##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the quarterly period ended June 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the transition period from to
 Commission file number: 0-26906
 ASTA FUNDING, INC.
  DELAWARE
    
    22-3388607(State or other jurisdiction
    
    (IRS Employerof incorporation or organization)
    
    Identification No.)210 SYLVAN AVE., ENGLEWOOD CLIFFS, NEW JERSEY
    
    07632(Address of principal executive offices)
    
    (Zip Code)
   þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ




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##### 



Part I. Financial Information


3Item 1. Condensed Consolidated Financial Statements


3Condensed
Consolidated Balance Sheets as of June 30, 2008
(unaudited) and September 30, 2007 (unaudited)


3Condensed Consolidated Statements of Operations for the nine and three month periods ended
June 30, 2008 and 2007 (unaudited)


4Condensed Consolidated Statement of Stockholders Equity for the nine month period ending
June 30, 2008 (unaudited)


5Condensed Consolidated Statements of Cash Flows for the nine month periods ended June 30,
2008 and 2007 (unaudited)


6Notes to Condensed Consolidated Financial Statements (unaudited)


7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations


27Item 3. Quantitative and Qualitative Disclosures about Market Risk


40Item 4. Controls and Procedures


40Part II. Other Information


41Item 1. Legal Proceedings


41Item 1A Risk Factors


41Item 2. Unregistered Sale of Equity Securities and Use of Proceeds


43Item 3. Defaults Upon Senior Securities


43Item 4. Submission of Matters to a Vote of Security Holders


43Item 5. Other Information


43Item 6. Exhibits


43Signatures


44EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
  2




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##### Table of Contents



June 30,
    
    
    September 30,2008
    
    
    2007(Unaudited)
    
    
    
    (Unaudited)ASSETSCash
    
    $
    2,817,000
    
    
    $
    4,525,000Restricted cash
    
    
    3,776,000
    
    
    
    5,694,000Consumer receivables acquired for liquidation, (at net realizable value)
    
    
    487,004,000
    
    
    
    545,623,000Due from third party collection agencies and attorneys
    
    
    5,106,000
    
    
    
    4,909,000Investment in venture
    
    
    663,000
    
    
    
    2,040,000Furniture and equipment, net
    
    
    823,000
    
    
    
    793,000Deferred income taxes
    
    
    12,238,000
    
    
    
    12,349,000Other assets and other investments
    
    
    4,111,000
    
    
    
    4,323,000Total assets
    
    $
    516,538,000
    
    
    $
    580,256,000LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesDebt
    
    $
    251,958,000
    
    
    $
    326,466,000Subordinated debt  related party
    
    
    8,270,000
    
    
    
    Other liabilities
    
    
    4,346,000
    
    
    
    7,537,000Dividends payable
    
    
    571,000
    
    
    
    557,000Income taxes payable
    
    
    3,206,000
    
    
    
    8,161,000Total liabilities
    
    
    268,351,000
    
    
    
    342,721,000Stockholders EquityPreferred stock, $.01 par value; authorized 5,000,000; issued and
outstanding  none
    
    
    
    
    
    
    Common stock, $.01 par value; authorized 30,000,000 shares; issued
and outstanding  14,276,158 at June 30, 2008 and 13,918,158 at
September 30, 2007
    
    
    143,000
    
    
    
    139,000Additional paid-in capital
    
    
    68,723,000
    
    
    
    65,030,000Retained earnings
    
    
    178,714,000
    
    
    
    172,366,000Accumulated other comprehensive income
    
    
    607,000
    
    
    
    Total stockholders equity
    
    
    248,187,000
    
    
    
    237,535,000Total liabilities and stockholders equity
    
    $
    516,538,000
    
    
    $
    580,256,000
  3




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Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJune 30, 2008
    
    
    June 30, 2007
    
    
    June 30, 2008
    
    
    June 30, 2007Revenues:Finance income, net
    
    $
    23,560,000
    
    
    $
    38,845,000
    
    
    $
    91,573,000
    
    
    $
    96,139,000Other income
    
    
    12,000
    
    
    
    43,000
    
    
    
    156,000
    
    
    
    502,00023,572,000
    
    
    
    38,888,000
    
    
    
    91,729,000
    
    
    
    96,641,000Expenses:General and administrative
    
    
    7,615,000
    
    
    
    6,510,000
    
    
    
    20,544,000
    
    
    
    17,388,000Interest
    
    
    3,643,000
    
    
    
    6,651,000
    
    
    
    14,295,000
    
    
    
    11,949,000Impairments
    
    
    8,153,000
    
    
    
    
    
    
    
    43,153,000
    
    
    
    2,412,00019,411,000
    
    
    
    13,161,000
    
    
    
    77,992,000
    
    
    
    31,749,000Income before equity in (loss)
earnings in venture and income
taxes
    
    
    4,161,000
    
    
    
    25,727,000
    
    
    
    13,737,000
    
    
    
    64,892,000Equity in (loss) earnings of venture
    
    
    (59,000
    )
    
    
    50,000
    
    
    
    (137,000
    )
    
    
    1,025,000Income tax expense
    
    
    1,662,000
    
    
    
    10,469,000
    
    
    
    5,553000
    
    
    
    26,731,000Net income
    
    $
    2,440,000
    
    
    $
    15,308,000
    
    
    $
    8,047,000
    
    
    $
    39,186,000Net income per share:Basic
    
    $
    0.17
    
    
    $
    1.10
    
    
    $
    0.57
    
    
    $
    2.84Diluted
    
    $
    0.17
    
    
    $
    1.03
    
    
    $
    0.55
    
    
    $
    2.67Weighted average number of shares
outstanding:Basic
    
    
    14,276,158
    
    
    
