<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 March 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 |_| No |X|

         As of May 1, 2004, the registrant had approximately 13,377,000 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 March 31, 2004 (unaudited) and September 30, 2003..........      2
         Consolidated Statements of Operations for the six and three month periods ended
            March 31, 2004 and 2003 (unaudited).......................................................      3
         Consolidated Statement of Stockholders' Equity for the six month period ending
            March 31, 2004 (unaudited)................................................................      4
         Consolidated Statements of Cash Flows for the six month periods ended
            March 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...................................     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
Certificate of Principal Executive Officer............................................................     21
Certificate of Principal Financial Officer............................................................     22
</TABLE>


                                       1
<PAGE>

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

                      ASTA FUNDING, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                        March 31,     September 30,
                                                                          2004            2003
                                                                       -----------    ------------
                                                                       (Unaudited)
<S>                                                                   <C>            <C>
                                 ASSETS
Cash ...............................................................   $  5,950,000   $  6,846,000
Restricted cash, net ...............................................         54,000         54,000
Consumer receivables acquired for liquidation ......................    120,044,000    105,592,000
Auto loans receivable, net .........................................          4,000          5,000
Furniture and equipment, net .......................................        725,000        710,000
Other assets .......................................................        526,000        169,000
                                                                       ------------   ------------
          Total assets .............................................   $127,303,000   $113,376,000
                                                                       ============   ============
                    LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
   Debt ............................................................   $ 23,044,000   $ 16,381,000
   Other liabilities ...............................................      1,296,000      3,741,000
   Income taxes payable ............................................        106,000        802,000
   Deferred income taxes ...........................................         81,000         85,000
                                                                       ------------   ------------
          Total liabilities ........................................     24,527,000     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 -- 13,376,000 at March 31, 2004 and
   13,180,000 at September 30, 2003 ................................        134,000        132,000
   Additional paid-in capital ......................................     58,736,000     57,718,000
   Retained earnings ...............................................     43,906,000     34,517,000
                                                                       ------------   ------------
          Total stockholders' equity ...............................    102,776,000     92,367,000
                                                                       ------------   ------------
Total liabilities and stockholders' equity .........................   $127,303,000   $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  Six Months Ended    Six Months Ended
                                                         March 31, 2004      March 31, 2003     March 31, 2004      March 31, 2003
                                                         --------------      --------------     --------------      --------------
<S>                                                      <C>                 <C>                 <C>                 <C>
Revenues:
Finance income ...................................        $12,864,000         $ 7,720,000         $24,319,000         $14,471,000
                                                          -----------         -----------         -----------         -----------




Expenses:
General and administrative .......................          2,981,000           2,009,000           5,524,000           3,362,000
Third-party servicing ............................            454,000           1,645,000           1,316,000           3,176,000
Interest .........................................            285,000              11,000             456,000              13,000
                                                          -----------         -----------         -----------         -----------

                                                            3,720,000           3,665,000           7,296,000           6,551,000
                                                          -----------         -----------         -----------         -----------


Income before income taxes .......................          9,144,000           4,055,000          17,023,000           7,920,000

Income tax expense ...............................          3,711,000           1,626,000           6,902,000           3,179,000
                                                          -----------         -----------         -----------         -----------

Net income .......................................        $ 5,433,000         $ 2,429,000         $10,121,000         $ 4,741,000
                                                          -----------         -----------         -----------         -----------


Net income per share:

Basic ............................................        $      0.41         $      0.30         $      0.76         $      0.58
                                                          -----------         -----------         -----------         -----------

Diluted ..........................................        $      0.38         $      0.27         $      0.71         $      0.54
                                                          -----------         -----------         -----------         -----------


Weighted average number of shares outstanding:

Basic ............................................         13,347,000           8,166,000          13,276,000           8,160,000
                                                          -----------         -----------         -----------         -----------

Diluted ..........................................         14,304,000           8,894,000          14,229,000           8,802,000
                                                          -----------         -----------         -----------         -----------
</TABLE>










