 4(2) of the Securities Act of 1933,
as amended (the Securities Act). The Notes were sold by the Company through
an NASD member firm which served as placement agent. In connection with the
Offering, the Company issued the Notes and also entered into a Subscription
Agreement with each of the Note holders.

F-15

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTSDecember 31, 2007 and 2006

NOTE 8 - CONVERTIBLE SECURED DEBENTURES AND NOTES (Continued)

Pursuant to the Offering,
the Company issued Notes in the aggregate principal amount of $2,350,000.
Interest on the notes is payable monthly in arrears commencing September 30,
2007. The Notes are subordinated in liquidation preference and in right of
payment to all of the Companys existing debt. The Notes are senior in right of
payment and in liquidation preference to any future long term debt of the
Company. To the extent the Company were to complete a subsequent financing with
the placement agent on or before March 29, 2008 (Subsequent Financing), the
Notes will automatically convert into the underlying securities (either
convertible debt or preferred stock) sold in the Subsequent Financing. To the
extent the new issue in the Subsequent Financing contains an interest rate less
than 10% per annum; the exchange ratio of the Notes will automatically adjust
to maintain a 10.0% yield. To the extent the Company does not complete a
Subsequent Financing; the Notes may be converted, at the option of the holder,
into shares of the Companys common stock at a price of $2.50 per share,
subject to certain adjustments.

The Company used the net
proceeds from the Offering primarily for the purchase of portfolios of consumer
receivables and for general corporate purposes.

For its services in
connection with the Offering, the placement agent received a fee of 7% of the
principal amount of the Notes sold. In addition, the Company paid an
unaccountable expense allowance of 1% of the principal amount of the Notes
sold. As a result, after other Offering expenses of approximately $41,500, the
Company received net proceeds of approximately $2,125,500. Total costs of
$224,500 related to this offering have been capitalized and are being amortized
over the life of the notes.

NOTE 9 - RELATED PARTY TRANSACTIONS

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

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

Of the $3,350,000 in
acquisition financing on the Melbourne Property $1,400,000 was provided by Dr.
Kelly and Mr. Granatell, who subsequently became members of the Companys Board
of Directors. Additionally, Mr. Robert Kleinert and Ms. Yoke, related parties
of the President and CEO of the Company, provided $900,000 of this financing in
connection with the acquisition. Interest on these related party notes with respect
to the Melbourne Property accrued in the amounts of $242,273 and $216,528 for
the years ended December 31, 2007 and 2006 which is included in accounts
payable and accrued expenses. Interest paid to other related parties as
referenced in NOTE 7 totaled $14,000 and $18,269, for the years ended December
31, 2007 and 2006.

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.
In May 2007, the fee arrangements were approved by Unanimous Written Consent of
the Board of Directors other than Mr. Ragan, Sr. who abstained.

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

F-16

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTSDecember 31, 2007 and 2006

NOTE 9 - RELATED PARTY TRANSACTIONS (Continued)

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

|                          |  |                   |           |                   |   |           | 
|------------------------- |  | ----------------- | --------- | ----------------- | - | --------- | 
|                          |  | December 31,
2007 |           | December 31,
2006 |  
|                          |  |                   |           |                   |  
|Velocity Investments, LLC |  | $                 | 1,128,107 |                   | $ | 1,225,577 | 
|J. Holder, Inc.           |  |                   | 6,000     |                   |   | 10,139    | 
|VOM, LLC                  |  |                   | 238       |                   |   | 5,528     | 
|                          |  |                   |           |                   |   |           | 
|                          |  |                   |           |                   |   |           | 
|                          |  | $                 | 1,134,345 |                   | $ | 1,241,244 | 
|                          |  |                   |           |                   |   |           | 

NOTE 10 - 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. No
options have been granted to date.

The Company did not make any
awards under the Employee Plan during the year ended December 31, 2007. During
the year ended December 31, 2006, the Company issued restricted stock awards.
The following summarizes shares of common stock under the Employee Plan:

|                    |  |                           |         |                         |  |                            |  |                   |              |                   |                   |         |  |   |         | 
|------------------- |  | ------------------------- | ------- | ----------------------- |  | -------------------------- |  | ----------------- | ------------ | ----------------- | ----------------- | ------- |  | - | ------- | 
|                    |  |                           |         |                         |  |                            |  |                   |              |                   | Expenses Recorded |        
|                    |  |                           |         |                         |  |                            |  |                   |              |                   |                   |        
|Employee            |  | Number of 
Shares
Granted |         | Number of
Shares
Vested |  | Date of Grant
Market Value |  | December 31,
2007 |              | December 31,
2006 |                  
|                    |  |                           |         |                         |  |                            |  |                   |              |                   |                  
|James J.
 Mastriani |  |                           | 200,000 |                         |  | 200,000                    |  |                   | 1.55         |                   | $                 | 110,000 |  | $ | 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   | 
|                    |  |                           |         |                         |  |                            |  |                   |              |                   |                   |         |  |   |         | 
|                    |  |                           |         |                         |  |                            |  |                   |              |                   | $                 | 110,000 |  | $ | 256,800 | 
|                    |  |                           |         |                         |  |                            |  |                   |              |                   |                   |         |  |   |         | 

The stock based compensation
expense of $110,000 pertained to 75,000 shares of common stock which vested to
James J. Mastriani in 2007. For the year ended December 31, 2007, there was no
tax benefits realized related to stock based compensation issued to employees
in 2006.

F-17

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS 
December 31, 2007 and 2006

NOTE 11 - COMMON STOCK OFFERING

On September 26, 2007, the
Company consummated a closing of its private placement offering (the Offering)
of shares of common stock (the Shares) and warrants to purchase shares of
common stock (the Warrants, together with the Shares, the Securities) to
accredited investors (Investors). The Securities were offered and sold
pursuant to an exemption from registration under Section 4(2) of the Securities
Act of 1933, as amended (the Securities Act). In connection with the
Offering, the Company also entered into a Securities Purchase Agreement and a
Registration Rights Agreement with the investors in the Offering. The Company
sold an aggregate of 675,000 shares at a purchase price of $2.00 per share and
delivered Warrants to purchase an aggregate of 165,000 shares.

On October 11, 2007, the
Company closed on its second offering of shares of common stock and warrants to
purchase shares of common stock to accredited investors under the same terms
described above. Together with the first closing, the Company sold an aggregate
of 862,500 shares at a purchase price of $2.00 per share and delivered Warrants
to purchase an aggregate of 172,500 shares of the Companys common stock. Net
proceeds from the financing were used for working capital purposes including
the purchase of distressed consumer receivable portfolios.

The Company received net
proceeds of $1,632,500 from these placements, after offering expenses of
approximately $10,000 and commissions of approximately $82,500. In addition,
the placement agent received 2 year warrants to acquire 41,250 shares of the
Companys common stock.

The Warrants entitle the
holders to purchase shares of the Companys common stock (the Warrant Shares)
for a period of three years commencing on April 4, 2008 at an exercise price of
$2.50 per share. The Warrants contain certain anti-dilution rights. In
addition, the Investors are entitled to additional shares of common stock if,
during the six month period after the Initial Closing, the Company sells or
issues additional shares of Common Stock, or securities (debt and/or equity)
convertible into common stock, with a purchase, exercise or conversion price of
less than $2.00.

Pursuant to the Registration
Rights Agreement, the Company agreed to file a registration statement providing
for the resale of the Shares and the Warrant Shares. The Company agreed to file
the registration statement within 45 days of the initial closing and to use its
best efforts to cause the registration statement to become effective within 90
or 120 days, The Company met its obligations under the registration rights
arrangement and therefore, the carrying amount of the liability representing
the Companys registration rights obligations was $0. The registration
statement for the Offering was filed on November 9, 2007 and declared effective
on November 21, 2007.

NOTE 12 - PREFERRED STOCK OFFERING

On May 18, 2006, the Company
sold 1,200,000 shares of Series A 10% Convertible Preferred Stock (Preferred
Stock) at $10 per share resulting in gross proceeds of $12,000,000. The
underwriters were granted an over allotment option to purchase up to an additional
180,000 shares of Preferred Stock.  The underwriters were also issued a warrant
to purchase 120,000 shares of Preferred Stock at $10 per share. On May 31, 2006, the underwriters
exercised their overallotment option to purchase 180,000 shares of the
Preferred Stock. 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 the Companys 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 per share, plus accrued
and unpaid dividends to the redemption date.

