<PAGE>

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                For the quarterly period ended December 31, 2004

                                       OR

|_| 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.
        (Exact name of small business issuer as specified in its charter)



               DELAWARE                                          22-3388607
     (State or other jurisdiction                               (IRS Employer
   of incorporation or organization)                         Identification No.)


  210 SYLVAN AVE., ENGLEWOOD CLIFFS, NEW JERSEY                    07632
    (Address of principal executive offices)                    (Zip Code)


                    ISSUER'S TELEPHONE NUMBER: (201) 567-5648


         Former name, former address and former fiscal year, if changed since
last report: N/A

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act) Yes |X| No |_|

         As of February 1, 2005, the registrant had approximately 13,551,047
common shares outstanding.

================================================================================

<PAGE>




                               ASTA FUNDING, INC.

                               INDEX TO FORM 10-Q

<TABLE>
<S>                                                                                                       <C>
Part I.     Financial Information.....................................................................      2
Item 1.     Consolidated Financial Statements.........................................................      2
            Consolidated Balance Sheets as of December 31, 2004 (unaudited) and September 30, 2004....      2
            Consolidated Statements of Operations for the three month periods ended
               December 31, 2004 and 2003 (unaudited).................................................      3
            Consolidated Statement of Stockholders' Equity for the three month period ending
               December 31, 2004 (unaudited)..........................................................      4
            Consolidated Statements of Cash Flows for the three month periods ended
               December 31, 2004 and 2003 (unaudited).................................................      5
            Condensed Notes to Consolidated Financial Statements (unaudited)..........................      6
Item 2.     Management's Discussion and Analysis of Financial Condition and Results of Operations.....     13
Item 3.     Quantitative and Qualitative Disclosures about Market Risk................................     17
Item 4.     Controls and Procedures...................................................................     17

Part II.    Other Information.........................................................................     18
Item 1.     Legal Proceedings.........................................................................     18
Item 2.     Changes in Securities and Use of Proceeds.................................................     18
Item 3.     Defaults Upon Senior Securities...........................................................     18
Item 4.     Submission of Matters to a Vote of Security Holders.......................................     18
Item 5.     Other Information.........................................................................     18
Item 6.     Exhibits and Reports on Form 8-K..........................................................     18
Signatures  ..........................................................................................     19
Section 302 Certificate of Chief Executive Officer....................................................     20
Section 302 Certificate of Chief Financial Officer....................................................     21
Section 906 Certificate of Chief Executive Officer....................................................     22
Section 906 Certificate of Chief Financial Officer....................................................     23
</TABLE>



                                       1
<PAGE>



PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                       ASTA FUNDING, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                     DECEMBER 31,        SEPTEMBER 30,
                                                                                         2004                2004
                                                                                     ------------        -------------
                                                                                     (UNAUDITED)
                                 ASSETS
<S>                                                                                    <C>                <C>
Cash ...........................................................................       $  1,850,000       $  3,344,000
Consumer receivables acquired for liquidation ..................................        159,776,000        146,165,000
Deposit on receivable purchase .................................................             75,000          7,288,000
Furniture and equipment, net ...................................................            589,000            596,000
Other assets ...................................................................          1,116,000          1,248,000
                                                                                       ------------       ------------
          Total assets .........................................................       $163,406,000       $158,641,000
                                                                                       ============       ============
                    LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
   Debt ........................................................................       $ 37,354,000       $ 39,355,000
   Other liabilities ...........................................................          1,307,000          3,351,000
   Income taxes payable ........................................................          3,310,000          1,425,000
   Deferred income taxes .......................................................             44,000             44,000
                                                                                       ------------       ------------
          Total liabilities ....................................................         42,015,000         44,175,000
                                                                                       ------------       ------------

Stockholders' Equity
   Preferred 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 -- 13,551,000 at December 31, 2004 and 13,432,000
   at September 30, 2004 .......................................................            135,000            134,000
   Additional paid-in capital ..................................................         60,406,000         59,184,000
   Retained earnings ...........................................................         60,850,000         55,148,000
                                                                                       ------------       ------------
          Total stockholders' equity ...........................................        121,391,000        114,466,000
                                                                                       ------------       ------------
Total liabilities and stockholders' equity .....................................       $163,406,000       $158,641,000
                                                                                       ============       ============
</TABLE>















           See accompanying notes to consolidated financial statements


                                       2
<PAGE>



                       ASTA FUNDING, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED     THREE MONTHS ENDED
                                                              DECEMBER  31,          DECEMBER  31,
                                                                 2004                    2003
                                                           -------------------    ------------------
<S>                                                          <C>                       <C>
Revenues
   Finance income ....................................       $13,830,000               $11,455,000
                                                             -----------               -----------

Expenses
   General and administrative ........................         3,044,000                 2,543,000
   Interest ..........................................           407,000                   171,000
   Third party servicing .............................                --                   862,000
                                                             -----------               -----------
                                                               3,451,000                 3,576,000
                                                             -----------               -----------
Income before income taxes ...........................        10,379,000                 7,879,000
Income tax expense ...................................         4,204,000                 3,191,000
                                                             -----------               -----------
Net income ...........................................       $ 6,175,000               $ 4,688,000
                                                             ===========               ===========
Net income per share -- Basic ........................       $      0.46               $      0.35
                                                             -----------               -----------
Diluted ..............................................       $      0.43               $      0.33
                                                             -----------               -----------
Weighted average number of shares outstanding -- Basic        13,471,000                13,206,000
                                                             -----------               -----------
Diluted ..............................................        14,303,000                14,158,000
                                                             -----------               -----------
</TABLE>



























