10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2020

OR

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

For the transition period from                    to                    

Commission file number: 001-35637

ASTA FUNDING, INC.

(Exact name of registrant as specified in its charter)

Delaware	22-3388607
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
210 Sylvan Ave., Englewood Cliffs, New Jersey	07632
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number: (201) 567-5648

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒   No   ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    

Yes   ☒     No   ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	ASFI	Nasdaq Global Select Market

As of May 22, 2020, the registrant had 6,567,765 common shares outstanding.

ASTA FUNDING, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

Part I-FINANCIAL INFORMATION	3
Item 1. Condensed Consolidated Financial Statements	3
Condensed Consolidated Balance Sheets as of March 31, 2020 (unaudited) and September 30, 2019	3
Condensed Consolidated Statements of Operations for the three and six months ended March 31, 2020 (unaudited) and 2019 (unaudited)	4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended March 31, 2020 (unaudited) and 2019 (unaudited)	5
Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended March 31, 2020 (unaudited) and 2019 (unaudited)	6
Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2020 (unaudited) and 2019 (unaudited)	7
Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 4. Controls and Procedures	36
Part II-OTHER INFORMATION	37
Item 1. Legal Proceedings	37
Item 1A. Risk Factors	38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3. Defaults Upon Senior Securities	38
Item 4. Mine Safety Disclosures	38
Item 5. Other Information	39
Item 6. Exhibits	39
Signatures	40

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ASTA FUNDING, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

	March 31, 2020 (Unaudited)			September 30, 2019
ASSETS
Cash and cash equivalents	$	8,982,000		$	4,308,000
Available for sale debt securities (at fair value)		55,692,000			56,123,000
Investments in equity securities (at fair value)		8,111,000			8,136,000
Consumer receivables acquired for liquidation (at cost)		1,193,000			1,668,000
Investment in personal injury claims, net		3,709,000			5,190,000
Due from third party collection agencies and attorneys		345,000			596,000
Accounts receivable, net		212,000			266,000
Prepaid and income taxes receivable, net		68,000			264,000
Furniture and equipment, net of accumulated depreciation of $2.0 million at March 31, 2020 and $1.9 million at September 30, 2019		72,000			120,000
Right of use assets		454,000		––
Equity method investment		223,000			280,000
Settlement receivable		757,000			1,558,000
Deferred income taxes		9,383,000			9,631,000
Goodwill		1,410,000			1,410,000
Other assets		1,754,000			1,135,000
Total assets	$	92,365,000		$	90,685,000
LIABILITIES
Accounts payable and accrued expenses	$	1,499,000		$	994,000
Right of use liability		456,000		––
Income taxes payable		391,000			787,000
		2,346,000			1,781,000
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Preferred stock, $.01 par value; authorized 5,000,000 shares; issued and outstanding — none		—			—
Preferred stock, Series A Junior Participating, $.01 par value; authorized 30,000 shares; issued and outstanding — none		—			—
Common stock, $.01 par value, authorized 30,000,000 shares; issued 13,459,708 at March 31, 2020 and September 30, 2019; and outstanding 6,567,765 at March 31, 2020 and September 30, 2019		135,000			135,000
Additional paid-in capital		68,558,000			68,558,000
Retained earnings		88,880,000			87,907,000
Accumulated other comprehensive income, net of taxes		418,000			276,000
Treasury stock (at cost) 6,891,943 shares at March 31, 2020 and September 30, 2019		(67,972,000	)		(67,972,000	)
Total stockholders’ equity		90,019,000			88,904,000
Total liabilities and stockholders’ equity	$	92,365,000		$	90,685,000

