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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, 2010ORo

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(Address of principal
    executive offices)

07632(Zip
    Code)   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-T o o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 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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Documents
    incorporated by reference:
  Form 10-K




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##### 



FORM 10-K
  TABLE OF CONTENTS
  PagePART IItem 1.


Business


4Item 1A.


Risk Factors


12Item 1B.


Unresolved Staff Comments


23Item 2.


Properties


23Item 3.


Legal Proceedings


23Item 4.


(Removed and Reserved)


23PART IIItem 5.


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


24Item 6.


Selected Financial Data


26Item 7.


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


27Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


39Item 8.


Financial Statements and Supplementary Data


40Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


40Item 9A


Controls and Procedures


40Item 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


43EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2   2




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Caution
    Regarding Forward Looking Statements
  Form 10-K Form 10-K,
     3




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Part I  Item 1.
    Business.  Overview
    
    Primary charged-off receivables consisting of accounts that have
    been written-off by the originators and may have been previously
    serviced by collection agencies;
    Semi-performing receivables consisting of accounts where the
    debtor is currently making partial or irregular monthly
    payments, but the accounts may have been written-off by the
    originators;
    Performing receivables consisting of accounts where the debtor
    is making regular monthly payments that may or may not have been
    delinquent in the past; and
    Distressed consumer receivables consisting of the unpaid debts
    of individuals to banks, finance companies and other credit and
    service providers.  ® ®
             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, or when we can capitalize on pricing during times when
    we feel the pricing environment is high; and
    capitalizing on our strategic relationships to identify and
    acquire consumer receivable portfolios as pricing, financing and
    conditions permit.      Consumer
    Receivables Business
  Receivables
    Purchase Program
  ® ®
   5




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
    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.      
    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; 6




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
    payments made since charge-off;
    the credit originator and their credit guidelines;
    the locations of the debtors as there are states with better
    regulatory environments, better collection histories, and that
    are better suited to attempt to collect in and ultimately we
    have better predictability of the liquidations and the expected
    cash flows all of which factor into our cash flow analysis;
    financial wherewithal of the seller;
    jobs or property of the debtors within portfolios 
    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
          Operations
    Collections
    
    Initiating outbound collection calls and handling incoming calls
    from the consumer. If a call is received for an account that has
    already been outsourced to a servicer; the collector relays the
    corresponding contact information and directs the customer to
    call the servicer directly.
    Identifying the debt and iterating the benefits of paying the
    obligation.
    Working with the customer to develop acceptable means of
    satisfying the obligation. The Collection Department (and our
    third party network of servicers) has the ability to tailor
    repayment plans that accommodate the situation of the obligor by
    considering components including their monthly budgets and
    employment status. 8




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
    Offering (if necessary and based upon the individual situation)
    an obligor a discount on the overall obligation.        
    Coordinating customer inquiries and assisting the collection
    agencies in their processes, if needed.
    Handling the repurchase process of ineligible accounts received
    from a Seller that may be included in a purchased portfolio.
    Working with Buyers during the transition period and post-sale
    process.
    Handling any issues that may arise once a purchased receivable
    portfolio is sold.
    Reading incoming correspondence for accounts that are currently
    assigned to the Collection Department, ensuring the account is
    handled properly, taking the initial action required and
    forwarding to a collector
    and/or
    manager for follow up action.  Media
    Disputes
    Correspondence
    Accounting
    and Finance
    
    Making daily deposits of debtor payments.
    Posting payments to debtors accounts.
    Providing senior management with daily, weekly and monthly
    receivable activity and performance reports.   9




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Collections
    Represented by Account Sales
    
    the age of the receivable;
    the status of the receivable  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;
    timeliness of purchase decisions; and
    reputation.    Seasonality
    and Trends
   10




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




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and/or
  Employees
    www.astafunding.com Form 10-Ks, 10-Qs, 8-Ks, additional information
  Item 1A.
    Risk
    Factors.  Note
    Regarding Risk Factors
  You should carefully consider the risk factors below 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
    risk factors presented below are those which we currently
    consider material. However, they are not the only risks facing
    our company. Additional risks not presently known to us, or
    which we currently consider immaterial, may also adversely
    affect us. There may be risks that a particular investor views
    differently from us, and our analysis might be wrong. If any of
    the risks that we face actually occur, our business, financial
    condition and operating results could be materially adversely
    affected and could differ materially from
 12




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any possible results suggested by any forward-looking
    statements that we have made or might make. In such case, the
    trading price of our common stock could decline, and you could
    lose part or all of your investment. Except as required by law,
    we expressly disclaim any obligation to update or revise any
    forward-looking statements.
  The
    enactment of the Dodd-Frank Wall Street Reform and Consumer
    Protection Act will subject us to substantial additional federal
    regulation, and we cannot predict the effect of such regulation
    on our business, results of operations, cash flows or financial
    condition.
      
    increased cost of operations due to greater regulatory
    oversight, supervision and compliance with consumer debt
    issuance and collection practices;
    the limitation on the ability to expand consumer product and
    service offerings due to anticipated stricter consumer
    protection laws and regulations.        Government
    regulations may limit our ability to recover and enforce the
    collection of our receivables.
   13




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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;
    The Fair Credit Reporting Act;
    The Dodd-Frank Wall Street Reform and Consumer Protection Act;
    The Financial Privacy Rule;
    The Safeguards Rule;
    Telephone Consumer Protection Act;
    Health Insurance Portability and Accountability Act
    (HIPAA)/Health Information Technology for Economical
    and Clinical Health Act (HITECH);
    U.S. Bankruptcy Code; and
    Credit Card Accountability Responsibility and Disclosure Act of
    2009.      and/or
  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; 14




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
    reductions in consumer spending;
    changes in the underwriting criteria by originators; and
    changes in laws and regulations governing consumer lending and
    the related collections.  and/or
  We may
    not be able to purchase consumer receivable portfolios at
    favorable prices or on sufficiently favorable terms or at
    all.
    