           See accompanying notes to consolidated financial statements

                                       3
<PAGE>

                       ASTA FUNDING, INC. AND SUBSIDIARIES

                  CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                              ADDITIONAL
                                                     COMMON STOCK               PAID-IN       RETAINED
                                                SHARES          AMOUNT          CAPITAL       EARNINGS           TOTAL
                                              ----------    -------------   -------------   -------------    -------------
<S>                                            <C>          <C>             <C>             <C>              <C>
Balance, September 30, 2004 .............      13,432,000   $     134,000   $  59,184,000      55,148,000      114,466,000
Exercise of options .....................         119,000           1,000       1,103,000              --        1,104,000
Tax benefit arising from exercise of non-
    qualified stock options .............              --              --         119,000              --          119,000
Dividends ...............................              --              --              --        (473,000)        (473,000)
Net Income ..............................              --              --              --       6,175,000        6,175,000
                                            -------------   -------------   -------------   -------------    -------------
Balance, December 31, 2004 ..............      13,551,000   $     135,000   $  60,406,000   $  60,850,000    $ 121,391,000
                                            =============   =============   =============   =============    =============
</TABLE>










































           See accompanying notes to consolidated financial statements


                                       4
<PAGE>



                       ASTA FUNDING, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                           THREE MONTHS ENDED     THREE MONTHS ENDED
                                                                              DECEMBER  31,          DECEMBER  31,
                                                                                  2004                   2003
                                                                           ------------------     ------------------
<S>                                                                            <C>                    <C>
Cash flows from operating activities:
 Net income .........................................................          $  6,175,000           $  4,688,000

Adjustments to reconcile net income to net cash provided by operating
   activities:
 Depreciation and amortization ......................................               118,000                 61,000
 Deferred income taxes ..............................................                    --                 (4,000)

Changes in:
 Other assets .......................................................                77,000                 78,000
 Income taxes payable ...............................................             1,881,000              2,478,000
Other liabilities ...................................................            (2,043,000)            (2,041,000)
                                                                               ------------           ------------
    Net cash provided by operating activities .......................             6,208,000              5,260,000
Cash flows from investing activities:
 Purchase of consumer receivables acquired for liquidation ..........           (36,542,000)           (35,421,000)
 Principal collected on receivables acquired for liquidation ........            22,931,000             17,442,000
 Deposit on receivable purchase .....................................             7,213,000                     --

 Capital expenditures ...............................................               (56,000)               (49,000)
                                                                               ------------           ------------
    Net cash (used in) investing activities .........................            (6,454,000)           (18,028,000)

Cash flows from financing activities:
 Proceeds from exercise of options ..................................             1,104,000                541,000
 Tax benefit arising from exercise of non-qualified stock options ...               119,000                     --
 Dividends paid .....................................................              (470,000)              (330,000)
 Advances (payments) under line of credit, net ......................            (2,001,000)            10,264,000
                                                                               ------------           ------------
    Net cash (used in) provided by financing activities .............            (1,248,000)            10,475,000
                                                                               ------------           ------------
(Decrease) in cash ..................................................            (1,494,000)            (2,293,000)
Cash at the beginning of period .....................................             3,344,000              6,846,000
                                                                               ------------           ------------
Cash at end of period ...............................................          $  1,850,000           $  4,553,000
                                                                               ============           ============
Supplemental disclosure of cash flow information:

 Cash paid during the period
  Interest ..........................................................          $    324,000           $    143,000
  Income taxes ......................................................          $  2,200,000           $  1,054,000
</TABLE>


                                        5
<PAGE>



                       ASTA FUNDING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1: BUSINESS AND BASIS OF PRESENTATION

 Business

     Asta Funding, Inc., together with its wholly owned subsidiaries, is engaged
in the business of purchasing, managing and servicing non-conforming and
distressed consumer receivables. Non-conforming consumer receivables are the
obligations of individuals that have incurred credit impairment either at the
time the obligation was originated or subsequent to origination. Distressed
consumer receivables are the unpaid debts of individuals to banks, finance
companies and other credit providers. A large portion of our distressed consumer
receivables are MasterCard(R), Visa(R), other credit card accounts and
telecommunication accounts which were charged-off by the issuers for
non-payment. We acquire these portfolios at substantial discounts from their
face values that are based on the characteristics of the underlying accounts of
each portfolio.

 Basis of Presentation

     The consolidated balance sheet as of December 31, 2004, the consolidated
statements of operations for the three month periods ended December 31, 2004 and
2003, and the consolidated statements of cash flows for the three month periods
ended December 31, 2004 and 2003, have been prepared by us without an audit. In
the opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position of us at
December 31, 2004 and September 30, 2004, the results of operations for the
three month periods ended December 31, 2004 and 2003 and cash flows for the
three month periods ended December 31, 2004 and 2003 have been made. The results
of operations for the three month periods ended December 31, 2004 and 2003 are
not necessarily indicative of the operating results for any other interim period
or the full fiscal year.

     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with Rule 10-01 of Regulation S-X promulgated by the
Securities and Exchange Commission and therefore do not include all information
and footnote disclosures required under generally accepted accounting
principles. We suggest that these financial statements be read in conjunction
with the financial statements and notes thereto included in our Annual Report on
Form 10-K for the fiscal year ended September 30, 2004 filed with the Securities
and Exchange Commission on December 14, 2004.

