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UNITED STATES
    SECURITIES AND EXCHANGE COMMISSIONWashington, D. C.
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    September 30, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file
    number: 0-26906
  ASTA FUNDING, INC.
 (Exact Name of Registrant
    Specified in its Charter)
  Delaware

22-3388607(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)   210 Sylvan Avenue, Englewood
    Cliffs, NJ


07632(Zip Code
)(Address of principal executive
    offices)   Issuers
    telephone number, including area code:
    (201) 567-5648
  Securities registered pursuant to Section 12(b) of the
    Exchange Act: None
  Securities registered pursuant to Section 12(g) of the
    Exchange Act:
  Common
    Stock, par value $.01 per share
  (Title of Class)
  o þ
  o þ
  o þ
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ




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##### 





FORM 10-K
  TABLE OF
    CONTENTS
   
 PagePART IItem 1.


Business


4Item 1A.


Risk Factors


12Item 1B.


Unresolved Staff Comments


26Item 2.


Properties


26Item 3.


Legal Proceedings


26Item 4.


Submission of Matters to a Vote of Security
    Holders


26PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


27Item 6.


Selected Financial Data


29Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operation


30Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


44Item 8.


Financial Statements and Supplementary Data


45Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


45Item 9A


Controls and Procedures


45Item 9B.


Other Information


48PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


48Item 11.


Executive Compensation


50Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


61Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


64Item 14.


Principal Accounting Fees and Services


64PART IVItem 15.


Exhibits and Financial Statement Schedules


66EX-10.19: SEVENTH AMENDMENT TO THE FOURTH AMENDED AND RESTATED LOAN AGREEMENTEX-10.20: FORM OF AMENDED AND RESTATED REVOLVING NOTEEX-10.21: FOURTH AMENDMENT TO THE RECEIVABLES FINANCING AGREEMENTEX-10.22: SUBORDINATED GUARANTOR SECURITY AGREEMENTEX-10.23: SUBORDINATED LIMITED RECOURSE GUARANTY AGREEMENTEX-10.24: SUBORDINATED GUARANTOR SECURITY AGREEMENTEX-10.25: SUBORDINATED LIMITED RECOURSE GUARANTY AGREEMENTEX-10.26: FORM OF INTERCREDITOR AGREEMENTEX-10.27: AMENDED AND RESTATED MANAGEMENT AGREEMENTEX-10.28: AMENDED AND RESTATED MASTER SERVICING AGREEMENTEX-10.29: FIRST AMENDMENT TO AMENDED AND RESTATED MASTER SERVICING AGREEMENTEX-14.1: CODE OF ETHICSEX-21.1: SUBSIDIARIES OF THE COMPANYEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION   2




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Caution
    Regarding Forward Looking Statements
  Form 10-K
 3




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Part I  Item 1.
    Business.  Overview
    
    charged-off receivables  accounts that have been
    written-off by the originators and may have been previously
    serviced by collection agencies;
    semi-performing receivables  accounts where the
    debtor is currently making partial or irregular monthly
    payments, but the accounts may have been written-off by the
    originators; and in limited circumstances; and
    performing receivables  accounts where the debtor is
    making regular monthly payments that may or may not have been
    delinquent in the past.      
    our relationships with industry participants, financial
    institutions, collection agencies, investors and our financing
    sources;
    brokers who specialize in the sale of consumer receivable
    portfolios; and
    other sources.         4




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Industry
    Overview
    
    increasing levels of consumer debt;
    increasing defaults of the underlying receivables; and
    increasing utilization of third-party providers to collect such
    receivables.    Strategy
    
    managing the collection and servicing of our consumer receivable
    portfolios, including outsourcing a majority of those activities
    to maintain low fixed overhead;
    although reduced pricing has slowed our capabilities, we seek to
    sell accounts on an opportunistic basis, generally when our
    efforts have been exhausted through traditional collecting
    methods, when pricing is at our indifference point, or when we
    can capitalize on pricing during times when we feel the pricing
    environment is high; and
    although our purchases of consumer receivable portfolios are at
    a lower level than in recent years, we remain focused on
    capitalizing on our strategic relationships to identify and
    acquire consumer receivable portfolios as pricing and conditions
    permit.     5




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Consumer
    Receivables Business
  Receivables
    Purchase Program
        
    our relationships with industry participants, financial
    institutions, collection agencies, investors and our financing
    sources;
    brokers who specialize in the sale of consumer receivable
    portfolios; and
    Other sources.      
    coordinating due diligence, including, in some cases,
    on-site
    visits to the sellers office;
    stratifying and analyzing the portfolio characteristics;
    valuing the portfolio;
    preparing bid proposals;
    negotiating pricing and terms;
    negotiating and executing a purchase contract;
    closing the purchase; and
    coordinating the receipt of account documentation for the
    acquired portfolios.   6




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
    the number of collection agencies previously attempting to
    collect the receivables in the portfolio;
    the average balance of the receivables;
    the age of the receivables (as older receivables might be more
    difficult to collect or might be less cost effective);
    past history of performance of similar assets  as we
    purchase portfolios of similar assets, we believe we have built
    significant history on how these receivables will liquidate and
    cash flow;
    time elapsed since charge-off;
    payments made since charge-off;
    the credit originator and their credit guidelines;
    the locations of the debtors as there are better states to
    attempt to collect in and ultimately we have better
    predictability of the liquidations and the expected cash flows.
    Conversely, there are also states where the liquidation rates
    are not as good and that is factored into our cash flow analysis;
    jobs or property of the debtors found within portfolios-with our
    business model, this is of particular importance. Debtors with
    jobs or property are more likely to repay their obligation and
    conversely, debtors without jobs or property are less likely to
    repay their obligation; and
    the ability to obtain customer statements from the original
    issuer.        
    adequate internal controls to detect fraud;
    the ability to provide post sale support; and
    the capacity to honor put-back and return warranty requests. 7




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
    debts paid prior to the cutoff date;
    debts in which the consumer filed bankruptcy prior to the cutoff
    date;
    debts in which the consumer was deceased prior to cutoff
    date; and
    fraudulent accounts.        Receivable
    Servicing
         8




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
    collection/skiptrace;
    customer service; and
    accounting and finance  Collection/Skiptrace.
  
    contacting customers;
    explaining the benefits of making payment on the
    obligations; and
    working with the customers to develop acceptable means to
    satisfy their obligations.    
    offering obligors a discount on the overall obligation; and/or
    tailoring repayment plans that provide for the payment of these
    obligations as a component of the obligors monthly budget.    follow-up.
  Customer Service.
  
    handling incoming calls from debtors and third-party collection
    agencies that are responsible for collecting on our consumer
    receivable portfolios;
    coordinating customer inquiries and assisting the collection
    agencies in the collection process;
    handling buy-back and information requests from companies that
    have purchased receivables from us;
    working with the buyers during the transition period and post
    sale process; and
    handling any issues that may arise once a receivable portfolio
    has been sold.  Accounting and Finance.
  
    making daily deposits of customer payments; 9




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
    posting these payments to the customers account; and
    in conjunction with the customer service department, providing
    senior management with weekly and monthly receivable activity
    and performance reports.    Collections
    Represented by Account Sales
    
    the age of the receivables;
    the status of the receivables  whether paying or
    non-paying; and
    the selling price.    Marketing
    Competition
    
    other purchasers of consumer receivables, including third-party
    collection companies; and
    other financial services companies who purchase consumer
    receivables.      
    purchase price;
    representations, warranties and indemnities requested;
    making purchase decisions in a timely manner; and
    reputation of the purchaser.   10




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Technology
      Government
    Regulation
  Truth-In-Lending and/or
     11




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and/or
  Employees
    www.astafunding.com. 10-Ks, 10-Qs, 8-Ks
  Item 1A.
    Risk
    Factors.  You should carefully consider these risk factors in
    evaluating the Company. In addition to the following risks,
    there may also be risks that we do not yet know of or that we
    currently think are immaterial that may also impair our business
    operations. If any of the following risks occur, our business,
    results of operation or financial condition could be adversely
    affected, the trading price of our common stock could decline
    and shareholders might lose all or part of their investment.
  The
    Company has risks associated with its purchase of
    $6.9 billion in face value of receivable purchase for
    $300 million in March 2007 (the Portfolio
    Purchase)
      Recent
    amendments to our credit agreements increase our risk and
    potential loss and will limit our ability to purchase
    portfolios.
   12




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The
    anticipated benefits of the Portfolio Purchase have not and may
    not meet our expectations.
    . 03-3, (SOP 03-3)
  We
    incurred substantial debt in connection with the Portfolio
    Purchase Agreement. The BMO Facility has been amended on a
    number of occasions and has required additional credit support
    from the Company.
     13




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14




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We are
    highly leveraged and may incur further debt in the future which
    could adversely affect our ability to obtain additional
    funds.
             15




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Business
    issues with a significant third party servicer (the
    Servicer) has led to the need to secure subordinated
    financing reduced purchases and other disruptions in the
    business relationship.
  Start-up Form 10-K Form 10-K/A start-up
        We are
    highly leveraged which places constraints on our business and
    increases our vulnerability to economic and business
    downturns.
    
    we are required to dedicate a significant portion of our cash
    flows from operations to pay debt service costs and, as a
    result, we will have less funds available for operations, future
    acquisitions of consumer receivable portfolios, and other
    purposes;
    it may be more difficult and expensive to obtain additional
    funds through financings, if available at all; 16




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
    we are more vulnerable to economic downturns and fluctuations in
    interest rates, less able to withstand competitive pressures and
    less flexible in reacting to changes in our industry and general
    economic conditions; and
    if we defaulted under our existing credit facilities or if our
    creditors demanded payment of a portion or all of our
    indebtedness, we may not have sufficient funds to make such
    payments.        
    acceleration of the payment of our outstanding indebtedness;
    cross defaults to and acceleration of the payment under other
    financing arrangements;
    our inability to borrow additional amounts under our existing
    financing arrangements; and
    our inability to secure financing on favorable terms or at all
    from alternative sources.    The
    current economic environment has slowed our ability to collect
    from our debtors.
    
