<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                   FORM 10-QSB

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the quarterly period ended March 31, 1997

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the transition period from ________ to ___________

Commission file number: 0-26906
                        -------

                               ASTA FUNDING, INC.
                               ------------------
        (Exact name of small business issuer as specified in its charter)

           Delaware                                     22-3388607
           --------                                     ----------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)            


 210 Sylvan Ave., Englewood Cliffs, New Jersey                 07632
 ---------------------------------------------                 -----
  (Address of principal executive offices)                  (Zip Code)

Issuer's telephone number: (201) 567-5648

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

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for 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
   -----   -----

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes      No
   -----   -----
                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of April 30, 1997 the registrant
had 4,460,000 common shares outstanding.

Transitional Small Business Disclosure Format (check one): Yes     No  X
                                                              ----   -----
<PAGE>




                        Asta Funding, Inc. and Subsidiary
                           Form 10-QSB March 31, 1997


                                      INDEX


Part I.  Financial Information
------------------------------

         Item 1. Financial Statements

                 Consolidated Balance Sheets as of  March 31, 1997 (Unaudited)
                 and September 30, 1996

                 Consolidated Statements of Operations for the three-
                 and six-month periods ended March 31, 1997 and March 31, 1996
                 (Unaudited)

                 Consolidated Statements of Cash Flows for the
                 six-month periods ended March 31, 1997 and March 31, 1996
                 (Unaudited)
 
                 Notes to consolidated financial statements (Unaudited)

         Item 2. Management's Discussion and Analysis of Financial Condition and
                 Results of  Operations


Part II. Other Information
--------------------------

         Item 1.  Legal Proceedings

         Item 4.  Submission of Matters to a Vote of Security Holders

         Item 6.  Exhibits and Reports on Form 8-K

Signatures
<PAGE>


PART I - FINANCIAL INFORMATION

Item 1. Financial Statements


Asta Funding, Inc. and Subsidiary

Consolidated Balance Sheets
<TABLE>
<CAPTION>

                                                                          March 31,               September 30,
                                                                        -----------               -------------
                                                                            1997                       1996
                                                                            ----                       ----
                                                                          Unaudited
<S>                                                                     <C>                        <C>
Assets
Cash                                                                    $    16,270                $ 3,401,674
Restricted cash and cash equivalents, net                                   764,848                    358,179
Loans receivable, net                                                     9,998,048                  3,285,130
Accrued interest receivable                                                 135,465                     36,168
Servicing fees receivable                                                    43,643                     59,919
Excess servicing receivable, net                                          1,663,031                  2,675,407
Due from trustee                                                            147,584                  2,079,679
Furniture and equipment, net                                                135,284                     97,894
Repossessed automobiles, net                                                982,241                    491,314
Deferred taxes                                                              250,000                    365,000
Other assets                                                                156,949                    259,475
                                                                        -----------                -----------
          Total Assets                                                  $14,293,363                $13,109,839
                                                                        ===========                ===========



Liabilities and Stockholders' Equity
Liabilities
Bank overdraft                                                          $   152,908                $    54,304
Income taxes payable                                                        327,123                  1,705,000
Estimated future losses on loans sold                                          --                       76,756
Accounts payable and accrued expenses                                       304,305                    592,356
Advances under a line of credit                                           5,000,000                      --
Due to parent                                                                48,237                  1,919,704
                                                                        -----------                -----------
          Total Liabilities                                               5,832,573                  4,348,120
                                                                        -----------                -----------

Stockholders' Equity
Common stock, $.01 par value; authorized
10,000,000 shares; issued and outstanding
4,460,000                                                                    44,600                     44,600
Additional paid-in capital                                                9,597,271                  9,597,271
Accumulated deficit                                                      (1,181,081)                  (880,152)
                                                                        -----------                -----------
          Total Liabilities                                               8,460,790                  8,761,719
                                                                        -----------                -----------
Total Liabilities and Stockholders' Equity                              $14,293,363                $13,109,839
                                                                        ===========                ===========
</TABLE>