NOTE 2: PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of Asta Funding,
Inc. and its wholly-owned subsidiaries. All significant intercompany balances
and transactions have been eliminated in consolidation. All prior period share
and per share amounts have been adjusted to reflect the two-for-one stock split,
effected through a 100% stock dividend that became effective March 23, 2004

NOTE 3: CONSUMER RECEIVABLES ACQUIRED FOR LIQUIDATION

     Accounts acquired for liquidation are stated at their net realizable value
and consist of mainly defaulted consumer loans to individuals throughout the
country. We account for the investment in receivable portfolios on the "accrual
basis" or "cost recovery basis" of accounting in accordance with the provisions
of the AICPA's Practice Bulletin 6, "Amortization of Discounts on Certain
Acquired Loans". Static pools are established for each portfolio acquired. Once
a static pool is established, the receivables are permanently assigned to the
pool. The discount (i.e. the difference between the cost of each static pool and
the related gross aggregate receivable balance) is not recorded because we
expect to collect substantially less than the gross receivable balance. As a
result, we record these receivable portfolios at cost at the time of
acquisition.



                                       6
<PAGE>

                       ASTA FUNDING, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

NOTE 3: CONSUMER RECEIVABLES ACQUIRED FOR LIQUIDATION--(CONTINUED)

     The following tables summarize the changes in the balance sheet of the
investment in receivable portfolios during the following periods:



<TABLE>
<CAPTION>
                                                                              FOR THE THREE MONTHS ENDED DECEMBER 31, 2004
                                                                       -----------------------------------------------------------
                                                                          ACCRUAL                CASH
                                                                           BASIS                 BASIS
                                                                         PORTFOLIOS            PORTFOLIOS                TOTAL
                                                                       ------------           -------------          -------------
<S>                                                                    <C>                    <C>                    <C>
Balance, beginning of period ..................................        $ 144,812,000          $   1,353,000          $ 146,165,000
Acquisitions of receivable portfolios, net ....................           36,542,000                     --             36,542,000
Gross cash collections including sales proceeds ...............          (33,943,000)            (2,848,000)           (36,791,000)
Finance income recognized .....................................           11,784,000              2,076,000             13,860,000
                                                                       -------------          -------------          -------------
Balance, end of period ........................................        $ 159,195,000          $     581,000          $ 159,776,000
                                                                       =============          =============          =============
Revenue as a percentage of collections ........................                 34.7%                  72.9%                  37.7%


                                                                               FOR THE THREE MONTHS ENDED DECEMBER 31, 2003
                                                                              -----------------------------------------------
                                                                          ACCRUAL                CASH
                                                                           BASIS                 BASIS
                                                                         PORTFOLIOS            PORTFOLIOS                TOTAL
                                                                       ------------           -------------          -------------
Balance, beginning of period ..................................        $ 102,809,000          $   2,783,000          $ 105,592,000
Acquisitions of receivable portfolios, net ....................           34,717,000                704,000             35,421,000
Gross cash collections including sales proceeds ...............          (26,543,000)            (2,328,000)           (28,871,000)
Finance income recognized .....................................            9,954,000              1,475,000             11,429,000
                                                                       -------------          -------------          -------------
Balance, end of period ........................................        $ 120,937,000          $   2,634,000          $ 123,571,000
                                                                       =============          =============          =============
Revenue as a percentage of collections ........................                 37.5%                  63.4%                  39.6%


NOTE 4: FURNITURE AND EQUIPMENT

     Furniture and equipment consist of the following as of the dates indicated:

                                                                                              DECEMBER  31,           SEPTEMBER  30,
                                                                                                 2004                       2004
                                                                                             -------------            --------------
Furniture ................................................................                     $  307,000                $  307,000
Equipment ................................................................                      1,381,000                 1,325,000
                                                                                               ----------                ----------
                                                                                                1,688,000                 1,632,000
Less accumulated depreciation ............................................                      1,099,000                 1,036,000
                                                                                               ----------                ----------
Balance, end of period ...................................................                     $  589,000                $  596,000
                                                                                               ==========                ==========
</TABLE>


                                        7

<PAGE>



                       ASTA FUNDING, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)

NOTE 5: DEBT

     In May 2004, the Company entered into an amended and restated loan and
security agreement that increased the line of credit with a lending institution
from $35 million to $60 million and extended it to May 11, 2006. The line of
credit bears interest at the lesser of LIBOR plus an applicable margin, or the
prime rate plus or minus an applicable margin based on certain leverage ratios
(the applicable rate was 4.75% at December 31, 2004). The credit line is
collateralized by all portfolios of consumer receivables acquired for
liquidation and contains customary financial and other covenants (relative to
tangible net worth, interest coverage, and leverage ratio, as defined) that must
be maintained in order to borrow funds. As of December 31, 2004, $37.4 million
was outstanding.

NOTE 6: COMMITMENTS AND CONTINGENCIES

 Employment Agreements

     We have an employment agreement with one executive and are in the process
of formalizing new employment agreements with two other executive officers. Such
agreement and anticipated agreements provide for base salary payments as well as
bonuses. The agreements also contain confidentiality and non-compete provisions.
Please refer to our definitive Proxy Statement, as filed with the Securities and
Exchange Commission, under the caption "Executive Compensation" for additional
information.

 Leases

     We are a party to two operating leases with respect to our facilities in
Englewood Cliffs, New Jersey and Bethlehem, Pennsylvania. Please refer to our
consolidated financial statements and notes thereto in our Annual Report on Form
10-K, as filed with the Securities and Exchange Commission, for additional
information.

 Litigation

     In the ordinary course of our business, we are involved in numerous legal
proceedings. We regularly initiate collection lawsuits, using our network of
third party law firms, against consumers. Also, consumers occasionally initiate
litigation against us, in which they allege that we have violated a federal or
state law in the process of collecting their account. We do not believe that
these ordinary course matters are material to our business and financial
condition. As of the date of this Form 10-Q, we were not involved in any
material litigation in which we were a defendant.