    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 be negatively impacted 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; 15




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
    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.    We
    have risks associated with our purchase of $6.9 billion in
    face value of receivables purchased for $300 million in
    March 2007 (the Portfolio Purchase) which has not
    met our expectations and has and may continue to adversely
    impact our financial position and results of
    operations.
    There
    is no assurance that we will realize the full value of the
    deferred tax asset.
    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 impairment charges if we do not achieve the
    collections forecasted by our model.
   16




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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.
    As the
    mix of our portfolios has shifted to the cost recovery method,
    there is a negative impact on finance income as no finance
    income is recognized on the cost recovery portfolios until the
    carrying value has been recovered.
    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; and
    subsequently deemed these obligations as uncollectible     17




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We are
    subject to competition for the purchase of consumer receivable
    portfolios which could result in an increase in the prices of
    such portfolios.
    We are
    dependent upon third parties who we do not control to service a
    significant portion of our consumer receivable portfolios. The
    loss of certain servicers could have a material adverse effect
    on our financial position and results of
    operation.
    The
    current economic environment has had adverse effects on others
    in this industry; certain third parties providing services to us
    have filed for bankruptcy protection which has delayed
    collections.
    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
 18




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We may
    rely on third parties to locate, identify and evaluate consumer
    receivable portfolios available for purchase.
    We
    have an ongoing dispute with a significant servicer for which we
    are currently negotiating a settlement.
    Our
    collections may decrease if bankruptcy filings
    increase.
    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 the Company, substantially
    reducing the influence of our other stockholders.
   19




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
    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.    Current
    economic conditions have had a significant impact on our ability
    to sell accounts.
    An
    unfavorable government review of our tax returns could adversely
    affect our operating results.
    Negative
    press regarding the debt collection industry may have a negative
    impact on a debtors willingness to pay the debt we
    acquire.
    Class
    action suits and other litigation in our industry could divert
    our managements attention from operating our business and
    increase our expenses.
   20




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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.
   21




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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 by members of the Stern Family or
    other shareholders may depress our stock price.
    Rule 10b5-1
  We
    have the ability to issue preferred shares, warrants,
    convertible debt and other securities without shareholder
    approval which could dilute the relative ownership interest of
    current shareholders and adversely effect our share
    price.
    Climate
    change and related regulatory responses may impact our
    business.
   22




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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.  Item 1B.
    Unresolved
    Staff Comments.    Item 2.
    Properties.        Item 3.
    Legal
    Proceedings.    Item 4.
    (Removed
    and Reserved). 23




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

Low2009October 1, 2008 to December 31, 2008

$
10.08


$
1.79January 1, 2009 to March 31, 2009


2.75



1.00April 1, 2009 to June 30, 2009


6.36



2.45July 1, 2009 to September 30, 2009


9.24



4.902010October 1, 2009 to December 31, 2009

$
8.49


$
6.53January 1, 2010 to March 31, 2010


8.10



6.00April 1, 2010 to June 30, 2010


10.03



7.05July 1, 2010 to September 30, 2010


10.02



7.07   Dividends
   24




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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,
    in whole or in part, the following Performance Graph shall not
    be incorporated by reference into any such filings.
  COMPARISON
    OF CUMULATIVE TOTAL RETURN
  
  ASSUMES $100
    INVESTED ON OCT. 1, 2005
    ASSUMES DIVIDEND REINVESTED
    FISCAL YEAR ENDING SEPT. 30, 2010
   Comparison
    of cumulative total return of one or more companies, peer
    groups, industry
    indexes, and/or broad markets
  Period EndingCompany/Index/Market


9/30/2005


9/30/2006


9/30/2007


9/30/2008


9/30/2009


9/30/2010ASTA FUNDING, INC.


$
100.00



$
125.36



$
128.70



$
23.88



$
26.35



$
26.87NASDAQ MARKET INDEX


$
100.00



$
105.83



$
127.44



$
99.42



$
101.93



$
114.78PEER GROUP INDEX


$
100.00



$
84.28



$
72.59



$
42.45



$
41.84



$
56.39   The customer selected stock group is currently comprised
    of:
      25




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Item 6.
    Selected
    Financial Data.    Year Ended September 30,2010


2009


2008


2007


2006(In thousands, except per share data)Operations Statement Data:Finance income

$
45,631


$
70,156


$
115,295


$
138,356


$
101,024Other income


218



199



255



2,406



955Total revenue


45,849



70,355



115,550



140,762



101,979Costs and expenses:General and administrative


23,211



25,915



29,561



25,450



18,268Interest expense


4,368



8,452



17,881



18,246



4,641Impairments


13,029



183,500



53,160



9,097



2,245Total expenses


40,608



217,867



100,602



52,793



25,154Income (loss) before income taxes


5,241



(147,512
)


14,948



87,969



76,825Provisions (benefit) for income taxes


2,112



(56,787
)


6,119



35,703



31,060Net income (loss)

$
3,129


$
(90,725
)

$
8,829


$
52,266


$
45,765Basic net income (loss) per share

$
0.22


$
(6.36
)

$
0.62


$
3.79


$
3.36Diluted net income (loss) per share

$
0.22


$
(6.36
)

$
0.61


$
3.56


$
3.13   2010


2009


2008


2007


2006(In millions)Other Financial Data:For the Year ended September 30,Cash collections

$
101.9


$
147.4


$
208.0


$
281.8


$
214.5Portfolio purchases, at cost


8.0



19.6



49.9



440.9



200.2Portfolio purchases, at face


269.1



577.0



1,456.1



10,891.9



5,194.0Return on average assets(1)


1.1
%


(23.5
)%


1.7
%


12.0
%


19.6
%Return on average stockholders equity(1)


2.0
%


(44.8
)%


3.6
%


24.8
%


27.8
%Dividends declared per share(2)

$
0.08


$
0.08


$
0.16


$
0.16


$
0.56At September 30,Total assets


259.2



290.8



481.1



580.3



287.8Total debt


94.9



130.9



221.7



326.5



82.8Total stockholders equity


161.9



157.4



247.9



237.5



184.3Inception to date  September 30,Cumulative aggregate purchases, at face


31,896.0



31,626.9



31,049.9



29,593.8



18,701.9     (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. 26




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Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operation.  Caution
    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, financial
    institutions, 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. 27