          See accompanying notes to consolidated financial statements


                                       3
<PAGE>

                       ASTA FUNDING, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                   Common Stock           Additional
                                           ---------------------------     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 ....................        196,000          2,000      1,018,000            --         1,020,000
Dividends paid and payable .............           --             --             --          (732,000)       (732,000)
Net Income .............................           --             --             --        10,121,000      10,121,000
                                           ------------   ------------   ------------    ------------    ------------
Balance, March  31, 2004 ...............     13,376,000   $    134,000   $ 58,736,000    $ 43,906,000    $102,776,000
                                           ============   ============   ============    ============    ============
</TABLE>










          See accompanying notes to consolidated financial statements


                                       4
<PAGE>

                       ASTA FUNDING, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                            Six Months Ended   Six Months Ended
                                                                             March 31, 2004     March 31, 2003
                                                                             --------------     --------------
<S>                                                                          <C>                <C>
Cash flows from operating activities:
 Net income ............................................................      $ 10,121,000       $  4,741,000

Adjustments to reconcile net income to net cash provided by operating
   activities:
 Depreciation and amortization .........................................           105,000             66,000
 Deferred income taxes .................................................            (4,000)            47,000

Changes in:
 Repossessed automobiles held for sale .................................              --               62,000
 Other assets ..........................................................          (357,000)           355,000
 Income taxes payable ..................................................          (696,000)        (1,468,000)
 Other liabilities .....................................................        (2,445,000)        (1,211,000)
                                                                              ------------       ------------
    Net cash provided by operating activities ..........................         6,724,000          2,592,000


Cash flows from investing activities:
 Auto loan principal payments ..........................................             1,000             29,000
 Purchase of consumer receivables acquired for liquidation .............       (49,440,000)        (4,428,000)
 Principal collected on receivables acquired for liquidation ...........        34,988,000         13,839,000
 Finance receivables ...................................................              --            1,443,000
 Capital expenditures ..................................................          (120,000)          (440,000)
                                                                              ------------       ------------
    Net cash (used in) provided by investing activities ................       (14,571,000)        10,443,000

Cash flows from financing activities:
 Proceeds from exercise of options .....................................         1,020,000             61,000
 Dividends paid ........................................................          (732,000)              --
 Advances (payments) under line of credit, net .........................         6,663,000           (382,000)
                                                                              ------------       ------------
    Net cash provided by (used in) financing activities ................         6,951,000           (321,000)
                                                                              ------------       ------------
(Decrease) increase in cash ............................................          (896,000)        12,714,000
Cash at the beginning of period ........................................         6,846,000          2,213,000
                                                                              ------------       ------------
Cash at end of period ..................................................      $  5,950,000       $ 14,927,000
                                                                              ============       ============
Supplemental disclosure of cash flow information:

 Cash paid during the period
  Interest .............................................................      $    428,000       $      7,000
  Income taxes .........................................................      $  3,654,000       $  2,804,000
</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 March 31, 2004, the consolidated
statements of operations for the six and three month periods ended March 31,
2004 and 2003, and the consolidated statements of cash flows for the six month
periods ended March 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 our financial position at
March 31, 2004 and September 30, 2003, the results of operations for the six and
three month periods ended March 31, 2004 and 2003 and cash flows for the six
month periods ended March 31, 2004 and 2003 have been made. The results of
operations for the six and three month periods ended March 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, 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 Six Months Ended March 31, 2004
                                                                     (in thousands)
                                                    -----------------------------------------------
                                                       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 ......      48,736,000         704,000        49,440,000
Gross cash collections including sales proceeds .     (55,274,000)     (3,982,000)      (59,256,000)
Finance income recognized .......................      21,639,000       2,629,000        24,268,000
                                                    -------------     -----------     -------------
Balance, end of period ..........................   $ 117,910,000     $ 2,134,000     $ 120,044,000
                                                    =============     ===========     =============
Revenue as a percentage of collections ..........            39.1%           66.0%             41.0%
</TABLE>

