- Quarterly Report (10-Q)

Share Name	Share Symbol	Market	Type
Velocity Asset Management,	AMEX:JVI	AMEX	Ordinary Share

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-Q


x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended September 30, 2008

	or

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from: _____________________to _____________________


000-161570
(Commission file No.)

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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o		Accelerated filer	o
Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	x

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

As of November 3, 2008, there were 17,875,987 shares of the Company’s common stock outstanding.

VELOCITY ASSET MANAGEMENT, INC.

TABLE OF CONTENTS

FORM 10-Q

September 30, 2008


		Page

PART I - FINANCIAL INFORMATION		1

Item 1. Condensed Consolidated Financial Statements		1
Condensed Consolidated Balance Sheets (unaudited)		1
Condensed Consolidated Statements of Income (unaudited)		2
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)		3
Condensed Consolidated Statements of Cash Flows (unaudited)		4
Notes to the Condensed Consolidated Financial Statements (unaudited)		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3. Quantitative and Qualitative Disclosure About Market Risks		23
Item 4. Controls and Procedures		23

PART II - OTHER INFORMATION		24

Exhibit 31.1	Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2	Certification of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1	Certification of Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2	Certification of Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	September 30, 2008			December 31, 2007

	(Unaudited)
ASSETS

Cash and cash equivalents	$	33,992		$	162,180
Consumer receivables, net		46,152,417			46,971,014
Property and equipment, net of accumulated depreciation		47,347			64,420
Deferred income tax asset, net		83,600			98,600
Security deposits		30,224			30,224
Other assets (including $0 and $115,146 employee loan to a related party at September 30, 2008 and December 31, 2007, respectively)		351,035			487,071
Assets of discontinued operations		5,730,328			6,793,319


Total assets	$	52,428,943		$	54,606,828


LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES

Accounts payable and accrued expenses	$	477,590		$	552,269
Estimated court and media costs		5,742,939			7,374,212
Line of credit		9,792,567			14,429,138
Notes payable		400,000			—
Notes payable to related parties		740,000			200,000
Convertible subordinated notes		2,350,000			2,350,000
Income taxes payable		1,605,919			820,222
Liabilities from discontinued operations (including notes payable to related parties of $2,300,000)		5,490,675			4,374,441


Total liabilities		26,599,690			30,100,282


STOCKHOLDERS’ EQUITY

Series A 10% convertible preferred stock, $0.001 par value, 10,000,000 shares authorized, 1,380,000 shares issued and outstanding (liquidation preference of $13,800,000)		1,380			1,380
Common stock, $0.001 par value, 40,000,000 shares authorized, 17,875,987 and 17,066,821 shares issued and outstanding, respectively		17,875			17,066
Additional paid-in-capital		25,921,639			25,243,944
Accumulated deficit		(111,641	)		(755,844	)


Total stockholders’ equity		25,829,253			24,506,546


Total liabilities and stockholders’ equity	$	52,428,943		$	54,606,828

The accompanying notes are an integral part of the condensed consolidated financial statements.

VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,

	2008			2007			2008			2007

REVENUES

Income on consumer receivables	$	3,447,831		$	3,554,441		$	10,942,757		$	9,901,507
Other income		138			3,153			3,334			27,176


Total revenues		3,447,969			3,557,594			10,946,091			9,928,683


OPERATING EXPENSES

Professional fees (including fees paid to related parties of $197,436 and $257,311 and $634,081 and $868,761 for the three and nine month periods ended September 30, 2008 and 2007, respectively)		1,246,701			1,313,876			3,817,408			3,438,740
General and administrative expenses		358,969			751,108			1,557,351			2,156,741


Total operating expenses		1,605,670			2,064,984			5,374,759			5,595,481


Income from operations		1,842,299			1,492,610			5,571,332			4,333,202

Interest expense (including interest incurred to related parties of $21,435 and $3,500 and $28,435 and $10,500 for the three and nine month periods ended September 30, 2008 and 2007, respectively)		(271,286	)		(456,678	)		(880,064	)		(1,196,045	)


Income from continuing operations before provision for income taxes		1,571,013			1,035,932			4,691,268			3,137,157

Provision for income taxes		566,210			510,945			1,888,038			1,307,720


Income from continuing operations		1,004,803			524,987			2,803,230			1,829,437

Loss from discontinued operations (including fees paid and interest incurred to related parties of $-0- and $4,531 and $-0- and $4,723 and $58,778 and $58,956 and $175,056 and $164,559 for the three and nine months ended September 30, 2008 and 2007, respectively and net of tax benefit of $146,876 and $101,166 and $442,430 and $195,330 for the three and nine months ended September 30, 2008 and 2007		(280,730	)		(140,378	)		(1,124,027	)		(269,288	)


Net income		724,073			384,609			1,679,203			1,560,149

Preferred dividends		(345,000	)		(345,000	)		(1,035,000	)		(1,035,000	)


Net income attributable to common stockholders	$	379,073		$	39,609		$	644,203		$	525,149


Earnings (loss) per common share:
Income from continuing operations:
Basic	$	0.04		$	0.01		$	0.10		$	0.05
Diluted	$	0.04		$	0.01		$	0.10		$	0.04
Discontinued operations:
Basic	$	(0.02	)	$	(0.01	)	$	(0.06	)	$	(0.02	)
Diluted	$	(0.02	)	$	(0.01	)	$	(0.06	)	$	(0.02	)
Net income:
Basic	$	0.02		$	—		$	0.04		$	0.03
Diluted	$	0.02		$	—		$	0.04		$	0.03

Average common shares - basic		17,875,987			16,225,517			17,472,117			16,176,207
Average common shares - diluted		17,875,987			18,001,859			17,530,210			17,869,236

The accompanying notes are an integral part of the condensed consolidated financial statements.

VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Nine Months Ended September 30, 2008
(Unaudited)


	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, 2007		1,380,000	$	1,380		17,066,821		$	17,066		$	25,243,944		$	(755,844	)	$	24,506,546

Dividends paid on preferred stock		—		—		—			—			—			(1,035,000	)		(1,035,000	)

Retirement of common stock		—		—		(136,000	)		(136	)		(115,010	)		—			(115,146	)

Private placement offering of 945,166 shares of common stock and warrants to purchase 236,293 shares of common stock (net of issuance costs of $61,350)		—		—		945,166			945			792,705			—			793,650

Net income		—		—		—			—			—			1,679,203			1,679,203


BALANCES, September 30, 2008		1,380,000	$	1,380		17,875,987		$	17,875		$	25,921,639		$	(111,641	)	$	25,829,253

The accompanying notes are an integral part of the condensed consolidated financial statements.

VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


	For the Nine Months Ended September 30,

	2008			2007

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,679,203		$	1,560,149
Loss from discontinued operations		1,124,027			269,288

Income from continuing operations		2,803,230			1,829,437
Adjustments to reconcile net income to net cash provided by operating activities
Stock compensation		—			110,000
Depreciation and amortization		120,861			140,281
Deferred income tax		15,000			86,800

Increase (decrease) in:
Security deposits		—			(124	)
Other assets		12,622			(43,835	)
Accounts payable and accrued expenses		(74,681	)		256,925
Estimated court and media costs		(1,631,273	)		(1,136,414	)
Income taxes payable		785,697			(108,069	)

Net cash provided by operating activities		2,031,456			1,135,001


CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment		(1,122	)		(24,242	)
Acquisition of consumer receivables		(1,903,802	)		(11,491,502	)
Collections applied to principal on consumer receivables		2,678,002			3,156,608

Net cash provided by (used in) investing activities		773,078			(8,359,136	)


CASH FLOWS FROM FINANCING ACTIVITIES
(Repayments) borrowings under lines of credit, net		(4,686,571	)		2,982,113
Proceeds of notes payable		400,000			—
Proceeds of note payable from related parties		540,000			—
Net proceeds from private placement		793,650			1,290,000
Net proceeds from convertible subordinated notes		—			2,125,500
Payment of preferred dividends		(1,035,000	)		(1,035,000	)

Net cash (used in) provided by financing activities		(3,987,921	)		5,362,613


CASH FLOWS FROM DISCONTINUED OPERATIONS, NET
Operating activities		58,207			(581,002	)
Investing activities		100,000			(229,486	)
Financing activities		896,992			876,000

Net cash provided by discontinued operations		1,055,199			65,512


Net decrease in cash and cash equivalents		(128,188	)		(1,796,010	)

Cash and cash equivalents, beginning of period		162,180			2,444,356


Cash and cash equivalents, end of period	$	33,992		$	648,346


Supplemental disclosure of cash flow information:
Cash paid for interest - continuing operations	$	912,107		$	1,180,777
Cash paid for income taxes - continuing operations	$	785,711		$	1,170,714

Non-cash item:
Retirement of common stock in satisfaction of employee receivable	$	115,146		$	—

The accompanying notes are an integral part of the condensed consolidated financial statements.

VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(UNAUDITED)

NOTE 1 – ORGANIZATION AND BUSINESS

The condensed consolidated financial statements of Velocity Asset Management, Inc. (“VAMI”) and its wholly-owned subsidiaries, Velocity Investments, LLC (“Velocity”), J. Holder, Inc. (“J. Holder”), VOM, LLC, (“VOM”), TLOP Acquisition Company, LLC (“TLOP”) and SH Sales, Inc. (“SH”) (the “Subsidiaries”, and together with Velocity Asset Management, Inc., the “Company”) included herein have been prepared by the Company and are unaudited; however, such information has been prepared in accordance with Securities and Exchange Commission regulations and reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations, and cash flows for the interim periods to which the report relates. The results of operations for the periods ended September 30, 2008 and 2007 are not necessarily indicative of the operating results that may be achieved for the full year. The assets, liabilities and results of operations of J. Holder and VOM, have been presented as discontinued operations of these entities in these financial statements.

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

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

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Properties Held for Sale

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

Tax Certificates Held and Accrued Interest Receivable

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

Consumer Receivables

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

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

VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(UNAUDITED)

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 currently has no consumer receivable portfolios accounted for under the cost recovery method.

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

The Company establishes valuation allowances for all acquired loans subject to SOP 03-3 to reflect only those losses incurred after acquisition (that is, the present value of cash flows initially expected at acquisition that are no longer expected to be collected). Valuation allowances are established only subsequent to acquisition of the loans, if necessary. At September 30, 2008 and December 31, 2007, the Company had no valuation allowances on its consumer receivables.

Use of Estimates

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

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

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

Reclassifications

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

Recently Issued Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No.157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and emphasizes that fair value is a market-based measurement, not an entity-specific measurement. It establishes a fair value hierarchy and expands disclosures about fair value measurements in both interim and annual periods. SFAS 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. FASB Staff Position No. FAS 157-2 (as amended) defers the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities on a non-recurring basis to fiscal years beginning after November 15, 2008. With the exception of nonfinancial assets and nonfinancial liabilities, the Company adopted SFAS 157 on January 1, 2008 which did not have an impact on its consolidated financial position and results of operations.

VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(UNAUDITED)

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

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

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

In May 2008, the FASB issued SFAS No. 162 “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles generally accepted in the United States. SFAS 162 is effective sixty days following the SEC’s approval of PCAOB amendments to AU Section 411, “The Meaning of ‘Present Fairly in Conformity With Generally Accepted Accounting Principles’”.

