<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 June 30, 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 |_| No |X|

         As of August 1, 2004, the registrant had approximately 13,429,000
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 June 30, 2004 (unaudited) and September  30, 2003..........      2
         Consolidated Statements of Operations for the nine and three month periods ended
            June 30, 2004 and 2003 (unaudited)........................................................      3
         Consolidated Statement of Stockholders' Equity for the nine month period ending
            June 30, 2004 (unaudited).................................................................      4
         Consolidated Statements of Cash Flows for the nine month periods ended
            June 30, 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...................................     18
Item 4.  Controls and Procedures......................................................................     18
Part II. Other Information............................................................................     19
Item 1.  Legal Proceedings............................................................................     19
Item 2.  Changes in Securities and Use of Proceeds....................................................     19
Item 3.  Defaults Upon Senior Securities..............................................................     19
Item 4.  Submission of Matters to a Vote of Security Holders..........................................     19
Item 5.  Other Information............................................................................     19
Item 6.  Exhibits and Reports on Form  8-K............................................................     19
Signatures  ..........................................................................................     20
Section 302 Certification of Chief Executive Officer..................................................     21
Section 302 Certification of Chief Financial Officer..................................................     22
Section 906 Certification of Chief Executive Officer..................................................     23
Section 906 Certification of Chief Financial Officer..................................................     24
</TABLE>


                                       1
<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                       ASTA FUNDING, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                          JUNE 30,     SEPTEMBER 30,
                                                                            2004           2003
                                                                        ------------   ------------
                                                                         (UNAUDITED)
<S>                                                                     <C>            <C>
                                 ASSETS
Cash ................................................................   $  1,201,000   $  6,846,000
Restricted cash, net ................................................         54,000         54,000
Consumer receivables acquired for liquidation .......................    112,188,000    105,592,000
Auto loans receivable, net ..........................................             --          5,000
Furniture and equipment, net ........................................        694,000        710,000
Other assets ........................................................      1,178,000        169,000
                                                                        ------------   ------------
          Total assets ..............................................   $115,315,000   $113,376,000
                                                                        ============   ============
                    LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
   Debt .............................................................   $  5,700,000   $ 16,381,000
   Other liabilities ................................................        906,000      3,741,000
   Income taxes payable .............................................        351,000        802,000
   Deferred income taxes ............................................         55,000         85,000
                                                                        ------------   ------------
          Total liabilities .........................................      7,012,000     21,009,000
                                                                        ------------   ------------

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 -- 13,429,000 at June 30, 2004 and 13,180,000
   at September 30, 2003 ...........................................         134,000        132,000
   Additional paid-in capital .......................................     59,059,000     57,718,000
   Retained earnings ................................................     49,110,000     34,517,000
                                                                        ------------   ------------
          Total stockholders' equity ................................    108,303,000     92,367,000
                                                                        ------------   ------------
Total liabilities and stockholders' equity ..........................   $115,315,000   $113,376,000
                                                                        ============   ============
</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  Nine Months Ended   Nine Months Ended
                                                     June 30, 2004      June 30, 2003      June 30, 2004        June 30, 2003
                                                     -------------      -------------      -------------        -------------
<S>                                                   <C>                <C>                <C>                  <C>
Revenues:
Finance income ...............................        $12,050,000        $ 9,208,000        $36,369,000          $23,679,000
                                                      -----------        -----------        -----------          -----------

Expenses:
General and administrative ...................          2,474,000          2,067,000          7,998,000            5,429,000
Third-party servicing ........................               --            1,320,000          1,316,000            4,496,000
Interest .....................................            167,000          1,409,000            623,000            1,422,000
                                                      -----------        -----------        -----------          -----------
                                                        2,641,000          4,796,000          9,937,000           11,347,000
                                                      -----------        -----------        -----------          -----------

Income before income taxes ...................          9,409,000          4,412,000         26,432,000           12,332,000

Income tax expense ...........................          3,802,000          1,872,000         10,704,000            5,051,000
                                                      -----------        -----------        -----------          -----------

Net income ...................................        $ 5,607,000        $ 2,540,000        $15,728,000          $ 7,281,000
                                                      -----------        -----------        -----------          -----------



Net income per share:

Basic ........................................        $      0.42        $      0.30        $      1.18          $      0.88
                                                      -----------        -----------        -----------          -----------

Diluted ......................................        $      0.39        $      0.27        $      1.10          $      0.81
                                                      -----------        -----------        -----------          -----------


Weighted average number of shares outstanding:

Basic ........................................         13,403,000          8,376,000         13,318,000            8,232,000
                                                      -----------        -----------        -----------          -----------

