##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended December 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ________ to _______
 Commission file number: 0-26906
 ASTA FUNDING, INC.
  Delaware
(State or other jurisdiction 
of incorporation or organization)
    
    22-3388607
(IRS Employer
Identification No.)210 Sylvan Ave., Englewood Cliffs, New Jersey
(Address of principal executive offices)
    
    07632
(Zip Code)
 Registrants telephone number: (201) 567-5648
  þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




---



##### 



ASTA FUNDING, INC.
INDEX TO FORM 10-Q
 Part I. Financial Information
    
    
    3Item 1. Condensed Consolidated Financial Statements
    
    
    3Condensed Consolidated Balance Sheets as of December 31, 2010 (unaudited) and September
30, 2010
    
    
    3Condensed Consolidated Statements of Operations for the three month periods ended
December 31, 2010 and 2009 (unaudited)
    
    
    4Condensed Consolidated Statement of Stockholders Equity for the three month period
ending December 31, 2010 (unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows for the three month periods ended
December 31, 2010 and 2009 (unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    33Item 4. Controls and Procedures
    
    
    33Part II. Other Information
    
    
    34Item 1. Legal Proceedings
    
    
    34Item 1A. Risk Factors
    
    
    34Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    34Item 3. Defaults Upon Senior Securities
    
    
    34Item 4. (Removed and Reserved)
    
    
    34Item 5. Other Information
    
    
    34Item 6. Exhibits
    
    
    34Signatures
    
    
    36Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 ASTA FUNDING, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Balance Sheets
 December 31,
    
    
    September 30,2010
    
    
    2010(Unaudited)ASSETSCash and cash equivalents
    
    $
    81,058,000
    
    
    $
    84,235,000Restricted cash
    
    
    1,202,000
    
    
    
    1,304,000Consumer receivables acquired for liquidation (at net realizable value)
    
    
    139,579,000
    
    
    
    147,031,000Due from third party collection agencies and attorneys
    
    
    2,425,000
    
    
    
    3,528,000Prepaid and income taxes receivable
    
    
    
    
    
    
    196,000Furniture and equipment, net
    
    
    446,000
    
    
    
    338,000Deferred income taxes
    
    
    18,307,000
    
    
    
    18,762,000Other assets
    
    
    4,396,000
    
    
    
    3,770,000Total assets
    
    $
    247,413,000
    
    
    $
    259,164,000LIABILITIESDebt
    
    $
    79,268,000
    
    
    $
    90,483,000Subordinated debt  related party
    
    
    
    
    
    
    4,386,000Other liabilities
    
    
    1,314,000
    
    
    
    2,105,000Dividends payable
    
    
    292,000
    
    
    
    292,000Income taxes payable
    
    
    1,204,000
    
    
    
    Total liabilities
    
    
    82,078,000
    
    
    
    97,266,000Commitments and contingenciesSTOCKHOLDERS EQUITYPreferred stock, $.01 par value; authorized 5,000,000 shares;
issued and outstanding  noneCommon stock, $.01 par value; authorized 30,000,000 shares; issued
and outstanding  14,633,188 shares at December 31, 2010 and
14,600,423 at September 30, 2010
    
    
    146,000
    
    
    
    146,000Additional paid-in capital
    
    
    73,715,000
    
    
    
    72,717,000Retained earnings
    
    
    91,400,000
    
    
    
    89,026,000Accumulated other comprehensive income
    
    
    74,000
    
    
    
    9,000Total stockholders equity
    
    
    165,335,000
    
    
    
    161,898,000Total liabilities and stockholders equity
    
    $
    247,413,000
    
    
    $
    259,164,000
   3




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Operations
 (Unaudited)
 Three Months
    
    
    Three MonthsEnded
    
    
    EndedDecember 31, 2010
    
    
    December 31, 2009RevenuesFinance income, net
    
    $
    10,759,000
    
    
    $
    10,974,000Other income
    
    
    79,000
    
    
    
    79,00010,838,000
    
    
    
    11,053,000ExpensesGeneral and administrative
    
    
    5,481,000
    
    
    
    5,629,000Interest expense (fiscal year 2011 - Related Party  $86,000;
fiscal year - 2010 - Related Party  $130,000)
    
    
    879,000
    
    
    
    1,259,0006,360,000
    
    
    
    6,888,000Income before income taxes
    
    
    4,478,000
    
    
    
    4,165,000Income tax expense
    
    
    1,812,000
    
    
    
