##### 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,
    2009ORo

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. o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer þ
    Smaller
    reporting
    company o   Rule 12b-2 o þ




---



##### 





FORM 10-K
  TABLE OF
    CONTENTS
   
 PagePART IItem 1.

Business


4Item 1A.

Risk Factors


12Item 1B.

Unresolved Staff Comments


22Item 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


42PART IIIItem 10.

Directors, Executive Officers and Corporate
    Governance


42Item 11.

Executive Compensation


42Item 12.

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


42Item 13.

Certain Relationships and Related Transactions,
    and Director Independence


42Item 14.

Principal Accounting Fees and Services


42PART IVItem 15.

Exhibits and Financial Statement Schedules


42EX-14.1: CODE OF ETHICS


49EX-21.1: SUBSIDIARIES OF THE COMPANY


52EX-23.1: CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


53EX-23.2: CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


54EX-31.1: CERTIFICATION


55EX-31.2: CERTIFICATION


56EX-32.1: CERTIFICATION


57EX-32.2: CERTIFICATION


58EX-10.32EX-14.1EX-21.1EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1EX-32.2   2




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Caution
    Regarding Forward Looking Statements
  Form 10-K
 3




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##### Table of Contents



Part I  Item 1.
    Business.  Overview
        
    our relationships with industry participants, financial
    institutions, collection agencies, investors and our financing
    sources;
    brokers who specialize in the sale of consumer receivable
    portfolios; and
    other sources.       4




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




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




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
    the number of collection agencies previously attempting to
    collect the receivables in the portfolio;
    the average balance of the receivables;
    the age of the receivables (as older receivables might be more
    difficult to collect or might be less cost effective);
    past history of performance of similar assets  as we
    purchase portfolios of similar assets, we believe we have built
    significant history on how these receivables will liquidate and
    cash flow;
    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.        
    adequate internal controls to detect fraud;
    the ability to provide post-sale support; and
    the capacity to honor put-back and return warranty requests.   7




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




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
    collection/skiptrace;
    customer service; and
    accounting and finance.  Collection/Skiptrace.
  
    contacting customers;
    explaining the benefits of making payment on the
    obligations; and
    working with the customers to develop acceptable means to
    satisfy their obligations.    
    offering obligors a discount on the overall obligation; and/or
    tailoring repayment plans that provide for the payment of these
    obligations as a component of the obligors monthly budget.    follow-up.
  Customer Service.
  
    handling incoming calls from debtors and third-party collection
    agencies;
    coordinating customer inquiries and assisting the collection
    agencies in the collection process;
    handling buy-back and information requests from companies that
    have purchased receivables from us;
    working with the buyers during the transition period and
    post-sale process; and
    handling any issues that may arise once a receivable portfolio
    has been sold.  Accounting and Finance.
  
    making daily deposits of debtor payments;
    posting these payments to each debtors account; and
    in conjunction with the customer service department, 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 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;
    timeliness of purchase decisions; and
    reputation of the purchaser.   10




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




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and/or
  Employees
    www.astafunding.com. Form 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
    effected, the trading price of our common stock could decline
    and shareholders might lose all or part of their investment.
  We
    have recently recorded substantial impairments losses in the
    value of our portfolios
    Our
    current financing facility is a twelve month facility of
    $6 million which will limit our ability to purchase larger
    portfolios of consumer receivables.
   12




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The
    Company has risks associated with its 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.
    We may
    not be able be to timely satisfy all amounts due to Bank of
    Montreal under the Receivables Financing Agreement
    The
    Company will be applying for a Federal tax refund of
    approximately $46 million upon filing the tax return for
    fiscal year 2009 and may not receive such refund in a timely
    manner.
    There
    is no assurance the Company will realize the full value of the
    deferred tax asset.
    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; 13




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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; 14




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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.      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.
    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 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.
   15




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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      We are
    subject to competition for the purchase of consumer receivable
    portfolios.
    We are
    dependent upon third parties to service a majority of our
    consumer receivable portfolios.
   16




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The
    current economic environment has had adverse effects on others
    in this industry, including parties providing services to
    us.
    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
  We may
    rely on third parties to locate, identify and evaluate consumer
    receivable portfolios available for purchase.
    Business
    issues with a significant third party servicer (the
    Servicer) led to the need to secure subordinated
    financing, reduced purchases and other disruptions in the
    business relationship.
  Start-up
 17




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Form 10-K Form 10-K/A start-up
        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.
    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. 18




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
    cause our indebtedness to become immediately payable;
    preclude us from further borrowings from these existing
    sources; and
    prevent us from securing alternative sources of financing
    necessary to purchase consumer receivable portfolios and to
    operate our business.  The
    loss of 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.    Current
    economic conditions, have had a significant impact on our
    ability to sell accounts.
    Government
    regulations may limit our ability to recover and enforce the
    collection of our receivables.
   19




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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; and
    The Fair Credit Reporting Act.      and/or
  Class
    action suits and other litigation in our industry could divert
    our managements attention from operating our business and
    increase our expenses.
    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; 20




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
    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.
    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.
   21




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Rule 10b5-1
  The
    Company purchased a portfolio in a South American country
    exposing the Company to currency rate
    fluctuations.
    Our
    quarterly operating results may fluctuate and cause our stock
    price to decline.
    