NOTE 3 – CONSUMER RECEIVABLES

Consumer receivable activity for the periods ended September 30, 2008 and 2007 was as follows:


	Three Months Ended September 30, 2008			Three Months Ended September 30, 2007			Nine Months Ended September 30, 2008			Nine Months Ended September 30, 2007

Balance at beginning of period	$	46,826,499		$	42,879,889		$	46,971,014		$	38,327,926


Acquisitions and capitalized costs, net of returns		300,720			5,041,101			1,903,802			11,491,501
Amortization of capitalized costs		(14,799	)		(14,799	)		(44,397	)		(44,397	)

		285,921			5,026,302			1,859,405			11,447,104


Cash collections (1)		(4,393,524	)		(4,842,210	)		(13,553,840	)		(13,058,115	)
Income recognized on consumer receivables (1)		3,433,521			3,554,441			10,875,838			9,901,507

Cash collections applied to principal		(960,003	)		(1,287,769	)		(2,678,002	)		(3,156,608	)


Balance at end of period	$	46,152,417		$	46,618,422		$	46,152,417		$	46,618,422


	(1)	Excludes $14,310 and $66,919 derived from fully amortized pools for the three and nine months ended September 30, 2008, respectively.

VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(UNAUDITED)

As of September 30, 2008, based upon management’s current estimate of projected future collections, principal reductions will be as follows:


	September 30,

2009	$	11,339,926
2010		12,578,402
2011		15,413,249
2012		6,086,986
2013		733,854


	$	46,152,417

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 September 30, 2008 and 2007. Changes in the accretable yield are as follows:


	Nine Months Ended September 30, 2008			Nine Months Ended September 30, 2007

Balance at beginning of period	$	31,442,803		$	29,643,803
Income recognized on consumer receivables (1)		(10,875,838	)		(9,901,507	)
Additions		551,926			15,214,460


Balance at end of period	$	21,118,891		$	34,956,756


(1)	Excludes $66,919 derived from fully amortized pools for the nine months ended September 30, 2008.

NOTE 4 – DISCONTINUED OPERATIONS

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

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

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


	Three Months Ended September 30, 2008			Three Months Ended September 30, 2007			Nine Months Ended September 30, 2008			Nine Months Ended September 30, 2007

Revenues	$	4,873		$	529,296		$	387,902		$	810,437

Loss from discontinued operations before income taxes	$	(427,606	)	$	(241,544	)	$	(1,566,457	)	$	(464,618	)

VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(UNAUDITED)

Assets and liabilities of the discontinued businesses were as follows:


	September 30, 2008		December 31, 2007


Notes receivable	$	25,000	$	25,000
Notes receivable from related party		—		100,000
Deposits on properties		10,000		10,000
Properties held for sale		4,868,052		5,962,739
Tax certificates held and accrued interest receivable, net		253,353		325,339
Deferred income tax asset, net		572,000		325,000
Other assets		1,923		45,241

Total assets	$	5,730,328	$	6,793,319


Accounts payable and accrued expenses	$	1,092,683	$	873,441
Line of credit		212,992		316,000
Notes payable		1,885,000		885,000
Notes payable to related parties		2,300,000		2,300,000

Total liabilities	$	5,490,675	$	4,374,441

NOTE 5 – LINES OF CREDIT

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

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

As of September 30, 2008 and December 31, 2007, the Company had $9,792,567 and $14,429,138 outstanding on the credit facility, respectively. The rate of interest at September 30, 2008 was 6.50%.

On June 14, 2007, the Company entered into an agreement for a revolving credit line for $800,000 with Northern State Bank. Interest on the outstanding principal balance is equal to the bank’s prime rate plus one-half percent per annum. Any sums loaned under the line 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 was due and payable. The credit line is secured by various mortgages of real property held by the Company’s subsidiary, J. Holder. The Company had $212,992 and $316,000 outstanding on the credit line as of September 30, 2008 and December 31, 2007, respectively, which is reported in net liabilities of discontinued operations. On July 1, 2008, the Company extended the maturity date of the line until January 1, 2009 and reduced the maximum principal amount of the line to $212,992.

NOTE 6 – NOTES PAYABLE

On January 25, 2008, the Company issued a promissory note for $1,000,000 with a financial institution. The note bears interest at a rate of 7% per annum, payable monthly in arrears, on the first day of each month with the original principal amount plus accrued interest due October 25, 2008. On October 1, the note was extended until January 25, 2009. The note is collateralized by specified real property owned by the Company’s subsidiary, J. Holder. The note is guaranteed by the Company and personally by certain executive officers of the Company. J. Holder has agreed to maintain a loan to value ratio of 33% at all times. This is reported in net liabilities of discontinued operations.

VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(UNAUDITED)

On May 30, 2008 and June 10, 2008, Velocity consummated the closings of its private placement offering of 14% Subordinated Notes (the “Notes”) due May and June 2011 (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”).

Velocity issued Notes in the aggregate principal amount of $940,000. Interest is payable quarterly in arrears beginning on the last day of the month that is four months from the date of the Notes. Velocity will pay the principal amount of the Notes upon the earlier of maturity or redemption. The Notes will be 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. Upon an event of default, Velocity will pay the Note holder a late charge computed at the rate of 18% per annum of the amount not paid. $540,000 of the Notes are held by related parties of the Company.

Velocity used the net proceeds from the offering primarily for the purchase of portfolios of unsecured consumer receivables and for general corporate purposes, including working capital.

NOTE 7 – COMMON STOCK

On May 6, 2008, the Company consummated an initial closing of its private placement offering of units comprised of shares of common stock and warrants to purchase shares of common stock to accredited investors. The Company sold an aggregate of 800,003 shares at a purchase price of $0.90 per share with three year warrants to purchase an aggregate of 200,001 shares of the Company’s common stock at an exercise price of $1.125 per share.