See accompanying notes to consolidated financial statements

<PAGE>



Asta Funding, Inc. and Subsidiary

Consolidated Statements of Operations
Unaudited
<TABLE>
<CAPTION>

                                                          Three Months Ended                Six Months Ended
                                                               March 31,                         March 31,
                                                    -----------------------------       -----------------------------
                                                      1997                1996            1997               1996
                                                      ----                ----            ----               ----
<S>                                                 <C>                <C>              <C>                <C>
Revenues:
Interest                                            $  822,689         $  782,929       $1,353,125         $1,289,663
Servicing fees                                          44,955               --            357,785             --
                                                    ----------         ----------       ----------         ----------
                                                       867,644            782,929        1,710,910          1,289,663
                                                    ----------         ----------       ----------         ----------
Expenses:
General and administrative                             832,031            333,381        1,457,841            545,907
Provision for credit losses                            345,746            132,600          619,746            258,400
Interest                                                96,181             98,624          136,201            212,087
                                                    ----------         ----------       ----------         ----------
                                                     1,273,958            564,605        2,213,788          1,016,394
                                                    ----------         ----------       ----------         ----------
Income (loss) before provision (benefit) for
     income taxes                                   $ (406,314)        $  218,324       $ (502,878)        $  273,269

Provision (benefit) for income taxes                  (163,350)            89,002         (201,950)           111,002
                                                    ----------         ----------       ----------         ----------
Net income (loss)                                   $ (242,964)        $  129,322       $ (300,928)        $  162,267
                                                    ==========         ==========       ==========         ==========

Net income (loss) per share                         $    (0.06)        $     0.04       $    (0.07)        $     0.05
                                                    ==========         ==========       ==========         ==========
Weighted average number of shares
      outstanding                                    3,960,000          3,588,132        3,960,000          3,241,522
                                                    ==========         ==========       ==========         ==========
</TABLE>

See accompanying notes to consolidated financial statements

<PAGE>

Asta Funding, Inc. and Subsidiary

Consolidated Statements of Cash Flows
Unaudited
<TABLE>
<CAPTION>
                                                                          Six Months Ended
                                                                              March 31,
                                                                     ---------------------------
                                                                          1997           1996
                                                                          ----           ----
<S>                                                                  <C>             <C>
Cash flows from operating activities:
  Net income (loss)                                                  $  (300,928)    $   162,267
  Adjustments to reconcile net income (loss) to net
    cash provided by (used in) operating activities:
    Depreciation and amortization                                         53,951          50,134
    Amortization of excess servicing                                     988,416            --
    Provision for losses                                                 619,700         258,400
    Deferred income taxes                                                115,000         (90,000)
    Expenses advanced by parent                                           46,740          36,279
    Changes in operating assets and liabilities:
       Accrued interest receivable                                       (99,296)        (95,623)
       Servicing fees receivable                                          16,276            --
       Other assets                                                       (5,417)       (188,323)
       Due from trustee                                                1,932,095            --
       Restricted cash                                                (1,237,747)           --
       Accounts payable and accrued expenses                          (1,665,927)        194,193
                                                                     -----------     -----------
           Net cash provided by operating activities                     462,863         327,327

Cash flows from investing activities:
    Loans originated                                                  (8,827,302)     (8,628,396)
    Loans repaid                                                       1,834,969       2,031,941
    Capital expenditures                                                 (57,640)         (9,123)
                                                                     -----------     -----------
            Net cash used in investing activities                     (7,049,973)     (6,605,578)

Cash flows from financing activities:
   Advances from parent                                                     --             3,955
    Payments to parent                                                (1,896,898)           --
    Increase in bank overdraft                                            98,604            --
    Issuance of common stock                                                --         5,699,371
    Deferred offering costs                                                 --            97,631
    Advances under a line of credit                                    5,000,000       1,033,925
                                                                     -----------     -----------
            Net cash provided by financing activities                  3,201,706       6,834,882
                                                                     -----------     -----------
Increase (decrease) in cash                                           (3,385,404)        556,631

Cash at the beginning of period                                        3,401,674         107,607
                                                                     -----------     -----------
Cash at end of period                                                $    16,270     $   664,238
                                                                     ===========     ===========

Supplemental disclosure of cash flow information:
   Cash paid during the period
         Interest                                                    $    84,876     $   179,086
         Income taxes                                                $   900,000     $    14,500
</TABLE>

See accompanying notes to consolidated financial statements
<PAGE>


                               Asta Funding, Inc.
                   Notes to Consolidated Financial Statements

Note 1: Basis of  Presentation

Asta Funding, Inc. (the "Company") is a consumer finance company engaged in the
business of purchasing, selling and servicing retail installment sales contracts
("Contracts") originated by automobile dealers ("Dealers") in the sale primarily
of used automobiles. The Company was formed July 7, 1994. However, activity did
not commence until October 1994. The Company's fiscal year-end is September 30.