    A slowdown in the economy;
    severe problems in the credit and housing markets;
    higher unemployment;
    reductions in consumer spending;
    changes in the underwriting criteria by originators; and
    changes in laws and regulations governing consumer lending and
    the related collections.    We may
    not be able to purchase consumer receivable portfolios at
    favorable prices or on sufficiently favorable terms or at
    all.
   17




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
    the growth in consumer debt;
    the volume of consumer receivable portfolios available for sale;
    availability of financing to fund purchases;
    competitive factors affecting potential purchasers and sellers
    of consumer receivable portfolios; and
    possible future changes in the bankruptcy laws, state laws and
    homestead acts which could make it more difficult for us to
    collect.  Our
    future operating results will suffer as we have not replaced our
    defaulted consumer receivables at historic levels.
    Our
    inability to purchase sufficient quantities of receivables
    portfolios may necessitate workforce reductions, which may harm
    our business.
    
    lower employee morale, higher employee attrition rates and fewer
    experienced employees;
    disruptions in our operations and loss of efficiency in
    collection functions;
    excess costs associated with unused space in collection
    facilities; and
    further reliance on our third party collection agencies and
    attorneys.  We
    have seen at certain times that the market for acquiring
    consumer receivable portfolios has become more competitive,
    thereby diminishing from time to time our ability to acquire
    such receivables at prices we are willing to pay.
    
    the continuation of a slowdown in the economy;
    continuation of the problems in the credit and housing markets;
    reductions in consumer spending;
    changes in the underwriting criteria by originators; and
    changes in laws and regulations governing consumer lending.   18




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With
    portfolios classified under the interest method, our projections
    of future cash flows from our portfolio purchases may prove to
    be inaccurate, which could result in reduced revenues or the
    recording of an impairment charge if we do not achieve the
    collections forecasted by our model.
    We use
    estimates for recognizing finance income on a portion of our
    consumer receivables acquired for liquidation and our earnings
    would be reduced if actual results are less than
    estimated.
  SOP 03-3. SOP 03-3 SOP 03-3 SOP 03-3
  We may
    not be able to collect sufficient amounts on our consumer
    receivable portfolios to recover the costs associated with the
    purchase of those portfolios and to fund our
    operations.
    
    made numerous attempts to collect on these obligations, often
    using both their in-house collection staff and third-party
    collection agencies;
    subsequently deemed these obligations as uncollectible; and
    charged-off these obligations.   19




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We are
    subject to competition for the purchase of consumer receivable
    portfolios.
    We are
    dependent upon third parties to service a majority of our
    consumer receivable portfolios.
    We
    rely on our third party collectors to comply with all rules and
    regulations and maintain proper internal controls over their
    accounting and operations.
  and/or
 20




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We may
    rely on third parties to locate, identify and evaluate consumer
    receivable portfolios available for purchase.
    Our
    collections may decrease if bankruptcy filings
    increase.
    If we
    are unable to access external sources of financing, we may not
    be able to fund and grow our operations.
    
    purchase consumer receivable portfolios; and
    achieve our growth plans.    
    cause our indebtedness to become immediately payable;
    preclude us from further borrowings from these existing
    sources; and
    prevent us from securing alternative sources of financing
    necessary to purchase consumer receivable portfolios and to
    operate our business.  The
    loss of an asset type could impact our ability to acquire
    receivable portfolios.
    We may
    not be successful at acquiring receivables of new asset types or
    in implementing a new pricing structure.
   21




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The
    loss of any of our executive officers may adversely affect our
    operations and our ability to successfully acquire receivable
    portfolios.
  , Form 10-K.
  The
    Stern family effectively controls Asta, substantially reducing
    the influence of our other stockholders.
    
    the election of a majority of our directors; and
    the approval of mergers, sales of assets or other corporate
    transactions or matters submitted for stockholder approval.    We
    have experienced rapid growth over the past several years, which
    has placed significant demands on our administrative,
    operational and financial resources and could result in an
    increase in our expenses.
    
    the effective and timely initiation and development of
    relationships with sellers of consumer receivable portfolios and
    strategic partners;
    our ability to maintain the collection of consumer receivables
    efficiently; and
    the recruitment, motivation and retention of qualified personnel.   22




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Current
    economic conditions, have had a significant impact on our
    ability to sell accounts.
    Government
    regulations may limit our ability to recover and enforce the
    collection of our receivables.
  and/or
  
    The Fair Debt Collection Practices Act;
    The Federal Trade Commission Act;
    The
    Truth-In-Lending
    Act;
    The Fair Credit Billing Act;
    The Equal Credit Opportunity Act; and
    The Fair Credit Reporting Act.      and/or
  Class
    action suits and other litigation in our industry could divert
    our managements attention from operating our business and
    increase our expenses.
   23




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We may
    seek to make acquisitions that prove unsuccessful or strain or
    divert our resources.
    
    the diversion of our managements attention from our
    everyday business activities;
    the assimilation of the operations and personnel of the acquired
    business;
    the contingent and latent risks associated with the past
    operations of, and other unanticipated problems arising in, the
    acquired business; and
    the need to expand management, administration and operational
    systems.    
    we will be able to successfully integrate the operations of any
    new businesses into our business;
    we will realize any anticipated benefits of completed
    acquisitions; or
    there will be substantial unanticipated costs associated with
    acquisitions.    
    potentially dilutive issuances of our equity securities;
    the incurrence of additional debt; and
    the recognition of significant charges for depreciation and
    impairment charges related to goodwill and other intangible
    assets.    Our
    investments in other businesses and entry into new business
    ventures may adversely affect our operations.
    If our
    technology and phone systems are not operational, our operations
    could be disrupted and our ability to successfully acquire
    receivable portfolios and receive collections from debtors could
    be adversely affected.
   24




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Our
    organizational documents and Delaware law may make it harder for
    us to be acquired without the consent and cooperation of our
    board of directors and management.
    Future
    sales of our common stock may depress our stock
    price.
    Rule 10b5-1
  The
    Company purchased a portfolio in a South American country
    exposing the Company to currency rate
    fluctuations.
    Our
    quarterly operating results may fluctuate and cause our stock
    price to decline.
    
    the timing and amount of collections on our consumer receivable
    portfolios;
    our inability to identify and acquire additional consumer
    receivable portfolios;
    a decline in the estimated future value of our consumer
    receivable portfolio recoveries;
    increases in operating expenses associated with the growth of
    our operations;
    general and economic market conditions; and 25




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
    prices we are willing to pay for consumer receivable portfolios.  Item 1B.
    Unresolved
    Staff Comments.    Item 2.
    Properties.        Item 3.
    Legal
    Proceedings.  Form 10-K,
  Item 4.
    Submission
    of Matters to a Vote of Security Holders.   26




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PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities.    High


LowOctober 1, 2006 to December 31, 2006

$
37.25


$
27.63January 1, 2007 to March 31, 2007


43.89



29.03April 1, 2007 to June 30, 2007


46.50



36.90July 1, 2007 to September 30, 2007


43.80



31.85October 1, 2007 to December 31, 2007

$
39.78


$
24.71January 1, 2008 to March 31, 2008


26.29



12.92April 1, 2008 to June 30, 2008


15.25



6.74July 1, 2008 to September 30, 2008


10.01



6.76   Dividends
    Securities
    Authorized for Issuance under Equity Compensation
    Plans
    Number ofSecuritiesRemaining AvailableNumber of





for Future IssuanceSecurities to be





Under EquityIssued Upon


Weighted-Average


Compensation PlansExercise of


Exercise Price of


(ExcludingOutstanding


Outstanding


SecuritiesOptions, Warrants


Options, Warrants


Reflected in ColumnEquity Compensation Plan

and Rights


and Rights


(a))Information: Plan Category

(a)


(b)


(c)Equity compensation plans approved by security holders


1,037,438


$
11.69



1,267,334Equity compensation plans not approved by security holders


0



0



0Total


1,037,438


$
11.69



1,267,334  27




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Performance
    Graph
  Notwithstanding anything to the contrary set forth in any of
    our filings under the Securities Act of 1933, as amended, or the
    Securities Exchange Act of 1934, as amended, that might
    incorporate by reference this
    Form 10-K
    Statement, in whole or in part, the following Performance Graph
    shall not be incorporated by reference into any such filings.
    COMPARISON
    OF 5-YEAR CUMULATIVE TOTAL RETURN
    AMONG ASTA FUNDING, INC.,
    NASDAQ MARKET INDEX AND PEER GROUP INDEX
  
  ASSUMES $100
    INVESTED ON SEPT. 30, 2003
    ASSUMES DIVIDEND REINVESTED
    FISCAL YEAR ENDING SEPT. 30, 2008
  2003



2004



2005



2006



2007



2008ASTA FUNDING, INC.



100.00




125.67




236.92




324.42




333.05




61.80PEER GROUP INDEX



100.00




112.80




223.39




168.29




147.05




82.13NASDAQ MARKET INDEX



100.00




106.02




120.61




127.77




152.68




118.28  28




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Item 6.
    Selected
    Financial Data.    Year Ended September 30,2008


2007


2006


2005


2004(In thousands, except per share data)Operations Statement Data:Finance income

$
115,295


$
138,356


$
101,024


$
69,479


$
51,175Other income


200



2,181



405







Total revenue


115,495



140,537



101,429



69,479



51,175Costs and expenses:General and administrative


29,561



25,450



18,268



15,340



11,258Interest expense


17,881



18,246



4,641



1,853



845Impairments


53,160



9,097



2,245







Third party servicing


















1,316Provision for credit losses


















300Total expenses


100,602



52,793



25,154



17,193



13,719Income before equity in earnings in venture and income taxes


14,893



87,744



76,275



52,286



37,456Equity in earnings in venture


55



225



550







Income before income taxes


14,948



87,969



76,825



52,286



37,456Provisions for income taxes


6,119



35,703



31,060



21,290



15,219Net income

$
8,829


$
52,266


$
45,765


$
30,996


$
22,237Basic net income per share

$
0.62


$
3.79


$
3.36


$
2.29


$
1.67Diluted net income per share

$
0.61


$
3.56


$
3.13


$
2.15


$
1.57   2008


2007


2006


2005


2004(In millions)Other Financial Data:For the Year ended September 30Cash collections

$
208.0


$
281.8


$
214.5


$
168.9


$
114.0Portfolio purchases, at cost


49.9



440.9



200.2



126.0



103.7Portfolio purchases, at face


1,456.1



10,891.9



5,194.0



3,445.2



2,833.6Return on average assets(1)


1.7
%


12.0
%


19.6
%


18.3
%


16.3
%Return on average stockholders equity(1)


3.6
%


24.8
%


27.8
%


23.9
%


21.5
%Dividends declared per share(2)

$
0.16


$
0.16


$
0.56


$
0.14


$
0.12At September 30,Total assets


481.1



580.3



287.8



180.0



158.6Total debt


221.7



326.5



82.8



29.3



39.4Total stockholders equity


247.9



237.5



184.3



145.2



114.5Inception to date  September 30,Cumulative aggregate purchases, at face


31,049.9



29,593.8



18,701.9



13,507.9



10,062.7     (1)
    
    The return on average assets is computed by dividing net income
    by average total assets for the fiscal year. The return on
    average stockholders equity is computed by dividing net
    income by the average stockholders equity for the fiscal
    year. Both ratios have been computed using beginning and
    period-end balances.(2)
    
    Includes a special dividend of $0.40 per share in 2006. 29




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Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operation.  Cautions
    Regarding Forward-Looking Statements
  Form 10-K
  Overview
    
    charged-off receivables accounts that have
    been written-off by the originators and may have been previously
    serviced by collection agencies;
    semi-performing receivables accounts where
    the debtor is making partial or irregular monthly payments, but
    the accounts may have been written-off by the originators; and
    in limited circumstances,
    performing receivables accounts where the
    debtor is making regular monthly payments that may or may not
    have been delinquent in the past.      
    our relationships with industry participants, collection
    agencies, investors and our financing sources;
    brokers who specialize in the sale of consumer receivable
    portfolios; and
    other sources.  Critical
    Accounting Policies
    
    The interest method; or
    The cost recovery method. 30




---



##### Table of Contents



SOP 03-3
  
    same issuer/originator
    same underlying credit quality
    similar geographic distribution of the accounts
    similar age of the receivable and
    same type of asset class (credit cards, telecommunications, etc.)    
    the number of collection agencies previously attempting to
    collect the receivables in the portfolio;
    the average balance of the receivables;
    the age of the receivables (as older receivables might be more
    difficult to collect or might be less cost effective);
    past history of performance of similar assets  as we
    purchase portfolios of similar assets, we believe we have built
    significant history on how these receivables will liquidate and
    cash flow;
    number of months since charge-off;
    payments made since charge-off;
    the credit originator and their credit guidelines;
    the locations of the debtors as there are better states to
    attempt to collect in and ultimately we have better
    predictability of the liquidations and the expected cash flows.
    Conversely, there are also states where the liquidation rates
    are not as good and that is factored into our cash flow analysis;
    financial wherewithal of the seller;
    jobs or property of the debtors found within portfolios-with our
    business model, this is of particular importance. Debtors with
    jobs or property are more likely to repay their obligation and
    conversely, debtors without jobs or property are less likely to
    repay their obligation; and
    the ability to obtain customer statements from the original
    issuer. 31