<TABLE>
<CAPTION>
                                                       For the Six Months Ended March 31, 2003
                                                                   (in thousands)
                                                    -----------------------------------------------
                                                       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 ......      4,159,000         269,000        4,428,000
Gross cash collections including sales proceeds .    (23,747,000)     (4,406,000)     (28,153,000)
Finance income recognized .......................     10,899,000       3,415,000       14,314,000
                                                    ------------     -----------     ------------
Balance, end of period ..........................   $ 24,108,000     $ 2,560,000     $ 26,668,000
                                                    ============     ===========     ============
Revenue as a percentage of collections ..........           45.9%           77.5%            50.8%
</TABLE>

<TABLE>
<CAPTION>
                                                       For the Three Months Ended March 31, 2004
                                                                   (in thousands)
                                                    -----------------------------------------------
                                                       Accrual          Cash
                                                        Basis           Basis
                                                     Portfolios      Portfolios         Total
                                                    ------------     -----------     ------------
<S>                                                <C>              <C>             <C>
Balance, beginning of period ....................   $ 120,937,000    $ 2,634,000     $ 123,571,000
Acquisitions of receivable portfolios, net ......      14,019,000           --          14,019,000
Gross cash collections including sales proceeds .     (28,731,000)    (1,654,000)      (30,385,000)
Finance income recognized .......................      11,685,000      1,154,000        12,839,000
                                                    -------------    -----------     -------------
Balance, end of period ..........................   $ 117,910,000    $ 2,134,000     $ 120,044,000
                                                    =============    ===========     =============
Revenue as a percentage of collections ..........            40.7%          69.8%             42.3%
</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 March 31, 2003
                                                                   (in thousands)
                                                    -----------------------------------------------
                                                       Accrual          Cash
                                                        Basis           Basis
                                                     Portfolios      Portfolios         Total
                                                    ------------     -----------     ------------
<S>                                                <C>              <C>             <C>
Balance, beginning of period ....................   $ 27,521,000     $ 2,982,000     $ 30,503,000
Acquisitions of receivable portfolios, net ......      2,498,000            --          2,498,000
Gross cash collections including sales proceeds .    (11,992,000)     (2,016,000)     (14,008,000)
Finance income recognized .......................      6,081,000       1,594,000        7,675,000
                                                    ------------     -----------     ------------
Balance, end of period ..........................   $ 24,108,000     $ 2,560,000     $ 26,668,000
                                                    ============     ===========     ============
Revenue as a percentage of collections ..........           50.7%           79.1%            54.8%
</TABLE>


Note  4: Furniture and Equipment

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

                                                    March 31,     September 30,
                                                       2004           2003
                                                    ----------     ----------
Furniture .......................................   $  314,000     $  307,000
Equipment .......................................    1,291,000      1,178,000
                                                    ----------     ----------
                                                     1,605,000      1,485,000
Less accumulated depreciation ...................      880,000        775,000
                                                    ----------     ----------
Balance, end of period ..........................   $  725,000     $  710,000
                                                    ==========     ==========

Note 5: Debt


         In January 2001, a bank advanced $10,000,000 under a line of credit
with interest at the prime rate (4.00% at March 31, 2004). The credit line is
collateralized by 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. In January 2003, the line of credit was
increased to $25,000,000. In November 2003, the line of credit was increased to
$35 million. This line was due to expire on January 31, 2004, but has been
extended by the bank until May 31, 2004. As of March 31, 2004, $23.0 million was
outstanding and we were in compliance with all of the covenants under this line
of credit.

         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, and includes additional
financial covenants as defined in the agreement.

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 six and three month periods ending March 31,
2004 and 40.1% for the six and three month periods ending March 31, 2003.

         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 six and three months ended March 31, 2004 and 2003:

<TABLE>
<CAPTION>
                                                  Six Months Ended March 31,
                              ------------------------------------------------------------------
                                             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 .....................   $10,121,000   13,276,000   $0.76   $4,741,000   8,160,000   $0.58
                                                         =====                            =====
Effect of Dilutive Stock ..                    953,000                          642,000
                              -----------   ----------           ----------   ---------
Diluted ...................   $10,121,000   14,229,000   $0.71   $4,741,000   8,802,000   $0.54
                              ===========   ==========   =====   ==========   =========   =====
</TABLE>

