<PAGE>

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

                                  UNITED STATES
                       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, 2006

                                       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 registrant 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)


                  REGISTRANT'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 a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of "accelerated filer and large accelerated filer as in Rule 12b-2 of
the Exchange Act.

Large accelerated filer |_|   Accelerated filer |X|    Non-accelerated filer |_|

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

             As of May 2, 2006, the registrant had 13,621,157 common shares
outstanding.
================================================================================

<PAGE>

                               ASTA FUNDING, INC.

                               INDEX TO FORM 10-Q

<TABLE>
<S>                                                                                                    <C>
Part I. Financial Information.........................................................................      2
Item 1.  Condensed Consolidated Financial Statements..................................................      2
         Condensed Consolidated Balance Sheets as of March 31, 2006 (unaudited) and
                    September 30, 2005................................................................      2
         Condensed Consolidated Statements of Operations for the six and three month periods ended
            March 31, 2006 and 2005 (unaudited).......................................................      3
         Condensed Consolidated Statement of Stockholders' Equity for the six month period ending
            March 31, 2006 (unaudited)................................................................      4
         Condensed Consolidated Statements of Cash Flows for the six month periods ended
            March 31, 2006 and 2005 (unaudited).......................................................      5
         Notes to Condensed Consolidated Financial Statements (unaudited).............................      6
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations........     17
Item 3.  Quantitative and Qualitative Disclosures about Market Risk...................................     24
Item 4.  Controls and Procedures......................................................................     24

Part II. Other Information............................................................................     25
Item 1.  Legal Proceedings............................................................................     25
Item 1A  Risk Factors.................................................................................     25
Item 2.  Unregistered Sale of Equity Securities and Use of Proceeds...................................     25
Item 3.  Defaults Upon Senior Securities..............................................................     25
Item 4.  Submission of Matters to a Vote of Security Holders..........................................     25
Item 5.  Other Information............................................................................     26
Item 6.  Exhibits.....................................................................................     26
Signatures  ..........................................................................................     27
Section 302 Certificate of Principal Executive Officer................................................     28
Section 302 Certificate of Principal Financial Officer................................................     29
Section 906 Certificate of Principal Executive Officer................................................     30
Section 906 Certificate of Principal Financial Officer................................................     31
</TABLE>




                                       1
<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                       ASTA FUNDING, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                              MARCH 31,          SEPTEMBER 30,
                                                                                2006                 2005
                                                                           --------------       --------------
                                                                             (UNAUDITED)
<S>                                                                        <C>                  <C>
                                 ASSETS
Cash....................................................................   $    3,971,000       $    4,059,000
Consumer receivables acquired for liquidation...........................      237,206,000          172,727,000
Due from third party collection agencies and attorneys..................        2,830,000            1,425,000
Furniture and equipment, net............................................        1,061,000              989,000
Other assets............................................................        2,236,000              838,000
                                                                           --------------       --------------
          Total assets..................................................   $  247,304,000       $  180,038,000
                                                                           ==============       ==============
                    LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
   Debt.................................................................   $   72,000,000       $   29,285,000
   Other liabilities ...................................................        2,436,000            4,180,000
   Income taxes payable ................................................        7,921,000            1,243,000
   Deferred income taxes................................................          153,000              153,000
                                                                           --------------       --------------
          Total liabilities.............................................       82,510,000           34,861,000
                                                                           --------------       --------------

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 -- 13,621,157 at March 31, 2006 and
   13,595,324 at September 30, 2005.....................................          136,000              136,000
   Additional paid-in capital...........................................       61,089,000           60,798,000
   Retained earnings....................................................      103,569,000           84,243,000
                                                                           --------------       --------------
          Total stockholders' equity....................................      164,794,000          145,177,000
                                                                           --------------       --------------
Total liabilities and stockholders' equity..............................   $  247,304,000       $  180,038,000
                                                                           ==============       ==============
</TABLE>















      See accompanying notes to condensed consolidated financial statements



                                       2
<PAGE>



                      ASTA FUNDING, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                     Three Months Ended     Three Months Ended     Six Months Ended    Six Months Ended
                                       March 31, 2006         March 31, 2005        March 31, 2006      March 31, 2005
                                     -------------------    ------------------     ----------------    -----------------

<S>                                      <C>                   <C>                   <C>                   <C>
Revenue:
Finance income, net                      $24,829,000           $16,662,000           $45,089,000           $30,492,000
                                         -----------           -----------           -----------           -----------



Expenses:
General and administrative                 4,848,000             3,925,000             8,800,000             6,969,000
Interest                                   1,302,000               496,000             1,965,000               903,000
                                         -----------           -----------           -----------           -----------

                                           6,150,000             4,421,000            10,765,000             7,872,000
                                         -----------           -----------           -----------           -----------


Income before income tax expense          18,679,000            12,241,000            34,324,000            22,620,000

Income tax expense                         7,576,000             4,960,000            13,909,000             9,164,000
                                         -----------           -----------           -----------           -----------

Net income                               $11,103,000           $ 7,281,000           $20,415,000           $13,456,000
                                         -----------           -----------           -----------           -----------


Net income per share:
Basic                                    $      0.82           $      0.54           $      1.50           $      1.00
                                         -----------           -----------           -----------           -----------

Diluted                                  $      0.76           $      0.51           $      1.40           $      0.94
                                         -----------           -----------           -----------           -----------


Weighted average number of common
  shares outstanding:

Basic                                     13,608,994            13,553,765            13,603,485            13,511,678
                                         -----------           -----------           -----------           -----------

Diluted                                   14,604,636            14,405,176            14,583,252            14,352,244
                                         -----------           -----------           -----------           -----------
</TABLE>





      See accompanying notes to condensed consolidated financial statements





                                       3
<PAGE>



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

<TABLE>
<CAPTION>
                                                                         ADDITIONAL
                                                     COMMON STOCK         PAID-IN     RETAINED
                                                  SHARES      AMOUNT      CAPITAL     EARNINGS           TOTAL
                                                ----------   ---------  -----------  ------------      ------------
<S>                                             <C>           <C>       <C>           <C>              <C>
Balance, September 30, 2005..................   13,595,324    $136,000  $60,798,000   $84,243,000      $145,177,000
Exercise of options..........................       25,833                  291,000             -           291,000
Dividends....................................            -           -            -    (1,089,000)       (1,089,000)
Net Income...................................            -           -            -    20,415,000        20,415,000
                                                ----------   ---------  -----------  ------------      ------------
Balance, March 31, 2006......................   13,621,157    $136,000  $61,089,000  $103,569,000      $164,794,000
                                                ==========   =========  ===========  ============      =============
</TABLE>





















      See accompanying notes to condensed consolidated financial statements




                                       4
<PAGE>



                       ASTA FUNDING, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                            SIX MONTHS ENDED      SIX MONTHS ENDED
                                                                             MARCH 31, 2006        MARCH 31, 2005
                                                                            ---------------       ----------------

<S>                                                                          <C>                   <C>
Cash flows from operating activities:
 Net income .........................................................        $  20,415,000         $  13,456,000

Adjustments to reconcile net income to net cash provided by operating
   activities:
 Depreciation and amortization ......................................              264,000               240,000

Changes in:

 Due from third party collection agencies and attorneys .............           (1,405,000)           (6,426,000)
 Income taxes payable ...............................................            6,678,000            (3,058,000)
 Other assets .......................................................             (116,000)            1,465,000
 Other liabilities ..................................................           (1,812,000)             (633,000)
                                                                             -------------         -------------
    Net cash provided by operating activities .......................           24,024,000             5,044,000


Cash flows from investing activities:
 Purchase of consumer receivables acquired for liquidation ..........         (121,188,000)          (60,851,000)
 Principal collected on receivables acquired for liquidation ........           44,649,000            33,343,000
 Principal collected on receivable accounts represented by
       account sales ................................................           12,060,000            15,138,000

 Acquisition of businesses, net of cash acquired ....................           (1,406,000)          (13,521,000)

 Deposit on receivable purchase .....................................                 --               7,213,000

 Capital expenditures ...............................................             (213,000)             (214,000)
                                                                             -------------         -------------
    Net cash (used in) investing activities .........................          (66,098,000)          (18,892,000)
Cash flows from financing activities:
 Proceeds from exercise of options ..................................              291,000             1,185,000
 Tax benefit arising from exercise of non-qualified stock options....                 --                 119,000

 Dividends paid .....................................................           (1,020,000)             (944,000)
 Advances under line of credit, net .................................           42,715,000            12,759,000
                                                                             -------------         -------------
    Net cash provided by financing activities .......................           41,986,000            13,119,000
                                                                             -------------         -------------
Decrease in cash ....................................................              (88,000)             (729,000)
Cash at the beginning of period .....................................            4,059,000             3,344,000
                                                                             -------------         -------------
Cash at end of period ...............................................        $   3,971,000         $   2,615,000
                                                                             =============         =============
Supplemental disclosure of cash flow information:

 Cash paid during the period
  Interest ..........................................................        $   1,820,000         $     915,000
  Income taxes ......................................................        $   7,146,000         $  12,099,000
</TABLE>

  Certain 2005 amounts have been reclassified to be comparative to 2006.



