Asta Funding
Annual Report 2015

Plain-text annual report

ASTA FUNDING INC FORM 10-K (Annual Report) Filed 12/14/15 for the Period Ending 09/30/15 Address 210 SYLVAN AVE ENGLEWOOD CLIFFS, NJ 07632 2015675648 CIK 0001001258 Telephone Symbol ASFI SIC Code 6153 - Short-Term Business Credit Institutions, Except Agricultural Industry Consumer Financial Services Sector Fiscal Year Financial 09/30 http://www.edgar-online.com © Copyright 2015, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use. Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D. C. 20549Form 10-K þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For the fiscal year ended September 30, 2015OR ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934For the transition period from to Commission file number: 001-35637ASTA FUNDING, INC.(Exact Name of Registrant Specified in its Charter) Delaware 22-3388607(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.)210 Sylvan Avenue, EnglewoodCliffs, NJ 07632(Zip Code)(Address of principal executive offices) Issuer’s telephone number, including area code: (201) 567-5648Securities registered pursuant to Section 12(b) of the Exchange Act: Title of each Class Name of Exchange on Which RegisteredCommon Stock, par value $.01 per share NASDAQ Global Select MarketSecurities registered pursuant to Section 12(g) of the Exchange Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes ¨ No þIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act Yes ¨ No þ¨ 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 of1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes þ No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File requiredto be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required tosubmit and post such files). Yes þ No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the bestof the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K. þIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See thedefinitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ¨ Accelerated filer þ Non-accelerated filer ¨ Smaller reporting company ¨ (Do not check if a smaller reporting company)Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þThe aggregate market value of voting and nonvoting common equity held by non-affiliates of the registrant was approximately $73,926,000 as of the lastbusiness day of the registrant’s most recently completed second fiscal quarter.As of December 8, 2015, the registrant had 12,070,373 shares of Common Stock issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCEIn accordance with General Instruction G (3) of Form 10-K, certain information required by Part III hereof will either be incorporated into this Form 10-K byreference to the registrant’s definitive proxy statement for registrant’s 2016 Annual Meeting of Stockholders filed within 120 days of September 30, 2015 or will beincluded in an amendment to this Form 10-K filed within 120 days of September 30, 2015.Table of ContentsFORM 10-KTABLE OF CONTENTS Page PART I Item 1. Business 3 Item 1A. Risk Factors 14 Item 1B. Unresolved Staff Comments 22 Item 2. Properties 22 Item 3. Legal Proceedings 22 Item 4. Mine Safety Disclosures 22 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 23 Item 6. Selected Financial Data 25 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 41 Item 8. Financial Statements and Supplementary Data 41 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 41 Item 9A Controls and Procedures 41 Item 9B. Other Information 44 PART III Item 10. Directors, Executive Officers and Corporate Governance 44 Item 11. Executive Compensation 44 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 44 Item 13. Certain Relationships and Related Transactions, and Director Independence 44 Item 14. Principal Accounting Fees and Services 44 PART IV Item 15. Exhibits and Financial Statement Schedules 44 1Table of ContentsCaution Regarding Forward Looking StatementsThis Annual Report on Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, asamended, and Section 21E of the Securities Exchange Act of 1934, as amended . All statements other than statements of historical facts included or incorporated byreference in this Annual Report on Form 10-K, including without limitation, statements regarding our future financial position, business strategy, budgets, projectedrevenues, projected costs and plans and objectives of management for future operations, are forward-looking statements. Forward-looking statements generally canbe identified by the use of forward-looking terminology such as “may,” “will,” “expects,” “intends,” “plans,” “projects,” “estimates,” “anticipates,” or “believes” orthe negative thereof or any variation there on or similar terminology or expressions.We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are notguarantees and are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance orachievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-lookingstatements. Important factors which could materially affect our results and our future performance include, without limitation, our ability to purchase defaultedconsumer receivables at appropriate prices, changes in government regulations that affect our ability to collect sufficient amounts on our defaulted consumerreceivables, our ability to employ and retain qualified employees, changes in the credit or capital markets, changes in interest rates, deterioration in economicconditions, negative press regarding the debt collection industry which may have a negative impact on a debtor’s willingness to pay the debt we acquire, andstatements of assumption underlying any of the foregoing, as well as other factors set forth under “Item 1A. Risk Factors” beginning on page 19 of this report and“Item 7—Management’s Discussions and Analysis of Financial Condition and Results of Operation” below.All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by theforegoing. Except as required by law, we assume no duty to update or revise any forward-looking statements. 2Table of ContentsPart I Item 1.Business.OverviewAsta Funding, Inc., together with its wholly owned significant operating subsidiaries Palisades Collection LLC, Palisades Acquisition XVI, LLC (“PalisadesXVI”), VATIV Recovery Solutions LLC (“VATIV”), ASFI Pegasus Holdings, LLC (“APH”), Fund Pegasus, LLC (“Fund Pegasus”), GAR Disability Advocates,LLC (“GAR Disability Advocates”) and other subsidiaries, not all wholly owned (the “Company”, “we” or “us”), is engaged in several business segments in thefinancial services industry including structured settlements through our 80% owned subsidiary CBC Settlement Funding, LLC, funding of personal injury claims,through our 80% owned subsidiary Pegasus Funding, LLC social security and disability advocates through our wholly owned subsidiary GAR Disability Advocates, LCC and the business of purchasing, servicing and managing for its own account, distressed consumer receivables, including charged off receivables, and semi-performing receivables. The Company started out in the consumer receivable business in 1994 as a subprime auto lender. The primary charged-off receivables areaccounts that have been written-off by the originators and may have been previously serviced by collection agencies. Semi-performing receivables are accountswhere the debtor is currently making partial or irregular monthly payments, but the accounts may have been written-off by the originators. Our efforts in this areahave been in the international arena as we have discontinued our active purchasing of consumer receivables in the United States. We acquire these and otherconsumer receivable portfolios at substantial discounts to their face values. The discounts are based on the characteristics (issuer, account size, debtor location andage of debt) of the underlying accounts of each portfolio.GAR Disability Advocates is a social security disability advocacy firm. GAR Disability Advocates assists claimants in obtaining long term disability benefitsfrom the Social Security Administration.We own 80% of Pegasus Funding, LLC (“Pegasus”), which invests in funding personal injury claims and 80% of CBC Settlement Funding, LLC (“CBC”),which invests in structured settlements.Pegasus provides funding for individuals in need of short term funds pending insurance settlements of their personal injury claims. The funds will berecouped when the underlying insurance settlements are paid. The long periods of time taken by insurance companies to settle and pay such claims resulting fromlengthy litigation and the court process is fueling the demand for such funding.CBC provides liquidity to consumers by purchasing certain deferred payment streams including, but not limited to, structured settlements and annuities. CBCgenerates business from direct marketing as well as through wholesale purchases from brokers or other third parties. CBC has its principal office in Conshohocken,Pennsylvania. CBC primarily warehouses the receivables it originates and periodically resells or securitizes those assets on a pooled basis. The structuredsettlement marketplace is regulated by federal and state law, requiring that each transaction is reviewed and approved by court order.We operate principally in the United States in four reportable business segments.Financial Information About Operating SegmentsThe Company operates through strategic business units that are aggregated into four reportable segments consisting of the following: • Consumer receivables segment is engaged in the business of purchasing, managing for its own account and servicing distressed consumer receivables,including charged off and semi-performing receivables, primarily in the international sector. The charged-off receivables are accounts that have beenwritten-off by the originators and may have been previously serviced by collection agencies. Semi-performing receivables are accounts where the debtoris currently making partial or irregular monthly payments, but the accounts may have been written-off by the originators. Distressed consumer receivablesare the unpaid debts of individuals to banks, finance companies and other credit providers. These receivables were acquired at substantial discounts totheir face values. The discounts are based on the characteristics 3Table of Contents (issuer, account size, debtor location and age of debt) of the underlying accounts of each portfolio. Litigation related receivables are semi-performinginvestments whereby the Company is assigned the revenue stream from the proceeds received. The business conducts its activities primarily under thename Palisades Collection, LLC. • Personal injury claims – Pegasus Funding, LLC , an 80% owned subsidiary, purchases interests in personal injury claims from claimants who are a partyto personal injury litigation. Pegasus advances to each claimant funds on a non-recourse basis at an agreed upon interest rate, in anticipation of a futuresettlement. The interest in each claim purchased by Pegasus consists of the right to receive, from such claimant, part of the proceeds or recoveries whichsuch claimant receives by reason of a settlement, judgment or award with respect to such claimant’s claim. • Structured settlements – On December 31, 2013 the Company purchased an 80% interest in CBC Settlement Funding, LLC. CBC purchases periodicstructured settlements and annuity policies from individuals in exchange for a lump sum payment. • GAR Disability Advocates is a social security benefit and disability advocacy group, which obtains and represents individuals in their claims for socialsecurity disability and supplemental security income benefits from the Social Security Administration.Three of the Company’s business lines accounted for 10% or more of consolidated net revenue during fiscal years 2015 and 2014. In fiscal year 2013 two ofthe Company’s business lines accounted for 10% or more of consolidated net revenue. The following table summarizes the net revenues by percentage from thefour lines of business for the fiscal years 2015, 2014, and 2013: Years Ended September 30, 2015 2014 2013 Finance income (consumer receivables) 48.9% 60.7% 83.1%Personal injury claims 20.0% 22.1% 16.9%Structured settlements 27.8% 16.0% —%GAR Disability Advocates 3.3% 1.2% —% Total revenues 100.0% 100.0% 100.0% The Company has no segment information from international operations that needs to be reported.Information about the results of each of the Company’s reportable segments for the last three fiscal years and total assets as of the end of the last three fiscalyears, reconciled to the consolidated results, is set forth below. For additional information, refer to the information set forth under the caption “Segment Resultsfrom Continuing Operations” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” below. (Dollars in millions) Fiscal Year Consumer Receivables PersonalInjury Claims Structured Settlements GAR Disability Advocates Corporate Total Company Revenues 2015 $20.8 $8.5 $11.8 $1.4 $— $42.5 2014 19.8 7.2 5.2 0.4 — 32.6 2013 31.8 6.4 — — — 38.2 Other income 2015 — — — — 1.7 1.7 2014 26.1 — — — 1.4 27.5 2013 — — — — 1.6 1.6 Income before income taxes 2015 13.8 0.1 3.5 (5.8) (6.7) 4.9 2014 18.9 2.3 0.4 (2.7) (7.9) 11.0 2013 10.1 2.0 — (1.2) (7.6) 3.3 4Table of Contents(Dollars in millions) Fiscal Year Consumer Receivables PersonalInjury Claims Structured Settlements GAR Disability Advocates Corporate Total Company Total assets 2015 $17.0 $39.6 $63.1 $2.6 $115.1 $237.4 2014 30.5 34.0 38.5 1.0 113.1 217.1 2013 65.4 36.8 — 0.2 109.1 211.5 Principal Markets and Methods of DistributionAll of the Company’s lines of business are principally conducted in the United States, with some investments overseas.Consumer receivablesPrior to purchasing a portfolio, we perform a qualitative and quantitative analysis of the underlying receivables and calculate the purchase price which isintended to offer us an adequate return on our investment after servicing expenses. After purchasing a portfolio, we actively monitor performance and review andadjust our collection and servicing strategies accordingly.We purchase receivables from credit grantors and others through privately negotiated direct sales, brokered transactions and auctions in which sellers ofreceivables seek bids from several pre-qualified debt purchasers. We fund portfolios through a combination of internally generated cash flow.Our objective is to maximize our return on investment in acquired consumer receivable portfolios. As a result, before acquiring a portfolio, we analyze theportfolio to determine how to best maximize collections in a cost efficient manner and decide whether to use our internal servicing and collection department, third-party collection agencies, attorneys, or a combination of all three options.When we outsource the servicing of receivables, our management typically determines the appropriate third-party collection agencies and attorneys based onthe type of receivables purchased. Once a group of receivables is sent to third-party collection agencies and attorneys, our management actively monitors andreviews the third-party collection agencies’ and attorneys’ performance on an ongoing basis. Based on portfolio performance considerations, our management willeither (i) move certain receivables from one third-party collection agency or attorney to another, or (ii) sell portions of the portfolio accounts. Our internalcollection unit, which currently employs approximately five collection-related staff, including senior management, assists us in benchmarking our third-partycollection agencies and attorneys, and provides us with greater flexibility for servicing a percentage of our consumer receivable portfolios in-house.We have increased our focus on purchasing consumer receivables internationally from foreign banks via direct sales or auctions, similar to the domesticpurchase process. We have established relationships with agencies and attorneys in our selected countries and we are committed to continue acquiring foreignconsumer receivables to maximize our return on investment.Personal injury claimsPegasus conducts its business solely in the United States. Pegasus obtains its business from external brokers and internal sales professionals solicitingindividuals with personal injury claims. Business is also obtained from the Pegasus web site and through attorneys.Structured settlementsCBC purchases structured settlement and annuity policies through privately negotiated direct consumer purchases and brokered transactions across theUnited States. CBC funds the purchases primarily from cash, its line of credit and its securitized debt, issued through its BBR subsidiaries. Blue Bell Receivables I,LLC (“BBR I”), Blue Bells Receivables II, LLC (“BBR II”), Blue Bell Receivables III, LLC (“BBR III”), Blue Bell Receivables IV, LLC (“BBR IV”) and BlueBell Receivables V, LLC (“BBR V”), collectively the “Blue Bell Entities”, are variable interest entities (“VIEs”). CBC is considered the primary beneficiarybecause it has the power to direct the significant activities of the VIEs via its ownership and service contract. It also has the rights to receive benefits from thecollections that exceed the payments to the note holders. 5Table of ContentsSocial security benefit advocacyGAR Disability Advocates provides its disability advocacy services throughout the United States. It relies upon search engine optimization (“SEO”) to bringawareness to its intended market.Industry OverviewConsumer receivablesThe purchasing, servicing and collection of charged-off, semi-performing and performing consumer receivables is an industry that is driven by: • increasing levels of consumer debt; • increasing defaults of the underlying receivables; and • increasing utilization of third-party providers to collect such receivables.Personal injury claimsThe funding of personal claims is driven by the growth of the market for financing personal injury claims. Individuals with personal injury claims incurcurrent cash obligations which will not be recouped until insurance settlements are paid. The demand for providing financing to individuals in need of short termfunds pending insurance settlements of their personal injury claims is driven by the long periods of time taken by the insurance industry to settle and pay suchclaims, due to lengthy litigation and the court process.Structured settlementsThe investment in structured settlements is driven by the direct-to-consumer model. The structured settlement market became organized under the Model Actin 2001 and now 49 states abide by the guidelines. The underlying basis for a structured settlement transaction is a court order.Social security benefit advocacyThe disability advocate industry is driven by the increasing number of disability applicants who find it difficult to obtain such benefits without the aid ofthird party assistance.StrategyConsumer receivablesOur primary objective for our international sector is to utilize our management’s experience and expertise by identifying, evaluating, pricing and acquiringconsumer receivable portfolios and maximizing collections of such receivables in a cost efficient manner. Our strategies include: • managing the collection and servicing of our consumer receivable portfolios, including outsourcing those activities to maintain low fixed overhead bypartnering with experienced collection and debt buying firms; • selling accounts on an opportunistic basis, generally when our efforts have been exhausted through traditional collecting methods, or when we cancapitalize on pricing during times when we feel the pricing environment is high; and • capitalizing on our strategic relationships to identify and acquire consumer receivable portfolios as pricing, financing and conditions permit.Personal injury claimsPegasus intends to maintain its business through its attorneys, brokers and sales contacts.Structured settlementsThe success of CBC is tied to its ability to efficiently deploy marketing expenditures, negotiate the purchase of deferred cash flows at attractive yields andobtain asset based financing at competitive rates. 6Table of ContentsSocial security benefit advocacyGAR Disability Advocates intends to explore expansion into related businesses. In fiscal year 2015, GAR Disability Advocates began its Five Star DisabilityDepartment, assisting veterans in obtaining their benefits.OperationsConsumer ReceivablesThe Operations Servicing Division of consumer receivables consists of the Collection Department, which handles disputes and correspondence, and theAccounting and Finance Department.Collection DepartmentThe Collection Department is responsible for making contact with and receiving calls from consumers for the purpose of collecting upon the accountscontained in our consumer receivables portfolios. Collection efforts are specific to accounts that are not yet being serviced by our network of external agencies andattorneys. The Collection Department uses a friendly, customer service approach to collect receivables and utilizes collection software, a dialer and telephonesystem to accomplish this goal. Each collector is responsible for:Initiating outbound collection calls and handling incoming calls from the consumer;Identifying the debt and iterating the benefits of paying the obligation;Working with the customer to develop acceptable means of satisfying the obligation; andOffering (if necessary, and based upon the individual situation) an obligor a discount on the overall obligation.Accounting and Finance DepartmentIn addition to the customary accounting activities, the Accounting and Finance Department is responsible for:Making daily deposits of customer payments;Posting payments to customers accounts; andProviding senior management with daily, weekly and monthly receivable activity and performance reports.Accounting and finance employees assist collection department employees in handling customer disputes relating to payment and balance information andhandling the repurchase requests from companies to whom we have sold receivables.Additionally, the Accounting Department reviews the results of the collection of consumer receivable portfolios that are being serviced by third partycollection agencies and attorneys. The Accounting and Finance Department also participates in the internal auditing of all business segments.Personal Injury ClaimsThe operations structure of the personal injury claims unit of Pegasus Funding, LLC includes:Sales — the sales group is responsible for business development and generating leads for possible funding of personal injury cases.Underwriting — The underwriting group is responsible for analyzing the merits of the personal injury claims presented for possible funding.Accounting — The accounting group is responsible for the reporting of all the financial operations of the personal injury claims unit.Structured SettlementsThe operations structure of the structured settlements unit of CBC Settlement, LLC includes:Operations — Underwriting/Collections — The Operations Department is responsible for underwriting, processing and collecting structured settlement andannuity transactions. 7Table of ContentsSocial security benefit advocacyGAR Disability Advocates utilizes search engine optimization (“SEO”) to bring more awareness to prospective clients. In particular, through substantial useof the internet, it intends to increase consumer awareness of its existence on various government websites.Marketing — The Marketing Group is responsible for researching various court records to secure information to follow up for possible structured settlementcases.Sales — The Sales Group is responsible for the sales strategy and advertising campaigns of CBC.Accounting — The accounting group is responsible for the reporting of all the financial operations of the structured settlement unit.Social security benefit advocacyGAR Disability Advocates consists of the following departments:Intake — The Intake Department is responsible for client development, including screening leads and developing information on individual cases.Case Management — The Case Management Department processes approved cases through the Social Security Disability process.MarketingConsumer receivablesOur consumer debt portfolio purchases were 12 portfolio purchases in fiscal year 2015. We have expanded relationship with credit providers internationally,as well as maintained our existing relationships domestically with brokers, finance companies and other credit providers. We utilize a sales team internationally toexpand our name recognition by attending international conferences, utilizing email solicitations and attending face-to-face bank meetings.Personal injury claimsPegasus does not invest in a formal marketing program at this time. It relies on external brokers, internal sales professionals and attorneys to maintain itsmarket share.Structured settlementsCBC purchases deferred cash flow receivables through retail and wholesale channels. CBC invests in direct to consumer marketing, including, but notlimited to, on line, television and direct mail.Social security benefit advocacyGAR Disability Advocates utilizes SEO to bring more awareness to prospective clients. In particular, through substantial use of the internet, it intends toincrease consumer awareness of its existence on various government websites.CompetitionConsumer receivablesWith the competitive nature of the domestic market, there are strategic advantages of acquiring portfolios internationally in specific foreign countries withless established competition. We feel our expertise in establishing alliances with third-party collection agencies and attorneys can be leveraged in the internationalsector to be successful against our competitors; however, we cannot assure that the competition will not increase internationally in the future, affecting ourconsumer receivables financial performance.We compete with: • other purchasers of consumer receivables, including third-party collection companies; and 8Table of Contents • other financial services companies who purchase consumer receivables.Some of our competitors are larger and more established and may have substantially greater financial, technological, personnel and other resources than wehave, including greater access to the credit and capital markets. We believe that no individual competitor or group of competitors has a dominant presence in themarket.We compete in the marketplace for consumer receivable portfolios based on many factors, including: • purchase price; • representations, warranties and indemnities requested; • timeliness of purchase decisions; and• reputation.Our strategy is designed to capitalize on the market’s lack of a dominant industry player. We believe that our management’s experience and expertise inidentifying, evaluating, pricing and acquiring consumer receivable portfolios and managing collections, coupled with our strategic alliances with third-partycollection agencies and attorneys and our sources of financing, give us a competitive advantage. However, we cannot assure that we will be able to competesuccessfully against current or future competitors or that competition will not increase in the future.Personal injury claimsThe litigation funding business is highly competitive and fragmented, and we expect that competition from new and existing companies will continue. Wecompete in the litigation funding marketplace based on many factors, including:cost of funds lent;application Fee costs;broker’s commissions and bonuses paid;reputation; anddirect and on-line marketing.We believe that the management of Pegasus has the expertise and experience in identifying, evaluating, pricing and acquisition of litigating funding cases.However, we cannot assure that our litigation funding businesses will be able to compete against current or future competitors or that competition will not increasein the future.Structured settlementsCBC competes with brokers and other direct purchasers of deferred consumer receivables. We compete in the marketplace for the purchase of structuredsettlement and annuity cash flows on many factors, including purchase price, reputation, effectiveness of marketing message and reach. We expect competitionfrom new and existing companies to continue. Some of our competitors are larger and more established and may have substantially greater financial, technological,personnel and other resources than we have, including greater access to credit and capital markets. We believe that one of our competitors may account for 50% ormore of the industry volume and that the remaining competitors are fragmented.Social security benefit advocacyThe social security benefit advocacy environment is competitive. We believe our GAR Disability Advocates management has the knowledge to compete inthis environment. Nevertheless, we can offer no assurance that the business will remain competitive against current and future competitors. 