<TABLE>
<CAPTION>
                                                 Three Months Ended March 31,
                              ------------------------------------------------------------------
                                             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 .....................   $5,433,000    13,347,000   $0.41   $2,429,000   8,166,000   $0.30
                                                         =====                            =====
Effect of Dilutive Stock ..                    957,000                          728,000
                              ----------    ----------           ----------   ---------
Diluted ...................   $5,433,000    14,304,000   $0.38   $2,429,000   8,894,000   $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>
                                                                      Six Months Ended March 31,
                                                                     -----------------------------
                                                                          2004            2003
                                                                     -------------   -------------
<S>                                                                 <C>             <C>
Net income as reported ...........................................   $  10,121,000   $   4,741,000
Stock based compensation expense
 Determined under fair value method, net of related tax effects ..      (1,103,000)       (530,000)
                                                                     -------------   -------------
Pro forma net income .............................................   $   9,018,000   $   4,211,000
                                                                     =============   =============
Earnings per share:
 Basic-- as reported .............................................   $        0.76   $        0.58
                                                                     =============   =============
 Basic-- pro forma ...............................................   $        0.68   $        0.52
                                                                     =============   =============
 Diluted-- as reported ...........................................   $        0.71   $        0.54
                                                                     =============   =============
 Diluted-- pro forma .............................................   $        0.63   $        0.48
                                                                     =============   =============
</TABLE>


                                       10
<PAGE>

                               ASTA FUNDING, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 10: Stock-based Compensation - (Continued)

<TABLE>
<CAPTION>
                                                                     Three Months Ended March 31,
                                                                     -----------------------------
                                                                          2004            2003
                                                                     -------------   -------------
<S>                                                                 <C>             <C>
Net income as reported ...........................................   $   5,433,000   $   2,429,000
Stock-based compensation expense
 Determined under fair value method, net of related tax effects ..        (552,000)       (265,000)
                                                                     -------------   -------------
Pro forma net income .............................................   $   4,881,000   $   2,164,000
                                                                     =============   =============
Earnings per share:
 Basic-- as reported .............................................   $        0.41   $        0.30
                                                                     =============   =============
 Basic-- pro forma ...............................................   $        0.37   $        0.27
                                                                     =============   =============
 Diluted-- as reported ...........................................   $        0.38   $        0.27
                                                                     =============   =============
 Diluted-- pro forma .............................................   $        0.34   $        0.24
                                                                     =============   =============
</TABLE>

The weighted average fair value of the options granted during 2004 and 2003 were
$8.96 and $3.55 per share on the dates of grant, respectively, using the
Black-Scholes option pricing model with the following assumptions: dividend
yield 0.0094% (2004) and dividend yield 0% (2003), weighted average volatility
41.559% (2004) and 56.4378% (2003), expected life 10 years, weighted average
risk free interest rate of 4.2895% in 2004 and 4.0050% 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 March 31, 2004,
54,002 shares of common stock were available for issuance under the 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 March 31, 2004, 860,000 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>
                                                              Six Months Ended March 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 ..    1,225,000    $ 3.2377    1,109,000    $ 2.8657
Options granted .................................      357,000     15.0492      260,000      5.0735
Options exercised ...............................     (196,000)     5.2131      (26,000)     2.3905
Options cancelled ...............................            0           0      (13,000)     4.1475
                                                    ----------    --------   ----------    --------
Outstanding options at the end of period ........    1,386,000    $ 6.0005    1,330,000    $ 3.2939
                                                    ----------               ----------

Exercisable options at the end of period ........      967,000    $ 3.8731      862,000    $ 2.6409
                                                    ----------               ----------
</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 March 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 - $ 1.8100 .......          205,000             5.2        $ 0.8125        205,000        $ 0.8125
$ 1.8101 - $ 3.3620 .......          553,000             5.6          2.6016        553,000          2.6016
$ 3.3621 - $ 5.4300 .......          183,000             8.6          4.7250         50,000          4.7250
$ 5.4310 - $ 7.2400 .......           81,000             8.0          6.6569         46,000          6.6546
$ 7.2410 - $ 9.0500 .......           24,000             9.0          7.7450         14,000          7.7450
$ 9.0510 - $14.480  .......                0               0               0              0               0
$14.4801 - $16.29   .......          323,000             9.6          14.898         93,000          14.870
$16.2901 - $18.10   .......           17,000             9.9          18.100          6,000          18.100
                                   ---------        --------        --------        -------        --------
                                   1,386,000             7.1        $ 6.0005        967,000        $ 3.8731
                                   =========                                        =======
</TABLE>