See accompanying notes to condensed consolidated financial statements

3

ASTA FUNDING, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months			Three Months		Six Months			Six Months
	Ended			Ended		Ended			Ended
	March 31, 2020			March 31, 2019		March 31, 2020			March 31, 2019
Revenues:
Finance income, net	$	2,808,000		$	3,481,000	$	5,940,000		$	6,975,000
Personal injury claims income		165,000			456,000		541,000			1,169,000
Disability fee income		900,000			1,296,000		1,708,000			2,557,000
Total revenues		3,873,000			5,233,000		8,189,000			10,701,000
Other Income:
Interest and dividend income		320,000			255,000		649,000			454,000
Gain on settlement		30,000			323,000		30,000			323,000
Other income (expense), net		(172,000	)		51,000		(161,000	)		86,000
Total other income		178,000			629,000		518,000			863,000
		4,051,000			5,862,000		8,707,000			11,564,000
Expenses:
General and administrative		3,906,000			3,395,000		7,098,000			7,321,000
Impairment of consumer receivables acquired for liquidation	––				—		23,000			—
Loss from equity method investment		53,000			56,000		57,000			86,000
		3,959,000			3,451,000		7,178,000			7,407,000
Income before income tax		92,000			2,411,000		1,529,000			4,157,000
Income tax expense		164,000			638,000		556,000			1,109,000
Net (loss) income	$	(72,000	)	$	1,773,000	$	973,000		$	3,048,000
Net income (loss) per share:
Basic	$	(0.01	)	$	0.27	$	0.15		$	0.46
Diluted	$	(0.01	)	$	0.27	$	0.15		$	0.46
Weighted average number of common shares outstanding:
Basic		6,567,765			6,685,415		6,567,765			6,685,415
Diluted		6,567,765			6,685,827		6,654,873			6,685,775

See accompanying notes to condensed consolidated financial statements

4

ASTA FUNDING, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

March 31, 2020 and 2019

(Unaudited)

	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019			Six Months Ended March 31, 2020			Six Months Ended March 31, 2019
Comprehensive income is as follows:
Net (loss) income	$	(72,000	)	$	1,773,000		$	973,000		$	3,048,000
Net unrealized gain (loss) on debt securities, net of tax (expense)/ benefit of ($9,000) and ($35,000) during the three months ended March 31, 2020 and 2019, respectively, and $43,000 and ($87,000) during the six months ended March 31, 2020 and 2019, respectively.		21,000			88,000			(107,000	)		223,000
Reclassification adjustment for securities sold, net of tax expense of ($2,000) and $0 during the three months ended March 31, 2020 and 2019, respectively, and ($50,000) and $0 during the six months ended March 31, 2020 and 2019, respectively.		5,000		––				127,000		––
Foreign currency translation, net of tax (expense) / benefit of ($43,000) and $17,000 during the three months ended March 31, 2020 and 2019, respectively, and ($31,000) and ($7,000) during the six months ended March 31, 2020 and 2019, respectively.		166,000			(44,000	)		122,000			36,000
Other comprehensive income		192,000			44,000			142,000			259,000
Total comprehensive income	$	120,000		$	1,817,000		$	1,115,000		$	3,307,000

See accompanying notes to condensed consolidated financial statements

5

ASTA FUNDING, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

	Common Stock				Additional					Accumulated Other						Total
	Issued Shares		Amount		Paid-in Capital		Retained Earnings			Comprehensive Income			Treasury Stock			Stockholders’ Equity
Balance, September 30, 2019		13,459,708	$	135,000	$	68,558,000	$	87,907,000		$	276,000		$	(67,972,000	)	$	88,904,000
Net income		—		—		—		1,045,000			—			—			1,045,000
Unrealized loss on debt securities, net		—		—		—		—			(128,000	)		—			(128,000	)
Amount reclassified from other comprehensive income		—		—		—		—			122,000			—			122,000
Foreign currency translation, net		—		—		—		—			(44,000	)		—			(44,000	)
Balance, December 31, 2019		13,459,708	$	135,000	$	68,558,000	$	88,952,000		$	226,000		$	(67,972,000	)	$	89,899,000
Net loss		—		—		—		(72,000	)		—			—			(72,000	)
Unrealized gain on debt securities, net		—		—		—		—			21,000			—			21,000
Amount reclassified from other comprehensive income		—		—		—		—			5,000			—			5,000
Foreign currency translation, net		—		—		—		—			166,000			—			166,000
Balance, March 31, 2020		13,459,708	$	135,000	$	68,558,000	$	88,880,000		$	418,000		$	(67,972,000	)	$	90,019,000