On May 19, 2008, the Company consummated its second and final closing of its private placement offering of Units comprised of shares of common stock and warrants to purchase shares of common stock to accredited investors. Together with the first closing, the Company sold an aggregate of 945,166 shares, 800,003 of which were at a purchase price of $0.90 per share and 145,163 of which were at a purchase price of $0.93 per share and delivered three-year warrants to purchase an aggregate of 236,293 shares of the Company’s common stock. The Company used the net proceeds from the Offering primarily for the purchase of portfolios of unsecured consumer receivables and for general corporate purposes, including working capital.

The warrants entitle the holders to purchase shares of the Company’s common stock reserved for issuance thereunder for a period of three years from the date of issuance. 200,001 of the warrants have an exercise price of $1.125 per share and 36,292 of the warrants have an exercise price of $1.16 per share, or the holders may receive shares pursuant to a net settled stock appreciation right provision. The warrants contain certain anti-dilution rights on terms specified in the warrants.

The Company received net proceeds of $793,650 from the placement, after commissions of approximately $61,350. The Company retained a registered FINRA broker dealer to act as placement agent. In addition, the placement agent received three-year warrants to acquire 80,000 shares of the Company’s common stock at an exercise price of $1.125 per share.

NOTE 8 – RELATED PARTY TRANSACTIONS

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

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

The Company has notes payable to various related parties. Total interest expense to related parties for the three and nine months ended September 30, 2008 and 2007 was $80,213 and $62,456 and $203,491 and $175,059, respectively. For the three and nine months ended September 30, 2008 and 2007, $58,778 and $58,956 and $175,056 and $164,559, respectively, are included in the results of operations of discontinued operations.

VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(UNAUDITED)

The Company engages Ragan & Ragan, PC, an entity owned by Messrs. Ragan & Ragan, a director and officer of the Company, respectively, to pursue legal collection of its receivable portfolios with respect to obligors and properties located in the State of New Jersey. The fee arrangements between the Company’s subsidiaries Velocity, J. Holder and VOM and Ragan & Ragan, P.C., each dated as of January 1, 2005, have been reviewed and approved by all the members of a committee appointed by the Board of Directors other than Mr. Ragan, Sr. who abstained. 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 condensed consolidated balance sheets.

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


	Three Months Ended September 30, 2008		Three Months Ended September 30, 2007		Nine Months Ended September 30, 2008		Nine Months Ended September 30, 2007

Velocity Investments, LLC	$	197,436	$	257,311	$	634,081	$	868,761
J. Holder, Inc.		—		4,500		—		4,500
VOM, LLC		—		31		—		223

	$	197,436	$	261,842	$	634,081	$	873,484

NOTE 9 – 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 6,207,814 and 1,342,160 shares of common stock; convertible preferred stock, convertible into 5,520,000 shares of common stock; and convertible notes, convertible into 940,000 and 929,670 and 940,000 and 313,187 shares for the three and nine months ended September 30, 2008 and 2007, respectively, were not included in the dilutive per share calculations because their effect would have been anti-dilutive.

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


	Three Months Ended September 30, 2008			Three Months Ended September 30, 2007			Nine Months Ended September 30, 2008			Nine Months Ended September 30, 2007

Numerator:
Income from continuing operations	$	1,004,803		$	524,987		$	2,803,230		$	1,829,437
Preferred stock dividends		(345,000	)		(345,000	)		(1,035,000	)		(1,035,000	)

Income from continuing operations available to common shareholders		659,803			179,987			1,768,230			794,437
Discontinued operations, net of tax		(280,730	)		(140,378	)		(1,124,027	)		(269,288	)


Net income attributable to common shareholders -Basic and Diluted	$	379,073		$	39,609		$	644,203		$	525,149


Denominator:
Average shares of common stock outstanding - Basic		17,875,987			16,225,517			17,472,117			16,176,207
Effect of dilutive instruments:
Stock options		—			1,776,342			58,093			1,693,029

Weighted average shares - Diluted		17,875,987			18,001,859			17,530,210			17,869,236

VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008
(UNAUDITED)

NOTE 10 – SUBSEQUENT EVENTS

On October 29, 2008, Velocity consummated a final closing of a private placement offering of 14% Subordinated Notes due 2011 (the “Notes”) to accredited investors. Velocity issued new Notes in the aggregate principal amount of $360,000. The Notes were offered and sold pursuant to exemption from registration under Section 4(2) of the Securities Act of 1933, as amended.

Together with the May 2008 and June 2008 private placements, Velocity has issued Notes in the aggregate principal amount of $1,300,000 in the offering. Interest shall be payable quarterly in arrears beginning on the last day of the month that is four months from the date of the Notes. Velocity will pay the principal amount of the Notes upon the earlier of maturity or redemption. The Notes will be 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. Upon an event of default, Velocity will pay the Note holder a late charge computed at the rate of 18% per annum of the amount not paid. Of the $1,300,000 in Notes that were issued, $900,000 are held by related parties to Velocity, including a Note in the amount of $150,000 to our CEO, John C. Kleinert, and Notes in the aggregate of $750,000 to immediate family members of John C. Kleinert. Velocity intends to use the net proceeds from the offering primarily for the purchase of portfolios of unsecured consumer receivables and for general corporate purposes, including working capital.

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

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

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

Note on Forward Looking Statements

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

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

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


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

	·	competition in the industry;

	·	the availability of debt and equity financing;

	·	future acquisitions;

	·	the availability of qualified personnel;

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

	·	general economic and market conditions;

	·	general economic conditions, including the current economic and housing crisis could have a material effect on the current carrying value of real properties held for sale by our discontinued operations;

	·	changes in applicable state and federal laws;

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

	·	the timing and amount of collections on our consumer receivable portfolios in light of the current economic and housing crisis; and

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

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

Overview

We are a portfolio management company that purchases unsecured consumer receivables in the secondary market and seeks to collect those receivables through an outsourced legal collection network. Our primary business is to acquire credit-card receivable portfolios at significant discounts to the total amounts owed by the debtors. We use our proprietary valuation process to calculate the purchase price so that our estimated cash flow from such portfolios offers us an adequate return on our investment after servicing expenses.