---



##### Table of Contents



18-28 month 130-150%
  Results
    of Operations
  Form 10-K.
  Years Ending September 30,2008


2007


2006Finance income


99.8
%


98.4
%


99.6
%Other income


0.2
%


1.6
%


0.4
%Total revenue


100.0
%


100.0
%


100.0
%General and administrative expenses


25.6
%


18.1
%


18.0
%Interest expense


15.5
%


13.0
%


4.6
%Impairments


46.0
%


6.5
%


2.2
%Income before equity in earnings in venture and income taxes


12.9
%


62.4
%


75.2
%Equity in earnings in venture


0
%


0.2
%


0.5
%Income before income taxes


12.9
%


62.6
%


75.7
%Provision for income taxes


5.3
%


25.4
%


30.6
%Net income


7.6
%


37.2
%


45.1
%  32




---



##### Table of Contents



Year
    Ended September 30, 2008 Compared to the Year Ended
    September 30, 2007
  Finance income.
      Other income.
  General and administrative expenses.
 33




---



##### Table of Contents



Interest expense.
  Impairments.
  Equity in earnings of venture.
  Net income.
  Year
    Ended September 30, 2007 Compared to the Year Ended
    September 30, 2006
  Finance income.
 34




---



##### Table of Contents



Other income.
  General and administrative expenses.
  Interest expense.
 35




---



##### Table of Contents



Impairments.
  Equity in earnings of venture.
  Net income.
  Liquidity
    and Capital Resources
   36




---



##### Table of Contents



37




---



##### Table of Contents



Start-up start-up
         38




---



##### Table of Contents



39




---



##### Table of Contents



Year Ended September 30,2008


2007


2006


2005


2004(In millions)Balance at beginning of period

$
545.6


$
257.3


$
172.7


$
146.1


$
105.6Acquisitions of finance receivables, net of buybacks


49.9



440.9



200.2



126.0



103.7Cash collections from debtors applied to principal(1)(2)


(81.7
)


(114.4
)


(90.4
)


(59.6
)


(37.6
)Cash collections represented by account sales applied to
    principal(1)


(11.0
)


(29.1
)


(23.0
)


(39.8
)


(25.3
)Impairments/Portfolio write down


(53.2
)


(9.1
)


(2.2
)






(0.3
)Effect of foreign exchange


(0.6
)














Balance at end of period

$
449.0


$
545.6


$
257.3


$
172.7


$
146.1  40




---



##### Table of Contents



(1)
    
    Cash collections applied to principal consists of cash
    collections less income recognized on finance receivables plus
    amounts received by us from the sale of consumer receivable
    portfolios to third parties.(2)
    
    In 2007, includes put backs of purchased accounts returned to
    the seller totaling $5.5 million.    Portfolio
    Purchases
  Year Ended September 30,2008


2007


2006(In millions)Aggregate Purchase Price

$
49.9


$
440.9


$
200.2Aggregate Portfolio Face Amount


1,605.1



10,891.9



5,194.0     Schedule
    of Portfolios by Income Recognition Category
  September 30, 2008


September 30, 2007


September 30, 2006Cost


Interest


Cost


Interest


Cost


InterestRecovery


Method


Recovery


Method


Recovery


MethodPortfolios


Portfolios


Portfolios


Portfolios


Portfolios


Portfolios(In millions)Original Purchase Price (at period end)

$
405.9


$
789.5


$
101.1


$
1,045.4


$
50.6


$
655.0Cumulative Aggregate Managed Portfolios (at period end)


12,053.4



18,980.0



3,961.5



25,464.7



2,205.0



16,332.8Receivable Carrying Value (at period end)


245.5



203.5



32.0



513.6



1.1



256.3Finance Income Earned (for the respective period)


1.2



114.0



2.2



136.2



3.4



97.6Total Cash Flows (for the respective period)


24.9



183.0



21.2



260.6



3.7



210.8     Collections
    Represented by Account Sales
  CollectionsRepresented


FinanceBy account


IncomeYear

Sales


Recognized2008

$
20,395,000


$
9,361,0002007


54,193,000



25,164,0002006


55,035,000



32,041,000  41




---



##### Table of Contents



Portfolio
    Performance (1)
    TotalNet Cash








EstimatedCollections


Estimated


Total


CollectionsPurchase

Purchase


Including


Remaining


Estimated


as a PercentagePeriod

Price(2)


Cash Sales(3)


Collections(4)


Collections(5)


of Purchase Price2001

$
65,120,000


$
105,302,000







105,302,000



162
%2002


36,557,000



47,826,000







47,826,000



131
%2003


115,626,000



203,875,000



2,692,000



206,567,000



179
%2004


103,743,000



171,857,000



3,635,000



175,492,000



169
%2005


126,023,000



185,217,000



37,717,000



222,934,000



177
%2006


200,237,000



203,438,000



103,504,000



306,942,000



153
%2007(6)


109,235,000



59,176,000



90,521,000



149,697,000



137
%2008


26,626,000



12,449,000



23,535,000



35,984,000



135
%     (1)
    
    Total collections do not represent full collections of the
    Company with respect to this or any other year.(2)
    
    Purchase price refers to the cash paid to a seller to acquire a
    portfolio less the purchase price refunded by a seller due to
    the return of non-compliant accounts (also defined as
    put-backs), plus third party commissions(3)
    
    Cash collections include: net collections from our third-party
    collection agencies and attorneys, collections from our in-house
    efforts and collections represented by account sales.(4)
    
    Does not include estimated collections from portfolios that are
    zero basis(5)
    
    Total estimated collections refer to the actual net cash
    collections, including cash sales, plus estimated remaining
    collections.(6)
    
    The Portfolio Purchase was reclassified from the interest method
    to the cost recovery method during the third quarter of fiscal
    year 2008 The following table describes the impact of the
    reclassification on the year 2007.  TotalNet Cash








EstimatedCollections


Estimated


Total


CollectionsPurchase


Including


Remaining


Estimated


as a PercentagePrice


Cash Sales


Collections


Collections


of Purchase PriceAs reported 2007

$
384,850,000


$
69,409,000


$
460,205,000


$
529,614,000



138
%Less: Portfolio Purchase


(275,615,000
)


(45,499,000
)


(334,701,000
)


(380,200,000
)


(138
)%Interest method Portfolios without Portfolio Purchase-2007

$
109,235,000


$
23,910,000


$
125,504,000


$
149,414,000



137
%2008 Activity






35,266,000



(34,983,000
)


283,000As reported 2008

$
109,235,000


$
59,176,000


$
90,521,000


$
149,697,000



137
%      42




---



##### Table of Contents



New
    Accounting Pronouncements
  Share-Based Payment and/or
  The Fair
    Value Option for Financial Assets and Financial Liabilities
        Fair Value Measurements
  Inflation
   43




---



##### Table of Contents



Seasonality
    and Trends
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk   44




---



##### 



Item 8.
    Financial
    Statements And Supplementary Data.     
 Index to Audited Financial Statements:

PageReport of Independent Registered Public Accounting Firms


F-2Consolidated Balance Sheets  September 30, 2008
    and 2007


F-4Consolidated Statements of Operations  Years ended
    September 30, 2008, 2007 and 2006


F-5Consolidated Statements of Shareholders Equity 
    Years ended September 30, 2008, 2007 and 2006


F-6Consolidated Statements of Cash Flows  Years ended
    September 30, 2008, 2007 and 2006


F-7Notes to Consolidated Financial Statements


F-8    Item 9.
    Changes
    in and Disagreements With Accountants on Accounting and
    Financial Disclosure.    Item 9A.
    Controls
    and Procedures.  Disclosure
    Controls and Procedures
  Rules 240.13a-15(e) 240.15d-15(e))
  Managements
    Annual Report on Internal Control Over Financial
    Reporting
  Rule 13a-15(f)
         45




---



##### Table of Contents



Changes
    in Internal Controls over Financial Reporting
   46




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Internal Control  Integrated Framework
        Internal Control-Integrated Framework
    /s/  Grant
    Thornton LLP
    47




---



##### Table of Contents



Item 9B.
    Other
    Information.   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance.  Directors
    and Executive Officers
    Name

Age

PositionArthur Stern


88


Director, Chairman of the Board and Executive Vice PresidentGary Stern


56


Director, President and Chief Executive OfficerHerman Badillo(1)(3)


79


DirectorEdward Celano(1)


70


DirectorDavid Slackman(2)(4)


61


DirectorHarvey Leibowitz(1)(2)


74


DirectorAlan Rivera(2)(3)(5)


46


DirectorLouis A. Piccolo(3)


56


DirectorCameron E. Williams


61


Chief Operating OfficerMary Curtin


47


Senior Vice PresidentMitchell Cohen(6)


53


Chief Financial OfficerRobert J. Michel(7)


51


Controller     (1)
    
    Member of Audit Committee(2)
    
    Member of Compensation Committee(3)
    
    Member of Governance Committee(4)
    
    Lead Independent Director(5)
    
    Resigned from the Board of Directors on December 17, 2008(6)
    
    Resigned as Chief Financial Officer effective after the filing
    of Report on
    Form 10-K
    for 2008(7)
    
    Assumes the role of Chief Financial Officer effective after the
    filing of Report on
    Form 10-K
    for 2008  Board
    of Directors
  Arthur Stern
  Gary Stern
  Herman Badillo
 48




---



##### Table of Contents



Edward Celano
  David Slackman
  Harvey Leibowitz
  Alan Rivera
  Louis A. Piccolo
    Corporate
    Officers
  Cameron Williams
  Mary Curtin
  Mitchell Cohen Form 10-K.
  Robert J. Michel
 49




---



##### Table of Contents



Committees
    of the Board of Directors
  Compensation Committee.
  Audit Committee.
  Audit Committee Financial Expert.
  Governance Committee.
  Code
    of Ethics
  Form 10-K.
  Item 11.
    Executive
    Compensation.  Compensation
    Discussion and Analysis
  Introduction
   50




---



##### Table of Contents



Compensation
    Philosophy and Objectives
    o
  o
    motivate and fairly reward executives whose knowledge, skills
    and performance are critical to our success; and  o
           51




---



##### Table of Contents



Elements
    of Executive Officer Compensation
  Overview.
  ,
  Base Salary.
      Cash Incentive Bonuses.
    Equity Compensation.
 52




---



##### Table of Contents



Severance and
    Change-in-Control
    Benefits. change-in-control
  Share
    Retention
    Regulatory
    Considerations
    THE
    COMPENSATION COMMITTEE REPORT
    ON EXECUTIVE COMPENSATION
       53




---



##### Table of Contents



SUMMARY
    OF COMPENSATION
    Summary Compensation TableAll OtherFiscal

Salary

Bonus

Stock Awards

Compensation

TotalName and Principal Position

Year

($)

($)(1)

($)(3)

($)(8)

($)Arthur Stern


2008



360,385



0



167,055



466



527,906Executive Vice President


2007



370,962



0
(2)


220,340



455



591,757Chairman of the Board(4)Gary Stern


2008



577,500



0



236,406



33,695



847,601President & CEO


2007



570,096



0
(2)


220,340



21,124



811,560Mitchell Cohen


2008



277,308



0



143,956



28,662



449,926Chief Financial Officer(5)


