##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 0-26906
 ASTA FUNDING, INC.
  DELAWARE
(State or other jurisdiction 
of incorporation or organization)
    
    22-3388607
(IRS Employer
Identification No.)
 210 SYLVAN AVE., ENGLEWOOD CLIFFS, NEW JERSEY
(Address of principal executive offices)
    
    07632
(Zip Code)
   þ o
  o þ o
 o þ




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##### Table of Contents



Part I.
    
    Financial InformationItem 1.
    

Condensed
Consolidated Financial StatementsCondensed Consolidated Balance Sheets as of June 30, 2007 (unaudited)
and September 30, 2006Condensed Consolidated Statements of Operations for the nine and three month periods ended
June 30, 2007 and 2006 (unaudited)Condensed Consolidated Statement of Stockholders Equity for the nine month period ending
June 30, 2007 (unaudited)Condensed Consolidated Statements of Cash Flows for the nine month periods ended
June 30, 2007 and 2006 (unaudited)Notes to Condensed Consolidated Financial Statements (unaudited)Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of OperationsItem 3.
    
    Quantitative and Qualitative Disclosures about Market RiskItem 4.
    
    Controls and ProceduresPart II.
    
    Other InformationItem 1.
    
    Legal ProceedingsItem 1A
    
    Risk FactorsItem 2.
    
    Unregistered Sale of Equity Securities and Use of ProceedsItem 3.
    
    Defaults Upon Senior SecuritiesItem 4.
    
    Submission of Matters to a Vote of Security HoldersItem 5.
    
    Other InformationItem 6.
    
    ExhibitsSignaturesExhibit 10.1
    
     Fifth Amendment to the Fourth Amended and Restated Loan Agreement dated June 26, 2007Exhibit 10.2
    
     First Amendment to the Receivables Financing Agreement dated July 1, 2007Exhibit 31.1
    
     Section 302 Certification of Chief Executive OfficerExhibit 31.2
    
     Section 302 Certification of Chief Financial OfficerExhibit 32.1
    
     Section 906 Certification of Chief Executive OfficerExhibit 32.2
    
     Section 906 Certification of Chief Financial OfficerEX-10.1: FIFTH AMENDED TO FOURTH AMEDED AND RESTATED LOAN AGREEMENTEX-10.2: AMENDMENT TO RECEIVABLES FINANCING AGREEMENTEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION




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##### Table of Contents



June 30,
    
    
    September 30,2007
    
    
    2006(Unaudited)ASSETSCash
    
    $
    20,638,000
    
    
    $
    7,826,000Consumer receivables acquired for liquidation, (at net realizable value)
    
    
    539,703,000
    
    
    
    257,275,000Due from third party collection agencies and attorneys
    
    
    5,069,000
    
    
    
    3,062,000Investment in venture
    
    
    3,514,000
    
    
    
    5,965,000Furniture and equipment, net
    
    
    1,067,000
    
    
    
    1,101,000Deferred income taxes
    
    
    12,576,000
    
    
    
    7,577,000Other assets
    
    
    4,801,000
    
    
    
    5,034,000Total assets
    

    $
    587,368,000
    
    
    $
    287,840,000LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesDebt
    
    $
    344,688,000
    
    
    $
    82,811,000Other liabilities
    
    
    4,706,000
    
    
    
    4,338,000Dividends payable
    
    
    557,000
    
    
    
    6,052,000Income taxes payable
    
    
    12,746,000
    
    
    
    10,377,000Total liabilities
    
    
    362,697,000
    
    
    
    103,578,000Stockholders EquityPreferred stock, $.01 par value; authorized 5,000,000; issued and
outstanding  noneCommon stock, $.01 par value; authorized 30,000,000 shares; issued
and outstanding  13,913,158 at
June 30, 2007 and 13,755,157 at September 30, 2006
    
    
    138,000
    
    
    
    138,000Additional paid-in capital
    
    
    64,690,000
    
    
    
    61,803,000Retained earnings
    
    
    159,843,000
    
    
    
    122,321,000Total stockholders equity
    
    
    224,671,000
    
    
    
    184,262,000Total liabilities and stockholders equity
    
    $
    587,368,000
    
    
    $
    287,840,000




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##### Table of Contents



Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJune 30, 2007
    
    
    June 30, 2006
    
    
    June 30, 2007
    
    
    June 30, 2006Revenues:Finance income, net
    
    $
    38,845,000
    
    
    $
    26,090,000
    
    
    $
    96,139,000
    
    
    $
    71,179,000Other income
    
    
    43,000
    
    
    
    336,000
    
    
    
    502,000
    
    
    
    336,000Equity in earnings in venture
    
    
    50,000
    
    
    
    
    
    
    
    1,025,000
    
    
    
    38,938,000
    
    
    
    26,426,000
    
    
    
    97,666,000
    
    
    
    71,515,000Expenses:General and administrative
    
    
    6,510,000
    
    
    
    4,692,000
    
    
    
    17,388,000
    
    
    
    13,492,000Interest
    
    
    6,651,000
    
    
    
    1,249,000
    
    
    
    11,949,000
    
    
    