9Table of ContentsSeasonality and TrendsConsumer receivablesOur management believes that our operations may, to some extent, be affected by high delinquency rates and by lower recoveries on consumer receivablesacquired for liquidation during or shortly following certain holiday periods and during the summer months.Personal injury claimsThere are no discernible trends to indicate seasonality in the personal injury claims business.Structured settlementsThe purchase of deferred payment obligations is not significantly impacted by the time of year and consumer demand for advance funding remainsreasonably constant.Social security benefit advocacyThere is no indication that seasonality has any noticeable impact on GAR Disability Advocates.TechnologyConsumer receivablesWe believe that a high degree of automation is necessary to enable us to grow and successfully compete with other finance companies. Accordingly, wecontinually look to upgrade our technology systems to support the servicing and recovery of consumer receivables acquired for liquidation. Ourtelecommunications and technology systems allow us to quickly and accurately process large amounts of data necessary to purchase and service consumerreceivable portfolios. In addition, we rely on the information technology of our third-party collection agencies and attorneys and periodically review their systemsto ensure that they can adequately service the consumer receivable portfolios outsourced to them.Due to our desire to increase productivity through automation, we periodically review our systems for possible upgrades and enhancements. We are lookingto enhance our international systems capabilities during fiscal year 2016.Personal injury claimsPegasus is dependent on its website to maintain and increase its business and, therefore, must remain current with technology.Structured settlementsCBC recognizes that a high level of automation is required to continue to grow and compete within the industry. CBC has invested significantly intechnology since its inception and particularly in its customer relationship management (“CRM”) system in order to maximize large quantities of information. Thistechnology provides CBC management with the necessary tool to optimize its processes to improve its efficiency. CBC intends to continue to invest in technology.Social security benefit advocacyGAR Disability Advocates relies on substantial use of the internet and, therefore, endeavors to remain current technologically. We are in the process ofinstalling a new client software system in fiscal year 2016, which is expected to improve management reporting capabilities.Government RegulationConsumer receivablesOur businesses are subject to extensive federal and state regulations. The relationship of a consumer and a creditor is extensively regulated by federal, stateand local laws, rules, regulations and ordinances. These laws 10Table of Contentsinclude, but are not limited to, the following federal statutes and regulations: the Federal Truth-In-Lending Act, the Fair Credit Billing Act (“FCBA”), the EqualCredit Opportunity Act and the Fair Credit Reporting Act (“FCRA”), as well as comparable statutes in states where consumers reside and/or where creditors arelocated. Among other things, the laws and regulations applicable to various creditors impose disclosure requirements regarding the advertisement, application,establishment and operation of credit card accounts or other types of credit programs. Federal law requires a creditor to disclose to consumers, among other things,the interest rates, fees, grace periods and balance calculation methods associated with their accounts. In addition, consumers are entitled to have payments andcredits applied to their accounts promptly, to receive prescribed notices and to request that billing errors be resolved promptly. In addition, some laws prohibitcertain discriminatory practices in connection with the extension of credit. Further, state laws may limit the interest rate and the fees that a creditor may impose onconsumers. Failure by the creditors to comply with applicable laws could create claims and rights of offset by consumers that would reduce or eliminate theirobligations, which could have a material adverse effect on our operations. Pursuant to agreements under which we purchase receivables, we are typicallyindemnified against losses resulting from the failure of the creditor to have complied with applicable laws relating to the receivables prior to our purchase of suchreceivables.Certain laws, including the laws described above, may limit our ability to collect amounts owing with respect to the receivables regardless of any act oromission on our part. For example, under the FCBA, a credit card issuer may be subject to certain claims and defenses arising out of certain transactions in which acredit card is used if the consumer has made a good faith attempt to obtain satisfactory resolution of a problem relative to the transaction and, except in cases wherethere is a specified relationship between the person honoring the card and the credit card issuer, the amount of the initial transaction exceeds $50 and the placewhere the initial transaction occurred was in the same state as the consumer’s billing address or within 100 miles of that address. Accordingly, as a purchaser ofdefaulted receivables, we may purchase receivables subject to valid defenses on the part of the consumer. Other laws provide that, in certain instances, consumerscannot be held liable for, or their liability is limited to $50 with respect to, charges to the credit card credit account that were a result of an unauthorized use of thecredit card account. No assurances can be given that certain of the receivables were not established as a result of unauthorized use of a credit card account, and,accordingly, the amount of such receivables may not be collectible by us.Several federal, state and local laws, rules, regulations and ordinances, including, but not limited to, the Fair Debt Collection Practices Act (“FDCPA”) andthe Federal Trade Commission Act and comparable state statutes, regulate consumer debt collection activity. Although, for a variety of reasons, we may not bespecifically subject to the FDCPA or certain state statutes that govern third-party debt collectors, it is our policy to comply with applicable laws in our collectionactivities. Additionally, our third-party collection agencies and attorneys may be subject to these laws. To the extent that some or all of these laws apply to ourcollection activities or our third-party collection agencies’ and attorneys’ collection activities, failure to comply with such laws could have a material adverse effecton us.In order to comply with the foregoing laws and regulations, we provide a comprehensive development training program for our new collection/disputedepartment representatives and on-going training for all collection/dispute department associates. All collection and dispute representatives are tested annually ontheir knowledge of the FDCPA and other applicable laws. Account representatives not achieving our minimum standards are required to complete a FDCPA reviewsession and are then retested. In addition, annual supplemental instruction in the FDCPA and collection techniques is provided to all our account representatives.On July 21, 2010, the Dodd-Frank Wall Street Reform and Protection Act, or the Dodd-Frank Act, was enacted. There are significant corporate governanceand executive compensation-related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in areas such as corporategovernance, “say on pay” and proxy access. Our efforts to comply with these requirements have resulted in, and are likely to continue to result in, an increase inexpenses and a diversion of management’s time from other business activities. We are subject to changing rules and regulations of federal and state governments,the Public Company Accounting Oversight Board (“PCAOB”), the Financial Industry Regulatory Authority, Inc. (“FINRA”) and NASDAQ, all of which haveissued a significant number of new and increasingly complex requirements and 11Table of Contentsregulations over the course of the last several years and continue to develop additional regulations and requirements in response to laws enacted by Congress.The enactment of the Dodd-Frank Act will subject us to substantial additional federal regulation, and we cannot predict the effect of such regulation on ourbusiness, results of operations, cash flows or financial condition. Through the Dodd-Frank Act, Congress established the Consumer Financial Protection Bureau(the “CFPB”), which has regulatory, supervisory and enforcement authority over entities involved in consumer financial markets. The CFPB has the authority toconduct periodic examinations of “larger participants” in each market, and we believe it is likely that we will be subject to an examination.The CFPB published a final rule on October 24, 2012, that allows the agency to federally supervise the larger consumer debt collectors. The CFPB alsoreleased the field guide that examiners will use to ensure that companies and banks engaging in debt collection are following the law.The consumer debt collection market covered by the rule includes three main types of debt collectors: first, firms that may buy defaulted debt and collect theproceeds for themselves; second, firms that may collect defaulted debt owned by another company in return for a fee; and third, debt collection attorneys thatcollect through litigation. A single company may be involved in any or all of these activities.The CFPB’s supervisory authority over these entities began when the rule took effect on January 2, 2013. Under the rule, any firm that has more than $10million in annual receipts from consumer debt collection activities will be subject to the CFPB’s supervisory authority. This authority will extend to about 175 debtcollectors, which, according to the CFPB, account for over 60 percent of the industry’s annual receipts in the consumer debt collection market.Pursuant to the CFPB’s supervisory authority, examiners will be assessing potential risks to consumers and whether debt collectors are complying withrequirements of federal consumer financial law. Among other things, examiners will be evaluating whether debt collectors provide required disclosures; useaccurate information; maintain a consumer complaint and dispute resolution process; and communicate with consumers in the manner required by law.The CFPB’s general Supervision and Examination Manual, as well as its examination manual specific to the debt collection market, provide guidance onhow the bureau will be conducting its monitoring of debt collection activities. Examiners will evaluate the quality of the regulated entity’s compliance managementsystems, review practices to ensure they comply with federal consumer financial law, and identify risks to consumers throughout the debt collection process. TheCFPB can seek relief that includes: rescission or reformation of contracts, restitution, disgorgement of profits, payment of damages, limits on activities and civilmoney penalties of up to $1 million per day for knowing violations.As a company that engages in debt collection, we need to be prepared for the heavy oversight that the CFPB will bring. Preparing for a CFPB audit will costtime and money. Additionally, the CFPB has the power to bring an enforcement action or cause a required settlement. Another large concern is the amount ofprivileged and confidential information the CFPB could release, which can lead to private lawsuits — including class and mass actions — as well as other state andfederal agency oversight.The CFPB is expressly charged with prohibiting unfair, deceptive or abusive acts or practices. Through its broad powers to regulate and enforce federalconsumer financial laws, the CFPB could place restrictions on our business, the businesses of our customers and the business of our affiliates, if the CFPB were todetermine through rulemaking, supervisory or enforcement actions, for example, that particular acts or practices were unfair, deceptive or abusive to consumers.The CFPB will thus exercise supervisory authority over us. At this time, it is not possible or practical to attempt to provide a comprehensive analysis of howthese new laws and regulations may impact debt collectors.Additionally, the Dodd-Frank Act empowers state attorneys general (or the equivalent thereof) to bring civil actions in federal district court (or a state courtthat is located in that state and that has jurisdiction over the defendant), to enforce Title X of the Act or regulations issued by the CFPB thereunder. Therefore, wecould also 12Table of Contentsbe the subject of investigations and enforcement actions by the Federal Trade Commission or by state agencies (e.g., state attorneys general) with powers to enforceCFPB regulations and the FCRA.The Dodd-Frank Act authorized the CFPB to prescribe rules interpreting the FDCPA. On November 12, 2013, the CFPB signaled its intention to promulgatesubstantive rules under the FDCPA by publishing an Advance Notice of Proposed Rulemaking (ANPR) with regard to debt collection practices. The ANPRrequested comments with regard to a wide array of issues relating to debt collection. The comment period closed on February 28, 2014. The CFPB has not yetissued a proposed rule. In its Fall 2015 Regulatory Agenda, the CFPB stated that it expects “Pre-rule activities” are the steps that the CFPB takes in preparation forissuing proposed regulations.The Company has and will continue to have a substantive compliance program and maintain procedures to ensure that the law is followed and that consumercomplaints are dealt with in an appropriate fashion.Additional laws or amendments to existing laws, may be enacted that could impose additional restrictions on the servicing and collection of receivables.Such new laws or amendments may adversely affect our ability to collect the receivables.We currently hold a number of licenses issued under applicable consumer credit laws or other licensing statutes or regulations. Certain of our currentlicenses, and any licenses that we may be required to obtain in the future, may be subject to periodic renewal provisions and/or other requirements. Our inability torenew licenses or to take any other required action with respect to such licenses could have a material adverse effect upon our results of operation and financialcondition.Personal injury claimsNumerous states have recently introduced legislation with respect to the litigation funding business, which, up to now, has been largelyunregulated. According to the National Conference of State Legislatures during the 2015 legislative session, 10 states had legislation pending regarding litigationfinancing transactions, and two states enacted legislation. While the legislation varies from state to state, these proposed laws generally would establishrequirements for contracts relating to litigation funding, including setting maximum amounts of interest, fees and other charges that may be imposed.Structured settlementsWith respect to the structured settlement business, 49 states have enacted regulations commonly referred to as Structured Settlement Protection Acts(“SSPAs”). The statutes generally require certain consumer disclosures as well as requiring that each transaction be filed in court and receive judicial approval. Inaddition to the state SSPAs, U.S. Code 5891, passed into law in 2002, imposes a 40% excise tax of 40% on any transactions not approved in compliance with theapplicable SSPA.Social security benefit advocacyThe liquidity of funds available to pay Social Security disability benefits could have a material impact on the GAR Disability Advocates business.EmployeesAs of September 30, 2015, we had 149 full-time employees. We are not a party to any collective bargaining agreements.Additional InformationOur web address is www.astafunding.com. Copies of our Form 10-Ks, 10-Qs, 8-Ks, proxy statements, amendments thereto, and other SEC reports areavailable on our website as soon as reasonably practical after filing electronically with the Securities and Exchange Commission . No part of our website isincorporated by reference into this report. 13Table of ContentsItem 1A.Risk Factors.Note Regarding Risk FactorsYou should carefully consider the risk factors below in evaluating us. In addition to the following risks, there may also be risks that we do not yet know of orthat we currently think are immaterial that may also impair our business operations. If any of the following risks occur, our business, results of operation orfinancial condition could be adversely affected, the trading price of our common stock could decline and stockholders might lose all or part of their investment. Therisk factors presented below are those which we currently consider material. However, they are not the only risks facing our company. Additional risks notpresently known to us, or which we currently consider immaterial, may also adversely affect us. There may be risks that a particular investor views differently fromus, and our analysis might be wrong. If any of the risks that we face actually occur, our business, financial condition and operating results could be materiallyadversely affected and could differ materially from any possible results suggested by any forward-looking statements that we have made or might make. In suchcase, the trading price of our common stock could decline, and you could lose part or all of your investment. Except as required by law, we expressly disclaim anyobligation to update or revise any forward-looking statements.The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act subjects us to substantial additional federal regulation, and we cannotpredict the effect of such regulation on our business, results of operations, cash flows or financial condition.On July 21, 2010, the Dodd-Frank Wall Street Reform and Protection Act, or the Dodd-Frank Act, was enacted. There are significant corporate governanceand executive compensation-related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas such as “say onpay” and proxy access. Our efforts to comply with these requirements have resulted in, and are likely to continue to result in, an increase in expenses and adiversion of management’s time from other business activities.Given the uncertainty associated with the manner in which the provisions of the Dodd-Frank Act will be implemented, in their entirety, by the variousregulatory agencies and through regulations, the full extent of the impact such requirements will have on our operations is unclear. The changes resulting from theDodd-Frank Act may impact the profitability of business activities, require changes to certain business practices, or otherwise adversely affect our business. Inparticular, the potential impact of the Dodd-Frank Act on our operations and activities, both currently and prospectively, include, among others: • increased cost of operations due to greater regulatory oversight, supervision and compliance with consumer debt issuance and collection practices; and • the limitation on the ability to expand consumer product and service offerings due to anticipated stricter consumer protection laws and regulations.The Dodd-Frank Act establishes the CFPB, which has broad regulatory powers over debt collectors and virtually all other “covered persons” who have anyconnection to consumer financial products or services. The CFPB has exclusive rule-making authority with respect to all significant federal statutes that impact thecollection industry, including the FDCPA, the FCRA, and others. This means, for example, that the CFPB has the ability to pass rules and regulations that interpretany of the provisions of the FDCPA, potentially impacting all facets of the collection channel. Federal agencies, including the CFPB, have been given significantdiscretion in drafting the rules and regulations that will implement the Dodd-Frank Act. Consequently, many of the details and much of the impact of the Dodd-Frank Act may not be known for some time. In addition, this legislation mandated multiple studies and reports for Congress, which could result in additionallegislative or regulatory action.The CFPB has the authority to conduct periodic examinations of “larger participants” in each market, and we believe it is likely that we will be subject to anexamination.We cannot predict the requirements of the regulations ultimately adopted under the Dodd-Frank Act, the effect such regulations will have on financialmarkets generally, or on our businesses specifically, the additional 14Table of Contentscosts associated with compliance with such regulations, or any changes to our operations that may be necessary to comply with the Dodd-Frank Act, any of whichcould have a material adverse effect on our business, results of operations, cash flows or financial condition.Government regulations may limit our ability to recover and enforce the collection of our receivables.Federal, state and local laws, rules, regulations and ordinances may limit our ability to recover and enforce our rights with respect to the receivables acquiredby us. These laws include, but are not limited to, the following federal statutes and regulations promulgated thereunder and comparable statutes in states whereconsumers reside and/or where creditors are located: • The Fair Debt Collection Practices Act; • The Federal Trade Commission Act; • The Truth-In-Lending Act; • The Fair Credit Billing Act; • The Equal Credit Opportunity Act; • The Fair Credit Reporting Act; • The Financial Privacy Rule; • The Safeguards Rule; • Telephone Consumer Protection Act; • Health Insurance Portability and Accountability Act (“HIPAA”)/Health Information Technology for Economical and Clinical Health Act (“HITECH”); • U.S. Bankruptcy Code; and • Credit Card Accountability Responsibility and Disclosure Act of 2009.We may be precluded from collecting receivables we purchase where the creditor or other previous owner or third-party collection agency or attorney failedto comply with applicable law in originating or servicing such acquired receivables. Laws relating to the collection of consumer debt also directly apply to ourbusiness. Our failure to comply with any laws applicable to us, including state licensing laws, could limit our ability to recover on receivables and could subject usto fines and penalties, which could reduce our earnings and result in a default under our loan arrangements. In addition, our third-party collection agencies andattorneys may be subject to these and other laws and their failure to comply with such laws could also materially adversely affect our finance income and earnings.Additional laws or amendments to existing laws may be enacted that could impose additional restrictions on the servicing and collection of receivables. Suchnew laws or amendments may adversely affect the ability to collect on our receivables, which could also adversely affect our finance income and earnings.Because our receivables are generally originated and serviced pursuant to a variety of federal, state and/or local laws by a variety of entities and may involveconsumers in all 50 states, the District of Columbia, Puerto Rico and South America, there can be no assurance that all originating and servicing entities have, at alltimes, been in substantial compliance with applicable law. Additionally, there can be no assurance that we or our third-party collection agencies and attorneys havebeen or will continue to be at all times in substantial compliance with applicable law. Failure to comply with applicable law could materially adversely affect ourability to collect our receivables and could subject us to increased costs, fines and penalties.We are subject to changing rules and regulations of federal and state government as well as the stock exchange on which our common stock is listed. Theseentities, including PCAOB, the SEC and the NASDAQ Global Market, have issued a significant number of new and increasingly complex requirements andregulations over the course of the last several years and continue to develop additional regulations and requirements in response to laws enacted by Congress. 15Table of ContentsWe are subject to various risks in connection with our litigation funding business.Risks of the litigation funding business include the potential regulation or limitation of interest rates and other fees advanced by our litigation fundingsubsidiaries under federal and/or state regulation, a change in statutory or case law which limits or restricts the ability of our litigation funding subsidiaries tocharge or collect fees and interest at anticipated levels, claimants being unsuccessful in whole or in part in the personal injury claims or divorce settlement uponwhich our funds are provided, the continued services of the senior management of our litigation funding subsidiaries to source and analyze cases in accordance withthe subsidiaries’ respective underwriting guidelines.We are subject to various risks in connection with our structured settlement funding business.Risks of the structured settlement funding business include the potential regulation that could stem from the Dodd Frank Act, state regulation and/or anyother change in statutory or case law which may limit or restrict the ability of our structured settlement business to: make investments; the effectiveness of ourmarketing programs; and our ability to continue to grow the volume of structured settlements. Competition in the marketplace could drive up the purchase price ofstructured settlement and annuity receivables. Additionally, the fact that one company controls at least 50% of the marketplace means that other players, includingus, may be negatively impacted by strategic decisions employed by this competitor. Our failure or inability to execute any element of our business strategy and/orincreased competition in the marketplace could materially adversely affect our business, financial position and results of operations.We are exposed to interest rate volatility risk as interest rates can fluctuate in the period between when we purchase structured settlements payment streamsand when we securitize such payment streams.We purchase structured settlements at a discount rate based on, among other factors, our then estimates of the future interest rate environment. Once a criticalmass of payment streams is achieved, those payment streams are then securitized, generally through fixed rate private placements. The discount rate at which oursecuritization is sold to investors is based on the current interest rates as of the time of the securitization. Interest rates may fluctuate significantly during the periodbetween the purchase and securitization of payment streams, which can increase or decrease the spread between the discount rate at which we purchase thepayment streams and the discount rate at which we securitize such payment streams, which could increase or decrease our revenues. Volatile interest rateenvironments can lead to volatility in our results of operations. If we are unable to finance the payment streams we purchase at a discount rate that is sufficientlylower than the discount rate at which we make such purchases, it could have a material adverse effect on our business, financial condition, results of operations andcash flows.We are subject to various risks in connection to our disability advocacy business.We have recently entered the disability advocacy business and are subject to all of the risks inherent in a new business. We are incurring substantial start-upcosts and there can be no assurance this business segment will become profitable in the future. Risks of the disability advocacy business include the competition ofother advocacy firms, statutory cut backs on the Federal Disability program and stricter guidelines in qualifying for disability benefits.We may not be able to purchase consumer receivable portfolios domestically and internationally at favorable prices or on sufficiently favorable terms if atall.Our success in this business segment depends upon the continued availability of consumer receivable portfolios that meet our purchasing criteria and ourability to identify and finance the purchases of such portfolios. The availability of consumer receivable portfolios at favorable prices and on terms acceptable to us,if at all, depends on a number of factors outside of our control, including: • the growth in consumer debt; • the volume of consumer receivable portfolios available for sale; 16Table of Contents • availability of financing to fund purchases; • competitive factors affecting potential purchasers and sellers of consumer receivable portfolios; and • possible future changes in the bankruptcy laws, state laws and homestead acts which could make it more difficult for us to collect. • The foreign exchange rate changes of the countries in which we do businessThere is no assurance that we will realize the full value of the deferred tax asset.Although the carry forward period for income taxes is up to twenty years, such allowance period is outside a reasonable period to forecast full realization ofthe deferred tax asset. We continually monitor forecast information to ensure the valuation allowance is appropriate.We may not be able to collect sufficient amounts on our consumer receivable portfolios to recover the costs associated with the purchase of those portfoliosand to fund our operations.We acquire (internationally) and collect on consumer receivable portfolios that contain charged-off receivables. In order to operate profitably over the longterm, we must continually purchase (internationally) and collect on a sufficient volume of receivables to generate revenue that exceeds our purchase costs. Foraccounts that are charged-off or semi-performing, the originators or interim owners of the receivables generally have: • made numerous attempts to collect on these obligations, often using both their in-house collection staff and third-party collection agencies; and • subsequently deemed these obligations as uncollectible.These receivable portfolios are purchased internationally at significant discounts to the amount the consumers owe. These receivables are difficult to collectand actual recoveries may be less than the amount expected. In addition, our collections may worsen in a weak economic cycle. We may not recover amounts inexcess of our acquisition and servicing costs.Our ability to recover the purchase costs on our portfolios and produce sufficient returns can be negatively impacted by the quality of the purchasedreceivables. In the normal course of our portfolio acquisitions, some receivables may be included in the portfolios that fail to conform to certain terms of thepurchase agreements and we may seek to return these receivables to the seller for payment or replacement receivables. However, we cannot guarantee that any ofsuch sellers will be able to meet their payment obligations to us. Accounts that we are unable to return to sellers may yield no return. If cash flows from operationsare less than anticipated as a result of our inability to collect sufficient amounts on our receivables, our ability to satisfy our debt obligations, purchase newportfolios, and achieve future growth and profitability may be materially adversely affected.We may be subject to competition for the purchase of international consumer receivable portfolios which may result in an increase in prices of suchportfolios.We compete with other purchasers of consumer receivable portfolios, with third-party collection agencies and with financial services companies that managetheir own consumer receivable portfolios. We compete on the basis of price, reputation, industry experience and performance. Some of our competitors havegreater capital, personnel and other resources than we have. The possible entry of new competitors, including competitors that historically have focused on theacquisition of different asset types, and the expected increase in competition from current market participants may reduce our access to consumer receivableportfolios. Aggressive pricing by our competitors has raised the price of consumer receivable portfolios above levels that we are willing to pay, which could reducethe number of consumer receivable portfolios suitable for us to purchase or if purchased by us, reduce the profits, if any, generated by such portfolios. If we areunable to purchase receivable portfolios at favorable prices or at all, our finance income and earnings could be materially reduced. 17Table of ContentsWe depend upon third parties to service a significant portion of our domestic and international consumer receivable portfolios. The loss of certain servicerscould have an adverse effect on our financial position and results of operation.As 38% of our portfolio face value is serviced by five organizations domestically , we are dependent upon the efforts of these collection agencies andattorneys to service and collect our consumer receivables. Any failure by our third-party collection agencies and attorneys to adequately perform collection servicesfor us or remit such collections to us could materially reduce our finance income and our profitability. In addition, our finance income and profitability could bematerially adversely affected if we are not able to secure replacement third party collection agencies and attorneys and redirect payments from the customers to ournew third party collection agencies and attorneys promptly in the event our agreements with our third-party collection agencies and attorneys are terminated, ourthird-party collection agencies and attorneys fail to adequately perform their obligations or if our relationships with such third-party collection agencies andattorneys adversely change.We may rely on third parties to locate, identify and evaluate international consumer receivable portfolios available for purchase.We may rely on third parties, including brokers and third-party collection agencies and attorneys, to identify consumer receivable portfolios and, in someinstances, to assist us in our evaluation and purchase of these portfolios. As a result, if such third parties fail to identify receivable portfolios or if our relationshipswith such third parties are not maintained, our ability to identify and purchase additional receivable portfolios could be materially adversely affected. In addition, ifwe, or such parties, fail to correctly or adequately evaluate the value or collectability of these consumer receivable portfolios, we may pay too much for suchportfolios and suffer an impairment, which would negatively impact our earnings.We rely on our third party collectors to comply with all rules and regulations and maintain proper internal controls over their accounting and operations.Because the receivables were originated and serviced pursuant to a variety of federal and/or state laws by a variety of entities and involved consumers in all50 states, the District of Columbia, Panama, Puerto Rico, Columbia and Peru, there can be no assurance that all original servicing entities have, at all times, been insubstantial compliance with applicable law. Additionally, there can be no assurance that we or our third-party collection agencies and attorneys have been or willcontinue to be at all times in substantial compliance with applicable law. The failure to comply with applicable law and not maintain proper controls in theiraccounting and operations could materially adversely affect our ability to collect our receivables and could subject us to increased costs, fines and penalties.Our collections may decrease if bankruptcy filings increase.During times of economic uncertainty, the amount of defaulted consumer receivables generally increases, which contributes to an increase in the amount ofpersonal bankruptcy filings. Under certain bankruptcy filings, a debtor’s assets are sold to repay credit originators, but since the defaulted consumer receivables wepurchase are generally unsecured, we may not be able to collect on those receivables. Our collections may decline with an increase in bankruptcy filings. If ouractual collection experience with respect to a defaulted consumer receivable portfolio is significantly lower than we projected when we purchased the portfolio, ourearnings could be negatively affected.The loss of any of our executive officers may adversely affect our operations and our ability to successfully acquire receivable portfolios.Our executive officers are responsible for making substantially all management decisions, including determining which portfolios to purchase, the purchaseprice and other material terms of such portfolio acquisitions. These decisions are instrumental to the success of our business. Significant losses of the services ofour executive officers or the inability to replace our officers with individuals who have experience in the industry or with the Company could disrupt our operationsand adversely affect our ability to successfully acquire receivable portfolios. 