    the timing and amount of collections on our consumer receivable
    portfolios;
    our inability to identify and acquire additional consumer
    receivable portfolios;
    a decline in the estimated future value of our consumer
    receivable portfolio recoveries;
    increases in operating expenses associated with the growth of
    our operations;
    general and economic market conditions; and
    prices we are willing to pay for consumer receivable portfolios.  Item 1B.
    Unresolved
    Staff Comments.    Item 2.
    Properties.        Item 3.
    Legal
    Proceedings.  Form 10-K,
  Item 4.
    Submission
    of Matters to a Vote of Security Holders.   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, 2007 to December 31, 2007

$
39.78


$
24.71January 1, 2008 to March 31, 2008


26.29



12.92April 1, 2008 to June 30, 2008


15.25



6.74July 1, 2008 to September 30, 2008


10.01



6.76October 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



4.90   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


1,157,905


$
10.76



1,150,668Equity compensation plans not approved by security holders


0



0



0Total


1,157,905


$
10.76



1,150,668  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.
    COMPARISON
    OF 5-YEAR CUMULATIVE TOTAL RETURN
    AMONG ASTA FUNDING, INC.,
    NASDAQ MARKET INDEX AND PEER GROUP INDEX
  
  ASSUMES $100
    INVESTED ON SEPT. 30, 2004
    ASSUMES DIVIDEND REINVESTED
    FISCAL YEAR ENDING SEPT. 30, 2009
  2004



2005



2006



2007



2008



2009ASTA FUNDING, INC.



100.00




188.53




258.17




265.03




49.17




54.27PEER GROUP INDEX(1)



100.00




198.04




149.19




130.36




72.81




71.92NASDAQ MARKET INDEX



100.00




113.76




120.51




144.01




111.56




112.97     (1)
    
    The Peer Group Index is made up of the following securities:      24




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Item 6.
    Selected
    Financial Data.    Year Ended September 30,2009


2008


2007


2006


2005(In thousands, except per share data)Operations Statement Data:Finance income

$
70,156


$
115,295


$
138,356


$
101,024


$
69,479Other income


134



200



2,181



405



Total revenue


70,290



115,495



140,537



101,429



69,479Costs and expenses:General and administrative


25,915



29,561



25,450



18,268



15,340Interest expense


8,452



17,881



18,246



4,641



1,853Impairments


183,500



53,160



9,097



2,245



Total expenses


217,867



100,602



52,793



25,154



17,193Income before equity in earnings in venture and income taxes


(147,577
)


14,893



87,744



76,275



52,286Equity in earnings in venture


65



55



225



550



Income before income taxes


(147,512
)


14,948



87,969



76,825



52,286Provisions for income taxes


(56,787
)


6,119



35,703



31,060



21,290Net (loss) income

$
(90,725
)

$
8,829


$
52,266


$
45,765


$
30,996Basic net (loss) income per share

$
(6.36
)

$
0.62


$
3.79


$
3.36


$
2.29Diluted net (loss) income per share

$
(6.36
)

$
0.61


$
3.56


$
3.13


$
2.15   2009

2008

2007

2006

2005(In millions)Other Financial Data:For the Year ended September 30Cash collections

$
147.4


$
208.0


$
281.8


$
214.5


$
168.9Portfolio purchases, at cost


19.6



49.9



440.9



200.2



126.0Portfolio purchases, at face


577.0



1,456.1



10,891.9



5,194.0



3,445.2Return on average assets(1)


(23.5
)%


1.7
%


12.0
%


19.6
%


18.3
%Return on average stockholders equity(1)


(44.8
)%


3.6
%


24.8
%


27.8
%


23.9
%Dividends declared per share(2)

$
0.08


$
0.16


$
0.16


$
0.56


$
0.14At September 30,Total assets


290.8



481.1



580.3



287.8



180.0Total debt


130.9



221.7



326.5



82.8



29.3Total stockholders equity


157.4



247.9



237.5



184.3



145.2Inception to date  September 30,Cumulative aggregate purchases, at face


31,626.9



31,049.9



29,593.8



18,701.9



13,507.9     (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. 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
    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. 26




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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.   27




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24-39 month 18-28 month 130-140%
    Results
    of Operations
  Form 10-K.
  Years Ending September 30,2009


2008


2007Finance income


99.8
%


99.8
%


98.4
%Other income


0.2
%


0.2
%


1.6
%Total revenue


100.0
%


100.0
%


100.0
%General and administrative expenses


36.9
%


25.6
%


18.1
%Interest expense


12.0
%


15.5
%


13.0
%Impairments


261.1
%


46.0
%


6.5
%(Loss) income before equity in earnings in venture and income
    taxes


(210.0
)%


12.9
%


62.4
%Equity in earnings in venture


0.1
%


0
%


0.2
%(Loss) income before income taxes


(209.9
)%


12.9
%


62.6
%Provision for income taxes


(80.8
)%


5.3
%


25.4
%Net (loss) income


(129.1
)%


7.6
%


37.2
%  28




---



##### Table of Contents



Year
    Ended September 30, 2009 Compared to the Year Ended
    September 30, 2008
  Finance income.
    $ $
  Other income.
  General and administrative expenses.
  Interest expense.
  Impairments.
 29