    3,214,000Impairments
    
    
    
    
    
    
    675,000
    
    
    
    2,412,000
    
    
    
    675,00013,161,000
    
    
    
    6,616,000
    
    
    
    31,749,000
    
    
    
    17,381,000Income before income taxes
    
    
    25,777,000
    
    
    
    19,810,000
    
    
    
    65,917,000
    
    
    
    54,134,000Income tax expense
    
    
    10,469,000
    
    
    
    8,030,000
    
    
    
    26,731,000
    
    
    
    21,939,000Net income
    
    $
    15,308,000
    
    
    $
    11,780,000
    
    
    $
    39,186,000
    
    
    $
    32,195,000Net income per share:Basic
    
    $
    1.10
    
    
    $
    0.86
    
    
    $
    2.84
    
    
    $
    2.37Diluted
    
    $
    1.03
    
    
    $
    0.80
    
    
    $
    2.67
    
    
    $
    2.20Weighted average number of shares outstanding:Basic
    
    
    13,907,554
    
    
    
    13,628,776
    
    
    
    13,794,877
    
    
    
    13,611,915Diluted
    
    
    14,819,926
    
    
    
    14,639,432
    
    
    
    14,677,258
    
    
    
    14,604,678




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##### Table of Contents



AdditionalCommon Stock
    
    
    Paid-In
    
    
    RetainedShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    TotalBalance, September 30, 2006
    
    
    13,755,157
    
    
    $
    138,000
    
    
    $
    61,803,000
    
    
    $
    122,321,000
    
    
    $
    184,262,000Exercise of options
    
    
    90,001
    
    
    
    
    
    
    
    1,254,000
    
    
    
    
    
    
    
    1,254,000Restricted stock granted
    
    
    68,000Stock based compensation expense
    
    
    
    
    
    
    
    
    
    
    953,000
    
    
    
    
    
    
    
    953,000Excess tax benefit arising from exercise of
non-qualified stock options and vesting of
restricted stock
    
    
    
    
    
    
    
    
    
    
    680,000
    
    
    
    
    
    
    
    680,000Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,664,000
    )
    
    
    (1,664,000
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,186,000
    
    
    
    39,186,000Balance, June 30, 2007
    
    
    13,913,158
    
    
    $
    138,000
    
    
    $
    64,690,000
    
    
    $
    159,843,000
    
    
    $
    224,671,000




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##### Table of Contents



Nine Months Ended
    
    
    Nine Months EndedJune 30, 2007
    
    
    June 30, 2006Cash flows from operating activities:Net income
    
    $
    39,186,000
    
    
    $
    32,195,000Adjustments to reconcile net income to net cash provided by operating
activities:Depreciation and amortization
    
    
    439,000
    
    
    
    382,000Deferred income taxes
    
    
    (4,999,000
    )Impairments of consumer receivables acquired for liquidation
    
    
    2,412,000
    
    
    
    675,000Stock based compensation
    
    
    953,000
    
    
    
    105,000Other
    
    
    (209,000
    )Changes in:Income taxes payable
    
    
    2,369,000
    
    
    
    (474,000
    )Due from third party collection agencies and attorneys
    
    
    (2,007,000
    )
    
    
    (313,000
    )Other assets
    
    
    (17,000
    )
    
    
    (133,000
    )Other investments
    
    
    (2,471,000
    )Other liabilities
    
    
    (531,000
    )
    
    
    (1,082,000
    )Net cash provided by operating activities
    
    
    35,125,000
    
    
    
    31,355,000Cash flows from investing activities:Purchase of consumer receivables acquired for liquidation
    
    
    (402,316,000
    )
    
    
    (155,361,000
    )Principal collected on receivables acquired for liquidation
    
    
    94,921,000
    
    
    
    72,569,000Principal collected on receivable accounts represented by
account sales
    
    
    22,555,000
    
    
    
    18,805,000Cash distribution from venture
    
    
    2,450,000
    
    
    
    Purchase of other investments
    
    
    (5,777,000
    )Collections on other investments
    
    
    9,357,000Acquisition of businesses, net of cash acquired
    
    
    
    
    
    
    (1,406,000
    )Capital expenditures
    
    
    (155,000
    )
    
    
    (338,000
    )Net cash used in investing activities
    
    
    (278,965,000
    )
    
    
    (65,731,000
    )Cash flows from financing activities:Proceeds from exercise of options
    
    
    1,254,000
    
    
    
    590,000Excess tax benefit arising from exercise of non-qualified options and
Vesting of restricted stock
    
    
    680,000
    
    
    
    Dividends paid
    
    
    (7,159,000
    )
    
    
    (1,565,000
    )Advances under lines of credit, net
    
    
    261,877,000
    
    
    
    36,002,000Net cash provided by financing activities
    
    
    256,652,000
    
    
    
    35,027,000Increase in cash
    
    
    12,812,000
    
    
    
    651,000Cash at the beginning of period
    
    
    7,826,000
    
    
    
    4,059,000Cash at end of period
    
    $
    20,638,000
    
    
    $
    4,710,000Supplemental disclosure of cash flow information:Cash paid during the periodInterest
    
    $
    9,121,000
    
    
    $
    3,132,000Income taxes
    
    $
    28,655,000
    
    
    $
    22,322,000




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##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 Note 1: Business and Basis of Presentation
  ® ®
     Recent Accounting Pronouncements
  Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements




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##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 1: Business and Basis of Presentation  ( Continued )
   Reclassification
  Note 2: Principles of Consolidation
  Note 3: Consumer Receivables Acquired for Liquidation




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##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 3: Consumer Receivables Acquired for Liquidation  ( continued )
  
    
    the interest method; or
    
    the cost recovery method.
    