18Table of ContentsThe Stern family effectively controls the Company, substantially reducing the influence of our other stockholders.Members of the Stern family own directly or indirectly, approximately 32% of our outstanding shares of common stock as of September 30, 2015. As aresult, the Stern family is able to significantly influence the actions that require stockholder approval, including: • the election of our directors; and • the approval of mergers, sales of assets or other corporate transactions or matters submitted for stockholder approval.As a result, our other stockholders may have reduced influence over matters submitted for stockholder approval. In addition, the Stern family’s influencecould preclude any unsolicited acquisition of us and, consequently, materially adversely affect the price of our common stock.Negative press regarding the debt collection industry may have a negative impact on a customer’s willingness to pay the debt we acquire.Consumers are exposed to information from a number of sources that may cause them to be more reluctant to pay their debts or to pursue legal actionsagainst us. Online, print and other media publish stories about the debt collection industry which cite specific examples of abusive collection practices. Thesestories can lead to the rapid dissemination of the story, adding to the level of exposure to negative publicity about our industry. Various Internet sites aremaintained where consumers can list their concerns about the activities of debt collectors and seek guidance from other website posters on how to handle thesituation. Advertisements by debt relief attorneys and credit counseling centers are becoming more common, adding to the negative attention given to our industry.As a result of this negative publicity, customers may be more reluctant to pay their debts or could pursue legal action against us regardless of whether those actionsare warranted. These actions could impact our ability to collect on the receivables we acquire and affect our revenues and profitability.Class action suits and other litigation could divert our management’s attention from operating our business and increase our expenses.Originators, debt purchasers and third-party collection agencies and attorneys in the consumer credit industry are frequently subject to putative class actionlawsuits and other litigation. Claims include failure to comply with applicable laws and regulations and improper or deceptive origination and servicing practices.Being a defendant in such class action lawsuits or other litigation could materially adversely affect our results of operations and financial condition.We may seek to make acquisitions that prove unsuccessful or strain or divert our resources.We may seek to grow through acquisitions of related businesses in the financial services sector. Such acquisitions present risks that could materiallyadversely affect our business and financial performance, including: • the diversion of our management’s attention from our everyday business activities; • the assimilation of the operations and personnel of the acquired business; • the contingent and latent risks associated with the past operations of, and other unanticipated problems arising in, the acquired business; and • the need to expand management, administration and operational systems.If we make such acquisitions, we cannot predict whether: • we will be able to successfully integrate the operations of any new businesses into our business; • we will realize any anticipated benefits of completed acquisitions; or • there will be substantial unanticipated costs associated with acquisitions. 19Table of ContentsIn addition, future acquisitions by us may result in: • potentially dilutive issuances of our equity securities; • the incurrence of additional debt; and • the recognition of significant charges for depreciation and impairment charges related to goodwill and other intangible assets.If our technology infrastructure is not operational, our operations could be disrupted and our ability to successfully operate the business could becompromised.Our success depends, in part, on sophisticated telecommunications and computer systems. The temporary loss of our computer or telecommunicationssystems, through casualty, operating malfunction or service provider failure, could disrupt our operations. In addition, we must record and process significantamounts of data quickly and accurately to properly bid on prospective acquisitions of receivable portfolios and to access, maintain and expand the databases we usefor our collection and monitoring activities. Any failure of our information systems and their backup systems would interrupt our operations. We may not haveadequate backup arrangements for all of our operations and we may incur significant losses if an outage occurs. In addition, we rely on third-party collectionagencies and attorneys who also may be adversely affected in the event of an outage in which the third-party collection agencies and attorneys do not have adequatebackup arrangements. Any interruption in our operations or our third-party collection agencies’ and attorneys’ operations could have an adverse effect on ourresults of operations and financial condition. However, we are in the process of implementing a disaster recovery program which would mitigate this risk.A cyber security incident could have a negative effect on our business as we outsource a significant amount of the collection accounts with personalinformation electronically.A security breach could have a detrimental effect on our business as we maintain a significant amount of personal information in our electronic files. Abreach of our system or a leak of the personal information we maintain could leave us vulnerable to, among other things, loss of information and potential litigationeach of which could have a material adverse effect on our business.Our organizational documents and Delaware law may make it harder for us to be acquired without the consent and cooperation of our board of directorsand management.Several provisions of our organizational documents and Delaware law may deter or prevent a takeover attempt, including a takeover attempt in which thepotential purchaser offers to pay a per share price greater than the current market price of our common stock. Under the terms of our certificate of incorporation,our board of directors has the authority, without further action by the stockholders, to issue shares of preferred stock in one or more series and to fix the rights,preferences, privileges and restrictions thereof. The ability to issue shares of preferred stock could tend to discourage takeover or acquisition proposals notsupported by our current board of directors. In addition, we are subject to Section 203 of the Delaware General Corporation Law, which restricts businesscombinations with some stockholders once the stockholder acquires 15% or more of our common stock.We have adopted a stockholder rights plan which could make it more difficult for a third-party to acquire us.We adopted a stockholder rights plan which is intended to protect us from efforts to obtain control of us that are inconsistent with our best interests and theinterests of our stockholders. The rights will be exercisable ten days following the earlier of the public announcement that a stockholder has acquired 20% or moreof our common stock without board approval or the announcement of a tender offer which results in the ownership of 20% or more of our common stock. If therights become exercisable, all rights holders (other than the person triggering the rights) will be entitled to acquire our securities at a substantial discount. Becausethe rights may substantially dilute the stock ownership of a person or group attempting to take over the Company without the approval of our board of directors, therights plan could make it more difficult for a third-party to acquire us or a significant percentage of our outstanding capital stock, without first negotiating with theboard of directors. 20Table of ContentsFuture sales of our common stock by our affiliates or other stockholders may depress our stock price.Sales of a substantial number of shares of our common stock in the public market could cause a decrease in the market price of our common stock. We had12,070,373 shares of common stock issued and outstanding as of December 8, 2015. Of these shares, 4,196,806 are owned by our affiliates. In addition, options topurchase 1,043,566 shares of our common stock were outstanding as of September 30, 2015, of which 860,891 were exercisable. We may also issue additionalshares in connection with our business and may grant additional stock options or restricted shares to our employees, officers, directors and consultants under ourpresent or future equity compensation plans or we may issue warrants to third parties outside of such plans. As of September 30, 2015, there were 1,511,179 sharesavailable for such purpose with such shares available under the 2012 Stock Option and Performance Award Plan. If a significant portion of these shares were soldin the public market, the market value of our common stock could be adversely affected.We have the ability to issue preferred shares, warrants, convertible debt and other securities without stockholder approval which could dilute the relativeownership interest of current stockholders and adversely affect our share price.Future sales of our equity-related securities in the public market, including sales of our common stock pursuant to our shelf-registration statement, couldadversely affect the trading price of our common stock and our ability to raise funds in new stock offerings. Our common shares may be subordinate to classes ofpreferred shares issued in the future in the payment of dividends and other distributions made with respect to common shares, including distributions uponliquidation or dissolution. Our certificate of incorporation permits our board of directors to issue preferred shares without first obtaining stockholder approval. If weissued preferred shares, these additional securities may have dividend or liquidation preferences senior to our common shares. If we issue convertible preferredshares, a subsequent conversion may dilute the current common stockholders’ interest. We have similar abilities to issue convertible debt, warrants and other equitysecurities.Climate change and related regulatory responses may adversely impact our business.Climate change as a result of emissions of greenhouse gases is a significant topic of discussion and may generate federal and other regulatory responses inthe near future, including the imposition of a so-called “cap and trade” system. It is impracticable to predict with any certainty the impact on our business of climatechange or the regulatory responses to it, although we recognize that they could be significant. The most direct impact is likely to be an increase in energy costs,which would increase slightly our operating costs, primarily through increased utility and transportations costs. In addition, increased energy costs could impactconsumers and their ability to incur and repay indebtedness. However, it is too soon for us to predict with any certainty the ultimate impact, either directionally orquantitatively, of climate change and related regulatory responses.Our quarterly operating results may fluctuate and cause our stock price to decline.Because of the nature of our business, our quarterly operating results may fluctuate, which may adversely affect the market price of our common stock. Ourresults may fluctuate as a result of any of the following: • the timing and amount of collections on our consumer receivable portfolios; • our inability to identify and acquire additional consumer receivable portfolios; • a decline in the estimated future value of our consumer receivable portfolio recoveries; • increases in operating expenses associated with the growth of our operations; • general and economic market conditions; and • Prices we are willing to pay for consumer receivable portfolios. 21Table of ContentsItem 1B.Unresolved Staff Comments.None Item 2.PropertiesOur executive and administrative offices are located in Englewood Cliffs, New Jersey, where we lease approximately 14,700 square feet of general officespace for approximately $21,000 per month, plus utilities. The lease was renewed September 1, 2015 and expires on August 31, 2020.Our office in Houston, Texas occupies approximately 2,600 square feet of general office space for approximately $4,000 per month. The lease expires onAugust 18, 2016.Our New York City office occupies approximately 6,600 square feet for approximately $19,000 per month, including electricity. The lease expires inSeptember 2017.Our Conshohocken, Pennsylvania office occupies approximately 5,800 square feet for approximately $14,000 per month, plus utilities. The lease expires inJanuary 2020.We believe that our existing facilities are adequate for our current needs. Ite m 3.Legal Proceedings.In the ordinary course of our business, we are involved in numerous legal proceedings. We regularly initiate collection lawsuits, using 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 ofcollecting on their account. We do not believe that these ordinary course matters are material to our business and financial condition. As of the date of this report,we were not involved in any material litigation in which we were a defendant. Item 4.Mi ne Safety Disclosures.Not applicable. 22Table of ContentsPART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.Our common stock is quoted on the NASDAQ Global Select Market under the symbol “ASFI.” On December 8, 2015 there were 15 holders of record of ourcommon stock. High and low sales prices of our common stock since October 1, 2013 as reported by NASDAQ are set forth below (such quotations reflect inter-dealer prices without retail markup, markdown, or commission, and may not necessarily represent actual transactions): High Low 2014 October 1, 2013 to December 31, 2013 $8.85 $7.94 January 1, 2014 to March 31, 2014 8.59 7.99 April 1, 2014 to June 30, 2014 8.77 8.03 July 1, 2014 to September 30, 2014 8.51 8.11 2015 October 1, 2014 to December 31, 2014 $9.50 $7.81 January 1, 2015 to March 31, 2015 8.94 8.02 April 1, 2015 to June 30, 2015 8.40 8.00 July 1, 2015 to September 30, 2015 9.38 7.57 DividendsFuture dividend payments will be at the discretion of our board of directors and will depend upon our financial condition, operating results, capitalrequirements and any other factors our board of directors deems relevant. In addition, our agreements with our lender may, from time to time, restrict our ability topay dividends. Currently there are no restrictions in place. The Company did not declare any dividends for fiscal years 2015 and 2014.Share Repurchase ProgramWe have a share repurchase program that authorizes us to purchase up to $15.0 million of shares of our common stock, which is effective throughDecember 31, 2015. The share repurchases may occur from time-to-time through open market purchases at prevailing market prices or through privately negotiatedtransactions as permitted by securities laws and other legal requirements. The following table sets forth information regarding our repurchases or acquisitions ofcommon stock during the fiscal year ended September 30, 2015. Period Total Number ofShares (or Units) Purchased Average Price Paidper Share (or Unit) Total Numberof Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number(or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs(1) Repurchases from October 1, 2014 through September 30, 2015 201,800 $8.66 201,800 $13,249,000 (1)On August 17, 2015, our board of directors authorized the repurchase of up to $15.0 million of shares of our common stock through a non-discretionary stockrepurchase plan. 23Table of ContentsPerformance GraphNotwithstanding anything to the contrary set forth in any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,as amended, that might incorporate by reference this Form 10-K, in whole or in part, the following Performance Graph shall not be incorporated by reference intoany such filings.Comparison of 5 Year Cumulative Total ReturnAssumes Initial Investment of $1002015 2010 2011 2012 2013 2014 2015 ASTA FUNDING, INC. 100.00 107.34 125.44 119.76 110.60 114.91 NASDAQ MARKET INDEX 100.00 102.96 134.39 165.00 199.01 206.96 PEER GROUP INDEX 100.00 98.64 152.07 253.97 226.70 219.14 PEER GROUP INDEX + ASTA FUNDING, INC. 100.00 99.18 150.43 246.31 220.06 213.16 24Table of ContentsItem 6.Selected Financial DataThe following tables set forth a summary of our consolidated financial data as of and for the five fiscal years ended September 30, 2015. The selectedfinancial data for the five fiscal years ended September 30, 2015, have been derived from our audited consolidated financial statements. The selected financial datapresented below should be read in conjunction with our consolidated financial statements, related notes, and other financial information included elsewhere in thisreport, including the information set forth in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Certain items inprior years’ information have been reclassified to conform to the current year’s presentation. Year Ended September 30, (In thousands, except per share data) 2015 2014 2013 2012 2011 Income Statement Data: Finance income, net $20,757 $19,865 $31,762 $40,803 $44,056 Personal injury claims income 8,482 7,134 6,438 1,647 — Unrealized gain on structured settlements 7,146 2,840 — — — Interest income on structured settlements 4,672 2,368 — — — Disability fee income 1,434 378 2 — — Total revenues 42,491 32,585 38,202 42,450 44,056 Forgiveness of non-recourse debt — 26,101 — — — Other income 1,687 1,399 1,609 2,256 557 44,178 60,085 39,811 44,706 44,613 Expenses: General and administrative expenses 36,933 28,192 24,212 23,640 21,807 Interest expense 2,395 1,260 1,300 2,539 3,016 Impairments of consumer receivables acquired for liquidation — 19,591 10,990 1,771 2,066 39,328 49,043 36,502 27,950 26,889 Income before income tax 4,850 11,042 3,309 16,756 17,724 Income tax expense 2,122 4,613 894 6,797 7,143 Net income 2,728 6,429 2,415 9,959 10,581 Less: net income attributable to non-controlling interests 712 528 406 31 — Net income attributable to Asta Funding, Inc. $2,016 $5,901 $2,009 $9,928 $10,581 Basic net income per share $0.15 $0.45 $0.16 $0.71 $0.72 Diluted net income per share $0.15 $0.45 $0.15 $0.69 $0.71 25Table of Contents (In millions) 2015 2014 2013 2012 2011 Other Financial Data (Unaudited): For the Year ended September 30 Cash collections $36.7 $40.2 $51.7 $70.0 $81.2 Portfolio purchases, at cost 2.1 5.1 3.3 2.5 7.5 Portfolio purchases, at face value 28.0 478.9 53.5 6.0 19.5 Return on average assets 1.0% 4.7%(2) 1.2% 4.2% 4.1%Return on average stockholders’ equity(1) 1.3% 5.7%(2) 1.6% 5.9% 6.3%Dividends declared per share $0.00 $0.00 $0.08 $0.08 $0.08 At September 30, Total assets 237.4 217.1 211.5 237.6 252.6 Total debt and other liabilities 56.1 35.8 38.2 64.6 75.1 Total stockholders’ equity 181.3 181.3 173.3 173.0 177.5 Inception to date — September 30, Cumulative aggregate purchases, at face value 32,465.3 32,437.3 31,958.3 31,904.9 31,898.9 (1)The return on average assets is computed by dividing net income by average total assets for the fiscal year. The return on average stockholders’ equity iscomputed by dividing net income by the average stockholders’ equity for the fiscal year. Both ratios have been computed using beginning and period-endbalances. (2)Return calculations in fiscal year 2014 were significantly improved by the $26.1 million loan forgiveness recorded in that fiscal year. 26Table of ContentsItem 7.Management’s Discussion and Analysis of Financial Condition and Results of Operation.Caution Regarding Forward-Looking StatementsThis Management’s Discussion and Analysis of Financial Condition and Results of Operations and other parts of this Annual Report on Form 10-K containforward-looking statements that involve risks and uncertainties. All forward-looking statements included in this Annual Report on Form 10-K are based oninformation available to us on the date hereof, and except as required by law, we assume no obligation to update any such forward-looking statements. Our actualresults may differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under thecaption “Risk Factors” contained in this report and elsewhere herein. The following should be read in conjunction with our annual financial statements containedelsewhere in this report.OverviewWe are engaged in the businesses of acquiring, managing, servicing and recovering on portfolios of consumer receivables, and, through Pegasus, funding ofpersonal injury claims, through CBC, investing in structured settlements and through GAR Disability Advocates, assisting claimants in the process of disability andsocial security claims.Consumer ReceivablesThe consumer receivable portfolios generally consist of one or more of the following types of consumer receivables: • charged-off receivables — accounts that have been written-off by the originators and may have been previously serviced by collection agencies; and • semi-performing receivables — accounts where the debtor is making partial or irregular monthly payments, but the accounts may have been written-off bythe originators.We acquire these consumer receivable portfolios at a significant discount to the amount actually owed by the borrowers. We acquire these portfolios after aqualitative and quantitative analysis of the underlying receivables and calculate the purchase price so that our estimated cash flow offers us an adequate return onour investment after servicing expenses. After purchasing a portfolio, we actively monitor its performance and review and adjust our collection and servicingstrategies accordingly.We purchase receivables from credit grantors and others through privately negotiated direct sales, brokered transactions and auctions in which sellers ofreceivables seek bids from several pre-qualified debt purchasers. We pursue new acquisitions of consumer receivable portfolios on an ongoing basis through: • our relationships with industry participants, financial institutions, collection agencies, investors and our financing sources; • brokers who specialize in the sale of consumer receivable portfolios; and • other sources.Litigation Funding BusinessOn December 28, 2011, the Company purchased an 80% interest in Pegasus. Pegasus Legal Funding (“PLF”) holds the other 20% interest. The Company iscommitted to loan up to $22.4 million per year to Pegasus for a term of five (5) years, all of which is secured by the assets of Pegasus. These loans will providefinancing for the personal injury litigation claims and operating expenses of Pegasus.The Pegasus business model entails the outlay of non-recourse advances to a plaintiff with an agreed-upon fee structure to be repaid from the plaintiff’srecovery. Typically, such advances to a plaintiff approximate 10-20% of the anticipated recovery. These funds are generally used by the plaintiff for a variety ofurgent necessities, ranging from surgical procedures to everyday living expenses. 27Table of ContentsPegasus’s profits and losses are distributed at 80% to the Company and 20% to PLF. These distributions will be made only after the repayment of FundPegasus’ principal amount loaned, plus an amount equal to advances for overhead expenses. While the overall returns to Pegasus are currently estimated to be inexcess of 20% per annum, the Company has reserved the right to terminate Pegasus if returns to the Company for any rolling twelve (12) month period, after thefirst year of operations, do not exceed 15%. As of September 30, 2015, the Company had a net invested balance of approximately $36.7 million in personal injurycases. During the fiscal year ended September 30, 2015, distributions of $1.0 million were made to PLF.On May 18, 2012, we announced the formation of BP Case Management, LLC (“Balance Point”), a joint venture (the “Venture”) with California-basedBalance Point Divorce Funding, LLC (“Balance Point Management”). The Venture provides non-recourse funding to a spouse in a matrimonial action where themarital assets exceed $2,000,000. Such funds can be used for legal fees, expert costs and necessary living expenses. The Venture receives an agreed percentage ofthe proceeds received by such spouse upon final resolution of the case. Balance Point’s profits and losses will be distributed 60% to us and 40% to Balance PointManagement, after the return of our investment on a case by case basis and after a 15% preferred return to us. Our initial investment in the Venture consists of up to$15 million to fund divorce claims to be fulfilled in three tranches of $5 million each. Each investment tranche is contingent upon a minimum 15% cash-on-cashreturn to us. At our option, there could be an additional $35 million investment in divorce claims in tranches of $10 million, $10 million, and $15 million, also witha 15% preferred return and such investments may even exceed a total of $50 million, at our sole option. Should the preferred return be less than 15% on any $5million tranche, the 60%/40% profit and loss split would be adjusted to reflect our priority to a 15% preferred return. As of September 30, 2015, we have invested$2.6 million, net of reserve charges, in cases managed by this Venture.In 2012, we provided a $1.0 million revolving line of credit to partially fund Balance Point Management’s operations with such loan bearing interest at theprevailing prime rate with an initial term of twenty four months. In September 2014, the agreement was revised to extend the term of the loan to August 2016,increase the credit line to $1.5 million and include a personal guarantee of the principal of Balance Point management. The revolving line of credit is collateralizedby Balance Point management’s profits share in the venture and other assets. At September 30, 2015, the balance in the revolving line of credit was approximately$1.5 million.Structured Settlement BusinessOn December 31, 2013, the Company acquired an 80% ownership interest in CBC Settlement Funding, LLC (“CBC”) and its affiliate, CBC ManagementServices, LLC for approximately $5.9 million. In addition, the Company will provide financing to CBC of up to $5 million.CBC purchases periodic payments under structured settlements and annuity policies from individuals in exchange for a lump sum payment. The operatingprincipals of CBC, William J. Skyrm, Esq. and James Goodman, have over 30 years combined experience in the structured settlements industry and continue toserve as management of CBC.CBC has a portfolio of structured settlements which is financed by approximately $51.6 million of debt, including a $25.0 million line of credit from aninstitutional source (approximately $20.4 million of the line was unused as of September 30, 2015) and notes issued by CBC to third party investors. OnSeptember 15, 2015, CBC entered into the Ninth Amendment, increasing the line from $22.0 million to $25.0 million. and the interest rate floor was decreasedfrom 4.75% to 4.1 %. At September 30, 2015, the line of credit had an expiration date of March 1, 2017 and the Company had an invested value of $64.6 million instructured settlements.Disability Advocacy BusinessGAR Disability Advocates is a social security disability advocacy group, which obtains and represents individuals in their claims for social securitydisability and supplemental security income benefits from the Social Security Administration. 28Table of ContentsCritical Accounting PoliciesWe may account for our investments in consumer receivable portfolios, using either: • The interest method; or • The cost recovery method.As we believe our extensive liquidating experience in certain asset classes such as distressed credit card receivables, consumer loan receivables and mixedconsumer receivables has matured, we use the interest method when we believe we can reasonably estimate the timing of the cash flows. In those situations wherewe diversify our acquisitions into other asset classes in which we do not possess the same expertise or history, or we cannot reasonably estimate the timing of thecash flows, we utilize the cost recovery method of accounting for those portfolios of receivables.The Company accounts for certain of its investments in finance receivables using the guidance of FASB Accounting Standards Codification (“ASC”),Receivables — Loans and Debt Securities Acquired with Deteriorated Credit Quality, (“ASC 310”). Under the guidance of ASC 310, static pools of accounts areestablished. 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 therecognition of income, principal payments and loss provision. Effective October 1, 2013, due to the substantial reduction of portfolios reported under the interestmethod, and the ability to reasonably estimate cash collections required to account for those portfolios under the interest method the Company concluded the costrecovery method is the appropriate accounting method under the circumstances.Although the Company has switched to the cost recovery method on its current inventory of portfolios, the Company must still analyze a portfolio uponacquisition and once a static pool is established for a quarter, individual receivable accounts are not added to the pool (unless replaced by the seller) or removedfrom the pool (unless sold or returned to the seller).The Company uses the cost recovery method when collections on a particular pool of accounts cannot be reasonably predicted. Under the cost recoverymethod, 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 balancesheet) while still generating cash collections. In this case, all cash collections are recognized as revenue when received.The Company accounts for its investments in personal injury claims at an agreed upon interest rate, in anticipation of a future settlement. The interestpurchased by Pegasus in each claim will consist of the right to receive from such claimant part of the proceeds or recoveries which such claimant receives byreason of a settlement, judgment or reward with respect to such claimant’s claim. Open case revenue is estimated, recognized and accrued at a rate based on theexpected realization and underwriting guidelines and facts and circumstances for each individual case. These personal injury claims are non-recourse. When a caseis closed and the cash is received for the advance provided to a claimant, review is recognized based upon the contractually agreed upon interest rate, and, ifapplicable, adjusted for any changes due to a settled amount and fees charged to the claimant.CBC purchases periodic payments under structured settlements and annuity policies from individuals in exchange for a lump sum payment. The Companyelected to carry structured settlements at fair value. Unearned income on structured settlements is recognized as interest income using the effective interest methodover the life of the related settlement. Changes in fair value are recorded in unrealized gain (loss) in structured settlements in our statements of income.The Company recognizes revenue for GAR Disability Advocates when cases close and fees are collected. 