##### Table of Contents





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, 2007ORo

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
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large
    accelerated
    filer o     
    Accelerated
    filer þ      Non-accelerated
    filer o
  Rule 12b-2 o þ
      DOCUMENTS INCORPORATED BY REFERENCE:
  Form 10-K




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##### 





FORM 10-K
  TABLE OF CONTENTS
   
 PART IItem 1.


Business

4Item 1A


Risk Factors

12Item 1B


Unresolved Staff Comments

21Item 2.


Properties

22Item 3.


Legal Proceedings

22Item 4.


Submission of Matters to a Vote of Security
    Holders

22PART IIItem 5.


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

23Item 6.


Selected Financial Data

25Item 7.


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

26Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk

38Item 8.


Financial Statements and Supplementary Data

39Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure

39Item 9A.


Controls and Procedures

39Item 9B.


Other information

43PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance

43Item 11.


Executive Compensation

43Item 12.


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

43Item 13.


Certain Relationships and Related Transactions,
    and Director Independence

43Item 14.


Principal Accounting Fees and Services

43PART IVItem 15.


Exhibits and Financial Statement Schedules

44Signatures

46CertificationsEX-10.15: SECOND AMENDMENT TO THE RECEIVABLES FINANCING AGREEMENTEX-23.1: CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMEX-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
    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.         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;
    selling 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;
    expanding financial flexibility through increased capital and
    lines of credit;
    capitalizing on our strategic relationships to identify and
    acquire consumer receivable portfolios; and
    expanding our business through the purchase of consumer
    receivables from new sources and consisting of different asset
    classes.      Consumer
    Receivables Business
  Receivables
    Purchase Program
     5




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
    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.      
    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.      
    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 days 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; 6




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
    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.    
    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.       7




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Receivable
    Servicing
              
    collection/skiptrace;
    legal;
    customer service; and
    accounting.  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. 8




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
    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.
  Legal.
  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 who
    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.
  
    making daily deposits of customer payments;
    posting these payments to the customers account;
    mailing monthly statements to customers; 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
   9




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
    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;
    speed in making purchase decisions; and
    reputation of the purchaser.    Management
    Information Systems
   10




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




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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 recent Portfolio Purchase
    Agreement.
      We may
    not be able to satisfy our obligation under our Receivable
    Financing Agreement.
    The
    anticipated benefits of the Portfolio Purchase may not meet our
    expectations.
   12




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We
    have incurred substantial debt from time to time in connection
    with our purchase of consumer receivable portfolios,
    particularly with respect to the Portfolio Purchase Agreement,
    and may incur further debt in the future which could affect our
    ability to obtain additional funds and may increase our
    vulnerability to economic or business downturns.
           13




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
    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;
    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.    We may
    not be able to purchase consumer receivable portfolios at
    favorable prices or on sufficiently favorable terms or at
    all.
    
    the continuation of the current growth trend in consumer debt;
    the continued volume of consumer receivable portfolios available
    for sale;
    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. 14




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We may
    not be able to continually replace our defaulted consumer
    receivables.
    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.
    
    a slowdown in the economy;
    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.      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
    prices we are willing to pay for consumer receivable portfolios.  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.
   15




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We may
    not be able to recover 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.      We are
    subject to intense competition for the purchase of consumer
    receivable portfolios.
    We are
    dependent upon third parties to service a majority of our
    consumer receivable portfolios.
   16




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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
  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.  We use
    estimates for recognizing finance income on substantially all of
    our consumer receivable portfolio investments and our earnings
    would be reduced if actual results are less than
    estimated.
  03-3 SOP 03-3 SOP 03-3
 17




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SOP 03-3
  We may
    rely on third parties to locate, identify and evaluate consumer
    receivable portfolios available for purchase.
    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.
    The
    loss of any of our executive officers may adversely affect our
    operations and our ability to successfully acquire receivable
    portfolios.
    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. 18




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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.    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
 19




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Class
    action suits and other litigation in our industry could divert
    our managements attention from operating our business and
    increase our expenses.
    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
    amortization related to goodwill impairment 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 could be adversely affected.
   20




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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 recently purchased a portfolio in a South American
    country exposing the Company to currency rate
    fluctuations.
    Item 1B.
    Unresolved
    Staff Comments.   21




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Item 2.
    Properties.        Item 3.
    Legal
    Proceedings.  Form 10-K,
      Item 4.
    Submission
    of Matters to a Vote of Security Holders.   22




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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, 2005 to December 31, 2005