    
    Same issuer/originator;
    
    Same underlying credit quality;
    
    Similar geographic distribution of the accounts;
    
    Similar age of the receivable; and
    
    Same type of asset class (credit cards, telecom etc.)
  
    
    The number of collection agencies previously attempting to collect the receivables in the portfolio;
    
    the average balance of the receivables, as higher balances might be more difficult to collect while
low balances might not be cost effective to collect;
    
    the age of the receivables, as older receivables might be more difficult to collect or might be
less cost effective. On the other hand, the passage of time, in certain circumstances, might result
in higher collections due to changing life events of some individual debtors;
    
    past history of performance of similar assets;
    
    number of days since charge-off;
    
    payments made since charge-off;
    
    the credit originator and its credit guidelines;
    
    our ability to analyze accounts and resell accounts that meet our criteria for resale;
    
    the locations of the debtors as there are better states to attempt to collect in and ultimately we
have better predictability of the liquidations and the expected cash flows. Conversely, there are
also states where the liquidation rates are not as favorable and that is factored into our cash
flow analysis;




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##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 3: Consumer Receivables Acquired for Liquidation  ( continued )
 
    
    Jobs or property of the debtors found within portfolios-with our business model, this is of
particular importance. Debtors with jobs or property are more likely to repay their obligation and
conversely, debtors without jobs or property are less likely to repay their obligation ; and
    
    the ability to obtain customer statements from the original issuer.
   For The Nine Months Ended June 30, 2007CostInterest
    
    
    RecoveryMethod
    
    
    Method
    
    
    TotalBalance, beginning of period
    
    $
    256,199,000
    
    
    $
    1,076,000
    
    
    $
    257,275,000Acquisitions of receivable portfolios, net
    
    
    356,884,000
    
    
    
    45,432,000
    
    
    
    402,316,000Net cash collections from collections of consumer
receivables acquired for
liquidation (1)
    
    
    (164,829,000
    )
    
    
    (8,020,000
    )
    
    
    (172,849,000
    )Net cash collections represented by accounts sales of
consumer receivables acquired for liquidation
    
    
    (36,519,000
    )
    
    
    (4,247,000
    )
    
    
    (40,766,000
    )Transfer to
cost recovery (2)
    
    
    (4,478,000
    )
    
    
    4,478,000
    
    
    
    Impairment
    
    
    (2,412,000
    )
    
    
    
    
    
    
    (2,412,000
    )Finance
income recognized (3)
    
    
    94,168,000
    
    
    
    1,971,000
    
    
    
    96,139,000Balance, end of period
    
    $
    499,013,000
    
    
    $
    40,690,000
    
    
    $
    539,703,000Revenue as a percentage of collections
    
    
    46.8
    %
    
    
    16.1
    %
    
    
    45.0
    %
 
 (1)
    
    Includes put backs of purchased accounts returned to the
seller totaling $5.5 million.(2)
    
    Represents a portfolio acquired during the three months ended December 31, 2006 which
the Company has successfully negotiated the return to the seller. The portfolio was
returned on July 31, 2007.(3)
    
    Includes $11.1 million derived from fully amortized interest method pools. For The Nine Months Ended June 30, 2006CostInterest
    
    
    RecoveryMethod
    
    
    Method
    
    
    TotalBalance, beginning of period
    
    $
    172,636,000
    
    
    $
    91,000
    
    
    $
    172,727,000Acquisitions of receivable portfolios, net
    
    
    155,361,000
    
    
    
    
    
    
    
    155,361,000Net cash collections from collections of consumer
receivables acquired for liquidation
    
    
    (116,464,000
    )
    
    
    (2,820,000
    )
    
    
    (119,284,000
    )Net cash collections represented by account sales of
consumer receivables acquired for liquidation
    
    
    (43,034,000
    )
    
    
    (235,000
    )
    
    
    (43,269,000
    )Transfer to cost recovery
    
    
    (529,000
    )
    
    
    529,000
    
    
    
    Impairment
    
    
    (675,000
    )
    
    
    
    
    
    
    (675,000
    )Finance
income recognized (4)
    
    
    68,415,000
    
    
    
    2,764,000
    
    
    
    71,179,000Balance, end of period
    
    $
    235,710,000
    
    
    $
    329,000
    
    
    $
    236,039,000Revenue as a percentage of collections
    
    
    42.9
    %
    
    
    90.5
    %
    
    
    43.8
    %
 
 (4)
    
    Includes $4.0 million derived from fully amortized interest method pools.




