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

NOTE ON FORWARD LOOKING STATEMENTS

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

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

We cannot give any guarantee that these plans, intentions or expectations will be achieved. Investors are cautioned that all forward-looking statements involve risks and uncertainties, and actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including those Risk Factors set forth in our Form 10-K for the year ended December 31, 2008. Listed below and discussed elsewhere in this quarterly report are some important risks, uncertainties and contingencies that could cause our actual results, performances or achievements to be materially different from the forward-looking statements included in this quarterly report. These risks, uncertainties and contingencies include, but are not limited to, the following:

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

† competition in the industry;

† the availability of debt and equity financing;

† future acquisitions;

† the availability of qualified personnel;

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

† general economic and market conditions;

† changes in applicable laws;

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

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

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

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

Velocity Portfolio Group, Inc., previously known as Velocity Asset Management, Inc. until November 19, 2008, and prior to that name was known as Tele-Optics, Inc. was organized in the State of Delaware in December 1986. We were inactive until February 3, 2004, when we acquired STB, Inc., a New Jersey corporation. Since that acquisition, we have engaged in the business of acquiring, managing and servicing distressed assets, consisting of consumer receivable portfolios, interests in distressed real property and tax lien certificates. The business is carried on by our three wholly-owned subsidiaries:
Velocity Investments, LLC ("Velocity"), which invests in non-performing consumer debt purchased in the secondary market at a discount from face value and then seeks to liquidate these debt portfolios through legal collection means; J. Holder, Inc., which invests in distressed real property interests, namely real property being sold at sheriff's foreclosure and judgment execution sales, defaulted mortgages, partial interests in real property and the acquisition of real property with clouded title; and VOM, LLC, which invests in New Jersey municipal tax liens with the focus on realization of value through legal collection and owned real estate opportunities presented by the current tax environment.

Our consumer receivable portfolios are purchased at a discount from the amount actually owed by the obligor. Our interests in distressed real property are purchased following an extensive due diligence process concerning the legal status of each property and a market analysis of the value of the property or underlying property. Our tax lien certificates are purchased at a discount from par following a due diligence analysis similar to that performed in connection with the purchase of interests in distressed real property. Our profitability as a company depends upon our ability to purchase and collect on a sufficient volume of our consumer receivables, the sale of our interests in distressed real property and the collection of taxes and accrued interest on our tax lien certificates to generate revenue that exceeds our cost. Most of our revenue is derived from the consumer receivables business and it is our primary operating focus.

Critical Accounting Policies

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

Recent Developments

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

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

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.

Under Statement of Position 03-3, when expected cash flows are higher than prior projections, the increase in expected cash flows results in an increase in the internal rate of return and therefore, the effect of the cash flow increase is recognized as increased revenue prospectively over the remaining life of the affected pool. However, when expected cash flows are lower than prior projections, Statement of Position 03-3 requires that the expected decrease be recognized as an impairment by decreasing the carrying value of the affected pool (rather than lowering the internal rate of return) so that the pool will amortize over its expected life using the original internal rate of return.

Historically, these portfolios had been expected to amortize over a five year period based on our estimated future cash flows. A majority of the cash we ultimately collect on a portfolio has generally been received during the first 48 months after acquiring the portfolio, although additional amounts are collected over the remaining period. The estimated future cash flows of the portfolios are re-evaluated quarterly.

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

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

• variability of timing of the legal process. As a result of geographic expansion from our original core states of New Jersey, Maryland, Delaware and New York, we are now able to more accurately forecast the state by state variance in the timing of awards of default judgments and the enforcement of such judgments;

• current macroeconomic conditions have resulted in less PIF/SIF (payments in full and settlements in full) and a greater percentage of debtors entering into settlement plans, effectively extending the collection curve; and

• current macroeconomic conditions have caused deterioration with respect to certain purchase assumptions regarding homeownership and employment resulting in a longer than expected collection curve with respect to each category of debtor.

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

We establish valuation allowances for all acquired consumer receivable portfolios subject to Statement of Position 03-3 to reflect only those losses incurred after acquisition (that is, the present value of cash flows initially expected at acquisition that are no longer expected to be collected). Valuation allowances are established only subsequent to acquisition of the loans. At March 31, 2009 and December 31, 2008, we had $9.07 million and $8.36 of valuation allowances on our consumer receivables, respectively.

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

                                                         Three Months        Three Months
                                                            Ended               Ended
                                                        March 31, 2009      March 31, 2008

Balance at beginning of year                          $     37,592,634    $     46,971,014


Acquisitions and capitalized costs, net of returns             499,957             265,181
Amortization of capitalized costs                              (14,799 )           (14,799 )

                                                               485,158             250,382


Cash collections (1)                                        (3,535,488 )        (4,449,725 )
Income recognized on consumer receivables (1)                1,679,869           3,834,853

Cash collections applied to principal                       (1,855,619 )          (614,872 )


Impairment                                                    (710,008 )                 -


Balance at end of period                              $     35,512,165    $     46,606,524

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

Stock Based Compensation

We utilize the fair value recognition provisions of "Share-Based Payment" (SFAS No. 123R). The statement addresses the accounting for share-based payment transactions with employees and other third parties and requires that the compensation costs relating to such transactions be recognized in the condensed consolidated financial statements. SFAS No. 123R also requires disclosures relating to the income tax and cash flow effects resulting from share-based payments. Additionally, regarding the treatment of non-employee stock based compensation, we follow the guidance of EITF 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services."

New Accounting Pronouncements

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

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

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

Total Operating Expenses

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

Interest Expense

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

Net Income (Loss)

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

Liquidity and Capital Resources

The term "liquidity" refers to our ability to generate adequate amounts of cash to fund our operations, including portfolio purchases, operating expenses, tax payments and dividend payments, if any. Historically, we have generated working capital primarily from cash collections on our portfolios of consumer receivables in excess of the cash collections required to make principal and interest payments on our senior credit facility, and from offerings of equity securities and debt instruments. At March 31, 2009, we had approximately $150,000 in cash and cash equivalents, approximately $14.5 million in credit available from our credit facility and trade accounts payable of approximately $1.2 million. Management believes that the revenues expected to be generated from operations and our line of credit will be sufficient to finance operations through March 2010. However, in order to continue to execute our business plan and grow our consumer receivables portfolio, we will need to raise additional capital by way of the sale of equity securities or debt instruments. If, for any reason, our available cash otherwise proves to be insufficient to fund operations (because of future changes in the industry, general economic conditions, unanticipated increases in expenses, or other factors, including acquisitions), we will be required to seek additional funding. On February 26, 2009, we temporarily suspended the payment of dividends on our Series A Preferred Stock in order to preserve capital. On February 27, 2009, we withdrew . . .