    1,690,000Net income
    
    $
    2,666,000
    
    
    $
    2,475,000Net income per share  Basic
    
    $
    0.18
    
    
    $
    0.17Net income per share  Diluted
    
    $
    0.18
    
    
    $
    0.17Weighted average number of shares outstanding:Basic
    
    
    14,606,121
    
    
    
    14,272,420Diluted
    
    
    14,827,767
    
    
    
    14,615,054
   4




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statement of Stockholders Equity
 (Unaudited)
 AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-in
    
    
    Retained
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    TotalBalance, September
30, 2010
    
    
    14,600,423
    
    
    $
    146,000
    
    
    $
    72,717,000
    
    
    $
    89,026,000
    
    
    $
    9,000
    
    
    $
    161,898,000Restricted common
stock
    
    
    32,765Stock based
compensation
expense
    
    
    
    
    
    
    
    
    
    
    998,000
    
    
    
    
    
    
    
    
    
    
    
    998,000Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (292,000
    )
    
    
    
    
    
    
    (292,000
    )Accumulated other
comprehensive
income, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,000
    
    
    
    65,000Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,666,000
    
    
    
    
    
    
    
    2,666,000Balance,
December 31, 2010
    
    
    14,633,188
    
    
    $
    146,000
    
    
    $
    73,715,000
    
    
    $
    91,400,000
    
    
    $
    74,000
    
    
    $
    165,335,000
 Comprehensive income is as follows:
 Three Months
    
    
    Three MonthsEnded
    
    
    Ended12/31/10
    
    
    12/31/09Net income
    
    $
    2,666,000
    
    
    $
    2,475,000Other comprehensive income (loss), net of
tax  Foreign currency translation
    
    
    65,000
    
    
    
    (41,000
    )Comprehensive income
    
    $
    2,731,000
    
    
    $
    2,434,000Accumulated other comprehensive income
    
    $
    74,000
    
    
    $
    5,000
   5




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Cash Flows
 (Unaudited)
 Three Months
    
    
    Three MonthsEnded
    
    
    EndedDecember 31, 2010
    
    
    December 31, 2009Cash flows from operating activities:Net income
    
    $
    2,666,000
    
    
    $
    2,475,000Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    68,000
    
    
    
    307,000Deferred income taxes
    
    
    455,000
    
    
    
    (245,000
    )Stock based compensation
    
    
    998,000
    
    
    
    559,000Changes in:Other assets
    
    
    (638,000
    )
    
    
    (14,000
    )Due from third party collection agencies and attorneys
    
    
    1,103,000
    
    
    
    515,000Income taxes payable and receivable
    
    
    1,400,000
    
    
    
    1,856,000Other liabilities
    
    
    (724,000
    )
    
    
    (433,000
    )Net cash provided by operating activities
    
    
    5,328,000
    
    
    
    5,020,000Cash flows from investing activities:Purchase of consumer receivables acquired for liquidation
    
    
    (2,883,000
    )
    
    
    (2,300,000
    )Principal collected on receivables acquired for liquidation
    
    
    10,245,000
    
    
    
    16,755,000Principal collected on receivables accounts represented by
account sales
    
    
    101,000
    
    
    
    1,701,000Foreign exchange effect on receivables acquired for liquidation
    
    
    (10,000
    )
    
    
    (21,000
    )Capital expenditures
    
    
    (164,000
    )
    
    
    (27,000
    )Net cash provided by investing activities
    
    
    7,289,000
    
    
    
    16,108,000Cash flows from financing activities:Tax benefit arising from vesting of restricted stock awards
    
    
    
    
    
    
    51,000Changes in restricted cash
    
    
    102,000
    
    
    
    442,000Dividends paid
    
    
    (292,000
    )
    
    
    (285,000
    )Repayment of debt
    
    
    (15,603,000
    )
    
    
    (21,389,000
    )Net cash used in financing activities
    
    
    (15,793,000
    )
    
    
    (21,181,000
    )Net decrease in cash and cash equivalents
    
    
    (3,176,000
    )
    
    
    (53,000
    )Effect of foreign exchange on cash
    
    
    (1,000
    )
    
    
    5,000Cash and cash equivalents at beginning of period
    
    
    84,235,000
    
    
    
    2,385,000Cash and cash equivalents at end of period
    
    $
    81,058,000
    
    
    $
    2,337,000Supplemental disclosure of cash flow information:Cash paid for:Interest (Related Party : 2011  $122,000;2010  $172,000)
    