	Common Stock				Additional					Accumulated Other						Total
	Issued Shares		Amount		Paid-in Capital		Retained Earnings			Comprehensive Income			Treasury Stock			Stockholders’ Equity
Balance, September 30, 2018		13,459,708	$	135,000	$	68,551,000	$	80,834,000		$	35,000		$	(67,128,000	)	$	82,427,000
Cumulative effect of adjustment for adoption of ASC 606, net of tax of $80,000		—		—		—		173,000			—			—			173,000
Cumulative effect of adjustment for adoption of ASU No. 2016-01, net of tax of $5,000		—		—		—		(10,000	)		10,000			—			—
Adjusted opening equity		13,459,708	$	135,000	$	68,551,000	$	80,997,000		$	45,000		$	(67,128,000	)	$	82,600,000
Stock based compensation expense		—		—		7,000		—			—			—			7,000
Net income		—		—		—		1,275,000			—			—			1,275,000
Unrealized gain on debt securities, net		—		—		—		—			135,000			—			135,000
Foreign currency translation, net		—		—		—		—			80,000			—			80,000
Balance, December 31, 2018		13,459,708	$	135,000	$	68,558,000	$	82,272,000		$	260,000		$	(67,128,000	)	$	84,097,000
Net income		—		—		—		1,773,000			—			—			1,773,000
Unrealized gain on debt securities, net		—		—		—		—			88,000			—			88,000
Foreign currency translation, net		—		—		—		—			(44,000	)		—			(44,000	)
Balance, March 31, 2019		13,459,708	$	135,000	$	68,558,000	$	84,045,000		$	304,000		$	(67,128,000	)	$	85,914,000

See accompanying notes to condensed consolidated financial statements

6

ASTA FUNDING, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited) 

	Six Months Ended
	March 31, 2020			March 31, 2019
Cash flows from operating activities:
Net income	$	973,000		$	3,048,000
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		48,000			44,000
Deferred income taxes		241,000			305,000
Impairment of consumer receivables acquired for liquidation		23,000		––
Stock based compensation	––				7,000
Unrealized (gain)loss on equity securities		162,000			(21,000	)
Provision/ (recoveries) for bad debts – personal injury claims		(59,000	)		158,000
Loss from equity method investment		57,000			86,000
Changes in:
Prepaid and income taxes receivable		196,000			(3,109,000	)
Due from third party collection agencies and attorneys		238,000			87,000
Accounts receivable		54,000			(209,000	)
Settlement receivable	––				(223,000	)
Other assets		(619,000	)		(449,000	)
Other liabilities		627,000			(648,000	)
Right of use assets		182,000		––
Right of use liabilities		(180,000	)	––
Income taxes payable		(396,000	)	––
Net cash provided by (used in) operating activities		1,547,000			(924,000	)
Cash flows from investing activities:
Principal collected on receivables acquired for liquidation		411,000			1,026,000
Purchase of available for sale debt securities and investments in equity securities		(97,248,000	)		(38,474,000	)
Proceeds from sale of available for sale debt securities		97,569,000			30,480,000
Proceeds from note receivable	––				482,000
Proceeds from settlement receivable		801,000			925,000
Personal injury claims - advances		(116,000	)		—
Personal injury claims - receipts		1,656,000			3,957,000
Change in equity method investment	––				(61,000	)
Capital expenditures	––				(112,000	)
Net cash (used in) provided by investing activities		3,073,000			(1,777,000	)
Cash flows from financing activities:
Net cash provided by financing activities		—			—
Foreign currency effect on cash		54,000			111,000
Net increase (decrease) in cash and cash equivalents		4,674,000			(2,590,000	)
Cash and cash equivalents at beginning of period		4,308,000			6,284,000
Cash and cash equivalents at end of period	$	8,982,000		$	3,694,000
Supplemental disclosure of cash flow information:
Cash paid for: Income taxes	$	700,000		$	4,000,000
Supplemental disclosure of non-cash operating activities:
Initial recognition of right of use assets	$	636,000		––
Initial recognition of right of use assets	$	636,000		$	—

See accompanying notes to condensed consolidated financial statements

7

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

   Note 1 – Correction of Previously Issued Consolidated Financial Statements

During the preparation of its Quarterly Report on Form 10-Q for the three and six months ended March 31, 2020, Asta Funding, Inc. (the “Company”) determined that certain adjustments were needed to correct the previously issued September 30, 2019 consolidated financial statements.  Specifically, management determined that it had understated its income taxes payable and related income tax expense from foreign operations and understated accrued professional fees and related professional fee expense as of and for the year ended September 30, 2019. In accordance with Securities and Exchange Commission Staff Accounting Bulletin (“SAB”) No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, we evaluated the materiality of the errors from a qualitative and quantitative perspective and concluded that the effect of the errors were not material to our previously issued consolidated financial statements.