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##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 3: Consumer Receivables Acquired for Liquidation  ( continued )
 For The Three Months Ended June 30, 2007CostInterest
    
    
    RecoveryMethod
    
    
    Method
    
    
    TotalBalance, beginning of period
    
    $
    522,345,000
    
    
    $
    41,389,000
    
    
    $
    563,734,000Acquisitions of receivable portfolios, net
    
    
    11,086,000
    
    
    
    4,548,000
    
    
    
    15,634,000Net cash collections from collections of consumer
receivables acquired for
liquidation (5)
    
    
    (62,814,000
    )
    
    
    (5,931,000
    )
    
    
    (68,745,000
    )Net cash collections represented by account sales of
consumer receivables acquired for liquidation
    
    
    (9,765,000
    )
    
    
    
    
    
    
    (9,765,000
    )Finance
income recognized (6)
    
    
    38,161,000
    
    
    
    684,000
    
    
    
    38,845,000Balance, end of period
    
    $
    499,013,000
    
    
    $
    40,690,000
    
    
    $
    539,703,000Revenue as a percentage of collections
    
    
    52.6
    %
    
    
    11.5
    %
    
    
    49.5
    %
 
 (5)
    
    Includes put backs of purchased accounts returned to the
seller totaling $5.5 million.(6)
    
    Includes $5.6 million derived from fully amortized interest method pools. For The Three Months Ended June 30, 2006CostInterest
    
    
    RecoveryMethod
    
    
    Method
    
    
    TotalBalance, beginning of period
    
    $
    236,821,000
    
    
    $
    385,000
    
    
    $
    237,206,000Acquisitions of receivable portfolios, net
    
    
    34,173,000
    
    
    
    
    
    
    
    34,173,000Net cash collections from collections of consumer
receivables acquired for liquidation
    
    
    (42,994,000
    )
    
    
    (798,000
    )
    
    
    (43,792,000
    )Net cash collections represented by account sales of
consumer receivables acquired for liquidation
    
    
    (16,963,000
    )
    
    
    
    
    
    
    (16,963,000
    )Impairment
    
    
    (675,000
    )
    
    
    
    
    
    
    (675,000
    )Finance
income recognized (7)
    
    
    25,348,000
    
    
    
    742,000
    
    
    
    26,090,000Balance, end of period
    
    $
    235,710,000
    
    
    $
    329,000
    
    
    $
    236,039,000Revenue as a percentage of collections
    
    
    42.3
    %
    
    
    93.0
    %
    
    
    42.9
    %
 
 (7)
    
    Includes $1.2 million derived from fully amortized interest method pools.  September 30,
2007 (three months ending)
    
    $
    10,793,000September 30, 2008
    
    
    176,700,000September 30, 2009
    
    
    153,283,000September 30, 2010
    
    
    121,320,000September 30, 2011
    
    
    63,513,000September 30, 2012
    
    
    1,595,000527,204,000Cash collections in advance of projected amounts
(deferred revenue)
    
    
    (28,191,000
    )Total
    
    $
    499,013,000




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##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 3: Consumer Receivables Acquired for Liquidation  ( continued )
  Nine Months
    
    
    Nine MonthsEnded
    
    
    EndedJune 30, 2007
    
    
    June 30, 2006Balance at beginning of period
    
    $
    148,900,000*
    
    
    $
    94,022,000Income recognized on finance receivables, net
    
    
    (94,168,000
    )
    
    
    (68,415,000
    )Additions representing expected revenue from purchases
    
    
    135,224,000
    
    
    
    85,252,000Impairment
    
    
    (423,000
    )
    
    
    (600,000
    )Reclassifications from nonaccretable difference
    
    
    19,177,000
    
    
    
    37,734,000*Balance at end of period
    
    $
    208,710,000
    
    
    $
    147,993,000*
 Three Months
    
    
    Three MonthsEnded
    
    
    EndedJune 30, 2007
    
    
    June 30, 2006Balance at beginning of period
    
    $
    231,971,000*
    
    
    $
    156,659,000*Income recognized on finance receivables, net
    
    
    (38,161,000
    )
    
    
    (25,348,000
    )Additions representing expected revenue from purchases
    
    
    3,654,000
    
    
    
    13,582,000Impairment
    
    
    
    
    
    
    (600,000
    )Reclassifications from nonaccretable difference
    
    
    11,246,000
    
    
    
    3,700,000*Balance at end of period
    
    $
    208,710,000
    
    
    $
    147,993,000*
    For The Nine Months Ended June 30,2007
    
    
    2006Gross collections (1)
    
    $
    304,692,000
    
    
    $
    238,054,000Commissions and fees (2)
    
    
    91,077,000
    
    
    
    75,501,000Net collections
    
    $
    213,615,000
    
    
    $
    162,553,000




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##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 3: Consumer Receivables
Acquired for Liquidation  ( continued )
 For The Three Months Ended June 30,2007
    
    
    2006Gross collections (1)
    
    $
    111,877,000
    
    
    $
    93,022,000Commissions and fees (2)
    
    
    33,367,000
    
    
    