We generally purchase consumer receivable portfolios that include charged-off credit card receivables, which are accounts that have been written-off by the originators, and consumer installment loans. When evaluating a portfolio for purchase, we conduct an extensive quantitative and qualitative analysis of the portfolio to appropriately price the debt and to identify portfolios that are optimal for collection through our legal collection network. This analysis relies upon, but is not limited to, the use of our proprietary pricing and collection probability model and draws upon our extensive experience in the legal collection and debt-buying industry.

We purchase consumer receivable portfolios from creditors and others through privately negotiated direct sales and auctions in which sellers of consumer receivables seek bids from pre-qualified debt purchasers. We pursue new acquisitions of consumer receivable portfolios on an ongoing basis through our relationships with industry participants, collection agencies, investors, our financing sources, brokers who specialize in the sale of consumer receivable portfolios and other sources. Our consumer receivable portfolios are purchased through internally generated cash flow, seller financed credit lines/leases and traditional leverage methods. Our profitability depends upon our ability to purchase and collect on a sufficient volume of our consumer receivables to generate revenue that exceeds our costs.

As of September 30, 2008, we held approximately $500 million in consumer receivables. We currently service approximately 115,000 accounts and place these accounts with over 80 law firms across the 50 states and Puerto Rico. Our portfolios have face amounts ranging from $225,000 to approximately $43 million with purchase prices ranging from $0.017 to $0.25 per $1.00 of such face amounts.

History

We were organized in the State of Delaware in December 1986 as Tele-Optics, Inc. We were inactive until February 3, 2004, when we acquired STB, Inc. Since that acquisition, we have focused on the business of acquiring, managing and servicing distressed assets, consisting of consumer receivable portfolios, interests in distressed real property and tax lien certificates. Historically, the business had been carried on by our three wholly-owned subsidiaries: Velocity Investments, LLC (“Velocity Investments”), which invests in non-performing consumer debt purchased in the secondary market at a discount from face value and then seeks to liquidate these debt portfolios through legal collection means; J. Holder, Inc. (“JHI”), which invested in distressed real property interests, namely real property being sold at sheriff’s foreclosure and judgment execution sales, defaulted mortgages, partial interests in real property and the acquisition of real property with clouded title; and VOM, LLC (“VOM”), which invested in New Jersey municipal tax liens with the focus on realization of value through legal collection and owned real estate opportunities presented by the current tax environment. On December 31, 2007, our Board of Directors unanimously approved management’s plan to discontinue the operation of JHI and VOM and to sell and dispose of the assets or membership interests/capital stock of such subsidiaries. The divestiture of the businesses is consistent with our strategy of concentrating our resources on purchasing, managing, servicing and collecting portfolios of consumer receivables. The Company does not expect management’s plan with respect to the disposal of the assets of the discontinued operations to have a material effect on reported results of operations.

Recent Developments

On September 18, 2008, we filed a Registration Statement on Form S-1 with respect to a secondary, firm commitment offering of shares of our common stock. On September 29, 2008, our stockholders approved an amendment to our Certificate of Incorporation to effect a reverse stock split of our issued and outstanding common stock, par value $0.001 per share of between one-for-ten (1-10) and one-for-twenty (1-20) reverse stock split in the discretion of our Board of Directors. On September 29, 2008, our stockholders also approved an amendment to our Certificate of Incorporation to change the name of our company from Velocity Asset Management, Inc. to Velocity Portfolio Group, Inc. We plan to effectuate the reverse split and name change in the fourth quarter of 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, plus the estimated cost of court filing fees and account media. The portfolios of consumer receivables contain accounts that have experienced deterioration of credit quality between origination and our acquisition of the consumer receivable portfolios. The discounted amount paid for a portfolio of consumer receivable accounts reflects our determination that it is probable we will be unable to collect all amounts due according to the contractual terms of the accounts. At acquisition, we review the consumer receivable accounts in the portfolio to determine whether there is evidence of deterioration of credit quality since origination and whether it is probable that we will be unable to collect all amounts due according to the contractual terms of the accounts. If both conditions exist, we determine whether each such portfolio is to be accounted for individually or whether such portfolios will be assembled into static pools based on common risk characteristics. We consider expected prepayments and estimate the amount and timing of undiscounted expected principal, interest and other cash flows for each acquired portfolio of consumer receivable accounts and subsequently aggregated pools of consumer receivable portfolios. We determine the excess of the pool’s scheduled contractual principal and contractual interest payments over all cash flows expected at acquisition as an amount that should not be accreted based on our proprietary acquisition models. The remaining amount, representing the excess of the loan’s cash flows expected to be collected over the amount paid, is accreted into income recognized on consumer receivables over the remaining life of the loan or pool using the interest method.

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

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

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

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

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

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

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

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 September 30, 2008 and September 30, 2007, we had no valuation allowance on our consumer receivables.

Application of Statement of Position 03-3 requires the use of estimates to calculate a projected internal rate of return for each pool. These estimates are based on historical cash collections. If future cash collections are materially different in amount or timing than projected cash collections, earnings could be affected either positively or negatively. Higher collection amounts or cash collections that occur sooner than projected cash collections will have a favorable impact on yield and revenues. Lower collection amounts or cash collections that occur later than projected cash collections will have an unfavorable impact on operations. Consumer receivable activity for the three and nine month periods ended September 30, 2008 and 2007 consisted of the following:


	Three Months Ended September 30, 2008			Three Months Ended September 30, 2007			Nine Months Ended September 30, 2008			Nine Months Ended September 30, 2007

Balance at beginning of period	$	46,826,499		$	42,879,889		$	46,971,014		$	38,327,926


Acquisitions and capitalized costs, net of returns		300,720			5,041,101			1,903,802			11,491,501
Amortization of capitalized costs		(14,799	)		(14,799	)		(44,397	)		(44,397	)

		285,921			5,026,302			1,859,405			11,447,104


Cash collections (1)		(4,393,524	)		(4,842,210	)		(13,553,840	)		(13,058,115	)
Income recognized on consumer receivables (1)		3,433,521			3,554,441			10,875,838			9,901,507

Cash collections applied to principal		(960,003	)		(1,287,769	)		(2,678,002	)		(3,156,608	)


Balance at end of period	$	46,152,417		$	46,618,422		$	46,152,417		$	46,618,422


	(1)	Excludes $14,310 and $66,919 derived from fully amortized pools for the three and nine months ended September 30, 2008, respectively.