Note 12: Stockholders' Equity

         During the six months ended March 31, 2004, we paid $331,000 on
November 1, 2003 and accrued $401,000 as of March 31, 2004 for dividends.

         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 periods reported in
this Form-10Q 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 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
six-month period ended March 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 recognize 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 is reported as an expense
on our income statement as third-party service expense. This portfolio was sold
in March 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 and December
31, 2003, we revised our estimates. Such change in accounting estimates has
resulted in approximately a $2.8 million increase in finance income recognized
during the six months ended March 31, 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 six-month period ended March 31, 2004, compared to the six-month
         period ended March 31, 2003

         Revenues. During the six-month period ended March 31, 2004, finance
income increased $9.8 million or 67.6% to $24.3 million from $14.5 million for
the six-month period ended March 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 six-months ended March
31, 2004, as compared to the same prior year period. During the six-months ended
March 31, 2004, we acquired receivables at a cost of $49.4 million as compared
to $4.4 million during the six- months ended March 31, 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. In addition,
based on an increase in projected portfolio collections on certain portfolios as
compared to what we estimated at September 30, 2003 and December 31, 2003, we
revised our estimates. Such change in accounting estimates has resulted in
approximately a $2.8 million increase in finance income recognized during the
six months ended March 31, 2004.

         General and Administrative Expenses. During the six-month period ended
March 31, 2004, general and administrative expenses increased $2.1 million or
61.8% to $5.5 million from $3.4 million for the six-months ended March 31, 2003,
and represented 75.3% of total expenses for the six months ended March 31, 2004.
The increase in general and administrative expenses was primarily due to an
increase in receivable servicing expenses during the six-month period ended
March 31, 2004, as compared to the same prior year period. The increase in
receivable servicing expenses resulted from the substantial increase in our
average outstanding accounts acquired for liquidation during the six-months
ended March 31, 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
six months ended March 31, 2004, compared to only three months of these expenses
during the six months ended March 31, 2003.

         Third-Party Servicing Expenses. During the six-month period ended March
31, 2004, third-party servicing expenses decreased $1.9 million or 59.4% to $1.3
million from $3.2 for the six months ended March 31, 2003, and represented 17.8%
of total expenses for the six months ended March 31, 2004. This expense relates
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 six months ended March 31, 2004, as compared to the same
prior year period, and the sale of this specific portfolio as of February 29,
2004.


                                       14
<PAGE>

         Interest Expense. During the six-month period ended March 31, 2004,
interest expense increased to $0.5 million from no interest expense in the same
prior year period and represented 6.9% of total expenses for the six-month
period ended March 31, 2004. The increase was due to an increase in average
outstanding borrowings under our line of credit during the six-month period
ended March 31, 2004, as compared to the same period in the prior year. 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, 2003 and the first half of the current fiscal year, as
compared to the corresponding prior year periods.

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

         Revenues. During the three-month period ended March 31, 2004, finance
income increased $5.2 million or 67.5% to $12.9 million from $7.7 million for
the three-month period ended March 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 six and three-month
periods ended March 31, 2004, as compared to the same prior year periods. During
the three months ended March 31, 2004, we acquired receivables at a cost of
$49.4 million as compared to $4.4 million during the three months ended March
31, 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. In addition, based on an increase in projected portfolio collections
on certain portfolios as compared to what we estimated at September 30, 2003 and
December 31, 2003, we revised our estimates. Such change in accounting estimates
has resulted in approximately a $1.3 million increase in finance income
recognized during the three months ended March 31, 2004.