     See accompanying notes to condensed consolidated financial statements.


                                       5
<PAGE>

                       ASTA FUNDING, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED 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-performing and
distressed consumer receivables. Non-conforming consumer receivables are the
obligations of individuals that have incurred credit impairment either at the
time the obligation was originated or subsequent to origination. Distressed
consumer receivables are the unpaid debts of individuals to banks, finance
companies and other credit providers. A large portion of our distressed consumer
receivables are MasterCard(R), Visa(R), other credit card accounts and
telecommunication accounts which were charged-off by the issuers for
non-payment. We acquire these portfolios at substantial discounts from their
contractual amounts that are based on the characteristics (issuer, account size,
debtor location and age of debt) of the underlying accounts of each portfolio.

  Basis of Presentation

     The condensed consolidated balance sheets as of March 31, 2006 and the
consolidated balance sheets as of September 30, 2005, (the September 30, 2005
financial information included in this report has been extracted from our
audited financial statements included in our Annual Report on Form 10-K/A) the
consolidated statements of operations for the six and three month periods ended
March 31, 2006 and 2005, respectively, the condensed consolidated statement of
stockholders' equity as of and for the six months ended March 31, 2006 and the
condensed consolidated statements of cash flows for the six month periods ended
March 31, 2006 and 2005, 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,
2006 and September 30, 2005, the results of operations for the six and three
month periods ended March 31, 2006 and 2005 and cash flows for the six month
periods ended March 31, 2006 and 2005 have been made. The results of operations
for the six and three month periods ended March 31, 2006 and 2005 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/A for the fiscal year ended September 30, 2005 filed with the
Securities and Exchange Commission.

     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.



    Recent Accounting Pronouncements

    In December 2004, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 123 (revised 2004)
Share-Based Payment ("SFAS No.123R"). This statement is a revision of FASB
Statement No. 123, Accounting for Stock-Based Compensation. This Statement
supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its
related implementation guidance. This Statement requires that the cost resulting
from all share-based payment transactions be recognized in the financial
statements. This Statement supersedes the current method utilized by the Company
of the disclosure-only provisions of the original SFAS No. 123. The effective
date for implementation of SFAS No. 123R for the Company was October 1, 2005.
The Company had been disclosing the impact on net income and earnings per share
since the adoption of the original SFAS No. 123 and its amendment, SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure" in the
notes to the financial statements. As permitted by SFAS 148 and SFAS 123, we
continued to apply the accounting provisions of Accounting Principles Board
Opinion Number 25, "Accounting for Stock Issued to Employees," and related
interpretations, with regard to the measurement of compensation cost for options
granted under our Stock Option Plans through September 30, 2005. No employee
compensation expense has been recorded as all options granted had an exercise
price equal to the market value of the underlying common stock on the date of
grant. No stock options were awarded during the six month period ended March 31,
2006.

                                       6
<PAGE>

                       ASTA FUNDING, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                    (UNAUDITED)
NOTE 1: BUSINESS AND BASIS OF PRESENTATION (CONTINUED)

     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 internal rate of return while decreases in expected cash flows should be
recognized as impairment. This SOP became effective October 1, 2005. We believe
the implementation of this SOP will make it more likely that an impairment loss
may be recorded some time in the future, although through March 31, 2006 no
impairment loss has been recorded.

     SFAS No. 153, "Exchanges of Nonmonetary Assets - an amendment of APB
Opinion No. 29" ("SFAS 153") addresses the measurement of exchanges of
nonmonetary assets. It eliminates the exception from fair value accounting for
nonmonetary exchange of similar productive assets and replaces it with an
exception for exchanges that do not have commercial substance. SFAS 153
specifies that a nonmonetary exchange has commercial substance if the future
cash flows of an entity are expected to change significantly as a result of the
exchange. This statement became effective October 1, 2005. This statement is not
expected to have an impact on the Company's financial results.


     In May 2005, the FASB issued SFAS 154, Accounting Changes and Error
Corrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3"
(SFAS 154), which requires a retrospective application to prior periods'
financial statements of changes in accounting principle for all periods
presented. This statement replaces APB Opinion No. 20 which required that most
voluntary changes in accounting principle be recognized by including in net
income of the period of the change the cumulative effect of changing to the new
accounting principle. The provisions of SFAS 154 are effective for fiscal years
beginning after December 15, 2006, (the Company's fiscal year 2008.) This
statement is not expected to have an impact on the Company's financial results.


   Reclassifications

     Certain items in prior year's financial statements have been reclassified
to conform to current period's presentation.

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 of mainly defaulted consumer loans to individuals throughout the
country.

     Prior to September 30, 2005, the Company accounted for its investment in
finance receivables using the interest method under the guidance of Practice
Bulletin 6, "Amortization of Discounts on Certain Acquired Loans." Effective
October 1, 2005, the Company adopted and began to account for its investment in
finance receivables using the interest method under the guidance of American
Institute of Certified Public Accountants ("AICPA") Statement of Position
("SOP") 03-3, "Accounting for Loans or Certain Securities Acquired in a
Transfer." Practice Bulletin 6 was amended by SOP 03-3 as described further in
this note. Under the guidance of SOP 03-3 (and the amended Practice Bulletin 6);
static pools of accounts are established. These pools are aggregated based on
certain common risk criteria. Each static pool is recorded at cost and is
accounted for as a single unit for the recognition of income, principal payments
and loss provision. Once a static pool is established for a quarter, individual
receivable accounts are not added to the pool (unless replaced by the seller) or
removed from the pool (unless sold or returned to the seller). SOP 03-3 (and the
amended Practice Bulletin 6) requires that the excess of the contractual cash
flows over expected cash flows not be recognized as an adjustment of revenue or
expense or on the balance sheet. The SOP initially freezes the internal rate of
return, referred to as IRR, estimated when the accounts receivable are purchased
as the basis for subsequent impairment testing. Significant increases in actual,
or expected future cash flows may be recognized prospectively through an upward
adjustment of the IRR over a portfolio's remaining life. Any increase to the IRR
then becomes the new benchmark for impairment testing. Effective for fiscal
years beginning October 1, 2005 under SOP 03-3 and the amended Practice Bulletin
6, rather than lowering the estimated IRR if the collection estimates are not
received or projected to be received, the carrying value of a pool would be
written down to maintain the then current IRR. Through March 31, 2006, the
Company has not made any such downward adjustments to the carrying amount of any
of its pools. Income on


                                       7
<PAGE>


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


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

finance receivables is earned based on each static pool's effective IRR. Under
the interest method, income is recognized 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 cost. Revenue arising from
collections in excess of anticipated amounts attributable to timing differences
is deferred. The estimated future cash flows are reevaluated quarterly. Under
the cost recovery method, no income is recognized until the cost of the
portfolio has been fully recovered. A pool can become fully amortized (zero
carrying balance on the balance sheet) while still generating cash collections.
In this case, all cash collections are recognized as revenue when received.
Additionally, the Company uses the cost recovery method when collections on a
particular pool of accounts cannot be reasonably predicted.