Stock Based Compensation

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

New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and emphasizes that fair value us a market-based measurement, not an entity-specific measurement. It establishes a fair value hierarchy and expands disclosures about fair value measurements in both interim and annual periods. SFAS 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. FASB Staff Position No. FAS 157-2 (as amended) defers the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities on a non-recurring basis to fiscal years beginning after November 15, 2008. With the exception of nonfinancial assets and nonfinancial liabilities, the Company adopted SFAS 157 on January 1, 2008 which did not have an impact on its consolidated 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 after November 15, 2007. Management has not made an election to adopt this pronouncement.

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

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

Results of Operations

Total revenues for continuing operations for the three month period ended September 30, 2008 (the “2008 Third Quarter”) were $3,447,969 as compared to $3,557,594 during the three month period ended September 30, 2007 (the “2007 Third Quarter”), representing a 3.08% decrease. Revenues in the nine month period ended September 30, 2008 (the “2008 Period”) were $10,946,091 as compared to $9,928,683 in the same period in the prior year (the “2007 Period”), representing a 10.24% increase. The slight decrease in revenues in the 2008 Third Quarter was primarily attributable to a decrease in acquisitions in consumer receivable portfolios and resulting decrease in revenues from collections on consumer receivables. The increase in revenues in the 2008 Period was primarily attributable to an increase in acquisitions in consumer receivable portfolios and resulting revenues from collections on consumer receivables.

Total Operating Expenses

Total operating expenses for continuing operations for the 2008 Third Quarter were $1,605,670 as compared to $2,064,984 during the 2007 Third Quarter, representing a 22.24% decrease. Total operating expenses for the 2008 Period were $5,374,759 as compared to $5,595,481 during the 2007 Period, representing a 3.94% decrease. The decrease in total operating expenses for the 2008 Third Quarter and the 2008 Period was primarily attributable to a significant decrease in general and administrative expenses as a result of a decrease of due diligence expenses and electronic search fees for Velocity Investments and a decrease in payroll expense.

Interest Expense

Interest expense in the 2008 Third Quarter was $271,286 as compared to $456,678 in the 2007 Third Quarter, representing a 40.6% decrease. Interest expense in the 2008 Period was $880,064 as compared to $1,196,045 in the 2007 Period, representing a 26.42% decrease. The decrease in interest expense was primarily attributable to declining interest rates and a reduction in amounts outstanding on Velocity Investments’ line of credit with Wells Fargo Foothill, Inc.

Net Income

Net income for the 2008 Third Quarter was $724,073, as compared to net income for the 2007 Third Quarter of 384,069, an 88.53% increase. Net income attributable to common stockholders for the 2008 Third Quarter was $379,073 as compared to net income attributable to common stockholders for the 2007 Third Quarter of $39,609, an 857.04% increase. The increase in net income is primarily attributable to a significant decrease in interest expense and operating expenses partially offset by a loss of $280,730 at our discontinued operations. Income from continuing operations for the 2008 Third Quarter was $1,004,803 as compared to income from continuing operations for the 2007 Third Quarter of $524,987, a 91.4% increase. The Company had a $280,730 loss from discontinued operations in the 2008 Third Quarter as compared to a loss of $140,378 in the 2007 Third Quarter. Net income for the 2008 Period was $1,679,203, as compared to net income for the 2007 Period of $1,560,149, a 7.63% increase. Net income attributable to common stockholders for the 2008 Period was $644,203 as compared to net income attributable to common stockholders of $525,149 for the 2007 Period, a 22.67% increase. Income from continuing operations for the 2008 Period was $2,803,230 as compared to income from continuing operations for the 2007 Period of $1,829,437, a 53.23% increase. The Company had a $1,124,027 loss from discontinued operations in the 2008 Period compared to a loss of $269,288 in the 2007 Period. The loss from discontinued operations in the 2008 Period was primarily attributable to cumulative impairments of approximately $660,000 in connection with an investment property in Melbourne, Florida.

Liquidity and Capital Resources

The term “liquidity” refers to our ability to generate adequate amounts of cash to fund our operations, including portfolio purchases, operating expenses, tax payments and dividend payments, if any. Historically, we have generated working capital primarily from cash collections on our portfolios of consumer receivables in excess of the cash collections required to make principal and interest payments on our senior credit facility, and from offerings of equity securities and debt instruments. At September 30, 2008, we had approximately $34,000 in cash and cash equivalents, approximately $12,700,000 in credit available from our credit facility and trade accounts payable of approximately $478,000. Management believes that the revenues expected to be generated from operations, the May 2008 equity offering discussed below, proceeds of the 14% subordinated debt issuance and our line of credit with Wells Fargo Foothill, Inc. will be sufficient to finance operations through the next 12 months. However, in order to continue to execute our business plan and grow our consumer receivables portfolio, we will need to raise additional capital by way of the sale of equity securities or debt instruments. If, for any reason, our available cash otherwise proves to be insufficient to fund operations (because of future changes in the industry, general economic conditions, unanticipated increases in expenses, or other factors, including acquisitions), we will be required to seek additional funding.