29Table of ContentsResults of OperationsThe following discussion of our operations and financial condition should be read in conjunction with our financial statements and notes thereto includedelsewhere in this report. In these discussions, most percentages and dollar amounts have been rounded to aid presentation. As a result, all such figures areapproximations. Years Ended September 30, 2015 2014 2013 Finance income, net 48.9% 60.9% 83.1%Personal injury claim income 20.0% 21.9% 16.9%Unrealized gain on structured settlements 16.8% 8.7% —%Interest income on structured settlements 11.0% 7.3% —% Disability fee income 3.3% 1.2% —% Total revenues 100.0% 100.0% 100.0%Debt forgiveness —% 80.1% —%Other income 3.9% 4.3% 4.2% 103.9% 184.4% 104.2% General and administrative expenses 86.9% 86.5% 63.4%Interest expense 5.6% 3.9% 3.4%Impairments of consumer receivables acquired for liquidation —% 60.1% 28.7% 92.5% 150.5% 95.5% Income before income taxes 11.4% 33.9% 8.7%Income tax expense 5.0% 14.2% 2.3% Net income 6.4% 19.7% 6.4%Less: net income attributable to non-controlling interest 1.7% 1.6% 1.1% Net income attributable to Asta Funding, Inc. 4.7% 18.1% 5.3% Year Ended September 30, 2015 Compared to the Year Ended September 30, 2014Finance income. For the fiscal year ended September 30, 2015 (“fiscal year 2015”), finance income from consumer receivables increased $1.0 million, or5.1%, to $20.8 million from $19.8 million for the fiscal year ended September 30, 2014 (“fiscal year 2014”) , reflecting increased zero basis income. During fiscalyear 2015, we acquired $28.0 million in face value of new portfolios at a cost of $2.1 million as compared to $478.9 million of face value portfolios at a cost ofapproximately $5.1 million, during fiscal year 2014. The portfolios purchased during fiscal year 2015 are accounted for on the cost recovery method.Net collections decreased $3.5 million, or 8.7%, to $36.7 million for fiscal year 2015 from $40.2 million for fiscal year 2014. During fiscal year 2015, grosscollections decreased 17.2% to $56.2 million from $67.9 million for fiscal year 2014, reflecting the lower level of purchases. Commissions and fees associated withgross collections from our third party collection agencies and attorneys decreased $8.2 million, or 29.7% as compared to the same period in the prior year andaveraged 34.8% of collections for fiscal year 2015 as compared to 40.9% in the same prior year period The lower rate is the result of lower commissionedcollections and lower search costs in the current year.Personal injury claims income. Personal injury claims income increased $1.4 million or 19.7% to $8.5 million from the prior year level of $7.1 million, asinvestment in personal injury claims in fiscal years 2013 and 2014 translated into more closed cases in fiscal year 2015 than in the prior year (cases take an averageof 18 months to mature), in addition to increased level of investment in personal injury claims. 30Table of ContentsStructured settlement income of $11.8 million, which includes $7.1 million of unrealized gains and $4.7 million of interest income, is included in theCompany’s results in fiscal year 2015, compared to $5.2 million, which includes $2.8 million of unrealized gains and $2.4 million of interest income in fiscal year2014. This increase in income is the result of increased investments in structured settlements in the current fiscal year in addition, fiscal year 2015 was the first fullyear of results included as CBC Settlement Funding, LLC was acquired on December 31, 2013. Unrealized gains on structured settlements is comprised of bothunrealized gains resulting from fair market valuation at the date of acquisition of the structured settlements and the subsequent fair value adjustments resulting fromthe change in the discount rate. Of the $7.1 million of unrealized gains recognized in the fiscal year ended September 30, 2015, approximately $7.1 million is dueto day one gains on new structured settlements financed during the period, $1.8 million due to a change in the discount rate, offset by a decrease of $1.8 million inrealized gains recognized as realized interest income on structured settlements during the period. There were no other changes in assumptions during the period.Disability Fee income of $1.4 million in fiscal year 2015 compared to $0.4 million in fiscal year 2014 is the result of a significant increase in manpower inthe current fiscal year, translating into a significant increase in closed cases.Forgiveness of debt is the result of the Settlement Agreement with the Bank of Montreal (“BMO”), reached in August of fiscal year 2013. The Companymade the final payment of the Remaining Amount in June 2014. This was accompanied by a one-time $26.1 million forgiveness of debt.Other income. The following table summarizes other income for the years ended September 30, 2015 and 2014: 2015 2014 Interest and dividend income $1,223,000 $1,315,000 Realized gains 369,000 43,000 Other 95,000 41,000 $1,687,000 $1,399,000 General and administrative expenses. For the year ended September 30, 2015, general and administrative expenses increased $8.7 million, or 31.0%, to$36.9 million from $28.2 million for the year ended September 30, 2014. The increase in General and Administrative expenses is related to the growth of GARDisability Advocates, $4.2 million and the full year inclusion of CBC Settlement Funding, LLC, $2.2 million. In addition, there was an increase of bad debtexpense at Pegasus Funding, LLC, $2.1million.Interest expense. For the fiscal year ended September 30, 2015, interest expense increased $1.1 million to $2.4 million from $1.3 million in the fiscal yearended September 30, 2014. The increase is due to the growth of CBC and completion of CBC’s fourth private placement of approximately $20.9 million of fixedrate asset-backed notes in November 2014, as a result of the expanding structured settlement business. Additionally, we recognized 12 months of interest expensein the current fiscal year compared to only nine months in fiscal year 2014.Impairments – There were no impairments in the fiscal ended September 30, 2015 as compared to $19.5 million recorded during the fiscal year endedSeptember 30, 2014. The $19.6 million of impairments in the fiscal year 2014 was comprised of $14.1 million for the Great Seneca Portfolio, $4.8 million for themedical receivables portfolio and $0.7 million for other portfolios.The Great Seneca portfolio was purchased in March 2007. The portfolio was purchased on the secondary market and as such accounts included in theportfolio were 5 to 6 years old at the time of purchase. Purchasing portfolios on the secondary market was not a normal course of action for us at the time, as weprimarily purchased accounts from the originator of the accounts. This action of purchasing from the secondary market played a role in the determination in March2008 that we could no longer reasonably forecast cash collections and therefore switched the portfolio to the cost recovery method. Based upon the age of the GreatSeneca portfolio in June 31Table of Contents2014 (over seven years from our purchase date, and 12 to 13 years from the inception of the portfolio) the portfolio was clearly on the outer bounds of ourcollection forecasts. Based upon the significantly reduced collection forecast and the lower valuation of the judgments as they age, we determined an impairment of$14 million was necessary in June 2014.The medical receivables were related to a market that we are no longer in. We exited the market in terms of financing such receivables in 2012 and impairedthe portfolio and switched to the cost recovery method at that time. The collections continued to deteriorate and fell short of expectations by a significant marginand, therefore, we impaired the remaining value of the portfolio of $4.8 million in June 2014.Net income before taxes — Consumer Receivables. Net income before taxes decreased $5.1 million, from $18.9 million for the fiscal year endedSeptember 30, 2014 as compared to $13.8 million for the fiscal year ended September 30, 2015, primarily due to BMO debt forgiveness in fiscal year 2014,partially offset by reduced impairments in the current fiscal year.Net income before taxes — Personal Injury Claims. Net income before taxes decreased $2.2 million to $0.1 million in fiscal year 2015 from $2.3 millionfor the prior fiscal year, as increased revenues, $1.3 million, were offset by the increase in bad debt reserves, $3.0 million.Net income before taxes — Structured Settlements. Net income before taxes was $3.5 million in fiscal year 2015 compared to $0.4 million in fiscal year2014. The increase is due to the continued growth in the investment of the structured settlements. Additionally, we recognized 12 months of net income beforetaxes in the current fiscal year versus nine months in fiscal year 2014.Net loss before taxes — GAR Disability Advocates. Net loss before taxes was $5.8 million in the 2015 fiscal year compared to a net loss of $2.7 million inthe same prior year period, reflecting increased start-up costs in the current fiscal year. Salaries increased by $1.9 million and marketing expense increased by$1.4 million compared to the prior fiscal year.Income tax expense. Income tax expense of $2.1 million recorded for fiscal year 2015 consists of a $7.4 million current income tax expense and a $5.3million deferred income tax benefit. Income tax expense was lower primarily due to lower pre-tax income, significantly influenced by the $26.1 million of debtforgiveness in the prior fiscal year. In fiscal year 2014, income tax expense of $4.6 million consisted of a current income tax expense of $4.1 million and a $0.5million deferred income tax expense.Net income. For the year ended September 30, 2015, net income decreased $3.7 million to $2.7 million from $6.4 million for the year ended September 30,2014, primarily reflecting the forgiveness of debt of $26.1 million in the prior fiscal year, in addition to higher general and administrative expenses, $9.1 million, inthe current fiscal year, partially offset by the impairments of $19.6 million in the prior fiscal year.Income attributable to non-controlling interest. Income to non-controlling interests increased $184,000 from $528,000 for the year ended September 30,2014 to $712,000 for the year ended September 30, 2015, due to the improvement in the results of CBC.Net income attributable to Asta Funding, Inc. For the year ended September 30, 2015, net income attributable to Asta Funding, Inc. decreased $3.9 millionto $2.0 million from $5.9 million for the year ended September 30, 2014, primarily reflecting the forgiveness of debt of $26.1 million in the prior fiscal year, plusincreased general and administrative expenses, $9.1 million, partially offset by decreased impairments, $19.6 million. Net income per diluted share for the yearended September 30, 2015 decreased to $0.17 per diluted share from $0.45 per diluted share for the year ended September 30, 2014. 32Table of ContentsThe following tables detail non-controlling interest for the year ended September 30, 2015: For the Year Ended September 30, 2015 Pegasus FundingLLC CBC Settlement Funding, LLC Total Non- Controlling Interests Balance, beginning of period $(783,000) $70,000 $(713,000) Non-controlling interest 11,000 701,000 712,000 Distributions (996,000) — (996,000) Balance, end of period $(1,768,000) $771,000 $(997,000) The non-controlling interests are related to Pegasus and CBC. The distribution to non-controlling interests is the distributions made to the 20% non-controlling interest owners of Pegasus Funding, LLC (“Pegasus Funding”). The distribution, based upon the profitability of the closed personal injury cases usingthe formula included in the operating agreement signed December 28, 2011, as revised, are calculated with a 20% deduction for overhead expenses of the PegasusFunding operation unit and a 20% write off of the personal injury cases deemed to be lost. The 20% write off amount is deducted directly from the distributionamount. Distributions have been greater than the net income attributable to Asta Funding, primarily due to bad debt reserves reducing the net income attributable toAsta Funding, but not specifically factored into the formula to determine the distributions to non-controlling interest owners based on the operating agreement.Ultimately, this timing difference will reverse when personal injury cases are actually written-off. No distributions have been made to CBC.Year Ended September 30, 2014 Compared to the Year Ended September 30, 2013Finance income. For the fiscal year ended September 30, 2014, finance income from consumer receivables decreased $12.0 million, or 37.5%, to $19.8million from $31.8 million for the fiscal year ended September 30, 2013 (“fiscal year 2013”). The decrease is primarily due to the lower level of portfolio purchasesover the last four years, and the reduction of zero based income. Zero based income decreased $5.8 million, from $25.7 million in the year 2013 to $19.8 million inthe year 2014. Effective October 1, 2013 the Company transferred the remaining $1.3 million of interest method portfolios to the cost recovery method. Duringfiscal year 2014, we acquired $478.9 million in face value of new portfolios at a cost of $5.1 million as compared to $53.5 million of face value portfolios at a costof approximately $3.3 million, during fiscal year 2013.Net collections decreased $14.0 million, or 25.8%, to $40.2 million for fiscal year 2014, from $54.1 million for fiscal year 2013. During fiscal year 2014,gross collections decreased 20.6% to $67.9 million from $85.5 million for fiscal year 2013, reflecting the lower level of purchases over the last three years.Commissions and fees associated with gross collections from our third party collection agencies and attorneys decreased $3.7 million, or 11.7% as compared to thesame period in the prior year and averaged 40.9% of collections for fiscal year 2014 as compared to 36.7% in the same prior year period. The higher rate was theresult of higher collections (of higher commissioned) out-of-statute paper coupled with increased asset search costs in the current fiscal year.As we switched to the cost recovery method on the current inventory of portfolios, there were no accretable yield adjustments recorded during the fiscal yearended September 30, 2014. Accretable yield adjustments were $0.6 million in fiscal year 2013.Personal injury claims income. Personal injury claims income increased $0.7 million or 10.8% to $7.1 million from the prior year level of $6.4 million, asinvestment in personal injury claims in fiscal years 2012 and 2013 translated into more closed cases in fiscal year 2014 than in the prior year (cases take an averageof 18 months to mature).Structured settlement income of $5.2 million, which includes $2.8 million of unrealized gains and $2.4 million of interest income, is included in theCompany’s results for the first time with no comparative results in the prior year. 33Table of ContentsDisability fee income Disability fee income amounted to $0.4 million in fiscal year 2014. Fiscal year 2013 disability fee income was immaterial for the startup operation, which included only five months of results.Forgiveness of debt is the result of the Settlement Agreement with the Bank of Montreal (“BMO”), reached in August of fiscal year 2013. The Companymade the final payment of the Remaining Amount in June 2014. The Company is entitled to 100% of the next $16.9 million of collections on the PortfolioPurchase, at which time collections will be split, with the Bank of Montreal on a 70%/ 30% distribution, with 70% being retained by the Company.Other income. The following table summarizes other income for the years ended September 30, 2014 and 2013: 2014 2013 Interest and dividend income $1,315,000 $1,583,000 Realized gains (losses) 43,000 (27,000) Other 41,000 53,000 $1,399,000 $1,609,000 General and administrative expenses. For the year ended September 30, 2014, general and administrative expenses increased $4.0 million, or 16.4%, to$28.2 million from $24.2 million for the year ended September 30, 2013. The increase is due primarily to increased expenses related to the inclusion of CBC, $3.4million, and the increased start-up expenses of GAR Disability Advocates, $1.9 million. CBC is included in the consolidated results of the Company for the firsttime in fiscal year 2014 and GAR Disability Advocates includes a full year of results during fiscal year 2014 as compared to approximately five months duringfiscal year 2013. Offsetting these increases, costs associated with the collection business decreased 18.6% from fiscal year 2013.Interest expense. For the fiscal year ended September 30, 2014, interest expense was essentially flat as compared to the fiscal year ended September 30,2013. The interest expense incurred during fiscal year 2014 was primarily from CBC. Interest expense from the consumer receivables business was immaterialduring fiscal year 2014, as the Company signed a Settlement Agreement with BMO in August 2013 with a minimal interest rate and the final payment made in June2014. The interest expense in fiscal year 2013 was primarily related to the Receivables Financing Agreement (“Receivables Financing Agreement”) with BMO,which was in place when the Settlement Agreement was signed.Impairments. We recorded impairments of $19.6 million during the year ended September 30, 2014, of which $14.1 million was recorded on the GreatSeneca portfolio (“the Portfolio Purchase”) as projected collections continued to deteriorate. Approximately $4.8 million of the impairment was related to themedical receivable asset class. Impairments of $11.0 million were recorded for the year ended September 30, 2013, of which $10.1 million was recorded on thePortfolio Purchase.The Great Seneca portfolio was purchased in March 2007. The portfolio was purchased on the secondary market and as such accounts included in theportfolio were 5 to 6 years old at the time of purchase. Purchasing portfolios on the secondary market was not a normal course of action for us at the time, as weprimarily purchased accounts from the originator of the accounts. This action of purchasing from the secondary market played a role in the determination in March2008 that we could no longer reasonably forecast cash collections and therefore switched the portfolio to the cost recovery method. Based upon the age of the GreatSeneca portfolio in June 2014 (over seven years from our purchase date, and 12 to 13 years from the inception of the portfolio) the portfolio was clearly on theouter bounds of our collection forecasts. Based upon the significantly reduced collection forecast and the lower valuation of the judgments as they age, wedetermined an impairment of $14 million was necessary in June 2014.The medical receivables were related to a market that we are no longer in. We exited the market in terms of financing such receivables in 2012 and impairedthe portfolio and switched to the cost recovery method at that time. The collections continued to deteriorate and fell short of expectations by a significant marginand, therefore, we impaired the remaining value of the portfolio of $4.7 million in June 2014. 34Table of ContentsNet income before taxes — Consumer Receivables. Net income before taxes increased $8.8 million, from $10.1 million for the fiscal year endedSeptember 30, 2013 as compared to $18.9 million for the fiscal year ended September 30, 2014, as the BMO debt forgiveness more than offset the negative impactof lower collections.Net income before taxes — Personal Injury Claims. Net income before taxes increased slightly to $2.3 million in fiscal year 2014 from $2.0 million for theprior fiscal year, as increased revenues were partially offset by higher salary expenses.Net income before taxes — Structured Settlements. Net income before taxes was $0.4 million in fiscal year 2014, with no corresponding data in the priorfiscal year.Net loss before taxes — GAR Disability Advocates. Net loss before taxes was $2.7 million in the 2014 fiscal year compared to a net loss of $1.2 million inthe same prior year period, reflecting increased start-up costs in the current fiscal year. Salaries increased by $0.8 million and marketing expense increased by$0.7 million compared to the prior fiscal year.Income tax expense. Income tax expense of $4.6 million recorded for fiscal year 2014 consists of a $4.1 million current income tax expense and a $0.5million deferred income tax expense. Income tax expense was higher primarily due to higher pre-tax income, significantly influenced by the $26.1 million of debtforgiveness. In fiscal year 2013, income tax expense of $0.8 million consisted of a current income tax expense of $0.9 million and a deferred income tax benefit of$0.1 million.Net income. For the year ended September 30, 2014, net income increased $ 4.0 million to $6.4 million from $2.4 million for the year endedSeptember 30, 2013, primarily reflecting the forgiveness of debt of $26.1 million, offset by the impairments of $19.5 million and higher general and administrativeexpenses.Income attributable to non-controlling interest. Income to non-controlling interests increased $122,000 from $406,000 for the year ended September 30,2013 to $528,000 for the year ended September 30, 2014, due to the improvement in the results of the joint venture Pegasus and the inclusion of CBC for the firsttime ($70,000) with no comparative results from fiscal year 2013.Net income attributable to Asta Funding, Inc. For the year ended September 30, 2014, net income attributable to Asta Funding, Inc. increased $3.9 millionto $5.9 million from $2.0 million for the year ended September 30, 2013, primarily reflecting decreased total revenue, offset by the forgiveness of debt of$26.1 million, increased general and administrative expenses, increased impairments and income to non-controlling interests and higher income taxes. Net incomeper diluted share for the year ended September 30, 2014 increased to $0.45 per diluted share from $0.15 per diluted share for the year ended September 30, 2013.The following tables detail non-controlling interest for the year ended September 30, 2014: For the Year Ended September 30, 2014 Pegasus FundingLLC CBC Settlement Funding, LLC Total Non- Controlling Interests Balance, beginning of period $(184,000) $— $(184,000) Non-controlling interest 458,000 70,000 528,000 Distributions (1,057,000) — (1,057,000) Balance, end of period $(783,000) $70,000 $(713,000) The non-controlling interests are related to Pegasus and CBC. The distribution to non-controlling interests is the distributions made to the 20% non-controlling interest owners of Pegasus Funding, LLC (“Pegasus Funding”). The distribution, based upon the profitability of the closed personal injury cases usingthe formula included in the operating agreement signed December 28, 2011, as revised, are calculated with a 20% deduction for overhead expenses of the PegasusFunding operation unit and a 20% write off of the personal injury cases deemed to be lost. The 20% write off amount is deducted directly from the distributionamount. Distributions have been greater than the net income attributable to Asta Funding, primarily due to bad debt reserves reducing 35Table of Contentsthe net income attributable to Asta Funding, but not specifically factored into the formula to determine the distributions to non-controlling interest owners based onthe operating agreement. Ultimately, this timing difference will reverse when personal injury cases are actually written-off. No distributions have been made toCBC.Liquidity and Capital ResourcesOur primary source of cash from operations is collections on the receivable portfolios we have acquired and the funds generated from the Pegasus and CBCbusiness segments. Our primary uses of cash include repayments of debt, our purchases of consumer receivable portfolios, interest payments, costs involved in thecollections of consumer receivables, taxes and dividends, if approved. In the past, we relied significantly upon our lenders to provide the funds necessary for thepurchase of consumer receivables acquired for liquidation.Receivables Financing AgreementIn March 2007, Palisades XVI borrowed approximately $227 million under the Receivables Financing Agreement, as amended in July 2007, December2007, May 2008, February 2009, October 2010 and August 2013 from BMO, in order to finance the Portfolio Purchase which had a purchase price of $300 million.The original term of the agreement was three years. This term was extended by each of the Second, Third, Fourth, Fifth Amendments and the most recentagreement signed in August 2013, discussed below.Financing Agreement. The Settlement Agreement and Omnibus Amendment (“Settlement Agreement”) was in effect on August 7, 2013, Palisades XVI, a100% owned bankruptcy remote subsidiary, entered into a Settlement Agreement with BMO as an amendment to the Receivables Financing Agreement. Inconsideration for a $15 million prepayment funded by the Company, BMO has agreed to significantly reduce minimum monthly collection requirements and theinterest rate. If and when BMO were to receive the next $15 million of collections from the Portfolio Purchase, (the “Remaining Amount”) less certain credits forpayments made prior to the consummation of the Settlement Agreement, the Company would be entitled to recover from future net collections the $15 millionprepayment that it funded. Thereafter, BMO would have the right to receive 30% of future net collections. Upon repayment of the Remaining Amount to BMO, theCompany would be released from the remaining contractual obligation of the Receivables Financing Agreement and the Settlement Agreement.On June 3, 2014, Palisades XVI finished paying the Remaining Amount. The final principal payment of $2.9 million included a voluntary prepayment of$1.9 million provided from funds of the Company. Accordingly, Palisades XVI will be entitled to receive $16.9 million of future collections from the PortfolioPurchase before BMO is entitled to receive any payments with respect to its Income Interest. The Company estimated the Income Interest to be between $0 and$1.4 million. However, the Company believes that no amount would be incurred because of the continued deterioration of the collections from the portfoliopurchase.With the payment of the Remaining Amount and upon completion of the documents granting the Palisades XVI Income Interest, including a writtenconfirmation from BMO that the obligation has been paid in full, Palisades XVI has been released from further debt obligations from the RFA. We have recordedas other income, forgiveness of non-recourse debt, in the amount of approximately $26.1 million, pre-tax in the third quarter of fiscal year 2014.Bank Hapoalim B.M. (“Bank Hapoalim”) Line of CreditOn May 2, 2014, the Company obtained a $20 million line of credit facility from Bank Hapoalim, pursuant to a Loan Agreement (the “Loan Agreement”)among the Company and its subsidiary, Palisades Collection, LLC, as borrowers, and Bank Hapoalim, as agent and lender. The Loan Agreement provides for a$20.0 million committed line of credit and an accordion feature providing an increase in the line of credit of up to $30 million, at the discretion of the lenders. Thefacility is for a term of three years at an interest rate of LIBOR plus 275 basis points or prime, at the Company’s option. The Loan Agreement includes covenantsthat require the Company to maintain a minimum net worth of $150 million and pay an unused line fee. The facility is secured pursuant to a Security Agreement(“Security Agreement”) among the parties to the Loan Agreement. As of September 30, 2015, the Company had not used this facility. 36Table of ContentsPersonal Injury ClaimsOn December 28, 2011, we formed a joint venture Pegasus Funding, LLC (“Pegasus”) with Pegasus Legal Funding, LLC (“PLF”). Pegasus purchasesinterests in personal injury claims from claimants who are a party to personal injury litigation with the expectation of a settlement in the future. Pegasus advances toeach claimant funds on a non-recourse basis at an agreed upon interest rate in anticipation of a future settlement. The interest purchased by Pegasus in each claimwill consist of the right to receive from such claimant part of the proceeds or recoveries which such claimant receives by reason of a settlement, judgment or awardwith respect to such claimant’s claim. The profits from the joint venture are distributed based on the ownership percentage of the parties — Asta Funding, Inc. 80%and PLF, 20%.Divorce FundingOn May 18, 2012, we formed BP Case Management, LLC (“BPCM), a joint venture with California-based Balance Point Divorce Funding, LLC (“BPDivorce Funding”). BPCM provides non-recourse funding to a spouse in a matrimonial action. The Company provides a $1.5 million revolving line of credit topartially fund BP Divorce Funding’s operations, with such loan bearing interest at the prevailing prime rate, with an initial term of twenty-four months. Therevolving line of credit is collateralized by BP Divorce Funding’s profit share in BPCM and other assets. The term of the loan was to end in May 2014, but hasbeen extended until August 2016.Structured SettlementsOn December 31, 2013, the Company acquired 80% ownership of CBC and its affiliate, CBC Management Services, LLC for approximately $5.9 million. Atthe closing, the operating principals of CBC, William J. Skyrm, Esq. and James Goodman, were each issued a 10% interest in CBC. In addition, the Company hasagreed to provide financing to CBC of up to $5 million. Through the transaction we acquired debt that totaled $23 million consisting of $9.6 million of a revolvingline of credit with a financial institution and $13.8 million of non-recourse notes issued by CBC’s subsidiaries. As of September 30, 2015, the debt approximated$51.6 million. On September 30, 2015, CBC completed its fifth private placement backed by structured settlements and fixed annuity payments. CBC issuedthrough its subsidiary, BBRV, LLC, approximately $16.6 million of fixed rate asset-backed notes with a yield of 5.1%. On November 26, 2014, CBC announcedthe completion of its fourth private placement, backed by structured settlement and fixed annuity payments. CBC issued, through its subsidiary, BBR IV, LLC,approximately $20.8 million of fixed rate asset-backed notes with a yield of 5.4%. On March 1, 2015, CBC entered into the Ninth Amendment of the agreementwith a new maturity date of March 1, 2017, increased the credit to $25.0 million and lowered the floor to 4.1%.Cash FlowAs of September 30, 2015, our cash and cash equivalents decreased $4.4 million to $24.3 million, from $28.7 million at September 30, 2014. Although ourcash flow remains strong, we have diversified some of our cash flow into other investments.Net cash used in operating activities was $21.1 million during the fiscal year ended September 30, 2015, as compared to $2.1 million for the fiscal yearended September 30, 2014. The decrease is primarily due to no impairments in the current fiscal year compared to $19.6 million in fiscal year 2014. Net cash usedin investing activities was $0.3 million during the fiscal year ended September 30, 2015, as compared to $1.0 million during the fiscal year ended September 30,2014. The change in cash in investing activities is primarily due to increased investments in personal injury claims and other investments offset by decreasedconsumer receivable collections. Net cash provided by financing activities was $17.0 million during the fiscal year ended September 30, 2015, as compared to $3.3million used in financing activities in the same 2014 period. The increase in net cash provided by financing activities was primarily due to an increase in netborrowings of CBC debt in the current fiscal year, partially offset by a pay down of non-recourse debt in the prior fiscal year.Our cash requirements have been and will continue to be significant and include external financing to operate various lines of business. Significantrequirements include investment in personal injury claims, investments in structured settlements, costs involved in the collections of consumer receivables,repayment of CBC debt and 37Table of Contentsinvestment in consumer receivable portfolios, and, until the third quarter of fiscal year 2014, repayments under our non-recourse debt facilities. In addition, ifapproved by the board of directors, dividends are financed though operations. Acquisitions recently have been financed through cash flows from operatingactivities. We believe we will be less dependent on a credit facility (with the exception of CBC) in the short-term, as our cash flow from operations will besufficient to invest in personal injury claims, purchase portfolios and finance the early stages of the disability advocacy business. Structured settlements arefinanced through the use of a credit line, warehouse facility and private placement financing.We believe our available cash resources and expected cash flows from operations will be sufficient to fund operations for the next twelve months. We do notexpect to incur any material capital expenditures during the next twelve months. We are cognizant of the current market fundamentals in the debt purchase andcompany acquisition markets which, because of significant supply and tight capital availability, could result in increased buying opportunities. The outcome of anyfuture transaction(s) is subject to market conditions. In addition, due to these opportunities, we continue to seek opportunities with banking organizations and otherson a possible financing loan facility.Share Repurchase ProgramOn August 17, 2015, we announced the adoption of a Rule 10b5-1 plan under which we may repurchase our shares of common stock. On August 11, 2015,the Board of Directors of the Company approved the repurchase of up to $15.0 million of our common stock and authorized management of the Company to enterinto a Rule 10b5-1 plan. The plan is effective through December 31, 2015. Through September 30, 2015, we purchased 201,800 shares at a cost of approximately$1,751,000. We anticipate that the cash used for the repurchase program will come primarily from current cash and from ongoing operating activities and the cashgenerated from such activities.Contractual ObligationsThe following table summarizes our contractual obligations in future fiscal years:Payments Due By Period Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years Long Term Debt Obligations $46,988,000 $3,412,000 $6,259,000 $6,344,000 $30,973,000 Operating Lease Obligations 2,650,000 819,000 1,106,000 725,000 0 Total $49,638,000 $4,231,000 $7,365,000 $7,069,000 $30,973,000 Off-Balance Sheet ArrangementsAs of September 30, 2015, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structuredfinance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Assuch, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships. 