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, 2006
                                                                 ----------------------------------------------------
                                                                    ACCRUAL             CASH
                                                                     BASIS              BASIS
                                                                   PORTFOLIOS         PORTFOLIOS             TOTAL
                                                                 -------------       -------------       -------------
<S>                                                              <C>                 <C>                 <C>
Balance, beginning of period ...............................     $ 172,636,000       $      91,000       $ 172,727,000
Acquisitions of receivable portfolios, net .................       121,188,000                --           121,188,000
Net cash collections from collection of consumer
     receivables acquired for liquidation ..................       (73,470,000)         (2,022,000)        (75,492,000)
Net cash collections represented by account sales of
        consumer receivables acquired for liquidation ......       (26,071,000)           (235,000)        (26,306,000)

Transferred to cost recovery................................          (529,000)            529,000                --

Finance income recognized ..................................        43,067,000           2,022,000          45,089,000
                                                                 -------------       -------------       -------------
Balance, end of period .....................................     $ 236,821,000       $     385,000       $ 237,206,000
                                                                 =============       =============       =============
Finance income as a percentage of collections ..............              43.3%               89.6%               44.3%
</TABLE>



<TABLE>
<CAPTION>
                                                                        FOR THE SIX MONTHS ENDED MARCH 31, 2005
                                                                  ----------------------------------------------------
                                                                    ACCRUAL             CASH
                                                                     BASIS              BASIS
                                                                   PORTFOLIOS         PORTFOLIOS            TOTAL
                                                                 -------------       -------------      -------------
<S>                                                              <C>                 <C>                <C>
Balance, beginning of period ...............................     $ 144,812,000       $   1,353,000      $ 146,165,000
Acquisitions of receivable portfolios, net .................        73,337,000                --           73,337,000
Net cash collections from collection of consumer
     receivables acquired for liquidation ..................       (51,980,000)         (2,452,000)       (54,432,000)
Net cash collections represented by account sales of
        consumer receivables acquired for liquidation.......       (23,042,000)         (1,499,000)       (24,541,000)
Finance income recognized ..................................        27,367,000           3,125,000         30,492,000
                                                                 -------------       -------------      -------------
Balance, end of period .....................................     $ 170,494,000       $     527,000      $ 171,021,000
                                                                 =============       =============      =============
Finance income as a percentage of collections ..............              36.5%               79.1%              38.6%
</TABLE>



                                       8
<PAGE>



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


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


<TABLE>
<CAPTION>
                                                                       FOR THE THREE MONTHS ENDED MARCH 31, 2006
                                                                  ----------------------------------------------------
                                                                   ACCRUAL              CASH
                                                                    BASIS               BASIS
                                                                  PORTFOLIOS          PORTFOLIOS             TOTAL
                                                                 -------------       -------------       -------------
<S>                                                              <C>                 <C>                 <C>
Balance, beginning of period ...............................     $ 248,758,000       $     425,000       $ 249,183,000
Acquisitions of receivable portfolios, net .................        18,783,000                --            18,783,000
Net cash collections from collections of consumer
         receivables acquired for liquidation ..............       (42,408,000)           (849,000)        (43,257,000)
Net cash collections represented by account sales of
          consumer receivables acquired for liquidation ....       (12,332,000)               --           (12,332,000)
Finance income recognized ..................................        24,020,000             809,000          24,829,000
                                                                 -------------       -------------       -------------
Balance, end of period .....................................     $ 236,821,000       $     385,000       $ 237,206,000
                                                                 =============       =============       =============
Finance income as a percentage of collections ..............              43.9%               95.3%               44.7%
</TABLE>



<TABLE>
<CAPTION>
                                                                       FOR THE THREE MONTHS ENDED MARCH 31, 2005
                                                                -----------------------------------------------------
                                                                  ACCRUAL              CASH
                                                                   BASIS               BASIS
                                                                 PORTFOLIOS          PORTFOLIOS            TOTAL
                                                                -------------       -------------       -------------
<S>                                                             <C>                 <C>                 <C>
Balance, beginning of period ..............................     $ 159,195,000       $     581,000       $ 159,776,000
Acquisitions of receivable portfolios, net ................        36,795,000                --            36,795,000
Net cash collections from collections of consumer
         receivables acquired for liquidation .............       (31,524.000)         (1,103,000)        (32,627,000)
Net cash collections represented by account sales of
          consumer receivables acquired for liquidation ...        (9,555,000)               --            (9,555,000)
Finance income recognized .................................        15,583,000           1,049,000          16,632,000
                                                                -------------       -------------       -------------
Balance, end of period ....................................     $ 170,494,000       $     527,000       $ 171,021,000
                                                                =============       =============       =============
Finance income as a percentage of collections .............              37.9%               95.1%               39.4%
</TABLE>


     In March 2005, through a wholly owned subsidiary, the Company acquired
Option Card, LLC, a Denver, Colorado based consumer debt buyer and debt
management company. Benefits accruing to the Company include portfolios of
distressed consumer receivable debt of approximately $197 million that consist
of paying accounts, accounts already within a legal network, and non paying
accounts. The purchase price, substantially all of which was applied to the cost
of the portfolios, was approximately $13.5 million in cash.







                                       9
<PAGE>





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


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

     As of March 31, 2006 the Company had $237,206,000 in consumer receivables
acquired for liquidation. Based upon current projections, net cash collections,
applied to principal for interest method portfolios will be as follows for the
twelve months in the periods ending:


September 30, 2006 (six months ending)                   $ 22,886,000
September 30, 2007                                         70,675,000
September 30, 2008                                         63,506,000
September 30, 2009                                         50,048,000
September 30, 2010                                         29,701,000
September 30, 2011                                              5,000
                                                         ------------
Total                                                    $236,821,000
                                                         ============

     Accretable yield represents the amount of income the Company can expect to
generate over the remaining life of its existing portfolios based on estimated
future net cash flows as of March 31, 2006. The Company adjusts the accretable
yield upward when it believes, based on available evidence, that portfolio
collections will exceed amounts previously estimated. Changes in accretable
yield for the three months and six months ended March 31, 2006 are as follows:

                                                              SIX MONTHS
                                                                ENDED
                                                            MARCH 31, 2006
                                                            --------------

Balance at beginning of period, September 30, 2005            $ 94,022,000

Income recognized on finance receivables, net                  (43,067,000)
Additions representing expected revenue from purchases          71,670,000
Reclassifications from nonaccretable difference                 31,234,000
                                                              ------------
Balance at end of period, March 31, 2006                      $153,859,000
                                                              ============


                                                             THREE MONTHS
                                                                 ENDED
                                                             MARCH 31, 2006
                                                             --------------
Balance at beginning of period, December 31, 2005             $ 135,306,000

Income recognized on finance receivables, net                   (24,020,000)
Additions representing expected revenue from purchases           11,339,000
Reclassifications from nonaccretable difference                  31,234,000
                                                               ------------
Balance at end of period, March 31, 2006                       $153,859,000
                                                               ============

     During the six months ended March 31, 2006, the Company purchased $2.5
billion of face value charged-off consumer receivables at a cost of $121.2
million. During the three months ended March 31, 2006 the Company purchased
$351.3 million of face value charged-off consumer receivables at a cost of $18.8
million. At March 31, 2006, the estimated remaining net collections on the
receivables purchased in the six months ended March 31, 2006 are $171.8 million.





                                       10
<PAGE>

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

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


     The following table summarizes collections on a gross basis as received by
our third-party collection agencies and attorneys, less commissions and direct
costs for the three and six month periods ended March 31, 2006 and 2005,
respectively.

                                      FOR THE SIX MONTHS ENDED MARCH 31,
                                      ----------------------------------
                                          2006               2005
                                          ----               ----

Gross collections (1)                 $145,032,000         $104,931,000

Commissions and fees (2)                43,234,000           25,958,000
                                      ------------         ------------

Net collections                       $101,798,000         $ 78,973,000
                                      ============         ============


                                      FOR THE THREE MONTHS ENDED MARCH 31,
                                      ------------------------------------
                                          2006               2005
                                          ----               ----

Gross collections (1)                 $ 79,304,000         $ 51,500,000

Commissions and fees (2)                23,715,000            9,318,000
                                      ------------         ------------

Net collections                       $ 55,589,000         $ 42,182,000
                                      ============         =============

         (1) Gross collections include: collection 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.