The consolidated balance sheet as of March 31, 1997, the consolidated statement
of operations for the three- and six-month periods ended March 31, 1997 and
1996, and the consolidated statement of cash flows for the six-month periods
ended March 31, 1997 and 1996, have been prepared by the Company without an
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position at
March 31, 1997 and 1996, the results of operations for the three- and six-month
periods ended March 31, 1996 and 1997 and the cash flows for the six-month
periods ended March 31, 1996 and 1997 have been made. The results of operations
for the three- and six-month periods ended March 31, 1997 are not necessarily
indicative of the operating results for the full year.

Pursuant to the rules and regulations of the Securities and Exchange Commission,
certain information and footnote disclosures required under generally accepted
accounting principles have been condensed or omitted from the presented
financial statements. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended September 30,
1996.

Note 2:  Principles of Consolidation

The consolidated financial statements include the accounts of Asta Funding, Inc.
and its wholly-owned subsidiary, Asta Auto Receivables Company, a limited
purpose corporation formed to accommodate certain resales of Contracts by the
Company. All significant intercompany balances and transactions have been
eliminated in consolidation.

Note 3: Loans Receivable

The Contracts which the Company purchases from dealers provide for finance
charges of between 18.9% and 29.9% per annum. Each Contract provides for full
amortization, equal monthly payments and permits prepayments by the borrower at
any time without penalty. The Company generally purchases Contracts at a
discount from the full amount financed under a Contract.

Note 4: Interest Income

Interest income on loans is recognized using the interest method. Accrual of
interest income on loans receivable is suspended when a loan is contractually
delinquent more than 60 days.

Note 5:  Servicing Fees

Servicing fees are reported as income when earned, net of related amortization
of excess servicing fees. Servicing costs are charged to expense as incurred.

Note 6: Initial Public Offering

On November 17, 1995, the Company, in its initial public offering, sold
1,200,000 shares of its common stock. Proceeds, net of expenses of the offering,
were approximately $4,400,000. Additionally, the underwriter received warrants
to purchase shares of common stock at $6.50 per share. An additional 180,000
shares were sold on December 1, 1995 pursuant to the exercise by the underwriter
of the over-allotment option for approximately $800,000 net of expenses.

<PAGE>




                               Asta Funding, Inc.
     Item 2. Management's Discussion and Analysis of Financial Condition and
                             Results of Operations

Overview

The Company is engaged in the business of purchasing, selling and servicing
retail installment sales contracts ("Contracts") originated by automobile
dealers ("Dealers") in the sale primarily of used automobiles. The Company was
formed July 7, 1994 and purchased its first Contract in October 1994.

The Company typically purchases Contracts between Dealers and purchasers of
automobiles ("Sub-Prime Borrowers") who may have limited credit histories, low
incomes or past credit problems and, therefore, are generally unable to obtain
credit from traditional sources of automobile financing such as commercial
banks, savings and loan associations or credit unions. Sub-Prime Borrowers
typically pay a higher rate of interest than do prime borrowers utilizing
traditional financing sources.

The Company generates revenues, earnings and cash flow primarily through the
purchase and collection of principal, interest and other payments on Contracts.

Results of operations

The three-month period ended March 31, 1997, compared to the three-month period
ended March 31, 1996
-------------------------------------------------------------------------------

Revenues. During the three-month period ended March 31, 1997, revenues increased
by $84,715 compared to the three-month period ended March 31, 1996. Interest
income increased by $39,760 compared to the three-month period ended March 31,
1996. The increase in revenue and interest income is due to the increase in the
volume of Contracts serviced by the Company. During the three-month period ended
March 31, 1997, the Company purchased 368 Contracts from Dealers, compared to
498 in the three-month period ended March 31, 1996. The Company earned Servicing
fees of $44,955 for the three months ended March 31, 1997, which consisted of
base and excess monthly servicing fees on Contracts sold and serviced by the
Company. As the Company completed its first sale and securitization of a
portfolio of Contracts in September 1996, it did not have any income from
servicing fees during the three-month period ended March 31, 1996.