    32,267,000Net collections
    
    $
    78,510,000
    
    
    $
    60,755,000
 
 (1)
    
    Gross collections include: collections from third-party collection agencies and
attorneys, collections from our in-house efforts and collections
represented by account sales. In addition, includes put backs of
purchased accounts returned to the seller totaling $5.5 million
in 2007.(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: Investment in venture
  Note 5: Furniture and Equipment
  June 30,
    
    
    September 30,2007
    
    
    2006Furniture
    
    $
    307,000
    
    
    $
    307,000Equipment
    
    
    2,718,000
    
    
    
    2,563,0003,025,000
    
    
    
    2,870,000Less accumulated depreciation
    
    
    1,958,000
    
    
    
    1,769,000Balance, end of period
    
    $
    1,067,000
    
    
    $
    1,101,000
 Note 6: Debt




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 6: Debt  (continued)
  Note 7: Commitments and Contingencies
 Employment Agreements
  Leases




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 7: Commitments and Contingencies   (continued)
 Litigation
    Note 8: Income Recognition and Impairments
 Income Recognition
   Impairments




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 8: Income Recognition and Impairments  (continued)
  
    
    The type of receivable, the location of the debtor and the number of
collection agencies previously attempting to collect the receivables in
the portfolio. We have found that there are better states to try collect
receivables and we factor in both good and bad states when establishing
our initial cash flow expectations.
    
    the average balance of the receivables influence our analysis in that
lower average balance portfolios tend to be more collectible in the
short-term and higher average balance portfolios are more suitable for our
suit strategy and thus yield better results over the longer term. As we
have significant experience with both types of balances, we are able to
factor these variables into our initial expected cash flows;
    
    the age of the receivables, the number of days since charge-off, the
number of days from charge-off, the payments, if any, since charge-off,
and the credit guidelines of the credit originator also represent factors
taken into consideration in our estimation process since, for example,
older receivables might be more difficult to collect in amount and/or
require more time to collect;
    
    past history and performance of similar assets acquired. As we purchase
portfolios of like assets, we have built significant history on the
tendencies of debtor repayments and factor this into our initial expected
cash flows;
our ability to analyze accounts and resell accounts that meet our criteria;
    
    our ability to analyze accounts and resell accounts that meet
our criteria;
    
    Jobs or property of the debtors found within portfolios. With our business
model, this is of particular importance. Debtors with jobs or property are
more likely to repay their obligation through the suit strategy and
conversely, debtors without jobs or property are less likely to repay
their obligation. While we believe that debtors with jobs or property are
more likely to repay, we also believe that these debtors generally might
take longer to repay and that is factored into our initial expected cash
flows.




---



##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 9: Income Taxes
  Note 10: Net Income Per Share
   Nine Months Ended June 30,2007
    
    
    2006Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedNet
    
    
    Average
    
    
    Per Share
    
    
    Net
    
    
    Average
    
    
    Per ShareIncome
    
    
    Shares
    
    
    Amount
    
    
    Income
    
    
    Shares
    
    
    AmountBasic
    
    $
    39,186,000
    
    
    
    13,794,877
    
    
    $
    2.84
    
    
    $
    32,195,000
    
    
    
    13,611,915
    
    
    $
    2.37Effect of Dilutive Stock
    
    
    
    
    
    
    882,381
    
    
    
    
    
    
    
    
    
    
    
    992,763Diluted
    
    $
    39,186,000
    
    
    
    14,677,258
    
    
    $
    2.67
    
    
    $
    32,195,000
    
    
    
    14,604,678
    
    
    $
    2.20
 Three Months Ended June 30,2007
    
    
    2006Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedNet
    
    
    Average
    
    
    Per Share
    
    
    Net
    
    
    Average
    
    
    Per ShareIncome
    
    
    Shares
    
    
    Amount
    
    
    Income
    
    
    Shares
    
    
    AmountBasic
    
    $
    15,308,000
    
    
    
    13,907,554
    
    
    $
    1.10
    
    
    $
    11,780,000
    
    
    
    13,628,776
    
    
    $
    0.86Effect of Dilutive Stock
    
    
    
    
    
    
    912,372
    
    
    
    
    
    
    
    
    
    
    
    1,010,656Diluted
    
    $
    15,308,000
    
    
    
    14,819,926
    
    
    $
    1.03
    
    
    $
    11,780,000
    
    
    
    14,639,432
    
    
    $
    0.80
 Note 11: Stock-Based Compensation




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##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued  (Unaudited)
 Note 11: Stock-Based Compensation  ( continued )
    Risk free interest rate
    
    
    4.94
    %Expected term (years)
    
    
    10.0Expected volatility
    
    
    36.3
    %Dividend yield
    
    
    0.47
    %
 Note 12: Stock Option Plans
 Equity Compensation Plan
    2002 Stock Option Plan




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##### Table of Contents



ASTA FUNDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Note 12: Stock Option Plans  ( continued )
 1995 Stock Option Plan
     Nine Months Ended June 30,2007
    