NOTE  4: FURNITURE AND EQUIPMENT

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

                                                   MARCH 31,     SEPTEMBER 30,
                                                     2006            2005
                                               -------------     -------------
Furniture..................................     $    307,000     $    307,000
Equipment..................................        2,353,000        2,108,000
                                               -------------      -----------
                                                   2,660,000        2,415,000
Less accumulated depreciation..............        1,599,000        1,426,000
                                               -------------      -----------
Balance, end of period.....................   $    1,061,000     $    989,000
                                                 ===========      ===========





                                       11
<PAGE>

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

NOTE 5: DEBT

     In January 2006, the Company entered into an amended and restated loan and
security agreement that increased the line of credit with a consortium of banks
from $100 million to $125 million. The amended and restated loan and security
agreement expiration date remains May 11, 2006. (see below) The line of credit
bears interest at the lesser of LIBOR plus an applicable margin, or the prime
rate plus or minus an applicable margin based on certain leverage ratios (the
applicable rate was 7.25% at March 31, 2006, with an average rate of 6.69% for
the six month period ended March 31, 2006). The credit line is collateralized by
all portfolios of consumer receivables acquired for liquidation and contains
customary financial and other covenants (relative to tangible net worth,
interest coverage, and leverage ratio, as defined) that must be maintained in
order to borrow funds. As of March 31, 2006, $72.0 million was outstanding. The
Company is currently in negotiations for a new, increased credit facility and
has agreed with its lenders to extend the current agreement for sixty days until
a new agreement can be finalized.

NOTE 6: COMMITMENTS AND CONTINGENCIES

Employment Agreements

     We have an employment agreement with one executive and are in the process
of formalizing new employment agreements with two other executive officers. Such
agreement and anticipated agreements provide for base salary payments as well as
bonuses. The agreements also contain confidentiality and non-compete provisions.

Leases

     We are a party to two operating leases with respect to our facilities in
Englewood Cliffs, New Jersey and Bethlehem, Pennsylvania. Please refer to our
consolidated financial statements and notes thereto in our Annual Report on Form
10-K/A, 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 May 9, 2006, we were not involved in any material litigation in
which we were a defendant.

NOTE 7: INCOME RECOGNITION

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

     Under the interest method, we recognize income on the effective yield
method based on the actual cash collected during a period and future estimated
cash flows and timing of such estimated collections. Finance income arising from
collections in excess of anticipated amounts attributed to timing differences,
is deferred. The estimated future cash flows are revaluated quarterly. Under the
cost recovery method, no finance income is recognized until we have fully
collected the cost of the portfolio

     We recognize income net of collection fees paid to third-party collection
agencies. With respect to amounts collected in-house, such finance income is
recognized at the gross amount collected. Income from finance receivables was
recognized over the periods from the date of purchase to the estimated
collection date.




                                       12
<PAGE>

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

NOTE 8: INCOME TAXES

     The provision for income tax expense reflects income tax expense at an
effective rate of approximately 40.5% for the six and three month periods ending
March 31, 2006 and 2005.

     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.

     The following table presents the computation of basic and diluted per share
data for the six and three months ended March 31, 2006 and 2005:

<TABLE>
<CAPTION>
                                                          SIX MONTHS ENDED MARCH 31,

                                                   2006                                   2005
                                     ---------------------------------     --------------------------------------
                                                   WEIGHTED                              WEIGHTED
                                        NET         AVERAGE   PER SHARE     NET           AVERAGE     PER SHARE
                                      INCOME        SHARES      AMOUNT     INCOME         SHARES       AMOUNT
                                      ---------   ----------  --------   ----------     ------------  --------
<S>                                  <C>          <C>            <C>      <C>            <C>            <C>
Basic............................    $20,415,000  13,603,485     $1.50    $13,456,000    13,511,678     $1.00
                                                               =======                               ========
Effect of Dilutive Stock.........                    979,767                                840,566
                                    ------------  ----------             ------------  -----------
Diluted..........................    $20,415,000  14,583,252     $1.40    $13,456,000    14,352,244     $0.94
                                    ============  ==========   =======   ============  ============  ========
</TABLE>

<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED MARCH 31,
                                                   2006                                   2005
                                     -----------------------------------   -----------------------------------
                                                   WEIGHTED                              WEIGHTED
                                        NET         AVERAGE   PER SHARE      NET         AVERAGE     PER SHARE
                                      INCOME        SHARES     AMOUNT       INCOME        SHARES       AMOUNT
                                    ------------  ----------  ---------  ------------   ------------  --------
<S>                                  <C>          <C>            <C>       <C>           <C>            <C>
Basic............................    $11,103,000  13,608,994     $0.82     $7,281,000    13,553,765     $0.54
                                                               =======                               ========
Effect of Dilutive Stock.........                    995,642                                851,411
                                    ------------  ----------             ------------  ------------
Diluted..........................    $11,103,000  14,604,636     $0.76     $7,281,000    14,405,176     $0.51
                                    ============  ==========   =======   ============  ============  ========
</TABLE>


NOTE 10: STOCK-BASED COMPENSATION

     The Company accounts for stock-based employee compensation under Financial
Accounting Standards Board Statement of Financial Accounting Standards No. 123
(Revised 2005), Share-Based Payment ("SFAS 123R"). SFAS 123R which the Company
adopted October 1, 2005, requires that compensation expense associated with
stock options be recognized in the statement of operations, rather than a
disclosure in the notes to the Company's consolidated financial statements.


     Effective September 30, 2005, the Company accelerated the vesting of all
unvested stock options previously awarded to employees, officers and directors
under the Company's stock option plans. In order to prevent unintended personal
benefits to employees, officers and directors, the Board imposed restrictions on
any shares received through the exercise of accelerated options held by those
individuals. These restrictions prevent the sale of any stock obtained through
exercise of an accelerated option prior to the earlier of the original vesting
date or the individual's termination of employment.


                                       13
<PAGE>


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


NOTE 10: STOCK-BASED COMPENSATION (CONTINUED)

     Financial Accounting Standards Board ("FASB") Financial Interpretation No.
44 would require the Company to recognize compensation expense under certain
circumstances, such as the change in the vesting schedule, that would allow an
employee to vest in an option that would have otherwise been forfeited based on
the award's original terms. The Company would be required to begin to recognize
compensation expense over the new expected vesting periods based on estimates of
the numbers of options that employees ultimately will retain that otherwise
would have been forfeited, absent the modifications. The accelerated options,
absent the acceleration, would substantially have vested over the period October
1, 2005 through April 30, 2007. Such estimates would be based on such factors
such as historical and expected employee turnover rates and similar statistics.
Of the 587,000 stock option that were affected by the acceleration of the
vesting of all stock options as of September 30, 2005, 547,000 are attributable
to officers and directors of the Company representing $9.0 million of the $9.7
million intrinsic value of the newly vested stock options. The Company is unable
to estimate the number of options that employees will ultimately retain that
otherwise would have been forfeited, absent the modification. Based on the
current circumstances, market price above the grant price, concentration of
options awarded to officers and directors and low historical turnover rates, no
compensation expense resulting from the new measurement date has been recognized
through March 31, 2006 or, prior to the employees' termination. The Company will
recognize compensation expense in future periods, should a benefit be realized
by the holders of the aforementioned options, which they would not otherwise
have been entitled to. In the event the Company grants stock options under the
stock option plans, the Company will recognize compensation expense in
accordance with Financial Interpretation No. 44. The primary purpose of the
accelerated vesting is to eliminate the compensation expense the Company would
otherwise recognize in its income statement with respect to these accelerated
stock options based upon the adoption of Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 123 (Revised 2005), Share-Based
Payment ("SFAS 123R").

     Pro-forma net income for the three and six months ended March 31, 2005 if
the fair value based method as prescribed by 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" is displayed in the following table.


