JVI Velocity Asset Management,

NOTE 13 - SUBSEQUENT EVENT

On October 11, 2007, Velocity Asset Management, Inc. consummated its second and final closing of its private placement offering (the "Offering") of shares of common stock and warrants to purchase shares of common stock to accredited investors. The Securities were offered and sold pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended. In connection with the Offering, the Company issued the Securities and also entered into a Securities Purchase Agreement and a Registration Rights Agreement with the investors in the Offering (the "Investors"). Together with the first closing, the Registrant sold an aggregate of 862,500 shares at a purchase price of $2.00 per share and delivered Warrants to purchase an aggregate of 172,500 shares of the Company's common stock.

VELOCITY ASSET MANAGEMENT, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2007
(UNAUDITED)

NOTE 13 - SUBSEQUENT EVENT (Continued)

The Company received aggregate net proceeds of $1,596,500 from the placement, after payment of offering expenses of approximately $25,000 and commissions of approximately $82,500. The Company retained a registered FINRA broker dealer to act as placement agent. In addition, the placement agent is entitled to receive 2 year warrants to acquire 41,250 shares of the Company's common stock. The registration statement for the Offering was filed on November 9, 2007.

The terms of the Securities are identical to the terms of the Securities described in NOTE 11 - COMMON STOCK OFFERING.

Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN 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-QSB 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-KSB for the year ended December 31, 2006. 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 or incorporated by reference in this quarterly report. These risks, uncertainties and contingencies include, but are not limited to, the following:

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

o competition in the industry;

o the availability of debt and equity financing;

o future acquisitions;

o the availability of qualified personnel;

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

o general economic and market conditions;

o changes in applicable laws;

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

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

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

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

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

Overview

Velocity Asset Management, Inc., previously known as Tele-Optics, Inc., was organized in the State of Delaware in December 1986. We were inactive until February 3, 2004, when we acquired STB, Inc., a New Jersey corporation. Since that acquisition, we have engaged in the business of acquiring, managing and servicing distressed assets, consisting of consumer receivable portfolios, interests in distressed real property and tax lien certificates. The business is carried on by our three wholly-owned subsidiaries: Velocity Investments, LLC, which invests in non-performing consumer debt purchased in the secondary market at a discount from face value and then seeks to liquidate these debt portfolios through legal collection means; J. Holder, Inc., which invests in distressed real property interests, namely real property being sold at sheriff's foreclosure and judgment execution sales, defaulted mortgages, partial interests in real property and the acquisition of real property with clouded title; and VOM, LLC, which invests in New Jersey municipal tax liens with the focus on realization of value through legal collection and owned real estate opportunities presented by the current tax environment.

Our consumer receivable portfolios are purchased at a discount from the amount actually owed by the obligor. Our interests in distressed real property are purchased following an extensive due diligence process concerning the legal status of each property and a market analysis of the value of the property or underlying property. Our tax lien certificates are purchased at a discount from par following a due diligence analysis similar to that performed in connection with the purchase of interests in distressed real property. Our profitability as a company depends upon our ability to purchase and collect on a sufficient volume of our consumer receivables, the sale of our interests in distressed real property and the collection of taxes and accrued interest on our tax lien certificates to generate revenue that exceeds our cost. Most of our revenue is derived from the consumer receivables business and it is our primary operating focus. After careful consideration of trends in revenues and future opportunities for growth, management has made the determination that the consumer receivables business will be the sole operating focus of the Company in fiscal 2008. As a result, the Company is currently considering all strategic alternatives for J. Holder, Inc. and VOM, including, but not limited to, the sale of some or all of each entity's assets, partnering or other collaboration agreements, or a merger, spin-off or other strategic transaction.

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 and are recorded by us at our acquisition cost, including the estimated cost of court filing fees and account media. The portfolios of consumer receivables contain accounts that have experienced deterioration of credit quality between origination and our acquisition of the consumer receivable portfolios. The discounted amount paid for a portfolio of consumer receivable accounts reflects our determination that it is probable we will be unable to collect all amounts due according to the contractual terms of the accounts. At acquisition, we review the consumer receivable accounts in the portfolio to determine whether there is evidence of deterioration of credit quality since origination and if it is probable that we will be unable to collect all amounts due according to the contractual terms of the accounts. If both conditions exist, we determine whether each such 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.