---



##### Table of Contents



Income tax (benefit) expense
  Net (loss) income.
  Year
    Ended September 30, 2008 Compared to the Year Ended
    September 30, 2007
  Finance income.
   30




---



##### Table of Contents



Other income.
  General and administrative expenses.
  Interest expense.
 31




---



##### Table of Contents



Impairments.
  Equity in earnings of venture.
  Net income.
  Liquidity
    and Capital Resources
         32




---



##### Table of Contents



33




---



##### Table of Contents



Year Ended September 30,2009


2008


2007


2006


2005(In millions)Balance at beginning of period

$
449.0


$
545.6


$
257.3


$
172.7


$
146.1Acquisitions of finance receivables, net of buybacks


19.6



49.9



440.9



200.2



126.0Cash collections from debtors applied to principal(1)(2)


(69.1
)


(81.7
)


(114.4
)


(90.4
)


(59.6
)Cash collections represented by account sales applied to
    principal(1)


(8.1
)


(11.0
)


(29.1
)


(23.0
)


(39.8
)Impairments/Portfolio write down


(183.5
)


(53.2
)


(9.1
)


(2.2
)


Effect of foreign exchange


0.4



(0.6
)










Balance at end of period

$
208.3


$
449.0


$
545.6


$
257.3


$
172.7     (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. 34




---



##### Table of Contents



Portfolio
    Purchases
  Year Ended September 30,2009

2008

2007(In millions)Aggregate Purchase Price

$
19.6


$
49.9


$
440.9Aggregate Portfolio Face Amount


577.0



1,605.1



10,891.9     Schedule
    of Portfolios by Income Recognition Category
  September 30, 2009

September 30, 2008

September 30, 2007Cost

Interest

Cost

Interest

Cost

InterestRecovery

Method

Recovery

Method

Recovery

MethodPortfolios

Portfolios

Portfolios

Portfolios

Portfolios

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

$
442.2


$
772.8


$
405.9


$
789.5


$
101.1


$
1,045.4Cumulative Aggregate Managed Portfolios (at period end)


13,884.5



17,725.9



12,053.4



18,980.0



3,961.5



25,464.7Receivable Carrying Value (at period end)


137.6



70.6



245.5



203.5



32.0



513.6Finance Income Earned (for the respective period)


2.5



67.7



1.2



114.0



2.2



136.2Total Cash Flows (for the respective period)


47.0



100.4



24.9



183.0



21.2



260.6     Collections
    Represented by Account Sales
  CollectionsRepresented

FinanceBy account

IncomeYear

Sales

Recognized2009

$
8,662,000


$
3,085,0002008


20,395,000



9,361,0002007


54,193,000



25,164,000  35




---



##### 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


$
105,427,000


$



$
105,427,000



162
%2002


36,557,000



47,955,000







47,955,000



131
%2003


115,626,000



209,396,000



1,392,000



210,788,000



182
%2004


103,743,000



177,670,000



682,000



178,352,000



172
%2005


126,023,000



198,857,000



10,931,000



209,788,000



166
%2006(6)


163,392,000



225,327,000



22,479,000



247,806,000



152
%2007(7)


109,235,000



73,602,000



37,865,000



111,467,000



102
%2008


26,626,000



25,661,000



3,936,000



29,597,000



111
%2009


19,129,000



3,043,000



19,240,000



22,283,000



116
%     (1)
    
    Total collections do not represent full collections of the
    Company with respect to this or any other year.(2)
    
    Purchase price refers to the cash paid to a seller to acquire a
    portfolio less the purchase price refunded by a seller due to
    the return of non-compliant accounts (also defined as
    put-backs), plus third party commissions(3)
    
    Cash collections include: net collections from our third-party
    collection agencies and attorneys, collections from our in-house
    efforts and collections represented by account sales.(4)
    
    Does not include estimated collections from portfolios that are
    zero basis(5)
    
    Total estimated collections refer to the actual net cash
    collections, including cash sales, plus estimated remaining
    collections.(6)
    
    Four portfolios purchased in 2006 with an aggregate purchase
    price of $36,845,000 were reclassified from the interest method
    to the cost recovery method during fiscal year 2009. The
    following table describes the impact of the reclassification on
    the year 2007:  TotalNet Cash








EstimatedCollections


Estimated


Total


CollectionsPurchase


Including


Remaining


Estimated


as a PercentagePrice


Cash Sales


Collections


Collections


of Purchase PriceAs reported 2007

$
200,237,000


$
149,368,000


$
160,913,000


$
310,281,000



155
%Less: Portfolio purchases transferred to cost recovery method in
    2009


36,845,000



15,112,000



34,539,000



49,651,000



135
%Interest method Portfolios

$
163,392,000


$
134,256,000


$
126,374,000


$
260,630,000



160
%2008 and 2009 Activity






91,071,000



(103,895,000
)


(12,824,000
)As reported 2009

$
163,392,000


$
225,327,000


$
22,479,000


$
247,806,000



152
%  36




---



##### Table of Contents



(7)
    
    The Portfolio Purchase was reclassified from the interest method
    to the cost recovery method during the third quarter of fiscal
    year 2008. The following table describes the impact of the
    reclassification on the year 2007:  TotalNet Cash