Expenses. During the three-month period ended March 31, 1997, general and
administrative expenses increased by $498,650 compared to the three-month period
ended March 31, 1996. The increase is due to the hiring of additional employees
and the increased overhead expenses necessary to accommodate the Company's
increased volume of servicing Contracts. The increase is also due to the
Company's increased marketing expenses.

Interest expense decreased by $2,443 during the three-month period ended March
31, 1997 compared to the same period in the prior year and represented 8% of
total expenses for the three-month period ended March 31, 1997. The decrease is
due to a decrease in borrowings under the line of credit on the Company's credit
facility with BankAmerica Business Credit, Inc. ("BankAmerica").

During the three-month period ended March 31, 1997, the provision for losses on
Contracts purchased increased by $213,146 and represented 27% of total expenses
compared to the three-month period ended March 31, 1996. The increase is due to
management's evaluation of its loan loss reserves.

The six-month period ended March 31, 1997, compared to the six-month period
ended March 31, 1996
---------------------------------------------------------------------------

Revenues. During the six-month period ended March 31, 1997, revenues increased
by $421,247 compared to the six-month period ended March 31, 1996. Interest
income increased by $63,462 compared to the six-month period ended March 31,
1996. The increase in revenue and interest income is due to the Company's
expansion of the number of Contracts serviced. During the six-month period ended
March 31, 1997, the Company purchased 859 Contracts from Dealers, compared to
967 in the six-month period ended March 31, 1996. The Company earned Servicing
fees of $357,785 for the six months ended March 31, 1997 which consisted of base
and excess monthly servicing fees on Contracts sold and serviced by the Company.
The Company completed its first sale and securitization of a portfolio of
Contracts in September 1996 and therefore did not have income from servicing
fees for the six-month period ended March 31, 1996.
<PAGE>


                               Asta Funding, Inc.
     Item 2. Management's Discussion and Analysis of Financial Condition and
                             Results of Operations


Expenses. During the six-month period ended March 31, 1997, operating expenses
increased by $1,197,394 as compared to the six-month period ended March 31,
1996. The increase is due to the addition of employees and increased overhead
expenses necessary to accommodate the Company's increased volume of servicing
Contracts. The increase is also due to the Company's increased marketing
expenses.

Interest expense decreased by $75,886 during the six-month period ended March
31, 1997 compared to the same period in the prior year and represented 6% of
total expenses for the six-month period ended March 31, 1997. The decrease is
due to a decrease in borrowings under the line of credit on the Company's credit
facility with BankAmerica.

During the six-month period ended March 31, 1997, the provision for losses on
Contracts purchased increased by $361,346 and represented 28% of total expenses
compared to the six-month period ended March 31, 1997. The increase is due to
management's evaluation of its loan loss reserves.

Liquidity and Capital Resources

The funds necessary to support the Company's purchasing of Contracts have been
provided primarily from its initial public offering, bank borrowings under a
line of credit and contributed capital from Asta Group, Incorporated, the
Company's majority stockholder.

In November 1995, the Company entered into a two-year credit facility with
BankAmerica (the "Credit Facility") under which the Company can borrow the
lesser of the advance rate (between 70% and 80% of eligible loans receivable)
and $15 million. At March 31, 1997, advances under the Credit Facility
aggregated $5,000,000. The advances bear interest at the prime rate plus 1%. At
December 31, 1996 and March 31, 1997, the Company was in technical default under
certain covenants contained in the Credit Facility. Currently, the Company is
renegotiating these covenants.

The Company's cash requirements have been and will continue to be significant.
Pursuant to the terms of the securitization agreement between Greenwich Capital
Markets, Inc. and Asta Funding, Inc., entered into in September 1996, the
Company was required to make a significant initial cash deposit, for purposes of
credit enhancement, to a spread account (the "Spread Account"). The Spread
Account is pledged to support the related Asset Backed Securities ("ABS"), and
is invested in high quality liquid securities. Excess cash flows from the
securitized Contracts are required to be deposited into the Spread Account until
such time as the Spread Account balance reaches a specific percent of the
outstanding balance of the related ABS.

The Company anticipates the funds available under the Credit Facility, the
proceeds from the sale of Contracts and cash from operations will be sufficient
to satisfy the Company's estimated cash requirements for the next 12 months,
assuming that the Company continues to have a means by which to sell its
warehoused Contracts. If for any reason the Company is unable to sell its
Contracts, or if the Company's 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), the Company may be required to seek additional funding.