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

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

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

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

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

The internal rate of return is estimated and periodically recalculated based on the timing and amount of anticipated cash flows using our proprietary collection models. A pool can become fully amortized (zero carrying balance on the balance sheet) while still generating cash collections. In this case, all cash collections are recognized as revenue when received. Additionally, we use the cost recovery method when collections on a particular pool of accounts cannot be reasonably predicted. Under the cost recovery method, no revenue is recognized until we have fully collected the cost of the portfolio, or until such time that we consider the collections to be probable and estimable and begin to recognize income based on the interest method as described above. We have no consumer receivable portfolios that are accounted for under the cost recovery method.

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

December 31, 2006 and September 30, 2007, we had no valuation allowance on our consumer receivables. Prior to January 1, 2005, if estimated future cash collections would be inadequate to amortize the carrying balance, an impairment charge would be taken with a corresponding write-off of the receivable balance.

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

The following table shows the changes in consumer receivables, including amounts paid to acquire new portfolios of consumer receivables, for the three and nine months ended September 30, 2007 and 2006:

 Three Months Three Months Nine Months Nine Months
 Ended Ended Ended Ended
 September 30, September 30, September 30, September 30,
 2007 2006 2007 2006
 ------------- ------------- ------------- -------------
Balance at beginning of period $ 42,879,889 $ 23,740,758 $ 38,327,926 $ 17,758,661
 ------------- ------------- ------------- -------------

Acquisitions and capitalized costs, net of returns 5,041,101 7,018,057 11,491,501 14,858,873

Amortization of capitalized costs (14,799) -- (44,397) --
 ------------- ------------- ------------- -------------

 5,026,302 7,018,057 11,447,104 14,858,873
 ------------- ------------- ------------- -------------

Cash collections (4,842,210) (2,795,060) (13,058,115) (7,950,156)

Income recognized on consumer receivables 3,554,441 2,356,782 9,901,507 5,653,159
 ------------- ------------- ------------- -------------

 Cash collections applied to principal (1,287,769) (438,278) (3,156,608) (2,296,997)
 ------------- ------------- ------------- -------------

Balance at end of period $ 46,618,422 $ 30,320,537 $ 46,618,422 $ 30,320,537
 ============= ============= ============= =============

Stock Based Compensation

We have adopted the fair value recognition provisions of SFAS No. 123 (revised 2004), "Share-Based Payment" (SFAS No. 123R), which supersedes Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees." The revised statement addresses the accounting for share-based payment transactions with employees and other third

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

New Accounting Pronouncements

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115." 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. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, "Fair Value Measurements." Management has not determined whether the Company will voluntarily choose to measure any of its financial assets and financial liabilities at fair value. Management also has not determined whether the adoption of this statement will affect its reported results of operations or financial condition.

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

Results of Operations

Total revenues for the three month period ended September 30, 2007 (the "2007 Third Quarter") were $4,086,890 as compared to $2,925,131 during the three month period ended September 30, 2006 (the "2006 Third Quarter"), representing a 39.72% increase. Revenues in the nine month period ended September 30, 2007 (the "2007 Period") were $10,739,120 as compared to $6,918,576 in the same period in the prior year (the"2006 Period"), representing a 55.22% increase. The increase in revenues was primarily attributable to a significant increase in collections on consumer receivables at our Velocity Investments subsidiary and an increase in revenues from the sale of real property at our J. Holder subsidiary. Revenues from the sale of real property, the collection of consumer receivables and the collection of taxes and interest derived from tax lien certificates owned by the Company represented approximately 12.94%, 86.97% and 0.09%, respectively, during the 2007 Third Quarter as compared to 15.59%, 80.57% and 3.84% during the 2006 Third Quarter, and approximately 6.96%, 92.20% and 0.84% during the 2007 Period as compared to 15.32%, 81.71% and 2.97% during the 2006 Period. Although management believes that the mix of revenues on a comparative basis will vary from reporting period to reporting period partly as a result of factors beyond its control, such as maturity dates, court decisions and other similar events that affect the timing of revenue recognition, it also believes that the increase in consumer receivables revenues in the 2007 Third Quarter is reflective of the continued growth in its consumer receivables business.