2007



260,577



75,000



220,340



19,570



575,487Cameron Williams


2008



286,538



0



0



17,145



303,683Chief Operating Officer(6)


2007



16,346



0



0



1,200



17,546Mary Curtin


2008



225,577



0



61,854



8,782



296,213Senior Vice President(7)


2007



190,577



70,000



73,456



8,400



342,433     (1)
    
    No bonuses were awarded to Named Executive Officers for fiscal
    year 2008. Bonuses reflected in the table above were awarded in
    January 2008 for fiscal year ended September 30, 2007. Also
    included above is a $50,000 bonus paid to Mr. Cohen during
    fiscal year 2007 for his work in connection with the
    $300 million portfolio purchase in March 2007. Bonuses paid
    in fiscal year 2007 for services provided in fiscal year 2006,
    as reported in our 2007 proxy statement, were as follows:  Arthur Stern

$
50,000Gary Stern

$
100,000Mitchell Cohen

$
50,000   (2)
    
    Bonuses awarded to Gary Stern and Arthur Stern of $250,000 and
    $50,000, respectively, were not paid at the election of the two
    Named Executive Officers.(3)
    
    The amounts shown in the Stock Awards column represent the
    approximate amount we recognized for financial statement
    reporting purposes in fiscal year 2008 for the fair value of
    equity awards granted to the named executive officers in fiscal
    year 2008 and prior years, in accordance with
    SFAS No. 123(R), excluding the impact of estimated
    forfeitures related to service-based vesting conditions, as
    required by SEC rules. As a result, these amounts do not reflect
    the amount of compensation actually received by the named
    executive officer during the fiscal year. For a description of
    the assumptions used in calculating the fair value of equity
    awards under SFAS No. 123(R), see Note A [10] and
    Note K of our financial statements in our
    Form 10-K
    for the year ended September 30, 2008.(4)
    
    Arthur Stern as of January 2009 has stepped down as an employee
    of the Company, although he will continue to serve on the Board,
    with the title Chairman Emeritus and to consult for a
    combined annual directors and consulting fee of $300,000.
    Mr. Stern founded the Company and has served as Executive
    Vice President and Chairman of Board of the Company since 1995.(5)
    
    Mitchell Cohen has resigned from the Company.
    Mr. Cohens resignation takes affect after the filing
    of this Form
    10-K.
    Mr. Cohen will continue to consult with the Company to
    insure a smooth transition, and will receive a consulting fee of
    $5,000 per month for six months. The Board has also agreed to
    accelerate the vesting of 5,000 shares of restricted stock
    of the Company which otherwise would have vested on
    March 19, 2009.(6)
    
    Mr. Williams was appointed to the Chief Operating Officer
    position on January 8, 2008. Salary for fiscal year 2007
    represents the period August 27, 2007 (commencement of
    employment with the Company) through September 30, 2007.
    Salary earned for period was in the capacity of Vice
    President  Strategic Initiatives.(7)
    
    Ms. Curtin was appointed to the Senior Vice President
    position on January 8, 2008. Salary, Bonus and Stock Awards
    were in a non-executive capacity for 2007. 54




---



##### Table of Contents



(8)
    
    These amounts consist of:  
    
    matching Company contributions under our 401(k) plan, and
    
    life premiums as follows:  401(k)

Life



HealthCompany

Insurance

Automobile

InsuranceMatch

Premium

Allowance

Premiums

TotalName

Year

($)

($)

($)

($)

($)Arthur Stern


2008















466



4662007















455



455Gary Stern


2008



5,661



24,982







3,052



33,6952007



10,000



8,224







2,900



21,124Mitchell Cohen


2008



6,933



19,000







2,729



28,6622007



7,500



9,475







2,595



19,570Cameron Williams


2008



5,250







9,600



2,296



17,1462007











1,200



0



1,200Mary Curtin


2008



7,750











1,032



8,7822007



7,500











900



8,400   GRANTS
    OF STOCK OPTION AND STOCK AWARDS
    All OtherStock Awards:Number ofShares ofStocks or


Grant Date FairUnits


Value of Stock andName

Grant Date


(#)(1)


Option Awards ($)Arthur Stern


1/17/08



5,000


$
98,650Gary Stern


1/17/08



20,000


$
394,600Mitchell Cohen










Cameron Williams










Mary Curtin


1/17/08



3,000


$
59,190     (1)
    
    These restricted stock awards vest in three equal annual
    installments beginning 10/1/08. 55




---



##### Table of Contents



OUTSTANDING
    EQUITY AWARDS AT FISCAL YEAR-END
    Option Awards


Stock AwardsNumber ofSecuritiesUnderlying











Market Value ofUnexercised


Option





Number of Shares or


Shares or Units ofOptions


Exercise


Option


Units of Stock That


Stock That Have Not(#)


Price


Expiration


Have Not Vested


VestedName

Exercisable


($)


Date


(#)


($)(1)Arthur Stern














5,000



35,0506,000



5.96



11/14/11



3,334



23,37130,000



4.725



11/1/1270,000



14.87



11/3/1380,000



18.22



10/28/14Gary Stern














5,000



35,050300,000



2.625



9/18/10



13,334



93,4716,000



5.96



11/14/1160,000



4.725



11/1/1270,000



14.87



11/3/13150,000



18.22



10/28/14Mitchell Cohen


20,000



16.57



9/9/14



5,000



35,050Cameron Williams


















Mary Curtin














1,668



11,6933,334



18.76



11/16/14



2,000



14,020     (1)
    
    Based on $7.01 per share, the closing price of the common stock
    as reported by NASDAQ on September 30, 2008.  OPTION
    EXERCISES AND VESTING OF RESTRICTED STOCK AWARDS
    OPTION
    EXERCISES AND STOCK VESTED
  Stock AwardsOption Awards


Number ofNumber of


Value


Shares


ValueShares


Realized


Acquired


RealizedAcquired


on


on


onon Exercise


Exercise


Vesting


VestingName

(#)


($)(1)


(#)


($)(2)Arthur Stern


100,000



1,237,500



6,666



79,479Gary Stern


200,000



4,407,500



11,666



114,679Mitchell Cohen


0



0



5,000



67,750Cameron Williams


0



0



0



0Mary Curtin


0



0



2,667



29,623     (1)
    
    Represents the difference between the market price of the
    underlying securities at exercise and the exercise price of the
    option.(2)
    
    Represents the number of shares vested multiplied by the market
    value of the shares on the vesting date. 56




---



##### Table of Contents



Employment
    Agreements
  Form 10-K.
        Gary Stern

$
577,500Arthur Stern

$
355,000Cameron Williams

$
300,000Mitchell Cohen

$
280,000     Cause
 57




---



##### Table of Contents




    a lump sum amount in cash equal to two (2) times the sum of
    the executives base salary in effect on the date of
    termination and the highest annual bonus earned by the executive
    during his employment with the Company, and
    the executive will continue to receive the benefits and
    perquisites as provided in the employment agreement for two
    years from the date of termination.      Termination


Change-inwithout Cause


control TriggerName(1)

(2)


Event(3)Arthur Stern(4)

$
355,000


$
810,000Gary Stern

$
577,500


$
1,355,000Mitchell Cohen(5)

$
280,000


$
710,000Cameron Williams

$
450,000


$
600,000     (1)
    
    Ms. Curtin does not have an employment agreement.(2)
    
    Executive is paid for a period of twelve months following
    termination date. Chart does not include the value of
    12 months continued health, medical and other benefits nor
    the effects of the requirement to give 90 days notice of
    termination or pay for such 90 day period.(3)
    
    Executive is paid a lump sum amount in cash equal to two
    (2) times the sum of the executives base salary in
    effect on the date of termination and the highest annual bonus
    earned by the executive during his employment with the Company.
    Chart does not include the value of 24 months continued
    health, medical and other benefits.(4)
    
    Arthur Sterns contract expired 12/31/08. Additionally,
    Mr. Stern as of January 2009 has stepped down as an
    employee of the Company, although he will continue to serve on
    the Board, with the title Chairman Emeritus and to consult
    for a combined annual directors and consulting fee of $300,000.(5)
    
    Mitchell Cohen, will be leaving the Company to relocate and take
    another position. A date has not yet been set for his departure
    as Mr. Cohen intends to stay with the Company until the
    latest banking arrangements are finalized and the Company has
    filed its
    Form 10-K
    for fiscal 2008. Mr. Cohen will continue to consult with
    the Company to insure a smooth transition, and will receive a
    consulting fee of $5,000 per month for six months. The Board has
    also agreed to accelerate the vesting of 5,000 shares of
    restricted stock of the Company which otherwise would have
    vested on March 19, 2009.  DIRECTOR
    COMPENSATION
    
    An annual fee of $35,000 per year for each Independent Director,
    An annual fee for the Lead Independent Director of $25,000 per
    year, 58




---



##### Table of Contents




    An annual fee of $20,000 for Chairman of Audit Committee,
    An annual fee of $10,000 for Audit Committee Member,
    An annual fee of $15,000 for Chairman of the Compensation
    Committee,
    An annual fee of $7,500 for Compensation Committee Member,
    An annual fee of $15,000 for Chairman of the Governance
    Committee, and
    An annual fee of $7,500 for Governance Committee Member.    DIRECTOR
    COMPENSATION
  FeesEarned orPaid in


Stock


OptionCash


Awards


Awards


TotalName

($)


($)(1)


($)(1)


($)Herman Badillo


40,000



51,883



15,346



107,229
(2)Edward Celano


48,750



51,883



15,346



115,979
(3)Harvey Leibowitz


56,250



51,883



15,346



123,479
(4)David Slackman


57,500



51,883



15,346



124,729
(5)Alan Rivera


45,000



51,883



15,346



112,229
(6)Louis Piccolo


39,375



51,502



15,346



106,604
(7)     (1)
    
    The amounts shown in the Stock Awards and Option Awards columns
    represents the approximate amount we recognized for financial
    statement reporting purposes in fiscal year 2008 for the fair
    value of equity awards granted to the outside directors in
    fiscal year 2008 and prior years, in accordance with
    SFAS No. 123(R), excluding the impact of estimated
    forfeitures related to service-based vesting conditions, as
    required by SEC rules. As a result, these amounts do not reflect
    the amount of compensation actually received by the named
    executive officer during the fiscal year. For a description of
    the assumptions used in calculating the fair value of equity
    awards under SFAS No. 123(R), see Note A [10] and
    Note K of our financial statements in our
    Form 10-K
    for the year ended September 30, 2008.(2)
    
    Includes $3,750 paid in cash for Chairmanship of the Governance
    Committee and $2,500 for being a member of the Audit Committee.
    Both positions have been held since June 3, 2008.(3)
    
    Includes $7,500 paid in cash for Chairmanship of the Nominating
    Committee (predecessor committee to Governance Committee)
    Mr. Celano was chairman until June 3, 2008. Also
    includes $7,500 for being a member of the Audit Committee.(4)
    
    Includes $16,875 paid in cash for Chairmanship of the Audit
    Committee and $5,625 for being a member of the Compensation
    Committee.(5)
    
    Includes $12,500 paid in cash for Chairmanship of the
    Compensation Committee, $5,000 in cash for being a member of the
    Audit Committee (member through June 3, 2008) and
    $6,250 for being Lead Independent Director, a position
    Mr. Slackman has held since June 3, 2008.(6)
    
    Includes $11,250 paid in cash for being a member of the
    Compensation Committee and the Governance Committee.
    Mr. Rivera resigned his position on the Board of Directors
    effective December 17, 2008.(7)
    
    Includes $5,625 paid in cash for being a member of the
    Governance Committee. 59