33.45



23.25January 1, 2006 to March 31, 2006


35.36



26.80April 1, 2006 to June 30, 2006


43.29



30.67July 1, 2006 to September 30, 2006


39.30



31.67October 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



31.85   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


1,337,438


$
9.39



1,325,334Equity compensation plans not approved by security holders


0



0



0Total


1,337,438


$
9.39



1,325,334  23




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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.
    COMPARE
    5-YEAR CUMULATIVE TOTAL RETURN
    AMONG ASTA FUNDING, INC.,
    NASDAQ MARKET INDEX AND PEER GROUP INDEX
  
  ASSUMES $100
    INVESTED ON SEPT. 30, 2002
    ASSUMES DIVIDENDS REINVESTED
    FISCAL YEAR ENDING SEPT. 30, 2007
 24




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Item 6.
    Selected
    Financial Data.    Year Ended September 30,2007


2006


2005


2004


2003(In thousands, except per share data)Operations Statement Data:Finance income

$
138,356


$
101,024


$
69,479


$
51,175


$
34,862Other income.


2,181



405











Equity in earnings of venture


225



550Total revenue.


140,762



101,979



69,479



51,175



34,862Costs and expenses:General and administrative


25,450



18,268



15,340



11,258



7,837Interest expense.


18,246



4,641



1,853



845



1,855Impairments


9,097



2,245











Third party servicing














1,316



5,564Provision for credit losses.














300



Total expenses


52,793



25,154



17,193



13,719



15,256Income before provisions for income taxes.


87,969



76,825



52,286



37,456



19,606Provisions for income taxes.


35,703



31,060



21,290



15,219



8,032Net income

$
52,266


$
45,765


$
30,996


$
22,237


$
11,574Basic net income per share

$
3.79


$
3.36


$
2.29


$
1.67


$
1.23Diluted net income per share

$
3.56


$
3.13


$
2.15


$
1.57


$
1.13   2007


2006


2005


2004


2003(In millions)Other Financial Data:For the Year ended September 30Cash collections

$
281.8


$
214.5


$
168.9


$
114.0


$
80.5Portfolio purchases, at cost


440.9



200.2



126.0



103.7



115.6Portfolio purchases, at face


10,891.9



5,194.0



3,445.2



2,833.6



3,576.4Return on average assets(1)


12.0
%


19.6
%


18.3
%


16.3
%


15.0
%Return on average stockholders equity(1)


24.8
%


27.8
%


23.9
%


21.5
%


18.4
%Dividends declared per share(2)

$
0.16


$
0.56


$
0.14


$
0.12


$
0.025At September 30,Total assets


580.3



287.8



180.0



158.6



113.4Total debt


326.5



82.8



29.3



39.4



16.4Total stockholders equity


237.5



184.3



145.2



114.5



92.4Inception to date  September 30,Cumulative aggregate purchases, at face


29,593.8



18,701.9



13,507.9



10,062.7



7,349.0     (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. 25




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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
    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.   26




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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, telecom 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 days 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.     27




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18-28 month 130-150%
  Results
    of Operations
    Years Ending September 30,2007


2006


2005Finance income


98.3
%


99.1
%


100.0
%Other income


1.5
%


0.4
%


0.0
%Equity in earnings of venture


0.2
%


0.5
%


0.0
%Total revenue


100.0
%


100.0
%


100.0
%General and administrative expenses


18.1
%


17.9
%


22.1
%Interest expense


13.0
%


4.6
%


2.7
%Impairments


6.5
%


2.2
%


0.0
%Income before provision for income taxes


62.4
%


75.3
%


75.3
%Provision for income taxes


25.4
%


30.5
%


30.6
%Net income


37.0
%


44.9
%


44.6
%   Year
    Ended September 30, 2007 Compared to the Year Ended
    September 30, 2006
  Finance income.
 28




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Other income.
  Equity in earnings of venture.
  General and administrative expenses.
 29




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Interest expense.
  Impairments.
  Net income.
  Year
    Ended September 30, 2006 Compared to the Year Ended
    September 30, 2005
  Finance income.
   30




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##### Table of Contents



Other income.
  Equity in earnings of venture.
  General and administrative expenses.
  Interest Expense.
  Net income.
  Liquidity
    and Capital Resources
   31




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##### Table of Contents



32




---



##### Table of Contents



Year Ended September 30,2007


2006


2005


2004


2003(In millions)Balance at beginning of period

$
257.3


$
172.7


$
146.1


$
105.6


$
36.1Acquisitions of finance receivables, net of buybacks


440.9



200.2



126.0



103.7



115.6Cash collections from debtors applied to principal(1)


(114.4
)


(90.4
)


(59.6
)


(37.6
)