         General and Administrative Expenses. During the three-month period
ended March 31, 2004, general and administrative expenses increased $1.0 million
or 50.0% to $3.0 million from $2.0 million for the three-months ended March 31,
2003, and represented 80.1% of total expenses for the three months ended March
31, 2004. The increase in general and administrative expenses was primarily due
to an increase in receivable servicing expenses during the three-month period
ended March 31, 2004, as compared to the same prior year period. The increase in
receivable servicing expenses resulted from the substantial increase in our
average outstanding accounts acquired for liquidation during the three-months
ended March 31, 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
March 31, 2004, third-party servicing expenses decreased $1.1 million or 68.8%
to $0.5 million from $1.6 for the three months ended March 31, 2003, and
represented 12.2% of total expenses for the three months ended March 31, 2004.
This expense relates 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 during the three months ended March 31, 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 three-month period ended March 31, 2004,
interest expense increased to $0.3 million from no interest expense in the same
prior year period and represented 7.7% of total expenses for the three-month
period ended March 31, 2004. The increase was due to an increase in average
outstanding borrowings under our line of credit during the three-month period
ended March 31, 2004, as compared to the same period in the prior year. 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, 2003 and the first half of the current fiscal year, as
compared to the corresponding prior year periods.

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 and
commercial accounts receivable portfolios. While we maintain a $35 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 $35 million
line of credit with a financial institution. As of March 31, 2004, there was
$23.0 million outstanding balance under this facility. In May 2004, our credit
facility was increased to $60 million and extended for two years. As of March
31, 2004, our cash and cash equivalents decreased to $5.9 million from $6.8
million at September 30, 2003. The decrease in cash and cash equivalents during
the six month period ended March 31, 2004 was primarily due to an increase in
consumer receivable purchases and an increase in other liability and tax
payments during the six months ended March 31, 2004 as compared to the same
prior year period.


                                       15
<PAGE>

         Net cash provided by operating activities was $6.7 million during the
six months ended March 31, 2004, compared to net cash provided by operating
activities of $2.6 million during the six months ended March 31, 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 during the six months ended March 31, 2004,
as compared to the same year period. Net cash used in investing activities was
$14.6 million during the six months ended March 31, 2004, compared to net cash
provided by investing activities of $10.4 million during the six months ended
March 31, 2003. 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 six months ended March 31, 2004, compared to the same
period in the prior year. Net cash provided by financing activities was $7.0
million during the six months ended March 31, 2004, compared to net cash used of
$0.3 million during the six months March 31, 2003. The increase in net cash
provided by financing activities was primarily due to an increase in borrowings
under our line of credit which was due to an increase in accounts acquired for
liquidation during the six months ended March 31, 2004, as compared to the same
prior year period.

         We have a $35 million line of credit with a bank with interest at the
prime rate. 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 was due to expire on January 31, 2004,
but has been extended by the bank until May 31, 2004. As of March 31, 2004,
there was $23.0 million outstanding balance under this line of credit and we
were in compliance with all of the covenants under this line of credit.

         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, and includes additional
financial covenants as defined in the agreement.

         Our cash requirements have been and will continue to be significant. We
depend on external financing to acquire consumer receivables. During the six
months ended March 31, 2004, we acquired consumer receivable portfolios at a
cost of approximately $49.4 million. These acquisitions were financed with our
credit facility and cash flows from operating activities.

         We anticipate the funds available under our current credit facility
that we entered into on May 11, 2004, 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. However, we have not reached any agreement or arrangement with
respect to any particular acquisition and 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 Six Months Ended March 31, 2004
                                                      -------------------------------------------------
                                                                       (in thousands)
                                                         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 ...           48,736,000          704,000         49,440,000
Cash collections including sales proceeds ....          (55,274,000)      (3,982,000)       (59,256,000)
Finance income recognized ....................           21,639,000        2,629,000         24,268,000
                                                      -------------      -----------      -------------
Balance, end of period .......................        $ 117,910,000      $ 2,134,000      $ 120,044,000
                                                      =============      ===========      =============
Revenue as a percentage of collections .......                 39.1%            66.0%              41.0%
</TABLE>