    13,907,554
    
    
    
    14,111,954
    
    
    
    13,794,877Diluted
    
    
    14,535,548
    
    
    
    14,819,926
    
    
    
    14,642,467
    
    
    
    14,677,258
  4




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##### Table of Contents



Additional

    
    
    
    
    
    AccumulatedCommon Stock
    
    
    Paid-In
    
    
    Retained
    
    
    Other ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    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
    
    
    
    
    
    
    
    
    
    
    731,000
    
    
    
    
    
    
    
    
    
    
    
    731,000Excess tax benefit
arising from exercise
of non-qualified stock
options and vesting of
restricted stock
    
    
    
    
    
    
    
    
    
    
    2,541,000
    
    
    
    
    
    
    
    
    
    
    
    2,541,000Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,699,000
    )
    
    
    
    
    
    
    (1,699,000
    )Other comprehensive
income (net of $413,000
of tax)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    607,000
    
    
    
    607,000Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,047,000
    
    
    
    
    
    
    
    8,047,000Balance, June 30, 2008
    
    
    14,276,158
    
    
    $
    143,000
    
    
    $
    68,723,000
    
    
    $
    178,714,000
    
    
    $
    607,000
    
    
    $
    248,187,000
  Net income
    
    $
    8,047,000Other comprehensive income, net of tax
    
    
    607,000Comprehensive income
    
    $
    8,654,000
  5




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##### Table of Contents



Nine Months Ended
    
    
    Nine Months EndedJune 30, 2008
    
    
    June 30, 2007Cash flows from operating activities:Net income
    
    $
    8,047,000
    
    
    $
    39,186,000Adjustments to reconcile net income to net cash provided by operating
activities:Depreciation and amortization
    
    
    915,000
    
    
    
    439,000Deferred income taxes
    
    
    111,000
    
    
    
    (4,999,000
    )Impairments of consumer receivables acquired for liquidation
    
    
    43,153,000
    
    
    
    2,412,000Stock based compensation
    
    
    731,000
    
    
    
    953,000Other
    
    
    
    
    
    
    (209,000
    )Changes in:Income taxes payable
    
    
    (4,955,000
    )
    
    
    2,369,000Due from third party collection agencies and attorneys
    
    
    (197,000
    )
    
    
    (2,007,000
    )Other assets
    
    
    (478,000
    )
    
    
    (17,000
    )Other investments
    
    
    
    
    
    
    (2,471,000
    )Other liabilities
    
    
    (2,695,000
    )
    
    
    (531,000
    )Net cash provided by operating activities
    
    
    44,632,000
    
    
    
    35,125,000Cash flows from investing activities:Purchase of consumer receivables acquired for liquidation
    
    
    (48,864,000
    )
    
    
    (402,316,000
    )Principal collected on receivables acquired for liquidation
    
    
    56,757,000
    
    
    
    94,921,000Principal collected on receivable accounts represented by account sales
    
    
    8,355,000
    
    
    
    22,555,000Effect of foreign exchange on receivable accounts acquired for
liquidation
    
    
    (782,000
    )
    
    
    Cash distribution from venture
    
    
    1,240,000
    
    
    
    3,475,000Loss (earnings) in venture
    
    
    137,000
    
    
    
    (1,025,000
    )Purchase of other investments
    
    
    
    
    
    
    (5,777,000
    )Collections on other investments
    
    
    
    
    
    
    9,357,000Capital expenditures
    
    
    (296,000
    )
    
    
    (155,000
    )Net cash provided by (used in) investing activities
    
    
    16,547,000
    
    
    
    (278,965,000
    )Cash flows from financing activities:Proceeds from exercise of options
    
    
    425,000
    
    
    
    1,254,000Excess tax benefit arising from exercise of non-qualified options and
vesting of restricted stock
    
    
    2,541,000
    
    
    
    680,000Change in restricted cash
    
    
    1,918,000
    
    
    
    Dividends paid
    
    
    (1,685,000
    )
    
    
    (7,159,000
    )(Payments) advances under lines of credit, net
    
    
    (74,508,000
    )
    
    
    261,877,000Advance under subordinated debt  related party
    
    
    8,270,000
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (62,929,000
    )
    
    
    256,652,000(Decrease) increase in cash
    
    
    (1,750,000
    )
    
    
    12,812,000Effect of foreign exchange on cash
    
    
    42,000
    
    
    
    Cash at the beginning of period
    
    
    4,525,000
    
    
    
    7,826,000Cash at end of period
    
    $
    2,817,000
    
    
    $
    20,638,000Supplemental disclosure of cash flow information:Cash paid during the periodInterest
    
    $
    14,657,000
    
    
    $
    9,121,000Income taxes
    
    $
    8,233,000
    
    
    $
    28,655,000
  6




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ASTA FUNDING, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 Note 1: Business and Basis of Presentation
       Recent Accounting Pronouncements
 Accounting for Financial Guarantee Insurance Contractsan interpretation of FASB Statement No. 60
   7




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ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (continued)  (Unaudited)
 Note 1: Business and Basis of Presentation (continued)
 Disclosures about Derivative Instruments
and Hedging Activitiesan amendment of FASB Statement No. 133 Accounting for Derivative Instruments and Hedging Activities
 Share-Based Payment
 Application of Accounting
Principles to Loan Commitments Accounting for Derivative Instruments and Hedging
Activities Accounting for Servicing of Financial Assets The Fair Value Option for Financial Assets and Financial Liabilities,
 The Fair Value Option for Financial
Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115
 8




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ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 1: Business and Basis of Presentation (continued)
 Fair Value Measurements
 Reclassification
  Note 2: Principles of Consolidation
  Note 3: Consumer Receivables Acquired for Liquidation
    9




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ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 3: Consumer Receivables Acquired for Liquidation  ( continued )
  
    
    the interest method; or
    
    the cost recovery method.
    