On December 31, 2007, our Board of Directors unanimously approved management’s plan to discontinue the operation of our JHI and VOM subsidiaries. Management began implementation of the plan in the first quarter of 2008. We do not expect management’s plan with respect to the disposal of assets of the discontinued operations to have a material effect on our liquidity. The discontinued operations have no employees and management believes that it will require an immaterial amount of general and administrative expense to execute management’s plan.

Net cash provided by operating activities was approximately $2,031,000 during the nine months ended September 30, 2008, compared to net cash provided by operating activities of approximately $1,135,000 during the nine months ended September 30, 2007. The increase in net cash provided by operating activities was primarily due to increase in income from continuing operations and income taxes offset by payment of estimated court and media costs and a decrease in accounts payable and accrued expense. Net cash provided by investing activities was approximately $773,000 during the nine months ended September 30, 2008, as compared to net cash used in investing activities of approximately $8,359,000 during the nine months ended September 30, 2007. The decrease in net cash used in investing activities was primarily due to a decrease in acquisition of consumer receivables portfolios. Net cash used in financing activities was approximately $3,988,000 during the nine months ended September 30, 2008, as compared to net cash provided by financing activities of approximately $5,363,000 during the nine months ended September 30, 2007. The decrease in net cash provided by financing activities was primarily due to collections of consumer receivables at Velocity Investments paying down the principal amount outstanding on the Wells Fargo Loan, partially offset by proceeds of the May 2008 equity offering and proceeds of the 14% subordinated debt issuance. Net cash provided by discontinued operations was approximately $1,055,000 during the nine months ended September 30, 2008 as compared to net cash provided by discontinued operations of approximately $66,000 during the nine months ended September 30, 2007. The increase in cash provided by discontinued operations was primarily due to a $1,000,000 promissory note issued by J. Holder collateralized by an investment property in Melbourne, Florida.

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

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

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

Use of the Credit Facility is subject to VI meeting certain restrictive covenants under the Fourth Amendment to the Loan Agreement including, but not limited to: a restriction on incurring additional indebtedness or liens; a change of control of Velocity; a restriction on entering into transactions with affiliates outside the course of Velocity’s ordinary business; and a restriction on making payments to the Company in compliance with the Subordination Agreement. Velocity has agreed to maintain at least $14,000,000 in member’s equity and subordinated debt. The Company has also agreed to maintain at least $25,000,000 in stockholder’s equity and subordinated debt for the duration of the facility. In addition, Velocity and the Company covenant that net income for each subsequent quarter shall not be less than $375,000 and $200,000, respectively. The Company had approximately $9,800,000 outstanding on the credit line as of September 30, 2008.

On November 1, 2008, the Company’s Velocity subsidiary entered into a Fifth Amendment to the Loan and Security Agreement with the Lender. Pursuant to the Fifth Amendment to the Loan and Security Agreement, the applicable interest rate on loans to Velocity changed from the prime rate plus 1.5% to the rate equal to the three-month LIBOR plus 4%. Also pursuant to the Fifth Amendment to the Loan and Security Agreement, the loan sub-account amortization schedule which sets forth the maximum principal loan amount Velocity may have outstanding during a three-month period has been extended from 36 months to 42 months.

On January 25, 2008, the Company issued a promissory note for $1,000,000 to a financial institution. The note bears interest at a rate of 7% per annum, payable monthly in arrears, on the first day of each month with the original principal amount plus accrued interest due January 25, 2009. The note is collateralized with specified real property owned by the Company’s subsidiary, J. Holder. The Note is guaranteed by the Company and personally by certain executive officers of the Company. J. Holder has agreed to maintain a loan to value ratio of 33% at all times.

In May 2008, the Company consummated several closings of its private placement offering of units comprised of shares of common stock and warrants to purchase shares of common stock to accredited investors. The Company sold an aggregate of 800,003 shares at a purchase price of $0.90 per share and 145,163 at $0.93 per share and 200,001 warrants at an exercise price of $1.125 per share and 36,292 warrants at an exercise price of $1.16 per share, or the holders may receive shares pursuant to a cashless exercise provision. The Company intends to use the net proceeds from the offering primarily for the purchase of portfolios of unsecured consumer receivables and for general corporate purposes, including working capital.

The warrants contain certain anti-dilution rights on terms specified in the warrants.

The Company received net proceeds of $793,650 from the placement, after commissions of approximately $61,350. The Company retained a registered FINRA broker dealer to act as placement agent. In addition, the placement agent will receive three-year warrants to acquire 80,000 shares of the Company’s common stock at an exercise price of $1.125 per share.

On May 30, 2008, June 10, 2008 and October 29, 2008, our Velocity subsidiary consummated closings of a private placement offering of 14% Subordinated Notes due 2011 to accredited investors. The Notes were offered and sold pursuant to exemption from registration under Section 4(2) of the Securities Act of 1933, as amended. Velocity has issued Notes in the aggregate principal amount of $1,300,000 in the Offering and also entered into Subscription Agreements with Note holders. Interest is payable quarterly in arrears beginning on the last day of the month that is four months from the date of the Notes. Velocity is obligated to pay the principal amount of the Notes upon the earlier of maturity or redemption. The Notes are subordinated in liquidation preference and in right of payment to all of the Registrant’s existing debt. The Notes are senior in right of payment and in liquidation preference to any future “long term” debt of the Registrant. Upon an event of default, Velocity is obligated to pay the Note holder a late charge computed at the rate of 18% per annum of the amount not paid. Velocity intends to use the net proceeds from the Offering primarily for the purchase of portfolios of unsecured consumer receivables and for general corporate purposes, including working capital.

We anticipate 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. On September 18, 2008, we filed a Registration Statement on Form S-1 with respect to a secondary, firm commitment offering of shares of our common stock.