EstimatedCollections


Estimated


Total


CollectionsPurchase


Including


Remaining


Estimated


as a PercentagePrice


Cash Sales


Collections


Collections


of Purchase PriceAs reported 2007

$
384,850,000


$
69,409,000


$
460,205,000


$
529,614,000



138
%Less: Portfolio Purchase


(275,615,000
)


(45,499,000
)


(334,701,000
)


(380,200,000
)


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

$
109,235,000


$
23,910,000


$
125,504,000


$
149,414,000



137
%2008 and 2009 Activity






49,692,000



(87,639,000
)


(37,947,000
)As reported 2009

$
109,235,000


$
73,602,000


$
37,865,000


$
111,467,000



102
%       New
    Accounting Pronouncements
  paragraphs 38-76.
   37




---



##### Table of Contents



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




---



##### Table of Contents



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

PageReports of Independent Registered Public Accounting Firms


F-2Consolidated Balance Sheets  September 30, 2009
    and 2008


F-4Consolidated Statements of Operations  Years ended
    September 30, 2009, 2008 and 2007


F-5Consolidated Statements of Shareholders Equity 
    Years ended September 30, 2009, 2008 and 2007


F-6Consolidated Statements of Cash Flows  Years ended
    September 30, 2009, 2008 and 2007


F-7Notes to Consolidated Financial Statements


F-8   Item 9.
    Changes
    in and Disagreements With Accountants on Accounting and
    Financial Disclosure.    Item 9A.
    Controls
    and Procedures.  Disclosure
    Controls and Procedures
  Rules 240.13a-15(e) 240.15d-15(e))
  Managements
    Annual Report on Internal Control Over Financial
    Reporting
  Rule 13a-15(f)
         39




---



##### Table of Contents



Changes
    in Internal Controls over Financial Reporting
   40




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Internal Control  Integrated Framework
        Internal Control-Integrated Framework
    /s/  Grant
    Thornton LLP
    41




---



##### Table of Contents



Item 9B.
    Other
    Information.   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance.  Directors
    and Executive Officers
    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.   Part IV Item 15.Exhibits,
    Financial Statement Schedules.  Form 10-K.
           42




---



##### Table of Contents



ExhibitNumber3
.1

Certificate of Incorporation.(1)3
.2

Amendment to Certificate of Incorporation(3)3
.3

By laws.(2)10
.1

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Seventh Amendment to the Fourth Amended and Restated Loan
    Agreement, Dated February 20, 2009 between the Company and
    IDB(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) 43




---



##### Table of Contents



ExhibitNumber10
.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.*14
.1

Code of Ethics for Senior Financial Officers*23
.1

Consent of Independent Registered Public Accounting Firm*23
.2

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,
    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.*     (1)
    
    Incorporated by reference to an Exhibit to Asta Fundings
    Registration Statement on
    Form SB-2
    (File No. 33-97212).(2)
    
    Incorporated by reference to Exhibit 3.1 to Asta
    Fundings Annual Report on
    Form 10-KSB
    for the year ended September 30, 1998.(3)
    
    Incorporated by reference to an Exhibit to Asta Fundings
    Quarterly Report on
    Form 10-QSB
    for the three months ended March 31, 2002.(4)
    
    Not used.(5)
    
    Incorporated by reference to Exhibit 10.1 to Asta
    Fundings Current Report on
    Form 8-K
    filed May 19, 2004.(6)
    
    Incorporated by reference to Exhibit 10.1 to Asta
    Fundings Current Report on
    Form 8-K
    filed March 3, 2006.(7)
    
    Incorporated by reference to Exhibit 10.1 to Asta
    Fundings Current Report on
    Form 8-K
    filed July 12, 2006.(8)
    
    Incorporated by reference to Exhibit 10.1 to Asta
    Fundings Current Report on
    Form 8-K
    filed August 2, 2005.(9)
    
    Not used(10)
    
    Incorporated by reference to Exhibit 10.1 to Asta
    Fundings Quarterly Report on
    Form 10-Q
    for the three months ended March 31, 2007.(11)
    
    Incorporated by reference to Exhibit 10.1 to Asta
    Fundings Current Report on
    Form 8-K
    filed February 9, 2007(12)
    
    Incorporated by reference to Exhibit 10.2 to Asta
    Fundings Quarterly Report on
    Form 10-Q
    for the Three Months Ended March 31, 2007(13)
    
    Incorporated by reference to Exhibit 10.3 to Asta
    Fundings Quarterly Report on
    Form 10-Q
    for the Three Months Ended March 31, 2007(14)
    
    Incorporated by reference to Exhibit 10.1 to Asta
    Fundings Quarterly Report on
    Form 10-Q
    for the Three Months Ended June 30, 2007(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 44




---



##### Table of Contents



(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(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 45




---



##### 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 29, 2009/s/  Robert
    J. MichelRobert
    J. Michel

Chief Financial Officer 
    Principal Financial Officer and 
    Accounting Officer