Total Operating Expenses

Total operating expenses for the 2007 Third Quarter were $2,745,588 as compared to $1,891,999 during the 2006 Third Quarter, representing a 45.12% increase. Total operating expenses for the 2007 Period were $6,628,882 as compared to $4,760,384 for the 2006 Period, representing a 39.25% increase. The increase in total operating expenses was primarily attributable to increased professional fees incurred as a result of an increase in collections and a corresponding increase in legal commission expense as a result of the expansion of operations at our Velocity Investments' subsidiary. The Company has also recorded a $220,948 impairment of a property held for sale in connection with an estate property owned by its J. Holder subsidiary in Melbourne, Florida. As discussed above, management is currently examining all strategic alternatives for the distressed real estate and tax lien certificate businesses. General and administrative expenses also increased in the 2007 Third Quarter as a result of our increasing due diligence expenses and electronic search fees for Velocity Investments and an increase in payroll expense.

Other Expense

Interest expense in the 2007 Third Quarter was $546,914 as compared to $340,347 in the 2006 Third Quarter, representing a 60.69% increase. Interest expense in the 2007 Period was $1,437,699 as compared to $971,932 in the 2006 Period, representing a 47.92% increase. The increase in interest expense was primarily attributable to an expansion of Velocity Investments' line of credit with Wells Fargo Foothill, Inc.

Net Income

Net income for the 2007 Third Quarter was $384,609 as compared to net income for the 2006 Third Quarter of $433,704, an 11.32% decrease. The decrease in net income is primarily attributable to a $221,000 impairment of a property held for sale in connection with an estate property owned by our J. Holder subsidiary in Melbourne, Florida. Net income for the 2007 Period was $1,560,149 as compared to net income for the 2006 Third Quarter of $703,723, a 121.70% increase.

Liquidity and Capital Resources

At September 30, 2007, the Company had approximately $650,000 in cash and cash equivalents and trade accounts payable of approximately $1,400,000. Management believes that the revenues expected to be generated from operations, the Company's line of credit and the proceeds of the subordinated debt financing discussed below, will be sufficient to finance operations for the rest of the fiscal year. However, in order to expand operations by, among other things, purchasing additional portfolios of distressed consumer receivables, we have been seeking to raise additional capital by way of the sale of equity securities or debt instruments. If, for any reason, our available cash otherwise proves to be insufficient to fund operations (because of future changes in the industry, general economic conditions, unanticipated increases in expenses, or other factors, including acquisitions), we will be required to seek additional funding.

Net cash used in operating activities was approximately $8,010,000 during the 2007 Period, compared to net cash used in operating activities of approximately $8,404,000 in the 2006 Period. The decrease in net cash used in operating activities was primarily due to a decrease in the purchase of portfolios of consumer receivables, partially offset by an increase in the purchases of properties held for sale during the 2006 Period. Net cash provided by financing activities was approximately $6,239,000 during the 2007 Period, compared to net cash provided by financing activities of approximately $14,022,000 in the 2006 Period. The decrease in net cash provided by financing activities was primarily due to the $13,800,000 preferred stock offering in May 2006.

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

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

On February 27, 2006, Velocity Investments, LLC entered into a First Amendment to the Loan and Security Agreement pursuant to which Wells Fargo Foothill extended the credit facility until January 27, 2009 and agreed to increase the advance rate under the facility to 75% (up from 60%) of the purchase price of individual pools of unsecured consumer receivables that are approved by the lender. Under the First Amendment to the Loan and Security Agreement, Wells Fargo Foothill also agreed to reduce the interest rate on the loan from 3.50% above the prime rate of Wells Fargo Bank, N.A. to 1.50% above such prime rate. In addition, the amortization schedule for each portfolio has been extended from twenty-four to thirty months. Wells Fargo Foothill also agreed to reduce the personal limited guarantees from $1,000,000 to $250,000.

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

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

On October 27, 2005, we and our wholly owned subsidiary, J. Holder, Inc., entered into a Securities Purchase Agreement with an institutional investor relating to a sale of a 10% Secured Convertible Debenture, due April 27, 2007, in the principal amount of $1.8 million, and an associated common stock purchase warrant to purchase 200,000 shares of our common stock at an exercise price of $3.10 per share. Proceeds from the financing ($1,780,000) were used primarily for working capital purposes including, but not limited to, the purchase of distressed real property interests and distressed consumer receivable portfolios. On May 19, 2006, we entered into an amendment to the Securities Purchase Agreement pursuant to which we extended the initial maturity date of the Convertible Debenture and issued an additional warrant to purchase 50,000 shares of our common stock at a purchase price of $3.10. On May 19, 2006, we used $1,823,000 from proceeds of the preferred offering of our Series A stock (as described in the next paragraph) to repay in full interest and principal under the Convertible Debenture.