NOTE 7: INCOME RECOGNITION

     We recognize income on non-performing and performing consumer receivable
portfolios, which are acquired for liquidation, using either the interest method
or cost recovery method. Upon acquisition of a portfolio of receivables,
management estimates the future anticipated cash flows and determines the
allocation of payments based upon this estimate. If management can reasonably
estimate the expected amount to be collected on a portfolio and can reasonably
determine the timing of such payments based on historic experience and other
factors, we use the interest method. If management cannot reasonably estimate
the future cash flows, we use the cost recovery method.

     Under the interest method, we recognize income on the effective yield
method based on the actual cash collected during a period and future estimated
cash flows and timing of such estimated collections. The estimated future cash
flows are reevaluated quarterly. Under the cost recovery method, no income is
recognized until we have fully collected the cost of the portfolio.

     We recognize income net of collection fees paid to third-party collection
agencies. With respect to amounts collected in-house, such finance income is
recognized at the gross amount collected.

     Income from finance receivables was recognized over the periods from the
date of purchase to the estimated collection date.



                                       8
<PAGE>

                       ASTA FUNDING, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)

NOTE 8: INCOME TAXES

     The provision for income tax expense for the three month periods ending
December 31, 2004 and 2003, reflects income tax expense at an effective rate of
40.5%.Deferred federal and state taxes arise from temporary differences
resulting primarily from the provision for credit losses and depreciation
expense.

NOTE 9: NET INCOME PER SHARE

     Basic per share data is determined by dividing net income by the weighted
average shares outstanding during the period. Diluted per share data is computed
by dividing net income by the weighted average shares outstanding, assuming all
dilutive potential common shares were issued. With respect to the assumed
proceeds from the exercise of dilutive options, the treasury stock method is
calculated using the average market price for the period.

     The following table presents the computation of basic and diluted per share
data for the three months ended December 31, 2004 and 2003:

<TABLE>
<CAPTION>
                                                     2004                                          2003
                                      --------------------------------------      --------------------------------------
                                                     WEIGHTED                                    WEIGHTED
                                        NET          AVERAGE        PER SHARE          NET        AVERAGE     PER SHARE
                                      INCOME          SHARES         AMOUNT          INCOME       SHARES       AMOUNT
                                      ----------    ----------      --------       ----------   -----------   --------
<S>                                   <C>           <C>               <C>          <C>           <C>            <C>
Basic............................     $6,175,000    13,471,000        $0.46        $4,688,000    13,206,000     $0.35
                                                                      =====                                     =====
Effect of Dilutive Stock.........                      832,000                                      952,000
                                      ----------    ----------                     ----------    ----------
Diluted..........................     $6,175,000    14,303,000        $0.43        $4,688,000    14,158,000     $0.33
                                      ==========    ==========        =====        ==========    ==========     =====
</TABLE>





























                                       9
<PAGE>





                       ASTA FUNDING, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)

NOTE 10: STOCK BASED COMPENSATION

     The Company accounts for stock-based employee compensation under Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations. The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation" and SFAS No. 148,
"Accounting for Stock-Based Compensation -- Transition and Disclosure", which
was released in December 2002 as an amendment of SFAS No. 123. The following
table illustrates the effect on net income and earnings per share if the fair
value based method had been applied to all awards.

<TABLE>
<CAPTION>
                                                                                   THREE MONTHS ENDED DECEMBER  31,
                                                                                 ------------------------------------
                                                                                       2004              2003
                                                                                   ------------     --------------
<S>                                                                             <C>               <C>
Net income as reported......................................................    $  6,175,000      $   4,688,000
Stock based compensation expense
 Determined under fair value method, net of related tax effects.............        (556,000)          (511,000)
                                                                                ------------      -------------
Pro forma net income........................................................    $  5,619,000      $   4,177,000
                                                                                ============       ============
Earnings per share:
 Basic -- as reported........................................................   $      0.46        $       0.35
                                                                                ============       ============
 Basic -- pro forma..........................................................   $      0.42        $       0.32
                                                                                ============       ============
 Diluted -- as reported......................................................   $      0.43        $       0.33
                                                                                ============       ============
 Diluted -- pro forma........................................................   $      0.39        $       0.30
                                                                                ============       ============
</TABLE>

     The weighted average fair value of the options granted during 2004 and 2003
were $9.44 and $8.87 per share on the dates of grant, respectively, using the
Black-Scholes option pricing model with the following assumptions: dividend
yield 0.8289% (2004) and dividend yield .0093% (2003), volatility 40.13% (2004)
and 56.637% (2003), expected life 10 years, risk free interest rate of 4.19% in
2004 and 4.05% in 2003.

NOTE 11: STOCK OPTION PLANS

 1995 Stock Option Plan

     The Company has a stock option plan under which 1,840,000 shares of common
stock are reserved for issuance upon exercise of either incentive or
non-incentive stock options, which may be granted from time to time by the Board
of Directors to employees and others. The Board of Directors determines the
option price (not to be less than fair market value for incentive options) at
the date of grant. The options have a maximum term of 10 years and outstanding
options expire from November 2005 through October 2014. As of December 31, 2004,
96,002 shares of common stock were available for issuance under the stock option
plan.