<TABLE>
<CAPTION>
                                                                                SIX MONTHS         THREE MONTHS
                                                                               ENDED MARCH 31,    ENDED MARCH 31,
                                                                                    2005              2005
                                                                                ------------       -------------
<S>                                                                             <C>                <C>
Net income as reported......................................................    $ 13,456,000       $  7,281,000
Stock based compensation expense
 Determined under fair value method, net of related tax effects.............     (1,114,000)           (558,000)
                                                                                ------------       ------------
Pro forma net income........................................................    $ 12,342,000       $  6,723,000
                                                                                ============       ============
Earnings per share:
 Basic -- as reported........................................................   $       1.00      $        0.54
                                                                                ============       ============
 Basic -- pro forma..........................................................   $       0.91      $        0.50
                                                                                ============       ============
 Diluted -- as reported......................................................   $       0.94      $        0.51
                                                                                ============       ============
 Diluted -- pro forma........................................................   $       0.86      $        0.47
                                                                                ============       ============
</TABLE>



     The weighted average fair value of the options granted during 2005 was
$18.25 per share on the dates of grant, using the Black-Scholes option pricing
model with the following assumptions: dividend yield 0.0083% (2005) weighted
average volatility 40.128% (2005), expected life 10 years, weighted average risk
free interest rate of 4.1900% in 2005.



                                       14
<PAGE>


                      ASTA FUNDING, INC. AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                                  (UNAUDITED)

NOTE 11: STOCK OPTION PLANS

Equity Compensation Plan

         On December 1, 2005, the Board of Directors adopted the Company's
Equity Compensation Plan (the "Equity Compensation Plan"), subject to the
approval of the stockholders of the Company. The Equity Compensation Plan was
adopted to supplement the Company's existing 2002 Stock Option Plan. In addition
to permitting the grant of stock options as are permitted under the 2002 Stock
Option Plan, the Equity Compensation Plan allows the Company flexibility with
respect to equity awards by also providing for grants of stock awards (i.e.
restricted or unrestricted), stock purchase rights and stock appreciation
rights. The Equity Compensation Plan was ratified by the shareholders on March
1, 2006.

         The general purpose of the Equity Compensation Plan is to provide an
incentive to our employees, directors and consultants, including executive
officers, employees and consultants of any subsidiaries, by enabling them to
share in the future growth of our business. The Board of Directors believes that
the granting of stock options and other equity awards promotes continuity of
management and increases incentive and personal interest in the welfare of the
Company by those who are primarily responsible for shaping and carrying out our
long range plans and securing our growth and financial success.

         The Board believes that the Equity Compensation Plan will advance our
interests by enhancing our ability to (a) attract and retain employees,
directors and consultants who are in a position to make significant
contributions to our success; (b) reward employees, directors and consultants
for these contributions; and (c) encourage employees, directors and consultants
to take into account our long-term interests through ownership of our shares.

2002 Stock Option Plan

         On March 5, 2002, the Board of Directors adopted the Asta Funding, Inc.
2002 Stock Option Plan (the "2002 Plan"), which plan was approved by the
Company's stockholders on May 1, 2002. The 2002 Plan was adopted in order to
attract and retain qualified directors, officers and employees of, and
consultants to, the Company. The following description does not purport to be
complete and is qualified in its entirety by reference to the full text of the
2002 Plan, which is included as an exhibit to the Company's reports filed with
the SEC.

         The 2002 Plan authorizes the granting of incentive stock options (as
defined in Section 422 of the Code) and non-qualified stock options to eligible
employees of the Company, including officers and directors of the Company
(whether or not employees) and consultants of the Company.

         The Company has 1,000,000 shares of Common Stock authorized for
issuance under the 2002 Plan and 404,667 were available as of March 31, 2006. As
of March 31, 2006, approximately 140 of the Company's employees were eligible to
participate in the 2002 Plan. Future grants under the 2002 Plan have not yet
been determined.

1995 Stock Option Plan

         The 1995 Stock Option Plan expired on September 14, 2005. The plan was
adopted in order to attract and retain qualified directors, officers and
employees of, and consultants, to the Company. The following description does
not purport to be complete and is qualified in its entirety by reference to the
full text of the 1995 Stock Option Plan, which is included as an exhibit to the
Company's reports filed with the SEC.

         The 1995 Stock Option Plan authorized the granting of incentive stock
options (as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code")) and non-qualified stock options to eligible employees of
the Company, including officers and directors of the Company (whether or not
employees) and consultants of the Company.

         The Company authorized 1,840,000 shares of Common Stock authorized for
issuance under the 1995 Stock Option Plan. All but 96,002 shares were utilized.
As of September 14, 2005, no more options could be issued under this plan.




                                       15
<PAGE>

                      ASTA FUNDING, INC. AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                                  (UNAUDITED)

NOTE 11: STOCK-OPTION PLANS - (CONTINUED)

The following table summarizes stock option transactions under the plans:

<TABLE>
<CAPTION>
                                                                       SIX MONTHS ENDED MARCH 31,
                                                             --------------------------------------------------
                                                                    2006                         2005
                                                             ----------------------     -----------------------
                                                                          WEIGHTED                     WEIGHTED
                                                                           AVERAGE                     AVERAGE
                                                                          EXERCISE                     EXERCISE
                                                              SHARES        PRICE        SHARES         PRICE
                                                             ---------    ---------     ---------      --------
<S>                                                          <C>           <C>          <C>            <C>
Outstanding options at the beginning of period..........     1,580,605     $ 9.1082     1,364,171       $6.2700
Options granted.........................................           -0-       0.0000       402,500       18.2502
Options exercised.......................................       (25,833)     11.2895      (131,453)       9.0114
Options cancelled.......................................           -0-       0.0000       (40,002)      11.7144
                                                             ---------     --------     ---------      --------
Outstanding options at the end of period................     1,554,772     $ 9.0720     1,595,216      $ 8.9267
                                                             ---------                  ---------

Exercisable options at the end of period................     1,554,772     $ 9.0720     1,013,004      $ 4.6063
                                                             ---------                  ---------
</TABLE>


     The following table summarizes information about the Plans outstanding
options as of March 31, 2006:

<TABLE>
<CAPTION>
                                                        OPTIONS OUTSTANDING                 OPTIONS EXERCISABLE
                                              ---------------------------------------     ------------------------
                                                               WEIGHTED
                                                                AVERAGE       WEIGHTED                    WEIGHTED
                                                               REMAINING       AVERAGE                     AVERAGE
                                                NUMBER        CONTRACTUAL     EXERCISE      NUMBER         EXERCISE
RANGE OF EXERCISE PRICE                       OUTSTANDING   LIFE (IN YEARS)     PRICE     EXERCISABLE       PRICE
--------------------                          -----------   ---------------  ---------    ------------   ----------
<C>       <C>                                   <C>                <C>       <C>             <C>         <C>
$0.0000 - $2.2360.......................        200,000            3.2       $  0.8125       200,000     $  0.8125
$2.2361 - $4.4720.......................        520,000            3.5          2.5644       520,000        2.5644
$4.4721 - $6.7080.......................        135,334            6.5          4.8345       135,334        4.8345
$13.4161 - $15.6520.....................        245,002            7.6         14.8700       245,002       14.8700
$15.6521 - $17.8880.....................         31,944            8.4         16.5347        31,944       16.5347
$17.8881 - $20.1240.....................        402,492            8.6         18.2266       402,492       18.2266
$20.1241 - $22.3600.....................         20,000            8.9         22.3600        20,000       22.3600
                                             ----------           ----         --------    ---------     ---------
                                              1,554,772            5.9         $9.0720     1,554,772     $  9.0720
                                             ==========                                    ========
</TABLE>

NOTE 12: STOCKHOLDERS' EQUITY

     For the six months ended March 31, 2006, we declared dividends of
$1,089,000 of which $545,000 was accrued as of March 31, 2006 and paid May 1,
2006.

NOTE 13: ACQUISITION

     In February 2006 the Company acquired VATIV Recovery Solutions LLC for
approximately $1.4 million in cash. VATV provides nationwide bankruptcy and
deceased account servicing. The purchase price has been tentatively and
substantially allocated to goodwill.

                                       16
<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.