    $
    943,000
    
    
    $
    1,377,000Income taxes
    
    $
    2,000
    
    
    $
    
   6




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 NOTE 1   BUSINESS AND BASIS OF PRESENTATION
 Business
  Basis of Presentation
    Recent Accounting Pronouncements
   7




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 1   BUSINESS AND BASIS OF PRESENTATION (CONTINUED)
 Subsequent Events
  NOTE 2   PRINCIPLES OF CONSOLIDATION
  NOTE 3   CONSUMER RECEIVABLES ACQUIRED FOR LIQUIDATION
   
    
    the interest method; or
    
    the cost recovery method.
     8




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 3   CONSUMER RECEIVABLES ACQUIRED FOR LIQUIDATION (CONTINUED)
   
    
    Same issuer/originator;
    
    Same underlying credit quality;
    
    similar geographic distribution of the accounts;
    
    similar age of the receivable; and
    
    Same type of asset class (credit cards, telecommunication, etc.)
  
    
    the number of collection agencies previously attempting to collect the receivables in
the portfolio;
    
    the average balance of the receivables, as higher balances might be more difficult to
collect while low balances might not be cost effective to collect;
    
    the age of the receivables, as older receivables might be more difficult to collect
or might be less cost effective. On the other hand, the passage of time, in certain
circumstances, might result in higher collections due to changing life events of some
individual debtors;
    
    past history of performance of similar assets;
    
    time since charge-off;
    
    payments made since charge-off;
    
    the credit originator and its credit guidelines;
    
    our ability to analyze accounts and resell accounts that meet our criteria for resale;
  9




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 3   CONSUMER RECEIVABLES ACQUIRED FOR LIQUIDATION (CONTINUED)
 
    
    the locations of the debtors, as there are better states to
attempt to collect in and ultimately the Company has better
predictability of the liquidations and the expected cash
flows. Conversely, there are also states where the
liquidation rates are not as favorable and that is factored
into our cash flow analysis;
 
    
    financial condition of the seller
    
    jobs or property of the debtors found within portfolios. In the Companys
business model, this is of particular importance as debtors with jobs or
property are more likely to repay their obligation and conversely,
debtors without jobs or property are less likely to repay their
obligation; and
    
    The ability to obtain timely customer statements from the original issuer.
   10




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 3   CONSUMER RECEIVABLES ACQUIRED FOR LIQUIDATION (CONTINUED)
  For the Three Months Ended December 31, 2010CostInterest
    
    
    RecoveryMethod
    
    
    Method
    
    
    TotalBalance, beginning of period
    
    $
    46,348,000
    
    
    $
    100,683,000
    
    
    $
    147,031,000Acquisitions of receivable portfolios, net
    
    
    2,659,000
    
    
    
    224,000
    
    
    
    2,883,000Net cash collections from collection of consumer
receivables acquired for liquidation
    
    
    (15,579,000
    )
    
    
    (5,371,000
    )
    
    
    (20,950,000
    )Net cash collections represented by account sales
of consumer receivables acquired for liquidation
    
    
    (155,000
    )
    
    
    
    
    
    
    (155,000
    )Effect of foreign currency translation
    
    
    
    
    
    
    11,000
    
    
    
    11,000Finance income recognized (1)
    
    
    10,065,000
    
    
    
    694,000
    
    
    
    10,759,000Balance, end of period
    
    $
    43,338,000
    
    
    $
    96,241,000
    
    
    $
    139,579,000Revenue as a percentage of collections
    
    
    64.0
    %
    
    
    12.9
    %
    
    
    51.0
    %
 (1)
    
    Includes $8.8 million derived from fully amortized interest method pools. For the Three Months Ended December 31, 2009CostInterest
    
    
    RecoveryMethod
    
    
    Method
    
    
    TotalBalance, beginning of period
    
    $
    70,650,000
    
    
    $
    137,611,000
    
    
    $
    208,261,000Acquisitions of receivable portfolios, net
    
    
    2,148,000
    
    
    
    152,000
    
    
    
    2,300,000Net cash collections from collection of consumer
receivables acquired for liquidation
    
    
    (19,047,000
    )
    
    
    (7,786,000
    )
    
    
    (26,833,000
    )Net cash collections represented by account sales
of consumer receivables acquired for liquidation
    
    
    (2,593,000
    )
    
    
    (4,000
    )
    
    
    (2,597,000
    )Effect of foreign currency translation
    
    
    
    
    
    
    21,000
    
    
    
    21,000Finance income recognized (1)
    
    
    10,618,000
    
    
    
    356,000
    
    
    