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
    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.     28




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18-28 month 130-140%
    Results
    of Operations
    Years Ended September 30,2010


2009


2008Finance income


99.5
%


99.7
%


99.8
%Other income


0.5
%


0.3
%


0.2
%Total revenue


100.0
%


100.0
%


100.0
%General and administrative expenses


50.7
%


36.8
%


25.6
%Interest expense


9.5
%


12.0
%


15.5
%Impairments


28.4
%


261.1
%


46.0
%Income (loss) before income taxes


11.4
%


(209.9
)%


12.9
%Provision (benefit) for income taxes


4.6
%


(80.8
)%


5.3
%Net income (loss)


6.8.
%


(129.1
)%


7.6
%  29




---



##### Table of Contents



Year
    Ended September 30, 2010 Compared to the Year Ended
    September 30, 2009
  Finance income.
      Other income.
  General and administrative expenses.
  Interest expense.
  Impairments.
 30




---



##### Table of Contents



Income tax expense (benefit)
    Net income (loss).
  Year
    Ended September 30, 2009 Compared to the Year Ended
    September 30, 2008
  Finance income.
   31




---



##### Table of Contents



$ $
  Other income.
  General and administrative expenses.
  Interest expense.
  Impairments.
  Income tax (benefit) expense
 32




---



##### Table of Contents



Net (loss) income.
  Liquidity
    and Capital Resources
    Leumi
    Credit Agreement
    Receivables
    Financing Agreement
         33




---



##### Table of Contents



IDB
    Credit Facility
    Subordinated
    Debt  Related Party
     34




---



##### Table of Contents



Cash
    Flow
           35




---



##### Table of Contents



Contractual
    Obligations
    Payments
    Due By Period
  Less Than








More ThanTotal


1 Year


1-3 Years


3-5 Years


5 YearsLong Term Debt Obligations

$
90,483,000


$
17,950,000


$
27,000,000


$
45,533,000


$
Operating Lease Obligations

$
1,176,000


$
270,000


$
709,000


$
197,000



Subordinated Debt

$
4,386,000


$
4,386,000











Total

$
96,045,000


$
22,606,000


$
27,709,000


$
45,730,000



   Off-Balance
    Sheet Arrangements
      Year Ended September 30,2010


2009


2008


2007


2006(In millions)Balance at beginning of period

$
208.3


$
449.0


$
545.6


$
257.3


$
172.7Acquisitions of finance receivables, net of buybacks


8.0



19.6



49.9



440.9



200.2Cash collections from debtors applied to principal(1)(2)


(55.1
)


(69.1
)


(81.7
)


(114.4
)


(90.4
)Cash collections represented by account sales applied to
    principal(1)


(1.2
)


(8.1
)


(11.0
)


(29.1
)


(23.0
)Impairments/Portfolio write down


(13.0
)


(183.5
)


(53.2
)


(9.1
)


(2.2
)Effect of foreign exchange






0.4



(0.6
)






Balance at end of period

$
147.0


$
208.3


$
449.0


$
545.6


$
257.3     (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. Put backs are considered
    not material for all other years presented.    Portfolio
    Purchases
  Year Ended September 30,2010


2009


2008(In millions)Aggregate Purchase Price


8.0


$
19.6


$
49.9Aggregate Portfolio Face Amount


269.1



577.0



1,605.1    36




---



##### Table of Contents



Schedule
    of Portfolios by Income Recognition Category
  September 30, 2010


September 30, 2009


September 30, 2008Cost


Interest


Cost


Interest


Cost


InterestRecovery


Method


Recovery


Method


Recovery


MethodPortfolios


Portfolios


Portfolios


Portfolios


Portfolios


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

$
442.5


$
780.5


$
442.2


$
772.8


$
405.9


$
789.5Cumulative Aggregate Managed Portfolios (at period end)


13,913.3



17,966.2



13,884.5



17,725.9



12,053.4



18,980.0Receivable Carrying Value (at period end)


100.7



46.3



137.6



70.6



245.5



203.5Finance Income Earned (for the respective period)


1.7



43.9



2.5



67.7



1.2



114.0Total Cash Flows (for the respective period)


26.0



75.9



47.0



100.4



24.9



183.0     Collections
    Represented by Account Sales
  CollectionsRepresented


FinanceBy Account


IncomeYear

Sales


Recognized2010

$
3,485,000


$
2,272,0002009


8,662,000



3,085,0002008


20,395,000



9,361,000  37




---



##### 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


$
105,549,000







105,549,000



162
%2002


36,557,000



48,149,000







48,149,000



132
%2003


115,626,000



215,257,000



434,000



215,691,000



187
%2004


103,743,000



184,220,000



270,000



184,490,000



178
%2005


126,023,000



212,299,000



5,675,000



217,974,000



173
%2006


163,392,000



246,740,000



11,686,000



258,426,000



158
%2007


109,235,000



90,252,000



25,331,000



115,583,000



106
%2008


26,626,000



38,572,000



1,753,000



40,325,000



151
%2009


19,127,000



19,461,000



9,466,000



28,927,000



151
%2010


7,698,000



3,690,000



6,987,000



10,677,000



139
%     (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.      Recent
    Accounting Pronouncements
  2010-09,
  2009-17, 2009-17
 38




---



##### Table of Contents



2009-17 2009-17 2009-17
  Inflation
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk   39




---



##### Table of Contents



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

PageReports of Independent Registered Public
    Accounting Firm


F-2Consolidated Balance Sheets 
    September 30, 2010 and 2009


F-3Consolidated Statements of Operations 
    Years ended September 30, 2010, 2009 and 2008


F-4Consolidated Statements of Shareholders
    Equity  Years ended September 30, 2010, 2009 and
    2008


F-5Consolidated Statements of Cash Flows 
    Years ended September 30, 2010, 2009 and 2008