     CAUTIONS WITH RESPECT TO FORWARD LOOKING STATEMENTS

     This Form 10-Q contains forward-looking statements made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements typically are identified by use of terms such as
"may," "will," "should," "plan," "expect," "believe," "anticipate," "estimate"
and similar expressions, although some forward-looking statements are expressed
differently. Forward-looking statements represent our management's judgment
regarding future events. Although we believe that the expectations reflected in
such forward-looking statements are reasonable, we can give no assurance that
such expectations will prove to be correct. All statements other than statements
of historical fact included in this report regarding our financial position,
business strategy, products, products under development and clinical trials,
markets, budgets, plans, or objectives for future operations are forward-looking
statements. We cannot guarantee the accuracy of the forward-looking statements,
and you should be aware that our actual results could differ materially from
those contained in the forward-looking statements due to a number of factors,
including the statements under "Risk Factors" and "Critical Accounting Policies"
detailed in our annual report on Form 10-K/A for the year ended September 30,
2005, and other reports filed with the Securities and Exchange Commission.

     Our annual reports 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. The SEC also maintains an internet
site (www.sec.gov) that contains reports and information statements and other
information regarding issuers such as ourselves who file electronically with the
SEC.

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.

     The Company adjusts the accretable yield upward when it believes, based on
available evidence, that the portfolio collections will exceed amounts
previously estimated. Portfolios tracking below estimates may result in an
impairment charge.




                                       17


<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 - 24 months
after acquiring the portfolio, although additional amounts are collected over
the remaining periods. The estimated future cash flows of the portfolios are
reevaluated quarterly.

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

     The estimated future cash flows are reevaluated quarterly. Income on
finance receivables is earned based on each static pool's effective IRR. Under
the interest method, income is recognized 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 cost. We typically recognize
finance income net of collection fees paid to third-party collection agencies
and attorneys.

     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, 2006, COMPARED TO THE SIX-MONTH PERIOD
     ENDED MARCH 31, 2005

     Finance income. During the six-month period ended March 31, 2006, finance
income increased $14.6 million or 47.9% to $45.1 million from $30.5 million for
the six-month period ended March 31, 2005. 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, 2006, as compared to the same prior year period coupled with revenue
recognized by adjustments to accretable yields on certain portfolios. Based on
the available information, and based on improved liquidation rates from our
third party collection agencies and attorneys, management believes the
anticipated collections on these portfolios to be in excess of our original
projections. As we believe these improved liquidation rates will continue, we
have adjusted our accretable yield by $31.2 million. The average outstanding
accounts increased from $158.6 million for the six month period ended March 31,
2005 to $205.0 million for the same period of 2006. During the six-months ended
March 31, 2006, we acquired receivables at a cost of $121.2 million as compared
to $73.3 million during the six- months ended March 31, 2005 and for year ended
September 30, 2005, we acquired receivables at a cost of $126.0 million as
compared to $103.7 million for the year ended September 30, 2004. During the
six-month period ended March 31, 2006, the commissions and fees associated with
gross collections from our third-party collection agencies and attorneys
increased $17.2 million or 66.6% to $43.2 million from $26.0 million for the
six-month period ended March 31, 2005. The increase is indicative of a shift to
the suit strategy implemented by the Company. As we continue to purchase
portfolios and utilize our third party collection agencies and attorney
networks, we anticipate these costs will rise, however, they should stabilize in
the range of 30% to 32% of gross collections based upon the current mix of the
portfolio.

     General and Administrative Expenses. During the six-month period ended
March 31, 2006, general and administrative expenses increased $1.9 million, or
26.3% to $8.8 million from $6.9 million for the six-months ended March 31, 2005,
and represented 81.7% of total expenses (excluding income taxes) for the six
months ended March 31, 2006. 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, 2006, 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, 2006, as compared to the same
prior year period with the average balance increasing 29.2 %. A majority of the
increased costs were from collection expenses including printing, postage and
delivery costs, salary and related benefits, telephone charges, offset by
reduced professional fees, as work related to contracts and other legal matters
has been brought in-house.

      Interest Expense. During the six-month period ended March 31, 2006,
interest expense increased to $2.0 million from $0.9 million in the same prior
year period and represented 18.3% of total expenses (excluding income taxes) for
the six-month period ended March 31, 2006. The increase was due to an increase
in average outstanding borrowings coupled with a slightly higher interest during
the six-month period ended March 31, 2006, as compared to the same period in the
prior year. The weighted average balance increased from $36.9 for the six month
period ended March 31, 2005 to $61.0 million for the same period of fiscal year
2006. The increase in borrowings was due to the increase in acquisitions of
consumer receivables acquired for liquidation.

                                       18
<PAGE>


THE THREE-MONTH PERIOD ENDED MARCH 31, 2006, COMPARED TO THE THREE-MONTH PERIOD
ENDED MARCH 31, 2005

     Finance income. During the three-month period ended March 31, 2006, finance
income increased $8.1 million or 49.0% to $24.8 million from $16.7 million for
the three-month period ended March 31, 2005. 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, 2006, as compared to the same prior year periods,
coupled with revenue recognized by adjustments to accretable yields on certain
portfolios. Based on the available information, and based on improved
liquidation rates from our third party collection agencies and attorneys,
management believes the anticipated collections on these portfolios to be in
excess of our original projections. As we believe these improved liquidation
rates will continue, we have adjusted our accretable yield by $31.2 million.

     The average balance outstanding increased from $165.4 million for the
second quarter of 2005, to $243.2 million during the same period of fiscal 2006.
During the three months ended March 31, 2006, we acquired receivables at a cost
of $18.8 million, as compared to $36.8 million during the three months ended
March 31, 2005. For year ended September 30, 2005, we acquired receivables at a
cost of $126.0 million as compared to $103.7 million for the year ended
September 30, 2004. During the three-month period ended March 31, 2006, the
commissions and fees associated with gross collections from our third-party
collection agencies and attorneys increased $14.4 million or 154.5% to $23.7
million from $9.3 million for the three-month period ended March 31, 2005.

     General and Administrative Expenses. During the three-month period ended
March 31, 2006, general and administrative expenses increased $0.9 million, or
23.5% to $4.8 million from $3.9 million for the three-months ended March 31,
2005 and represented 78.8% of total expenses (excluding income taxes) for the
three months ended March 31, 2006 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, 2006, 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, 2006, as compared to the
same prior year period. A majority of the increased costs were from collection
expenses including printing, delivery, data processing costs, salaries and
related benefits and telephone charges, slightly offset by lower professional
fees and postage charges for the quarter.

     Interest Expense. During the three-month period ended March 31, 2006,
interest expense increased to $1.3 million from $.5 million in the same period
of the prior year and represented 21.2 % of total expenses (excluding income
taxes) for the three-month period ended March 31, 2006. The increase was due to
an increase in average outstanding borrowings coupled with a slightly higher
interest rate during the three-month period ended March 31, 2006, 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.

LIQUIDITY AND CAPITAL RESOURCES

     Our primary sources of cash from operations include payments on the
receivable portfolios that we have acquired. Our primary uses of cash include
our purchases of consumer receivable portfolios. We rely significantly upon our
lenders to provide the funds necessary for the purchase of consumer and
commercial accounts receivable portfolios. While we maintain a $125 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 $125 million
line of credit with a consortium of banks. As of March 31, 2006, there was a
$72.0 million outstanding balance under this facility. As of March 31, 2006, our
cash and cash equivalents decreased $0.1 million to $4.0 million from $4.1
million at September 30, 2005. The decrease in cash and cash equivalents during
the three month period ended March 31, 2006, was due to an increase in consumer
receivable purchases, higher dividend and interest payments offset by lower tax
payments during the six months ended March 31, 2006, as compared to the same
period in the prior year as we were in a pre-paid tax position at the end of
September 30, 2005.