38Table of ContentsThe following table shows the changes in finance receivables, including amounts paid to acquire new portfolios: Year Ended September 30, 2015 2014 2013 2012 2011 (In millions) Balance at beginning of period $29.4 $64.3 $94.2 $122.7 $154.5 Acquisitions of finance receivables, net of buybacks 2.1 5.1 3.3 2.5 7.5 Cash collections from customers applied to principal(1) (15.8) (20.4) (22.2) (29.1) (37.0)Cash collections represented by account sales applied to principal(1) (0.1) (0.1) — (0.1) (0.2)Impairments/Portfolio write down — (19.5) (11.0) (1.8) (2.1) Balance at end of period $15.6 $29.4 $64.3 $94.2 $122.7 (1)Cash collections applied to principal consists of cash collections less income recognized on finance receivables plus amounts received by us from the sale ofconsumer receivable portfolios to third parties.Portfolio Purchases Year Ended September 30, 2015 2014 2013 (In millions) Aggregate Purchase Price $2.1 $5.1 $3.3 Aggregate Portfolio Face Amount 28.0 478.9 53.5 The prices we pay for our consumer receivable portfolios are dependent on many criteria including the age of the portfolio, the number of third partycollection agencies and attorneys that have been involved in the collection process and the geographical distribution of the portfolio. When we pay higher prices forportfolios which are performing or fresher, we believe it is not at the sacrifice of our expected returns. Price fluctuations for portfolio purchases from quarter toquarter or year to year are primarily indicative of the overall mix of the types of portfolios we are purchasing.Schedule of Portfolios by Income Recognition Category September 30, 2015 September 30, 2014 September 30, 2013 Cost Recovery Portfolios Interest Method Portfolios Cost Recovery Portfolios Interest Method Portfolios Cost Recovery Portfolios Interest Method Portfolios (In millions) Original Purchase Price (at period end) $1,256.7 $— $1,254.6 $— $539.3 $710.3 Cumulative Aggregate Managed Portfolios (at period end) 32,465.3 — 32,437.3 — 15,102.4 16,855.9 Receivable Carrying Value (at period end) 15.6 — 29.4 — 51.1 13.1 Finance Income Earned (for the respective period) 20.8 — 19.5 — 4.5 27.3 Total Cash Flows (for the respective period) 36.7 — 40.2 — 25.2 28.8 The original purchase price reflects what we paid for the receivables from 1998 through the end of the respective period. The cumulative aggregate managedportfolio balance is the original aggregate amount owed by the borrowers at the end of the respective period. Additional differences between year to year periodend balances may result from the transfer of portfolios between the interest method and the cost recovery method. We 39Table of Contentspurchase consumer receivables at substantial discounts from the face amount. We record finance income on our receivables under either the cost recovery orinterest method. The receivable carrying value represents the current basis in the receivables after collections and amortization of the original price.Collections Represented by Account Sales Year Collections Represented By account Sales Finance Income Recognized 2015 $79,000 $77,000 2014 114,000 88,000 2013 2,448,000 2,015,000 We do not anticipate collecting the majority of the purchased principal amounts. Accordingly, the difference between the carrying value of the portfolios andthe gross receivables is not indicative of future finance income from these accounts acquired for liquidation. Since we purchased these accounts at significantdiscounts, we anticipate collecting only a portion of the face amounts.Recent Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board (the “FASB”) issued an update to ASC 606, “Revenue from Contracts with Customers,” that willsupersede virtually all existing revenue guidance. Under this update, an entity is required to recognize revenue upon transfer of promised goods or services tocustomers, in an amount that reflects the entitled consideration received in exchange for those goods or services. The guidance also requires additional disclosureabout the nature, amount, timing, and uncertainty of revenue and cash flows arising from the customer contracts. This update is effective for annual reportingperiods beginning after December 15, 2017, including interim periods within that reporting period. Early application is permitted for annual reporting periodsbeginning after December 15, 2016. We are currently evaluating the impact this update will have on our consolidated financial statements as well as the expectedadoption method.In June 2014, the FASB issued ASU 2014-11, “Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, andDisclosures.” The amendments in this ASU require two accounting changes. First, the amendments in this ASU change the accounting for repurchase-to maturitytransactions to secured borrowing accounting. Second, for repurchase financing arrangements, the amendments require separate accounting for a transfer of afinancial asset executed contemporaneously with a repurchase agreement with the same counterparty, which will result in secured borrowing accounting for therepurchase agreement. This ASU also includes new disclosure requirements. The accounting changes in this Update are effective for public business entities for thefirst interim or annual period beginning after December 15, 2014. An entity is required to present changes in accounting for transactions outstanding on theeffective date as a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. Earlier application for a public business entity isprohibited. The Company reviewed this ASU and determined that it did not have a material impact on its consolidated financial statements.In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis,” which amends theconsolidation requirements in ASC 810. This update is effective for public business entities for the first interim period in the first annual period beginning afterDecember 15, 2015. We are currently reviewing this ASU to determine if it will have an impact on our consolidated financial statements.In May 2015, the FASB issued ASU 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities that Calculate NetAsset Value per Share (or Its Equivalent)”. The amendments apply to reporting entities that elect to measure the fair value of an investment using the net assetvalue (“NAV”) per share (or its equivalent) practical equivalent. The amendments remove the requirement to categorize within the fair value hierarchy allinvestments for which fair value is measured using the NAV per share practical expedient. The amendments in this ASU are effective for reporting periodsbeginning after December 15, 2015, with early adoption permitted. The Company has reviewed this ASU and has elected to early adopt these amendments 40Table of Contentsin the quarter ending December 31, 2014 and has removed certain investments that are measured using the NAV practical expedient from the fair value hierarchy inall periods presented in the Company’s consolidated financial statements.InflationWe believe that inflation has not had a material impact on our results of operations for the years ended September 30, 2015, 2014 and 2013. Item 7A.Quantitative and Qualitative Disclosures About Market RiskWe 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 taxrates. The debt associated with CBC, had a balance of approximately $51.6 million, consisting of $4.6 million through a line of credit, at a rate of LIBOR plus 4%,with a floor of 4.1%, from a financial institution, and $47.0 million of notes at varying rates, from 5.07% to 8.75%, issued by CBC’s subsidiaries. At September 30,2015, the LIBOR rate was 0.19%. Thus, a 25 basis point change in the LIBOR rate would have had no impact on the line of credit interest expense, as the resultingrate would still have been below the 4.1% floor.We have elected to measure structured settlements at fair value under ASC 825. However, the date used to finance our investments in structured settlementsis measured at cost. This results in an accounting mismatch that yields potential gains or losses, recognized in the consolidated statements of income, dependingprimarily on changes in interest rates.We monitor changes in market rate primarily based on our periodic securitization of assets, whereby we are able to determine a market rate. A significantchange in the rate at which we can securitize can increase or decrease the gain or loss. We partially mitigate the risk over the long term by pricing new structuredsettlements originations relative to current market rates. As benchmark rates decrease, we can purchase structured settlements at lower discount rates to theconsumer, while maintaining spread or gain. As benchmark rates increase, the market value of the entire portfolio could lose value. As such, future structuredsettlement purchases must be purchased at an increased discount rate in order to maintain or increase spread or gain. The Company does not currently purchasederivative products to mitigate risk. Item 8.Financial Statements And Supplementary Data.The Financial Statements of the Company, the Notes thereto and the Report of Independent Registered Public Accounting Firm thereon required by this itembegin on page F-1 of this report located immediately preceding the signature page. Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.None. Item 9A.Controls and Procedures.Disclosure Controls and ProceduresWe conducted an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Actof 1934, as amended (the “Exchange Act”)) as of September 30, 2015. There are inherent limitations to the effectiveness of any system of disclosure controls andprocedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosurecontrols and procedures can only provide reasonable assurance of achieving their control objectives. Based on their evaluation, the Chief Executive Officer andChief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2015. 41Table of ContentsManagement’s Annual Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under theExchange Act). Under the supervision and with the participation of our management, including its principal executive officer and principal financial officer, weconducted an assessment of the effectiveness of its internal control over financial reporting. In making this assessment, we used the criteria set forth by theCommittee of Sponsoring Organizations of the Treadway Commission (“COSO 2013”) in Internal Control — Integrated Framework, issued in 2013. Based onmanagement’s assessment, and based on the criteria in COSO 2013, we believe that we maintained effective internal control over financial reporting as ofSeptember 30, 2015.Changes in Internal Controls over Financial ReportingIn fiscal year 2014, Management identified a material weakness in our internal control over financial reporting related to the revenue recognition process in ourconsumer receivables portfolios, specifically related to the application of the interest method of accounting as promulgated by Accounting Standards Codification(“ASC”) 310-30, Receivables – Loans and Debt Securities Acquired with Deteriorated Quality . During our review of portfolio cash flows, our controls did notinclude an analysis and review of the current cash flow variations within a quarter, to determine whether there is an impairment or accretion required. We tookaction to remediate the material weakness described above, which was completed during the 2015 fourth quarter. The action taken to remediate the materialweakness is as follows: • Implement the additional control of analyzing cash flows within a quarterly period, in addition to the already established life of the loan analysis, todetermine whether there is an impairment or accretion adjustment required, when necessary. • As our current inventory of portfolios are accounted for on the cost recovery method this control procedure was not applicable for the current quarter.Except for the change discussed above, there have been no changes that occurred during the fourth quarter of 2015 that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting. 42Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofAsta Funding, Inc.We have audited Asta Funding, Inc. and subsidiaries’ (the “Company”) internal control over financial reporting as of September 30, 2015, based on criteriaestablished in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internalcontrol over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is toexpress an opinion on the Company’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testingand evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as weconsidered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control overfinancial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of September 30, 2015, is fairlystated, in all material respects, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of SponsoringOrganizations of the Treadway Commission (“COSO”).We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheetsof the Company as of September 30, 2015 and 2014, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cashflows for each of the three years in the three-year period ended September 30, 2015, and our report dated December 14, 2015, expressed an unqualified opinion onthose consolidated financial statements./s/WeiserMazars LLPEdison, New JerseyDecember 14, 2015 43Table of ContentsItem 9B.Other Information.None.PART III Item 10.Directors, Executive Officers and Corporate Governance.The information required by this item will be set forth in our definitive proxy statement with respect to our 2016 annual meeting of stockholders to be filednot later than 120 days after September 30, 2015 and is incorporated herein by this reference. Item 11 .Executive Compensation.The information required by this item will be set forth in our definitive proxy statement with respect to our 2016 annual meeting of stockholders to be filednot later than 120 days after September 30, 2015 and is incorporated herein by this reference. Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.The information required by this item will be set forth in our definitive proxy statement with respect to our 2016 annual meeting of stockholders to be filednot later than 120 days after September 30, 2015 and is incorporated herein by this reference. Item 13.Certain Relationships and Related Transactions, and Director Independence.The information required by this item will be set forth in our definitive proxy statement with respect to our 2016 annual meeting of stockholders to be filednot later than 120 days after September 30, 2015 and is incorporated herein by this reference. Item 14.Principal Accounting Fees and Services.The information required by this item will be set forth in our definitive proxy statement with respect to our 2016 annual meeting of stockholders to be filednot later than 120 days after September 30, 2015 and is incorporated herein by this reference.Part IV Item 15.Exhibits, Financial Statement Schedules.(a) The following documents are filed as part of this report ExhibitNumber 3.1 Certificate of Incorporation(1)3.2 Amendment to Certificate of Incorporation(2)3.3 Certificate of Designation of Series A Preferred Stock(3)3.4 Bylaws(4)3.5 Amendments to Article IX of the By-Laws of Asta Funding, Inc.(5)4.1 Rights Agreement, dated as of August 23, 2012, between Asta Funding, Inc. and American Stock Transfer & Trust Co., LLC(6)10.1 Asta Funding, Inc 1995 Stock Option Plan as Amended(1)10.2 Asta Funding, Inc. 2002 Stock Option Plan(2) 44Table of ContentsExhibitNumber 10.3 Asta Funding, Inc. Equity Compensation Plan(7)10.4 Asta Funding, Inc. 2012 Stock Option and Performance Award Plan(8)10.5 Form of Intercreditor Agreement between Asta Funding and IDB as lending agent(9)10.6 Amended and Restated Management Agreement, dated as of January 16, 2009, between Palisades Collection, L.L.C., and [*](10)10.7 Amended and Restated Master Servicing Agreement, dated as of January 16, 2009, between Palisades Collection, L.L.C., and [*](11)10.8 First Amendment to Amended and Restated Master Servicing Agreement, dated as of September 16, 2007, by and among Palisades Collection,L.L.C., and [*], and [*](12)10.9 Indemnification agreement between Asta Funding and GMS Family Investors LLC. (13)10.10 Settlement Agreement and Omnibus Amendment among Asta Funding, Inc., Palisades Acquisition XVI and BMO Capital Markets dated August7, 2013. (20)10.11 Lease agreement between the Company and ESL200 LLC dated August 2, 2010 (14)10.12 Revolving Credit Agreement, dated December 28, 2011, by and between Pegasus Funding, LLC and Fund Pegasus, LLC(15)10.13 Security Agreement, dated December 28, 2011, by and between Pegasus Funding, LLC and Fund Pegasus, LLC(16)10.14 Secured Revolving Credit Note, dated December 28, 2011, by Pegasus Funding, LLC in favor of Fund Pegasus, LLC(17)10.15 Operating Agreement of Pegasus Funding, LLC, dated December 28, 2011(18)10.16 Consulting Agreement, dated December 12, 2011, by and between the Company and A.L. Piccolo & Co., Inc.(20)10.17 Membership Interest Purchase Agreement by and among CBC Settlement, LLC, CBC Management Services Group, LLC, Asta Funding, Inc. andOther Parties Hereto (22) (24)10.18 Amended and Restated Operating Agreement of CBC Settlement Funding, LLC (23) (24)10.19 Asta Funding, Inc. lease agreement with ESL 200 LLC (25)21.1 Subsidiaries of the Registrant*23.1 Consent of Independent Registered Public Accounting Firm*31.1 Certification of Registrant’s Chief Executive Officer, Gary Stern, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*31.2 Certification of Registrant’s Chief Financial Officer, Robert J. Michel, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*32.1 Certification of the Registrant’s Chief Executive Officer, Gary Stern, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*32.2 Certification of the Registrant’s Chief Financial Officer, Robert J. Michel, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* *Filed herewith(1)Incorporated by reference to an Exhibit to Asta Funding’s Registration Statement on Form SB-2 (File No. 33-97212).(2)Incorporated by reference to an Exhibit to Asta Funding’s Quarterly Report on Form 10-QSB for the three months ended March 31, 2002.(3)Incorporated by reference to Exhibit 3.1 to Asta Funding’s Current Report on Form 8-K filed August 24, 2012.(4)Incorporated by reference to Exhibit 3.1 to Asta Funding’s Annual Report on Form 10-KSB for the year ended September 30, 1998. 45Table of Contents(5)Incorporated by reference to Exhibit 3.2 to Asta Funding’s Current Report on Form 8-K filed August 24, 2012.(6)Incorporated by reference to Exhibit 4.1 to Asta Funding’s Current Report on Form 8-K filed August 24, 2012.(7)Incorporated by reference to Exhibit 10.1 to Asta Funding’s Current Report on Form 8-K filed March 3, 2006.(8)Incorporated by reference to Appendix A to Asta Funding’s Definitive Proxy Statement filed on February 17, 2012 for the March 21, 2012 Annual Meetingof Stockholders(9)Incorporated by reference to Exhibit 10.26 to Asta Funding’s Annual Report on Form 10-K for the year ended September 30, 2008.(10)Incorporated by reference to Exhibit 10.27 to Asta Funding’s Annual Report on Form 10-K for the year ended September 30, 2008.(11)Incorporated by reference to Exhibit 10.28 to Asta Funding’s Annual Report on Form 10-K for the year ended September 30, 2008.(12)Incorporated by reference to Exhibit 10.29 to Asta Funding’s Annual Report on Form 10-K for the year ended September 30, 2008.(13)Incorporated by reference to Exhibit 10.32 to Asta Funding’s Annual Report on Form 10-K for the year ended September 30, 2009.(14)Incorporated by reference to Exhibit 10.2 to Asta Funding’s Current Report on Form 8-K filed August 5, 2010.(15)Incorporated by reference to Exhibit 10.1 to Asta Funding’s Current Report on Form 8-K filed January 4, 2012.(16)Incorporated by reference to Exhibit 10.2 to Asta Funding’s Current Report on Form 8-K filed January 4, 2012.(17)Incorporated by reference to Exhibit 10.3 to Asta Funding’s Current Report on Form 8-K filed January 4, 2012.(18)Incorporated by reference to Exhibit 10.4 to Asta Funding’s Current Report on Form 8-K filed January 4, 2012.(19)Incorporated by reference to Exhibit 10.1 to Asta Funding’s Current Report on Form 8-K filed January 6, 2012.(20)Incorporated by reference to Exhibit 10.1 to Asta Funding’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2011.(21)Incorporated by reference to Exhibit 10.1 to Asta Funding’s Current Report on Form 8-K filed August 9, 2012.(22)Incorporated by reference to Exhibit 10.1 to Asta Funding’s Current Report on Form 8-K filed January 7, 2014.(23)Incorporated by reference to Exhibit 10.2 to Asta Funding’s Current Report on Form 8-K filed January 7, 2014.(24)The schedules to Exhibits 10.17 and 10.18 have not been filed with this registration statement as they contain due diligence information which the Registrantdoes not believe is material to an investment decision.(25)Incorporated by reference to Exhibit 10.1 to Asta Funding’s Current Report on Form 8-K filed October 29, 2015. 46Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESContents Page Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets as of September 30, 2015 and 2014 F-3 Consolidated Statements of Income for the years ended September 30, 2015, 2014 and 2013 F-4 Consolidated Statements of Comprehensive Income for the years ended September 30, 2015, 2014 and 2013 F-5 Consolidated Statements of Stockholders’ Equity for the years ended September 30, 2015, 2014 and 2013 F-6 Consolidated Statements of Cash Flows for the years ended September 30, 2015, 2014 and 2013 F-7 Notes to Consolidated Financial Statements F-8 F-1Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofAsta Funding, Inc.We have audited the accompanying consolidated balance sheets of Asta Funding, Inc. and subsidiaries (the “Company”) as of September 30, 2015 and 2014,and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the three-year periodended September 30, 2015. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express anopinion on these consolidated financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. Webelieve that our audits provide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of theCompany as of September 30, 2015 and 2014, and the consolidated results of their operations and their cash flows for each of the three years in the three-yearperiod ended September 30, 2015, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal controlover financial reporting as of September 30, 2015, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee ofSponsoring Organizations of the Treadway Commission (“COSO”) and our report dated December 14, 2015 expressed an unqualified opinion on the effectivenessof the Company’s internal control over financial reporting. /s/WeiserMazars LLPEdison, New JerseyDecember 14, 2015 F-2Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESConsolidated Balance Sheets September 30, 2015 2014 ASSETS Cash and cash equivalents $24,315,000 $28,710,000 Available-for-sale investments 59,727,000 66,799,000 Consumer receivables acquired for liquidation (at net realizable value) 15,608,000 29,444,000 Structured settlements 64,635,000 42,079,000 Investment in personal injury claims, net 36,668,000 32,352,000 Other investments 4,239,000 — Due from third party collection agencies and attorneys 1,422,000 1,026,000 Prepaid and income taxes receivable 6,744,000 430,000 Furniture and equipment (net of accumulated depreciation of $4,865,000 at September 30, 2015 and $4,499,000 atSeptember 30, 2014) 480,000 756,000 Deferred income taxes 12,279,000 6,786,000 Goodwill 2,770,000 2,770,000 Other assets 8,485,000 5,986,000 Total assets $237,372,000 $217,138,000 LIABILITIES AND STOCKHOLDERS’ EQUITY Other debt — CBC (includes non-recourse notes payable amounting to $47.0 million at September 30, 2015 and $12.7million at September 30, 2014) $51,611,000 $32,295,000 Other liabilities 4,441,000 3,587,000 Total liabilities 56,052,000 35,882,000 Commitments and contingencies 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 — 13,061,673 at September 30, 2015 and12,985,839 at September 30, 2014; and outstanding — 12,859,873 at September 30, 2015 and 12,985,839 atSeptember 30, 2014 131,000 130,000 Additional paid-in capital 65,011,000 63,102,000 Retained earnings 120,611,000 118,595,000 Accumulated other comprehensive (loss) income, net of income taxes (1,685,000) 142,000 Treasury stock (at cost), 201,800 shares at September 30, 2015 and 0 shares at September 30, 2014 (1,751,000) — Non-controlling interests (997,000) (713,000) Total stockholders’ equity 181,320,000 181,256,000 Total liabilities and stockholders’ equity $237,372,000 $217,138,000 See notes to accompanying consolidated financial statements F-3Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESConsolidated Statements of Income Year Ended September 30, 2015 2014 2013 Revenues: Finance income, net $20,757,000 $19,865,000 $31,762,000 Personal injury claims income 8,482,000 7,134,000 6,438,000 Unrealized gain on structured settlements 7,146,000 2,840,000 — Interest income on structured settlements 4,672,000 2,368,000 — Disability fee income 1,434,000 378,000 2,000 Total revenues 42,491,000 32,585,000 38,202,000 Forgiveness of non-recourse debt — 26,101,000 — Other income (includes ($155,000), ($143,000), and ($252,000) during the years ended September 30,2015, 2014 and 2013, respectively, of accumulated other comprehensive income reclassifications forrealized net losses on available for sale securities). 