(27.4
)Cash collections represented by account sales applied to
    principal(1)


(29.1
)


(23.0
)


(39.8
)


(25.3
)


(18.2
)Impairment/Portfolio writedown


(9.1
)


(2.2
)






(0.3
)


(0.5
)Balance at end of period

$
545.6


$
257.3


$
172.7


$
146.1


$
105.6     (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. 33




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##### Table of Contents



Portfolio
    Purchases
  Year Ended September 30,2007


2006


2005(In millions)Aggregate Purchase Price

$
440.9


$
200.2


$
126.0Aggregate Portfolio Face Amount


10,891.9



5,194.0



3,445.2     Schedule
    of Portfolios by Income Recognition Category
  September 30, 2007


September 30, 2006


September 30, 2005Cost


Interest


Cost


Interest


Cost


InterestRecovery


Method


Recovery


Method


Recovery


MethodPortfolios


Portfolios


Portfolios


Portfolios


Portfolios


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

$
101.1


$
1,045.4


$
50.6


$
655.0


$
49.3


$
454.8Cumulative Aggregate Managed Portfolios (at period end)


3,961.5



25,464.7



2,205.0



16,332.8



2,168.4



11,339.5Receivable Carrying Value (at period end)


32.0



513.6



1.1



256.3



0.1



172.6Finance Income Earned (for the respective period)


2.2



136.2



3.4



97.6



5.4



64.1Total Cash Flows (for the respective period)


21.2



260.6



3.7



210.8



6.6



162.3     Collections
    Represented by Account Sales
  CollectionsRepresented


FinanceBy account


IncomeYear

Sales


Recognized2007

$
54,193,000


$
25,164,0002006


55,035,000



32,041,0002005


64,731,000



24,918,000  34




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##### 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


$
95,340,000







95,340,000



146
%2002


36,557,000



52,346,000







52,346,000



143
%2003


115,626,000



195,051,000



3,535,000



198,586,000



172
%2004


103,743,000



160,767,000



1,210,000



161,977,000



156
%2005


126,023,000



155,789,000



59,267,000



215,056,000



171
%2006


200,237,000



149,368,000



160,913,000



310,281,000



155
%2007


384,850,000



69,409,000



460,205,000



529,614,000



138
%     (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).(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 refers to the actual net cash
    collections, including cash sales, plus estimated remaining
    collections.      New
    Accounting Pronouncements
  Business Combinations  Business
    Combinations
       35




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##### Table of Contents



Noncontrolling Interests in
    Consolidated Financial Statements  an Amendment of
    ARB No. 51
  
    the ownership interests in subsidiaries held by parties other
    than the parent be clearly identified, labeled, and presented in
    the consolidated statement of financial position within equity,
    but separate from the parents equity.
    the amount of consolidated net income attributable to the parent
    and to the noncontrolling interest be clearly identified and
    presented on the face of the consolidated statement of income.
    changes in a parents ownership interest while the parent
    retains its controlling financial interest in its subsidiary be
    accounted for consistently. A parents ownership interest
    in a subsidiary changes if the parent purchases additional
    ownership interests in its subsidiary or if the parent sells
    some of its ownership interests in its subsidiary. It also
    changes if the subsidiary reacquires some of its ownership
    interests or the subsidiary issues additional ownership
    interests. All of those transactions are economically similar,
    and this Statement requires that they be accounted for
    similarly, as equity transactions.
    when a subsidiary is deconsolidated, any retained noncontrolling
    equity investment in the former subsidiary be initially measured
    at fair value. The gain or loss on the deconsolidation of the
    subsidiary is measured using the fair value of any
    noncontrolling equity investment rather than the carrying amount
    of that retained investment.
    entities provide sufficient disclosures that clearly identify
    and distinguish between the interests of the parent and the
    interests of the noncontrolling owners.   36




---



##### Table of Contents



The
    Fair Value Option for Financial Assets and Financial
    Liabilities  Including an amendment of FASB Statement
    No. 115
  Considering the Effects of Prior
    Year Misstatements when Quantifying Misstatements in Current
    Year Financial Statements
  Employers Accounting for Defined Benefit Pension and
    Other Postretirement Plans  an amendment of FASB
    Statements No. 87, 88, 106 and 132(R)
  Fair Value Measurements
  Accounting for Uncertainty in Income Taxes 
    an interpretation of FASB Statement No. 109
 37




---



##### Table of Contents



Inflation:
    Seasonality
    and Trends
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk   38




---



##### 



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

PageReport of Independent Registered Public
    Accounting Firm


F-2Consolidated Balance Sheets 
    September 30, 2007 and 2006


F-3Consolidated Statements of Operations 
    Years ended September 30, 2007, 2006 and 2005