December 29, 2009/s/  Arthur
    SternArthur
    Stern

Chairman Emeritus and Director

December 29, 2009/s/  Herman
    BadilloHerman
    Badillo

Director

December 29, 2009/s/  Edward
    CelanoEdward
    Celano

Director

December 29, 2009/s/  Harvey
    LeibowitzHarvey
    Leibowitz

Director

December 29, 2009/s/  David
    SlackmanDavid
    Slackman

Director

December 29, 2009/s/  Louis
    A. PiccoloLouis
    A. Piccolo

Director

December 29, 2009  46




---



##### Table of Contents



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




---



##### Table of Contents



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


F-2Consolidated Balance sheets as of
    September 30, 2009 and 2008


F-4Consolidated Statements of operations for the
    years ended September 30, 2009, 2008 and 2007


F-5Consolidated Statements of stockholders
    equity for the years ended September 30, 2009, 2008 and
    2007


F-6Consolidated Statements of cash flows for the
    years ended September 30, 2009, 2008 and 2007


F-7Notes to consolidated financial statements


F-8




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Consolidated
    Balance Sheets
  September 30,2009


2008ASSETSCash and cash equivalents

$
2.385,000


$
3,623,000Restricted cash


2,130,000



3,047,000Consumer receivables acquired for liquidation (at net realizable
    value)


208,261,000



449,012,000Due from third party collection agencies and attorneys


2,573,000



5,070,000Prepaid and income taxes receivable


47,727,000



Investment in venture


168,000



555,000Furniture and equipment (net of accumulated depreciation of
    $2,758,000 in 2009 and $2,367,000 in 2008)


538,000



762,000Deferred income taxes


24,072,000



15,567,000Other assets


2,902,000



3,500,000Total assets

$
290,756,000


$
481,136,000LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesDebt

$
122,622,000


$
213,485,000Subordinated debt  related party


8,246,000



8,246,000Other liabilities


2,166,000



4,618,000Dividends payable


286,000



571,000Income taxes payable






6,315,000Total liabilities


133,320,000



233,235,000Commitments and contingenciesSTOCKHOLDERS EQUITYPreferred stock, $.01 par value; authorized 5,000,000;
    Issued  noneCommon stock, $.01 par value, authorized
    30,000,000 shares, issued and outstanding
    14,272,357 shares in 2009 and 14,276,158 in 2008


143,000



143,000Additional paid-in capital


70,189,000



69,130,000Retained earnings


87,058,000



178,925,000Accumulated other comprehensive income (loss)


46,000



(297,000
)Total stockholders equity


157,436,000



247,901,000Total liabilities and stockholders equity

$
290,756,000


$
481,136,000    F-4




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Consolidated
    Statements of Operations
  Year Ended September 30,2009


2008


2007Revenues:Finance income, net

$
70,156,000


$
115,295,000


$
138,356,000Other income


134,000



200,000



2,181,00070,290,000



115,495,000



140,537,000General and administrative expenses


25,915,000



29,561,000



25,450,000Interest expense (2009  Related party $515,000;
    2008  Related party  $154,000)


8,452,000



17,881,000



18,246,000Impairments of consumer receivables acquired for liquidation


183,500,000



53,160,000



9,097,000217,867,000



100,602,000



52,793,000(Loss) income before equity in earnings in venture and income
    taxes


(147,577,000
)


14,893,000



87,744,000Equity in earnings in venture


65,000



55,000



225,000(Loss) income before income tax (benefit) expense


(147,512,000
)


14,948,000



87,969,000Income tax (benefit) expense


(56,787,000
)


6,119,000



35,703,000Net (loss) income

$
(90,725,000
)

$
8,829,000


$
52,266,000Basic net (loss) income per share

$
(6.36
)

$
0.62


$
3.79Diluted net (loss) income per share

$
(6.36
)

$
0.61


$
3.56Weighted average shares outstanding:Basic


14,272,425



14,138,650



13,807,838Diluted


14,272,425



14,553,346



14,691,861    F-5




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Consolidated
    Statements of Stockholders Equity
  For the years ended September 30, 2009, 2008 and 2007
   AccumulatedAdditional





OtherCommon Stock


Paid-in


Retained


ComprehensiveShares


Amount


Capital


Earnings


Income (Loss)


TotalBalance, 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










759,000











759,000Dividends














(2,221,000
)






(2,221,000
)Net income














52,266,000







52,266,000Balance, September 30, 2007


13,918,158



139,000



65,030,000



172,366,000







237,535,000Exercise of options


300,000



3,000



422,000











425,000Restricted stock granted


58,000



1,000



(1,000
)










Stock based compensation expense










1,013,000











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










2,666,000











2,666,000Dividends














(2,270,000
)






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


$
157,436,000   Comprehensive
    income (loss) is as follows:
  2009


2008Net (loss) income

$
(90,725,000
)

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


343,000



(297,000
)Comprehensive (loss) income

$
(90,382,000
)

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

$
46,000


$
(297,000
)      F-6




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Consolidated
    Statements of Cash Flows
  Year Ended September 30,2009


2008


2007Cash flows from operating activities:Net (loss) income

$
(90,725,000
)

$
8,829,000


$
52,266,000Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


1,664,000



1,278,000



841,000Deferred income taxes


(8,505,000
)


(2,634,000
)