                                       10
<PAGE>




                       ASTA FUNDING, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)


 2002 Stock Option Plan

     During May 2002, the Company approved a new stock option plan under which
1,000,000 shares of common stock are reserved for issuance upon the exercise of
either incentive or non-incentive stock options, which may be granted from time
to time by the Board of Directors to employees and others. The Board of
Directors determines the option price (not to be less than fair market value for
incentive options) at the date of grant. The options have a maximum term of 10
years. As of December 31, 2004, 421,667 shares of common stock were available
for issuance under the stock option plan.

     The following table summarizes stock option transactions under the plans:

<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED DECEMBER  31,
                                                             ---------------------------------------------------
                                                                     2004                       2003
                                                             ----------------------    -------------------------
                                                                          WEIGHTED                      WEIGHTED
                                                                           AVERAGE                       AVERAGE
                                                                          EXERCISE                      EXERCISE
                                                              SHARES        PRICE        SHARES           PRICE
                                                             --------     --------      ---------       --------
<S>                                                          <C>           <C>          <C>            <C>
Outstanding options at the beginning of period..........     1,364,171     $ 6.2657     1,225,000      $ 3.2377
Options granted.........................................       402,500      18.2502       330,000       14.8700
Options canceled........................................       (40,002)     11.7145            --            --
Options exercised.......................................      (118,453)      9.3135       (93,998)       5.7652
                                                              --------     --------     ---------      --------
Outstanding options at the end of period................     1,608,216     $ 8.9051     1,461,002      $ 5.7025
                                                             =========                  =========
Exercisable options at the end of period................     1,011,005     $ 4.5229     1,036,008      $ 3.8504
                                                             =========                  =========
</TABLE>

The following table summarizes information about the Plans outstanding options
as of December 31, 2004:

<TABLE>
<CAPTION>
                                                        OPTIONS OUTSTANDING               OPTIONS EXERCISABLE
                                              --------------------------------------    ------------------------
                                                                WEIGHTED
                                                                 AVERAGE        WEIGHTED                       WEIGHTED
                                                                REMAINING       AVERAGE                        AVERAGE
                                                NUMBER         CONTRACTUAL      EXERCISE        NUMBER         EXERCISE
RANGE OF EXERCISE PRICE                       OUTSTANDING    LIFE (IN YEARS)     PRICE        EXERCISABLE       PRICE
--------------------                         ------------    ---------------   ----------     ------------    ----------
<S>                                           <C>                     <C>      <C>           <C>              <C>
$0.0000 - $1.8760.......................        200,000               4.4      $  0.8125       200,000        $  0.8125
$1.8761 - $3.7520.......................        520,000               4.8         2.5644       520,000           2.5644
$3.7521 - $5.6280.......................        137,334               7.8         4.7250        87,333           4.7250
$5.6281 - $7.5040.......................         43,668               7.1         6.5372        43,668           6.5372
$7.5041 - $9.3800.......................         12,000               8.2         7.7450         2,667           7.7450
$13.1321 - $15.0080.....................        245,002               8.8        14.8700       151,670          14.8700
$15.0081 - $16.8840.....................         33,888               9.7        16.5035                         0.0000
$16.8841 - $18.7600.....................        416,324               9.8        18.2443         5,667          18.1000
                                               --------              ----      ---------     ---------        ---------
                                              1,608,216               7.1      $  8.9051     1,011,005        $  4.5229
                                              =========                                      =========
</TABLE>




                                       11
<PAGE>



                       ASTA FUNDING, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                   (UNAUDITED)

NOTE 12: STOCKHOLDERS EQUITY

     During August 2004 we declared a quarterly cash dividend aggregating
$470,000 ($0.035 per share) which was paid November 1, 2004 and accrued $473,000
as of December 31, 2004, for record holders as of December 30, 2004 that was
paid on February 1, 2005.

     We declared a two-for-one stock split, effected through a 100% stock
dividend for record holders as of March 9, 2004 that became effective March 23,
2004. The basic and fully diluted shares outstanding for all prior periods
reported in this Form 10-Q reflect this dividend.

NOTE 13: USE OF ESTIMATES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates including management's estimates of future cash flows and the
allocation of collections between principal and interest resulting therefrom.




                                       12
<PAGE>



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

     We are primarily engaged in the business of acquiring, managing, servicing
and recovering on portfolios of consumer receivables. These portfolios generally
consist of one or more of the following types of consumer receivables:

     o    charged-off receivables -- accounts that have been written-off by the
          originators and may have been previously serviced by collection
          agencies;

     o    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

     o    performing receivables -- accounts where the debtor is making regular
          monthly payments that may or may not have been delinquent in the past.

     We acquire these consumer receivable portfolios at a significant discount
to the amount actually owed by the borrowers. We acquire these portfolios after
a qualitative and quantitative analysis of the underlying receivables and
calculate the purchase price so that our estimated cash flow offers us an
adequate return on our acquisition costs and servicing expenses. After
purchasing a portfolio, we actively monitor its performance and review and
adjust our collection and servicing strategies accordingly.

     We purchase receivables from credit grantors and others through privately
negotiated direct sales and auctions in which sellers of receivables seek bids
from several pre-qualified debt purchasers. We pursue new acquisitions of
consumer receivable portfolios on an ongoing basis through:

     o    our relationships with industry participants, collection agencies,
          investors and our financing sources;

     o    brokers who specialize in the sale of consumer receivable portfolios;
          and

     o    other sources.