F-4Consolidated Statements of Shareholders
    Equity  Years ended September 30, 2007, 2006 and
    2005


F-5Consolidated Statements of Cash Flows 
    Years ended September 30, 2007, 2006 and 2005


F-6Notes to Consolidated Financial Statements


F-7    Item 9.
    Changes
    in and Disagreements With Accountants on Accounting and
    Financial Disclosure.    Item 9A.
    Controls
    and Procedures.  Disclosure
    Controls and Procedures
  Rule 13a-15(e) Form 10-K
          Changes
    in Internal Controls over Financial Reporting
   39




---



##### Table of Contents



40




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Form 10-K,
          
    The Company had insufficient controls and procedures in place to
    assess whether information critical to accurate accounting and
    disclosure and for the effective review of all material
    arrangements were available on a timely basis to appropriate
    financial accounting personnel. Specifically, this control
    deficiency permitted the following:      As a result of this deficiency, it was necessary for management
    to incorporate significant additional data that was obtained
    subsequent to the preparation of their initial projections and
    disclosures. 41




---



##### Table of Contents




    The Company did not have effective policies and procedures in
    place to assess and disclose the Companys liquidity and
    compliance with debt covenants. As a result of this deficiency,
    the Company did not previously amend or disclose the need to
    amend certain debt covenants to facilitate compliance with
    existing agreements.          
      42




---



##### Table of Contents



Item 9B.
    Other
    Information.    PART III
  Item 10.
    Directors,
    Executive Officers and Corporate Governance.    Form 10-K
  Item 11.
    Executive
    Compensation.    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters.    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence.    Item 14.
    Principal
    Accounting Fees and Services.   43




---



##### Table of Contents



Part IV
  Item 15.
    Exhibits,
    Financial Statement Schedules.  Form 10-K.
            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
    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*14
.1

Code of Ethics for Senior Financial Officers(4)21
.1

Subsidiaries of the Company(9)23
.1

Consent of Independent Registered Public Accounting Firm*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.* 44




---



##### Table of Contents



ExhibitNumber32
.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 an Exhibit to Asta Fundings
    Annual Report on
    Form 10-KSB
    for the year ended September 30, 1999.(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)
    
    Incorporated by reference to Exhibit 14.1 to Asta
    Fundings Annual Report on
    form 10-K
    for the year ended September 30, 2004.(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)
    
    Incorporated by reference to Exhibit 21.1 to Asta
    Fundings Annual Report on
    Form 10-K
    for the year ended September 30, 2006.(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(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 45




---



##### Table of Contents



SIGNATURES
      By:
    /s/  Gary
    Stern          Signature

Title

Date/s/  Gary
    SternGary
    Stern

President, Chief Executive Officer and Director

December 28, 2007/s/  Mitchell
    CohenMitchell
    Cohen

Chief Financial Officer 
    Principal Financial and Accounting Officer

December 28, 2007/s/  Arthur
    SternArthur
    Stern

Chairman of the Board and Executive Vice President

December 28, 2007/s/  Herman
    BadilloHerman
    Badillo

Director

December 28, 2007/s/  Edward
    CelanoEdward
    Celano

Director

December 28, 2007/s/  Harvey
    LeibowitzHarvey
    Leibowitz

Director

December 28, 2007/s/  David
    SlackmanDavid
    Slackman

Director

December 28, 2007/s/  Alan
    RiveraAlan
    Rivera

Director

December 28, 2007/s/  Louis
    A. PiccoloLouis
    A. Piccolo

Director

December 28, 2007  46




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
  CONSOLIDATED FINANCIAL STATEMENTS
  SEPTEMBER 30, 2007 and 2006




---



##### 



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Contents
   
 PageConsolidated Financial StatementsReport of Independent Registered Public
    Accounting Firm


F-2Balance sheets as of September 30, 2007 and
    2006


F-3Statements of operations for the years ended
    September 30, 2007, 2006 and 2005


F-4Statements of stockholders equity for the
    years ended September 30, 2007, 2006 and 2005


F-5Statements of cash flows for the years ended
    September 30, 2007, 2006 and 2005


F-6Notes to consolidated financial statements


F-7




---



##### Table of Contents



REPORT
    OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             
      F-2




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Consolidated Balance Sheets
  September 30,2007


2006ASSETSCash and cash equivalents

$
4,525,000


$
7,826,000Restricted cash


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


545,623,000



257,275,000Due from third party collection agencies and attorneys


4,909,000



3,062,000Investment in venture


2,040,000



5,965,000Furniture and equipment (net of accumulated depreciation of
    $2,048,000 in 2007 and $1,769,000 in 2006)