Supplementary Information on Consumer Receivables Portfolios:

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

The following table shows the changes in consumer receivables, including amounts paid to acquire new portfolios of consumer receivables for the three and nine months ended September 30, 2008 and 2007:


	Portfolio Purchases/Collections (dollar amounts in thousands)

Reporting Period	Initial Outstanding Amount		Portfolios Purchased	Purchase Price		Gross Cash Collections Per Period


Three Month Period Ended September 30, 2008	$	—	—	$	—	4,407

Three Month Period Ended September 30, 2007	$	47,269	5	$	4,269	4,842

Nine Month Period Ended September 30, 2008	$	15,866	7	$	957	13,620

Nine Month Period Ended September 30, 2007	$	127,066	18	$	9,061	13,060

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	$	8,611,681	422.36	%	$	0.1773

2004	10	$	9,511,088	$	1,450,115	$	3,493,431	240.91	%	$	0.1525

2005	22	$	133,103,213	$	11,449,557	$	17,671,641	154.34	%	$	0.0860

2006	26	$	199,042,032	$	15,367,940	$	14,984,891	97.51	%	$	0.0772

2007	19	$	129,892,667	$	9,316,779	$	5,386,499	57.82	%	$	0.0717

2008	7	$	15,865,914		956,882		208,155	21.75	%	$	0.0603


(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 September 30, 2008.

(4)	Gross Cash Collections as a Percentage of Cost represents the gross cash collections on portfolios of consumer receivables as of September 30, 2008 divided by the purchase price such portfolios in the related calendar year.

(5)	Average Price Per Dollar Outstanding represents the Purchase Price of portfolios of consumer receivables divided by the Initial Outstanding Amount of such portfolios purchased in the related calendar year.

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

During the nine months ended September 30, 2008, we acquired 7 portfolios of consumer receivables aggregating approximately $16 million in initial outstanding amount at a purchase price of approximately $957,000, bringing the aggregate initial outstanding amount of consumer receivables under management as of September 30, 2008 to approximately $500 million, an increase of 3.52% as compared to approximately $483 million as of September 30, 2007. For the nine months ended September 30, 2008, we posted gross collections of approximately $13.62 million, compared to gross collections of $13.06 million in the nine month period ended September 30, 2007, representing a 4.28% increase.

Trends

As a result of our line of credit, notes payable and Preferred Stock offering, we anticipate that we will incur significant increases in interest expense and preferred dividend payments offset, over time, by expected increased revenues from consumer receivable portfolios purchased utilizing funds under such line of credit and the proceeds from the Preferred Stock offering. No assurance can be given that the expected revenues from such purchased portfolios will exceed the additional interest expense and preferred dividends. While we are not presently aware of any other known trends that may have a material impact on our revenues, we are continuing to monitor our collections to assess whether the current economic and housing crisis will have a long term impact on the collection environment and revenues from collections on consumer receivables. We do not believe that the recent decreases in interest rates, nor the anticipated gradual increases in interest rates, has had or will have a material adverse effect upon our business.

Item 3. Quantitative and Qualitative Disclosure About Market Risks

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report, the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer (the “Certifying Officers”), conducted evaluations of the Company’s disclosure controls and procedures. As defined under Sections 13a–15(e) and 15d–15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, included the Certifying Officers, to allow timely decisions regarding required disclosures.

Based on this evaluation, the Certifying Officers have concluded that the Company’s disclosure controls and procedures were effective to ensure that material information is recorded, processed, summarized and reported by management of the Company on a timely basis in order to comply with the Company’s disclosure obligations under the Exchange Act and the rules and regulations promulgated thereunder.

This Report does not include an attestation report of the Company’s 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 in this report.

Changes in Internal Control over Financial Reporting

Further, there were no changes in the Company’s internal control over financial reporting during the Company’s third fiscal quarter of 2008 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Limitations on the Effectiveness of Internal Controls

Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

PART II - OTHER INFORMATION


	Item 1	Legal Proceedings

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

As of September 30, 2008, there were no material pending legal proceedings to which we or any of our subsidiaries was a party or to which any of our property was the subject and, to the best of our knowledge, no such action against us is contemplated or threatened.


	Item 2	Unregistered Sales of Securities and Use of Proceeds

		None, other than as disclosed by the Company in its filings on Form-8K during the three month period ended September 30, 2008.

	Item 3	Defaults Upon Senior Securities

		None.

	Item 4	Submission of Matters to a Vote of Security Holders

The Company held its 2008 Annual Meeting of Stockholders on September 29, 2008.

At the 2008 Annual Meeting of Stockholders, the stockholders elected the following individuals as directors, to serve until the 2009 Annual Meeting of Stockholders, and until their successors are elected and qualified:


Name	Votes For	Votes Withheld

John C. Kleinert	14,292,162	10,389
W. Peter Ragan, Sr.	14,292,162	10,389
Steven Marcus	14,292,162	10,322
Dr. Michael Kelly	14,292,162	10,322
David Granatell	14,292,162	10,322

Also, at the 2008 Annual Meeting of Stockholders, the stockholders approved the ratification of the appointment Weiser, LLP as the Company’s independent registered public accounting firm for the year ended December 31, 2008. There were 14,302,451 votes cast for the ratification, no votes cast against the ratification and 100 abstentions.

The stockholders also approved amending the Company’s Certificate of Incorporation to effectuate a reverse split of the Company’s issued and outstanding common stock of between one-for-ten and one-for-twenty reverse stock split in the discretion of the board of directors. There were 14,211,942 votes cast for the reverse split, 90,609 votes cast against, and no abstentions.

The stockholders also approved amending the Company’s Certificate of Incorporation to change the name of the Company to Velocity Portfolio Group, Inc. There were 14,302,451 votes cast for the name change, no votes cast against the ratification and 100 abstentions.


	Item 5	Other Information

		None.

	Item 6	Exhibits

	31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350

	32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.

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


	VELOCITY ASSET MANAGEMENT, INC.

Dated: November 10, 2008	By:	/s/ John C. Kleinert

		John C. Kleinert
		Chief Executive Officer and President

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