    10,974,000Balance, end of period
    
    $
    61,776,000
    
    
    $
    130,350,000
    
    
    $
    192,126,000Revenue as a percentage of collections
    
    
    49.1
    %
    
    
    4.6
    %
    
    
    37.3
    %
 (1)
    
    Includes $8.1 million derived from fully amortized interest method pools.  11




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 3   CONSUMER RECEIVABLES ACQUIRED FOR LIQUIDATION (CONTINUED)
  September 30, 2011 (nine months remaining)
    
    $
    15,172,000September 30, 2012
    
    
    15,984,000September 30, 2013
    
    
    7,833,000September 30, 2014
    
    
    3,953,000September 30, 2015
    
    
    978,000September 30, 2016
    
    
    725,000September 30, 2017
    
    
    180,000September 30, 2018
    
    
    Total
    
    $
    44,825,000Deferred revenue
    
    
    (1,487,000
    )Total
    
    $
    43,338,000
  Three Months
    
    
    Three MonthsEnded
    
    
    EndedDecember 31, 2010
    
    
    December 31, 2009Balance at beginning of period
    
    $
    15,255,000
    
    
    $
    25,875,000Income recognized on finance receivables, net
    
    
    (10,065,000
    )
    
    
    (10,618,000
    )Additions representing expected revenue from purchases
    
    
    732,000
    
    
    
    809,000Reclassifications from nonaccretable difference
    
    
    7,952,000
    
    
    
    7,590,000Balance at end of period
    
    $
    13,874,000
    
    
    $
    23,656,000
   12




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 3   CONSUMER RECEIVABLES ACQUIRED FOR LIQUIDATION (CONTINUED)
  For the Three Months Ended December 31,2010
    
    
    2009Gross collections (1)
    
    $
    33,384,000
    
    
    $
    43,727,000Commissions and fees (2)
    
    
    12,279,000
    
    
    
    14,297,000Net collections
    
    $
    21,105,000
    
    
    $
    29,430,000
 (1)
    
    Gross collections include: collections from third-party
collection agencies and attorneys, collections from our
in-house efforts, and collections represented by account
sales.(2)
    
    Commissions and fees are the contractual commission earned
by third party collection agencies and attorneys, and
direct costs associated with the collection effort,
generally court costs. Includes a 3% fee charged by a
servicer on gross collections received by the Company in
connection with the Portfolio Purchase. Such arrangement
was consummated in December 2007. The fee is charged for
asset location, skiptracing and ultimately suing debtors in
connection with this portfolio purchase. NOTE 4   FURNITURE AND EQUIPMENT
  December 31,
    
    
    September 30,2010
    
    
    2010Furniture
    
    $
    310,000
    
    
    $
    310,000Equipment
    
    
    2,999,000
    
    
    
    2,855,000Software
    
    
    174,000
    
    
    
    153,000Leasehold improvements
    
    
    86,000
    
    
    
    86,0003,569,000
    
    
    
    3,404,000Less accumulated depreciation
    
    
    3,123,000
    
    
    
    3,066,000Balance, end of period
    
    $
    446,000
    
    
    $
    338,000
  13




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 5  DEBT AND SUBORDINATED DEBT  RELATED PARTY
  December 31, 2010
    
    
    September 30, 2010Stated
    
    
    Average
    
    
    Stated
    
    
    AverageDecember 31,
    
    
    September 30,
    
    
    Interest
    
    
    Interest
    
    
    Interest
    
    
    Interest2010
    
    
    2010
    
    
    Rate
    
    
    Rate
    
    
    Rate
    
    
    RateReceivables Financing Agreement
    
    $
    79,268,000
    
    
    $
    90,483,000
    
    
    
    3.76
    %
    
    
    3.76
    %
    
    
    3.76
    %
    
    
    3.77
    %Subordinated debt  related party
    
    $
    
    
    
    $
    4,386,000
    
    
    
    
    
    
    
    10.00
    %
    
    
    10.00
    %
    
    
    8.69
    %
 Leumi Credit Agreement
  Receivables Financing Agreement
   14




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 5   DEBT AND SUBORDINATED DEBT  RELATED PARTY (CONTINUED)
            15




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 5   DEBT AND SUBORDINATED DEBT  RELATED PARTY (CONTINUED)
 IDB Credit Facility
  Subordinated Debt  Related Party
   16




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 6  COMMITMENTS AND CONTINGENCIES
 Employment Agreements
   Leases
  Litigation
  NOTE 7.   INCOME RECOGNITION, IMPAIRMENTS, AND COMMISSIONS AND FEES
 Income Recognition
     17