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##### Table of Contents



STOCK
    OPTION AND STOCK AWARD PLANS
  Equity
    Compensation Plan
        2002
    Stock Option Plan
        1995
    Stock Option Plan
       60




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##### Table of Contents



Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters.  c/o Asta
  Amount andNatureof BeneficialName and Address of Beneficial Owner

Ownership

Percentage(1)Arthur Stern


647,683
(2)


4.5
%Gary Stern


1,535,987
(3)


10.3
%Mitchell Cohen


35,000
(4)



*Cameron Williams


0



n/aMary Curtin


9,667
(5)



*Herman Badillo


45,000
(6)



*120 Broadway
    New York, NY 10271Edward Celano


20,334
(7)



*2115 Scotch Gamble Road
    Scotch Plains, NJHarvey Leibowitz


80,000
(8)



*159 West
    53rd

    Street, Apt 229
    New York, NY 10019David Slackman


54,834
(9)



*28 Markwood Lane 
    East Northport, NY 11731Alan Rivera


49,666
(10)



*1370
    6th Avenue 

    25th Floor

    
    New York, NY 10019Louis A. Piccolo


34,769
(11)



*350 West
    50rd

    Street 
    New York, NY 10019Asta Group, Incorporated


842,000
(12)


5.9
%Barbara Marburger


440,451
(13)


3.1
%9 Locust Hollow Road 
    Monsey, NY 10952Judith R. Feder


1,573,000
(14)


11.0
%928 East
    10th Street

    
    Brooklyn, NY 11230Stern Family Investors LLC
    928 East
    10th Street

    
    Brooklyn, NY 11230


692,000
(15)


4.8
%GMS Family Investors LLC
    928 East
    10th Street

    Brooklyn, NY 11230


862,000
(16)


6.0
%Private Capital Management
    8889 Pelican Bay Blvd. Suite 500 
    Naples, FL 34108


1,316,238
(17)


9.2
%Wellington Management Company, LLP
    75 State Street 
    Boston, MA 02109


840,647
(18)


5.9
%Peters MacGregor Capital Management Pty Ltd
    P.O. Box 107
    Spring Hill Old 4004
    Australia


1,793,630
(19)


12.6
%First Wilshire Securities Management Inc. 
    1224 East Green Street 
    Suite 200
    Pasadena, CA 91106


808,520
(20)


5.7
%All executive officers and directors as a group (10 persons)


2,512,939
(21)


16.4
%  61




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##### Table of Contents



*
    
    Less than 1%(1)
    
    Any shares of common stock that any person named above has the
    right to acquire within 60 days of December 31, 2008,
    are deemed to be outstanding for purposes of calculating the
    ownership percentage of such person, but are not deemed to be
    outstanding for purposes of calculating the beneficial ownership
    percentage of any other person not named in the table above.(2)
    
    Includes 186,000 shares of common stock issuable upon
    exercise of options that are exercisable within 60 days of
    December 31, 2008, and 214,599 shares of common stock
    owned by Asta Group, Incorporated which shares are attributable
    to Arthur Stern based on his percentage ownership of Asta Group.
    Includes 8,334 shares of restricted stock that will not
    have vested within 60 days of December 31, 2008 which
    Mr. Stern has the right to vote. Excludes
    349,460 shares owned by Stern Family Investors LLC which
    shares are attributable to Arthur Stern based on his percentage
    ownership of such LLC and 948 shares owned by GMS Family
    Investors LLC which shares are attributable to Arthur Stern
    based on his percentage ownership of such LLC. Arthur Stern does
    not have voting or investment power with respect to any of the
    shares held by either LLC and disclaims beneficial ownership of
    the shares owned by the LLCs.(3)
    
    Includes 586,000 shares of common stock issuable upon
    exercise of options that are exercisable within 60 days of
    December 31, 2008, and 196,656 shares of common stock
    owned by Gary Stern as custodian for his minor children and
    285,607 shares of common stock owned by Asta Group, which
    shares are attributable to Gary Stern based on his percentage
    ownership of Asta Group. Includes 18,334 shares of
    restricted stock that will not have vested within 60 days
    of December 31, 2008 which Mr. Stern has the right to
    vote. Excludes 684,945 shares owned by GMS Family Investors
    LLC which shares are attributable to Gary Stern based on his
    percentage ownership of such LLC. Gary Stern does not have
    voting or investment power with respect to any of the shares
    held by the LLC and disclaims beneficial ownership of the shares
    owned by the LLC. Also excludes 196,656 shares of common
    stock held by one of his children who is no longer a minor and
    for which he disclaims beneficial ownership.(4)
    
    Includes 20,000 shares of common stock issuable upon
    exercise of options that are exercisable within 60 days of
    December 31, 2008. Includes 5,000 shares of restricted
    stock that will not have vested within 60 days of
    December 31, 2008 which Mr. Cohen has the right to
    vote.(5)
    
    Includes 3,668 shares of restricted stock that will not
    have vested within 60 days of December 31, 2008 which
    Ms. Curtin has the right to vote.(6)
    
    Includes 37,000 shares of common stock issuable upon
    exercise of options that are exercisable within 60 days of
    December 31, 2008. Includes 3,666 shares of restricted
    stock that will not have vested within 60 days of
    December 31, 2008 which Mr. Badillo has the right to
    vote. Excludes 1,000 shares of common stock issuable upon
    exercise of options that are not exercisable within 60 days
    of December 31, 2008.(7)
    
    Includes 10,334 shares of common stock issuable upon
    exercise of options that are exercisable within 60 days of
    December 31, 2008. Includes 3,666 shares of restricted
    stock that will not have vested within 60 days of
    December 31, 2008 which Mr. Celano has the right to
    vote. Excludes 1,000 shares of common stock issuable upon
    exercise of options that are not exercisable within 60 days
    of December 31, 2008.(8)
    
    Includes 72,000 shares of common stock issuable upon
    exercise of options that are exercisable within 60 days of
    December 31, 2008. Includes 2,666 shares of restricted
    stock that will not have vested within 60 days of
    December 31, 2008 which Mr. Leibowitz has the right to
    vote. Excludes 1,000 shares of common stock issuable upon
    exercise of options that are not exercisable within 60 days
    of December 31, 2008.(9)
    
    Includes 45,334 shares of common stock issuable upon
    exercise of options that are exercisable within 60 days of
    December 31, 2008. Includes 3,666 shares of restricted
    stock that will not have vested within 60 days of
    December 31, 2008 which Mr. Slackman has the right to
    vote. Excludes 1,000 shares of common stock issuable upon
    exercise of options that are not exercisable within 60 days
    of December 31, 2008.(10)
    
    Includes 44,000 shares of common stock issuable upon
    exercise of options that are exercisable within 60 days of
    December 31, 2008. Mr. Rivera resigned from the Board
    of Directors effective December 17, 2008. Effective with
    his resignation Mr. Rivera forfeited 4,334 restricted
    shares of common stock and 1,000 stock options that did not vest
    prior to his resignation. 62




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##### Table of Contents



(11)
    
    Includes 25,769 shares of common stock issuable upon
    exercise of options that are exercisable within 60 days of
    December 31, 2008. Includes 3,666 shares of restricted
    stock that will not have vested within 60 days of
    December 31, 2008 which Mr. Piccolo has the right to
    vote. Excludes 1,000 shares of common stock issuable upon
    exercise of options that are not exercisable within 60 days
    of December 31, 2008.(12)
    
    Asta Group, Incorporated is owned by Arthur Stern, our Chairman
    of the Board and an Executive Vice President, Gary Stern, our
    President and Chief Executive Officer, and other members of the
    Stern family, including Barbara Marburger.(13)
    
    Includes 90,676 shares of common stock owned by
    Ms. Marburger as custodian for her minor child and
    70,907 shares of common stock owned by Asta Group, which
    shares are attributable to Ms. Marburger based on her
    percentage ownership of Asta Group. Excludes shares of common
    stock held by her children who are no longer minors and for
    which she disclaims beneficial ownership. Ms. Marburger is
    the daughter of Arthur Stern and the sister of Gary Stern.(14)
    
    Includes 19,000 shares of common stock owned directly,
    692,000 shares owned by Stern Family Investors LLC and
    862,000 shares owned by GMS Family Investors LLC.
    Ms. Feder is the manager of each LLC and as such has sole
    voting and investment power as to such shares.(15)
    
    A limited liability company of which Judith R. Feder has sole
    voting and investment power. Arthur Stern has a 49.5% beneficial
    interest in the LLC, his wife, Alice Stern, has a 1% beneficial
    interest, and a trust for the benefit of the descendants of
    Arthur Stern, of which Judith R. Feder is trustee, has a 49.5%
    beneficial interest in the LLC.(16)
    
    A limited liability company of which Judith R. Feder has sole
    voting and investment power. Gary Stern has a 79.46% beneficial
    interest in the LLC, trusts for the benefit of the children of
    Gary Stern of which Judith R. Feder is the trustee have a
    combined 20.43% beneficial interest (10.215% each),
    and Arthur Stern has a .11% beneficial interest in the LLC.(17)
    
    Based on Information reported by Private Capital Management in
    its Form 13G/A filed with the Securities &
    Exchange Commission (SEC) on December 10, 2008.(18)
    
    Based on information contained in a NASDAQ online report as of
    January 14, 2009, based on the Form 13G and 13F
    filings with the SEC as of such date. The Company is not aware
    of any additional filings by any person or Company known to
    beneficially own more than 5% of the outstanding shares of
    common stock. On February 17, 2009 based on the Form 13G/A
    filed with the SEC, the ownership of Wellington Management
    Company LLP was zero percent.(19)
    
    Based on Information reported by Peters MacGregor Capital
    Management Pty, Ltd in its Form 13G/A filed with the
    Securities & Exchange Commission on February 3,
    2009.(20)
    
    Based on information contained in a NASDAQ online report as of
    January 14, 2009, based on the Form 13G and 13F
    filings with the SEC as of such date. The Company is not aware
    of any additional filings by any person or Company known to
    beneficially own more than 5% of the outstanding shares of
    common stock.(21)
    
    Includes 1,029,771 shares of common stock issuable upon
    exercise of options that are exercisable within 60 days of
    December 31, 2008. Includes 57,006 shares of
    restricted stock that will not have vested within 60 days
    of December 31, 2008. Excludes 5,000 shares of common
    stock issuable upon exercise of options that are not exercisable
    within 60 days of December 31, 2008. Excludes the
    shares owned in the aggregate by Stern Family Investors LLC and
    GMS Family Investors LLC. 63




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##### Table of Contents



EQUITY
    COMPENSATION PLAN INFORMATION
    (a)


(b)


(c)Number of SecuritiesRemaining Available forNumber of Securities





Future Issuance Underto be Issued Upon


Weighted-Average


Equity CompensationExercise of


Exercise Price of


Plans (ExcludingOutstanding Options,


Outstanding Options,


Securities Reflected InPlan Category

Warrants and Rights


Warrants and Rights


Column (a))Equity Compensation Plans Approved by Shareholders


1,037,438


$
11.69



1,267,334Equity Compensation Plans Not Approved by Shareholders










Total


1,037,438


$
11.69



1,267,334   SECTION 16(a)
    BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence.        Item 14.
    Principal
    Accounting Fees and Services.  Audit Fees. Form 10-Q Form 10-Q
 64




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##### Table of Contents



Financial Information Systems Design Implementation
    Fees. Rule 2-01 Regulation S-X
  Tax Fees and All Other Fees.
    Other Matters.
 65