    
    Same issuer/originator;
    
    Same underlying credit quality;
    
    Similar geographic distribution of the accounts;
    
    Similar age of the receivable; and
    
    Same type of asset class (credit cards, telecom etc.)
  
    
    The number of collection agencies previously attempting to collect the receivables in the portfolio;
    
    The average balance of the receivables, as higher balances might be more difficult to collect while
low balances might not be cost effective to collect;
    
    The age of the receivables, as older receivables might be more difficult to collect or might be
less cost effective. On the other hand, the passage of time, in certain circumstances, might result
in higher collections due to changing life events of some individual debtors;
    
    Past history of performance of similar assets;
    
    Number of days since charge-off;
    
    Payments made since charge-off;
    
    The credit originator and its credit guidelines;
    
    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;
    
    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 customer statements from the original issuer.
 10




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ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 3: Consumer Receivables Acquired for Liquidation  ( continued )
   11




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ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 3: Consumer Receivables Acquired for Liquidation  ( continued )
  For The Nine Months Ended June 30, 2008CostInterest
    
    
    RecoveryMethod
    
    
    Method
    
    
    TotalBalance, beginning of period
    
    $
    508,515,000
    
    
    $
    37,108,000
    
    
    $
    545,623,000Acquisitions of receivable portfolios, net
    
    
    25,622,000
    
    
    
    23,242,000
    
    
    
    48,864,000Net cash collections from collections of
consumer receivables acquired for
liquidation (1)
    
    
    (130,572,000
    )
    
    
    (10,633,000
    )
    
    
    (141,205,000
    )Net cash collections represented by
accounts sales of consumer receivables
acquired for liquidation
    
    
    (15,480,000
    )
    
    
    
    
    
    
    (15,480,000
    )Transfer to cost recovery (2)
    
    
    (208,693,000
    )
    
    
    208,693,000
    
    
    
    Impairments
    
    
    (43,153,000
    )
    
    
    
    
    
    
    (43,153,000
    )Effect of foreign currency translation
    
    
    
    
    
    
    782,000
    
    
    
    782,000Finance income recognized (3)
    
    
    90,624,000
    
    
    
    949,000
    
    
    
    91,573,000Balance, end of period
    
    $
    226,863,000
    
    
    $
    260,141,000
    
    
    $
    487,004,000Revenue as a percentage of collections
    
    
    62.0
    %
    
    
    8.9
    %
    
    
    58.4
    %
 
 (1)
    
    Includes the put back of a portfolio purchased and returned to the seller
in the amount of $2.8 million in the first quarter of fiscal year 2008.(2)
    
    The Company purchased $6.9 billion in face value receivables for a
purchase price of $300 million in March 2007 (the Portfolio Purchase).
During the quarter ending June 30, 2008, the Company transferred the
carrying value of the Portfolio Purchase from the interest method to the
cost recovery method.(3)
    
    Includes $34.2 million derived from fully amortized interest method pools. 12




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ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 3: Consumer Receivables Acquired for Liquidation  ( continued )
 For The Nine Months Ended June 30, 2007CostInterest
    
    
    RecoveryMethod
    
    
    Method
    
    
    TotalBalance, beginning of period
    
    $
    256,199,000
    
    
    $
    1,076,000
    
    
    $
    257,275,000Acquisitions of receivable portfolios, net
    
    
    356,884,000
    
    
    
    45,432,000
    
    
    
    402,316,000Net cash collections from collections of
consumer receivables acquired for
liquidation (1)
    
    
    (164,829,000
    )
    
    
    (8,020,000
    )
    
    
    (172,849,000
    )Net cash collections represented by
account sales of consumer receivables
acquired for liquidation
    
    
    (36,519,000
    )
    
    
    (4,247,000
    )
    
    
    (40,766,000
    )Transfer to cost recovery (2)
    
    
    (4,478,000
    )
    
    
    4,478,000
    
    
    
    Impairments
    
    
    (2,412,000
    )
    
    
    
    
    
    
    (2,412,000
    )Finance income recognized (3)
    
    
    94,168,000
    
    
    
    1,971,000
    
    
    
    96,139,000Balance, end of period
    
    $
    499,013,000
    
    
    $
    40,690,000
    
    
    $
    539,703,000Revenue as a percentage of collections
    
    
    46.8
    %
    
    
    16.1
    %
    
    
    45.0
    %
 
 (1)
    
    Includes put backs of purchased accounts returned to the seller totaling $5.5 million.(2)
    
    Represents a portfolio acquired during the three months ended December 31, 2006 which
the Company returned to the seller.on July 31, 2007.(3)
    
    Includes $11.1 million derived from fully amortized interest method pools. For The Three Months Ended June 30, 2008CostInterest
    
    
    RecoveryMethod
    
    
    Method
    
    
    TotalBalance, beginning of period
    
    $
    460,623,000
    
    
    $
    51,633,000
    
    
    $
    512,256,000Acquisitions of receivable portfolios, net
    
    
    5,467,000
    
    
    