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 7.   INCOME RECOGNITION, IMPAIRMENTS AND COMMISSIONS AND FEES (CONTINUED)
 Impairments
   
    
    the type of receivable, the location of the debtor and the
number of collection agencies previously attempting to
collect the receivables in the portfolio. The Company has
found that there are better states to try to collect
receivables and we factor in both better and worse states
when establishing our initial cash flow expectations.
    
    the average balance of the receivables influences our
analysis in that lower average balance portfolios tend to
be more collectible in the short-term and higher average
balance portfolios are more appropriate for our law suit
strategy and thus yield better results over the longer
term. As the Company has significant experience with both
types of balances, it is able to factor these variables
into our initial expected cash flows;
    
    the age of the receivables, the number of days since
charge-off, any payments since charge-off, and the credit
guidelines of the credit originator also represent factors
taken into consideration in our estimation process. For
example, older receivables might be more difficult and/or
require more time and effort to collect;
 
    
    past history and performance of similar assets acquired. As the Company purchase
portfolios of like assets, we accumulate a significant historical data base on the
tendencies of debtor repayments and factor this into our initial expected cash
flows;
    
    the Companys ability to analyze accounts and resell accounts that meet its criteria;
    
    jobs or property of the debtors found within portfolios. With our business model,
this is of particular importance. Debtors with jobs or property are more likely to
repay their obligation through the lawsuit strategy and, conversely, debtors without
jobs or property are less likely to repay their obligation. The Company believes
that debtors with jobs or property are more likely to repay because courts have
mandated the debtor must pay the debt. Ultimately, the debtor with property will pay
to clear title or release a lien. The Company also believes that these debtors
generally might take longer to repay and that is factored into our initial expected
cash flows; and
    
    credit standards of the issuer.
  18




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 7.   INCOME RECOGNITION, IMPAIRMENTS AND COMMISSIONS AND FEES (CONTINUED)
    Commissions and fees
  NOTE 8.   INCOME TAXES
     19




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 9.   NET INCOME PER SHARE
   December 31, 2010
    
    
    December 31, 2009Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedNet
    
    
    Average
    
    
    Per Share
    
    
    Net
    
    
    Average
    
    
    Per ShareIncome
    
    
    Shares
    
    
    Amount
    
    
    (Income)
    
    
    Shares
    
    
    AmountBasic
    
    $
    2,666,000
    
    
    
    14,606,121
    
    
    $
    0.18
    
    
    $
    2,475,000
    
    
    
    14,272,420
    
    
    $
    0.17Effect of Dilutive
Stock
    
    
    
    
    
    
    221,646
    
    
    
    
    
    
    
    
    
    
    
    342,634Diluted
    
    $
    2,666,000
    
    
    
    14,827,767
    
    
    $
    0.18
    
    
    $
    2,475,000
    
    
    
    14,615,054
    
    
    $
    0.17
    20




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 10.   STOCK BASED COMPENSATION
    Risk-free interest rate
    
    
    0.17
    %Expected term (years)
    
    
    10.0Expected volatility
    
    
    106.9
    %Dividend yield
    
    
    0.98
    %
   Risk-free interest rate
    
    
    0.17
    %Expected term (years)
    
    
    10.0Expected volatility
    
    
    110.2
    %Dividend yield
    
    
    1.12
    %
  21




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 11.   STOCK OPTION PLANS
 Equity Compensation Plan
     2002 Stock Option Plan
    1995 Stock Option Plan
    22




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 11.   STOCK OPTION PLANS (CONTINUED)
    Three Months Ended December 31,2010
    
    
    2009Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding options at the beginning of
period
    
    
    922,039
    
    
    $
    12.70
    
    
    
    1,157,905
    
    
    $
    10.76Options granted
    
    
    324,800
    
    
    
    6.89
    
    
    
    158,900
    
    
    
    8.07Options exercised
    
    
    0
    
    
    
    0
    
    
    
    (100
    )
    
    
    2.95Options forfeited
    
    
    (1,400
    )
    
    
    5.79
    
    
    
    0
    
    
    
    0Outstanding options at the end of period
    
    
    1,245,439
    
    
    $
    11.18
    
    
    
    1,316,705
    
    
    $
    10.44Exercisable options at the end of period
    
    
    954,109
    
    
    $
    12.56
    
    
    
    1,157,382
    
    
    $
    11.03
  Options Outstanding
    
    
    Options ExercisableWeighted
    
    
    Weighted
    
    
    
    
    
    
    WeightedWeighted
    
    
    Remaining
    
    
    Average
    
    
    