1,687,000 1,399,000 1,609,000 44,178,000 60,085,000 39,811,000 Expenses: General and administrative expenses 36,933,000 28,192,000 24,212,000 Interest expense 2,395,000 1,260,000 1,300,000 Impairments of consumer receivables acquired for liquidation — 19,591,000 10,990,000 39,328,000 49,043,000 36,502,000 Income before income tax 4,850,000 11,042,000 3,309,000 Income tax expense (includes tax benefit (expense) of $58,000, $59,000 and ($100,000) during the yearsended September 30, 2015, 2014 and 2013, respectively, of accumulated other comprehensiveincome reclassifications for realized net (losses) gains on available for sales securities) 2,122,000 4,613,000 894,000 Net income 2,728,000 6,429,000 2,415,000 Less: net income attributable to non-controlling interests 712,000 528,000 406,000 Net income attributable to Asta Funding, Inc. $2,016,000 $5,901,000 $2,009,000 Net income per share attributable to Asta Funding, Inc.: Basic $0.15 $0.45 $0.16 Diluted $0.15 $0.45 $0.15 Weighted average number of common shares outstanding: Basic 13,044,215 12,981,076 12,952,150 Diluted 13,314,605 13,205,933 13,216,051 See notes to accompanying consolidated financial statements F-4Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESConsolidated Statements of Comprehensive Income Year Ended September 30, 2015 2014 2013 Comprehensive income is as follows: Net income $2,728,000 $6,429,000 $2,415,000 Net unrealized securities (loss) / gain, net of tax benefit / (expense) of $303,000, ($599,000) and$705,000, during the years ended September 30, 2015, 2014 and 2013, respectively. (260,000) 900,000 (1,067,000)Reclassification adjustments for securities sold, net of tax benefit / (expense) of $68,000, $59,000 and($100,000), during years ended September 30, 2015, 2014 and 2013, respectively. (87,000) (84,000) 152,000 Foreign currency translation, net (1,480,000) — — Other comprehensive income (loss) (1,827,000) 816,000 (915,000) Total comprehensive income $901,000 $7,245,000 $1,500,000 See notes to accompanying consolidated financial statements F-5Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESConsolidated Statements of Stockholders’ EquityFor the years ended September 30, 2015, 2014 and 2013 Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock(1) Non- Controlling Interests Total Stockholders’ Equity Issued Shares Amount Balance, September 30, 2012 14,778,956 $148,000 $77,024,000 $111,715,000 $241,000 $(16,226,000) $31,000 $172,933,000 Exercise of options 36,700 125,000 125,000 Stock based compensation expense 1,956,000 1,956,000 Restricted stock 102,321 1,000 (1,000) — Dividends (1,030,000) (1,030,000)Purchase of treasury stock (1,579,000) (1,579,000)Net income, 2,009,000 406,000 2,415,000 Unrealized loss on marketable securities (915,000) (915,000)Distributions to non-controlling interest (621,000) (621,000) Balance, September 30, 2013 14,917,977 149,000 79,104,000 112,694,000 (674,000) (17,805,000) (184,000) 173,284,000 Exercise of options 11,600 40,000 40,000 Stock based compensation expense 1,744,000 1,744,000 Net income 5,901,000 528,000 6,429,000 Unrealized gain on marketable securities 816,000 816,000 Retirement of treasury stock (1,943,738) (19,000) (17,786,000) 17,805,000 — Distributions to non-controlling interest (1,057,000) (1,057,000) Balance, September 30, 2014 12,985,839 130,000 63,102,000 118,595,000 142,000 — (713,000) 181,256,000 Exercise of options 60,834 1,000 475,000 476,000 Stock based compensation expense 1,434,000 1,434,000 Restricted stock 15,000 — Net income 2,016,000 712,000 2,728,000 Unrealized gain on marketable securities (347,000) (347,000) Purchase of treasury stock (1,751,000) (1,751,000)Foreign currency translation, net (1,480,000) (1,480,000) Distributions to non-controlling interest (996,000) (996,000) Balance, September 30, 2015 13,061,673 $131,000 $65,011,000 $120,611,000 $(1,685,000) $(1,751,000) $(997,000) $181,320,000 (1)Treasury shares are as follows: September 30, 2012, 1,772,038; Purchase of treasury stock, 171,700 September 30, 2013, 1,943,738; Retirement of treasury stock, (1,943,738) September 30, 2014, 0; Purchase of treasury stock, 201,800; September 30, 2015, 201,800See notes to accompanying consolidated financial statements F-6Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESConsolidated Statements of Cash Flows Year Ended September 30, 2015 2014 2013 Cash flows from operating activities: Net income $2,728,000 $6,429,000 $2,415,000 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 366,000 363,000 440,000 Deferred income taxes (5,343,000) 446,000 57,000 Impairments of consumer receivables acquired for liquidation — 19,591,000 10,990,000 Stock based compensation 1,434,000 1,744,000 1,956,000 Loss on sale of available-for-sale securities 155,000 143,000 252,000 Structured settlements — accrued interest (4,330,000) (2,282,000) — Structured settlements — gains (7,146,000) (2,840,000) — Unrealized (gain) / loss on other investments (68,000) — — Unrealized foreign exchange (gain) / loss on other investments 829,000 — — Forgiveness of non-recourse debt — (26,101,000) — Changes in: Prepaid and income taxes receivable (6,314,000) 1,066,000 561,000 Due from third party collection agencies and attorneys (396,000) 143,000 873,000 Other assets (2,551,000) (1,592,000) (631,000)Other liabilities (489,000) 745,000 (434,000) Net cash (used in) provided by operating activities (21,125,000) (2,145,000) 16,479,000 Cash flows from investing activities: Purchase of consumer receivables acquired for liquidation (2,110,000) (5,078,000) (3,340,000)Principal collected on consumer receivables acquired for liquidation 15,944,000 20,271,000 21,902,000 Principal collected on consumer receivable accounts represented by account sales 2,000 26,000 433,000 Purchase of available-for-sale securities (17,843,000) (20,111,000) (34,171,000)Proceeds from sales of available-for-sale securities 24,178,000 12,560,000 33,076,000 Proceeds from maturities of certificates of deposit — — 42,682,000 Purchase of other investments (5,000,000) — — Cash paid for acquisition (net of cash acquired) — (5,588,000) — Investments in personal injury claims — advances (25,077,000) (22,218,000) (30,963,000)Investments in personal injury claims — receipts 20,761,000 25,624,000 13,801,000 Investments in structured settlements — advances (16,615,000) (9,808,000) — Investments in structured settlements — receipts 5,535,000 3,287,000 — Capital expenditures (90,000) (13,000) (725,000) Net cash (used in) provided by investing activities (315,000) (1,048,000) 42,695,000 Cash flows from financing activities: Proceeds from exercise of stock options 476,000 40,000 125,000 Purchase of treasury stock (1,751,000) — (1,579,000)Change in restricted cash — 968,000 120,000 Dividends paid — — (1,290,000)Distributions to non-controlling interest (996,000) (1,057,000) (621,000)Repayments of non-recourse debt — Bank of Montreal, net — (9,659,000) (25,703,000)Borrowings of other debt — CBC 54,766,000 9,903,000 — Repayments of other debt — CBC (35,450,000) (3,471,000) — Net cash provided by (used in) financing activities 17,045,000 (3,276,000) (28,948,000) Net (decrease) increase in cash and cash equivalents (4,395,000) (6,469,000) 30,226,000 Cash and cash equivalents at beginning of year 28,710,000 35,179,000 4,953,000 Cash and cash equivalents at end of year $24,315,000 $28,710,000 $35,179,000 Supplemental disclosure of cash flow information: Cash paid for: Interest $2,398,000 $1,004,000 $1,822,000 Income taxes $13,060,000 $3,100,000 $— Supplemental disclosures of non-cash investing and financing activities: Structured settlements — $30,436,000 — Other debt — CBC — $23,363,000 — Retirement of treasury stock — $17,505,000 — See notes to accompanying consolidated financial statements F-7Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE A — T HE C OMPANY AND ITS S IGNIFICANT A CCOUNTING P OLICIES[1] The Company:Asta Funding, Inc., together with its wholly owned significant operating subsidiaries Palisades Collection LLC, Palisades Acquisition XVI, LLC (“PalisadesXVI”), VATIV Recovery Solutions LLC (“VATIV”), ASFI Pegasus Holdings, LLC (“APH”), Fund Pegasus, LLC (“Fund Pegasus”), GAR Disability Advocates,LLC (“GAR Disability Advocates”) and other subsidiaries, not all wholly owned (the “Company”, “we” or “us”), is engaged in several business segments in thefinancial services industry including structured settlements through our 80% owned subsidiary CBC Settlement Funding, LLC, funding of personal injury claims,through our 80% owned subsidiary Pegasus Funding, LLC, social security and disability advocates through our wholly owned subsidiary GAR DisabilityAdvocates , LLC and the business of purchasing, managing for its own account and servicing distressed consumer receivables, including charged off receivables,and semi-performing receivables.Consumer receivablesThe Company started out in the consumer receivable business in 1994. Recently, our effort has been in the international areas, as we have curtailed ouractive purchasing of consumer receivables in the United States. We define consumer receivables as primary charged-off, semi-performing and distressed dependingon their collectability. We acquire these consumer receivables at substantial discounts to their face values, based on the characteristics of the underlying accounts ofeach portfolio.Personal injury claimsPegasus conducts its business solely in the United States. Pegasus obtains its business from external brokers and internal sales professionals solicitingindividuals with personal injury claims. Business is also obtained from the Pegasus web site and through attorneys.Structured settlementsCBC purchases structured settlement and annuity policies through privately negotiated direct consumer purchases and brokered transactions across theUnited States. CBC funds the purchases primarily from cash, and its securitized debt, issued through its BBR subsidiaries. Blue Bell Receivables I, LLC (“BBR I”),Blue Bell Receivables II, LLC (“BBR II”), Blue Bell Receivables III, LLC (“BBR III”), Blue Bell Receivables IV, LLC (“BBR IV”) and Blue Bell Receivables V,LLC (BBR V”), collectively the “Blue Bell Entities,” are variable interest entities (“VIEs”). CBC is considered the primary beneficiary because its has the power todirect the significant activities of the VIEs via its ownership and service contract. It also has the rights to receive benefits from the collections that exceed thepayments to the note holders.Social security benefit advocacyGAR Disability Advocates provides its disability advocacy services throughout the United States. It relies upon search engine optimization (“SEO”) to bringawareness to its intended market.The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) andindustry practices.[2] Liquidity:Consumer receivablesThe Company’s cash requirements have been and will continue to be significant. In the past, we have depended upon external financing to acquire consumerreceivables, fund operating expenses, interest and income taxes. If approved, the payment of dividends is also a significant use of cash. We have depended solelyon operating cash flow to fund the acquisition of portfolios, pay operating expenses, dividends, and taxes. Net collections decreased $3.5 million or 8.7% from$40.2 million in fiscal year 2014 to $36.7 million in fiscal year F-8Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE A — T HE C OMPANY AND ITS S IGNIFICANT A CCOUNTING P OLICIES (C ONTINUED )[2] Liquidity (Continued): 2015. Although the Company’s collections decreased from the prior year, the Company believes its net cash collections over the next twelve months, coupled withits current liquid cash balances, will be sufficient to cover its operating expenses.Personal Injury ClaimsOn December 28, 2011, we formed a joint venture Pegasus Funding, LLC (“Pegasus”) with Pegasus Legal Funding, LLC (“PLF”). Pegasus purchasesinterests in personal injury claims from claimants who are a party to a personal injury litigation with the expectation of a settlement in the future. Pegasus advancesto each claimant funds on a non-recourse basis at an agreed upon interest rate in anticipation of a future settlement. The interest purchased by Pegasus in each claimwill consist of the right to receive from such claimant part of the proceeds or recoveries which such claimant receives by reason of a settlement, judgment or awardwith respect to such claimant’s claim. The profits from the joint venture are distributed based on the ownership percentage of the parties — Asta Funding, Inc. 80%and PLF, 20%. Funding for the business comes from internally-generated revenue and the Company.Structured SettlementsOn December 31, 2013, the Company acquired 80% ownership of CBC and its affiliate, CBC Management Services, LLC for approximately $5.9 million. Atthe closing, the operating principals of CBC, William J. Skyrm, Esq. and James Goodman, were each issued a 10% interest in CBC. In addition, the Company hasagreed to provide financing to CBC of up to $5 million. Through the transaction we acquired debt that totaled $23 million consisting of $9.6 million of a revolvingline of credit with a financial institution and $13.8 million of non-recourse notes issued by CBC’s subsidiaries. As of September 30, 2015, the debt approximated$51.6 million. On September 30, 2015, CBC completed its fifth private placement backed by structured settlements and fixed annuity payments. CBC issuedthrough its subsidiary, BBRV, LLC, approximately $16.6 million of fixed rate asset-backed notes with a yield of 5.1%. On March 1, 2015 CBC entered into the 9th amendment of the agreement with a new maturity date of March 1, 2017, increased the credit to $25.0 million and lowered the floor to 4.1%. On November 26,2014, CBC announced the completion of its fourth private placement, backed by structured settlement and fixed annuity payments. CBC issued, through itssubsidiary, BBR IV, LLC, approximately $20.8 million of fixed rate asset-backed notes with a yield of 5.4%.Disability AdvocatesFunding for the GAR Disability Advocates business is from the Company and internally-generated revenues.[3] Principles of consolidation:The consolidated financial statements include the accounts of the Company and its wholly owned and majority owned subsidiaries. All significantintercompany balances and transactions have been eliminated in consolidation.Palisades XVI is a variable interest entity (“VIE”). Asta Funding, Inc. is considered the primary beneficiary because it has the power to direct the significantactivities of the VIE via its ownership and service contract. Palisades XVI holds the Great Seneca portfolio of $10.5 million as of September 30, 2015. See Note I— Debt, Non-Recourse Debt — Bank of Montreal for additional details. F-9Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE A — T HE C OMPANY AND ITS S IGNIFICANT A CCOUNTING P OLICIES (C ONTINUED )[3] Principles of consolidation (Continued): Blue Bell Receivables I, LLC, Blue Bells Receivables II, LLC, Blue Bell Receivables III, LLC, Blue Bell Receivables IV, LLC and Blue Bell Receivables V,LLC (the “Blue Bell Entities”) are VIEs. CBC is considered the primary beneficiary because it has the power to direct the significant activities of the VIEs via itsownership and service contract. It also has the rights to receive benefits from the collections that exceed the payments to the note holders. The Blue Bell Entitiesheld structured settlements of $64.6 million and non-recourse notes payable of $47.0 million as of September 30, 2015.[4] Concentration of Credit Risk — Cash:The Company considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents.Cash balances are maintained at various depository institutions and are insured by the Federal Deposit Insurance Corporation (“FDIC”). The Company hadcash balances with 12 banks that exceeded the balance insured by the FDIC by approximately $20.8 million at September 30, 2015. The Company does not believeit is exposed to any significant credit risk for cash.[5] Available-for-Sale Investments:Investments that the Company intends to hold for an indefinite period of time, but not necessarily to maturity, are classified as available-for-sale and arecarried at fair value. Unrealized gains and losses on available-for-sale securities are determined using the specific-identification method.Declines in the fair value of individual available-for-sale securities below their respective costs that are other than temporary will result in write-downs of theindividual securities to their fair value. Factors affecting the determination of whether an other-than-temporary impairment has occurred include: a downgrading ofthe security by a rating agency, a significant deterioration in the financial condition of the issuer, or that management would not have the ability to hold a securityfor a period of time sufficient to allow for any anticipated recovery in fair value.[6] Income recognition, Impairments and Accretable yield adjustments:Income RecognitionThe Company accounts for certain of its investments in finance receivables using the guidance of FASB Accounting Standards Codification (“ASC”),Receivables — Loans and Debt Securities Acquired with Deteriorated Credit Quality, (“ASC 310”). Under the guidance of ASC 310, static pools of accounts areestablished. 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 therecognition of income, principal payments and loss provision. Effective October 1, 2013, due to the substantial reduction of portfolios reported under the interestmethod, and the ability to reasonably estimate cash collections required to account for those portfolios under the interest method the Company concluded the costrecovery method is the appropriate accounting method under the circumstances.Although the Company has switched to the cost recovery method on its current inventory of portfolios, the Company must still analyze a portfolio uponacquisition and once a static pool is established for a quarter, individual receivable accounts are not added to the pool (unless replaced by the seller) or removedfrom the pool (unless sold or returned to the seller). F-10Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE A — T HE C OMPANY AND ITS S IGNIFICANT A CCOUNTING P OLICIES (C ONTINUED )[6] Income recognition, Impairments and Accretable yield adjustments (Continued): The Company uses the cost recovery method when collections on a particular pool of accounts cannot be reasonably predicted. Under the cost recoverymethod, 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 balancesheet) while still generating cash collections. In this case, all cash collections are recognized as revenue when received.The Company accounts for its investments in personal injury claims at an agreed upon interest rate, in anticipation of a future settlement. The interestpurchased by Pegasus in each claim will consist of the right to receive from such claimant part of the proceeds or recoveries which such claimant receives byreason of a settlement, judgment or reward with respect to such claimant’s claim. Open case revenue is estimated, recognized and accrued at a rate based on theexpected realization and underwriting guidelines and facts and circumstances for each individual case. These personal injury claims are non-recourse. When a caseis closed and the cash is received for the advance provided to a claimant, revenue is recognized based upon the contractually agreed upon interest rate, and, ifapplicable, adjusted for any changes due to a settled amount and fees charged to the claimant.The funding of matrimonial actions is on a non-recourse basis. Revenue from matrimonial actions is recognized under the cost recovery method.CBC purchases periodic payments under structured settlements and annuity policies from individuals in exchange for a lump sum payment. The Companyelected to carry structured settlements at fair value. Unearned income on structured settlements is recognized as interest income using the effective interest methodover the life of the related settlement. Changes in fair value are recorded in unrealized gain (loss) in structured settlements in our statements of income.The Company recognizes revenue for GAR Disability Advocates when cases close and fees are collected.Impairments and accretable yield adjustmentsThe Company accounts for its impairments in accordance with ASC 310, which provides guidance on how to account for differences between contractualand 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, tocredit quality. The recognition of income under ASC 310 is dependent on the Company having the ability to develop reasonable expectations of both the timing andamount of cash flows to be collected. In the event the Company cannot develop a reasonable expectation as to both the timing and amount of cash flows expectedto be collected, ASC 310 permits the change to the cost recovery method. The Company will recognize income only after it has recovered its carrying value.If collection projections indicate the carrying value will not be recovered, an impairment is required. The impairment will be equal to the difference betweenthe carrying value at the time of the forecast and the corresponding estimated remaining future collections.Increases in expected cash flows are recognized prospectively through an adjustment of the internal rate of return (“accretable yield adjustments”), whiledecreases in expected cash flow are recognized as impairments.As the Company switched to the cost recovery method at the very beginning of fiscal year 2014, there were no accretable yield adjustments recorded in thefiscal years ended September 30, 2015 and 2014. Accretable yield adjustments were $0.6 million in fiscal year 2013.The Company believes it has significant experience in acquiring certain distressed consumer receivable portfolios at a significant discount to the amountactually owed by underlying customers. The Company invests F-11Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE A — T HE C OMPANY AND ITS S IGNIFICANT A CCOUNTING P OLICIES (C ONTINUED )[6] Income recognition, Impairments and Accretable yield adjustments (Continued): in these portfolios only after both qualitative and quantitative analyses of the underlying receivables are performed and a calculated purchase price is paid so that itbelieves its estimated cash flow offers an adequate return on acquisition costs after servicing expenses. Additionally, when considering larger portfolio purchases ofaccounts, or portfolios from issuers with whom the Company has limited experience, it has the added benefit of soliciting its third party collection agencies andattorneys for their input on liquidation rates and, at times, incorporates such input into the estimates it uses for its expected cash flows.[7] Commissions and fees:Commissions and fees are the contractual commissions earned by third party collection agencies and attorneys, and direct costs associated with the collectioneffort- generally court costs. The Company expects to continue to purchase portfolios and utilize third party collection agencies and attorney networks.[8] Furniture, equipment and leasehold improvements:Furniture and equipment is stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets (5 to 7 years).Amortization on leasehold improvements is provided by the straight line-method of the remaining life of the respective lease. An accelerated depreciation methodis used for tax purposes.[9] Income taxes:Deferred federal and state taxes arise from (i) recognition of finance income collected for tax purposes, but not yet recognized for financial reporting;(ii) provision for impairments/credit losses, all resulting in timing differences between financial accounting and tax reporting; (iii) amortization of leaseholdimprovements resulting in timing differences between financial accounting and tax reporting; (iv) stock based compensation; and (v) partnership investments.[10] 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 computedby dividing net income by the weighted average shares outstanding, assuming all dilutive potential common shares were issued. The assumed proceeds from theexercise of dilutive options are calculated using the treasury stock method based on the average market price for the period. F-12Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE A — T HE C OMPANY AND ITS S IGNIFICANT A CCOUNTING P OLICIES (C ONTINUED )[10] Net income per share (Continued): The following table presents the computation of basic and diluted per share data for the fiscal years ended September 30, 2015, 2014 and 2013: 2015 2014 2013 Net Income Weighted Average Shares Per Share Amount Net Income Weighted Average Shares Per Share Amount Net Income Weighted Average Shares Per Share Amount Basic $2,016,000 13,044,215 $0.15 $5,901,000 12,981,076 $0.45 $2,009,000 12,952,150 $0.16 Dilutive effect of stock options 270,390 0.00 224,857 0.00 263,901 (0.01) Diluted $2,016,000 13,314,605 $0.15 $5,901,000 13,205,933 $0.45 $2,009,000 13,216,051 $0.15 At September 30, 2015, 418,962 options at a weighted average exercise price of $9.57 were not included in the diluted earnings per share calculation as theywere anti-dilutive. At September 30, 2014, 960,559 options at a weighted average exercise price of $12.12 were not included in the diluted earnings per sharecalculation as they were anti-dilutive. At September 30, 2013, 606,332 options at a weighted average exercise price of $8.01 were not included in the dilutedearnings per share calculation as they were anti-dilutive.[11] Use of estimates:The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management tomake estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses during the reporting period. With respect to income recognition the Company takes intoconsideration the relative credit quality of the underlying receivables constituting the portfolio acquired, the strategy involved to maximize the collections thereof,the time required to implement the collection strategy as well as other factors to estimate the anticipated cash flows. Actual results could differ from those estimatesincluding management’s estimates of future cash flows and the resultant allocation of collections between principal and interest resulting therefrom. Downwardrevisions to estimated cash flows will result in impairments.[12] Stock-based compensation:The Company accounts for stock-based employee compensation under FASB ASC 718, Compensation — Stock Compensation , (“ASC 718”). ASC 718requires that compensation expense associated with stock options and vesting of restricted stock awards be recognized in the statement of income.[13] Impact of Recently Issued Accounting Standards:In May 2014, the FASB issued an update to ASC 606, “Revenue from Contracts with Customers,” that will supersede virtually all existing revenue guidance.Under this update, an entity is required to recognize revenue upon transfer of promised goods or services to customers, in an amount that reflects the entitledconsideration received in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing, and uncertaintyof revenue and cash flows arising from the customer contracts. This update is effective for annual reporting periods beginning after December 15, 2017 includinginterim periods F-13Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE A — T HE C OMPANY AND ITS S IGNIFICANT A CCOUNTING P OLICIES (C ONTINUED )[13] Impact of Recently Issued Accounting Standards (Continued): within that reporting period. Early application is permitted for annual reporting periods beginning after December 15, 2016. We are currently evaluating the impactthis update will have on our consolidated financial statements as well as the expected adoption method.In June 2014, the FASB issued ASU 2014-11, “Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, andDisclosures.” The amendments in this ASU require two accounting changes. First, the amendments in this ASU change the accounting for repurchase-to maturitytransactions to secured borrowing accounting. Second, for repurchase financing arrangements, the amendments require separate accounting for a transfer of afinancial asset executed contemporaneously with a repurchase agreement with the same counterparty, which will result in secured borrowing accounting for therepurchase agreement. This ASU also includes new disclosure requirements. The accounting changes in this Update are effective for public business entities for thefirst interim or annual period beginning after December 15, 2014. An entity is required to present changes in accounting for transactions outstanding on theeffective date as a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. Earlier application for a public business entity isprohibited. The Company reviewed this ASU and determined that it did not have a material impact on its consolidated financial statements.In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis,” which amends theconsolidation requirements in ASC 810. This update is effective for public business entities for the first interim period in the first annual period beginning afterDecember 15, 2015. We are currently reviewing this ASU to determine if it will have an impact on our consolidated financial statements.In May 2015, the FASB issued ASU 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities that Calculate NetAsset Value per Share (or Its Equivalent)”. The amendments apply to reporting entities that elect to measure the fair value of an investment using the net assetvalue (“NAV”) per share (or its equivalent) practical equivalent. The amendments remove the requirement to categorize within the fair value hierarchy allinvestments for which fair value is measured using the NAV per share practical expedient. The amendments in this ASU are effective for reporting periodsbeginning after December 15, 2015, with early adoption permitted. The Company has reviewed this ASU and has elected to early adopt these amendments in thequarter ending December 31, 2014 and has removed certain investments that are measured using the NAV practical expedient from the fair value hierarchy in allperiods presented in the Company’s consolidated financial statements.[14] Foreign Currency TranslationThe U.S. dollar is the functional currency for the majority of our business. For local currency functional locations, assets and liabilities are translated at end-of-period rates while revenues and expenses are translated at average rates in effect during the period. Equity is translated at historical rates and the resultingcumulative translation adjustments are included as a component of accumulated other comprehensive income.[15] Reclassifications:Certain items in the years ended September 30, 2014 and 2013 in the consolidated financial statements have been reclassified to conform to the currentyear’s presentation, primarily related to certain statement of income items. F-14Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014 N OTE B — A VAILABLE - FOR -S ALE I NVESTMENTSMutual funds investments classified as available-for-sale at September 30, 2015 and 2014 consist of the following: Amortized Cost Unrealized Gains Unrealized Losses Fair Value 2015 $60,069,000 $98,000 $(440,000) $59,727,000 2014 $66,559,000 $411,000 $(171,000) $66,799,000 The available-for-sale investments did not have any contractual maturities. The Company sold four investments during the year ended September 30, 2015,with an aggregate realized loss of $155,000. Additionally, the Company received $234,000 in capital gains distributions during fiscal year 2015. The Company soldfive investments in fiscal year 2014, resulting in an aggregate realized loss of approximately $143,000. Additionally, the Company received $186,000 in capitalgains distributions during fiscal year 2014. The realized gains and losses are all included as part of other income.At September 30, 2015, there were six investments, four of which were in an unrealized loss position. Three of the four investments had unrealized lossesexisting for more than 12 months and one of the four for 12 months or less. At September 30, 2014, there were six investments, four of which were in an unrealizedloss position. However, the Company was in an aggregate gain position, as the unrealized gain of the remaining two investments more than offset the unrealizedloss of the four investments. All of these securities were considered to be acceptable credit risks. Based on the evaluation of the available evidence at that time,including changes in market rates and credit rating information, management believed that any decline in fair value for these instruments would be temporary. Inaddition, management had the ability but did not believe it would be required to sell those investment securities for a period of time sufficient to allow for ananticipated recovery or maturity. Should the impairment of any of those securities become other than temporary, the cost basis of the investment will be reducedand the resulting loss recognized in net income in the period in which the other-than-temporary impairment were identified.Unrealized holding gains and losses on available-for-sale securities are included in other comprehensive income within stockholders’ equity. Realized gains(losses) on available-for-sale securities are included in other income and, when applicable, are reported as a reclassification adjustment in other comprehensiveincome.N OTE C — C ONSUMER R ECEIVABLES A CQUIRED F OR L IQUIDATIONAccounts acquired for liquidation are stated at their net estimated realizable value and consist primarily of defaulted consumer loans to individuals primarilythroughout the United States.The Company may account for its investments in consumer receivable portfolios, using either: • the interest method; or • the cost recovery method.Prior to October 1, 2013 the Company accounted for certain of its investments in finance receivables using the interest method in accordance with theguidance of ASC 310-30. Under the guidance of ASC 310-30, static pools of accounts are established. These pools are aggregated based on certain common riskcriteria. 