The Company does not anticipate any need for significant capital expenditures in
connection with the expansion of its business for at least 12 months.

This Form 10-QSB contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements include but are not
limited to , the Company's opportunities to increase revenues through, among
other things, the purchase and sale of additional Contracts, and the anticipated
need and availability of financing.

Forward-looking statements are inherently subject to risks and uncertainties,
many of which cannot be predicted with accuracy and some of which might not even
be anticipated. Future events and actual results, financial and otherwise, could
differ materially from those set forth in or contemplated by the forward-looking
statements herein. Important factors that could contribute to such differences

<PAGE>

                        Asta Funding, Inc. and Subsidiary
     Item 2. Management's Discussion and Analysis of Financial Condition and
                             Results of Operations


are: increases in unemployment or other changes in domestic economic conditions
which adversely affect the sales of new and used automobiles and which may
result in increased delinquencies, foreclosures and losses on Contracts; adverse
economic conditions in geographic areas in which the Company's business is
concentrated, mainly the Northeast and Mid-Atlantic States; changes in interest
rates, adverse changes in the market for securitized receivables pools or a
substantial lengthening of the Company's warehousing each of which could
restrict the Company's ability to obtain cash for Contract origination and
purchases; increases in the amounts required to be set aside in spread accounts
or to be expended for other forms of credit enhancement to support future
securitizations; increased competition; a reduction in the number and amount of
acceptable Contracts submitted to the Company by its dealers; changes in
government regulations effecting consumer credit; and other risk factors
identified in the Company's filings with the Securities and Exchange Commission,
including under the caption "Risk Factors" in its most recent Registration
Statement on Form S-1. Subsequent, written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified by the precautionary statements in this paragraph and elsewhere in
this Form 10-QSB.

<PAGE>
                        Asta Funding, Inc. and Subsidiary
                           Form 10-QSB March 31, 1997


Part II. OTHER INFORMATION


Item 1.  Legal Proceedings

         As of the date of this Filing, the Company was not involved in any
material litigation in which it is the defendant. The Company regularly
initiates legal proceedings as a plaintiff in connection with its routine
collection activities.

Item 4.  Submission of Matters to a Vote of Security Holders

         The Company held its annual meeting of shareholders on March 14, 1997.
At that meeting, the following persons were elected directors, all of whom were
incumbents: Gary Stern, Mitchell Herman, Arthur Stern, Martin Fife, Herman
Badillo, General Buster Glosson and Edward Celano. Also at the meeting, the
shareholders voted to ratify the appointment of Richard A. Eisner & Company LLP
as the Company's independent public accountants for fiscal year 1997.

         Shares were voted for the election of directors as follows:

                                       For             Authority Withheld
                                       ---             ------------------

Gary Stern                         3,850,051                18,100
Mitchell Herman                    3,850,051                18,100
Arthur Stern                       3,850,051                18,100
Martin Fife                        3,850,051                18,100
Herman Badillo                     3,850,051                18,100
General Buster Glosson             3,850,051                18,100
Edward Celano                      3,850,051                18,100

         Shares were voted for the ratification of the appointment of Richard A.
Eisner & Company, LLP as follows:

                  For                                3,852,901
                  Against                                6,500
                  Abstentions                            8,750
                  Broker Non-Votes                           0


Item 6.  Exhibits and Reports on Form 8-K

         a. Exhibits

         Exhibit
         Number
         ------

         27       Financial Data Schedule


b.  Reports on Form 8-K filed during the quarter ended March 31, 1997-None.


<PAGE>



                        Asta Funding, Inc. and Subsidiary
                           Form 10-QSB March 31, 1997


Signatures
----------

         In accordance with the requirements of the Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                ASTA FUNDING, INC.
                                (Registrant)


Date: May 5, 1997               By: /s/       Gary Stern
                                    --------------------------------------------
                                  Gary Stern, President, Chief Executive Officer
                                  (Principal Executive Officer)


Date: May 5, 1997               By: /s/ Mitchell Herman
                                    ------------------------------------------- 
                                  Mitchell Herman, Chief Financial Officer 
                                  (Principal Financial Officer and
                                  Principal Accounting Officer)