Diluted ......................................         14,286,000          9,272,000         14,248,000            8,976,000
                                                      -----------        -----------        -----------          -----------
</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, 2003         13,180,000     $     132,000     $  57,718,000        34,517,000         92,367,000
Exercise of options ........           249,000             2,000         1,341,000              --            1,343,000
Dividends ..................                --                --                --        (1,135,000)        (1,135,000)
Net Income .................                --                --                --        15,728,000         15,728,000
                                 -------------     -------------     -------------     -------------      -------------
Balance, June 30, 2004 .....        13,429,000     $     134,000     $  59,059,000     $  49,110,000      $ 108,303,000
                                 =============     =============     =============     =============      =============
</TABLE>

           See accompanying notes to consolidated financial statements


                                       4
<PAGE>

                       ASTA FUNDING, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                 NINE MONTHS ENDED     NINE MONTHS ENDED
                                                                   JUNE 30, 2004         JUNE 30, 2003
                                                                 -----------------       -------------
<S>                                                                 <C>                  <C>
Cash flows from operating activities:
 Net income ................................................        $ 15,728,000         $  7,281,000

Adjustments to reconcile net income to net cash provided by
   operating activities:
 Depreciation and amortization .............................             203,000              108,000
 Deferred income taxes .....................................             (30,000)              62,000

Changes in:
 Repossessed automobiles held for sale .....................                --                 45,000
 Other assets ..............................................          (1,054,000)             513,000
 Income taxes payable ......................................            (451,000)          (1,493,000)
 Other liabilities .........................................          (2,908,000)            (147,000)
                                                                    ------------         ------------
    Net cash provided by operating activities ..............          11,488,000            6,369,000


Cash flows from investing activities:
 Auto loan principal payments ..............................               4,000               29,000
 Purchase of consumer receivables acquired for liquidation .         (55,584,000)         (61,499,000)
 Principal collected on receivables acquired for liquidation          48,988,000           22,707,000
 Finance receivables .......................................                --              1,443,000
 Capital expenditures ......................................            (141,000)            (507,000)
                                                                    ------------         ------------
    Net cash (used in) provided by investing activities ....          (6,733,000)         (37,827,000)

Cash flows from financing activities:
 Due from underwriters .....................................                              (47,761,000)
 Proceeds of common stock offering .........................                               47,320,000
 Proceeds from exercise of options .........................           1,343,000              215,000
 Cancellation of common shares .............................                                   90,000
 Dividends .................................................          (1,062,000)                --
 (Payments) advances under line of credit, net .............         (10,681,000)          31,095,000
                                                                    ------------         ------------
    Net cash (used in) provided by financing activities ....         (10,400,000)          30,959,000
                                                                    ------------         ------------
(Decrease) increase in cash ................................          (5,645,000)            (499,000)
Cash at the beginning of period ............................           6,846,000            2,213,000
                                                                    ------------         ------------
Cash at end of period ......................................        $  1,201,000         $  1,714,000
                                                                    ============         ============
Supplemental disclosure of cash flow information:

 Cash paid during the period
  Interest .................................................        $    598,000         $  1,614,000
  Income taxes .............................................        $  9,850,000         $  4,694,000
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       5
<PAGE>

                               ASTA FUNDING, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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) and other credit card accounts which were
charged-off by the issuing banks 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 June 30, 2004, the consolidated
statements of operations for the nine and three month periods ended June 30,
2004 and 2003, and the consolidated statements of cash flows for the nine month
periods ended June 30, 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 our financial position at
June 30, 2004 and September 30, 2003, the results of operations for the nine and
three month periods ended June 30, 2004 and 2003 and cash flows for the nine
month periods ended June 30, 2004 and 2003 have been made. The results of
operations for the nine and three month periods ended June 30, 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, 2003 filed
with the Securities and Exchange Commission on December 22, 2003.

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.

NOTE 3: CONSUMER RECEIVABLES ACQUIRED FOR LIQUIDATION

      Accounts acquired for liquidation are stated at their net realizable value
and consist mainly of 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.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 NINE MONTHS ENDED JUNE 30, 2004
                                                    -----------------------------------------------------
                                                       ACCRUAL             CASH
                                                        BASIS              BASIS
                                                      PORTFOLIOS         PORTFOLIOS            TOTAL
                                                    -------------       -------------       -------------
<S>                                                 <C>                 <C>                 <C>
Balance, beginning of period ..................     $ 102,809,000       $   2,783,000       $ 105,592,000
Acquisitions of receivable portfolios, net ....        54,880,000             704,000          55,584,000
Gross cash collections including sales proceeds       (79,713,000)         (5,563,000)        (85,276,000)
Finance income recognized .....................        32,458,000           3,830,000          36,288,000
                                                    -------------       -------------       -------------
Balance, end of period ........................     $ 110,434,000       $   1,754,000       $ 112,188,000
                                                    =============       =============       =============
Revenue as a percentage of collections ........          40.7%               68.8%               42.6%
</TABLE>