NOTE 13 - EARNINGS PER SHARE

Basic earnings per share are
computed using the weighted average number of shares outstanding during each
period. Diluted earnings per share are computed using the weighted average
number of shares outstanding during each period, plus the dilutive effects of
potential convertible securities related to preferred stock, convertible notes,
options and warrants. Outstanding options and warrants to non-employees
convertible into 1,390,910 and 1,177,160 shares of common stock, convertible
preferred stock, convertible into 5,520,000 shares of common stock and
convertible notes, convertible into 467,308 and 208,463 shares for the years ended
December 31, 2007 and 2006, respectively, were not included in the dilutive per
share calculations because their effect would have been anti-dilutive.

F-18

---



VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS 
December 31, 2007 and 2006

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

|                                                                    |  |                    |            |                    |   |            |  
|------------------------------------------------------------------- |  | ------------------ | ---------- | ------------------ | - | ---------- | -
|                                                                    |  | December 31,
 2007 |            | December 31,
 2006 |  
|                                                                    |  |                    |            |                    |  
|Numerator:                                                          |  |                    |            |                    |   |            |  
|Net income                                                          |  | $                  | 2,572,075  |                    | $ | 1,318,690  |  
|Preferred dividend                                                  |  |                    | (1,380,000 | )                  |   | (851,005   | )
|                                                                    |  |                    |            |                    |   |            |  
|                                                                    |  |                    |            |                    |   |            |  
|Net
 income attributable to common shareholders - Basic and Diluted |  | $                  | 1,192,075  |                    | $ | 467,685    |  
|                                                                    |  |                    |            |                    |   |            |  
|                                                                    |  |                    |            |                    |   |            |  
|Denominator:                                                        |  |                    |            |                    |   |            |  
|Weighted average shares - Basic                                     |  |                    | 16,395,040 |                    |   | 16,008,653 |  
|Effect of dilutive instruments:                                     |  |                    |            |                    |   |            |  
|Stock options                                                       |  |                    | 1,680,706  |                    |   | 1,268,224  |  
|                                                                    |  |                    |            |                    |   |            |  
|                                                                    |  |                    |            |                    |   |            |  
|Weighted average shares - Diluted                                   |  |                    | 18,075,746 |                    |   | 17,276,877 |  
|                                                                    |  |                    |            |                    |   |            |  
|                                                                    |  |                    |            |                    |   |            |  
|Net income per common share - Basic                                 |  | $                  | 0.07       |                    | $ | 0.03       |  
|                                                                    |  |                    |            |                    |   |            |  
|                                                                    |  |                    |            |                    |   |            |  
|Net income per common share - Diluted                               |  | $                  | 0.07       |                    | $ | 0.03       |  
|                                                                    |  |                    |            |                    |   |            |  

F-19

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS 
December 31, 2007 and 2006

NOTE 14  INCOME TAXES

|                                                           |  |                    |           |                    |   |           |  
|---------------------------------------------------------- |  | ------------------ | --------- | ------------------ | - | --------- | -
|The provision for income
 taxes consists of the following: |  |                    |           |                    |  
|                                                           |  | December 31,
 2007 |           | December 31,
 2006 |  
|                                                           |  |                    |           |                    |  
|Current:                                                   |  |                    |           |                    |   |           |  
|Federal                                                    |  | $                  | 1,390,688 |                    | $ | 765,072   |  
|State                                                      |  |                    | 571,347   |                    |   | 366,069   |  
|                                                           |  |                    |           |                    |   |           |  
|                                                           |  |                    |           |                    |   |           |  
|Total                                                      |  |                    | 1,962,035 |                    |   | 1,131,141 |  
|                                                           |  |                    |           |                    |   |           |  
|                                                           |  |                    |           |                    |   |           |  
|Deferred:                                                  |  |                    |           |                    |   |           |  
|Federal                                                    |  |                    | (81,200   | )                  |   | (103,000  | )
|State                                                      |  |                    | (35,500   | )                  |   | (56,100   | )
|                                                           |  |                    |           |                    |   |           |  
|                                                           |  |                    |           |                    |   |           |  
|Total                                                      |  |                    | (116,700  | )                  |   | (159,100  | )
|                                                           |  |                    |           |                    |   |           |  
|                                                           |  |                    |           |                    |   |           |  
|Total income tax expense                                   |  | $                  | 1,845,335 |                    | $ | 972,041   |  
|                                                           |  |                    |           |                    |   |           |  