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##### Table of Contents



Part IV  Item 15.
    Exhibits,
    Financial Statement Schedules.  Form 10-K.
      (a)
    The following documents are filed as part of this report    2.
    Exhibits  ExhibitNumber3
.1

Certificate of Incorporation.(1)3
.2

Amendment to Certificate of Incorporation(3)3
.3

By laws.(2)10
.1

Asta Funding, Inc 1995 Stock Option Plan as Amended(1)10
.2

Asta Funding, Inc. 2002 Stock Option Plan(3)10
.3

Asta Funding, Inc. Equity Compensation Plan(6)10
.4

Third Amended and Restated Loan and Security Agreement dated May
    11, 2004, between the Company and Israel Discount Bank of NY(5)10
.5

Fourth Amended and Restated Loan and Security Agreement dated
    July 10, 2006, between the Company and Israel Discount Bank of
    NY(7)10
.6

Lease agreement between the Company and 210 Sylvan Avenue LLC
    dated July 29, 2005(8)10
.7

Receivables Finance Agreement dated March 2, 2007 between the
    Company and the Bank of Montreal(10)10
.8

Subservicing Agreement between the Company and the Subservicer
    dated March 2, 2007(17)10
.9

Purchase and Sale Agreement dated February 5, 2007(11)10
.10

Third Amendment to the Fourth Amended and Restated Loan and
    Security Agreement dated March 30, 2007, between the Company and
    Israel Discount Bank(12)10
.11

Fourth Amendment to the Fourth Amended and Restated Loan and
    Security Agreement dated May 10, 2007, between the Company and
    Israel Discount Bank(13)10
.12

Fifth Amendment to the Fourth Amended and Restated Loan and
    Security Agreement dated June 27, 2007, between the Company and
    Israel Discount Bank(14)10
.13

First Amendment to the Receivables Finance Agreement dated July
    1, 2007 between the Company and Bank of Montreal(15)10
.14

Sixth Amendment to the Fourth Amended and Restated Loan and
    Security Agreement dated December 4, 2007, between the Company
    and Israel Discount Bank(16)10
.15

Second Amendment to the Receivables Financing Agreement dated
    December 27, 2007(18)10
.16

Third Amendment to the Receivables Financing Agreement dated May
    19, 2008(19)10
.17

Amended and Restated Servicing Agreement dated May 19, 2008
    between the Company and The Bank of Montreal(19)10
.18

Subordinated Promissory Note between Asta Funding, Inc and Asta
    Group, Inc. dated April 29, 2008(20)10
.19

Seventh Amendment to the Fourth Amended and Restated Loan
    Agreement, Dated February 20, 2009 between the Company and
    IDB*10
.20

Form of Amended and Restated Revolving Note* 66




---



##### Table of Contents



ExhibitNumber10
.21

Fourth Amendment to the Receivables Financing Agreement dated
    February 20, 2009 between the Company and Bank of Montreal*10
.22

Subordinated Guarantor Security Agreement dated February 20,
    2009 to Bank of Montreal*10
.23

Subordinated Limited Recourse Guaranty Agreement dated February
    20, 2009*10
.24

Subordinated Guarantor Security Agreement dated February 20,
    2009 to Asta  Group, Inc.*10
.25

Subordinated Limited Recourse Guaranty Agreement dated February
    20, 2009 to Asta Group.*10
.26

Form of Intercreditor Agreement*10
.27

Amended and Restated Management Agreement, dated as of January
    16, 2009, between Palisades Collection, L.L.C., and [*].*10
.28

Amended and Restated Master Servicing Agreement, dated as of
    January 16, 2009, between Palisades Collection, L.L.C., and [*] *10
.29

First Amendment to Amended and Restated Master Servicing
    Agreement, dated as of September 16, 2007, by and among
    Palisades Collection, L.L.C., and [*], and [*]*14
.1

Code of Ethics for Senior Financial Officers*21
.1

Subsidiaries of the Company*31
.1

Certification of Registrants Chief Executive Officer, Gary
    Stern, pursuant to Section 302 of the Sarbanes-Oxley Act of
    2002.*31
.2

Certification of Registrants Chief Financial Officer,
    Mitchell Cohen, pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.*32
.1

Certification of the Registrants Chief Executive Officer,
    Gary Stern, pursuant to Section 906 of the Sarbanes-Oxley Act of
    2002.*32
.2

Certification of the Registrants Chief Financial Officer,
    Mitchell Cohen, pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002.*     (1)
    
    Incorporated by reference to an Exhibit to Asta Fundings
    Registration Statement on
    Form SB-2
    (File
    No. 33-97212).(2)
    
    Incorporated by reference to Exhibit 3.1 to Asta
    Fundings Annual Report on
    Form 10-KSB
    for the year ended September 30, 1998.(3)
    
    Incorporated by reference to an Exhibit to Asta Fundings
    Quarterly Report on
    Form 10-QSB
    for the three months ended March 31, 2002.(4)
    
    Not used.(5)
    
    Incorporated by reference to Exhibit 10.1 to Asta
    Fundings Current Report on
    Form 8-K
    filed May 19, 2004.(6)
    
    Incorporated by reference to Exhibit 10.1 to Asta
    Fundings Current Report on
    Form 8-K
    filed March 3, 2006.(7)
    
    Incorporated by reference to Exhibit 10.1 to Asta
    Fundings Current Report on
    Form 8-K
    filed July 12, 2006.(8)
    
    Incorporated by reference to Exhibit 10.1 to Asta
    Fundings Current Report on
    Form 8-K
    filed August 2, 2005.(9)
    
    Not used(10)
    
    Incorporated by reference to Exhibit 10.1 to Asta
    Fundings Quarterly Report on
    Form 10-Q
    for the three months ended March 31, 2007.(11)
    
    Incorporated by reference to Exhibit 10.1 to Asta
    Fundings Current Report on
    Form 8-K
    filed February 9, 2007(12)
    
    Incorporated by reference to Exhibit 10.2 to Asta
    Fundings Quarterly Report on
    Form 10-Q
    for the Three Months Ended March 31, 2007(13)
    
    Incorporated by reference to Exhibit 10.3 to Asta
    Fundings Quarterly Report on
    Form 10-Q
    for the Three Months Ended March 31, 2007(14)
    
    Incorporated by reference to Exhibit 10.1 to Asta
    Fundings Quarterly Report on
    Form 10-Q
    for the Three Months Ended June 30, 2007 67




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##### Table of Contents



(15)
    
    Incorporated by reference to Exhibit 10.2 to Asta
    Fundings Quarterly Report on
    Form 10-Q
    for the Three Months Ended June 30, 2007.(16)
    
    Incorporated by reference to Exhibit 10.1 to Asta
    Fundings Current Report on
    Form 8-K
    filed December 10, 2007(17)
    
    Incorporated by reference to Exhibit 10.4 to Asta
    Fundings Quarterly Report on
    Form 10-Q
    for the Three Months Ended March 31, 2007(18)
    
    Incorporated by reference to Exhibit 10.15 to Asta
    Fundings Annual Report on
    Form 10-K
    for the year ended September 30, 2007(19)
    
    Incorporated by reference to Exhibit 10.15 to Asta
    Fundings Quarterly Report on
    Form 10-Q
    for the three months ended March 31, 2008(20)
    
    Incorporated by reference to Exhibit 10.1 to Asta
    Fundings Current Report on
    Form 8-K
    filed May 1, 2008 68




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##### Table of Contents



SIGNATURES
      By:
    /s/  Gary
    Stern          Signature

Title

Date/s/  Gary
    SternGary
    Stern

President, Chief Executive Officer and Director

February 20, 2009/s/  Mitchell
    CohenMitchell
    Cohen

Chief Financial Officer 
    Principal Financial and Accounting Officer

February 20, 2009/s/  Arthur
    SternArthur
    Stern

Chairman of the Board and
    Executive Vice President

February 20, 2009/s/  Herman
    BadilloHerman
    Badillo

Director

February 20, 2009/s/  Edward
    CelanoEdward
    Celano

Director

February 20, 2009/s/  Harvey
    LeibowitzHarvey
    Leibowitz

Director

February 20, 2009/s/  David
    SlackmanDavid
    Slackman

Director

February 20, 2009/s/  Louis
    A. PiccoloLouis
    A. Piccolo

Director

February 20, 2009  69




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##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
  CONSOLIDATED FINANCIAL STATEMENTS
  SEPTEMBER 30, 2008 and 2007




---



##### 



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Contents
   
 PageReport of Independent Registered Public
    Accounting Firms


F-2Balance sheets as of September 30, 2008 and
    2007


F-4Statements of operations for the years ended
    September 30, 2008, 2007 and 2006


F-5Statements of stockholders equity for the
    years ended September 30, 2008, 2007 and 2006


F-6Statements of cash flows for the years ended
    September 30, 2008, 2007 and 2006


F-7Notes to consolidated financial statements


F-8




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           Internal Control-Integrated
    Framework
  /s/  Grant Thornton LLP
    F-2




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
           /s/  EISNER LLP
    F-3




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Consolidated
    Balance Sheets
  September 30,2008


2007ASSETSCash and cash equivalents

$
3,623,000


$
4,525,000Restricted cash


3,047,000



5,694,000Consumer receivables acquired for liquidation (at net realizable
    value)


449,012,000



545,623,000Due from third party collection agencies and attorneys


5,070,000



4,909,000Investment in venture


555,000



2,040,000Furniture and equipment (net of accumulated depreciation of
    $2,367,000 in 2008 and $2,048,000 in 2007)


762,000



793,000Deferred income taxes


15,567,000



12,349,000Other assets


3,500,000



4,323,000$
481,136,000


$
580,256,000LIABILITIESDebt

$
213,485,000


$
326,466,000Subordinated debt  related party


8,246,000



Other liabilities


4,618,000



7,537,000Dividends payable


571,000



557,000Income taxes payable


6,315,000



8,161,000Total liabilities


233,235,000



342,721,000Commitments and contingenciesSTOCKHOLDERS EQUITYPreferred stock, $.01 par value; authorized 5,000,000;
    Issued  noneCommon stock, $.01 par value, authorized
    30,000,000 shares, issued and outstanding
    14,276,158 shares in 2008 and 13,918,158 in 2007


143,000



139,000Additional paid-in capital


69,130,000



65,030,000Retained earnings


178,925,000



172,366,000Accumulated other comprehensive loss


(297,000
)


Total stockholders equity


247,901,000



237,535,000$
481,136,000


$
580,256,000    F-4




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Consolidated
    Statements of Operations
  Year Ended September 30,2008


2007


2006Revenues:Finance income, net

$
115,295,000


$
138,356,000


$
101,024,000Other income


200,000



2,181,000



405,000115,495,000



140,537,000



101,429,000General and administrative expenses


29,561,000



25,450,000



18,268,000Interest expense (2008  Related party 
    $154,000)


17,881,000



18,246,000



4,641,000Impairments


53,160,000



9,097,000



2,245,000100,602,000



52,793,000



25,154,000Income before equity in earnings in venture and income taxes


14,893,000



87,744,000



76,275,000Equity in earnings in venture


55,000



225,000



550,000Income before income taxes


14,948,000



87,969,000



76,825,000Provision for income taxes


6,119,000



35,703,000



31,060,000Net income

$
8,829,000


$
52,266,000


$
45,765,000Basic net income per share

$
0.62


$
3.79


$
3.36Diluted net income per share

$
0.61


$
3.56


$
3.13Weighted average shares outstanding:Basic


14,138,650



13,807,838



13,637,406Diluted


14,553,346



14,691,861



14,615,148    F-5




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Consolidated
    Statements of Stockholders Equity
  For the
    years ended September 30, 2008, 2007 and 2006
  AccumulatedAdditional