<TABLE>
<CAPTION>
                                                           FOR THE NINE MONTHS ENDED JUNE 30, 2003
                                                    -----------------------------------------------------
                                                       ACCRUAL             CASH
                                                        BASIS              BASIS
                                                      PORTFOLIOS         PORTFOLIOS             TOTAL
                                                    -------------       -------------       -------------
<S>                                                 <C>                 <C>                 <C>
Balance, beginning of period ..................     $  32,797,000       $   3,282,000       $  36,079,000
Acquisitions of receivable portfolios, net ....        59,480,000           2,019,000          61,499,000
Gross cash collections including sales proceeds       (39,580,000)         (6,607,000)        (46,187,000)
Finance income recognized .....................        18,259,000           5,221,000          23,480,000
                                                    -------------       -------------       -------------
Balance, end of period ........................     $  70,956,000       $   3,915,000       $  74,871,000
                                                    =============       =============       =============
Revenue as a percentage of collections ........          46.1%               79.0%               50.8%
</TABLE>

<TABLE>
<CAPTION>
                                                           FOR THE THREE MONTHS ENDED JUNE 30, 2004
                                                    -----------------------------------------------------
                                                      ACCRUAL               CASH
                                                       BASIS               BASIS
                                                     PORTFOLIOS          PORTFOLIOS             TOTAL
                                                    -------------       -------------       -------------
<S>                                                 <C>                 <C>                 <C>
Balance, beginning of period ..................     $ 117,910,000       $   2,134,000       $ 120,044,000
Acquisitions of receivable portfolios, net ....         6,144,000                --             6,144,000
Gross cash collections including sales proceeds       (24,439,000)         (1,581,000)        (26,020,000)
Finance income recognized .....................        10,819,000           1,201,000          12,020,000
                                                    -------------       -------------       -------------
Balance, end of period ........................     $ 110,434,000       $   1,754,000       $ 112,188,000
                                                    =============       =============       =============
Revenue as a percentage of collections ........          44.3%               75.7%               46.2%
</TABLE>


                                       7
<PAGE>

                               ASTA FUNDING, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

<TABLE>
<CAPTION>
                                                           FOR THE THREE MONTHS ENDED JUNE  30, 2003
                                                     ----------------------------------------------------
                                                      ACCRUAL               CASH
                                                       BASIS               BASIS
                                                     PORTFOLIOS          PORTFOLIOS             TOTAL
                                                    -------------       -------------       -------------
<S>                                                 <C>                 <C>                 <C>
Balance, beginning of period ..................     $  24,108,000       $   2,560,000       $  26,668,000
Acquisitions of receivable portfolios, net ....        55,321,000           1,750,000          57,071,000
Gross cash collections including sales proceeds       (15,833,000)         (2,201,000)        (18,034,000)
Finance income recognized .....................         7,360,000           1,806,000           9,166,000
                                                    -------------       -------------       -------------
Balance, end of period ........................     $  70,956,000       $   3,915,000       $  74,871,000
                                                    =============       =============       =============
Revenue as a percentage of collections ........          46.5%               82.1%               50.8%
</TABLE>

NOTE  4: FURNITURE AND EQUIPMENT

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

<TABLE>
<CAPTION>
                                                                    JUNE 30,       SEPTEMBER 30,
                                                                     2004               2003
                                                                 -------------     --------------
<S>                                                              <C>               <C>
Furniture ..................................................     $    314,000      $    307,000
Equipment ..................................................        1,312,000         1,178,000
                                                                 ------------      ------------
                                                                    1,626,000         1,485,000
Less accumulated depreciation ..............................          932,000           775,000
                                                                 ------------      ------------
Balance, end of period .....................................     $    694,000      $    710,000
                                                                 ============      ============
</TABLE>

NOTE 5: DEBT

      On May 11, 2004, we entered into an amended and restated loan and security
agreement that increased our line of credit to $60 million and extended it to
May 11, 2006. This line of credit bears 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 (3.50% at June 30, 2004), and includes
additional financial covenants as defined in the agreement. As of June 30, 2004,
$5.7 million was outstanding and we were in compliance with all of the covenants
under this line of credit.

NOTE 6: COMMITMENTS AND CONTINGENCIES

 Employment Agreements

      We have employment agreements with our executive officers. Such 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.


                                       8
<PAGE>

                               ASTA FUNDING, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 6: COMMITMENTS AND CONTINGENCIES - (CONTINUED)

Leases

      We are a party to two operating leases with respect to our facilities.
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 collections and the portfolio's purchase. 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.

NOTE 8: INCOME TAXES

      The provision for income tax expense reflects income tax expense at an
effective rate of 40.5% for the nine and three month periods ending June 30,
2004. For the nine and three month periods ended June 30, 2003, the effective
income tax rate was 41.0% and 42.4% respectively.