     Net cash provided by operating activities was $24.0 million during the six
months ended March 31, 2006, compared to net cash provided by operating
activities of $5.0 million during the six months ended March 31, 2005. The
increase in net cash provided by operating activities was primarily due to the
increase in net income and a decrease in income tax payments and a decrease in
the amount due from third party collection agencies and attorneys. Net cash used
in investing activities was $66.1 million during the six months ended March 31,
2006, compared to net cash used by investing activities of $18.9 million during
the six months ended March 31, 2005. The increase in net cash used by investing
activities was primarily due to an increase in the purchase of accounts acquired
for liquidation during the six months ended March 31, 2006, compared to the same
period in the prior year. In addition, the Company acquired Vativ Recovery
Solutions, LLC during the second quarter. Net cash provided by financing
activities was $42.0 million and $13.1 million during the six month periods
ended March 31, 2006, and 2005, respectively. The increase in net cash provided
by financing activities was primarily due to an increase in



                                       19
<PAGE>


borrowings under our line of credit which was due to an increase in accounts
acquired for liquidation during the six months ended March 31, 2006, as compared
to the same prior year period.

     The advances under the 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. In January 2006, the line of credit was increased to $125
million from $100 million. The Company is currently in negotiations for a new,
increased credit facility and has agreed with its lenders to extend the current
agreement for sixty days until a new agreement can be finalized.

     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, 2006, we acquired consumer receivable portfolios at a
cost of approximately $121.2 million. These acquisitions were financed with our
credit facility and cash flows from operating activities.

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

     From time to time, we evaluate potential acquisitions of related
businesses. However, we have not reached any agreement or arrangement with
respect to any particular acquisition and we may not be able to 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:


<TABLE>
<CAPTION>
                                                                      FOR THE SIX MONTHS ENDED MARCH 31, 2006
                                                                -----------------------------------------------------
                                                                   ACCRUAL             CASH
                                                                    BASIS              BASIS
                                                                  PORTFOLIOS         PORTFOLIOS           TOTAL
                                                                -------------       -------------       -------------
<S>                                                             <C>                 <C>                 <C>
Balance, beginning of period ..............................     $ 172,636,000       $      91,000       $ 172,727,000
Acquisitions of receivable portfolios, net ................       121,188,000                --           121,188,000
Net cash collections from collection of consumer
     receivables acquired for liquidation .................       (73,470,000)         (2,022,000)        (75,492,000)

Net cash collections represented by account sales of
        consumer receivables acquired for liquidation .....       (26,071,000)           (235,000)        (26,306,000)

Transferred to cost recovery...............................          (529,000)            529,000                --

Finance income recognized .................................        43,067,000           2,022,000          45,089,000
                                                                -------------       -------------       -------------
Balance, end of period ....................................     $ 236,821,000       $     385,000       $ 237,206,000
                                                                =============       =============       =============
     Finance income as a percentage of collections ........              43.3%               89.6%               44.3%
</TABLE>








                                       20
<PAGE>

<TABLE>
<CAPTION>
                                                                         FOR THE SIX MONTHS ENDED MARCH 31, 2005
                                                                  ---------------------------------------------------
                                                                    ACCRUAL             CASH
                                                                     BASIS              BASIS
                                                                   PORTFOLIOS         PORTFOLIOS             TOTAL
                                                                 -------------       -------------       -------------
<S>                                                              <C>                 <C>                 <C>
Balance, beginning of period ...............................     $ 144,812,000       $   1,353,000       $ 146,165,000
Acquisitions of receivable portfolios, net .................        73,337,000                --            73,337,000
Net cash collections from collection of consumer
     receivables acquired for liquidation ..................       (51,980,000)         (2,452,000)        (54,432,000)

Net cash collections represented by account sales of
        consumer receivables acquired for liquidation.......       (23,042,000)         (1,499,000)        (24,541,000)
Finance income recognized ..................................        27,367,000           3,125,000          30,492,000
                                                                 -------------       -------------       -------------
Balance, end of period .....................................     $ 170,494,000       $     527,000       $ 171,021,000
                                                                 =============       =============       =============
Finance income as a percentage of collections ..............              36.5%               79.1%               38.6%
</TABLE>



<TABLE>
<CAPTION>
                                                                       FOR THE THREE MONTHS ENDED MARCH 31, 2006
                                                                -----------------------------------------------------
                                                                     ACCRUAL           CASH
                                                                      BASIS            BASIS
                                                                   PORTFOLIOS        PORTFOLIOS           TOTAL
                                                                -------------       -------------       -------------
<S>                                                             <C>                 <C>                 <C>
Balance, beginning of period ..............................     $ 248,758,000       $     425,000       $ 249,183,000
Acquisitions of receivable portfolios, net ................        18,783,000                --            18,783,000
Net cash collections from collections of consumer
         receivables acquired for liquidation .............       (42,408,000)           (849,000)        (43,257,000)
Net cash collections represented by account sales of
          consumer receivables acquired for liquidation....       (12,332,000)               --           (12,332,000)

Finance income recognized .................................        24,020,000             809,000          24,829,000
                                                                -------------       -------------       -------------
Balance, end of period ....................................     $ 236,821,000       $     385,000       $ 237,206,000
                                                                =============       =============       =============
Finance income as a percentage of collections .............              43.9%               95.3%               44.7%
</TABLE>


<TABLE>
<CAPTION>
                                                                      FOR THE THREE MONTHS ENDED MARCH 31, 2005
                                                                -----------------------------------------------------
                                                                     ACCRUAL           CASH
                                                                      BASIS            BASIS
                                                                   PORTFOLIOS       PORTFOLIOS          TOTAL
                                                                -------------       -------------       -------------
<S>                                                             <C>                 <C>                 <C>
Balance, beginning of period ..............................     $ 159,195,000       $     581,000       $ 159,776,000
Acquisitions of receivable portfolios, net ................        36,795,000                --            36,795,000
Net cash collections from collections of consumer
         receivables acquired for liquidation .............       (31,524,000)         (1,103,000)        (32,627,000)
Net cash collections represented by account sales of
          consumer receivables acquired for liquidation....        (9,555,000)               --            (9,555,000)

Finance income recognized .................................        15,583,000           1,049,000          16,632,000
                                                                -------------       -------------       -------------
Balance, end of period ....................................     $ 170,494,000       $     527,000       $ 171,021,000
                                                                =============       =============       =============
Finance income as a percentage of collections .............              37.9%               95.1%               39.4%
</TABLE>


                                       21
<PAGE>

ADDITIONAL SUPPLEMENTARY INFORMATION:

     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. During the six months ended March 31, 2006, we purchased portfolios
with an aggregate purchase price of $121.2 million with a face value of $2.5
billion.

     Prior to October 1, 2005, we accounted for our investment in finance
receivables using the interest method under the guidance of Practice Bulletin 6,
"Amortization of Discounts on Certain Acquired Loans." Effective October 1,
2005, we adopted and began to account for its investment in finance receivables
using the interest method under the guidance of American Institute of Certified
Public Accountants ("AICPA") Statement of Position ("SOP") 03-3, "Accounting for
Loans or Certain Securities Acquired in a Transfer." Practice Bulletin 6 was
amended by SOP 03-3 as described further. Under the guidance of SOP 03-3 (and
the amended Practice Bulletin 6), static pools of accounts are established.
These pools are aggregated based on certain common risk criteria. Each static
pool is recorded at cost and is accounted for as a single unit for the
recognition of income, principal payments and loss provision. Once a static pool
is established for a quarter, individual receivable accounts are not added to
the pool (unless replaced by the seller) or removed from the pool (unless sold
or returned to the seller). SOP 03-3 (and the amended Practice Bulletin 6)
requires that the excess of the contractual cash flows over expected cash flows
not be recognized as an adjustment of revenue or expense or on the balance
sheet. The SOP initially freezes the internal rate of return, referred to as
IRR, estimated when the accounts receivable are purchased as the basis for
subsequent impairment testing. Significant increases in actual, or expected
future cash flows may be recognized prospectively through an upward adjustment
of the IRR over a portfolio's remaining life. Any increase to the IRR then
becomes the new benchmark for impairment testing. Effective for fiscal years
beginning October 1, 2005 under SOP 03-3 and the amended Practice Bulletin 6,
rather than lowering the estimated IRR if the collection estimates are not
received or projected to be received, the carrying value of a pool would be
written down to maintain the then current IRR. Income on finance receivables is
earned based on each static pool's effective IRR. Under the interest method,
income is recognized 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 cost. Revenue arising from collections in excess
of anticipated amounts attributable to timing differences is deferred. The
estimated future cash flows are reevaluated quarterly.