    2006Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    ExerciseShares
    
    Price
    
    Shares
    
    PriceOutstanding options at the beginning of period
    
    
    1,414,439
    
    
    $
    9.4511
    
    
    
    1,580,605
    
    
    $
    9.1082Options granted
    
    
    18,000
    
    
    
    28.7500
    
    
    
    
    
    
    
    Options exercised
    
    
    (90,001
    )
    
    
    13.9446
    
    
    
    (39,166
    )
    
    
    15.0582Options cancelled
    
    
    
    
    
    
    
    
    
    
    (6,667
    )
    
    
    22.3600Outstanding options at the end of period
    
    
    1,342,438
    
    
    $
    9.4086
    
    
    
    1,534,772
    
    
    $
    8.8988Exercisable options at the end of period
    
    
    1,330,438
    
    
    $
    9.2341
    
    
    
    1,534,772
    
    
    $
    8.8988
 Three Months Ended June 30,2007
    
    2006Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    ExerciseShares
    
    Price
    
    Shares
    
    PriceOutstanding options at the beginning of period
    
    
    1,352,438
    
    
    $
    9.3739
    
    
    
    1,554,772
    
    
    $
    9.0720Options granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Options exercised
    
    
    (10,000
    )
    
    
    4.7250
    
    
    
    (13,333
    )
    
    
    15.0582Options cancelled
    
    
    
    
    
    
    
    
    
    
    (6,667
    )
    
    
    22.3600Outstanding options at the end of period
    
    
    1,342,438
    
    
    $
    9.4086
    
    
    
    1,534,772
    
    
    $
    8.8988Exercisable options at the end of period
    
    
    1,330,438
    
    
    $
    9.2341
    
    
    
    1,534,772
    
    
    $
    8.8988
    2007


2006Nine months ended June 30

$
2,034,000


$
761,000Three months ended June 30

$
355,000


$
221,000




---



##### Table of Contents



Options Exercisable
    
    Options OutstandingWeightedAverage
    
    Weighted
    
    
    
    
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    AverageNumber
    
    Contractual
    
    Exercise
    
    Number
    
    ExerciseRange Of Exercise Price
    
    Outstanding
    
    Life (In Years)
    
    Price
    
    Exercisable
    
    Price$0.8125  $2.8750
    
    
    600,000
    
    
    
    2.8
    
    
    $
    2.0208
    
    
    
    600,000
    
    
    $
    2.0208$2.8751  $5.7500
    
    
    106,667
    
    
    
    5.3
    
    
    
    4.7250
    
    
    
    106,667
    
    
    
    4.7250$5.7501  $8.6250
    
    
    12,000
    
    
    
    4.4
    
    
    
    5.9600
    
    
    
    12,000
    
    
    
    5.9600$14.3751  $17.2500
    
    
    223,611
    
    
    
    6.4
    
    
    
    15.0318
    
    
    
    223,611
    
    
    
    15.0318$17.2501  $20.1250
    
    
    382,160
    
    
    
    7.3
    
    
    
    18.2217
    
    
    
    382,160
    
    
    
    18.2217$28.7500  $28.7500
    
    
    18,000
    
    
    
    9.5
    
    
    
    28.7500
    
    
    
    6,000
    
    
    
    28.75001,342,438
    
    
    
    5.0
    
    
    $
    9.4085
    
    
    
    1,330,438
    
    
    $
    9.2341
  WeightedNine Months
    
    
    AverageEnded
    
    
    Grant DateJune 30, 2007
    
    
    Fair ValueUnvested at beginning of period
    
    
    0
    
    
    $
    0.00Awards granted
    
    
    68,000
    
    
    $
    28.75Vested
    
    
    (22,667
    )
    
    $
    28.75Forfeited
    
    
    0
    
    
    $
    0.00Unvested at end of period
    
    
    45,333
    
    
    $
    28.75
  Note 13: Stockholders Equity




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 OVERVIEW
  
    
    charged-off receivables  accounts that have been written-off by the originators and may
have been previously serviced by collection agencies;
    
    semi-performing receivables  accounts where the debtor is currently making partial or
irregular monthly payments, but the accounts may have been written-off by the originators; and
    
    performing receivables  accounts where the debtor is making regular monthly payments
that may or may not have been delinquent in the past.
   
    
    our relationships with industry participants, collection agencies, investors and our
financing sources;
    
    brokers who specialize in the sale of consumer receivable portfolios; and
    
    other sources.
 CAUTIONS WITH RESPECT TO FORWARD LOOKING STATEMENTS




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##### Table of Contents



Critical Accounting Policies
     
    
    the interest method; or
    
    the cost recovery method.
    
    
    Same issuer/originator
    
    Same underlying credit quality
    
    Similar geographic distribution of the accounts
    
    Similar age of the receivable and
    
    Same type of asset class (credit cards, telecom etc.)