The tax effect of temporary
differences that make up the significant components of the deferred tax assets
and liability for financial reporting purposes for the years ended December 31,
2007 and 2006 are as follows:

|                                     |  |                    |         |                    |   |         |  
|------------------------------------ |  | ------------------ | ------- | ------------------ | - | ------- | -
|                                     |  | December 31,
 2007 |         | December 31,
 2006 |  
|                                     |  |                    |         |                    |  
|Deferred tax assets                  |  |                    |         |                    |   |         |  
|Net operating loss carryforwards     |  | $                  | 156,100 |                    | $ | 176,100 |  
|Stock compensation                   |  |                    | 16,800  |                    |   | 110,400 |  
|Accrued interest                     |  |                    | 61,200  |                    |   | 30,000  |  
|Impairment of property held for sale |  |                    | 96,000  |                    |   |        |  
|Section 263(a)                       |  |                    | 128,200 |                    |   | 38,700  |  
|                                     |  |                    |         |                    |   |         |  
|                                     |  |                    | 458,300 |                    |   | 355,200 |  
|Deferred tax liability               |  |                    |         |                    |   |         |  
|Depreciation and amortization        |  |                    | (20,300 | )                  |   | (23,100 | )
|                                     |  |                    |         |                    |   |         |  
|                                     |  |                    |         |                    |   |         |  
|Net deferred income taxes            |  |                    | 438,000 |                    |   | 332,100 |  
|                                     |  |                    |         |                    |   |         |  
|Valuation allowance                  |  |                    | (14,400 | )                  |   | (25,200 | )
|                                     |  |                    |         |                    |   |         |  
|                                     |  |                    |         |                    |   |         |  
|Total                                |  | $                  | 423,600 |                    | $ | 306,900 |  
|                                     |  |                    |         |                    |   |         |  

Velocity Asset Management,
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 carryforwards. These
pre-reverse acquisition net operating loss carryforwards will be limited and
reduced based upon the applicable Federal and New Jersey rules.

The valuation allowance
decreased $10,800 in 2007.

F-20

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS 
December 31, 2007 and 2006

NOTE 14 - INCOME TAXES (Continued)

At December 31, 2007, the
Company had unused net operating loss carryforwards of approximately $380,500
for Federal purposes and $284,000 for New Jersey purposes. These net operating
losses may provide future income tax benefits of approximately $156,100 which
will expire between the years 2008 and 2023. The ability to utilize such losses
is dependent upon the Companys ability to generate taxable 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 carryforwards, a valuation reserve has been
established equal to the amount expected to expire unused.

The Company adopted FIN 48,
Accounting for Uncertainty in Income Taxes  an interpretation of FASB
Statement No. 109 effective January 1, 2007. FIN 48 contains a two-step
approach to recognizing and measuring uncertain tax positions accounted for in
accordance with SFAS No. 109, Accounting for Income Taxes. The first step is
to evaluate the tax position for recognition by determining if the weight of
available evidence indicates that it is more likely than not that the position
will be sustained on audit, including resolution of any related appeals or
litigation processes. The second step is to measure the tax benefit as the
largest amount that is more than 50% likely of being realized upon ultimate
settlement.

As a result of the
implementation of FIN 48, no adjustments have been deemed necessary to retained
earnings for prior periods due to immateriality; therefore the liability for
income taxes associated with uncertain tax positions at January 1, 2007 was $0.
This liability was increased during 2007 by approximately $29,000 (including
penalties and interest) for State income taxes. Therefore, the liability for
income taxes associated with uncertain tax positions at December 31, 2007 is
approximately $29,000. The Company has determined that there is no material
impact on the effective tax rate with respect to any uncertain tax positions. In
addition, the Company has also determined that there are no material uncertain
tax positions in the net deferred tax asset account as of December 31, 2007
with respect to the implementation of FIN 48.

The Company files Federal
and State income tax returns in jurisdictions with varying statutes of
limitations. The 2004, 2006 and 2007 tax years remain subject to examination by
Federal taxing authorities and the 2004 through 2007 tax years generally remain
subject to examination by State tax authorities. In 2007, the U.S. Internal
Revenue Service audited the 2005 U.S. Federal tax return. This audit has been
closed. There was no material effect on the Companys financial position.