      Deferred federal and state taxes arise from temporary differences
resulting primarily from the provision for credit losses and depreciation timing
differences.

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.


                                       9
<PAGE>

                               ASTA FUNDING, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9: NET INCOME PER SHARE - (CONTINUED)

      The following table presents the computation of basic and diluted per
share data for the nine and three months ended June 30, 2004 and 2003:
<TABLE>
<CAPTION>
                                                              NINE MONTHS ENDED JUNE 30,

                                                 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 ....................   $15,728,000      13,318,000       $1.18         $ 7,281,000       8,232,000       $0.88
                                                               =====                                           =====
Effect of Dilutive Stock..                       930,000                                         744,000
                             -----------      ----------                     -----------      ----------
Diluted ..................   $15,728,000      14,248,000       $1.10         $ 7,281,000       8,976,000       $0.81
                             ===========      ==========       =====         ===========      ==========       =====
</TABLE>

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED JUNE 30,
                                                     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.....................            $5,607,000    13,403,000      $0.42       $ 2,540,000     8,376,000     $0.30
                                                                    =====                                     =====
Effect of Dilutive Stock..                             883,000                                    896,000
                                     -----------   -----------                  -----------    ----------
Diluted...................            $5,607,000    14,286,000      $0.39       $ 2,540,000     9,272,000     $0.27
                                     ===========    ==========      =====       ===========    ==========     =====
</TABLE>

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>
                                                                                  NINE MONTHS ENDED JUNE 30,
                                                                                -----------------------------
                                                                                    2004              2003
                                                                                ------------       ----------
<S>                                                                             <C>                 <C>
Net income as reported......................................................    $15,728,000         7,281,000
Stock based compensation expense
 Determined under fair value method, net of related tax effects.............     (1,632,000)         (795,000)
                                                                                -----------         ---------
Pro forma net income........................................................    $14,096,000        $6,486,000
                                                                                ===========        ==========
Earnings per share:
 Basic -- as reported........................................................   $      1.18        $     0.88
                                                                                ===========        ==========
 Basic -- pro forma..........................................................   $      1.06        $     0.79
                                                                                ===========        ==========
 Diluted -- as reported......................................................   $      1.10        $     0.81
                                                                                ===========        ==========
 Diluted -- pro forma........................................................   $      0.99        $     0.72
                                                                                ===========        ==========
</TABLE>


                                       10
<PAGE>

                               ASTA FUNDING, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10: STOCK-BASED COMPENSATION - (CONTINUED)
<TABLE>
<CAPTION>
                                                                                 THREE MONTHS ENDED JUNE 30,
                                                                                -----------------------------
                                                                                    2004              2003
                                                                                ------------      -----------
<S>                                                                             <C>               <C>
Net income as reported......................................................    $ 5,607,000       $2,540,000
Stock-based compensation expense
 Determined under fair value method, net of related tax effects.............       (544,000)        (265,000)
                                                                                 ----------       ----------
Pro forma net income........................................................    $ 5,063,000       $2,275,000
                                                                                ===========       ==========
Earnings per share:
 Basic -- as reported........................................................   $      0.42       $     0.30
                                                                                ===========       ==========
 Basic -- pro forma..........................................................   $      0.38       $     0.27
                                                                                ===========       ==========
 Diluted -- as reported......................................................   $      0.39       $     0.27
                                                                                ===========       ==========
 Diluted -- pro forma........................................................   $      0.35       $     0.25
                                                                                ===========       ==========
</TABLE>

The weighted average fair value of the options granted during 2004 and 2003 were
$8.66 and $3.55 per share on the dates of grant, respectively, using the
Black-Scholes option pricing model with the following assumptions: dividend
yield 0.2508% (2004) and dividend yield 0% (2003), weighted average volatility
41.507% (2004) and 56.637% (2003), expected life 10 years, weighted average risk
free interest rate of 4.2966% in 2004 and 4.0223% 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 February 2014. As of June 30, 2004,
56,000 shares of common stock were available for issuance under this stock
option plan.

         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 June 30, 2004, 854,167 shares of common stock were
available for issuance under this stock option plan.