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
  Rules 13a-15(e) 15d-15(e))
  Managements
    Annual Report on Internal Control Over Financial
    Reporting
  Rule 13a-15(f)
       40




---



##### Table of Contents



Changes
    in Internal Controls over Financial Reporting
  Rules 13a-15(f) 15d-15(f))
 41




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Internal Control  Integrated Framework
        Internal Control-Integrated Framework
    /s/  Grant Thornton LLP
    42




---



##### Table of Contents



Item 9B.
    Other
    Information.   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance.  Directors
    and Executive Officers
    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.    Part IV  Item 15.
    Exhibits,
    Financial Statement Schedules.    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

Reserved 43




---



##### Table of Contents



ExhibitNumber10
.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(21)10
.20

Form of Amended and Restated Revolving Note between Asta Funding
    and IDB, as lending agent(22)10
.21

Fourth Amendment to the Receivables Financing Agreement dated
    February 20, 2009 between the Company and Bank of
    Montreal(23)10
.22

Subordinated Guarantor Security Agreement dated
    February 20, 2009 to Bank of Montreal(24)10
.23

Subordinated Limited Recourse Guaranty Agreement dated
    February 20, 2009(25)10
.24

Subordinated Guarantor Security Agreement dated
    February 20, 2009 to Asta Group, Inc.(26)10
.25

Subordinated Limited Recourse Guaranty Agreement dated
    February 20, 2009 to Asta Group.(27)10
.26

Form of Intercreditor Agreement between Asta Funding and IDB as
    lending agent(28)10
.27

Amended and Restated Management Agreement, dated as of
    January 16, 2009, between Palisades Collection, L.L.C., and
    [*].(29)10
.28

Amended and Restated Master Servicing Agreement, dated as of
    January 16, 2009, between Palisades Collection, L.L.C., and
    [*](30)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 [*](31)10
.30

Consulting Services Agreement dated November 30, 2009
    between Cameron E. Williams and the Company.(32)10
.31

Loan Agreement Between Asta Funding and Bank Leumi dated
    December 14, 2009.(33)10
.32

Indemnification agreement between Asta Funding and GMS Family
    Investors LLC.(34)10
.33

Fifth Amendment to the Receivables Financing Agreement dated
    October 26, 2010 between the Company and Bank of
    Montreal(35)10
.34

Omnibus Termination Agreement, by and among Palisades
    Acquisition XVI, LLC, BMO Capital Markets Corp., as collateral
    agent, Asta Group, Incorporated, and each guarantor set forth
    therein.(36)10
.35

Lease agreement between the Company and ESL 200 LLC
    dated August 2, 2010(37)14
.1

Code of Ethics for Senior Financial Officers(38)21
.1

Subsidiaries of the Registrant*23
.1

Consent of Independent Registered Public Accounting Firm* 44




---



##### Table of Contents



ExhibitNumber31
.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,
    Robert J. Michel, 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,
    Robert J. Michel, pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.*     *
    
    Filed herewith(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)
    
    Not used(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(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 10.18 to Asta
    Fundings Current Report on
    Form 8-K
    filed May 1, 2008(21)
    
    Incorporated by reference to Exhibit 10.19 to Asta
    Fundings Annual Report on
    Form 10-K
    for the year ended September 30, 2008 45




---



##### Table of Contents



(22)
    
    Incorporated by reference to Exhibit 10.20 to Asta
    Fundings Annual Report on
    Form 10-K
    for the year ended September 30, 2008(23)
    
    Incorporated by reference to Exhibit 10.21 to Asta
    Fundings Annual Report on
    Form 10-K
    for the year ended September 30, 2008(24)
    
    Incorporated by reference to Exhibit 10.22 to Asta
    Fundings Annual Report on
    Form 10-K
    for the year ended September 30, 2008(25)
    
    Incorporated by reference to Exhibit 10.23 to Asta
    Fundings Annual Report on
    Form 10-K
    for the year ended September 30, 2008(26)
    
    Incorporated by reference to Exhibit 10.24 to Asta
    Fundings Annual Report on
    Form 10-K
    for the year ended September 30, 2008(27)
    
    Incorporated by reference to Exhibit 10.25 to Asta
    Fundings Annual Report on
    Form 10-K
    for the year ended September 30, 2008(28)
    
    Incorporated by reference to Exhibit 10.26 to Asta
    Fundings Annual Report on
    Form 10-K
    for the year ended September 30, 2008(29)
    
    Incorporated by reference to Exhibit 10.27 to Asta
    Fundings Annual Report on
    Form 10-K
    for the year ended September 30, 2008(30)
    
    Incorporated by reference to Exhibit 10.28 to Asta
    Fundings Annual Report on
    Form 10-K
    for the year ended September 30, 2008(31)
    
    Incorporated by reference to Exhibit 10.29 to Asta
    Fundings Annual Report on
    Form 10-K
    for the year ended September 30, 2008(32)
    
    Incorporated by reference to Exhibit 99.1 to Asta
    Fundings Current Report on
    Form 8-K
    filed December 4, 2009(33)
    
    Incorporated by reference to Exhibit 10.1 to Asta
    Fundings Current Report on
    Form 8-K
    filed December 18, 2009(34)
    
    Incorporated by reference to Exhibit 10.32 to Asta
    Fundings Annual Report on
    Form 10-K
    for the year ended September 30, 2009(35)
    
    Incorporated by reference to Exhibit 10.1 to Asta
    Fundings Current Report on
    Form 8-K
    filed November 1, 2010(36)
    
    Incorporated by reference to Exhibit 10.2 to Asta
    Fundings Current Report on
    Form 8-K
    filed November 22, 2010(37)
    
    Incorporated by reference to Exhibit 10.2 to Asta
    Fundings Current Report on
    Form 8-K
    filed August 5, 2010(38)
    
    Incorporated by reference to Exhibit 14.1 to Asta
    Fundings Annual Report on
    Form 10-K
    for the year ended September 30, 2009 46