    2,090,000
    
    
    
    7,557,000Net cash collections from collections of
consumer receivables acquired for
liquidation
    
    
    (42,869,000
    )
    
    
    (3,303,000
    )
    
    
    (46,172,000
    )Net cash collections represented by
account sales of consumer receivables
acquired for liquidation
    
    
    (2,826,000
    )
    
    
    
    
    
    
    (2,826,000
    )Transfer to cost recovery (1)
    
    
    (208,693,000
    )
    
    
    208,693,000Impairments
    
    
    (8,153,000
    )
    
    
    
    
    
    
    (8,153,000
    )Effect of foreign currency translation
    
    
    
    
    
    
    782,000
    
    
    
    782,000Finance income recognized (2)
    
    
    23,314,000
    
    
    
    246,000
    
    
    
    23,560,000Balance, end of period
    
    $
    226,863,000
    
    
    $
    260,141,000
    
    
    $
    487,004,000Revenue as a percentage of collections
    
    
    51.0
    %
    
    
    7.4
    %
    
    
    48.1
    %
 
 (1)
    
    Represents the transfer of the carrying value of the Portfolio Purchase
from the interest method to the cost recovery method.(2)
    
    Includes $10.4 million derived from fully amortized interest method pools. 13




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ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 3: Consumer Receivables Acquired for Liquidation  ( continued)
 For The Three Months Ended June 30, 2007CostInterest
    
    
    RecoveryMethod
    
    
    Method
    
    
    TotalBalance, beginning of period
    
    $
    522,345,000
    
    
    $
    41,389,0000
    
    
    $
    563,734,000Acquisitions of receivable portfolios, net
    
    
    11,086,000
    
    
    
    4,548,000
    
    
    
    15,634,000Net cash collections from collections of
consumer receivables acquired for
liquidation (1)
    
    
    (62,814,000
    )
    
    
    (5,931,000
    )
    
    
    (68,745,000
    )Net cash collections represented by
account sales of consumer receivables
acquired for liquidation
    
    
    (9,765,000
    )
    
    
    
    
    
    
    (9,765,000
    )Finance income recognized (2)
    
    
    38,161,000
    
    
    
    684,000
    
    
    
    38,845,000Balance, end of period
    
    $
    499,013,000
    
    
    $
    40,690,000
    
    
    $
    539,703,000Revenue as a percentage of collections
    
    
    52.6
    %
    
    
    11.5
    %
    
    
    49.5
    %
 
 (1)
    
    Includes put backs of purchased accounts returned to the seller totaling $5.5 million.(2)
    
    Includes $5.6 million derived from fully amortized interest method pools.  September 30, 2008 (three months ending)
    
    $
    29,680,000September 30, 2009
    
    
    94,269,000September 30, 2010
    
    
    71,763,000September 30, 2011
    
    
    28,726,000September 30, 2012
    
    
    6,920,000September 30, 2013
    
    
    392,000231,750,000Cash collections in advance of projected amounts (deferred revenue)
    
    
    (4,887,000
    )Total
    
    $
    226,863,000
 14




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##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 3: Consumer Receivables Acquired for Liquidation  ( continued )
  Nine Months
    
    
    Nine MonthsEnded
    
    
    EndedJune 30, 2008
    
    
    June 30, 2007Balance at beginning of period
    
    $
    176,615,000
    
    
    $
    148,900,000Income recognized on finance receivables, net
    
    
    (67,337,000
    )
    
    
    (94,168,000
    )Additions representing expected revenue from purchases
    
    
    9,237,000
    
    
    
    135,224,000Transfers to cost recovery (1)
    
    
    (100,475,000
    )
    
    
    Reclassifications from nonaccretable difference
    
    
    51,530,000
    
    
    
    18,754,000Balance at end of period
    
    $
    69,570,000
    
    
    $
    208,710,000
 Three Months
    
    
    Three MonthsEnded
    
    
    EndedJune 30, 2008
    
    
    June 30, 2007Balance at beginning of period
    
    $
    189,434,000
    
    
    $
    231,971,000Income recognized on finance receivables, net
    
    
    (20,289,000
    )
    
    
    (38,161,000
    )Additions representing expected revenue from purchases
    
    
    1,915,000
    
    
    
    3,654,000Transfers to cost recovery (1)
    
    
    (100,475,000
    )
    
    
    Reclassifications from nonaccretable difference
    
    
    (1,015,000
    )
    
    
    11,246,000Balance at end of period
    
    $
    69,570,000
    
    
    $
    208,710,000
 
 (1)
    
    Represents the remaining finance income expected on the Portfolio Purchase which was
transferred from the interest method to the cost recovery method during the quarter ended June 30,
2008.   For The Nine Months Ended June 30,2008
    
    
    2007Gross collections (1)
    
    $
    254,833,000
    
    
    $
    304,692,000Commissions and fees (2)
    
    
    98,148,000
    
    
    
    91,077,000Net collections
    
    $
    156,685,000
    
    
    $
    213,615,000
 15




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##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 3: Consumer Receivables Acquired for Liquidation  ( continued )
 For The Three Months Ended June 30,2008
    
    
    2007Gross collections (1)
    
    $
    78,145,000
    
    
    $
    111,877,000Commissions and fees (2)
    
    
    29,147,000
    
    
    
    33,367,000Net collections
    
    $
    48,998,000
    
    
    $
    78,510,000
 
 (1)
    