THE FOLLOWING TABLE SUMMARIZES STOCK OPTION TRANSACTIONS UNDER THE PLANS:

<TABLE>
<CAPTION>

                                                                         NINE MONTHS ENDED JUNE 30,
                                                             ---------------------------------------------------
                                                                      2004                       2003
                                                             ------------------------   ------------------------
                                                                          WEIGHTED                      WEIGHTED
                                                                           AVERAGE                       AVERAGE
                                                                          EXERCISE                      EXERCISE
                                                              SHARES       PRICE         SHARES           PRICE
                                                             ---------   ----------    -----------    ----------
<S>                                                          <C>           <C>          <C>            <C>
Outstanding options at the beginning of period..........     1,225,000     $ 3.2377     1,109,000      $ 2.8657
Options granted.........................................       363,000      15.0643       260,000        5.0735
Options exercised.......................................      (248,000)      5.4221       (95,000)       2.9116
Options cancelled.......................................        (2,000)      7.5050       (49,000)       5.1914

                                                             ---------   ----------     ---------      --------
Outstanding options at the end of period................     1,338,000     $ 6.0337     1,225,000      $ 3.2377
                                                             ---------                  ---------

Exercisable options at the end of period................       939,000     $ 3.8411       805,000      $ 2.6630
                                                             ---------                  ---------
</TABLE>


                                       11
<PAGE>

                               ASTA FUNDING, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11: STOCK OPTION PLANS- (CONTINUED)

         The following table summarizes information about the Plans outstanding
options as of June 30, 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
-----------------------                       ----------- -------------- ----------    ------------  ----------
<C>                                           <C>              <C>       <C>             <C>        <C>
$0.0000 - $1.8100.......................        205,000         4.9       $  0.8125       205,000    $  0.8125
$1.8101 - $3.3620.......................        540,000         5.3          2.5875       540,000       2.5875
$3.3621 - $5.4300.......................        183,000         8.3          4.7250        50,000       4.7250
$5.4310 - $7.2400.......................         52,000         7.6          6.4479        40,000       6.5954
$7.2410 - $9.0500.......................         12,000         8.7          7.7450         3,000       7.7450
$9.0510 - $14.480.......................              0           0               0             0            0
$14.4801 - $16.29.......................        329,000         9.4         14.9173        95,000      14.8929
$16.2901 - $18.10.......................         17,000         9.6         18.1000         6,000      18.1000
                                             ----------         ----      ---------    ----------    ---------
                                              1,338,000         6.8       $  6.0337       939,000    $  3.8411
                                             ==========                                ==========
</TABLE>


NOTE 12: STOCKHOLDERS' EQUITY

         During the nine-month period ended June 30, 2004, we declared dividends
of $1,135,000, of which $403,000 was unpaid as of June 30, 2004.

         We declared a two-for-one stock split, affected 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 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.

         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,
2003, 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.

         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.



                                       13
<PAGE>

         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 to 24 months
after acquiring the portfolio, although additional amounts are collected over
the remaining periods. The estimated future cash flows of the portfolios are
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 have not recorded
any impairment charges on our consumer receivable portfolios during the
nine-month period ended June 30, 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 these
accounts that were 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 as third-party service expense. This
portfolio was sold as of February 29, 2004, and we will no longer incur
third-party servicing expenses on this portfolio.

         Based on an increase in projected portfolio collections on certain
portfolios as compared to what we estimated at September 30, 2003, we revised
our estimates. Such change in accounting estimates has resulted in approximately
a $5.9 million increase in finance income recognized during the nine months
ended June 30, 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 NINE-MONTH PERIOD ENDED JUNE 30, 2004, COMPARED TO THE NINE-MONTH
PERIOD ENDED JUNE 30, 2003

         Revenues. During the nine-month period ended June 30, 2004, finance
income increased $12.7 million or 53.6% to $36.4 million from $23.7 million for
the nine-month period ended June 30, 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 nine-month period ended
June 30, 2004, as compared to the same prior year period. During the nine-month
period ended June 30, 2004, we acquired receivables at a cost of $55.6 million
as compared to $61.5 million during the nine-month period ended June 30, 2003
and for year ended September 30, 2003, we acquired receivables at a cost of
$115.6 million as compared to $36.6 million for the year ended September 30,
2002. For the nine-month period ended June 30, 2004, we had an average of $108.9
million in consumer receivables acquired for liquidation as compared to $55.5
million during the same prior year period. In addition, based on an increase in
projected portfolio collections on certain portfolios as compared to what we
estimated at September 30, 2003 and June 30, 2004, we revised our accounting
estimates. Such change in accounting estimates has resulted in approximately a
$5.9 million increase in finance income recognized during the nine-month period
ended June 30, 2004. The changes in projected portfolio collections were
primarily due to changes in our servicing strategy in which we transferred a
substantial number of accounts from collection agencies to collection attorneys
during the fiscal year and have a substantial number of accounts that will be
sent to our collection attorneys in the coming months.

         General and Administrative Expenses. During the nine-month period ended
June 30, 2004, general and administrative expenses increased $2.6 million or
48.1% to $8.0 million from $5.4 million for the nine-month period ended June 30,
2003, and represented 80.8% of total expenses for the nine-month period ended
June 30, 2004. The increase in general and administrative expenses was primarily
due to an increase in receivable servicing expenses during the nine-month period
ended June 30, 2004, as compared to the same prior year period. The increase in
receivable servicing expenses resulted from the increase in our average
outstanding accounts acquired for liquidation during the nine-month period ended
June 30, 2004, as compared to the same prior year period. A majority of the
increased costs were from collection expenses including court costs, data
processing costs, salaries, payroll taxes and benefits, professional fees,
telephone charges and rent. In January 2003, we acquired a call center in
Bethlehem, PA that we use for servicing a portion of our receivables,
accordingly we have servicing expenses associated with this center during the
nine-month period ended June 30, 2004, compared to only six-months of these
expenses during the nine-month period ended June 30, 2003.