---



##### Table of Contents




    
    The number of collection agencies previously attempting to collect the receivables in the portfolio;
    
    the average balance of the receivables;
    
    the age of the receivables (as older receivables might be more difficult to collect or might be less cost effective);
    
    past history of performance of similar assets  as we purchase
portfolios of similar assets, we believe we have built significant
history on how these receivables will liquidate and cash flow;
    
    number of days since charge-off;
    
    payments made since charge-off;
    
    the credit originator and their credit guidelines;
    
    the locations of the debtors as there are better states to attempt
to collect in and ultimately we have better predictability of the
liquidations and the expected cash flows. Conversely, there are
also states where the liquidation rates are not as good and that
is factored into our cash flow analysis;
    
    Jobs or property of the debtors found within portfolios-with our
business model, this is of particular importance. Debtors with
jobs or property are more likely to repay their obligation and
conversely, debtors without jobs or property are less likely to
repay their obligation ; and
    
    the ability to obtain customer statements from the original issuer.
   Results of Operations
 The nine-month period ended June 30, 2007, compared to the nine-month period ended June 30,
2006
 Finance income




---



##### Table of Contents



Other
income .
 Equity in earnings of venture .
 General and Administrative Expenses
 Interest Expense
 Impairment.
 The three-month period ended June 30, 2007 as compared to the three month period ended June 30,
2006
 Finance income




---



##### Table of Contents



Other income .
 Equity in earnings of venture .
 General and Administrative Expenses
 Interest Expense
 Impairment
 Liquidity and Capital Resources




---



##### Table of Contents








---



##### Table of Contents



For The Nine Months Ended June 30, 2007CostInterest
    
    
    RecoveryMethod
    
    
    Method
    
    
    TotalBalance, beginning of period
    
    $
    256,199,000
    
    
    $
    1,076,000
    
    
    $
    257,275,000Acquisitions of receivable portfolios, net
    
    
    356,884,000
    
    
    
    45,432,000
    
    
    
    402,316,000Net cash collections from collections of consumer
receivables acquired for
liquidation (1)
    
    
    (164,829,000
    )
    
    
    (8,020,000
    )
    
    
    (172,849,000
    )Net cash collections represented by accounts sales of
consumer receivables acquired for liquidation
    
    
    (36,519,000
    )
    
    
    (4,247,000
    )
    
    
    (40,766,000
    )Transfer to
cost recovery (2)
    
    
    (4,478,000
    )
    
    
    4,478,000
    
    
    
    Impairment
    
    
    (2,412,000
    )
    
    
    
    
    
    
    (2,412,000
    )Finance
income recognized (3)
    
    
    94,168,000
    
    
    
    1,971,000
    
    
    
    96,139,000Balance, end of period
    
    $
    499,013,000
    
    
    $
    40,690,000
    
    
    $
    539,703,000Revenue as a percentage of collections
    
    
    46.8
    %
    
    
    16.1
    %
    
    
    45.0
    %
 
 (1)
    
    Includes put backs of purchased accounts returned to the
seller totaling $5.5 million.(2)
    
    Represents a portfolio acquired during the three months ended December 31, 2006 which
the Company has successfully negotiated the return to the seller. The portfolio was
returned on July 31, 2007.(3)
    
    Includes $11.1 million derived from fully amortized interest method pools. For The Nine Months Ended June 30, 2006CostInterest
    
    
    RecoveryMethod
    
    
    Method
    
    
    TotalBalance, beginning of period
    
    $
    172,636,000
    
    
    $
    91,000
    
    
    $
    172,727,000Acquisitions of receivable portfolios, net
    
    
    155,361,000
    
    
    
    
    
    
    
    155,361,000Net cash collections from collections of consumer
receivables acquired for liquidation
    
    
    (116,464,000
    )
    
    
    (2,820,000
    )
    
    
    (119,284,000
    )Net cash collections represented by account sales of
consumer receivables acquired for liquidation
    
    
    (43,034,000
    )
    
    
    (235,000
    )
    
    
    (43,269,000
    )Transfer to cost recovery
    
    
    (529,000
    )
    
    
    529,000
    
    
    
    Impairment
    
    
    (675,000
    )
    
    
    
    
    
    
    (675,000
    )Finance
income recognized (4)
    
    
    68,415,000
    
    
    
    2,764,000
    
    
    
    71,179,000Balance, end of period
    
    $
    235,710,000
    
    
    $
    329,000
    
    
    $
    236,039,000Revenue as a percentage of collections
    
    
    42.9
    %
    
    
    90.5
    %
    
    
    43.8
    %
 
 (4)
    
    Includes $4.0 million derived from fully amortized interest method pools. For The Three Months Ended June 30, 2007CostInterest
    
    
    RecoveryMethod
    
    
    Method
    
    
    TotalBalance, beginning of period
    
    $
    522,345,000
    
    
    $
    41,389,000
    
    
    $
    563,734,000Acquisitions of receivable portfolios, net
    
    
    11,086,000
    
    
    
    4,548,000
    
    
    
    15,634,000Net cash collections from collections of consumer
receivables acquired for
liquidation (5)
    
    
    (62,814,000
    )
    
    
    (5,931,000
    )
    
    
    (68,745,000
    )Net cash collections represented by account sales of
consumer receivables acquired for liquidation
    
    
    (9,765,000
    )
    
    
    
    
    
    
    (9,765,000
    )Finance
income recognized (6)
    
    
    38,161,000
    
    
    
    684,000
    
    
    
    38,845,000Balance, end of period
    
    $
    499,013,000
    
    
    $
    40,690,000
    
    
    $
    539,703,000Revenue as a percentage of collections
    
    
    52.6
    %
    
    
    11.5
    %
    
    
    49.5
    %
 
 (5)
    
    Includes put backs of purchased accounts returned to the
seller totaling $5.5 million.(6)
    
    Includes $5.6 million derived from fully amortized interest method pools.