As a result, the accompanying consolidated financial statements as of and for the year ended September 30, 2019 have been revised to correct for these immaterial accounting errors. Correction of these immaterial errors resulted in an increase in income taxes payable of $212,000 and an increase in accounts payable and accrued expenses of $53,000 with a corresponding increase in income tax expense and general and administrative expense, respectively. The cumulative effect of these adjustments on retained earnings as of October 1, 2019 was a reduction of $265,000.

The following tables summarize the effects of the revisions on the Company’s previously reported consolidated financial statements in its Annual Report on Form 10-K as of and for the fiscal year ended September 30, 2019 (the “2019 Form 10-K”).

	As of September 30, 2019
Consolidated Balance Sheet	As Previously Reported		Adjustment			As Revised
Liabilities:
Accounts payable and accrued expenses	$	941,000	$	53,000		$	994,000
Income taxes payable	$	575,000	$	212,000		$	787,000
Total liabilities	$	1,516,000	$	265,000		$	1,781,000
Stockholders' equity:
Retained earnings	$	88,172,000	$	(265,000	)	$	87,907,000
Total stockholders’ equity	$	89,169,000	$	(265,000	)	$	88,904,000

	Year Ended September 30, 2019
Consolidated Income Statement	As Previously Reported		Adjustment			As Revised
General and administrative expense	$	13,378,000	$	53,000		$	13,431,000
Total expenses	$	13,690,000	$	53,000		$	13,743,000
Income from continuing operations before income tax	$	9,754,000	$	(53,000	)	$	9,701,000
Income tax expense	$	2,579,000	$	212,000		$	2,791,000
Net income	$	7,175,000	$	(265,000	)	$	6,910,000
Net income (loss) per share:
Basic	$	1.08	$	(0.04	)	$	1.04
Diluted	$	1.08	$	(0.04	)	$	1.04

	Year Ended September 30, 2019
Consolidated Statement of Cash Flows	As Previously Reported			Adjustment			As Revised
Net income from continuing operations	$	7,175,000		$	(265,000	)	$	6,910,000
Changes in:
Accounts payable and accrued expenses	$	(1,237,000	)	$	53,000		$	(1,184,000	)
Income taxes payable	$	575,000		$	212,000		$	787,000
Net cash provided by operating activities	$	11,319,000		$	-		$	11,319,000

The correction of these errors had no net effect on net cash flows provided by operating activities, and no effect on financing or investing activities.

8

  Note 2—Business and Basis of Presentation  

Business  

The Company, Asta Funding, Inc., a Delaware Corporation (“we” or “us”), together with its wholly owned significant operating subsidiaries Palisades Collection, LLC, Palisades Acquisition XVI, LLC (“Palisades XVI”), Palisades Acquisition XIX, LLC (“Palisades XIX”), Palisades Acquisition XXIII, LLC (“Palisades XXIII”), VATIV Recovery Solutions LLC (“VATIV”), ASFI Pegasus Holdings, LLC (“APH”), Fund Pegasus, LLC (“Fund Pegasus”), GAR Disability Advocates, LLC (“GAR Disability Advocates”), Five Star Veterans Disability, LLC (“Five Star”), EMIRIC, LLC (“EMIRIC”), Simia Capital, LLC (“Simia”), Sylvave, LLC (“Sylvave”) (formerly known as Pegasus Funding, LLC (“Pegasus”)), Arthur Funding LLC (“Arthur Funding”) (formerly known as Practical Funding, LLC (“Practical Funding”)), and other subsidiaries, which are not all wholly owned, is engaged in several business segments in the financial services industry including funding of personal injury claims, through the Company's wholly owned subsidiaries Sylvave, Simia and Arthur Funding, social security disability advocacy through the Company's wholly owned subsidiaries GAR Disability Advocates and Five Star and the business of purchasing, managing for its own account and servicing distressed consumer receivables, including charged off receivables, and semi-performing receivables.

We operate principally in the United States in three reportable business segments: consumer receivables, social security disability advocacy and personal injury claims.

Consumer receivables

This segment is engaged in the business of purchasing, managing for its own account and servicing distressed charged off receivables including consumer receivables. Recently, our effort has been in the international areas (mainly South America), as we have curtailed our active purchasing of consumer receivables in the United States. We acquire these consumer receivables at substantial discounts to their face values, based on the characteristics of the underlying accounts of each portfolio. 