                    COLLECTIONS REPRESENTED BY ACCOUNT SALES


<TABLE>
<CAPTION>
                                                   Collections
                                                   Represented       Finance
                                                    By Account        Income
Period                                                Sales           Earned
------                                             ------------    ------------
<S>                                                 <C>            <C>
Six months ended March 31, 2006                     $26,306,000    $14,246,000

Three months ended March 31, 2006                   $12,332,000    $ 7,794,000



Six months ended March 31, 2005                     $24,541,000    $ 9,403,000

Three months ended March 31, 2005                   $ 9,555,000    $ 3,604,000
</TABLE>







                                       22
<PAGE>




PORTFOLIO PERFORMANCE (1)

<TABLE>
<CAPTION>
                                                                                              Total estimated      # of Weighted
                                         Cash Collections    Estimated         Total          Collections as a     Average Days
                            Purchase      Including Cash     Remaining        Estimated        Percentage of     Held During First
Purchase Period             Price (2)       Sales (3)      Collections (4)  Collections (5)    Purchase Price      Year Acquired
---------------             ---------       ---------      ---------------  ---------------    --------------     ----------------
<C>                       <C>             <C>              <C>               <C>                <C>                 <C>
2001                      $ 65,120,000    $  94,426,000              $0       $94,426,000          145%                119

2002                        36,557,000       51,488,000              $0        51,488,000          141%                183

2003                       115,626,000      151,824,000       44,865,000      196,689,000          170%                 81

2004                       103,743,000      114,217,000       47,754,000      161,971,000          156%                170

2005                       126,023,000       74,917,000      126,224,000      201,141,000          160%                181

2006 (Through 2nd Quarter) 121,188,000       21,626,000      171,837,000      193,463,000          160%                103
</TABLE>



     (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, collections from our in-house efforts and net
collections represented by account sales. Net collections are from the inception
of the portfolio acquisition.

     (4) Does not include estimated collections from portfolios that are zero
bases.

     (5) Total estimated collections refers to the actual net cash collections,
including cash sales, plus estimated remaining net collections.



RECENT ACCOUNTING PRONOUNCEMENTS

     In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123 (revised 2004) Share-Based
Payment ("SFAS No.123R"). This statement is a revision of FASB Statement No.
123, Accounting for Stock-Based Compensation. This Statement supersedes APB
Opinion No. 25, Accounting for Stock Issued to Employees, and its related
implementation guidance. This Statement requires that the cost resulting from
all share-based payment transactions be recognized in the financial statements.
This Statement supersedes the current method utilized by the Company of the
disclosure-only provisions of the original SFAS No. 123. The effective date for
implementation of SFAS No. 123R for the Company was October 1, 2005. The Company
had been disclosing the impact on net income and earnings per share since the
adoption of the original SFAS No. 123 and its amendment, SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure" in the
notes to the financial statements. As permitted by SFAS 148 and SFAS 123, we
continued to apply the accounting provisions of Accounting Principles Board
Opinion Number 25, "Accounting for Stock Issued to Employees," and related
interpretations, with regard to the measurement of compensation cost for options
granted under our Stock Option Plans through September 30, 2005. No employee
compensation expense has been recorded as all options granted had an exercise
price equal to the market value of the underlying common stock on the date of
grant. No stock options were awarded during the six month period ended March 31,
2006.


     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 internal rate of return while decreases in expected cash flows should be
recognized as impairment. This SOP became effective October 1, 2005. We believe
the implementation of this SOP will make it more likely that an impairment loss
may be recorded some time in the future, although through March 31, 2006, no
impairment loss has been recorded.


     SFAS No. 153, "Exchanges of Nonmonetary Assets - an amendment of APB
Opinion No. 29" ("SFAS 153") addresses the measurement of exchanges of
nonmonetary assets. It eliminates the exception from fair value accounting for
nonmonetary exchange of similar productive assets and replaces it with an
exception for exchanges that do not have commercial substance.



                                       23
<PAGE>

SFAS 153 specifies that a nonmonetary exchange has commercial substance if the
future cash flows of an entity are expected to change significantly as a result
of the exchange. This statement became effective October 1, 2005. This
statement is not expected to have an impact on the Company's financial results.


     In May 2005, the FASB issued SFAS 154, Accounting Changes and Error
Corrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3"
(SFAS 154), which requires a retrospective application to prior periods'
financial statements of changes in accounting principle for all periods
presented. This statement replaces APB Opinion No. 20 which required that most
voluntary changes in accounting principle be recognized by including in net
income of the period of the change the cumulative effect of changing to the new
accounting principle. The provisions of SFAS 154 are effective for fiscal years
beginning after December 15, 2006, the Company's fiscal year 2008. This
statement is not expected to have an impact on the Company's financial results.


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.

     During the six month period ended March 31, 2006, our management, including
the principal executive officer and principal financial officer, evaluated our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934) related to the recording, processing,
summarization and reporting of information in our reports that we file with the
SEC. These disclosure controls and procedures have been designed to ensure that
material information relating to us, including our subsidiaries, is made known
to our management, including these officers, by other of our employees, and that
this information is recorded, processed, summarized, evaluated and reported, as
applicable, within the time periods specified in the SEC rules and forms. Due to
the inherent limitations of control systems, not all misstatements may be
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty and that breakdowns can occur because of a simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons by collusion of two or more people, or by management
override of the control. Our controls and procedures can only provide
reasonable, not absolute, assurance that the above objectives have been met.

     Based on their evaluation as of March 31, 2006, our principal executive
officer and principal financial officer have concluded that our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934) are effective to reasonably ensure that the
information required to be disclosed by us in the reports that we file or submit
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in SEC 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.



                                       24
<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 May 9, 2006, we were not involved in any material litigation in
which we were a defendant.

ITEM 1A. RISK FACTORS

         There were no material changes in any risk factors previously disclosed
in the Company's Report on Form 10-K/A filed with the Securities & Exchange
Commission.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None.

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

     The Company held its annual meeting on March 1, 2006. At that meeting, the
following matters were voted on and received the votes indicated:

<TABLE>
<CAPTION>
                                                                      Authority
     Election of Directors                              For           Withheld
     ---------------------                              ---           --------
<S>                                                 <C>               <C>
Gary Stern ....................................     11,839,393        518,361

Arthur Stern ..................................     11,838,367        519,387

Herman Badillo ................................     11,604,266        753,488

David Slackman.................................     11,773,019        584,735

Edward Celano .................................     11,640,600        717,154

Harvey Leibowitz ..............................     11,542,656        815,098

Alan Rivera ...................................     11,908,539        449,215

Louis A. Piccolo ..............................     12,004,626        353,128
</TABLE>



     Approve adoption of the Asta Funding, Inc. Equity Compensation Plan:



         Votes For      Votes Against    Votes Abstain       Unvoted
         ---------      -------------    -------------       --------

         7,798,948        1,225,950          36,094         3,296,762










                                       25
<PAGE>

ITEM 5. OTHER INFORMATION

     None.

ITEM 6. EXHIBITS

     (a) Exhibits

         10.1     Third Amendment and Restated Loan and Security Agreement dated
                  as of May 11, 2004 (as amended, modified, supplemented or
                  restated from time to time, the "Credit Agreement").

         31.1     Certification of the Registrant's Chief Executive Officer,
                  Gary Stern, pursuant to Section 302 of the Sarbanes-Oxley Act
                  of 2002.

         31.2     Certification of the Registrant's Chief Financial Officer,
                  Mitchell Cohen, pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.

         32.1     Certification of the Registrant's Chief Executive Officer,
                  Gary Stern, pursuant to Section 906 of the Sarbanes-Oxley Act
                  of 2002.

         32.2     Certification of the Registrant's Chief Financial Officer,
                  Mitchell Cohen, pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002.



                                       26
<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 9, 2006                By: /s/ Gary Stern
                                 --------------------------------------
                                 Gary Stern, President, Chief Executive Officer
                                 (Principal Executive Officer)

Date: May 9, 2006                By: /s/ Mitchell Cohen
                                 --------------------------------------
                                 Mitchell Cohen, Chief Financial Officer

Sw                               (Principal Financial Officer and
                                 Principal Accounting Officer)


























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