SAFE HARBOR FOR FORWARD LOOKING STATEMENTS

     This Form 10-Q contains forward-looking statements made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements typically are identified by use of terms such as
"may," "will," "should," "plan," "expect," "believe," "anticipate," "estimate"
and similar expressions, although some forward-looking statements are expressed
differently. Forward-looking statements represent our management's judgment
regarding future events. Although we believe that the expectations reflected in
such forward-looking statements are reasonable, we can give no assurance that
such expectations will prove to be correct. All statements other than statements
of historical fact included in this report regarding our financial position,
business strategy, products, products under development and clinical trials,
markets, budgets, plans, or objectives for future operations are forward-looking
statements. We cannot guarantee the accuracy of the forward-looking statements,
and you should be aware that our actual results could differ materially from
those contained in the forward-looking statements due to a number of factors,
including the statements under "Risk Factors" and "Critical Accounting Policies"
detailed in our annual report on Form 10-K for the year ended September 30,
2004, and other reports filed with the Securities and Exchange Commission.

     Our annual report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and all other documents filed by the Company or with respect
to its securities with the Securities and Exchange Commission are available free
of charge through our website at www.astafunding.com. Information on our website
does not constitute a part of this report.

CRITICAL ACCOUNTING POLICIES

     We account for our investments in consumer receivable portfolios, using
either:

     o    the interest method; or

     o    the cost recovery method.



                                       13
<PAGE>

     Generally, each purchase is considered a separate portfolio of receivables
and is considered a financial investment. Based upon the expected performance
characteristics of the receivables in the portfolio, we determine whether the
portfolio should be accounted for using the interest method or the cost recovery
method. If we can reasonably estimate the amount to be collected on a portfolio
and can reasonably determine the timing of such payments based on historic
experience and other factors, we use the interest method. If we cannot
reasonably estimate the future cash flows, we use the cost recovery method.

     The interest method allows us to recognize income on the effective yield of
such portfolio based on the actual cash collected during a period and future
estimated cash flows and the timing of such collections and the purchase of such
portfolios. Under this method, we periodically apply a portion of the actual
funds collected as a reduction in the principal amount invested in each specific
portfolio and the remainder is recognized as finance income. Generally, these
portfolios are expected to amortize over a three to five year period based upon
our estimated future cash flows. Historically, a majority of the cash we
ultimately collect on a portfolio is received during the first 18 months after
acquiring the portfolio, although additional amounts are collected over the
remaining periods. The estimated future cash flows of the portfolios are
evaluated or reevaluated quarterly.

     Under the cost recovery method of accounting, no income is recognized until
the purchase price of a portfolio has been fully recovered by us.

     We periodically review our receivable portfolios for impairment based on
the estimated future cash flows. Provisions for losses are charged to operations
when it is determined that the remaining investment in the receivable portfolio
is greater than the estimated future collections. We did not record any
impairment charges on our consumer receivable portfolios during the three-month
period ended December 31, 2004. We typically recognize finance income net of
collection fees paid to third-party collection agencies. With respect to a
specific consumer receivable portfolio containing a significant amount of
performing and semi-performing accounts, we recognized finance income on
accounts that are being serviced by a third-party servicer at the gross amounts
received by the servicer. The servicing cost for this portfolio was reported as
an expense on our income statement for the period end December 31, 2003 as
third-party service expense. The servicing expense was completed during fiscal
year 2004.

     In the following discussions, most percentages and dollar amounts have been
rounded to aid presentation. As a result, all figures are approximations.

RESULTS OF OPERATIONS

     The three-month period ended December 31, 2004, compared to the three-month
period ended December 31, 2003

     Revenues. During the three-month period ended December 31, 2004, finance
income increased $2.4 million or 20.7 % to $13.8 million from $11.5 million for
the three-month period ended December 31, 2003. The increase in finance income
was primarily due to an increase in finance income earned on consumer
receivables acquired for liquidation, which resulted from an increase in the
average outstanding accounts acquired for liquidation during the three-months
ended December 31, 2004 of approximately $153.0 million, as compared to
approximately $114.6 million during the three month period ended December 31,
2003. During the three months ended December 31, 2004, we acquired receivables
at a cost of $36.5 million as compared to $35.4 million during the three months
ended December 31, 2003 and for year ended September 30, 2004, we acquired
receivables at a cost of $103.7 million as compared to $115.6 million for the
year ended September 30, 2003. During fiscal year 2004 management decided to
implement a greater collection effort utilizing its attorney networks which
could increase our court costs.

     General and Administrative Expenses. During the three-month period ended
December 31, 2004, general and administrative expenses increased $501,000 or
19.7% to $3.0 million from $2.5 million for the three-months ended December 31,
2003, and represented 88.2% of total expenses for the three months ended
December 31, 2004. The increase in general and administrative expenses was
primarily due to an increase in receivable servicing expenses that resulted from
the substantial increase in our average outstanding accounts acquired for
liquidation during the three months ended December 31, 2004 of approximately
$153.0 million, as compared to approximately $114.6 million during the three
month period ended December 31, 2003. A majority of the increased costs were
from collection expenses including court costs, data processing costs, salaries,
payroll taxes and benefits, professional fees, postage and telephone charges.


                                       14
<PAGE>


     Third-Party Servicing Expenses. During the three-month period ended
December 31, 2004, third-party servicing expenses decreased $862,000, or 100.0%
to $0.0 thousand from $862,000 for the three months ended December 31, 2003, The
decrease in third-party servicing expenses was due to the completion of the
service provided on a portfolio that was purchased in August 2001 and completed
during fiscal year 2004.