793,000



1,101,000Deferred income taxes


12,349,000



7,577,000Other assets


4,323,000



5,034,000$
580,256,000


$
287,840,000LIABILITIESAdvances under lines of credit

$
326,466,000


$
82,811,000Other liabilities


7,537,000



4,338,000Dividends payable


557,000



6,052,000Income taxes payable


8,161,000



10,377,000Total liabilities


342,721,000



103,578,000Commitments and contingenciesSTOCKHOLDERS EQUITYPreferred stock, $.01 par value; authorized 5,000,000;
    Issued  none Common stock, $.01 par value,
    authorized 30,000,000 shares, issued and outstanding
    13,918,158 shares in 2007 and 13,755,157 in 2006


139,000



138,000Additional paid-in capital


65,030,000



61,803,000Retained earnings


172,366,000



122,321,000Total stockholders equity


237,535,000



184,262,000$
580,256,000


$
287,840,000    F-3




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Consolidated Statements of Operations
  Year Ended September 30,2007


2006


2005Revenues:Finance income

$
138,356,000


$
101,024,000


$
69,479,000Other income


2,181,000



405,000Equity in earnings of venture


225,000



550,000140,762,000



101,979,000



69,479,000General and administrative expenses


25,450,000



18,268,000



15,340,000Interest expense


18,246,000



4,641,000



1,853,000Impairments


9,097,000



2,245,00052,793,000



25,154,000



17,193,000Income before provision for income taxes


87,969,000



76,825,000



52,286,000Provision for income taxes


35,703,000



31,060,000



21,290,000Net income

$
52,266,000


$
45,765,000


$
30,996,000Basic net income per share

$
3.79


$
3.36


$
2.29Diluted net income per share

$
3.56


$
3.13


$
2.15Weighted average shares:Basic


13,807,838



13,637,406



13,543,580Diluted


14,691,861



14,615,148



14,410,275    F-4




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Consolidated Statements of Stockholders
    Equity
  AdditionalCommon Stock


Paid-in


RetainedShares


Amount


Capital


Earnings


TotalBalance, September 30, 2004


13,432,594


$
134,000


$
59,184,000


$
55,148,000


$
114,466,000Exercise of options


162,730



2,000



1,417,000







1,419,000Tax benefit arising from exercise of non qualified stock options










197,000







197,000Dividends














(1,901,000
)


(1,901,000
)Net income














30,996,000



30,996,000Balance, 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
)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










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


$
237,535,000    F-5




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Consolidated Statements of Cash Flows
  Year Ended September 30,2007


2006


2005Cash flows from operating activities:Net income

$
52,266,000


$
45,765,000


$
30,996,000Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


841,000



575,000



485,000Deferred income taxes


(4,772,000
)


(7,730,000
)


109,000Impairments of consumer receivables acquired for liquidation


9,097,000



2,245,000Stock based compensation


1,140,000



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


(1,847,000
)


(1,637,000
)


(588,000
)Other assets


(2,324,000
)


(191,000
)


622,000Income taxes payable


(2,216,000
)


9,134,000



(182,000
)Other liabilities


3,390,000



632,000



615,000Net cash provided by operating activities


55,575,000



48,898,000



32,057,000Cash flows from investing activities:Purchase of consumer receivables acquired for liquidation


(440,895,000
)


(200,237,000
)


(113,537,000
)Principal payments received from collection of consumer
    receivables acquired for liquidation


114,421,000



90,450,000



59,648,000Principal payments received from collections represented by
    sales of consumer receivables acquired for liquidation


29,029,000



22,994,000



39,813,000Investment in venture






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


3,925,000



1,845,000Purchase of other investments


(5,777,000
)


(2,862,000
)Collections on other investments


8,251,000Acquisition of businesses, net of cash acquired






(1,406,000
)


(13,521,000
)Capital expenditures


(163,000
)


(423,000
)


(685,000
)Deposit on receivable purchase










7,288,000Net cash used in investing activities


(291,209,000
)


(97,449,000
)


(20,994,000
)Cash flows from financing activities:Borrowings (repayments) under lines of credit, net


243,655,000



53,526,000



(10,070,000
)Change in restricted cash


(5,694,000
)Dividends paid


(7,716,000
)


(2,110,000
)


(1,894,000
)Proceeds from exercise of stock options


1,329,000



872,000



1,419,000Tax benefit arising from exercise of non-qualified stock options


759,000



30,000



197,000Net cash provided by (used in) financing activities


232,333,000



52,318,000



(10,348,000
)Net (decrease) increase in cash and cash equivalents


(3,301,000
)