OtherCommon Stock


Paid-in


Retained


ComprehensiveShares


Amount


Capital


Earnings


Loss


TotalBalance, September 30, 2005


13,595,324


$
136,000


$
60,798,000


$
84,243,000


$



$
145,177,000Exercise of options


159,833



2,000



870,000











872,000Tax benefit arising from exercise of non qualified stock options










30,000











30,000Dividends














(7,687,000
)






(7,687,000
)Stock based compensation expense










105,000











105,000Net income














45,765,000







45,765,000Balance, September 30, 2006


13,755,157



138,000



61,803,000



122,321,000







184,262,000Exercise of options


95,001



1,000



1,328,000











1,329,000Restricted stock granted


68,000Stock based compensation expense










1,140,000











1,140,000Tax benefit arising from exercise of non qualified stock options
    and vesting of restricted stock of restricted of










759,000











759,000Dividends














(2,221,000
)






(2,221,000
)Net income














52,266,000







52,266,000Balance, September 30, 2007


13,918,158



139,000



65,030,000



172,366,000







237,535,000Exercise of options


300,000



3,000



422,000











425,000Restricted stock granted


58,000



1,000



(1,000
)










Stock based compensation expense










1,013,000











1,013,000Tax benefit arising from exercise of non-qualified stock options
    and vesting of restricted stock










2,666,000











2,666,000Dividends














(2,270,000
)






(2,270,000
)Other comprehensive loss(net of tax of $202,000)


















(297,000
)


(297,000
)Net income














8,829,000







8,829,000Balance, September 30, 2008


14,276,158


$
143,000


$
69,130,000


$
178,925,000


$
(297,000
)

$
247,901,000   Comprehensive
    income is as follows:
  2008Net income

$
8,829,000Other comprehensive loss, net of tax-foreign currency translation


(297,000
)Comprehensive income

$
8,532,000Accumulated other comprehensive loss

$
(297,000
)There were no elements of other comprehensive income for the
    years ended September 30, 2007 or 2006.    F-6




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Consolidated Statements of Cash Flows
  Year Ended September 30,2008


2007


2006Cash flows from operating activities:Net income

$
8,829,000


$
52,266,000


$
45,765,000Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


1,278,000



841,000



575,000Deferred income taxes


(2,634,000
)


(4,772,000
)


(7,730,000
)Impairments of consumer receivables acquired for liquidation


53,160,000



9,097,000



2,245,000Stock based compensation


1,013,000



1,140,000



105,000Changes in:Due from third party collection agencies and attorneys


(161,000
)


(1,847,000
)


(1,637,000
)Other assets


(136,000
)


(2,324,000
)


(191,000
)Income taxes payable


(1,846,000
)


(2,216,000
)


9,134,000Other liabilities


(3,725,000
)


3,390,000



632,000Net cash provided by operating activities


55,778,000



55,575,000



48,898,000Cash flows from investing activities:Purchase of consumer receivables acquired for liquidation


(49,886,000
)


(440,895,000
)


(200,237,000
)Principal payments received from collection of consumer
    receivables acquired for liquidation


81,645,000



114,421,000



90,450,000Principal payments received from collections represented by
    sales of consumer receivables acquired for liquidation


11,034,000



29,029,000



22,994,000Effect of foreign exchange on consumer receivables acquired for
    liquidation


658,000







Investment in venture










(7,810,000
)Cash distribution received from venture


1,485,000



3,925,000



1,845,000Purchase of other investments






(5,777,000
)


(2,862,000
)Collections on other investments






8,251,000



Acquisition of businesses, net of cash acquired










(1,406,000
)Capital expenditures


(361,000
)


(163,000
)


(423,000
)Net cash provided by (used) in investing activities


44,575,000



(291,209,000
)


(97,449,000
)Cash flows from financing activities:(Repayments) borrowings under lines of credit, net


(113,001,000
)


243,655,000



53,526,000Borrowings under subordinated loan  related party


8,246,000







Change in restricted cash


2,647,000



(5,694,000
)


Dividends paid


(2,256,000
)


(7,716,000
)


(2,110,000
)Proceeds from exercise of stock options


425,000



1,329,000



872,000Tax benefit arising from exercise of non-qualified stock options


2,666,000



759,000



30,000Net cash (used in) provided by financing activities


(101,273,000
)


232,333,000



52,318,000Net (decrease) increase in cash and cash equivalents


(920,000
)


(3,301,000
)


3,767,000Effect of foreign exchange on cash


18,000







Cash and cash equivalents at beginning of year


4,525,000



7,826,000



4,059,000Cash and cash equivalents at end of year

$
3,623,000


$
4,525,000


$
7,826,000Supplemental disclosure of cash flow information:Cash paid for:Interest (2008  Related party  $112,000)

$
19,784,000


$
16,644,000


$
4,766,000Income taxes

$
8,282,000


$
41,932,000


$
29,535,000    F-7




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes
    to Consolidated Financial Statements
 September 30,
    2008 and 2007
  Note A 
    The
    Company and its Significant Accounting Policies  [1]
    The Company:
      [1A]
    Liquidity
    Q-Subsequent Note F-Debt Debt-related
 F-8




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   Note A 
    The
    Company and its Significant Accounting
    Policies  (Continued)  [2]
    Principles of consolidation:
    [3]
    Cash and cash equivalents and restricted cash:
          [4]
    Income recognition, Impairments and Accretable yield
    adjustments:
  Income
    Recognition
  03-3, (SOP 03-3). SOP 03-3. SOP 03-3
  SOP 03-3 SOP 03-3
 F-9




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   Note A 
    The
    Company and its Significant Accounting
    Policies  (Continued)  
 [4]
    Income recognition, Impairments and Accretable yield
    adjustments:  (Continued)
  SOP 03-3
  Impairments
    and accretable yield adjustments
  SOP 03-3. SOP 03-3
  SOP 03-3 SOP 03-3 SOP 03-3
    
    the type of receivable, the location of the debtor and the
    number of collection agencies previously attempting to collect
    the receivables in the portfolio. We have found that there are
    better states to try to collect receivables and we factor in
    both better and worse states when establishing our initial cash
    flow expectations.
    the average balance of the receivables influence our analysis in
    that lower average balance portfolios tend to be more
    collectible in the short-term and higher average balance
    portfolios are more appropriate for our law suit strategy and
    thus yield better results over the longer term. As we have
    significant experience with both types of balances, we are able
    to factor these variables into our initial expected cash flows; F-10




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   Note A 
    The
    Company and its Significant Accounting
    Policies  (Continued)  
 [4]
    Income recognition, Impairments and Accretable yield
    adjustments:  (Continued)
   
    the age of the receivables, the number of days since charge-off,
    the payments, if any, since charge-off, and the credit
    guidelines of the credit originator also represent factors taken
    into consideration in our estimation process since, for example,
    older receivables might be more difficult to collect in amount
    and/or
    require more time to collect;
    past history and performance of similar assets acquired. As we
    purchase portfolios of like assets, we accumulate a significant
    historical data base on the tendencies of debtor repayments and
    factor this into our initial expected cash flows;
    our ability to analyze accounts and resell accounts that meet
    our criteria;
    jobs or property of the debtors found within portfolios. With
    our business model, this is of particular importance. Debtors
    with jobs or property are more likely to repay their obligation
    through the suit strategy and, conversely, debtors without jobs
    or property are less likely to repay their obligation. We
    believe that debtors with jobs or property are more likely to
    repay because courts have mandated the debtor must pay the debt.
    Ultimately, the debtor will pay to clear title or release a
    lien. We also believe that these debtors generally might take
    longer to repay and that is factored into our initial expected
    cash flows; and
    credit standards of issuer.      18-28 month 130-150%
 F-11




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   Note A 
    The
    Company and its Significant Accounting
    Policies  (Continued)  [5]
    Commissions and fees
    [6]
    Furniture, equipment and leasehold improvements:
    [7]
    Income taxes:
    [8]
    Net income per share:
      2008


2007


2006Weighted


Per





Weighted


Per





Weighted


PerNet


Average


Share


Net


Average


Share


Net


Average


ShareIncome


Shares


Amount


Income


Shares


Amount


Income


Shares


AmountBasic

$
8,829,000



14,138,650


$
0.62


$
52,266,000



13,807,838


$
3.79


$
45,765,000



13,637,406


$
3.36Dilutive effect of stock Options






414,696











884,023











977,742Diluted

$
8,829,000



14,553,346


$
0.61


$
52,266,000



14,691,861


$
3.56


$
45,765,000



114,615,148


$
3.13     [9]
    Use of estimates:
   F-12




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   Note A 
    The
    Company and its Significant Accounting
    Policies  (Continued)    [10]
    Stock-based compensation:
    [11]
    Impact of Recently Issued Accounting Standards
  Share-Based Payment and/or
  The Fair
    Value Option for Financial Assets and Financial Liabilities
     F-13




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   Note A 
    The
    Company and its Significant Accounting
    Policies  (Continued)  
 [11]
    Impact of Recently Issued Accounting
    Standards  (Continued)
      Fair Value Measurements
  [12]
    Reclassifications;
    Note B 
    Consumer
    Receivables Acquired For Liquidation          03-3, (SOP 03-3). SOP 03-3. SOP 03-3
  SOP 03-3 SOP 03-3
 F-14




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   Note B 
    Consumer
    Receivables Acquired For
    Liquidation  (Continued)      
    the interest method; or
    the cost recovery method.    SOP 03-3
  
    same issuer/originator;
    same underlying credit quality;
    similar geographic distribution of the accounts;
    similar age of the receivable; and
    same type of asset class (credit cards, telecommunication, etc.)    
    the number of collection agencies previously attempting to
    collect the receivables in the portfolio;
    the average balance of the receivables, as higher balances might
    be more difficult to collect while low balances might not be
    cost effective to collect;
    the age of the receivables, as older receivables might be more
    difficult to collect or might be less cost effective. On the
    other hand, the passage of time, in certain circumstances, might
    result in higher collections due to changing life events of some
    individual debtors;
    past history of performance of similar assets;
    time since charge-off;
    payments made since charge-off;
    the credit originator and its credit guidelines; F-15




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   Note B 
    Consumer
    Receivables Acquired For
    Liquidation  (Continued)   
    our ability to analyze accounts and resell accounts that meet
    our criteria for resale; F-16




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   Note B 
    Consumer
    Receivables Acquired For
    Liquidation  (Continued)   
    the locations of the debtors, as there are better states to
    attempt to collect in and ultimately the Company has better
    predictability of the liquidations and the expected cash flows.
    Conversely, there are also states where the liquidation rates
    are not as favorable and that is factored into our cash flow
    analysis;
    jobs or property of the debtors found within portfolios. In our
    business model, this is of particular importance. Debtors with
    jobs or property are more likely to repay their obligation and
    conversely, debtors without jobs or property are less likely to
    repay their obligation; and
    the ability to obtain timely customer statements from the
    original issuer.      For the Year Ended September 30, 2008Interest


CostMethod


RecoveryPortfolios


Portfolios


TotalBalance, beginning of period

$
508,515,000


$
37,108,000


$
545,623,000Acquisitions of receivable portfolios, net


26,626,000



23,260,000



49,886,000Net cash collections from collection of consumer receivables
    acquired for liquidation


(163,494,000
)


(24,085,000
)


(187,579,000
)Net cash collections represented by account sales of consumer
    receivables acquired for liquidation


(19,545,000
)


(850,000
)


(20,395,000
)Transfer to cost recovery(1)