                                       14
<PAGE>

         Third-Party Servicing Expenses. During the nine-month period ended June
30, 2004, third-party servicing expenses decreased $3.2 million or 71.1% to $1.3
million from $4.5 million for the nine-month period ended June 30, 2003, and
represented 13.1% of total expenses for the nine-month period ended June 30,
2004. This expense related to a specific portfolio, and the decrease in
third-party servicing expenses was primarily due to a reduction in the number of
accounts being serviced by third parties during the nine-month period ended June
30, 2004, as compared to the same prior year period, and the sale of this
specific portfolio as of February 29, 2004.

         Interest Expense. During the nine-month period ended June 30, 2004,
interest expense decreased to $0.6 million from $1.4 million in the same prior
year period and represented 6.1% of total expenses for the nine-month period
ended June 30, 2004. The decrease was due to a decrease in average outstanding
borrowings under our line of credit during the nine-month period ended June 30,
2004, as compared to the same period in the prior year. The decrease in
borrowings was due to the decrease in acquisitions of consumer receivables
acquired for liquidation during the third quarter ended June 30, 2004, as
compared to the same quarter last year and an increase in cash flow from
operations that was available to make debt payments during the nine-month period
ended June 30, 2004, as compared to the corresponding prior year period.

THE THREE-MONTH PERIOD ENDED JUNE 30, 2004, COMPARED TO THE THREE-MONTH PERIOD
ENDED JUNE 30, 2003.

         Revenues. During the three-month period ended June 30, 2004, finance
income increased $2.9 million or 31.5% to $12.1 million from $9.2 million for
the three-month period ended June 30, 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 month period
ended June 30, 2004, as compared to the same prior year period. During the
three-month period ended June 30, 2004, we acquired receivables at a cost of
$6.1 million as compared to $57.1 million during the three-month period ended
June 30, 2003, and for year ended September 30, 2003, we acquired receivables at
a cost of $115.6 million as compared to $36.6 million for the year ended
September 30, 2002. For the three-month period ended June 30, 2004, we had an
average of $116.1 million in consumer receivables acquired for liquidation as
compared to $50.8 million during the same prior year period. In addition, based
on an increase in projected portfolio collections on certain portfolios as
compared to what we estimated at September 30, 2003, December 31, 2003 and March
31, 2004, we revised our accounting estimates. Such change in accounting
estimates has resulted in approximately a $3.1 million increase in finance
income recognized during the three- month period ended June 30, 2004. The
changes in projected portfolio collections were primarily due to changes in our
servicing strategy in which we transferred a substantial number of accounts from
collection agencies to collection attorneys during the current fiscal year and
have a substantial number of accounts that will be sent to our collection
attorneys within the coming months.

         General and Administrative Expenses. During the three-month period
ended June 30, 2004, general and administrative expenses increased $0.4 million
or 19.0% to $2.5 million from $2.1 million for the three-month period ended June
30, 2003, and represented 93.7% of total expenses for the three-month period
ended June 30, 2004. The increase in general and administrative expenses was
primarily due to an increase in receivable servicing expenses during the
three-month period ended June 30, 2004, as compared to the same prior year
period. The increase in receivable servicing expenses resulted from the increase
in our average outstanding accounts acquired for liquidation during the
three-month period ended June 30, 2004, as compared to the same prior year
period. A majority of the increased costs were from collection expenses
including court costs, data processing costs, salaries, payroll taxes and
benefits, professional fees and telephone charges.

         Third-Party Servicing Expenses During the three-month period ended June
30, 2004, we did not incur any third-party servicing expense because we sold the
portfolio that this cost was related to as of February 29, 2004. During the same
period last year, this expense was $1.3 million.

         Interest Expense. During the three-month period ended June 30, 2004,
interest expense decreased to $0.2 million from $1.4 million in the same prior
year period and represented 6.3% of total expenses for the three-month period
ended June 30, 2004. The decrease was due to a decrease in average outstanding
borrowings under our line of credit during the three-month period ended June 30,
2004, as compared to the same period in the prior year. The decrease in
borrowings was due to the decrease in acquisitions of consumer receivables
acquired for liquidation during the third quarter ended June 30, 2004, as
compared to the same quarter last year and an increase in cash flow from
operations that was available to make debt payments during the three-month
period ended June 30, 2004, as compared to the corresponding prior year period.