---



##### Table of Contents



SIGNATURES
      By:
    /s/  Gary
    Stern   
      Signature

Title

Date/s/  Gary
    SternGary
    Stern

Chairman of the Board, President, and Chief Executive Officer

December 14, 2010/s/  Robert
    J. MichelRobert
    J. Michel

Chief Financial Officer Principal Financial Officer and
    Accounting Officer

December 14, 2010/s/  Arthur
    SternArthur
    Stern

Chairman Emeritus and Director

December 14, 2010/s/  Herman
    BadilloHerman
    Badillo

Director

December 14, 2010/s/  Edward
    CelanoEdward
    Celano

Director

December 14, 2010/s/  Harvey
    LeibowitzHarvey
    Leibowitz

Director

December 14, 2010/s/  David
    SlackmanDavid
    Slackman

Director

December 14, 2010/s/  Louis
    A. PiccoloLouis
    A. Piccolo

Director

December 14, 2010  47




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  CONSOLIDATED
    FINANCIAL STATEMENTS
  SEPTEMBER 30, 2010, 2009 and 2008




---



##### Table of Contents



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


F-2Consolidated Balance sheets as of
    September 30, 2010 and 2009


F-3Consolidated Statements of operations for the
    years ended September 30, 2010, 2009 and 2008


F-4Consolidated Statements of stockholders
    equity for the years ended September 30, 2010, 2009 and
    2008


F-5Consolidated Statements of cash flows for the
    years ended September 30, 2010, 2009 and 2008


F-6Notes to consolidated financial statements


F-7




---



##### Table of Contents



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




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
 Consolidated
    Balance Sheets  September 30,2010


2009ASSETSCash and cash equivalents

$
84,235,000


$
2,385,000Restricted cash


1,304,000



2,130,000Consumer receivables acquired for liquidation (at net realizable
    value)


147,031,000



208,261,000Due from third party collection agencies and attorneys


3,528,000



2,573,000Prepaid and income taxes receivable


196,000



47,727,000Furniture and equipment (net of accumulated depreciation of
    $3,006,000 in 2010 and $2,758,000 in 2009)


338,000



538,000Deferred income taxes


18,762,000



24,072,000Other assets


3,770,000



3,070,000Total assets

$
259,164,000


$
290,756,000LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesDebt

$
90,483,000


$
122,622,000Subordinated debt  related party


4,386,000



8,246,000Other liabilities


2,105,000



2,166,000Dividends payable


292,000



286,000Total liabilities


97,266,000



133,320,000Commitments 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
    14,600,423 shares in 2010 and 14,272,357 shares in 2009


146,000



143,000Additional paid-in capital


72,717,000



70,189,000Retained earnings


89,026,000



87,058,000Accumulated other comprehensive income, net of income taxes


9,000



46,000Total stockholders equity


161,898,000



157,436,000Total liabilities and stockholders equity

$
259,164,000


$
290,756,000    F-3




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
 Consolidated
    Statements of Operations  Year Ended September 30,2010


2009


2008Revenues:Finance income, net

$
45,631,000


$
70,156,000


$
115,295,000Other income


218,000



199,000



255,00045,849,000



70,355,000



115,550,000Expenses:General and administrative expenses


23,211,000



25,915,000



29,561,000Interest expense (Related Party  2010, $518,000;
    2009, $515,000; 2008, $154,000)


4,368,000



8,452,000



17,881,000Impairments of consumer receivables acquired for liquidation


13,029,000



183,500,000



53,160,00040,608,000



217,867,000



100,602,000Income (loss) before income taxes


5,241,000



(147,512,000
)


14,948,000Income tax expense (benefit)


2,112,000



(56,787,000
)


6,119,000Net income (loss)

$
3,129,000


$
(90,725,000
)

$
8,829,000Basic net income (loss) per share

$
0.22


$
(6.36
)

$
0.62Diluted net income (loss) per share

$
0.22


$
(6.36
)

$
0.61Weighted average shares outstanding:Basic


14,492,215



14,272,425



14,138,650Diluted


14,534,982



14,272,425



14,553,346    F-4




---



##### Table of Contents



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



For the
    years ended September 30, 2010, 2009 and 2008  AccumulatedAdditional





OtherCommon Stock


Paid-in


Retained


ComprehensiveShares


Amount


Capital


Earnings


Income (Loss)


TotalBalance, 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 benefit 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
)


247,901,000Exercise of options


533







1,000











1,000Restricted stock forfeited


(4,334
)Stock based compensation expense










984,000











984,000Tax benefit arising from exercise of non-qualified stock options
    and vesting of restricted stock










74,000











74,000Dividends














(1,142,000
)






(1,142,000
)Other comprehensive income (net of tax of $233,000)


















343,000



343,000Net (loss)














(90,725,000
)






(90,725,000
)Balance, September 30, 2009


14,272,357



143,000



70,189,000



87,058,000



46,000



157,436,000Exercise of options


328,066



3,000



867,000











870,0000Stock based compensation expense










1,189,000











1,189,000Tax benefit arising from exercise of non-qualified stock options
    and vesting of restricted stock










472,000











472,000Dividends














(1,161,000
)






(1,161,000
)Other comprehensive loss (net of tax benefit of $24,000)


















(37,000
)


(37,000
)Net income














3,129,000







3,129,000Balance, September 30, 2010


14,600,423


$
146,000


$
72,717,000


$
89,026,000


$
9,000


$
161,898,000   Comprehensive
    income (loss) is as follows:
  2010


2009


2008Net income (loss)

$
3,129,000


$
(90,725,000
)

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


(37,000
)


343,000



(297,000
)Comprehensive income (loss)

$
3,092,000


$
(90,382,000
)

$
8,532,000Accumulated other comprehensive income (loss)

$
9,000


$
46,000


$
(297,000
)    F-5




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Consolidated Statements of Cash
    Flows
  Year Ended September 30,2010


2009


2008Cash flows from operating activities:Net income (loss)

$
3,129,000


$
(90,725,000
)

$
8,829,000Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


1,291,000



1,664,000



1,278,000Deferred income taxes


5,310,000



(8,505,000
)