(209,518,000
)


209,518,000



Impairments


(53,160,000
)






(53,160,000
)Effect of foreign currency translation






(658,000
)


(658,000
)Finance income recognized(2)


114,046,000



1,249,000



115,295,000Balance, end of period

$
203,470,000


$
245,542,000


$
449,012,000Revenue as a percentage of collections


62.3
%


5.0
%


55.4
%     (1)
    
    The Company acquired the Portfolio Purchase in March 2007.
    During the quarter ending June 30, 2008, the Company
    transferred the carrying value of the Portfolio Purchase to the
    cost recovery method.(2)
    
    Includes $45.3 million derived from fully amortized
    interest method pools.  F-16




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   Note B 
    Consumer
    Receivables Acquired For
    Liquidation  (Continued)  For the Year Ended September 30, 2007Interest


CostMethod


RecoveryPortfolios


Portfolios


TotalBalance, beginning of period

$
256,199,000


$
1,076,000


$
257,275,000Acquisitions of receivable portfolios, net


390,350,000



50,545,000



440,895,000Net cash collections from collection of consumer receivables
    acquired for liquidation(1)


(213,135,000
)


(14,478,000
)


(227,613,000
)Net cash collections represented by account sales of consumer
    receivables acquired for liquidation


(47,502,000
)


(6,691,000
)


(54,193,000
)Transfer to cost recovery(2)


(4,478,000
)


4,478,000



Impairments


(9,097,000
)






(9,097,000
)Finance income recognized(3)


136,178,000



2,178,000



138,356,000Balance, end of period

$
508,515,000


$
37,108,000


$
545,623,000Revenue as a percentage of collections


52.2
%


10.3
%


49.1
%     (1)
    
    Includes put backs of purchased accounts returned to the seller
    totaling $5.5 million.(2)
    
    Represents a portfolio acquired during the three months ended
    December 31, 2006 which the Company successfully negotiated
    the return to the seller. The portfolio was returned on
    July 31, 2007.(3)
    
    Includes $23.9 million derived from fully amortized
    interest method pools.    September 30, 2009

$
92,701,000September 30, 2010


72,015,000September 30, 2011


29,519,000September 30, 2012


9,121,000September 30, 2013


1,342,000September 30, 2014


82,000September 30, 2015


4,000204,784,000Deferred revenue


(1,314,000
)Total

$
203,470,000    F-17




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   Note B 
    Consumer
    Receivables Acquired For
    Liquidation  (Continued)    Year EndedSeptember 30,2008Balance at beginning of period, October 1, 2007

$
176,615,000Income recognized on finance receivables, net


(114,046,000
)Additions representing expected revenue from purchases


9,569,000Transfer to cost recovery


(57,951,000
)Reclassifications from nonaccretable difference


43,947,000
(1)Balance at end of period, September 30, 2008

$
58,134,000   Year EndedSeptember 30,2007Balance at beginning of period, October 1, 2006

$
148,900,000
*Income recognized on finance receivables, net


(136,178,000
)Additions representing expected revenue from purchases


144,764,000Impairments


(3,345,000
)Reclassifications from nonaccretable difference


22,474,000Balance at end of period, September 30, 2007

$
176,615,000     *
    
    Revised to reflect zero basis income recognized.  (1)
    
    Includes portfolios that became zero based portfolios during the
    period, removal of zero basis portfolios from the accretable
    yield calculation and, other immaterial impairments and
    accretions based on the certain collection curves being extended.      For the Years Ended, September 30,2008


2007


2006Gross collections(1)

$
332,711,000


$
398,432,000


$
320,203,000Commissions and fees(2)


124,737,000



116,626,000



105,735,000Net collections

$
207,974,000


$
281,806,000


$
214,468,000  F-18




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   Note B 
    Consumer
    Receivables Acquired For
    Liquidation  (Continued)    (1)
    
    Gross collections include: collections from third-party
    collection agencies and attorneys, collections from in-house
    efforts and collections represented by account sales.(2)
    
    Commissions and fees are the contractual commissions earned by
    third party collection agencies and attorneys, and direct costs
    associated with the collection effort- generally court costs.
    The Company expects to continue to purchase portfolios and
    utilize third party collection agencies and attorney networks.      Impairment Charges(Dollars in millions)Impairment charge for year ended September 30, 2008

$
22.9Impact on impairment balance due to10% adverse change in
    collections(1)

$
0.5-$5.3Impact on impairment balance due to 20% change in collections(1)

$
1.1-$10.6Impact on impairment balance due to 30% change in collections(1)

$
1.6-$15.9     (1)
    
    The assumptions used to calculate the range of the impact is as
    follows:Decrease in collections in year one without recovery in
    subsequent years and decrease in collections in year one with
    corresponding increase in collections in subsequent years, and a
    decrease in collections without a corresponding recover in the
    following years.    Note C 
    Acquisition    Note D 
    Investment In Venture   F-19




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
  Note E 
    Furniture
    and Equipment    2008


2007Furniture

$
310,000


$
307,000Equipment


2,714,000



2,534,000Leasehold improvements


105,000



3,129,000



2,841,000Less accumulated depreciation


2,367,000



2,048,000Balance, end of period

$
762,000


$
793,000     Note F 
    Debt and Subordinated Debt  Related Party        ,
 F-20




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   Note F 
    Debt and Subordinated Debt  Related
    Party  (Continued)             F-21




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   Note F 
    Debt and Subordinated Debt  Related
    Party  (Continued)           F-22




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   Note F 
    Debt and Subordinated Debt  Related
    Party  (Continued)    2008Stated


AverageInterest


Interest2008


2007


Rate


RateCredit Facility

$
84,934,000


$
141,656,000



5.00
%


6.12
%Receivables Financing Agreement


128,551,000



184,810,000



6.69
%


6.10
%Total debt

$
213,485,000


$
326,466,000



n/a



6.11
%Subordinated debt  related party

$
8,246,000







6.25
%


6.25
%   Note G 
    Other Liabilities    2008


2007Accounts payable and accrued expenses

$
3,145,000


$
4,934,000Accrued interest payable


1,135,000



2,064,000Other


338,000



539,000Total other liabilities

$
4,618,000


$
7,537,000   Note H 
    Income Taxes    2008


2007


2006Current:Federal

$
6,567,000


$
30,476,000


$
29,206,000State


2,152,000



9,999,000



9,584,000Foreign


34,000







8,753,000



40,475,000



38,790,000Deferred:Federal


(1,987,000
)


(3,593,000
)


(5,820,000
)State


(647,000
)


(1,179,000
)


(1,910,000
)(2,634,000
)


(4,772,000
)


(7,730,000
)Provision for income taxes

$
6,119,000


$
35,703,000


$
31,060,000  F-23




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   Note H 
    Income Taxes  (Continued)    2008


2007


2006Statutory federal income tax rate


35.0
%


35.0
%


35.0
%State income tax, net of federal benefit


5.8



5.8



5.8Other


0.1



(0.2
)


(0.4
)Effective income tax rate


40.9
%


40.6
%


40.4
%     September 30,


September 30,2008


2007Deferred revenue

$
534,000



7,564,000Impairments


13,930,000



4,594,000Compensation expense


880,000



505,000Other


223,000



Equity in venture






(314,000
)Net deferred asset

$
15,567,000


$
12,349,000        F-24




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
  Note I 
    Commitments and Contingencies  Employment
    Agreements
        Leases
    YearEndingSeptember 30,2009

$
496,0002010


354,0002011


12,0002012


2013


$
862,000     Contingencies
   F-25




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   Note I 
    Commitments and
    Contingencies  (Continued)      Note J 
    Concentrations    Note K 
    Stock Option Plans  Equity
    Compensation Plan
         F-26




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   Note K 
    Stock Option Plans  (Continued)  2002
    Stock Option Plan
        1995
    Stock Option Plan
          Year Ended September 30,2008


2007


2006Weighted





Weighted





WeightedAverage





Average





AverageExercise





Exercise





ExerciseShares


Price


Shares


Price


Shares


PriceOutstanding options at the beginning of year


1,337,438


$
9.39



1,414,439


$
9.45



1,580,605


$
9.11Options granted










18,000



28.75







0.00Options cancelled














0.00



(6,333
)


22.36Options exercised


(300,000
)


1.42



(95,001
)


13.99



(159,833
)


5.51Outstanding options at the end of year


1,037,438


$
11.69



1,337,438


$
9.39



1,414,439


$
9.45Exercisable options at the end of year


1,031,438


$
11.59



1,325,438


$
9.21



1,414,439


$
9.45  F-27




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   Note K 
    Stock Option Plans  (Continued)            Options Outstanding


Options ExercisableWeightedAverage


Weighted





WeightedRemaining


Average





AverageRange of

Number


Contractual


Exercise


Number


ExerciseExercise Price

Outstanding


Life (In Years)


Price


Exercisable


Price$ 0.8100 - $ 2.8750


300,000



2.0


$
2.63



300,000


$
2.63$ 2.8751 - $ 5.7500


106,667



4.1



4.73



106,667



4.73$5.7501 - $ 8.6250


12,000



3.1



5.96



12,000



5.96$14.3751 - $17.2500


218,611



5.2



15.04



218,611



15.04$17.2501 - $20.1250


382,160



6.0



18.22



382,160



18.22$25.8751 - $28.7500


18,000



8.2



28.75



12,000



28.751,037,438



4.8


$
11.69



1,031,438


$
11.59     Weighted





WeightedYear Ended


Average


Year Ended


AverageSeptember 30, 2008


Grant Date


September 30, 2007


Grant DateShares


Fair Value


Shares


Fair ValueUnvested at the beginning of period


45,333


$
28.75



0


$
28.75Awards granted


58,000



19.73



68,000



19.73Vested


(22,666
)


28.75



(22,667
)


28.75Forfeited


0



0.00



0



0.00Unvested at the end of period


80,667


$
22.26



45,333


$
22.26      F-28




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   Note K 
    Stock Option Plans  (Continued)      Note L 
    Stockholders Equity        Note M 
    Retirement
    Plan    Note N 
    Fair Value of Financial Instruments       F-29




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
  Note O 
    Related
    Party Transaction      Note P 
    Summarized
    Quarterly Data (unaudited)  First


Second


Third


Fourth


FullQuarter


Quarter


Quarter


Quarter


Year2008Total revenue

$
34,275,000


$
33,882,000


$
23,572,000


$
23,766,000


$
115,495,000Income (loss) before income taxes


22,452,000



(12,954,000
)


4,102,000



1,348,000



14,948,000Net income (loss)


13,314,000



(7,707,000
)


2,440,000



782,000



8,829,000Basic net income per share

$
0.96


$
(0.54
)

$
0.17


$
0.05


$
0.62Diluted net income per share

$
0.90


$
(0.54
)

$
0.17


$
0.05


$
0.612007Total revenue

$
25,645,000


$
33,083,000


$
38,938,000


$
43,096,000


$
140,762,000Income before income taxes


19,038,000



21,102,000



25,777,000



22,052,000



87,969,000Net income


11,326,000



12,552,000



15,308,000



13,080,000



52,266,000Basic net income per share

$
0.82


$
0.91


$
1.10


$
0.94


$
3.79Diluted net income per share

$
0.77


$
0.85


$
1.03


$
0.88


$
3.56     *
    
    Due to rounding the sum of quarterly totals for earnings per
    share may not add to the yearly total.  Note Q 
    Subsequent
    events (unaudited)   F-30




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2008 and 2007
   NOTE Q 
    Subsequent
    events (unaudited)  (Continued)             F-31