3,767,000



715,000Cash and cash equivalents at beginning of year


7,826,000



4,059,000



3,344,000Cash and cash equivalents at end of year

$
4,525,000


$
7,826,000


$
4,059,000Supplemental disclosure of cash flow information:Cash paid for:Interest

$
16,644,000


$
4,766,000


$
1,927,000Income taxes

$
41,932,000


$
29,535,000


$
21,244,000    F-6




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to Consolidated Financial Statements
 September 30, 2007 and 2006
  Note A 
    The
    Company and its Significant Accounting Policies  [1]
    The Company:
    [2]
    Principles of consolidation:
    [3]
    Cash and cash equivalents and restricted cash:
         F-7




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
  [4]
    Income recognition:
  03-3, (SOP 03-3).
  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. The Company has found that
    certain states have exhibited better collection histories than
    others and this characteristic is factored in when estimating
    the initial cash flow expectations.
    the average balance of the receivables influences the analysis
    as that lower average balance portfolios tend to be more
    collectible in the short-term and higher average balance
    portfolios are more suitable for a suit strategy and thus yield
    better results over the longer term. As the Company has
    significant experience with both types of balances, the Company
    is able to factor these variables into the initial estimate of
    cash flows;
    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 the 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 the
    Company purchases portfolios of like assets, it analyzes the
    like tendencies of debtor repayments and factors this into the
    initial estimate of expected cash flows;
    the Companys ability to analyze accounts and resell
    accounts that meet certain criteria, such as the age of the
    receivable, the status of the receivables (paying or non-paying)
    and the selling price it can obtain; and
    estimating the Companys ability to locate debtors to their
    jobs, properties and other assets found within portfolios. With
    the Companys 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. While the Company believes that debtors with jobs or
    property are more likely to repay, it also believes that these
    debtors generally might take longer to repay and that is
    factored into the initial expected cash flows. F-8




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
         18-28 month 130-150%
    [5]
    Furniture and equipment:
    [6]
    Impairments:
  SOP 03-3.
 F-9




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
  [7]
    Income taxes:
    [8]
    Net income per share:
      2007


2006


2005Weighted


Per





Weighted


Per





Weighted


PerNet


Average


Share


Net


Average


Share


Net


Average


ShareIncome


Shares


Amount


Income


Shares


Amount


Income


Shares


AmountBasic

$
52,266,000



13,807,838


$
3.79


$
45,765,000



13,637,406


$
3.36


$
30,996,000



13,543,580


$
2.29Dilutive effect of stock Options






884,023











977,742











866,695Diluted

$
52,266,000



14,691,861


$
3.56


$
45,765,000



14,615,148


$
3.13


$
30,996,000



14,410,275


$
2.15   [9]
    Use of estimates:
    [10]
    Stock-based compensation:
     F-10




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
      YearEnded September 30,2005Net income as reported

$
30,996,000Stock based compensation expense determined under fair value
    method, net of related tax effects


(3,746,000
)Pro forma net income

$
27,250,000Earnings per share:Basic  as reported

$
2.29Basic  pro forma

$
2.01Diluted  as reported

$
2.15Diluted  pro forma

$
1.89     [11]
    Impact of Recently Issued Accounting Standards
  Business Combinations  Business Combinations
       F-11




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
                Noncontrolling Interests in
    Consolidated Financial Statements  an Amendment of
    ARB No. 51
  
    the ownership interests in subsidiaries held by parties other
    than the parent be clearly identified, labeled, and presented in
    the consolidated statement of financial position within equity,
    but separate from the parents equity.
    the amount of consolidated net income attributable to the parent
    and to the noncontrolling interest be clearly identified and
    presented on the face of the consolidated statement of income.
    changes in a parents ownership interest while the parent
    retains its controlling financial interest in its subsidiary be
    accounted for consistently. A parents ownership interest
    in a subsidiary changes if the parent purchases additional
    ownership interests in its subsidiary or if the parent sells
    some of its ownership interests in its subsidiary. It also
    changes if the subsidiary reacquires some of its ownership
    interests or the subsidiary issues additional ownership
    interests. All of those transactions are economically similar,
    and this Statement requires that they be accounted for
    similarly, as equity transactions.
    when a subsidiary is deconsolidated, any retained noncontrolling
    equity investment in the former subsidiary be initially measured
    at fair value. The gain or loss on the deconsolidation of the
    subsidiary is measured using the fair value of any
    noncontrolling equity investment rather than the carrying amount
    of that retained investment.
    entities provide sufficient disclosures that clearly identify
    and distinguish between the interests of the parent and the
    interests of the noncontrolling owners. F-12