(2,634,000
)Impairments of consumer receivables acquired for liquidation


13,029,000



183,500,000



53,160,000Stock based compensation


1,189,000



984,000



1,013,000Changes in:Income taxes payable and receivable


47,531,000



(54,042,000
)


(1,846,000
)Due from third party collection agencies and attorneys


(955,000
)


2,497,000



(161,000
)Other assets


(1,683,000
)


(268,000
)


1,349,000Other liabilities


(79,000
)


(2,193,000
)


(3,725,000
)Net cash provided by operating activities


68,762,000



32,912,000



57,263,000Cash flows from investing activities:Purchase of consumer receivables acquired for liquidation


(7,989,000
)


(19,552,000
)


(49,886,000
)Principal payments received from collection of consumer
    receivables acquired for liquidation


54,211,000



71,936,000



81,645,000Principal payments received from collections represented by
    sales of consumer receivables acquired for liquidation


2,076,000



5,317,000



11,034,000Effect of foreign exchange on consumer receivables acquired for
    liquidation


(85,000
)


(542,000
)


658,000Capital expenditures


(108,000
)


(187,000
)


(361,000
)Net cash provided by investing activities


48,105,000



56,972,000



43,090,000Cash flows from financing activities:Proceeds from exercise of stock options


870,000



1,000



425,000Tax benefit arising from exercise of non-qualified stock options


472,000



74,000



2,666,000Change in restricted cash


826,000



917,000



2,647,000Dividends paid


(1,155,000
)


(1,427,000
)


(2,256,000
)Repayments of debt, net


(32,166,000
)


(90,695,000
)


(113,001,000
)(Repayments) advance under subordinated debt  related
    party


(3,860,000
)






8,246,000Net cash used in financing activities


(35,013,000
)


(91,130,000
)


(101,273,000
)Net increase (decrease) in cash and cash equivalents


81,854,000



(1,246,000
)


(920,000
)Effect of foreign exchange on cash


(4,000
)


8,000



18,000Cash and cash equivalents at beginning of year


2,385,000



3,623,000



4,525,000Cash and cash equivalents at end of year

$
84,235,000


$
2,385,000


$
3,623,000Supplemental disclosure of cash flow information:Cash paid for:Interest (Related Party: 2010  $568,000;
    2009  $472,000; 2008  $112,000)

$
4,542,000


$
9,082,000


$
19,784,000Income taxes

$
2,052,000


$
5,887,000


$
8,282,000    F-6




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes
    to Consolidated Financial Statements
 September 30,
    2010 and 2009
  Note A 
    The
    Company and its Significant Accounting Policies  [1]
    The Company:
  ® ®
    [1A]
    Liquidity:
      [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
 September 30,
    2010 and 2009
   Note A 
    The
    Company and its Significant Accounting
    Policies  (Continued)  
 [3]
    Cash and cash equivalents and restricted
    cash:  (Continued)
        [4]
    Income recognition, Impairments and Accretable yield
    adjustments:
  Income
    Recognition
        Impairments
    and accretable yield adjustments
   F-8




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
   Note A 
    The
    Company and its Significant Accounting
    Policies  (Continued)  
 [4]
    Income recognition, Impairments and Accretable yield
    adjustments:  (Continued)
        
    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
    there are better states to try to collect receivables and the
    Company factors in both better and worse states when
    establishing their initial cash flow expectations.
    the average balance of the receivables influences 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 the Companys law suit
    strategy and thus yield better results over the longer term. As
    the Company has significant experience with both types of
    balances, it is able to factor these variables into its initial
    expected cash flows;
    the age of the receivables, the number of days since charge-off,
    any payments since charge-off, and the credit guidelines of the
    credit originator also represent factors taken into
    consideration in our estimation process . For example, older
    receivables might be more difficult
    and/or
    require more time and effort to collect;
    past history and performance of similar assets acquired. As the
    Company purchases portfolios of like assets, it accumulates a
    significant historical data base on the tendencies of debtor
    repayments and factor this into its initial expected cash flows;
    the Companys ability to analyze accounts and resell
    accounts that meet its 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 lawsuit strategy and, conversely, debtors without
    jobs or property are less likely to repay their obligation. The F-9




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
   Note A 
    The
    Company and its Significant Accounting
    Policies  (Continued)  
 [4]
    Income recognition, Impairments and Accretable yield
    adjustments:  (Continued)
  Company believes that debtors with jobs or property are more
    likely to repay because courts have mandated the debtor must pay
    the debt. Ultimately, the debtor with property will pay to clear
    title or release a lien. The Company also believes that these
    debtors generally might take longer to repay and that is
    factored into its initial expected cash flows; and  
    credit standards of issuer.      18-28 month 130-140%
  [5]
    Commissions and fees:
    [6]
    Furniture, equipment and leasehold improvements:
   F-10




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
   Note A 
    The
    Company and its Significant Accounting
    Policies  (Continued)  [7]
    Income taxes:
    [8]
    Net income (loss) per share:
       2010


2009


2008Weighted


Per





Weighted


Per





Weighted


PerNet


Average


Share


Net


Average


Share


Net


Average


ShareIncome


Shares


Amount


Income


Shares


Amount


Income


Shares


AmountBasic

$
3,129,000



14,492,215


$
0.22


$
(90,725,000
)


14,272,425


$
(6.36
)

$
8,829,000



14,138,650


$
0.62Dilutive effect of stock Options






42,767























414,696Diluted

$
3,129,000



14,534,982


$
0.22


$
(90,725,000
)


14,272,425


$
(6.36
)

$
8,829,000



14,553,346


$
0.61     [9]
    Use of estimates:
    [10]
    Stock-based compensation:
   F-11




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
   Note A 
    The
    Company and its Significant Accounting
    Policies  (Continued)  [11]
    Impact of Recently Issued Accounting Standards:
  2010-09,
  2009-17, 2009-17 2009-17 2009-17 2009-17
  [12]
    Reclassifications:
    Note B 
    Consumer
    Receivables Acquired For Liquidation      
    the interest method; or
    the cost recovery method.     F-12