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. EffectiveOctober 1, 2013, due to the substantial reduction of portfolios reported under the interest method, and the ability to reasonably estimate cash collections required toaccount for those portfolios under the interest method, the Company concluded the cost recovery method is the appropriate accounting method in thecircumstances. F-15Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE C — C ONSUMER R ECEIVABLES A CQUIRED F OR L IQUIDATION (C ONTINUED ) Although the Company has switched to the cost recovery method on its current inventory of portfolios, the Company must still analyze a portfolio uponacquisition to ensure which method is appropriate, and 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).The Company uses the cost recovery method when collections on a particular pool of accounts cannot be reasonably predicted. Under the cost recoverymethod, 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 balancesheet) while still generating cash collections. In this case, all cash collections are recognized as revenue when received.The Company has extensive liquidating experience is in the field of distressed credit card receivables, telecommunication receivables, consumer loanreceivables, retail installment contracts, consumer receivables, and auto deficiency receivables.The Company aggregates portfolios of receivables acquired sharing specific common characteristics which were acquired within a given quarter. In addition,the Company uses a variety of qualitative and quantitative factors to estimate collections and the timing thereof. The Company obtains and utilizes, as appropriate,input, including but not limited to, monthly collection projections and liquidation rates, from third party collection agencies and attorneys, as further evidentiarymatter, to assist in evaluating and developing collection strategies and in evaluating and modeling the expected cash flows for a given portfolio.The following tables summarize the changes in the balance sheet account of consumer receivables acquired for liquidation during the following periods: For the Year Ended September 30, 2015 Interest Method Cost Recovery Method Total Balance beginning of period $ — $29,444,000 $29,444,000 Acquisition of receivable portfolios — 2,110,000 2,110,000 Net cash collections from collection of consumer receivables acquired forliquidation — (36,361,000) (36,361,000) Net cash collections represented by account sales of consumer receivablesacquired for liquidation — (79,000) (79,000) Impairment — — — Effect of foreign currency translation — (263,000) (263,000) Finance income recognized — 20,757,000 20,757,000 Balance, end of period $— $15,608,000 $15,608,000 Finance income as a percentage of collections 0% 57.0% 57.0% F-16Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE C — C ONSUMER R ECEIVABLES A CQUIRED F OR L IQUIDATION (C ONTINUED ) For the Year Ended September 30, 2014 Interest Method Cost Recovery Method Total Balance beginning of period $13,121,000 $51,133,000 $64,254,000 Reclassification of interest method portfolios to cost recovery method (13,121,000) 13,121,000 — Acquisition of receivable portfolios — 5,078,000 5,078,000 Net cash collections from collection of consumer receivables acquired forliquidation — (40,048,000) (40,048,000) Net cash collections represented by account sales of consumer receivablesacquired for liquidation — (114,000) (114,000) Impairment — (19,591,000) (19,591,000) Finance income recognized — 19,865,000 19,865,000 Balance, end of period $— $29,444,000 $29,444,000 Finance income as a percentage of collections 0% 49.5% 49.5% Accretable yield represents the amount of income the Company can expect to generate over the remaining amortizable life of its existing portfolios based onestimated future net cash flows as of September 30, 2014. The Company adjusted the accretable yield upward when it believes, based on available evidence, thatportfolio collections will exceed amounts previously estimated. There were no accretable yield adjustments in fiscal years 2015 and 2014. As the Companytransferred the then remaining interest method portfolios to the cost recovery method in fiscal year 2014, there is no remaining projected accretable finance income.The accretable yield schedules for the fiscal year ended September 2014 is as follows: Year Ended September 30, 2014 Balance at beginning of period, October 1, 2013 $7,679,000 Transfer to cost recovery (7,679,000) Balance at end of period, September 30, 2014 $0 During the year ended September 30, 2015, the Company purchased $28.0 million in face value receivables at a cost of $2.1 million. During the year endedSeptember 30, 2014, the Company purchased $478.9 million in face value receivables at cost of $5.1 million. F-17Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE C — C ONSUMER R ECEIVABLES A CQUIRED F OR L IQUIDATION (C ONTINUED ) The following table summarizes collections received by the Company’s third-party collection agencies and attorneys, less commissions and direct costs forthe years ended September 30, 2015, 2014 and 2013, respectively. For the Years Ended September 30, 2015 2014 2013 Gross collections(1) $56,195,000 $67,913,000 $85,512,000 Less: commissions and fees(2) 19,755,000 27,751,000 31,415,000 Net collections $36,440,000 $40,162,000 $54,097,000 (1)Gross collections include collections from third-party collection agencies and attorneys, collections from in-house efforts and collections represented byaccount sales. (2)Commissions and fees are the contractual commissions earned by third party collection agencies and attorneys, and direct costs associated with the collectioneffort, generally court costs. Includes a 3% fee charged by a servicer on gross collections in connection with the Portfolio Purchase. Such arrangement wasconsummated in December 2007. The fee is charged for asset location, skip tracing and ultimately suing debtors in connection with this portfolio purchase.Finance income recognized on net collections represented by account sales was $0.1 million for the fiscal years ended September 30, 2015 and 2014, and$1.8 million for the fiscal year ended September 30, 2013.N OTE D — A CQUISITION OF CBCOn December 31, 2013, the Company acquired 80% ownership of CBC and its affiliate, CBC Management Services, LLC, for approximately $5.9 million.In addition, the Company will provide financing to CBC of up to $5 million. The 20% non-controlling interests are held by two of the original owners of CBC. Thefair value of non-controlling interests at the acquisition date was determined to be immaterial. The non-controlling interests will not be entitled to any distributionsfrom CBC until the Company receives distributions of $2,337,190. The non-controlling interests are entitled to two of the five seats of CBC’s Board of Managersand have the right to approve certain material transactions of CBC. The non-controlling interest owners are employed by CBC. If the employment is terminated,other than for cause, CBC could be required to purchase their membership interest in CBC. If the employment is terminated for any other reason, CBC has the rightto purchase their non-controlling interests. The purchase price would be determined by a third party appraiser and is payable over a period of time. The fair value ofthe put right was determined to be $0 at December 31, 2013. No re-measurement is required at September 30, 2015 as it is not probable that the put option willbecome redeemable. The acquisition provided the Company with the opportunity to further diversify its portfolio. F-18Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE D — A CQUISITION OF CBC (C ONTINUED ) CBC purchases periodic structured settlements and annuity policies from individuals in exchange for a lump sum payment. The Company accounted for thispurchase in accordance with ASC Topic 805 “Business Combinations”. Under this guidance, an entity is required to recognize the assets acquired and liabilitiesassumed and the consideration given at their fair value on the acquisition date. The following table summarizes the fair value of the assets acquired and theliabilities assumed as of the December 31, 2013 acquisition date: Cash $351,000 Structured settlements 30,436,000 Other assets 11,000 Other liabilities (356,000)Other debt (see Note J: Other debt — CBC (including non-recourse notes payable amounting to $13.8 million) (25,863,000) Total identifiable net assets acquired 4,579,000 Goodwill (see Note H: Goodwill) 1,360,000 Purchase Price $5,939,000 As the transaction was consummated on December 31, 2013, there were no actual operational results that were attributable to the Company in the firstquarter of fiscal year 2014 and the comparable period of fiscal years 2013. Total revenues, as reported, for the fiscal year ended September 30, 2014, were$32,207,000. On a pro forma basis, total revenues for the fiscal year ended September 30, 2014 would have been $33,842,000. Net income attributable to AstaFunding, Inc., as reported, for the fiscal year ended September 30, 2014, was $5,901,000. On a pro forma basis, net income attributable to Asta Funding, Inc. forthe fiscal year ended September 30, 2014 would have been $5,943,000. Total revenues, as reported, for the fiscal years ended September 30, 2013 was$38,200,000. On a pro forma basis, total revenues for the same prior year period would have been $42,544,000. Net income attributable to Asta Funding, Inc., asreported, for the fiscal year ended September 30, 2013 was $2,009,000. On a pro forma basis, net income attributable to Asta Funding, Inc. would have been$2,378,000 for the same prior year period.N OTE E — S TRUCTURED S ETTLEMENTS ( AT F AIR V ALUE )CBC purchases periodic payments under structured settlements and annuity policies from individuals in exchange for a lump sum payment. The Companyelected to carry the structured settlements at fair value. Unearned income on structured settlements is recognized as interest income using the effective interestmethod over the life of the related structured settlement. Changes in fair value are recorded in unrealized gain (loss) on structured settlements in the Company’sstatements of income. Unrealized gains on structured settlements is comprised of both unrealized gains resulting from fair market valuation at the date ofacquisition of the structured settlements and the subsequent fair value adjustments resulting from the change in the discount rate. Of the $7.1 million of unrealizedgains recognized in the fiscal year ended September 30, 2015, approximately $7.1 million is due to day one gains on new structured settlements financed during theperiod, $1.8 million due to a change in the discount rate, offset by a decrease of $1.8 million in realized gains recognized as realized interest income on structuredsettlements during the period. There were no other changes in assumptions during the period.We elected the fair value treatment under ASC 825-10-50-28 through 50-32 to be transparent to the user regarding the underlying fair value of the structuredsettlement which collateralizes the debt of CBC. The Com- F-19Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE E — S TRUCTURED S ETTLEMENTS ( AT F AIR V ALUE ) (C ONTINUED ) pany believes any change in fair value is driven by market risk as opposed to credit risk associated with the underlying structured settlement annuity issuer.The purchased personal injury structured settlements result in payments over time through an annuity policy. Most of the annuities acquired involveguaranteed payments with specific defined ending dates. CBC also purchases a small number of life contingent annuity payments with specific ending dates but theactual payments to be received could be less due to the mortality risk associated with the measuring life. CBC records a provision for loss each period. The lifecontingent annuities are not a material portion of assets at September 30, 2015 and revenue for the fiscal year ended September 30, 2015.Structured settlements consist of the following as of September 30, 2015 and 2014: September 30, 2015 September 30, 2014 Maturity(1)(2) $99,135,000 $64,852,000 Unearned income (34,500,000) (22,773,000) Net carrying value $64,635,000 $42,079,000 (1)The maturity value represents the aggregate unpaid principal balance at September 30, 2015 and 2014. (2)There are no amounts of structured settlements that are past due, or in nonaccrual status at September 30, 2015 and 2014.Encumbrances on structured settlements as of September 30, 2015 and 2014 are as follows: September 30, 2015 September 30, 2014 Notes payable secured by settlement receivables with principal and interest outstanding payable untilJune 2025(1) $2,270,000 $2,521,000 Notes payable secured by settlement receivables with principal and interest outstanding payable untilAugust 2026(1) 4,713,000 5,363,000 Notes payable secured by settlement receivables with principal and interest outstanding payable untilApril 2032(1) 4,497,000 4,828,000 Notes payable secured by settlement receivables with principal and interest outstanding payable untilFebruary 2037(1) 20,147,000 — Notes payable secured by settlement receivables with principal and interest outstanding payable untilMarch 30, 2034(1) 15,361,000 — Revolving line of credit — $25,000,000 at September 30, 2015 and $22,000,000 at September 30,2014(1) 4,623,000 19,583,000 Encumbered structured settlements 51,611,000 32,295,000 Structured settlements not encumbered 13,024,000 9,784,000 Total structured settlements $64,635,000 $42,079,000 (1)See Note J — Other Debt — CBC F-20Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE E — S TRUCTURED S ETTLEMENTS ( AT F AIR V ALUE ) (C ONTINUED ) At September 30, 2015, the expected cash flows of structured settlements based on maturity value are as follows: September 30, 2016 $7,363,000 September 30, 2017 7,428,000 September 30, 2018 5,918,000 September 30, 2019 6,257,000 September 30, 2020 5,637,000 Thereafter 66,532,000 Total $99,135,000 N OTE F — L ITIGATION F UNDINGPersonal Injury ClaimsOn December 28, 2011, the Company entered into a joint venture with Pegasus Legal Funding, LLC (“PLF”) in the operating subsidiary of Pegasus. Pegasuspurchases interests in claims from claimants who are a party to personal injury litigation. Pegasus advances, to each claimant, funds, on a non-recourse basis at anagreed upon interest rate, in anticipation of a future settlement. The interest in each claim purchased by Pegasus consists of the right to receive, from such claimant,part of the proceeds or recoveries which such claimant receives by reason of a settlement, judgment or award with respect to such claimant’s claims. The Company,through Pegasus, earned $8.5 million in interest and fees during fiscal year 2015 compared to $7.1 million and $6.4 during fiscal years 2014 and 2013, respectively.The Company had a net invested balance in personal injury claims of $36.7 million and $32.4 million on September 30, 2015 and 2014, respectively. Pegasusrecords reserves for bad debts, which, at September 30, 2015 and 2014 amounted to $5.5 million, and $2.5 million, respectively, as follows: For the Years Ended September 30, 2015 2014 Balance at beginning of period $2,474,000 $2,248,000 Provisions for losses 3,789,000 1,707,000 Write offs (804,000) (1,481,000) Balance at end of period $5,459,000 $2,474,000 Matrimonial ClaimsOn May 18, 2012, the Company formed BP Case Management, LLC (“BPCM”), a joint venture with California-based Balance Point Divorce Funding, LLC(“BP Divorce Funding”). BPCM provides non-recourse funding to a spouse in a matrimonial action. The Company provided a $1.0 million revolving line of creditto partially fund BPCM’s operations, with such loan bearing interest at the prevailing prime rate, with an initial term of twenty-four months. In September 2014, theagreement was revised to extend the term of the loan to August 2016, increase the credit line to $1.5 million and include a personal guarantee of the principal of BPDivorce Funding. The loan balance at September 30, 2015 was approximately $1.5 million. The revolving line of credit is collateralized by BP Divorce Funding’sprofits share in BPCM and other assets. As of September 30, 2015, the Company’s investment in cases through BPCM was approximately $2.6 million. TheCompany recognized no income during fiscal years 2015 and 2014 compared to $34,000 during fiscal year 2013. F-21Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014 N OTE G — F URNITURE AND E QUIPMENTFurniture and equipment as of September 30, 2015 and 2014 consist of the following: 2015 2014 Furniture $414,000 $323,000 Equipment 3,622,000 3,622,000 Software 1,210,000 1,211,000 Leasehold improvements 99,000 99,000 5,345,000 5,255,000 Less accumulated depreciation 4,865,000 4,499,000 $480,000 $756,000 Depreciation expense for the years ended September 30, 2015, 2014 and 2013 aggregated $366,000, $363,000, and $440,000, respectively.N OTE H — G OODWILLGoodwill represents the excess of the purchase price of an acquired business over the fair value of amounts assigned to assets acquired and liabilitiesassumed. Goodwill is reviewed for impairment if events or circumstances indicate that impairment may be present. Any excess in carrying value over the estimatedfair value is recorded as impairment loss and charged to results of operations in the period such determination is made. For each of the fiscal years endedSeptember 30, 2015 and 2014, management has determined that there was no impairment loss required to be recognized in the carrying value of goodwill.The goodwill balances at September 30, 2015 and 2014 are as follows: 2015 2014 Balance at beginning of period $2,770,000 $1,410,000 Goodwill from acquisition (see Note D: Acquisition of CBC) — 1,360,000 Balance at end of period $2,770,000 $2,770,000 N OTE I — N ON R ECOURSE D EBTNon-Recourse Debt — Bank of Montreal (“BMO”)In March 2007, Palisades XVI borrowed approximately $227 million under the Receivables Financing Agreement (“RFA”), as amended in July2007, December 2007, May 2008, February 2009, October 2010 and August 2013 from BMO, in order to finance a $300 million portfolio purchase in March 2007(the “Portfolio Purchase”). The original term of the agreement was three years. This term was extended by each of the Second, Third, Fourth and FifthAmendments and the most recent agreement signed in August 2013.On August 7, 2013, Palisades XVI, a 100% owned bankruptcy remote subsidiary, entered into a Settlement Agreement and Omnibus Amendment (the“Settlement Agreement”) with BMO as an amendment to the RFA. In consideration for a $15 million prepayment funded by the Company, BMO agreed tosignificantly reduce minimum monthly collection requirements and the interest rate. If and when BMO receives the next $15 million of collections from thePortfolio Purchase or from voluntary prepayments by Asta Funding, Inc., less certain credits for payments made prior to the consummation of the SettlementAgreement (the “Remaining Amount”), Palisades XVI and its affiliates would be automatically released from liability in connection with the RFA F-22Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE I — N ON R ECOURSE D EBT (C ONTINUED )Non-Recourse Debt — Bank of Montreal (“BMO”) (Continued) (subject to customary exceptions). A condition to the release was Palisade XVI’s agreement to grant BMO, as of the time of the payment of the RemainingAmount, the right to receive 30% of net collections from the Portfolio Purchase once Palisades XVI has received from future net collections, the sum of $15million plus voluntary prepayments included in the payment of the Remaining Amount (the “Income Interest”). The Company estimated the Income Interest to bebetween $0 and $1.4 million. However, the Company believes that no amount would be incurred because of the continued deterioration of collections from thePortfolio Purchase.On June 3, 2014, Palisades XVI paid the Remaining Amount. The final principal payment of $2,901,199 included a voluntary prepayment of $1,866,036provided from funds of the Company. Accordingly, Palisades XVI will be entitled to receive $16.9 million of future collections from the Portfolio Purchase beforeBMO is entitled to receive any payments with respect to its Income Interest.With the payment of the Remaining Amount and upon completion of the documents granting the Palisades XVI Income Interest, including a writtenconfirmation from BMO that the obligation has been paid in full, Palisades XVI has been released from further debt obligations from the RFA. The Company hasrecorded as other income, forgiveness of non-recourse debt, in the amount of approximately $26.1 million, pre-tax in the third quarter of fiscal year 2014.As of September 30, 2015, approximately $4.8 million remained to be received by the Company against the $16.9 million.Bank Hapoalim B.M. (“Bank Hapoalim”) Line of CreditOn May 2, 2014, the Company obtained a $20 million line of credit facility from Bank Hapoalim, pursuant to a Loan Agreement (the “Loan Agreement”)among the Company and its subsidiary, Palisades Collection, LLC, as borrowers (“the Borrowers”), and Bank Hapoalim, as agent and lender. The Loan Agreementprovides for a $20.0 million committed line of credit and an accordion feature providing an increase in the line of credit of up to $30 million, at the discretion of thelender. The facility is for a term of three years at an interest rate of either LIBOR plus 275 basis points or prime, at the Company’s option. The Loan Agreementincludes covenants that require the Company to maintain a minimum net worth of $150 million and pay an unused line fee. The facility is secured pursuant to aSecurity Agreement (“Security Agreement”) among the parties to the Loan Agreement, with property of the Borrowers serving as collateral. Since inception,through September 30, 2015, the Company has not used this facility.N OTE J — O THER D EBT — CBCThe Company assumed $25.9 million of debt related to the CBC acquisition (see Note D) on December 31, 2013. On the same date, the Company paid down$2.5 million of the debt. On March 27, 2014, CBC entered into the Sixth Amendment, whereby it increased its revolving line of credit from $12.5 million to $15.0million, the interest rate floor was reduced from 5.5% to 4.75% and the commitment was extended to February 28, 2015. The amendment also included changes incarrier concentration ratios and removal of the personal guarantees of the general managers and non-controlling interest partners. On July 15, 2014, CBC enteredinto the Seventh Amendment, extending the revolving line of credit to $20.0 million. On September 29, 2014, CBC entered into the Eighth Amendment, furtherextending the credit line to $22.0 million. On March 11, 2015, CBC entered into the Ninth Amendment. This amendment, effective March 1, 2015, extended thematurity date on its credit line from February 28, 2015 to March 1, 2017. Additionally, the credit line was increased from $22.0 million to $25.0 million and theinterest rate floor was decreased from 4.75% to 4.1%. Other terms and conditions were F-23Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE J — O THER D EBT — CBC (C ONTINUED ) materially unchanged. On November 26, 2014, CBC completed its fourth private placement, backed by structured settlement and fixed annuity payments. CBCissued, through its subsidiary, BBR IV, LLC, approximately $21.8 million of fixed rate asset-backed notes with a yield of 5.4%. On September 25, 2015, CBCcompleted its fifth private placement, backed by structured settlement and fixed annuity payments. CBC issued, through its subsidiary, BBR V, LLC,approximately $16.6 million of fixed rate asset-backed notes with a yield of 5.1%. As of September 30, 2015, the remaining debt amounted to $51.6 million, whichconsisted of $4.6 million drawdown from a line of credit from an institutional source and $47.0 million notes issued by entities 100%-owned and consolidated byCBC. These entities are bankruptcy-remote entities created to issue notes secured by structured settlements. The following table details the other debt atSeptember 30, 2015 and 2014: Interest Rate September 30, 2015 September 30, 2014 Notes payable secured by settlement receivables with principal and interestoutstanding payable until June 2025 8.75% $2,270,000 $2,521,000 Notes payable secured by settlement receivables with principal and interestoutstanding payable until August 2026 7.25% 4,713,000 5,363,000 Notes payable secured by settlement receivables with principal and interestoutstanding payable until April 2032 7.125% 4,497,000 4,828,000 Notes payable secured by settlement receivables with principal and interestoutstanding payable until February 2037 5.39% 20,147,000 — Notes payable secured by settlement receivables with principal and interestoutstanding payable until March 2034 5.07% 15,361,000 — Subtotal notes payable 46,988,000 12,712,000 $25,000,000 revolving line of credit expiring on March 1, 2017 4.1% 4,623,000 19,583,000 Total debt — CBC $51,611,000 $32,295,000 N OTE K — O THER L IABILITIESOther liabilities as of September 30, 2015 and 2014 are as follows: 2015 2014 Accounts payable and accrued expenses $3,394,000 $3,126,000 IRS interest payable (see Note L) 624,000 — Other 423,000 461,000 Total other liabilities $4,441,000 $3,587,000 F-24Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014 N OTE L — I NCOME T AXESThe components of the provision for income taxes for the years ended September 30, 2015, 2014 and 2013 are as follows: 2015 2014 2013 Current: Federal $6,875,000 $4,148,000 $561,000 Federal true up (34,000) 18,000 — Interest on IRS payment 624,000 7,465,000 4,166,000 561,000 Deferred: Federal (7,282,000) (1,620,000) 212,000 State 1,939,000 2,067,000 121,000 (5,343,000) 447,000 333,000 Provision for income taxes $2,122,000 $4,613,000 $894,000 The difference between the statutory federal income tax rate on the Company’s pre-tax income and the Company’s effective income tax rate is summarizedfor the years ended September 30, 2015, 2014 and 2013 as follows: 2015 2014 2013 Statutory federal income tax rate 34.0% 34.0% 34.0%State income tax, net of federal benefit 5.9 4.5 6.1 State tax rate change — 8.4 — Permanent difference in municipal interest (6.6) (3.3) (7.5)Permanent difference other — 0.2 (0.7)Federal prior year provision to return difference — 0.2 (2.1)Interest on IRS payment 12.9 — — Other (2.5) (2.2) (2.8) Effective income tax rate 43.7% 41.8% 27.0% F-25Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE L — I NCOME T AXES (C ONTINUED ) The Company recognized a net deferred tax asset of $12,279,000 and $6,786,000 as of September 30, 2015 and 2014, respectively. The components are asfollows: September 30, 2015 September 30, 2014 Deferred and accrued revenue $— $7,000 Impairments/bad debt reserves/prior period adjustments 1,752,000 915,000 Revenue recognition tax basis 9,911,000 — State tax net operating loss carryforward 6,684,000 9,958,000 Stock based compensation 3,062,000 2,814,000 Unrealized gain on structured settlements (3,644,000) (930,000)Depreciation, amortization and other 77,000 (249,000) Deferred income taxes 17,842,000 12,515,000 Deferred tax valuation allowance (5,563,000) (5,729,000) Deferred income taxes $12,279,000 $6,786,000 The Company files consolidated Federal and state income tax returns. Substantially all of the Company’s subsidiaries are single member limited liabilitycompanies and, therefore, do not file separate tax returns. Majority and minority owned subsidiaries file separate partnership tax returns. The expiration date forstate net operating loss (“NOL”) carryforwards (from September 30, 2009) is September 30, 2029. The New Jersey NOL carryforward balance as of September 30,2015 is approximately $87.9 million. Included in the Federal current tax provision is the effect of the recently concluded IRS audit, taking into consideration theadjustment effected in fiscal year 2013 for the tax periods 2009 through 2013, coupled with the Federal tax refund carryback claim resulting from the carryback ofthe current net operating loss. This current tax provision was offset by a deferred tax provision of the same amount because the IRS adjustment was temporary innature. There are no federal NOL carryforwards.The Company accounts for income taxes using the asset and liability method which requires the recognition of deferred tax assets and, if applicable, deferredtax liabilities, for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and, if applicable,liabilities. Additionally, the Company would adjust deferred taxes to reflect estimated tax rate changes, if applicable. The Company conducts periodic evaluationsto determine whether it is more likely than not that some or all of its deferred tax assets will not be realized. Among the factors considered in this evaluation areestimates of future earnings, the future reversal of temporary differences and the impact of tax planning strategies that the Company can implement, if warranted.The Company is required to provide a valuation allowance for any portion of our deferred tax assets that, more likely than not, will not be realized at September 30,2015. Based on this evaluation, the Company has a deferred tax asset valuation allowance of approximately $5.6 million as of September 30, 2015 as compared to$5.7 million reported on September 30, 2014. Although the carryforward period for state income tax purposes is up to twenty years, given the economic conditions,such economic environment could limit growth over a reasonable time period to realize the deferred tax asset. The Company determined the time period allowancefor carryforward is outside a reasonable period to forecast full realization of the deferred tax asset, therefore recognized the deferred tax asset valuation allowance.The Company continually monitors forecast information to ensure the valuation allowance is at the appropriate value. As required by FASB ASC 740, IncomeTaxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than notsustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largestbenefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. F-26Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE L — I NCOME T AXES (C ONTINUED ) Interest and penalties arising from uncertain tax positions are presented as a component of income taxes. $624,000 of interest was recognized in theCompany’s consolidated financial statements for 2015. On July 16, 2015, the Company made a payment to the IRS of approximately $13 million in anticipation ofthe conclusion of the examination by the IRS and in accordance with the notice of proposed adjustment, for the fiscal years September 30, 2009 throughSeptember 30, 2013. The adjustment is the result of a change in the accounting method for income tax purposes. Apart from the change in accounting method forincome tax purposes, there were no other material disallowances or adjustments to other items of income, deductions, and credits to the tax returns underexamination. The payment does not include approximately $624,000 of interest related to the tax year of the IRS adjustment, September 30, 2013, which has beenaccrued as of July 15, 2015, classified in the income tax line of the statements of income. The Company will be amending its federal tax return for the fiscal yearended September 30, 2014, to reflect the new accounting method for tax purposes. There is no state and local tax liability as a result of the federal tax examination,however the New Jersey state NOL was adjusted to reflect the current year and revised previous years results. On December 1, 2015 the Company receivednotification that the Congressional Joint Committee on Taxation completed its consideration on the income tax returns and took no exception to the conclusionsreached by the IRS.The Company does not have any uncertain tax positions.As a result of the IRS examination, the Company will amend its state tax returns for the same periods.N OTE M — C OMMITMENTS AND C ONTINGENCIESLeasesThe Company leases its facilities in (i) Englewood Cliffs, New Jersey, (ii) Houston, Texas, (iii) New York, New York and (iv) Conshohocken, Pennsylvania.The leases are operating leases, and the Company incurred related rent expense in the amounts of $967,000, $617,000 and $554,000 during the years endedSeptember 30, 2015, 2014 and 2013, respectively. The future minimum lease payments are as follows: YearEndingSeptember 30, 2016 $819,000 2017 677,000 2018 429,000 2019 434,000 2020 291,000 $2,650,000 ContingenciesIn the ordinary course of its business, the Company is involved in numerous legal proceedings. The Company regularly initiates collection lawsuits, using itsnetwork of third party law firms, against consumers. Also, consumers occasionally initiate litigation against the Company, in which they allege that the Companyhas violated a federal or state law in the process of collecting their account. The Company does not believe that these matters are material to its business andfinancial condition. The Company is not involved in any material litigation in which it was a defendant. F-27Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE M — C OMMITMENTS AND C ONTINGENCIES (C ONTINUED )Contingencies (Continued) The Company is fully cooperating with several state agencies in connection with subpoenas seeking information and/or documentation regarding businesspractices. The Company has not made any provision with respect to these matters in the financial statements because the Company does not believe that they arematerial to its business and financial condition.The Office of the Attorney General of the State of New York, Bureau of Consumer Frauds and Protection (“NYAG”) had conducted investigations into thedebt collection practices of several companies in the industry, including the Company. The Company cooperated with NYAG and, in April 2015, reached anAssurance of Discontinuation (“AOD”) that resolved NYAG’s concerns without admitting or denying any of NYAG’s allegations. The Company paid $100,000 toNew York State and has agreed to comply with debt collection laws and certain training and certification requirements. The AOD has not had a material impact onthe operating results of the Company.N OTE N — C ONCENTRATIONSAt September 30, 2015, approximately 38% of the Company’s portfolio face value was serviced by five collection organizations. The Company has servicingagreements in place with these five collection organizations, as well as all of the Company’s other third party collection agencies and attorneys that cover standardcontingency fees and servicing of the accounts.N OTE O — S TOCK O PTION P LANS2012 Stock Option and Performance Award PlanOn February 7, 2012, the Board of Directors adopted the Company’s 2012 Stock Option and Performance Award Plan (the “2012 Plan”), which wasapproved by the stockholders of the Company on March 21, 2012. The 2012 Plan replaces the Equity Compensation Plan (as defined below).The 2012 Plan provides the Company with flexibility with respect to equity awards by also providing for grants of stock awards (i.e., restricted orunrestricted), stock purchase rights and stock appreciation rights, in addition to the granting of stock options.The Company authorized 2,000,000 shares of Common Stock for issuance under the 2012 Plan. As of September 30, 2015, the Company has granted417,100 options and 117,321 shares of restricted stock since inception of the 2012 Plan. Additionally, 45,600 options have been cancelled during that time period,leaving 1,511,179 shares available as of September 30, 2015. As of September 30, 2015, approximately 95 of the Company’s employees were eligible to participatein the 2012 Plan.Equity Compensation PlanOn December 1, 