LIQUIDITY AND CAPITAL RESOURCES

         Our primary sources of cash from operations include payments on the
receivable portfolios that we have acquired and borrowings under our line of
credit. 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
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
group of financial institutions. As of June 30, 2004, there was $5.7 million
outstanding balance under this facility. As of June 30, 2004, our cash and cash
equivalents decreased to $1.2 million from $6.8 million at September 30, 2003.
The decrease in cash and cash equivalents during the nine-month period ended
June 30, 2004 was primarily due to an increase in our credit line payments,
other liability payments and tax payments during the nine-month period ended
June 30, 2004 as compared to the same prior year period.



                                       15
<PAGE>

         Net cash provided by operating activities was $11.5 million during the
nine-month period ended June 30, 2004, compared to net cash provided by
operating activities of $6.4 million during the nine-month period ended June 30,
2003. The increase in net cash provided by operating activities was primarily
due to an increase in net income which was partially offset by a decrease in
other liabilities and income taxes payable and an increase in other assets
during the nine-month period ended June 30, 2004, as compared to the same prior
year period. Net cash used in investing activities was $6.7 million during the
nine-month period ended June 30, 2004, compared to net cash used of $37.8
million during the nine-month period ended June 30, 2003. The decrease in net
cash used in investing activities was primarily due to a decrease in the
purchase of accounts acquired for liquidation and an increase in principal
collected during the nine-month period ended June 30, 2004, compared to the same
period in the prior year. Net cash used in financing activities was $10.4
million during the nine-month period ended June 30, 2004, compared to net cash
provided of $31.0 million during the nine-month period June 30, 2003. The
decrease in net cash provided by financing activities was primarily due to a
decrease in borrowings under our line of credit which was due to a decrease in
the purchase of accounts acquired for liquidation during the nine-month period
ended June 30, 2004, as compared to the same prior year period. In addition, we
declared dividends of $1.1 million during the nine-month period ended June 30,
2004, of which $732,000 was paid during the period and no dividends in the same
prior year period.

         On May 11, 2004, we entered into an amended and restated loan and
security agreement that increased our line of credit to $60 million and extended
it to May 11, 2006. This line of credit bears 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 (3.50% at June 30, 2004), and
includes additional financial covenants as defined in the agreement. As of June
30, 2004, there was $5.7 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 to acquire consumer receivables. During the
nine-month period ended June 30, 2004, we acquired consumer receivable
portfolios at a cost of approximately $55.6 million. These acquisitions were
financed with our cash flows from operating activities and our credit facility.

         We anticipate the funds available under our current credit facility,
as well as funds that may be made available by Asta Group, Incorporated, an
affiliate of ours, and cash from operations will be sufficient to satisfy the
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 but we may not be able to 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 NINE MONTHS ENDED JUNE 30, 2004
                                                               ------------------------------------------------
                                                                   ACCRUAL          CASH
                                                                    BASIS           BASIS
                                                                 PORTFOLIOS       PORTFOLIOS          TOTAL
                                                               ---------------   -------------   --------------
<S>                                                            <C>               <C>             <C>
Balance, beginning of period..............................     $   102,809,000   $   2,783,000   $  105,592,000
Acquisitions of receivable portfolios, net................          54,880,000         704,000       55,584,000
Gross cash collections including sales proceeds...........         (79,713,000)     (5,563,000)     (85,276,000)
Finance income recognized.................................          32,458,000       3,830,000       36,288,000
                                                               ---------------   -------------   --------------
Balance, end of period....................................     $   110,434,000   $   1,754,000   $  112,188,000
                                                               ===============   =============   ==============
Revenue as a percentage of collections........................       40.7%            68.8%           42.6%
</TABLE>



                                       16
<PAGE>

<TABLE>
<CAPTION>
                                                                     FOR THE NINE MONTHS ENDED JUNE 30, 2003
                                                                 ----------------------------------------------
                                                                    ACCRUAL           CASH
                                                                     BASIS            BASIS
                                                                   PORTFOLIOS       PORTFOLIOS          TOTAL
                                                                 -------------    ------------    -------------
<S>                                                              <C>              <C>             <C>
Balance, beginning of period..............................       $  32,797,000    $  3,282,000    $  36,079,000
Acquisitions of receivable portfolios, net................          59,480,000       2,019,000       61,499,000
Gross cash collections including sales proceeds...........         (39,580,000)     (6,607,000)     (46,187,000)
Finance income recognized.................................          18,259,000       5,221,000       23,480,000
                                                                 -------------    ------------    -------------
Balance, end of period....................................       $  70,956,000    $  3,915,000    $  74,871,000
                                                                 =============    ============    =============
Revenue as a percentage of collections........................         46.1%          79.0%            50.8%
</TABLE>