     Interest Expense. During the three-month period ended December 31, 2004,
interest expense increased $236,000 to $407,000 from $171,000 as compared to the
same period in the prior year and represented 11.8% of total expenses for the
three-month period ended December 31, 2004. The increase was due to an increase
in the average outstanding borrowings by us under our line of credit during the
three-month period ended December 31, 2004, as compared to the same period in
the prior year, and a higher rate of interest. The increase in borrowings was
due to the increase in acquisitions of consumer receivables acquired for
liquidation during the second half of our fiscal year ended September 30, 2004
and the first quarter of this fiscal year ended September 30, 2005, as compared
to the same prior year periods.

LIQUIDITY AND CAPITAL RESOURCES

     Our primary sources of cash from operations include payments on the
receivable portfolios that we have acquired. Our primary uses of cash include
our purchases of consumer receivable portfolios. We rely significantly upon our
lenders and others, including our affiliates, to provide the funds necessary for
the purchase of consumer and commercial accounts receivable portfolios. While we
maintain a $60 million line of credit for portfolio purchases, we also may
arrange financing on a transactional basis. While we have historically been able
to finance these purchases, we do not have committed loan facilities, other than
our $60 million line of credit with a financial institution. As of December 31,
2004, there was $37.4 million outstanding balance under this facility. As of
December 31, 2004, our cash and cash equivalents decreased $1.5 million to $1.8
million from $3.3 million at September 30, 2004. The decrease in cash and cash
equivalents during the three month period ended December 31, 2004, was due to an
increase in consumer receivable purchases, higher dividend, interest and tax
payments during the three months ended December 31, 2004 as compared to the same
period in the prior year.

     Net cash provided by operating activities was $6.2 million during the
three-months ended December 31, 2004, compared to net cash provided by operating
activities of $5.3 million during the three-months ended December 31, 2003. The
increase in net cash provided by operating activities was primarily due to an
increase in net income and income taxes payable which was partially offset by a
decrease in other liabilities during the three-months ended December 31, 2004,
as compared to the same prior year period. Net cash used in investing activities
was $6.5 million and $18.0 million during the three-months ended December 31,
2004, and December 31, 2003, respectively. The decrease in net cash provided by
investing activities was primarily due to an increase in the purchase of
accounts acquired for liquidation during the three-months ended December 31,
2004, compared to the same period in the prior year. In addition there was an
increase in cash collections as compared to the same period in the prior year.
Net cash used in financing activities was $1.2 million during the three-months
ended December 31, 2004, compared to net cash provided of $10.5 million during
the three-months December 31, 2003. The increase in net cash used in financing
activities was primarily due to the utilization of the cash provided by
operations to pay down the line of credit facility and the payment of increased
dividends.

     We have a $60 million line of credit with a bank with interest at the
lesser of LIBOR plus an applicable margin, or the lesser of the prime rate plus
or minus an applicable margin based on certain leverage ratios. The advances
under this credit line are collateralized by portfolios of consumer receivables
acquired for liquidation, and the loan agreement contains customary financial
and operating covenants that must be maintained in order for us to borrow funds.
This line expires on May 11, 2006. As of December 31, 2004, there was $37.4
million outstanding balance under this line of credit and we were in compliance
with all of the covenants under this line of credit.

     Our cash requirements have been and will continue to be significant. We
depend on external financing and cash generated from operations to acquire
consumer receivables. During the three-months ended December 31, 2004, we
acquired consumer portfolios at a cost of approximately $36.5 million. These
acquisitions were financed primarily through cash flows from operating
activities and with our credit facility.



                                       15
<PAGE>

     We anticipate the funds available under our current credit facility as well
as funds available from cash flows from operations will be sufficient to satisfy
our estimated cash requirements for at least the next 12 months. If for any
reason our available cash otherwise proves to be insufficient to fund operations
(because of future changes in the industry, general economic conditions,
unanticipated increases in expenses, or other factors), we may be required to
seek additional funding.

     From time to time, we evaluate potential acquisitions of related
businesses. However, we have not reached any agreement or arrangement with
respect to any particular acquisition and we may not be able to find or complete
any acquisitions on favorable terms or at all.

     The following tables summarize the changes in the balance sheet of the
investment in receivable portfolios during the following periods:

<TABLE>
<CAPTION>
                                                                 FOR THE THREE MONTHS ENDED DECEMBER 31, 2004
                                                               -------------------------------------------------

                                                                   ACCRUAL           CASH
                                                                    BASIS            BASIS
                                                                 PORTFOLIOS       PORTFOLIOS          TOTAL
                                                               -------------      ------------   --------------
<S>                                                            <C>                <C>            <C>
Balance, beginning of period................................   $  144,812,000     $  1,353,000   $  146,165,000
Acquisitions of receivable portfolios, net..................       36,542,000               -        36,542,000
Cash collections including sales proceeds...................      (33,943,000)      (2,848,000)     (36,791,000)
Finance income recognized...................................       11,784,000        2,076,000       13,860,000
                                                               -------------      ------------   --------------
Balance, end of period......................................   $  159,195,000     $    581,000   $  159,776,000
                                                               ==============     ============   ==============
Revenue as a percentage of collections......................             34.7%            72.9%            37.7%

                                                                 FOR THE THREE MONTHS ENDED DECEMBER 31, 2003
                                                               -------------------------------------------------

                                                                   ACCRUAL           CASH
                                                                    BASIS            BASIS
                                                                 PORTFOLIOS       PORTFOLIOS          TOTAL
                                                               -------------      ------------   --------------
Balance, beginning of period................................   $  102,809,000     $  2,783,000   $  105,592,000
Acquisitions of receivable portfolios, net..................       34,717,000          704,000       35,421,000
Cash collections including sales proceeds...................      (26,543,000)      (2,328,000)     (28,871,000)
Finance income recognized...................................        9,954,000        1,475,000       11,429,000
                                                               -------------      ------------   --------------
Balance, end of period......................................   $  120,937,000     $  2,634,000   $  123,571,000
                                                               ==============     ============   ==============
Revenue as a percentage of collections......................             37.5%            63.4%            39.6%
</TABLE>