(4,772,000
)Impairments of consumer receivables acquired for liquidation


183,500,000



53,160,000



9,097,000Stock based compensation


984,000



1,013,000



1,140,000Changes in:Income taxes payable and receivable


(54,042,000
)


(1,846,000
)


(2,216,000
)Due from third party collection agencies and attorneys


2,497,000



(161,000
)


(1,847,000
)Other assets


(655,000
)


(136,000
)


(2,324,000
)Other liabilities


(2,193,000
)


(3,725,000
)


3,390,000Net cash provided by operating activities


32,525,000



55,778,000



55,575,000Cash flows from investing activities:Purchase of consumer receivables acquired for liquidation


(19,552,000
)


(49,886,000
)


(440,895,000
)Principal payments received from collection of consumer
    receivables acquired for liquidation


71,936,000



81,645,000



114,421,000Principal payments received from collections represented by
    sales of consumer receivables acquired for liquidation


5,317,000



11,034,000



29,029,000Effect of foreign exchange on consumer receivables acquired for
    liquidation


(542,000
)


658,000



Cash distribution received from venture


387,000



1,485,000



3,925,000Purchase of other investments










(5,777,000
)Collections on other investments










8,251,000Capital expenditures


(187,000
)


(361,000
)


(163,000
)Net cash provided by (used) in investing activities


57,359,000



44,575,000



(291,209,000
)Cash flows from financing activities:Proceeds from exercise of stock options


1,000



425,000



1,329,000Tax benefit arising from exercise of non-qualified stock options


74,000



2,666,000



759,000Change in restricted cash


917,000



2,647,000



(5,694,000
)Dividends paid


(1,427,000
)


(2,256,000
)


(7,716,000
)(Repayments) borrowings of debt, net


(90,695,000
)


(113,001,000
)


243,655,000Advance under subordinated debt  related party






8,246,000



Net cash (used in) provided by financing activities


(91,130,000
)


(101,273,000
)


232,333,000Net decrease in cash and cash equivalents


(1,246,000
)


(920,000
)


(3,301,000
)Effect of foreign exchange on cash


8,000



18,000



Cash and cash equivalents at beginning of year


3,623,000



4,525,000



7,826,000Cash and cash equivalents at end of year

$
2,385,000


$
3,623,000


$
4,525,000Supplemental disclosure of cash flow information:Cash paid for:Interest (Related Party: 2009  $472,000
                          2008 
    $112,000)

$
9,082,000


$
19,784,000


$
16,644,000Income taxes

$
5,887,000


$
8,282,000


$
41,932,000    F-7




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes
    to Consolidated Financial Statements
 September 30,
    2009 and 2008
  Note A 
    The Company and its Significant Accounting Policies  [1]
    The Company:
      [1A]
    Liquidity:
      [2]
    Principles of consolidation:
   F-8




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note A 
    The
    Company and its Significant Accounting
    Policies  (Continued)  [3]
    Cash and cash equivalents and restricted cash:
          [4]
    Income recognition, Impairments and Accretable yield
    adjustments:
  Income
    Recognition
       F-9




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note A 
    The
    Company and its Significant Accounting
    Policies  (Continued)  
 [4]
    Income recognition, Impairments and Accretable yield
    adjustments:  (Continued)
  Impairments
    and accretable yield adjustments
        
    the type of receivable, the location of the debtor and the
    number of collection agencies previously attempting to collect
    the receivables in the portfolio. We have found that there are
    better states to try to collect receivables and we factor in
    both better and worse states when establishing our initial cash
    flow expectations.
    the average balance of the receivables 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 our law suit strategy and
    thus yield better results over the longer term. As we have
    significant experience with both types of balances, we are able
    to factor these variables into our initial expected cash flows; F-10




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note A 
    The
    Company and its Significant Accounting
    Policies  (Continued)  
 [4]
    Income recognition, Impairments and Accretable yield
    adjustments:  (Continued)
   
    the age of the receivables, the number of days since charge-off,
    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 we
    purchase portfolios of like assets, we accumulate a significant
    historical data base on the tendencies of debtor repayments and
    factor this into our initial expected cash flows;
    our ability to analyze accounts and resell accounts that meet
    our criteria;
    jobs or property of the debtors found within portfolios. With
    our business model, this is of particular importance. Debtors
    with jobs or property are more likely to repay their obligation
    through the lawsuit strategy and, conversely, debtors without
    jobs or property are less likely to repay their obligation. We
    believe that debtors with jobs or property are more likely to
    repay because courts have mandated the debtor must pay the debt.
    Ultimately, the debtor with property will pay to clear title or
    release a lien. We also believe that these debtors generally
    might take longer to repay and that is factored into our initial
    expected cash flows; and
    credit standards of issuer.      24-39 month 18-28 month 130-140%
 F-11




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note A 
    The
    Company and its Significant Accounting
    Policies  (Continued)  [5]
    Commissions and fees:
    [6]
    Furniture, equipment and leasehold improvements:
    [7]
    Income taxes:
    [8]
    Net (loss) income per share:
      2009


2008


2007Weighted


Per





Weighted


Per





Weighted


PerNet


Average


Share


Net


Average


Share


Net


Average


ShareIncome


Shares


Amount


Income


Shares


Amount


Income


Shares


AmountBasic

$
(90,725,000
)