    Gross collections include: collections from third-party collection
agencies and attorneys, collections from our in-house efforts and
collections represented by account sales. In addition, 2007 includes
put backs of purchased accounts returned to the seller totaling $5.5
million in 2007.(2)
    
    Commissions and fees are the contractual commission earned by third
party collection agencies and attorneys, and direct costs associated
with the collection effort- generally court costs. Note 4: Acquisition and Investment in Venture
   Note 5: Furniture and Equipment
  June 30,
    
    
    September 30,2008
    
    
    2007Furniture
    
    $
    310,000
    
    
    $
    307,000Leasehold improvements
    
    
    105,000
    
    
    
    Equipment
    
    
    2,681,000
    
    
    
    2,534,0003,096,000
    
    
    
    2,841,000Less accumulated depreciation
    
    
    2,273,000
    
    
    
    2,048,000Balance, end of period
    
    $
    823,000
    
    
    $
    793,000
 Note 6: Debt
 
 16




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ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 6: Debt  ( continued )
   ,
     17




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##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 6: Debt  ( continued )
   Note 7: Commitments and Contingencies
 Employment Agreements
        18




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##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 7: Commitments and Contingencies  (continued)
 Leases
  Litigation
  Note 8: Income Recognition, Impairments and Accretable Yield Adjustments
 Income Recognition
   19




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##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 8: 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 good and bad states when
establishing our initial cash flow expectations.
    
    the average balance of the receivables influence our analysis in that
lower average balance portfolios tend to be more collectible in the
short-term and higher average balance portfolios are more suitable for
our 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;
    
    the age of the receivables, the number of days since charge-off, the
payments, if any, since charge-off, and the credit guidelines of the
credit originator also represent factors taken into consideration in
our estimation process since, for example, older receivables might be
more difficult to collect in amount and/or require more time to
collect;
    
    past history and performance of similar assets acquired. As we purchase
portfolios of like assets, we accumulate a significant historical data
base on the tendencies of debtor repayments and factor this into our
initial expected cash flows;
    
    our ability to analyze accounts and resell accounts that meet our criteria;
    
    Jobs or property of the debtors found within portfolios. With our business
model, this is of particular importance. Debtors with jobs or property are
more likely to repay their obligation through the suit strategy and,
conversely, debtors without jobs or property are less likely to repay
their obligation. While we believe that debtors with jobs or property are
more likely to repay, we also believe that these debtors generally might
take longer to repay and that is factored into our initial expected cash
flows.
 20




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##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 8: Income Recognition, Impairments and Accretable Yield Adjustments (continued)
    Note 9: Income Taxes
  21




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ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 10: Net Income Per Share
   Nine Months Ended June 30,2008
    
    
    2007Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedNet
    
    
    Average
    
    
    Per Share
    
    
    Net
    
    
    Average
    
    
    Per ShareIncome
    
    
    Shares
    
    
    Amount
    
    
    Income
    
    
    Shares
    
    
    AmountBasic
    
    $
    8,047,000
    
    
    
    14,111,954
    
    
    $
    0.57
    
    
    $
    39,186,000
    
    
    
    13,794,877
    
    
    $
    2.84Effect of Dilutive
Stock
    
    
    
    
    
    
    530,513
    
    
    
    
    
    
    
    
    
    
    
    882,381Diluted
    
    $
    8,047,000
    
    
    
    14,642,467
    
    
    $
    0.55
    
    
    $
    39,186,000
    
    
    
    14,677,258
    
    
    $
    2.67
  Three Months Ended June 30,2008
    
    
    2007Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedNet
    
    
    Average
    
    
    Per Share
    
    
    Net
    
    
    Average
    
    
    Per ShareIncome
    
    
    Shares
    
    
    Amount
    
    
    Income
    
    
    Shares
    
    
    AmountBasic
    
    $
    2,440,000
    
    
    
    14,276,158
    
    
    $
    0.17
    
    
    $
    15,308,000
    
    
    
    13,907,554
    
    
    $
    1.10Effect of Dilutive
Stock
    
    
    
    
    
    
    259,390
    
    
    
    
    
    
    
    
    
    
    
    912,372Diluted
    
    $
    2,440,000
    
    
    
    14,535,548
    
    
    $
    0.17
    
    
    $
    15,308,000
    
    
    
    14,819,926
    
    
    $
    1.03
  Note 11: Stock-Based Compensation
 Share-Based Payment (SFAS 123R). SFAS 123R,
   22




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ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 11: Stock-based Compensation (continued)
    Risk-free interest rate
    
    
    4.94
    %Expected term (years)
    
    
    10.0Expected volatility
    
    
    36.3
    %Dividend yield
    
    
    0.47
    %
 Note 12: Stock Option Plans
 Equity Compensation Plan
     23




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ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 12: Stock Option Plans (continued)
 2002 Stock Option Plan
    1995 Stock Option Plan
    24




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ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Note 12: Stock Option Plans  ( continued )
  Nine Months Ended June 30,2008
    
    
    2007Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding options at the beginning of period
    
    
    1,337,438
    
    
    $
    9.39
    
    
    
    1,414,439
    
    
    $
    9.45Options granted
    
    
    
    
    
    
    
    
    
    
    18,000
    
    
    
    28.75Options exercised
    
    
    (300,000
    )
    
    
    1.42
    
    
    
    (90,001
    )
    
    
    13.94Outstanding options at the end of period
    
    
    1,037,438
    
    
    $
    11.69
    
    
    
    1,342,438
    
    
    $
    9.41Exercisable options at the end of period
    
    
    1,031,438
    
    
    $
    11.59
    
    
    