                                       16
<PAGE>

<TABLE>
<CAPTION>
                                                         For the Six Months Ended March 31, 2003
                                                                      (in thousands)
                                                    -------------------------------------------------
                                                       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 ......       4,159,000          269,000         4,428,000
Cash collections including sales proceeds .......     (23,747,000)      (4,406,000)      (28,153,000)
Finance income recognized .......................      10,899,000        3,415,000        14,314,000
                                                     ------------      -----------      ------------
Balance, end of period ..........................    $ 24,108,000      $ 2,560,000      $ 26,668,000
                                                     ============      ===========      ============
Revenue as a percentage of collections ..........            45.9%            77.5%             50.8%
</TABLE>

<TABLE>
<CAPTION>
                                                         For the Three Months Ended March 31, 2004
                                                      -------------------------------------------------
                                                                      (in thousands)
                                                         Accrual            Cash
                                                          Basis             Basis
                                                       Portfolios        Portfolios          Total
                                                      -------------      -----------      ------------
<S>                                                  <C>                <C>              <C>
Balance, beginning of period .....................    $ 120,937,000      $ 2,634,000      $ 123,571,000
Acquisitions of receivable portfolios, net .......       14,019,000             --           14,019,000
Gross cash collections including sales proceeds ..      (28,731,000)      (1,654,000)       (30,385,000)
Finance income recognized ........................       11,685,000        1,154,000         12,839,000
                                                      -------------      -----------      -------------
Balance, end of period ...........................    $ 117,910,000      $ 2,134,000      $ 120,044,000
                                                      =============      ===========      =============
Revenue as a percentage of collections ...........             40.7%            69.8%              42.3%
</TABLE>

<TABLE>
<CAPTION>
                                                        For the Three Months Ended March 31, 2003
                                                                      (in thousands)
                                                      -----------------------------------------------
                                                         Accrual           Cash
                                                          Basis            Basis
                                                       Portfolios       Portfolios          Total
                                                      ------------      -----------      ------------
<S>                                                  <C>               <C>              <C>
Balance, beginning of period .....................    $ 27,521,000      $ 2,982,000      $ 30,503,000
Acquisitions of receivable portfolios, net .......       2,498,000             --           2,498,000
Gross cash collections including sales proceeds ..     (11,992,000)      (2,016,000)      (14,008,000)
Finance income recognized ........................       6,081,000        1,594,000         7,675,000
                                                      ------------      -----------      ------------
Balance, end of period ...........................    $ 24,108,000      $ 2,560,000      $ 26,668,000
                                                      ============      ===========      ============
Revenue as a percentage of collections ...........            50.7%            79.1%             54.8%
</TABLE>

Additional Supplementary Information on Accounts Acquired for Liquidation

                                                     As of March 31, 2004
                                                --------------------------------
                                                Cost Recovery    Interest Method
                                                  Portfolios        Portfolios
                                                --------------   ---------------
Cumulative Original Purchase Price .........    $   49,300,000    $  220,400,000
Cumulative Aggregate Managed Portfolios ....    $2,168,400,000    $6,454,900,000

         The original purchase price reflects what we paid for the receivables
from 1998 through March 31, 2004. The cumulative aggregate managed portfolio
balance is the original aggregate amount owed by the borrowers from 1998 through
March 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.


                                       17
<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 six-months ended March 31, 2004, we earned interest income of
$2.6 million under the cost recovery method because we collected $2.6 million in
excess of our purchase price on certain receivable portfolios. In addition, we
earned $21.6 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.

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 February 11, 2004, issuance of an earnings press release
for the three months ended December 31, 2003.

         Furnished on February 18, 2004, issuance of a press release for a 100%
stock dividend for record holders as of March 9, 2004 and a cash dividend of
$0.03 for record holders as of March 31, 2004.


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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: May 12, 2004                By: /s/ Gary Stern
                                  ----------------------------------------------
                                  Gary Stern, President, Chief Executive Officer
                                  (Principal Executive Officer)

Date: May 12, 2004                By: /s/ Mitchell Herman
                                  ----------------------------------------------
                                  Mitchell Herman, Chief Financial Officer
                                  (Principal Financial Officer and
                                  Principal Accounting Officer)


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