    
    
    
    AverageNumber
    
    
    Contractual
    
    
    Exercise
    
    
    Number
    
    
    ExerciseRange of Exercise Price
    
    Outstanding
    
    
    Life (in Years)
    
    
    Price
    
    
    Exercisable
    
    
    Price$2.8751  $5.7500
    
    
    198,168
    
    
    
    4.8
    
    
    $
    3.91
    
    
    
    168,502
    
    
    $
    4.07$5.7501  $8.6250
    
    
    494,000
    
    
    
    9.4
    
    
    
    7.24
    
    
    
    232,336
    
    
    
    7.39$14.3751  $17.2500
    
    
    198,611
    
    
    
    2.8
    
    
    
    14.88
    
    
    
    198,611
    
    
    
    14.88$17.2501  $20.1250
    
    
    339,660
    
    
    
    3.8
    
    
    
    18.23
    
    
    
    339,660
    
    
    
    18.23$25.8751  $28.7500
    
    
    15,000
    
    
    
    6.0
    
    
    
    28.75
    
    
    
    15,000
    
    
    
    28.751,245,439
    
    
    
    6.1
    
    
    $
    11.18
    
    
    
    954,109
    
    
    $
    12.56
    23




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE 11.   STOCK OPTION PLANS (CONTINUED)
  Three Months Ended December 31,2010
    
    
    2009Weighted
    
    
    
    
    
    
    WeightedAverage Grant
    
    
    
    
    
    
    Average GrantDate Fair
    
    
    
    
    
    
    Date FairShares
    
    
    Value
    
    
    Shares
    
    
    ValueUnvested at the beginning of period
    
    
    17,669
    
    
    $
    19.73
    
    
    
    35,338
    
    
    $
    19.73Awards granted
    
    
    32,765
    
    
    
    7.63
    
    
    
    
    
    
    
    Vested
    
    
    (28,591
    )
    
    
    15.11
    
    
    
    (17,669
    )
    
    
    19.73Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unvested at the end of period
    
    
    21,843
    
    
    $
    7.63
    
    
    
    17,669
    
    
    $
    19.73
  NOTE 12.   STOCKHOLDERS EQUITY
  NOTE 13.   FAIR VALUE OF FINANCIAL INSTRUMENTS
     24




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
 Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Caution Regarding Forward Looking Statements
 This Quarterly Report on Form 10-Q contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. All statements other than
statements of historical facts included or incorporated by reference in this annual report on Form
10-K, including without limitation, statements regarding our future financial position, business
strategy, budgets, projected revenues, projected costs and plans and objective of management for
future operations, are forward-looking statements. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as may, will, expects, intends,
plans, projects, estimates, anticipates, or believes or the negative thereof or any
variation there on or similar terminology or expressions.
 We have based these forward-looking statements on our current expectations and projections
about future events. These forward-looking statements are not guarantees and are subject to known
and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels
of activity, performance or achievements to be materially different from any future results, levels
of activity, performance or achievements expressed or implied by such forward-looking statements.
Important factors which could materially affect our results and our future performance include,
without limitation, our ability to purchase defaulted consumer receivables at appropriate prices,
changes in government regulations that affect our ability to collect sufficient amounts on our
defaulted consumer receivables, our ability to employ and retain qualified employees, changes in
the credit or capital markets, changes in interest rates, deterioration in economic conditions,
negative press regarding the debt collection industry which may have a negative impact on a
debtors willingness to pay the debt we acquire, and statements of assumption underlying any of the
foregoing, as well as other factors set forth under Item 1A. Risk Factors in our annual report on
Form 10-K for the fiscal year ended September 30, 2010.
 All subsequent written and oral forward-looking statements attributable to us, or persons
acting on our behalf, are expressly qualified in their entirety by the foregoing. Except as
required by law, we assume no duty to update or revise any forward-looking statements.
 Overview
  
    
    charged-off receivables accounts that have been
written-off by the originators and may have been previously
serviced by collection agencies;
    
    semi-performing receivables accounts where the debtor is
currently making partial or irregular monthly payments, but
the accounts may have been written-off by the originators;
and
    
    performing receivables accounts where the debtor is
making regular monthly payments that may or may not have
been delinquent in the past.
  25




---



##### Table of Contents




    
    our relationships with industry participants, collection agencies, investors and our financing sources;
    
    brokers who specialize in the sale of consumer receivable portfolios; and
    
    other sources.
 Critical Accounting Policies
  
    
    the interest method; or
    
    the cost recovery method.
   