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
   Note B 
    Consumer
    Receivables Acquired For
    Liquidation  (Continued)          
    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;
    our ability to analyze accounts and resell accounts that meet
    our criteria for resale; F-13




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
   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, 2010Interest


CostMethod


RecoveryPortfolios


Portfolios


TotalBalance, beginning of period

$
70,650,000


$
137,611,000


$
208,261,000Acquisitions of receivable portfolios, net


7,698,000



291,000



7,989,000Net cash collections from collection of consumer receivables
    acquired for liquidation


(72,398,000
)


(26,036,000
)


(98,434,000
)Net cash collections represented by account sales of consumer
    receivables acquired for liquidation


(3,481,000
)


(4,000
)


(3,485,000
)Impairments






(13,029,000
)


(13,029,000
)Effect of foreign currency translation






97,000



97,000Finance income recognized(1)


43,879,000



1,753,000



45,632,000Balance, end of period

$
46,348,000


$
100,683,000


$
147,031,000Revenue as a percentage of collections


57.8
%


6.73
%


44.8
%     (1)
    
    Includes $34.3 million derived from fully amortized pools.  F-14




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
   Note B 
    Consumer
    Receivables Acquired For
    Liquidation  (Continued)  For the Year Ended September 30, 2009Interest


CostMethod


RecoveryPortfolios


Portfolios


TotalBalance, beginning of period

$
203,470,000


$
245,542,000


$
449,012,000Acquisitions of receivable portfolios, net


19,129,000



423,000



19,552,000Net cash collections from collection of consumer receivables
    acquired for liquidation(1)


(96,543,000
)


(42,204,000
)


(138,747,000
)Net cash collections represented by account sales of consumer
    receivables acquired for liquidation


(4,963,000
)


(3,699,000
)


(8,662,000
)Transfer to cost recovery(1)


(10,128,000
)


10,128,000



Impairments


(108,534,000
)


(74,966,000
)


(183,500,000
)Effect of foreign currency translation






450,000



450,000Finance income recognized(2)


68,219,000



1,937,000



70,156,000Balance, end of period

$
70,650,000


$
137,611,000


$
208,261,000Revenue as a percentage of collections


67.2
%


4.2
%


47.6
%     (1)
    
    During the 12 months ended September 30, 2009, three
    portfolios were transferred from the interest method to the cost
    recovery method. Based on the nature of these portfolios and the
    recent cash flows, our estimates of the timing of expected cash
    flows became uncertain.(2)
    
    Includes $40.7 million derived from fully amortized pools.    September 30, 2011

$
18,789,000September 30, 2012


15,212,000September 30, 2013


7,875,000September 30, 2014


4,059,000September 30, 2015


1,030,000September 30, 2016


777,000September 30, 2017


180,000Deferred revenue


(1,574,000
)Total

$
46,348,000    F-15




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
   Note B 
    Consumer
    Receivables Acquired For
    Liquidation  (Continued)    Year EndedSeptember 30,2010Balance at beginning of period, October 1, 2009

$
25,875,000Income recognized on finance receivables, net


(43,208,000
)Additions representing expected revenue from purchases


2,424,000Reclassifications from non-accretable difference(1)


30,164,000Balance at end of period, September 30, 2010

$
15,255,000   Year EndedSeptember 30,2009Balance at beginning of period, October 1, 2008

$
58,134,000Income recognized on finance receivables, net


(68,219,000
)Additions representing expected revenue from purchases


5,980,000Transfer to cost recovery


(3,372,000
)Reclassifications from non-accretable difference(1)


33,352,000Balance at end of period, September 30, 2009

$
25,875,000     (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 30,2010


2009


2008Gross collections(1)

$
157,574,000


$
224,528,000


$
332,711,000Commissions and fees(2)


55,654,000



77,119,000



124,737,000Net collections

$
101,920,000


$
147,409,000


$
207,974,000     (1)
    
    Gross collections include: collections from third-party
    collection agencies and attorneys, collections from in-house
    efforts and collections represented by account sales. F-16




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
   Note B 
    Consumer
    Receivables Acquired For
    Liquidation  (Continued)   (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.    Note C 
    Furniture
    and Equipment    2010


2009Furniture

$
310,000


$
310,000Equipment


2,855,000



2,783,000Software


153,000



117,000Leasehold improvements


86,000



86,0003,404,000



3,296,000Less accumulated depreciation


3,066,000



2,758,000Balance, end of period

$
338,000


$
538,000     Note D 
    Debt
    and Subordinated Debt  Related Party    2010Stated


AverageInterest


Interest2010


2009


Rate


RateCredit Facility  IDB

$



$
18,301,000




%


5.5
%Credit Agreement  Bank Leumi














4.5
%Receivables Financing Agreement


90,483,000



104,321,000



3.76
%


3.77
%Total debt

$
90,483,000


$
122,622,000



n/a



3.81
%Subordinated debt  related party

$
4,386,000


$
8,246,000



10.00
%


8.69
%   Leumi
    Credit Agreement
   F-17




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
   Note D 
    Debt
    and Subordinated Debt  Related
    Party  (Continued)    Receivables
    Financing Agreement
             F-18




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
   Note D 
    Debt
    and Subordinated Debt  Related
    Party  (Continued)            IDB
    Credit Facility
    Subordinated
    Debt  Related Party
   F-19




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
   Note D 
    Debt
    and Subordinated Debt  Related
    Party  (Continued)    Note E 
    Other
    Liabilities    2010


2009Accounts payable and accrued expenses

$
1,227,000


$
1,425,000Accrued interest payable


321,000



504,000Other


557,000



237,000Total other liabilities

$
2,105,000


$
2,166,000    Note
    F 
    Income
    Taxes    2010


2009


2008Current:Federal

$
2,215,000


$
(47,062,000
)

$
6,567,000State


175,000



(1,220,000
)


2,152,000Federal true up


(5,588,000
)






Foreign










34,000(3,198,000
)


(48,282,000
)


8,753,000Deferred:Federal


3,882,000



1,092,000



(1,987,000
)State


1,428,000



(9,597,000
)