On May 18, 2006, we consummated our public offering of 1,200,000 shares of our Series A Convertible Preferred Stock. The offering was underwritten by Anderson & Strudwick, Incorporated. The underwriters were granted an option to purchase up to an additional 180,000 shares of Series A Convertible Preferred Stock to cover over-allotments which they exercised on May 31, 2006. The public price per share for the offering was $10.00. Net proceeds of the offering amounted to approximately $12.4 million. As of September 30, 2007, approximately $6.5 million of the proceeds of the offering have been used for the purchase and servicing of distressed consumer receivable portfolios, $1.823 million has been used to repay the convertible debenture, $1.0 million has been used to redeem a mortgage on an investment property in Florida, $2.5 million has been used for general corporate expenses and approximately $810,000 has been used to redeem certain short term notes.

On June 29, 2007, Velocity Asset Management, Inc. (the "Company") consummated an initial closing (final closing July 27, 2007) of its private placement offering of 10.0% Convertible Subordinated Notes (the "Notes") due 2017 (the "Offering") to accredited investors ("Investors"). The Notes are being offered and sold pursuant to exemption from registration under Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"). The Notes are being sold by the Company through an NASD member firm which is serving as placement agent. In connection with the Offering, the Company issued the Notes and also entered into a Subscription Agreement with each of the Note holders.

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

For its services in connection with the Offering, the placement agent received a placement fee computed at the rate of seven percent (7.0%) of the aggregate principal amount of the Notes sold. In addition, the Company paid an accountable expense allowance of one percent (1%) of the aggregate principal amount of the Notes sold. As a result, after other Offering expenses of approximately $33,500 ($41,500 as of July 27, 2007) (legal and blue sky filing fees), the Company received net proceeds of approximately $2,035,000 ($2,127,000 as of July 27, 2007). Costs of $224,500 related to this offering have been capitalized and will be amortized over the life of the notes.

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

a Subsequent Financing, the Company will register the Common Stock underlying the Notes for resale by the Noteholders.

On June 14, 2007 the Company's J. Holder subsidiary entered into an agreement to secure a revolving credit line in the maximum principal sum of $800,000 dollars with Northern State Bank. During the term of the note, interest shall accrue on the outstanding principal balance of the note at a rate of the lenders prime rate plus one-half percent per annum. The Company can draw upon the note, during the twelve month period commencing on June 14, 2007. Any sums loaned under the note may be paid at any time, without premium or penalty, and reborrowed from time to time, until July 1, 2008. Payments of interest only are due on the 1st day of each and every month until the payment due July 1, 2008, on which date the entire balance or principal, interest and fees then unpaid shall become due and payable. The note is secured by various mortgages of real property held and owned by the Company's subsidiary, J. Holder, Inc. The Company had $641,000 outstanding on the credit line as of September 30, 2006.

On September 26, 2007, the Company consummated an initial closing of its private placement offering (the "Offering") of shares of common stock (the "Shares") and warrants to purchase shares of common stock (the "Warrants", together with the Shares, the "Securities") to accredited investors ("Investors"). The Securities were offered and sold pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"). In connection with the Offering, the Company issued the Securities and also entered into a Securities Purchase Agreement and a Registration Rights Agreement with the Investors. On October 11, 2007, the Company consummated its second and final closing of the Offering. Together with the first closing, the Registrant sold an aggregate of 862,500 Shares at a purchase price of $2.00 per Share and delivered Warrants to purchase an aggregate of 172,500 shares of the Company's common stock. Net proceeds from the financing are to be used primarily for working capital purposes including, but not limited to, the purchase of distressed consumer receivable portfolios.

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 which is six months after the date of issuance at an exercise price of $2.50 per share. The Warrants contain certain anti-dilution rights on terms specified in the Warrants. In addition, pursuant to the Securities Purchase Agreement, the Investors will be entitled to additional shares of common stock if, during the six month period after the Closing, the Company sells or issues additional shares of Common Stock, or securities (debt and/or equity) convertible into common stock, with a purchase, exercise or conversion price of less than $2.00. The registration statement for the Offering was filed on November 9, 2007.