    1,330,438
    
    
    $
    9.23
 Three Months Ended June 30,2008
    
    
    2007Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding options at the beginning of period
    
    
    1,037,438
    
    
    $
    11.69
    
    
    
    1,352,438
    
    
    $
    9.37Options granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Options exercised
    
    
    
    
    
    
    
    
    
    
    (10,000
    )
    
    
    4.73Outstanding options at the end of period
    
    
    1,037,438
    
    
    $
    11.69
    
    
    
    1,342,438
    
    
    $
    9.41Exercisable options at the end of period
    
    
    1,031,438
    
    
    $
    11.59
    
    
    
    1,330,438
    
    
    $
    9.23
   25




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ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Note 12: Stock Option Plans  ( continued )
  2008
    
    
    2007Nine months ended June 30
    
    $
    6,281,000
    
    
    $
    2,034,000Three months ended June 30
    
    $
    
    
    
    $
    355,000
  Options Outstanding
    
    Options ExercisableWeightedAverage
    
    Weighted
    
    
    
    
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    AverageNumber
    
    Contractual
    
    Exercise
    
    Number
    
    ExerciseRange Of Exercise Price
    
    Outstanding
    
    Life (In Years)
    
    Price
    
    Exercisable
    
    Price$2.6250    $2.8750
    
    
    300,000
    
    
    
    2.2
    
    
    $
    2.63
    
    
    
    300,000
    
    
    $
    2.63$2.8751    $5.7500
    
    
    106,667
    
    
    
    4.3
    
    
    $
    4.73
    
    
    
    106,667
    
    
    $
    4.73$5.7501    $8.6250
    
    
    12,000
    
    
    
    3.4
    
    
    $
    5.96
    
    
    
    12,000
    
    
    $
    5.96$14.3751  $17.2500
    
    
    218,611
    
    
    
    5.4
    
    
    $
    15.04
    
    
    
    218,611
    
    
    $
    15.04$17.2501  $20.1250
    
    
    382,160
    
    
    
    6.3
    
    
    $
    18.22
    
    
    
    382,160
    
    
    $
    18.22$28.7500  $28.7500
    
    
    18,000
    
    
    
    8.5
    
    
    $
    28.75
    
    
    
    12,000
    
    
    $
    28.751,037,438
    
    
    
    4.7
    
    
    $
    11.69
    
    
    
    1,031,438
    
    
    $
    11.59
  WeightedNine Months
    
    
    AverageEnded
    
    
    Grant DateJune 30, 2008
    
    
    Fair ValueUnvested at beginning of period
    
    
    45,333
    
    
    $
    28.75Awards granted
    
    
    58,000
    
    
    $
    19.73Vested
    
    
    (22,666
    )
    
    $
    28.75Forfeited
    
    
    0
    
    
    $
    0.00Unvested at end of period
    
    
    80,667
    
    
    $
    22.26
  Note 13: Stockholders Equity
  26




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 OVERVIEW
  
    
    charged-off receivables accounts that have been written-off by the
originators and may have been previously serviced by collection
agencies;
    
    semi-performing receivables accounts where the debtor is currently
making partial or irregular monthly payments, but the accounts may
have been written-off by the originators; and
    
    performing receivables accounts where the debtor is making regular
monthly payments that may or may not have been delinquent in the past.
   
    
    our relationships with industry participants, collection agencies, investors and our financing sources;
    
    brokers who specialize in the sale of consumer receivable portfolios; and
    
    other sources.
 Caution Regarding Forward Looking Statements
  www.astafunding.com. www.sec.gov
 Critical Accounting Policies
  27




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##### Table of Contents




    
    the interest method; or
    
    the cost recovery method.
    
    
    same issuer/originator;
    
    same underlying credit quality;
    
    similar geographic distribution of the accounts;
    
    similar age of the receivables; and
    
    same type of asset class (credit cards, telecom etc.)
  
    
    the number of collection agencies previously attempting to collect the receivables in the portfolio;
    
    the average balance of the receivables, as higher balances might be more difficult to collect while
low balances might not be cost effective to collect;
 28




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##### Table of Contents




    
    the age of the receivables, as older receivables might be more difficult to collect or might be
less cost effective. On the other hand, the passage of time, in certain circumstances, might result
in higher collections due to changing life events of some individual debtors;
    
    past history of performance of similar assets;
    
    number of days since charge-off;
    
    payments made since charge-off;
    
    the credit originator and its credit guidelines;
    
    our ability to analyze accounts and resell accounts that meet our criteria for resale;
    
    the locations of the debtors, as there are states that are a more favorable environment 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-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.
     Results of Operations
 The nine-month period ended June 30, 2008, compared to the nine-month period ended June 30,
2007
 Finance income
 29




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##### Table of Contents



Other income .
 General and Administrative Expenses
 Interest Expense
 30




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##### Table of Contents



Impairments.
 Equity in earnings of venture .
 The three-month period ended June 30, 2008 as compared to the three month period ended June 30,
2007
 Finance income
   Other income .
 General and Administrative Expenses
 Interest Expense
 31




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




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33



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34




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For The Nine Months Ended June 30, 2008CostInterest
    
    
    RecoveryMethod
    
    
    Method
    
    
    TotalBalance, beginning of period
    
    $
    508,515,000
    
    
    $
    37,108,000
    
    
    $
    545,623,000Acquisitions of receivable portfolios, net
    
    
    25,622,000
    
    
    
    23,242,000
    
    
    
    48,864,000Net cash collections from collections of
consumer receivables acquired for
liquidation (1)
    