---



##### Table of Contents



For The Three Months Ended June 30, 2006CostInterest
    
    
    RecoveryMethod
    
    
    Method
    
    
    TotalBalance, beginning of period
    
    $
    236,821,000
    
    
    $
    385,000
    
    
    $
    237,206,000Acquisitions of receivable portfolios, net
    
    
    34,173,000
    
    
    
    
    
    
    
    34,173,000Net cash collections from collections of consumer
receivables acquired for liquidation
    
    
    (42,994,000
    )
    
    
    (798,000
    )
    
    
    (43,792,000
    )Net cash collections represented by account sales of
consumer receivables acquired for liquidation
    
    
    (16,963,000
    )
    
    
    
    
    
    
    (16,963,000
    )Impairment
    
    
    (675,000
    )
    
    
    
    
    
    
    (675,000
    )Finance
income recognized (7)
    
    
    25,348,000
    
    
    
    742,000
    
    
    
    26,090,000Balance, end of period
    
    $
    235,710,000
    
    
    $
    329,000
    
    
    $
    236,039,000Revenue as a percentage of collections
    
    
    42.3
    %
    
    
    93.0
    %
    
    
    42.9
    %
 
 (7)
    
    Includes $1.2 million derived from fully amortized interest method pools. Additional Supplementary Information:




---



##### Table of Contents



CollectionsRepresented
    
    FinanceBy Account
    
    IncomePeriod
    
    Sales
    
    EarnedNine months ended June 30, 2007
    
    $
    40,766,000
    
    
    $
    18,211,000Three months ended June 30, 2007
    
    $
    9,765,000
    
    
    $
    3,697,000Nine months ended June 30, 2006
    
    $
    43,269,000
    
    
    $
    24,464,000Three months ended June 30, 2006
    
    $
    16,963,000
    
    
    $
    10,218,000
  NetCash
    
    
    
    
    
    
    
    
    
    Total estimatedCollections
    
    Estimated
    
    Total
    
    Collections as aPurchase
    
    Including Cash
    
    Remaining
    
    Estimated
    
    Percentage ofPurchase Period
    
    Price (2)
    
    Sales (3)
    
    Collections (4)
    
    Collections (5)
    
    Purchase Price2001
    
    $
    65,120,000
    
    
    $
    95,243,000
    
    
    $
    0
    
    
    $
    95,243,000
    
    
    
    146
    %2002
    
    
    36,557,000
    
    
    
    52,266,000
    
    
    
    0
    
    
    
    52,266,000
    
    
    
    143
    %2003
    
    
    115,626,000
    
    
    
    190,895,000
    
    
    
    9,476,000
    
    
    
    200,371,000
    
    
    
    173
    %2004
    
    
    103,743,000
    
    
    
    156,118,000
    
    
    
    8,168,000
    
    
    
    164,286,000
    
    
    
    158
    %2005
    
    
    126,023,000
    
    
    
    146,163,000
    
    
    
    70,858,000
    
    
    
    217,021,000
    
    
    
    172
    %2006
    
    
    200,237,000
    
    
    
    133,271,000
    
    
    
    175,642,000
    
    
    
    308,913,000
    
    
    
    154
    %2007
    
    
    356,884,000
    
    
    
    45,230,000
    
    
    
    443,579,000
    
    
    
    488,809,000
    
    
    
    137
    %
 
 (1)
    
    Total collections do not represent full collections of the Company with respect to
this or any other year.(2)
    
    Purchase price refers to the cash paid to a seller to acquire a portfolio less the
purchase price refunded by a seller due to the return of non-compliant accounts (also defined as
put-backs).(3)
    
    Net cash collections include: net collections from our third-party collection agencies and
attorneys, net collections from our in-house efforts and collections represented by account sales.(4)
    
    Does not include estimated collections from portfolios that are zero basis.(5)
    
    Total estimated collections refers to the actual net cash collections, including cash
sales, plus estimated remaining net collections.




---



##### Table of Contents



Recent Accounting Pronouncements
  Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  10.1
    
    Fifth Amended to the Fourth Amended and Restated Loan Agreement dated June 26, 200610.2
    
    Amendment to Receivables Financing Agreement Dated July 2, 200731.1
    
    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.




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##### Table of Contents



ASTA FUNDING, INC.
(Registrant)Date: August 9, 2007
    By:
    /s/ Gary SternGary Stern, President, Chief Executive Officer(Principal Executive Officer)Date: August 9, 2007
    By:
    /s/ Mitchell CohenMitchell Cohen, Chief Financial Officer(Principal Financial Officer and
Principal Accounting Officer)