    
    same issuer/originator
    
    same underlying credit quality
    
    similar geographic distribution of the accounts
    
    similar age of the receivable and
    
    same type of asset class (credit cards, telecommunications, etc.)
  
    
    the number of collection agencies previously attempting to collect the receivables in the portfolio;
    
    the average balance of the receivables;
 
    
    the age of the receivables (as older receivables might be more difficult to collect or might be less cost effective);
    
    past history of performance of similar assets  as we purchase portfolios of similar assets, we believe we have
built significant history on how these receivables will liquidate and cash flow;
    
    number of months since charge-off;
  26




---



##### Table of Contents




    
    payments made since charge-off;
    
    the credit originator and their credit guidelines;
    
    the locations of the debtors as there are better states to attempt to collect in and ultimately we have better
predictability of the liquidations and the expected cash flows. Conversely, there are also states where the
liquidation rates are not as good and that is factored into our cash flow analysis;
    
    financial wherewithal of the seller;
    
    jobs or property of the debtors found within portfolios-with our business model, this is of particular importance as
debtors with jobs or property are more likely to repay their obligation and conversely, debtors without jobs or
property are less likely to repay their obligation ; and
    
    the ability to obtain customer statements from the original issuer.
       27




---



##### Table of Contents



Results of Operations
 The Three-Month Period Ended December 31, 2010, Compared to the Three-Month Period Ended
December 31, 2009
 Finance income
  Other income .
 General and Administrative Expenses.
 Interest Expense.
 Income tax expense
 Net income.
 Liquidity and Capital Resources
   28




---



##### Table of Contents



Leumi Credit Agreement
  Receivables Financing Agreement
         29




---



##### Table of Contents



IDB Credit Facility
  Subordinated Debt  Related Party
  Cash Flow
    30




---



##### Table of Contents



For the Three Months Ended December 31, 2010CostInterest
    
    
    RecoveryMethod
    
    
    Method
    
    
    TotalBalance, beginning of period
    
    $
    46,348,000
    
    
    $
    100,683,000
    
    
    $
    147,031,000Acquisitions of receivable portfolios, net
    
    
    2,659,000
    
    
    
    224,000
    
    
    
    2,883,000Net cash collections from collection of consumer
receivables acquired for liquidation
    
    
    (15,579,000
    )
    
    
    (5,371,000
    )
    
    
    (20,950,000
    )Net cash collections represented by account sales
of consumer receivables acquired for liquidation
    
    
    (155,000
    )
    
    
    
    
    
    
    (155,000
    )Effect of foreign currency translation
    
    
    
    
    
    
    11,000
    
    
    
    11,000Finance income recognized (1)
    
    
    10,065,000
    
    
    
    694,000
    
    
    
    10,759,000Balance, end of period
    
    $
    43,338,000
    
    
    $
    96,241,000
    
    
    $
    139,579,000Revenue as a percentage of collections
    
    
    64.0
    %
    
    
    12.9
    %
    
    
    51.0
    %
 (1)
    
    Includes $8.8 million derived from fully amortized interest method pools. For the Three Months Ended December 31, 2009CostInterest
    
    
    RecoveryMethod
    
    
    Method
    
    
    TotalBalance, beginning of period
    
    $
    70,650,000
    
    
    $
    137,611,000
    
    
    $
    208,261,000Acquisitions of receivable portfolios, net
    
    
    2,148,000
    
    
    
    152,000
    
    
    
    2,300,000Net cash collections from collection of consumer
receivables acquired for liquidation (1)
    
    
    (19,047,000
    )
    
    
    (7,786,000
    )
    
    
    (26,833,000
    )Net cash collections represented by account sales
of consumer receivables acquired for liquidation
    
    
    (2,593,000
    )
    
    
    (4,000
    )
    
    
    (2,597,000
    )Effect of foreign currency translation
    
    
    
    
    
    
    21,000
    
    
    
    21,000Finance income recognized (1)
    
    
    10,618,000
    
    
    
    356,000
    
    
    
    10,974,000Balance, end of period
    
    $
    61,776,000
    
    
    $
    130,350,000
    
    
    $
    192,126,000Revenue as a percentage of collections
    
    
    49.1
    %
    
    
    4.6
    %
    
    
    37.3
    %
 (1)
    
    Includes $8.1 million derived from fully amortized interest method pools.  31




---



##### Table of Contents



Off Balance Sheet Arrangements
  Additional Supplementary Information:
  Item 2. Managements Discussion and Analysis
of Financial Condition and Results of Operations  Critical Accounting Policies
 Collections Represented by Account Sales
 CollectionsRepresented
    