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

|                                                 |  |                    |       |                    |  |       |  
|------------------------------------------------ |  | ------------------ | ----- | ------------------ |  | ----- | -
|                                                 |  | December 31,
 2007 |       | December 31,
 2006 | 
|                                                 |  |                    |       |                    | 
|Tax provision at Federal
 statutory rate         |  |                    | 34.00 | %                  |  | 34.00 | %
|                                                 |  |                    |       |                    |  |       |  
|State income taxes net of
 Federal benefit       |  |                    | 5.94  | %                  |  | 5.94  | %
|                                                 |  |                    |       |                    |  |       |  
|Non-deductible expenses                          |  |                    | 2.68  | %                  |  | 7.04  | %
|Other (permanent
 differences, overaccrual, etc) |  |                    | -0.85 | %                  |  | -4.55 | %
|                                                 |  |                    |       |                    |  |       |  
|                                                 |  |                    |       |                    |  |       |  
|Total                                            |  |                    | 41.77 | %                  |  | 42.43 | %
|                                                 |  |                    |       |                    |  |       |  

F-21

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS 
December 31, 2007 and 2006

NOTE 15 - OUTSTANDING WARRANTS AND OPTIONS

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) expire in February 2009. The second warrants
for 677,160 shares of common stock were granted pursuant to a private offering
as compensation for services rendered and expire on September 30, 2009. A third
warrant for 200,000 shares of common stock was granted in connection with the
October 2005 convertible debt financing and expires on 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 and issued to the holder an additional
warrant to purchase 50,000 shares of the Companys common stock at an exercise
price of $3.10 per share which expires on April 1, 2009.

At December 31, 2007, the
Company had issued three year warrants to purchase an aggregate of 172,500
shares of the Companys common stock at $2.50 and 41,250 of two year warrants
of the Companys common stock at $2.50 in conjunction with the private offering
discussed in NOTE 11  COMMON STOCK OFFERING.

At December 31, 2007, 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 which expires on September 1, 2008.

The following table
summarizes information on all common share purchase options and warrants issued
by the Company for the years ended December 31, 2007 and 2006, including common
share equivalents relating to convertible debenture share warrants.

|                                          |  |                   |           |                   |   |      |  |  |           |  |   |      | 
|----------------------------------------- |  | ----------------- | --------- | ----------------- | - | ---- |  |  | --------- |  | - | ---- | 
|                                          |  | December 31, 2007 |           | December 31, 2006 |  
|                                          |  |                   |           |                   |  
|Outstanding at the
 beginning of the year |  |                   | 4,376,660 |                   | $ | 1.47 |  |  | 4,326,660 |  | $ | 1.45 | 
|Granted during year                       |  |                   | 213,750   |                   |   | 2.50 |  |  | 50,000    |  |   | 3.10 | 
|Exercised during year                     |  |                   |          |                   |   |     |  |  |          |  |   |     | 
|Terminated or expired
 during the year    |  |                   |          |                   |   |     |  |  |          |  |   |     | 
|                                          |  |                   |           |                   |   |      |  |  |           |  |   |      | 
|                                          |  |                   |           |                   |   |      |  |  |           |  |   |      | 
|Outstanding at the end of
 the year       |  |                   | 4,590,410 |                   | $ | 1.49 |  |  | 4,376,660 |  | $ | 1.47 | 
|                                          |  |                   |           |                   |   |      |  |  |           |  |   |      | 
|                                          |  |                   |           |                   |   |      |  |  |           |  |   |      | 
|Exercisable at the end of
 the period     |  |                   | 4,590,410 |                   | $ | 1.49 |  |  | 4,376,660 |  | $ | 1.47 | 
|                                          |  |                   |           |                   |   |      |  |  |           |  |   |      | 

The number and weighted
average exercise prices of all common shares and common share equivalents
issuable and stock purchase options and warrants outstanding as of December 31,
2007 is as follows:

|                         |  |                                 |           |                                    |   |      | 
|------------------------ |  | ------------------------------- | --------- | ---------------------------------- | - | ---- | 
|Range
of Exercise Prices |  | Remaining 
 Number
 Outstanding |           | Weighted 
 Average
 Exercise Price |  
|                         |  |                                 |           |                                    |  
|$0
 - 2                  |  |                                 | 3,199,500 |                                    | $ | 1.04 | 
|$2
 - 4                  |  |                                 | 1,390,910 |                                    |   | 2.70 | 

NOTE 16  COMMITMENTS

On May 2, 2007, the Company
signed a lease with respect to its new business office located at 1800 Route
34, Wall, New Jersey 07719. The lease covers 2,450 square feet of office space
and commenced on July 1, 2007 with an initial term of five years (the Term).
The Company has two options to extend the Term for a period of five years each.
The total annual lease payment is $43,488, payable in equal monthly installments
on or before the first of each month.