<TABLE>
<CAPTION>
                                                                   FOR THE THREE MONTHS ENDED JUNE 30, 2004
                                                                ----------------------------------------------
                                                                  ACCRUAL          CASH
                                                                   BASIS           BASIS
                                                                 PORTFOLIOS      PORTFOLIOS         TOTAL
                                                               --------------   -------------   -------------
<S>                                                            <C>              <C>             <C>
Balance, beginning of period..............................     $  117,910,000   $   2,134,000   $  120,044,000
Acquisitions of receivable portfolios, net................          6,144,000               -        6,144,000
Gross cash collections including sales proceeds...........        (24,439,000)     (1,581,000)     (26,020,000)
Finance income recognized.................................         10,819,000       1,201,000       12,020,000
                                                               --------------   -------------   --------------
Balance, end of period....................................     $  110,434,000   $   1,754,000   $  112,188,000
                                                               ==============   =============   ==============
Revenue as a percentage of collections........................      44.3%            75.7%           46.2%
</TABLE>

<TABLE>
<CAPTION>
                                                                    FOR THE THREE MONTHS ENDED JUNE 30, 2003
                                                                 ----------------------------------------------
                                                                    ACCRUAL          CASH
                                                                     BASIS           BASIS
                                                                  PORTFOLIOS       PORTFOLIOS         TOTAL
                                                                 -------------    ------------    -------------
<S>                                                              <C>              <C>             <C>
Balance, beginning of period..............................       $  24,108,000    $  2,560,000    $  26,668,000
Acquisitions of receivable portfolios, net................          55,321,000       1,750,000       57,071,000
Gross cash collections including sales proceeds...........         (15,833,000)     (2,201,000)     (18,034,000)
Finance income recognized.................................           7,360,000       1,806,000        9,166,000
                                                                 -------------    ------------    -------------
Balance, end of period....................................       $  70,956,000    $  3,915,000    $  74,871,000
                                                                 =============    ============    =============
Revenue as a percentage of collections........................        46.5%           82.1%            50.8%
</TABLE>

ADDITIONAL SUPPLEMENTARY INFORMATION ON ACCOUNTS ACQUIRED FOR LIQUIDATION
<TABLE>
<CAPTION>
                                                                                    AS OF JUNE 30, 2004
                                                                             ----------------------------------
                                                                              COST RECOVERY     INTEREST METHOD
                                                                               PORTFOLIOS         PORTFOLIOS
                                                                             --------------     --------------
<S>                                                                          <C>                <C>
Cumulative Original Purchase Price.........................................  $   49,300,000     $  280,601,000
Cumulative Aggregate Managed Portfolios....................................  $2,168,400,000     $6,527,269,000
</TABLE>

         The original purchase price reflects what we paid for the receivables
from 1998 through June 30, 2004. The cumulative aggregate managed portfolio
balance is the original aggregate amount owed by the borrowers from 1998 through
June 30, 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.


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<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 nine-month period ended June 30, 2004, we earned interest
income of $3.8 million under the cost recovery method because we collected $3.8
million in excess of our purchase price on certain receivable portfolios. In
addition, we earned $32.5 million of interest income under the interest method
based on actuarial computations on certain portfolios based on actual
collections during the period based on what we project to collect in future
periods.

         During the three-month period ended June 30, 2004 we recorded total
gross collections of $26.0 million as compared to $30.4 million for the
three-month period ended March 31, 2004. Although this represents a decrease of
$4.4 million in gross collections during this quarter as compared to the quarter
ending March 31, 2004, collections excluding sales actually increased during
this quarter as compared to the prior quarter.

RECENT ACCOUNTING PRONOUNCEMENTS

         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 proposes 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. Increases in
expected cash flows should be recognized prospectively through an adjustment of
the IRR while decreases in expected cash flows should be recognized as
impairment. This SOP is effective for loans acquired in fiscal years beginning
after December 15, 2004. We are in the process of evaluating the application of
this SOP, but believe that the impact on our results would not be significant.

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. A 25 basis-point increase in interest rates could
increase 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.


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<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 Herman, 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 Herman, pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002.

         (b) Reports on Form 8-K

         Furnished on May 12, 2004, issuance of an earnings press release for
         the six months ended March 31, 2004.

         Furnished on May 19, 2004, exhibit 10.17 Third Amended Loan and
         Security Agreement dated May 11, 2004, between the Company and Israel
         Discount Bank of NY.


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<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: August 10, 2004             By: /s/ Gary Stern
                                  --------------------------------------
                                  Gary Stern, President, Chief Executive Officer
                                  (Principal Executive Officer)

Date: August 10, 2004             By: /s/ Mitchell Herman
                                  --------------------------------------
                                  Mitchell Herman, Chief Financial Officer
                                  (Principal Financial Officer and
                                  Principal Accounting Officer)






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