    
    (130,572,000
    )
    
    
    (10,633,000
    )
    
    
    (141,205,000
    )Net cash collections represented by
accounts sales of consumer receivables
acquired for liquidation
    
    
    (15,480,000
    )
    
    
    
    
    
    
    (15,480,000
    )Transfer to cost recovery (2)
    
    
    (208,693,000
    )
    
    
    208,693,000
    
    
    
    Impairments
    
    
    (43,153,000
    )
    
    
    
    
    
    
    (43,153,000
    )Effect of foreign currency translation
    
    
    
    
    
    
    782,000
    
    
    
    782,000Finance income recognized (3)
    
    
    90,624,000
    
    
    
    949,000
    
    
    
    91,573,000Balance, end of period
    
    $
    226,863,000
    
    
    $
    260,141,000
    
    
    $
    487,004,000Revenue as a percentage of collections
    
    
    62.0
    %
    
    
    8.9
    %
    
    
    58.4
    %
 
 (1)
    
    Includes the put back of a portfolio purchased and returned to the seller
in the amount of $2.8 million in the first quarter of fiscal year 2008.(2)
    
    The Company purchased $6.9 billion in face value receivables for a
purchase price of $300 million in March 2007 (the Portfolio Purchase).
During the quarter ending June 30, 2008, the Company transferred the
carrying value of the Portfolio Purchase from the interest method to the
cost recovery method.(3)
    
    Includes $34.2 million derived from fully amortized interest method pools. For The Nine Months Ended June 30, 2007CostInterest
    
    
    RecoveryMethod
    
    
    Method
    
    
    TotalBalance, beginning of period
    
    $
    256,199,000
    
    
    $
    1,076,000
    
    
    $
    257,275,000Acquisitions of receivable portfolios, net
    
    
    356,884,000
    
    
    
    45,432,000
    
    
    
    402,316,000Net cash collections from collections of
consumer receivables acquired for
liquidation (1)
    
    
    (164,829,000
    )
    
    
    (8,020,000
    )
    
    
    (172,849,000
    )Net cash collections represented by
account sales of consumer receivables
acquired for liquidation
    
    
    (36,519,000
    )
    
    
    (4,247,000
    )
    
    
    (40,766,000
    )Transfer to cost recovery (2)
    
    
    (4,478,000
    )
    
    
    4,478,000
    
    
    
    Impairments
    
    
    (2,412,000
    )
    
    
    
    
    
    
    (2,412,000
    )Finance income recognized (3)
    
    
    94,168,000
    
    
    
    1,971,000
    
    
    
    96,139,000Balance, end of period
    
    $
    499,013,000
    
    
    $
    40,690,000
    
    
    $
    539,703,000Revenue as a percentage of collections
    
    
    46.8
    %
    
    
    16.1
    %
    
    
    45.0
    %
 
 (1)
    
    Includes put backs of purchased accounts returned to the seller totaling $5.5 million.(2)
    
    Represents a portfolio acquired during the three months ended December 31, 2006 which
the Company returned to the seller on July 31, 2007.(3)
    
    Includes $11.1 million derived from fully amortized interest method pools. 35




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For The Three Months Ended June 30, 2008CostInterest
    
    
    RecoveryMethod
    
    
    Method
    
    
    TotalBalance, beginning of period
    
    $
    460,623,000
    
    
    $
    51,633,000
    
    
    $
    512,256,000Acquisitions of receivable portfolios, net
    
    
    5,467,000
    
    
    
    2,090,000
    
    
    
    7,557,000Net cash collections from collections of
consumer receivables acquired for
liquidation
    
    
    (42,869,000
    )
    
    
    (3,303,000
    )
    
    
    (46,172,000
    )Net cash collections represented by
account sales of consumer receivables
acquired for liquidation
    
    
    (2,826,000
    )
    
    
    
    
    
    
    (2,826,000
    )Transfer to cost recovery (1)
    
    
    (208,693,000
    )
    
    
    208,693,000Impairments
    
    
    (8,153,000
    )
    
    
    
    
    
    
    (8,153,000
    )Effect of foreign currency translation
    
    
    
    
    
    
    782,000
    
    
    
    782,000Finance income recognized (2)
    
    
    23,314,000
    
    
    
    246,000
    
    
    
    23,560,000Balance, end of period
    
    $
    226,863,000
    
    
    $
    260,141,000
    
    
    $
    487,004,000Revenue as a percentage of collections
    
    
    51.0
    %
    
    
    7.4
    %
    
    
    48.1
    %
 
 (1)
    
    Represents the transfer of the carrying value of the Portfolio Purchase from the interest method to the cost recovery method.(2)
    
    Includes $10.4 million derived from fully amortized interest method pools. For The Three Months Ended June 30, 2007CostInterest
    
    
    RecoveryMethod
    
    
    Method
    
    
    TotalBalance, beginning of period
    
    $
    522,345,000
    
    
    $
    41,389,0000
    
    
    $
    563,734,000Acquisitions of receivable portfolios, net
    
    
    11,086,000
    
    
    
    4,548,000
    
    
    
    15,634,000Net cash collections from collections of
consumer receivables acquired for

liquidation (1)
    
    
    (62,814,000
    )
    
    
    (5,931,000
    )
    
    
    (68,745,000
    )Net cash collections represented by
account sales of consumer receivables
acquired for
liquidation
    
    
    (9,765,000
    )
    
    
    
    
    
    
    (9,765,000
    )Finance income recognized (2)
    
    
    38,161,000
    
    
    