(647,000
)5,310,000



(8,505,000
)


(2,634,000
)Provision for income taxes

$
2,112,000


$
(56,787,000
)

$
6,119,000     2010


2009


2008Statutory federal income tax rate


35.0
%


35.0
%


35.0
%State income tax, net of federal benefit


6.2



5.8



5.8Deferred tax valuation allowance


15.8



(2.1
)


Permanent
    book-tax
    differences and true ups


(15.3
)






Other


(1.4
)


(0.2
)


0.1Effective income tax rate


40.3
%


38.5
%


40.9
%  F-20




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
   Note
    F 
    Income
    Taxes  (Continued)    September 30,


September 30,2010


2009Deferred revenue

$
638,000


$
221,000Impairments


12,228,000



12,472,000State tax net operating loss carryforward


10,768,000



14,488,000Compensation expense


496,000



1,273,000Other


(131,000
)


26,000Deferred income taxes


23,999,000



28,480,000Deferred tax valuation allowance


(5,237,000
)


(4,408,000
)Deferred income taxes

$
18,762,000


$
24,072,000          F-21




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
   Note
    F 
    Income
    Taxes  (Continued)      Note G 
    Commitments
    and Contingencies  Employment
    Agreements
    Leases
    YearEndingSeptember 30,2011

$
270,0002012


237,0002013


236,0002014


236,0002015


197,000$
1,176,000   Contingencies
   F-22




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
   Note G 
    Commitments
    and Contingencies  (Continued)  and/or
    Note H 
    Concentrations    Note I 
    Stock
    Option Plans  Equity
    Compensation Plan
         F-23




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
   Note I 
    Stock
    Option Plans  (Continued)  2002
    Stock Option Plan
        1995
    Stock Option Plan
       F-24




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
   Note I 
    Stock
    Option Plans  (Continued)    Year Ended September 30,2010


2009


2008Weighted





Weighted





WeightedAverage





Average





AverageExercise





Exercise





ExerciseShares


Price


Shares


Price


Shares


PriceOutstanding options at the beginning of year


1,157,905


$
10.76



1,037,438


$
11.69



1,337,438


$
9.39Options granted


158,900



8.07



122,000



2.95







Options cancelled


(66,700
)


17.48



(1,000
)


28.75







Options exercised


(328,066
)


2.65



(533
)


2.95



(300,000
)


1.42Outstanding options at the end of year


922,039


$
12.70



1,157,905


$
10.76



1,037,438


$
11.69Exercisable options at the end of year


792,377


$
13.65



1,081,912


$
11.31



1,031,438


$
11.59         Risk-free interest rate


0.17
%Expected term (years)


10.0Expected volatility


110.2
%Dividend yield


1.12
%    F-25




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
   Note I 
    Stock
    Option Plans  (Continued)    Risk-free interest rate


0.18
%Expected term (years)


10.0Expected volatility


111.7
%Dividend yield


1.145
%     Options Outstanding


Options ExercisableWeightedAverage


Weighted





WeightedRemaining


Average





AverageRange of

Number


Contractual


Exercise


Number


ExerciseExercise Price

Outstanding


Life (In Years)


Price


Exercisable


Price$ 2.8751 -  $ 5.7500


198,568



5.1


$
3.90



168,902


$
4.07$ 5.7501 -  $ 8.6250


169,700



8.6



7.92



69,704



7.71$14.3751 -  $17.2500


198,611



3.1



14.88



198,611



14.88$17.2501 -  $20.1250


340,160



4.1



18.23



340,160



18.23$25.8751 -  $28.7500


15,000



6.2



28.75



15,000



28.75922,039



5.0


$
12.70



792,377


$
13.65     Weighted





WeightedYear Ended


Average


Year Ended


AverageSeptember 30, 2010


Grant Date


September 30, 2009


Grant DateShares


Fair Value


Shares


Fair ValueUnvested at the beginning of period


35,338


$
19.73



80,667


$
22.26Awards granted






0.00







0.00Vested


(17,669
)


19.73



(40,995
)


24.29Forfeited






0.00



(4,334
)


21.81Unvested at the end of period


17,669


$
19.73



35,338


$
19.73      F-26




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
  Note J 
    Stockholders
    Equity        Note K 
    Retirement
    Plan    Note L 
    Fair
    Value of Financial Instruments        Note M 
    Related
    Party Transactions   F-27




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
   Note M 
    Related
    Party Transactions  (Continued)          Note N 
    Summarized
    Quarterly Data (unaudited)  First


Second


Third


Fourth


FullQuarter

Quarter


Quarter


Quarter


Quarter


Year2010Total revenue

$
11,053,000


$
11,200,000


$
12,097,000


$
11,499,000


$
45,849,000Income (loss) before income taxes


4,165,000



4,839,000



5,242,000



(9,005,000
)


5,241,000Net (loss) income


2,475,000



2,875,000



3,121,000



(5,342,000
)


3,129,000Basic net (loss) income per share

$
0.17


$
0.20


$
0.21


$
(0.37
)

$
0.22Diluted net (loss) income per share

$
0.17


$
0.20


$
0.21


$
(0.37
)

$
0.222009Total revenue

$
18,465,000


$
18,054,000


$
17,272,000


$
16,564,000


$
70,355,000Income (loss) before income taxes


(13,147,000
)


(8,674,000
)


2,491,000



(128,182,000
)


(147,512,000
)Net income (loss)


(7,837,000
)


(5,168,000
)


1,478,000



(79,198,000
)


(90,725,000
)Basic net income (loss) per share

$
(0.55
)

$
(0.36
)

$
0.10


$
(5.55
)

$
(6.36
)Diluted net income (loss) per share

$
(0.55
)

$
(0.36
)

$
0.10


$
(5.55
)

$
(6.36
)     *
    
    Due to rounding the sum of quarterly totals for earnings per
    share may not add to the yearly total.   F-28




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2010 and 2009
   Note N 
    Summarized
    Quarterly Data
    (unaudited)  (Continued)    Note O 
    Subsequent
    Events       F-29