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
         The Fair Value Option for Financial Assets and Financial
    Liabilities  Including an amendment of FASB Statement
    No. 115
  Considering the Effects of Prior
    Year Misstatements when Quantifying Misstatements in Current
    Year Financial Statements
  Employers Accounting for Defined Benefit Pension and
    Other Postretirement Plans  an amendment of FASB
    Statements No. 87, 88, 106 and 132(R)
  Fair Value Measurements
  Accounting for Uncertainty in Income Taxes 
    an interpretation of FASB Statement No. 109
 F-13




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
    [12]
    Reclassifications:
    Note B 
    Consumer
    Receivables Acquired For Liquidation    SOP 03-3. SOP 03-3. SOP 03-3 SOP 03-3 SOP 03-3 SOP 03-3
      
    the interest method; or
    the cost recovery method.   F-14




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
    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, telecom 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;
    number of days since charge-off;
    payments made since charge-off;
    the credit originator and its credit guidelines;
    the Companys ability to analyze accounts and resell
    accounts that meet the criteria for resale;
    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 the cash flow
    analysis;
    jobs or property of the debtors found within portfolios-with the
    Companys 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.   F-15




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
    For the Year Ended September 30, 2007Accrual


CashBasis


BasisPortfolios


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
)


4,478,000Impairments


(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 has 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.  For the Year Ended September 30, 2006Accrual


CashBasis


BasisPortfolios


Portfolios


TotalBalance, beginning of period

$
172,636,000


$
91,000


$
172,727,000Acquisitions of receivable portfolios, net


200,237,000







200,237,000Net cash collections from collection of consumer receivables
    acquired for liquidation


(155,960,000
)


(3,473,000
)


(159,433,000
)Net cash collections represented by account sales of consumer
    receivables acquired for liquidation


(54,800,000
)


(235,000
)


(55,035,000
)Transfer to cost recovery


(1,291,000
)


1,291,000Impairments


(2,245,000
)






(2,245,000
)Finance income recognized(4)


97,622,000



3,402,000



101,024,000Balance, end of period

$
256,199,000


$
1,076,000


$
257,275,000Revenue as a percentage of collections


46.3
%


91.7
%


47.1
%   (4)
    
    Includes $4.4 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 
    (Continued)
     September 30, 2008

$
180,559,000September 30, 2009


156,531,000September 30, 2010


123,420,000September 30, 2011


63,864,000September 30, 2012


2,820,000527,194,000Deferred revenue


(18,679,000
)Total

$
508,515,000     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   Year EndedSeptember 30,2006Balance at beginning of period, October 1, 2005

$
94,022,000Income recognized on finance receivables, net


(97,622,000
)Additions representing expected revenue from purchases


103,061,000Impairments


(151,000
)Reclassifications from nonaccretable difference


49,590,000
*Balance at end of period, September 30, 2006

$
148,900,000
*     *
    
    Revised to reflect zero basis income recognized.   F-17




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
    For the Years Ended, September 30,2007


2006Gross collections(1)

$
398,432,000


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


116,626,000



105,735,000Net collections

$
281,806,000


$
214,468,000     (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.    NoteC 
    Acquisition    Note D 
    Investment
    In Venture    Note E 
    Furniture and Equipment
    2007


2006Furniture

$
307,000


$
307,000Equipment


2,534,000



2,563,0002,841,000



2,870,000Less accumulated depreciation


2,048,000



1,769,000Balance, end of period

$
793,000


$
1,101,000    F-18




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
  Note F 
    Advances
    Under Lines of Credit            Note G 
    Other
    Liabilities    2007


2006Accounts payable and accrued expenses

$
6,998,000


$
3,205,000Other


539,000



1,133,000Total other liabilities

$
7,537,000


$
4,338,000  F-19




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##### Table of Contents



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


2006


2005Current:Federal

$
30,476,000


$
29,206,000


$
15,947,000State


9,999,000



9,584,000



5,234,00040,475,000



38,790,000



21,181,000Deferred:Federal


(3,593,000
)


(5,820,000
)


82,000State


(1,179,000
)


(1,910,000
)


27,000(4,772,000
)


(7,730,000
)


109,000Provision for income taxes

$
35,703,000


$
31,060,000


$
21,290,000     2007


2006


2005Statutory federal income tax rate


35.0
%


35.0
%


35.0
%State income tax, net of federal benefit


5.8



5.8



5.8Other


(0.2
)