    684,000
    
    
    
    38,845,000Balance, end of period
    
    $
    499,013,000
    
    
    $
    40,690,000
    
    
    $
    539,703,000Revenue as a percentage of collections
    
    
    52.6
    %
    
    
    11.5
    %
    
    
    49.5
    %
 
 (1)
    
    Includes put backs of purchased accounts returned to the seller totaling $5.5 million.(2)
    
    Includes $5.6 million derived from fully amortized interest method pools. Additional Supplementary Information:
   36




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##### Table of Contents



CollectionsRepresented
    
    FinanceBy Account
    
    IncomePeriod
    
    Sales
    
    EarnedNine months ended June 30, 2008
    
    $
    15,480,000
    
    
    $
    7,125,000Three months ended June 30, 2008
    
    $
    2,826,000
    
    
    $
    1,946,000Nine months ended June 30, 2007
    
    $
    40,766,000
    
    
    $
    18,211,000Three months ended June 30, 2007
    
    $
    9,975,000
    
    
    $
    3,697,000
  NetCash
    
    
    
    
    
    
    
    
    
    Total estimatedCollections
    
    Estimated
    
    Total
    
    Collections as aPurchase
    
    Including Cash
    
    Remaining
    
    Estimated
    
    Percentage ofPurchase Period
    
    Price (2)
    
    Sales (3)
    
    Collections (4)
    
    Collections (5)
    
    Purchase Price2001
    
    $
    65,120,000
    
    
    $
    105,305,000
    
    
    $
    0
    
    
    $
    105,305,000
    
    
    
    162
    %2002
    
    
    36,557,000
    
    
    
    47,734,000
    
    
    
    0
    
    
    
    47,734,000
    
    
    
    131
    %2003
    
    
    115,626,000
    
    
    
    200,979,000
    
    
    
    3,201,000
    
    
    
    204,180,000
    
    
    
    177
    %2004
    
    
    103,743,000
    
    
    
    169,139,000
    
    
    
    4,864,000
    
    
    
    174,003,000
    
    
    
    168
    %2005
    
    
    126,023,000
    
    
    
    179,123,000
    
    
    
    41,924,000
    
    
    
    221,047,000
    
    
    
    175
    %2006
    
    
    200,237,000
    
    
    
    191,482,000
    
    
    
    119,182,000
    
    
    
    310,664,000
    
    
    
    155
    %2007(6)
    
    
    109,235,000
    
    
    
    48,056,000
    
    
    
    99,295,000
    
    
    
    147,351,000
    
    
    
    135
    %2008
    
    
    25,622,000
    
    
    
    6,890,000
    
    
    
    27,967,000
    
    
    
    34,857,000
    
    
    
    136
    %
 
 (1)
    
    Total collections do not represent full collections of the Company with respect to this or any other year.(2)
    
    Purchase price refers to the cash paid to a seller to acquire a portfolio less the purchase price
refunded by a seller due to the return of non-compliant accounts (also defined as put-backs).(3)
    
    Net cash collections include: net collections from our third-party collection agencies and attorneys, net
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 net collections.(6)
    
    Purchase Price, Net Cash Collections Including Cash Sales, Estimated Remaining Collections, Total
Estimated Collections and Total Estimated Collections as a Percentage of Purchase Price reflect transfer
to Cost Recovery of the Portfolio Purchase effective during the third quarter of fiscal 2008. 37




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##### Table of Contents



Recent Accounting Pronouncements
 Accounting for Financial Guarantee Insurance
Contractsan interpretation of FASB Statement No. 60
   Disclosures about Derivative
Instruments and Hedging Activitiesan amendment of FASB Statement No. 133 Accounting for Derivative Instruments and Hedging Activities
 Share-Based Payment
 Application of Accounting Principles to Loan
Commitments Accounting for Derivative Instruments and Hedging Activities Accounting
for Servicing of Financial Assets The
Fair Value Option for Financial Assets and Financial Liabilities,
 The Fair Value Option for Financial Assets and Financial
 38




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##### Table of Contents



Liabilities  Including an
amendment of FASB Statement No. 115
 Fair Value Measurements
 39




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 a. Disclosure Controls and Procedures.
  Changes in Internal Controls Over Financial Reporting.
  40




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  We have seen, at certain times, the environment for collections
from debtors is slower and more challenging.
  
    
    the slowdown in the economy;
    
    problems in the credit and housing markets;
    
    reductions in consumer spending;
    
    changes in the underwriting criteria by originators; and
    
    changes in laws and regulations governing consumer lending.
  Recent amendments to
our credit facility increase our risk and potential loss.
  41




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##### Table of Contents



We rely on third parties to locate, identify and
evaluate consumer receivable portfolios available for purchase.
  The Company has been required to amend its revolving credit facility on a number of
occasions.
  42




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##### Table of Contents



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO
A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  31.1
    
    Certification of the Registrants Chief Executive Officer, Gary
Stern, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Registrants Chief Financial Officer, Mitchell
Cohen, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Registrants Chief Executive Officer, Gary
Stern, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Registrants Chief Financial Officer, Mitchell
Cohen, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 43




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##### Table of Contents



ASTA FUNDING, INC. 
(Registrant)Date: August 11, 2008
    By:
    /s/ Gary SternGary Stern, President, Chief Executive Officer(Principal Executive Officer)Date: August 11, 2008
    By:
    /s/ Mitchell CohenMitchell Cohen, Chief Financial Officer(Principal Financial Officer and Principal
Accounting Officer) 44