14,272,425


$
(6.36
)

$
8,829,000



14,138,650


$
0.62


$
52,266,000



13,807,838


$
3.79Dilutive effect of stock Options


















414,696











884,023Diluted

$
(90,725,000
)


14,272,425


$
(6.36
)

$
8,829,000



14,553,346


$
0.61


$
52,266,000



14,691,861


$
3.56     [9]
    Use of estimates:
   F-12




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note A 
    The
    Company and its Significant Accounting
    Policies  (Continued)    [10]
    Stock-based compensation:
    [11]
    Impact of Recently Issued Accounting Standards:
  paragraphs 38-76.
       F-13




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note A 
    The
    Company and its Significant Accounting
    Policies  (Continued)  
 [11]
    Impact of Recently Issued Accounting Standards: 
    (Continued)
  and/or
  [12]
    Reclassifications:
    Note B 
    Consumer
    Receivables Acquired For Liquidation      
    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
 September 30,
    2009 and 2008
   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;
    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; F-15




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note B 
    Consumer
    Receivables Acquired For Liquidation 
    (Continued)   
    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, 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


(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.  F-16




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note B 
    Consumer
    Receivables Acquired For Liquidation 
    (Continued)  For the Year Ended September 30, 2008Interest


CostMethod


RecoveryPortfolios


Portfolios


TotalBalance, beginning of period

$
508,515,000


$
37,108,000


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


26,626,000



23,260,000



49,886,000Net cash collections from collection of consumer receivables
    acquired for liquidation(1)


(163,494,000
)


(24,085,000
)


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


(19,545,000
)


(850,000
)


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


(209,518,000
)


209,518,000



Impairments


(53,160,000
)






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






(658,000
)


(658,000
)Finance income recognized(2)


114,046,000



1,249,000



115,295,000Balance, end of period

$
203,470,000


$
245,542,000


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


62.3
%


5.0
%


55.4
%     (1)
    
    The Company acquired the Portfolio Purchase in March 2007.
    During the quarter ending June 30, 2008, the Company
    transferred the carrying value of the Portfolio Purchase to the
    cost recovery method.(2)
    
    Includes $45.3 million derived from fully amortized pools.    September 30, 2010

$
23,518,000September 30, 2011


19,508,000September 30, 2012


15,073,000September 30, 2013


7,761,000September 30, 2014


3,856,000September 30, 2015


885,000September 30, 2016


691,00071,292,000Deferred revenue


(642,000
)Total

$
70,650,000    F-17




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note B 
    Consumer
    Receivables Acquired For Liquidation 
    (Continued)    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   Year EndedSeptember 30,2008Balance at beginning of period, October 1, 2007

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


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


9,569,000Transfer to cost recovery


(57,951,000
)Reclassifications from non-accretable difference (1)


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

$
58,134,000     (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 30,2009


2008


2007Gross collections(1)

$
224,528,000


$
332,711,000


$
398,432,000Commissions and fees(2)


77,119,000



124,737,000



116,626,000Net collections

$
147,409,000


$
207,974,000


$
281,806,000     (1)
    
    Gross collections include: collections from third-party
    collection agencies and attorneys, collections from in-house
    efforts and collections represented by account sales. F-18




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   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    2009


2008Furniture

$
310,000


$
310,000Equipment


2,783,000



2,714,000Software


117,000



Leasehold improvements


86,000



105,0003,296,000



3,129,000Less accumulated depreciation


2,758,000



2,367,000Balance, end of period

$
538,000


$
762,000     Note D 
    Debt
    and Subordinated Debt  Related Party  Credit
    Facility
               F-19




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note D 
    Debt
    and Subordinated Debt  Related
    Party  (Continued)         F-20




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note D 
    Debt
    and Subordinated Debt  Related
    Party  (Continued)    Receivables
    Financing Agreement
               F-21




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note D 
    Debt
    and Subordinated Debt  Related
    Party  (Continued)          Subordinated
    Debt  Related Party
     F-22




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note D 
    Debt
    and Subordinated Debt  Related
    Party  (Continued)        2009Stated


AverageInterest


Interest2009


2008


Rate


RateCredit Facility

$
18,301,000


$
84,934,000



5.50
%


4.47
%Receivables Financing Agreement


104,321,000



128,551,000



3.76
%


4.82
%Total debt

$
122,622,000


$
213,485,000



n/a



4.72
%Subordinated debt  related party

$
8,246,000



8,246,000



6.25
%


6.25
%    Note E 
    Other
    Liabilities    2009


2008Accounts payable and accrued expenses

$
1,425,000


$
3,145,000Accrued interest payable


504,000



1,135,000Other


237,000



338,000Total other liabilities

$
2,166,000


$
4,618,000   F-23




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note F 
    Income
    Taxes    2009


2008


2007Current:Federal

$
(47,062,000
)

$
6,567,000


$
30,476,000State


(1,220,000
)


2,152,000



9,999,000Foreign






34,000



(48,282,00
)


8,753,000



40,475,000Deferred:Federal


1,092,000



(1,987,000
)


(3,593,000
)State


(9,597,000
)


(647,000
)


(1,179,000
)(8,505,000
)


(2,634,000
)


(4,772,000
)Provision for income taxes

$
(56,787,000
)