2005, the board of directors adopted the Company’s Equity Compensation Plan (the “Equity Compensation Plan”), which was approved bythe stockholders of the Company on March 1, 2006. The Equity Compensation Plan was adopted to supplement the Company’s 2002 Stock Option Plan (as definedbelow).In addition to permitting the grant of stock options as are permitted under the 2002 Stock Option Plan, the Equity Compensation Plan allows the Companyflexibility with respect to equity awards by also providing for grants of stock awards (i.e., restricted or unrestricted), stock purchase rights and stock appreciationrights. F-28Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE O — S TOCK O PTION P LANS (C ONTINUED )Equity Compensation Plan (Continued) The Company authorized 1,000,000 shares of Common Stock for issuance under the Equity Compensation Plan. As of March 21, 2012, no more awardscould be issued under this plan.2002 Stock Option PlanOn March 5, 2002, the board of directors adopted the Company’s 2002 Stock Option Plan (the “2002 Plan”), which was approved by the Company’sstockholders on May 1, 2002. The 2002 Plan was adopted in order to attract and retain qualified directors, officers and employees of, and consultants to, theCompany.The 2002 Plan authorizes 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) andconsultants of the Company.The Company authorized 1,000,000 shares of Common Stock for issuance under the 2002 Plan. As of March 5, 2012, no more awards could be issued underthis plan.Stock Based CompensationThe Company accounts for stock-based employee compensation under ASC 718, Compensation — Stock Compensation (“ASC 718”). ASC 718 requires thatcompensation expense associated with stock options and other stock based awards be recognized in the income statement rather than a disclosure in the notes to theCompany’s consolidated financial statements.In February 2015, the Compensation Committee of the Board of Directors of the Company (“Compensation Committee”) granted 45,400 options toemployees of the Company. The exercise price of these options, issued on February 23, 2015, was at the market price on that date. The options generally vest inthree equal annual installments and are accounted for as one graded vesting award. The weighted average assumptions used in the option pricing model were asfollows: Risk-free interest rate 0.12%Expected term (years) 5.9 Expected volatility 32.7%Dividend yield 0.00%On October 2, 2014, the Compensation Committee of the Board of Directors of the Company (“Compensation Committee”) granted 15,000 restricted sharesto an employee of the Company. These shares vest in three equal installments, starting on the first anniversary of the grant.In February 2014, the Compensation Committee of the Board of Directors of the Company (“Compensation Committee”) granted 5,000 stock options to aconsultant of the Company. The exercise price of these was at the market price on that date. The options vested immediately. The weighted average assumptionsused in the option pricing model were as follows: Risk-free interest rate 0.06%Expected term (years) 5.9 Expected volatility 35.3%Dividend yield 0.00% F-29Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE O — S TOCK O PTION P LANS (C ONTINUED )Stock Based Compensation (Continued) In December 2013, the Compensation Committee of the Board of Directors of the Company (“Compensation Committee”) granted 156,700 stock options, ofwhich 70,000 options were awarded to the Officers of the Company and the remaining 86,700 stock options were awarded to non-officer employees of theCompany. The exercise price of these options, issued on December 12, 2013, was at the market price on that date. The options vest in three equal annualinstallments and accounted for as one graded vesting award. The weighted average assumptions used in the option pricing model were as follows: Risk-free interest rate 0.08%Expected term (years) 6.5 Expected volatility 98.3%Dividend yield 0.00%In June 2013, through a previous action of the Compensation Committee of the board of directors of the Company (the “Compensation Committee”)authorizing the Chief Executive Officer of the Company the discretion to grant stock option awards to non-officer employees, the Chief Executive Officer awarded50,000 stock options to non-officer employees. The exercise price of these options, issued on June 13, 2013, was at the market price on that date. The options vestin three equal installments, accounted for as one graded vesting award, starting on the first anniversary of the grant. The assumptions used in the option pricingmodel were as follows: Risk-free interest rate 0.10%Expected term (years) 6.2 Expected volatility 99.7%Dividend yield 0.92%In December 2012, the Compensation Committee granted 160,000 stock options, of which 65,000 options were awarded to three officers of the Companyand 20,000 options were awarded to an employee of the Company. The remaining 75,000 shares were issued to six non-employee directors of the Company. Theexercise price of these options, issued on December 18, 2012, was at the market price on that date. The options vest in three equal installments, accounted for asone graded vesting award, starting on the first anniversary of the grant. The assumptions used in the option pricing model were as follows: Risk-free interest rate 0.16%Expected term (years) 6.0 Expected volatility 101.0%Dividend yield 1.67%In addition, the Company granted 102,321 restricted shares to the Chief Executive Officer of the Company. The shares vest in three equal installments,starting on the first anniversary of the grant. F-30Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE O — S TOCK O PTION P LANS (C ONTINUED )Stock Based Compensation (Continued) The following table summarizes stock option transactions under the plans: Year Ended September 30, 2015 2014 2013 Shares WeightedAverage Exercise Price Shares WeightedAverage Exercise Price Shares WeightedAverage Exercise Price Outstanding options at the beginning of year 1,403,259 $10.78 1,622,771 $11.31 1,499,471 $11.27 Options granted 45,400 8.37 161,700 8.48 210,000 9.36 Options forfeited/cancelled (344,259) 17.90 (369,612) 12.33 (50,000) 7.77 Options exercised (60,834) 7.83 (11,600) 3.46 (36,700) 3.41 Outstanding options at the end of year 1,043,566 $8.47 1,403,259 $10.78 1,622,771 $11.31 Exercisable options at the end of year 860,891 $8.41 888,587 $12.15 1,108,271 $12.62 The Company recognized $1,063,000 of compensation expense related to stock options, for fiscal year 2015. The Company recognized $1,418,000 and$1,683,000 of compensation expense related to stock options in the fiscal years ended September 30, 2014 and 2013, respectively. As of September 30, 2015, therewas $661,000 of unrecognized compensation cost related to unvested stock options. The weighted average remaining period over which such costs are expected tobe recognized is 1.1 years.The intrinsic value of the outstanding and exercisable options as of September 30, 2015 was approximately $520, 000 and $512,000, respectively. Theintrinsic value of the options exercised during fiscal years 2015 and 2014 was approximately $76,000 and $57,000, respectively. The fair value of the optionsexercised during the fiscal years ended September 30, 2015 and 2014 was approximately $379,000 and $97,000, respectively. The proceeds from the exercise ofstock options during the fiscal years ended September 30, 2015 and 2014 were approximately $476,000 and $40,000, respectively. The weighted average remainingcontractual life of exercisable options as of September 30, 2015 is 5.8 years. The fair value of the stock options that vested during the 2015 and 2014 fiscal yearswas approximately $3,201,000 and $740,000, respectively. The fair value of options granted during the fiscal years ended September 30, 2015 and 2014 wasapproximately $298,000 and $1,372,000, respectively.The following table summarizes information about the plans’ outstanding options as of September 30, 2015: Options Outstanding Options Exercisable Range ofExercise Price Number Outstanding Weighted Average Remaining Contractual Life (In Years) WeightedAverage Exercise Price Number Exercisable WeightedAverage Exercise Price $ 2.8751 - $ 5.7500 7,100 3.6 $2.95 7,100 $2.95 $ 5.7501 - $ 8.6250 847,466 6.1 7.96 722,795 7.88 $ 8.6251 - $11.5000 174,000 7.3 9.40 115,996 9.40 $11.5001 - $28.7500 15,000 1.2 28.75 15,000 28.75 1,043,566 6.2 $8.47 860,891 $8.41 F-31Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE O — S TOCK O PTION P LANS (C ONTINUED )Stock Based Compensation (Continued) The following table summarizes information about restricted stock transactions: Year Ended September 30, 2015Shares Weighted Average Grant DateFair Value Year Ended September 30, 2014Shares Weighted Average Grant DateFair Value Unvested at the beginning of period 68,214 $9.57 102,321 $9.57 Awards granted 15,000 8.30 — 0.00 Vested (39,107) 9.41 (34,107) 9.57 Forfeited — 0.00 — 0.00 Unvested at the end of period 44,107 $9.28 68,214 $9.57 The Company recognized $371,000, $326,000 and $273,000 of compensation expense during the fiscal years ended September 30, 2015, 2014 and 2013,respectively, for restricted stock. As of September 30, 2015, there was a total of $150,000 of unrecognized compensation cost related to unvested restricted stock.The weighted average remaining period over which such costs are recognized is 1.1 years. There was $15,000 of restricted stock awards granted during the firstquarter of fiscal year 2015, with a fair value of $125,000. There were no restricted stock awards granted during fiscal year 2014. The fair value of the restrictedstock awards vested during the fiscal years ended September 30, 2015 and 2014 was approximately $368,000 and $326,000, respectively.The Company recognized an aggregate total of $1,434,000, $1,744,000 and $1,956,000 in compensation expense for the fiscal years ended September 30,2015, 2014 and 2013, respectively, for the stock options and restricted stock grants. As of September 30, 2015, there was a total of $811,000 of unrecognizedcompensation cost related to unvested stock options and restricted stock grants. The method used to calculate stock based compensation is the straight line pro-rated method.N OTE P — S TOCKHOLDERS ’ E QUITYDividends are at the discretion of the board of directors and will depend upon the Company’s financial condition, operating results, capital requirements andany other factors the board of directors deems relevant. In addition, agreements with the Company’s lenders may, from time to time, restrict the ability to paydividends. As of September 30, 2015, there were no such restrictions. No dividends were declared for fiscal years 2015 and 2014.On August 11, 2015, the Board of Directors of the Company approved the repurchase of up to $15,000,000 of the Company’s common stock and authorizedmanagement of the Company to enter into a Rule 10b5-1 plan. The plan is effective through December 31, 2015. Through September 30, 2015, the Companypurchased approximately 202,000 at an aggregate cost of approximately $1.8 million. No shares were repurchased in fiscal year 2014.N OTE Q — R ETIREMENT P LANThe Company maintains a 401(k) Retirement Plan covering all of its eligible employees. Matching contributions made by the employees to the plan aremade at the discretion of the board of directors each plan year. Contributions for the years ended September 30, 2015, 2014 and 2013 were $113,000, $119,000 and$88,000, respectively. F-32Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014 N OTE R — F AIR V ALUE OF F INANCIAL M EASUREMENTS AND D ISCLOSURESDisclosures about Fair Value of Financial InstrumentsFASB ASC 825, Financial Instruments , (“ASC 825”), requires disclosure of fair value information about financial instruments, whether or not recognizedon the balance sheet, for which it is practicable to estimate that value. Because there are a limited number of market participants for certain of the Company’s assetsand liabilities, fair value estimates are based upon judgments regarding credit risk, investor expectation of economic conditions, normal cost of administration andother risk characteristics, including interest rate and prepayment risk. These estimates are subjective in nature and involve uncertainties and matters of judgment,which significantly affect the estimates.The estimated fair value of the Company’s financial instruments is summarized as follows: September 30, 2015 September 30, 2014 Carrying Amount Fair Value Carrying Amount Fair Value Financial assets Cash and cash equivalents (Level 2) $24,315,000 $24,315,000 $28,710,000 $28,710,000 Available-for-sale investments (Level 1) 59,727,000 59,727,000 66,799,000 66,799,000 Consumer receivables acquired for liquidation (Level 3) 15,608,000 31,339,000 29,444,000 50,962,000 Structured settlements (Level 3) 64,635,000 64,635,000 42,079,000 42,079,000 Other investments(1) 4,239,000 4,239,000 — — Financial liabilities Other debt — CBC, revolving line of credit (Level 3) 4,623,000 4,623,000 19,583,000 19,583,000 Other debt — CBC, non-recourse notes payable with varying installments(Level 3) 46,988,000 46,988,000 12,712,000 12,712,000 (1)The Company has elected to early adopt ASU 2015-07 and in accordance with ASU 2015-07, certain investments that are measured at fair value using the netasset value per share (or its equivalent) have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended topermit reconciliation of the fair value hierarchy to the amounts presented in the condensed consolidated balance sheet.Disclosure of the estimated fair values of financial instruments often requires the use of estimates. The Company uses the following methods andassumptions to estimate the fair value of financial instruments:Cash and cash equivalents — The carrying amount of cash and cash equivalents approximates fair value.Available-for-sale investments — The available-for-sale securities consist of mutual funds that are valued based on quoted prices in active markets.Consumer receivables acquired for liquidation — The Company computed the fair value of the consumer receivables acquired for liquidation using itsproprietary forecasting model. The Company’s forecasting model utilizes a discounted cash flow analysis. The Company’s cash flows are an estimate of collectionsfor consumer receivables based on variables fully described in Note C: Consumer Receivables Acquired for Liquidation. These cash flows are discounted todetermine the fair value.Structured settlements — The Company determined the fair value based on the discounted forecasted future collections of the structured settlements.Unrealized gains on structured settlements is comprised of both unrealized gains resulting from fair market valuation at the date of acquisition of the structuredsettlements and the F-33Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE R — F AIR V ALUE OF F INANCIAL M EASUREMENTS AND D ISCLOSURES (C ONTINUED )Disclosures about Fair Value of Financial Instruments (Continued) subsequent fair value adjustments resulting from the change in the discount rate. Of the $7.1 million of unrealized gains recognized in the fiscal year endedSeptember 30, 2015, approximately $7.1 million is due to day one gains on new structured settlements financed during the period, $1.8 million due to a change inthe discount rate, offset by a decrease of $1.8 million in realized gains recognized as realized interest income on structured settlements during the period. Therewere no other changes in assumptions during the period.Other investments — The Company estimated the fair value using the net asset value per share of the investment. There are no unfunded commitments andthe investment cannot be redeemed for 5 years.Other debt CBC, revolving line of credit — The Company determined the fair value based on similar instruments in the market.Other debt CBC, notes payable with varying installments — The fair value at September 30, 2015 was based on the discounted forecasted future collectionsof the structured settlements.Fair Value HierarchyThe Company recorded its available-for-sale investments at estimated fair value on a recurring basis. The accompanying consolidated financial statementsinclude estimated fair value information regarding its available-for-sale investments as of September 30, 2015, as required by FASB ASC 820, Fair ValueMeasurements and Disclosures (“ASC 820”). ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exitprice) in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity tomaximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s level within the fair valuehierarchy is based on the lowest level of input significant to the fair value measurement.Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to assess at the measurement date.Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices in markets thatare not active for identical or similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially thefull term of the asset or liability.Level 3 — Unobservable inputs that are supported by little or no market activity and significant to the fair value of the assets or liabilities that are developedusing the reporting entities’ estimates and assumptions, which reflect those that market participants would use.A significant unobservable input used in the fair value measurement of structured settlements is the discount rate. Significant increases and decreases in thediscount rate used to estimate the fair value of structured settlements could decrease or increase the fair value measurement of the structured settlements. Thediscount rate could be affected by factors, which include, but are not limited to, creditworthiness of insurance companies, market conditions, specificallycompetitive factors, credit quality of receivables purchased, the diversity of the payors of the receivables purchased, the weighted average life of receivables,current benchmark rates (i.e. 10 year treasury or swap rate) and the historical portfolio performance of the originator and/or servicer.The Company’s available-for-sale investments are classified as Level 1 financial instruments based on the classifications described above. The Company didnot have any transfers into (out of) Level 1 investments during the fiscal year ended September 30, 2015. The Company had no Level 2 or Level 3 available-for-sale investments during the fiscal year ended September 30, 2015. F-34Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE R — F AIR V ALUE OF F INANCIAL M EASUREMENTS AND D ISCLOSURES (C ONTINUED )Fair Value Hierarchy (Continued) The following table sets forth the Company’s quantitative information about its Level 3 fair value measurements as of September 30, 2015: Fair Value Valuation Technique UnobservableInput Rate Structured settlements at fair value $64,635,000 Discountedcash flow Discount rate 5.07%The changes in structured settlements at fair value using significant unobservable inputs (Level 3) during the year ended September 30, 2015 were asfollows: Balance at September 30, 2014 $42,079,000 Total gains included in earnings 7,146,000 Purchases 16,615,000 Sales — Interest accreted 4,330,000 Payments received (5,535,000) Total $64,635,000 The amount of total gains for the year included in earnings attributable to the change in unrealized gains (losses) relating toassets held at September 30, 2015 $7,146,000 Realized and unrealized gains and losses included in earnings in the accompanying consolidated statements of income for the year ended September 30, 2015are reported in the following revenue categories: Total gains (losses) included in earnings in fiscal year 2015 $7,146,000 Change in unrealized gains (losses) relating to assets still held at September 30, 2015 $7,146,000 N OTE S — R ELATED P ARTY T RANSACTIONSOn December 12, 2011, the Company and Piccolo Business Advisory (“Piccolo”), which is owned by Louis Piccolo, a director of the Company, entered intoa Consulting Agreement, pursuant to which Piccolo provided consulting services which included, but was not limited to, analysis of proposed debt and equitytransactions, due diligence and financial analysis and management consulting services (“Services”). The Consulting Agreement was for a period of two years,which ended on December 31, 2013 and Piccolo received compensation of $150,000 per annum payable monthly, a bonus of $25,000 per new transaction closed bythe Company with Piccolo’s assistance (if any), and 30,000 options per year, with such options vesting in three equal annual installments on the first, second andthird anniversaries of the first grant date. The Company paid Piccolo $25,000 in the fiscal year ended September 30, 2014. This agreement was not immediatelyrenewed.On September 17, 2015, the Company and Piccolo agreed to terms to a new two-year, $80,000 contract, pursuant to which Piccolo will provide consultingservices, as described above. The compensation is to be paid quarterly. For the fiscal year ended September 30, 2015, the Company paid Piccolo approximately$3,000 for such services. F-35Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014 N OTE T — S UMMARIZED Q UARTERLY D ATA ( UNAUDITED ) Quarter First Quarter Second Quarter(1) Third Quarter Fourth Quarter Full Year 2015 Total revenue $9,827,000 $10,398,000 $10,032,000 $12,234,000 $42,491,000 Income before income taxes 419,000 1,143,000 408,000 2,880,000 4,850,000 Net income attributable to Asta Funding, Inc. 370,000 345,000 161,000 1,140,000 2,016,000 Basic net income per share attributable to Asta Funding, Inc. $0.03 $0.03 $0.01 $0.08 $0.15 Diluted net income per share attributable to Asta Funding, Inc. $0.03 $0.03 $0.01 $0.08 $0.15 2014 Total revenue $7,457,000 $7,857,000 $8,396,000 $8,875,000 $32,585,000 Income before income taxes 2,194,000 126,000 7,680,000 1,042,000 11,042,000 Net income attributable to Asta Funding, Inc. 947,000 75,000 4,687,000 192,000 5,901,000 Basic net income per share attributable to Asta Funding, Inc. $0.07 $0.01 $0.36 $0.01 $0.45 Diluted net income per share attributable to Asta Funding, Inc. $0.07 $0.01 $0.35 $0.01 $0.45 *Due to rounding the sum of quarterly totals for earnings per share may not add to the yearly total.(1)Second quarter of fiscal year 2015 was revised to reflect the proper period of recognizing the unrealized foreign exchange loss on other investments.N OTE U — S EGMENT R EPORTINGThe Company operates through strategic business units that are aggregated into four reportable segments: Consumer receivables, Personal injury claims,structured settlements and disability advocacy. The four reportable segments consist of the following: • Consumer receivables — segment is engaged in the business of purchasing, managing for its own account and servicing distressed consumer receivables,including charged off receivables, semi-performing receivables and performing receivables. The primary charged-off receivables are accounts that havebeen written-off by the originators and may have been previously serviced by collection agencies. Semi-performing receivables are accounts where thedebtor is currently making partial or irregular monthly payments, but the accounts may have been written-off by the originators. Performing receivablesare accounts where the debtor is making regular monthly payments that may or may not have been delinquent in the past. Distressed consumer receivablesare the unpaid debts of individuals to banks, finance companies and other credit providers. A large portion of our distressed consumer receivables areMasterCard , Visa and other credit card accounts which were charged-off by the issuers or providers for non-payment. We acquire these and otherconsumer receivable portfolios at substantial discounts to their face values. The discounts are based on the characteristics (issuer, account size, debtorlocation and age of debt) of the underlying accounts of each portfolio. Litigation related receivables are semi-performing investments F-36® ® Table of ContentsASTA FUNDING, INC. AND SUBSIDIARIESNotes to Consolidated Financial StatementsSeptember 30, 2015 and 2014N OTE U — S EGMENT R EPORTING (C ONTINUED ) whereby the Company is assigned the revenue stream from the proceeds received. The business conducts its activities primarily under the name PalisadesCollection, LLC. • Personal injury claims — Pegasus Funding, LLC , an 80% owned subsidiary, purchases interests in personal injury claims from claimants who are a partyto personal injury litigation. Pegasus advances to each claimant funds on a non-recourse basis at an agreed upon interest rate, in anticipation of a futuresettlement. The interest in each claim purchased by Pegasus consists of the right to receive, from such claimant, part of the proceeds or recoveries whichsuch claimant receives by reason of a settlement, judgment or award with respect to such claimant’s claim. • Structured settlements — On December 31, 2013, the Company purchased an 80% interest in CBC Settlement Funding, LLC. CBC purchases periodicstructured settlements and annuity policies from individuals in exchange for a lump sum payment. • GAR Disability Advocates is a non-attorney advocacy group, which obtains and represents individuals nationwide in their claims for social securitydisability and supplemental security income benefits from the Social Security Administration.Certain non-allocated administrative costs, interest income, interest expense and various other non-operating income and expenses are reflected in Corporate.Corporate assets include cash and cash equivalents, available-for-sale securities, property and equipment, goodwill, deferred taxes and other assets. (Dollars in millions) Fiscal Year Consumer Receivables PersonalInjury Claims Structured Settlements GAR Disability Advocates Corporate Total Company Revenues 2015 $20.8 $8.5 $11.8 $1.4 $— $42.5 2014 19.8 7.2 5.2 0.4 — 32.6 2013 31.8 6.4 — — — 38.2 Other income 2015 — — — — 1.7 1.7 2014 26.1 — — — 1.4 27.5 2013 — — — — 1.6 1.6 Income before income taxes 2015 13.8 0.1 3.5 (5.8) (6.7) 4.9 2014 18.9 2.3 0.4 (2.7) (7.9) 11.0 2013 10.1 2.0 — (1.2) (7.6) 3.3 Total assets 2015 17.0 39.6 63.1 2.6 115.1 237.4 2014 30.5 34.0 38.5 1.0 113.1 217.1 2013 65.4 36.8 — 0.2 109.1 211.5 Capital expenditures 2015 — — 0.1 — — 0.1 2014 — — — — — — 2013 — — — — 0.7 0.7 Depreciation 2015 — — 0.1 — 0.3 0.4 2014 — — — — 0.4 0.4 2013 — — — — 0.4 0.4 The Company does not have any intersegment revenue transactions. F-37Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned,thereunto duly authorized. ASTA FUNDING, INC.By: /s/ Gary Stern Gary Stern President and Chief Executive Officer (Principal Executive Officer)Dated: December 14, 2015Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in thecapacities and on the dates indicated: Signature Title Date/s/ Gary SternGary Stern Chairman of the Board, President, andChief Executive Officer December 14, 2015/s/ Robert J. MichelRobert J. Michel Chief Financial Officer(Principal Financial Officer andAccounting Officer) December 14, 2015/s/ Edward CelanoEdward Celano Director December 14, 2015/s/ Harvey LeibowitzHarvey Leibowitz Director December 14, 2015/s/ David SlackmanDavid Slackman Director December 14, 2015/s/ Louis A. PiccoloLouis A. Piccolo Director December 14, 2015Exhibit 21.1Subsidiary Companies Name Jurisdiction Under Which Organized PercentageOwned Asta Funding, Inc. Delaware Asta Funding Acquisition I, LLC Delaware 100%Asta Funding Acquisition II, LLC Delaware 100%Asta Commercial, LLC Delaware 100%Asta Funding.com, LLC Delaware 100%Palisades Acquisition I, LLC Delaware 100%Palisades Acquisition II, LLC Delaware 100%Palisades Acquisition IV, LLC Delaware 100%CBC Settlement Funding, LLC Delaware 80%Computer Finance, LLC Delaware 100%Palisades Collection, LLC Delaware 100%Palisades Acquisition VIII, LLC Delaware 100%Option Card, LLC Colorado 100%Palisades Acquisition IX, LLC Delaware 100%VATIV Recovery Solutions LLC Texas 100%Palisades Acquisition X, LLC Delaware 100%Cliffs Portfolio Acquisition I, LLC Delaware 100%Sylvan Acquisition I. LLC Delaware 100%Palisades Acquisition XI LLC Delaware 100%Palisades Acquisition XII LLC Delaware 100%Palisades Acquisition XIII LLC Delaware 100%Palisades Acquisition XIV LLC Delaware 100%Palisades Acquisition XV LLC Delaware 100%Palisades Acquisition XVI LLC Delaware 100%Palisades Acquisition XVII LLC Delaware 100%Palisades Acquisition XVIII LLC Delaware 100%LBLINY, LLC Delaware 100%Prestiga Funding, LLC Delaware 100%ASFI Litigation Holdings LLC Delaware 100%ASFI Pegasus Holdings, LLC Delaware 100%Pegasus Funding, LLC Delaware 80%GAR Disability Advocates, LLC Delaware 100%EMIRIC LLC Delaware 100%Snappy Rent, LLC Delaware 100%Palisades Acquisition XIX, LLC Delaware 100%Palisades Acquisition XXII, LLC Delaware 100%Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statements on Forms S-8 (File No. 333-185175, effective November 28, 2012, FileNo. 333-142201, effective April 18, 2007, File No. 333-99911, effective September 20, 2002, and File No. 333-38836, effective June 8, 2000) of our reports datedDecember 14, 2015 on (i) the consolidated financial statements of Asta Funding, Inc. and subsidiaries as of September 30, 2015 and 2014 and for each of the threeyears in the three-year period ended September 30, 2015 and (ii) the effectiveness of internal control over financial reporting as of September 30, 2015, all of whichappear in the Annual Report on Form 10-K of Asta Funding, Inc. for the year ended September 30, 2015. /s/ WeiserMazars LLPEdison, New JerseyDecember 14, 2015Exhibit 31.1CERTIFICATIONI, Gary Stern, certify that:1. I have reviewed this annual report on Form 10-K of Asta Funding, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant andhave:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles;(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. /s/ Gary Stern Gary Stern Chairman of the Board, President and Chief Executive Officer(Principal Executive Officer)Date: December 14, 2015A signed original of this written statement required by Section 302 has been provided to the Company and will be retained by the Company and furnished tothe Securities and Exchange Commission or its staff per request.Exhibit 31.2CERTIFICATIONI, Robert J. Michel, certify that:1. I have reviewed this annual report on Form 10-K of Asta Funding, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)) for the registrant and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles;(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. /s/ Robert J. Michel Robert J. Michel Chief Financial Officer and Secretary(Principal Financial Officer and Principal Accounting Officer)Date: December 14, 2015A signed original of this written statement required by Section 302 has been provided to the Company and will be retained by the Company and furnished tothe Securities and Exchange Commission or its staff per request.EXHIBIT 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Asta Funding, Inc. (the “Company”) on Form 10-K for the year ended September 30, 2015 as filed with theSecurities and Exchange Commission (the “Report”), I, Gary Stern, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and(2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the company as of thedates presented and the consolidated result of operations of the Company for the periods presented. /s/ Gary Stern Gary Stern President and Chief Executive Officer(Principal ExecutiveOfficer) Dated: December 14, 2015This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of the 10-K as a separatedisclosure statement.A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished tothe Securities and Exchange Commission or its staff per request.EXHIBIT 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Asta Funding, Inc. (the “Company”) on Form 10-K for the year ended September 30, 2015 as filed with theSecurities and Exchange Commission (the “Report”), I, Robert J. Michel, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and(2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of thedates presented and the consolidated result of operations of the Company for the periods presented. /s/ Robert J. Michel Robert J. Michel Chief Financial Officer and Secretary(Principal Financial Officer and Principal Accounting Officer)Dated: December 14, 2015This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of the 10-K as a separatedisclosure statement.A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished tothe Securities and Exchange Commission or its staff per request.

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