(0.4
)


(0.1
)Effective income tax rate


40.6
%


40.4
%


40.7
%     September 30,


September 30,2007


2006Deferred revenue

$
7,564,000



7,062,000Impairments


4,594,000



909,000Compensation expense


505,000



Equity in venture


(314,000
)


(223,000
)Other






(171,000
)Net deferred asset

$
12,349,000


$
7,577,000   Note I 
    Commitments
    and Contingencies  Employment
    Agreements
   F-20




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
  Leases
    YearEndingSeptember 30,2008

$
446,0002009


445,0002010


313,0002011


31,0002012


$
1,235,000   Contingencies
        Note J 
    Stock
    Option Plans  Equity
    Compensation Plan
   F-21




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
        2002
    Stock Option Plan
        1995
    Stock Option Plan
       F-22




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
    Year Ended September 30,2007


2006


2005Weighted





Weighted





WeightedAverage





Average





AverageExercise





Exercise





ExerciseShares


Price


Shares


Price


Shares


PriceOutstanding options at the beginning of year


1,414,439


$
9.45



1,580,605


$
9.11



1,364,171


$
6.27Options granted


18,000



28.75







0.00



422,500



18.44Options cancelled






0.00



(6,333
)


22.36



(43,002
)


12.21Options exercised


(95,001
)


13.99



(159,833
)


5.51



(163,064
)


8.70Outstanding options at the end of year


1,337,438


$
9.39



1,414,439


$
9.45



1,580,605


$
9.11Exercisable options at the end of year


1,325,438


$
9.21



1,414,439


$
9.45



1,580,605


$
9.11           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


600,000



2.5


$
2.0208



600,000


$
2.0208$ 2.8751 - $ 5.7500


106,667



5.1



4.7250



106,667



4.7250$ 5.7501 - $ 8.6250


12,000



4.1



5.9600



12,000



5.9600$14.3751 - $17.2500


218,611



6.2



15.0355



218,611



15.0355$17.2501 - $20.1250


382,160



7.0



18.2217



382,160



18.2217$25.8751 - $28.7500


18,000



9.2



28.7500



6,000



28.75001,337,438



5.8


$
9.3881



1,325,438


$
9.2128  F-23




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
    Year Ended


WeightedSeptember 30, 2007


Average Grant DateShares


Fair ValueUnvested at the beginning of period


0


$
0.00Awards granted


68,000



28.75Vested


(22,667
)


28.75Forfeited


0



0.00Unvested at the end of period


45,333


$
28.75       Note K 
    Stockholders
    Equity      Note L 
    Retirement
    Plan    Note M 
    Fair
    Value of Financial Instruments   F-24




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
      2007


2006Carrying Value


Fair Value


Carrying Value


Fair ValueCash, and cash equivalents

$
4,525,000


$
4,525,000


$
7,826,000


$
7,826,000Consumer receivables acquired for liquidation


545,623,000



604,000,000



257,275,000



346,300,000Advances under lines of credit, notes payable and Due to
    affiliates


326,466,000



326,466,000



82,811,000



82,811,000                F-25




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
  Note
    N  Summarized Quarterly Data (unaudited)
  First


Second


Third


Fourth


FullQuarter


Quarter


Quarter


Quarter


Year2007Total revenue

$
25,645,000


$
33,083,000


$
38,938,000


$
43,096,000


$
140,762,000Income before provision for 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


$
3.562006Total revenue

$
20,260,000


$
24,829,000


$
26,426,000


$
30,464,000


$
101,979,000Income before provision for income taxes


15,645,000



18,679,000



19,810,000



22,691,000



76,825,000Net income


9,312,000



11,103,000



11,780,000



13,570,000



45,765,000Basic net income per share

$
0.68


$
0.82


$
0.86


$
0.99


$
3.36Diluted net income per share

$
0.64


$
0.76


$
0.80


$
0.93


$
3.132005Total revenue

$
13,830,000


$
16,662,000


$
19,028,000


$
19,959,000


$
69,479,000Income before provision for income taxes


10,379,000



12,241,000



14,363,000



15,303,000



52,286,000Net income


6,175,000



7,281,000



8,536,000



9,004,000



30,996,000Basic net income per share

$
0.46


$
0.54


$
0.63


$
0.66


$
2.29Diluted net income per share

$
0.43


$
0.51


$
0.59


$
0.62


$
2.15     *
    
    Due to rounding the sum of quarterly totals for earnings per
    share may not add to the yearly total.  Note O 
    Subsequent
    events     F-26




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to Consolidated Financial Statements 
    (Continued)
       F-27