ADDITIONAL SUPPLEMENTARY INFORMATION ON ACCOUNTS ACQUIRED FOR LIQUIDATION

<TABLE>
<CAPTION>
                                                                                   AS OF DECEMBER 31, 2004
                                                                             ------------------------------------
                                                                              COST RECOVERY     INTEREST METHOD
                                                                               PORTFOLIOS         PORTFOLIOS
                                                                             ----------------- ----------------
<S>                                                                          <C>               <C>
Cumulative Original Purchase Price.........................................  $    49,300,000   $   370,300,000
Cumulative Aggregate Managed Portfolios....................................  $ 2,168,400,000   $ 8,927,000,000
</TABLE>


     The original purchase price reflects what we paid for the receivables from
1998 through December 31, 2004. The cumulative aggregate managed portfolio
balance is the original aggregate amount owed by the borrowers from 1998 through
December 31, 2004 at the time of purchase. We purchase consumer receivables at
substantial discounts from the face amount. We record interest income on our
receivables under either the interest or cost recovery method.


                                       16
<PAGE>


     We do not anticipate collecting the majority of the purchased principal
amounts. Accordingly, the difference between the carrying value of the
portfolios and the gross receivables is not indicative of future revenues from
these accounts acquired for liquidation. Since we purchased these accounts at
significant discounts, we anticipate collecting only a portion of the face
amounts.

     For the three-months ended December 31, 2004, we earned interest income of
$2.1 million under the cost recovery method because we collected $2.1 million in
excess of our purchase price on certain receivable portfolios. In addition, we
earned $11.8 million of interest income under the interest method based on
actuarial computations on certain portfolios which in turn are based on actual
collections during the period and future estimated collections.

RECENT ACCOUNTING PRONOUNCEMENTS

     In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123 (revised 2004) Share-Based
Payment ("SFAS No.123 (revised 2004)"). This statement is a revision of FASB
Statement No. 123, Accounting for Stock-Based Compensation. This Statement
supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its
related implementation guidance. This Statement requires that the cost resulting
from all share-based payment transactions be recognized in the financial
statements. This Statement supersedes the current method utilized by the Company
of the disclosure-only provisions of the original SFAS No. 123. The effective
date of this Statement is as of the beginning of the first interim or annual
period that begins after June 15, 2004. The Company has been disclosing the
impact on net income and earnings per share since the adoption of the original
SFAS No. 123 in the notes to the financial statements. The impact on the
Company's financial statements should be consistent with that of the previous
disclosures.

     In October 2003, the American Institute of Certified Accountants issued
Statement of Position ("SOP") 03-03, "Accounting for Loans or Certain Securities
Acquired in a Transfer." This SOP provides guidance on accounting for
differences between contractual and expected cash flows from an investor's
initial investment in loans or debt securities acquired in a transfer if those
differences are attributable, at least in part, to credit quality. This SOP
became effective for portfolios acquired after December 15, 2004. We do not
believe the adoption of this SOP has a material impact on the Company.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to various types of market risk in the normal course of
business, including the impact of interest rate changes and changes in corporate
tax rates. A material change in these rates could adversely affect our operating
results and cash flows. At December 31, 2004, our $60 million credit facility,
all of which is variable debt, had an outstanding balance of $37.4 million. A 25
basis-point increase in interest rates would have increased our annual interest
expense by $25,000 for each $10 million of variable debt outstanding for the
entire fiscal year. We do not invest in derivative financial or commodity
instruments.

ITEM 4. CONTROLS AND PROCEDURES

     a. Disclosure Controls and Procedures.

     As of the end of the period covered by this Quarterly Report on Form 10-Q,
we carried out an evaluation, with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures pursuant to Securities
Exchange Act Rule 13a-15. Based upon that evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures are effective in ensuring that information required to be disclosed
by us in the reports that we file or submit under the Securities Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the SEC's rules and forms.

     b. Changes in Internal Controls Over Financial Reporting.

     There have been no changes in our internal control over financial reporting
that occurred during our last fiscal quarter to which this Quarterly Report on
Form 10-Q relates that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.


                                       17
<PAGE>


PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     In the ordinary course of our business, we are involved in numerous legal
proceedings. We regularly initiate collection lawsuits, using our network of
third party law firms, against consumers. Also, consumers occasionally initiate
litigation against us, in which they allege that we have violated a federal or
state law in the process of collecting their account. We do not believe that
these ordinary course matters are material to our business and financial
condition. As of the date of this Form 10-Q, we were not involved in any
material litigation in which we were a defendant.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

ITEM 5. OTHER INFORMATION

     None.

ITEM 6. EXHIBITS AND REPORTS ON FORM  8-K

     (a) 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.

     (b) Reports on Form 8-K

     Furnished on November 26, 2004, issuance of an earnings press release for
the year ended September 30, 2004.




                                       18
<PAGE>



                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



                                 ASTA FUNDING, INC.
                                  (Registrant)

Date: February 9, 2005           By: /s/ Gary Stern
                                 --------------------------------------
                                 Gary Stern, President, Chief Executive Officer
                                 (Principal Executive Officer)

Date: February 9, 2005           By: /s/ Mitchell Cohen
                                 --------------------------------------
                                 Mitchell Cohen, Chief Financial Officer
                                 (Principal Financial Officer and
                                 Principal Accounting Officer)



                                       19