    
    FinanceBy Account
    
    
    IncomePeriod
    
    Sales
    
    
    EarnedThree months ended December 31, 2010
    
    $
    155,000
    
    
    $
    54,000Three months ended December 31, 2009
    
    $
    2,597,000
    
    
    $
    896,000
 Portfolio Performance (1)  Interest method portfolios only
 Total estimatedCash Collections
    
    
    Estimated
    
    
    Total
    
    
    Collections as aPurchase
    
    
    Including Cash
    
    
    Remaining
    
    
    Estimated
    
    
    Percentage ofPurchase Period
    
    Price (2)
    
    
    Sales (3)
    
    
    Collections (4)
    
    
    Collections (5)
    
    
    Purchase Price2001
    
    $
    65,120,000
    
    
    $
    105,563,000
    
    
    $
    
    
    
    $
    105,563,000
    
    
    
    162
    %2002
    
    
    36,557,000
    
    
    
    48,164,000
    
    
    
    
    
    
    
    48,164,000
    
    
    
    132
    %2003
    
    
    115,626,000
    
    
    
    216,066,000
    
    
    
    384,000
    
    
    
    216,450,000
    
    
    
    187
    %2004
    
    
    103,743,000
    
    
    
    185,230,000
    
    
    
    200,000
    
    
    
    185,430,000
    
    
    
    179
    %2005
    
    
    126,023,000
    
    
    
    214,159,000
    
    
    
    4,850,000
    
    
    
    219,009,000
    
    
    
    174
    %2006
    
    
    163,392,000
    
    
    
    249,785,000
    
    
    
    10,210,000
    
    
    
    259,995,000
    
    
    
    159
    %2007
    
    
    109,235,000
    
    
    
    92,696,000
    
    
    
    22,929,000
    
    
    
    115,625,000
    
    
    
    106
    %2008
    
    
    26,626,000
    
    
    
    40,469,000
    
    
    
    1,294,000
    
    
    
    41,763,000
    
    
    
    157
    %2009
    
    
    19,127,000
    
    
    
    22,068,000
    
    
    
    8,075,000
    
    
    
    30,143,000
    
    
    
    158
    %2010
    
    
    7,698,000
    
    
    
    5,497,000
    
    
    
    5,894,000
    
    
    
    11,391,000
    
    
    
    148
    %2011
    
    
    2,659,000
    
    
    
    81,000
    
    
    
    3,376,000
    
    
    
    3,457,000
    
    
    
    130
    %
 (1)
    
    Total collections do not represent full collections of the Company with respect to this or any other year.(2)
    
    Purchase price refers to the cash paid to a seller to acquire a portfolio less the purchase price refunded by a seller due to the return of non-compliant
accounts (also defined as put-backs).(3)
    
    Net cash collections include: net collections from our third-party collection agencies and attorneys, net collections from our in-house efforts and
collections represented by account sales.(4)
    
    Does not include collections from portfolios that are zero basis.(5)
    
    Total estimated collections refer to the actual net cash collections, including cash sales, plus estimated remaining net collections.  32




---



##### Table of Contents



Recent Accounting Pronouncements
  
 Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4.
    
    Controls and Procedures
 a. Disclosure Controls and Procedures
  b. Changes in Internal Controls Over Financial Reporting.
   33




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk factors
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3.
    
    Defaults Upon Senior Securities
  
 Item 4.
    
    (Removed and Reserved)
  
 Item 5.
    
    Other Information
  
 Item 6.
    
    Exhibits
  31.1
    
    
    Certification of the Registrants Chief Executive Officer, Gary Stern, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of the Registrants Chief Financial Officer, Robert J. Michel, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of the Registrants Chief Executive Officer, Gary Stern, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of the Registrants Chief Financial Officer, Robert J. Michel, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
  34




---



##### Table of Contents



SIGNATURES
  ASTA FUNDING, INC.
(Registrant)Date: February 9, 2011
    By:
    /s/ Gary SternGary Stern, President, Chief Executive Officer(Principal Executive Officer)Date: February 9, 2011
    By:
    /s/ Robert J. MichelRobert J. Michel, Chief Financial Officer(Principal Financial Officer and
Principal Accounting Officer)  35




---



##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber

    
    Description31.1
    
    
    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, Robert
J. Michel, pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1
    
    
    Certification of the Registrants Chief Executive Officer, Gary
Stern, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of the Registrants Chief Financial Officer, Robert
J. Michel, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
  36