$
6,119,000


$
35,703,000     2009


2008


2007Statutory federal income tax rate


35.0
%


35.0
%


35.0
%State income tax, net of federal benefit


5.8



5.8



5.8Deferred tax valuation allowance


(2.1
)






Other


(0.2
)


0.1



(0.2
)Effective income tax rate


38.5
%


40.9
%


40.6
%     September 30,


September 30,2009


2008Deferred revenue

$
221,000



534,000Impairments


26,960,000



13,930,000Compensation expense


1,273,000



880,000Other


26,000



223,000Deferred income taxes


28,480,000



15,567,000Deferred tax valuation allowance


(4,408,000
)


Deferred income taxes

$
24,072,000


$
15,567,000      F-24




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note F 
    Income
    Taxes  (Continued)        Note G 
    Commitments
    and Contingencies  Employment
    Agreements
    Leases
   F-25




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note G 
    Commitments
    and Contingencies  (Continued)    YearEndingSeptember 30,2010

$
320,0002011


13,0002012


2013


2014


$
333,000     Contingencies
          Note H 
    Concentrations   F-26




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note I 
    Stock
    Option Plans  Equity
    Compensation Plan
          2002
    Stock Option Plan
        1995
    Stock Option Plan
   F-27




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note I 
    Stock
    Option Plans  (Continued)          Year Ended September 30,2009


2008


2007Weighted





Weighted





WeightedAverage





Average





AverageExercise





Exercise





ExerciseShares


Price


Shares


Price


Shares


PriceOutstanding options at the beginning of year


1,037,438


$
11.69



1,337,438


$
9.39



1,414,439


$
9.45Options granted


122,000



2.95











18,000



28.75Options cancelled


(1,000
)


28.75















Options exercised


(533
)


2.95



(300,000
)


1.42



(95,001
)


13.99Outstanding options at the end of year


1,157,905


$
10.76



1,037,438


$
11.69



1,337,438


$
9.39Exercisable options at the end of year


1,081,912


$
11.31



1,031,438


$
11.59



1,325,438


$
9.21          F-28




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note I 
    Stock
    Option Plans  (Continued)    Options Outstanding


Options ExercisableWeightedAverage


Weighted





WeightedRemaining


Average





AverageRange of

Number


Contractual


Exercise


Number


ExerciseExercise Price

Outstanding


Life (In Years)


Price


Exercisable


Price$ 0.8100 -  $ 2.8750


300,000



1.0


$
2.63



300,000


$
2.63$ 2.8751 - $ 5.7500


228,134



6.6



3.78



152,141



4.19$ 5.7501 - $ 8.6250


12,000



2.1



5.96



12,000



5.96$14.3751 - $17.2500


218,611



4.2



15.04



218,611



15.04$17.2501 - $20.1250


382,160



5.0



18.22



382,160



18.22$25.8751 - $28.7500


17,000



7.2



28.75



17,000



28.751,157,905



4.1


$
10.76



1,081,912


$
11.31     Weighted





WeightedYear Ended


Average


Year Ended


AverageSeptember 30, 2009


Grant Date


September 30, 2008


Grant DateShares


Fair Value


Shares


Fair ValueUnvested at the beginning of period


80,667


$
22.26



45,333


$
28.75Awards granted


0



0.00



58,000



19.73Vested


(40,995
)


24.29



(22,666
)


28.75Forfeited


(4,334
)


21.81



0



0.00Unvested at the end of period


35,338


$
19.73



80,667


$
22.26       Note J 
    Stockholders
    Equity     F-29




---



##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note J 
    Stockholders
    Equity  (Continued)    Note K 
    Retirement
    Plan    Note L 
    Fair
    Value of Financial Instruments        Note M 
    Related
    Party Transaction   F-30




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   Note N 
    Summarized
    Quarterly Data (unaudited)  First


Second


Third


Fourth


FullQuarter


Quarter


Quarter


Quarter


Year2009Total revenue

$
18,448,000


$
18,126,000


$
17,238,000


$
16,478,000


$
70,290,000(Loss) income before income taxes


(13,147,000
)


(8,674,000
)


2,491,000



(128,182,000
)


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


(7,837,000
)


(5,168,000
)


1,478,000



(79,198,000
)


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

$
(0.55
)

$
(0.36
)

$
0.10


$
(5.55
)

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

$
(0.55
)

$
(0.36
)

$
0.10


$
(5.55
)

$
(6.36
)2008Total revenue

$
34,275,000


$
33,882,000


$
23,572,000


$
23,766,000


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


22,452,000



(12,954,000
)


4,102,000



1,348,000



14,948,000Net income (loss)


13,314,000



(7,707,000
)


2,440,000



782,000



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

$
0.96


$
(0.54
)

$
0.17


$
0.05


$
0.62Diluted net income (loss) per share

$
0.90


$
(0.54
)

$
0.17


$
0.05


$
0.61     *
    
    Due to rounding the sum of quarterly totals for earnings per
    share may not add to the yearly total.    Note O 
    Subsequent
    Events   F-31




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##### Table of Contents



ASTA
    FUNDING, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 September 30,
    2009 and 2008
   NOTE O 
    Subsequent
    Events  (Continued)       F-32