F-22

---



VELOCITY ASSET MANAGEMENT, INC. AND
SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS 
December 31, 2007 and 2006

The future minimum lease
payments for each of the twelve month periods ended December 31 are as follows:

|     |  |              |         | 
|---- |  | ------------ | ------- | 
|     |  | December 31, |        
|     |  |              |        
|2008 |  | $            | 43,488  | 
|2009 |  |              | 43,488  | 
|2010 |  |              | 43,488  | 
|2011 |  |              | 43,488  | 
|2012 |  |              | 21,744  | 
|     |  |              |         | 
|     |  |              |         | 
|     |  | $            | 195,696 | 
|     |  |              |         | 

Rent expense for the years
ended December 31, 2007 and 2006 was $56,198 and $21,328, respectively.

The Company has entered into
employment agreements with several officers with terms expiring through
December 31, 2009. The Companys gross commitments related to these agreements
amounted to $1,080,000.

NOTE 17 - SUBSEQUENT EVENTS

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

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

F-23

---



SIGNATURES

In accordance with Section
13 or 15(d) of the Exchange Act, the Company caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

|                                                                                                                                                                                                  |                                  |                                                                                            
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------- | -------------------------------------------------------------------------------------------
|                                                                                                                                                                                                  | VELOCITY ASSET MANAGEMENT,
 INC.
|                                                                                                                                                                                                  |                                  |                                                                                            
|Dated: March 17, 2008                                                                                                                                                                             | By:                              | /s/ JOHN C KLEINERT                                                                        
|                                                                                                                                                                                                  |                                  |                                                                                            
|                                                                                                                                                                                                  |                                  | John C. Kleinert,
 President and Chief Executive Officer                                   
|                                                                                                                                                                                                  |                                  |                                                                                            
|Dated: March 17, 2008                                                                                                                                                                             | By:                              | /s/ JAMES J. MASTRIANI                                                                     
|                                                                                                                                                                                                  |                                  |                                                                                            
|                                                                                                                                                                                                  |                                  | James
 J. Mastriani, Chief Financial Officer, Chief Legal Officer, Secretary and
 Treasurer
|                                                                                                                                                                                                  |                                  |                                                                                            
|In accordance with the
 Exchange Act, this report has been signed below by the following persons on
 behalf of Velocity Asset Management, Inc. and in the capacities and on the
 dates indicated.
|                                                                                                                                                                                                  |                                  |                                                                                            
|Dated: March 17, 2008                                                                                                                                                                             | By:                              | /s/ JOHN C KLEINERT                                                                        
|                                                                                                                                                                                                  |                                  |                                                                                            
|                                                                                                                                                                                                  |                                  | John C. Kleinert,
 President and Chief Executive Officer                                   
|                                                                                                                                                                                                  |                                  |                                                                                            
|Dated: March 17, 2008                                                                                                                                                                             | By:                              | /s/ JAMES J. MASTRIANI                                                                     
|                                                                                                                                                                                                  |                                  |                                                                                            
|                                                                                                                                                                                                  |                                  | James
 J. Mastriani, Chief Financial Officer, Chief Legal Officer, Secretary and
 Treasurer
|                                                                                                                                                                                                  |                                  |                                                                                            
|Dated: March 17, 2008                                                                                                                                                                             | By:                              | /s/ W. PETER RAGAN, SR                                                                     
|                                                                                                                                                                                                  |                                  |                                                                                            
|                                                                                                                                                                                                  |                                  | Vice President, Director                                                                   
|                                                                                                                                                                                                  |                                  |                                                                                            
|Dated: March 17, 2008                                                                                                                                                                             | By:                              | /s/ DR. MICHAEL KELLY                                                                      
|                                                                                                                                                                                                  |                                  |                                                                                            
|                                                                                                                                                                                                  |                                  | Dr. Michael Kelly,
 Director                                                               
|                                                                                                                                                                                                  |                                  |                                                                                            
|Dated: March 17, 2008                                                                                                                                                                             | By:                              | /s/ STEVEN MARCUS                                                                          
|                                                                                                                                                                                                  |                                  |                                                                                            
|                                                                                                                                                                                                  |                                  | Steven Marcus, Director                                                                    
|                                                                                                                                                                                                  |                                  |                                                                                            
|Dated: March 17, 2008                                                                                                                                                                             | By:                              | /s/ DAVID GRANATELL                                                                        
|                                                                                                                                                                                                  |                                  |                                                                                            
|                                                                                                                                                                                                  |                                  | David Granatell, Director                                                                  

---