Pursuant to the Registration Rights Agreement, the Company agreed to file with the Securities and Exchange Commission a registration statement on appropriate form providing for the resale by the investors of the Shares and the Warrant Shares. The Company agreed to file the registration statement within 45 days of the Initial Closing. If such Registration Statement is not filed within the required timeframe, or does not become effective within the required timeframe, or does not remain effective for any thirty (30) consecutive days, the Company has agreed to pay to the investors in the Offering liquidated damages for each thirty (30) day period in which the Registrant fails to comply with such requirements, all as more specifically provided in the Securities Purchase Agreement.

The Securities were not registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state securities laws, and were offered and sold only in the United States to "accredited investors" (as defined in Rule 501(a) of the Securities Act) pursuant to an exemption from registration under
Section 4(2) of the Securities Act. Neither the Securities and Exchange Commission (the "SEC") nor any state securities commission or regulatory body has approved or disapproved the securities. Any representation to the contrary is a criminal offense.

The Company received aggregate net proceeds of $1,596,500 from the placement, after payment of offering expenses of approximately $25,000 and commissions of approximately $82,500. The Company retained a registered FINRA broker dealer to act as placement agent. In addition, the placement agent is entitled to receive 2 year warrants to acquire 41,250 shares of the Company's common stock.

The Company anticipates that it will be undertaking additional financing from time to time to increase its working capital and to increase its ability to purchase additional pools of consumer receivables. Such financings may be private placement or public offerings, and may include common stock, debt securities or other equity based securities.

 Gross
Reporting Outstanding Portfolios Cash Collections
Period Principal Amount Purchased Purchase Price Per Period
----------- ---------------- ---------- -------------- ----------------
3 Mo. Ended $ 64,566 10 $ 4,431 $ 2,790
9/30/2006
9 Mo. Ended $ 108,393 19 $ 10,447 $ 7,896
9/30/2006
3 Mo. Ended $ 47,269 5 $ 4,269 $ 4,842
9/30/2007
9 Mo Ended $ 127,066 18 $ 9,061 $ 13,058
9/30/2007

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

During the three months ended September 30, 2007, we acquired 5 portfolios of consumer receivables aggregating approximately $47 million in initial outstanding principal amount at a purchase price of approximately $4.3 million, bringing the aggregate initial outstanding principal amount of consumer receivables under management as of September 30, 2007 to approximately $480 million, an increase of 82.51% as compared to approximately $263 million as of September 30, 2006. For the three month period ended September 30, 2007, we

posted gross collections of approximately $4.842 million, a 73.55% increase as compared to gross collections of $2.790 million in the three month period ended September 30, 2006. For the nine month period ended September 30, 2007, we posted gross collections of approximately $13.058 million, compared to gross collections of $7.896 million in the nine month period ended September 30, 2006, representing a 65.37% increase.

Trends

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

Item 3 Controls and Procedures.

(a) Disclosure Controls. As of the end of the period covered by this report, with the participation of our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934). Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that as of the end of such period, our disclosure controls and procedures were effective as of the period covered by this report in timely alerting them to material information relating to Velocity Asset Management, Inc. required to be disclosed in our periodic reports with the Securities and Exchange Commission. In addition, our Chief Executive Officer and our Chief Financial Officer concluded that as of the end of such period, our disclosure controls and procedures are also effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. There were no changes in our disclosure controls during the period covered by the Report on Form 10-QSB.

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, 2007, there are presently no material pending legal proceedings to which we or any of our subsidiaries is a party or to which any of our property is the subject and, to the best of our knowledge, no such actions against us is contemplated or threatened.

Item 2 Unregistered Sales of Securities and Use of Proceeds

None.

Item 3 Defaults Upon Senior Securities

None.

Item 4 Submission of Matters to a Vote of Security Holders

None.

Item 5 Other Information

None.

Item 6 Exhibits and Reports on Form 8-K

(a) Exhibits

10.1 Placement Agent Engagement Agreement dated as of August 6, 2007 between the Company and Security Research Associates, Inc.*

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..*

SIGNATURES

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 14, 2007 By: /s/ John C. Kleinert
 ---------------------
 John C. Kleinert
 Chief Executive Officer and President