 Personal injury claims

This segment is comprised of purchased interests in personal injury claims from claimants who are a party to a personal injury claim. The Company advances to each claimant funds on a non-recourse basis at an agreed upon fee, in anticipation of a future settlement. The Company capitalizes employee compensation and benefits expenses as direct costs related to the origination of personal injury advances. Claims purchased 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 award with respect to such claimant’s claim. The Company historically funded personal injury claims in Simia and Sylvave. The Company formed a new wholly owned subsidiary, Practical Funding on March 16, 2018 to continue in the personal injury claims funding business. On April 8, 2019, Practical Funding changed its name to Arthur Funding, LLC. Arthur Funding began funding advances on personal injury claims in May 2019 (see Note 6).

Simia commenced operations in January 2017, and conducts its business solely in the United States. Simia obtained its business from external brokers and internal sales professionals soliciting attorneys and law firms who represent claimants who have personal injury claims. Business was also obtained from its website and through attorneys. The personal injury claims segment includes the consolidated results of operations of Sylvave, Simia and Arthur Funding. Simia and Sylvave are not funding any new advances, but continue to collect on outstanding personal claim advances in the ordinary course. 

Social security disability advocacy 

This segment consists of advocacy groups representing individuals throughout the United States in their claims for social security disability and supplemental social security income benefits from the Social Security Administration and Department of Veterans Affairs. It relies upon Search Engine Optimization (“SEO”) to bring awareness to its intended market.

9

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2—Business and Basis of Presentation (Continued)

Basis of Presentation

The condensed consolidated balance sheet as of March 31, 2020, the condensed consolidated statements of operations for the three and six months ended March 31, 2020 and 2019, the condensed consolidated statements of comprehensive income (loss) for the three and six months ended March 31, 2020 and 2019, the condensed consolidated statements of stockholders’ equity as of and for the three and six months ended March 31, 2020 and 2019, and the condensed consolidated statements of cash flows for the six months ended March 31, 2020 and 2019, are unaudited. The September 30, 2019 financial information included in this report was derived from our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019. In the opinion of management, all adjustments necessary to present fairly our financial position at March 31, 2020, the results of operations for the three and six months ended March 31, 2020 and 2019, the condensed consolidated statement of comprehensive income (loss) for the three and six months ended March 31, 2020 and 2019, the condensed consolidated statement of stockholders' equity for the three and six months ended March 31, 2020 and 2019 and condensed consolidated cash flows for the six months ended March 31, 2020 and 2019 have been made. The results of operations for the three and six months ended March 31, 2020 and 2019 are not necessarily indicative of the operating results for any other interim period or the full fiscal year.  

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission and therefore do not include all information and note disclosures required under generally accepted accounting principles. The Company suggests that these financial statements be read in conjunction with the financial statements and notes thereto included in our 2019 Form 10-K filed with the Securities and Exchange Commission. 

The condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and industry practices.

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates including management’s estimates of future cash flows and the resulting rates of return.

The condensed consolidated financial statements include the accounts of Asta Funding, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Pending Transactions 

On April 8, 2020 the Company announced that it has entered into a definitive merger agreement (the “Merger Agreement”) under which the Stern Group, comprised of Gary Stern, Chairman, President and Chief Executive Officer of the Company, Ricky Stern and certain related parties, will acquire all of the issued and outstanding shares of common stock of the Company through the merger of the Company with a wholly-owned subsidiary of Asta Finance Acquisition Inc. (“Parent”), with the Company surviving as a wholly-owned subsidiary of Parent (the “Merger”).

Each share of outstanding common stock will be purchased for $11.47 in cash.

The Merger was unanimously approved by the board of directors of Asta (the “Board”), acting on the unanimous recommendation of a special committee of independent and disinterested directors (the “Special Committee”) that was granted full authority to conduct a comprehensive strategic review and evaluate, and if warranted, negotiate an acquisition proposal. The Merger is subject to the satisfaction of customary closing conditions as well as the approval by the Company’s stockholders other than the Stern Group. Upon closing, the Company will become a privately held company and as such, the Company’s shares of common stock will no longer be listed or traded on the Nasdaq Global Select Market.

Subsequent to the approval of the Merger by the Board, on May 22, 2020, RBF Capital, LLC notified the Company’s Board of Directors, of its proposal to acquire all of the outstanding shares of the Company not currently held by RBF Capital, LLC for a price of $13.00 per share in cash (the “RBF Capital Proposal”), representing a 13% premium to the Stern Investor Group’s proposed purchase price of $11.47 per share. RBF Capital, LLC intends to finance the proposed acquisition with internal cash. RBF Capital, LLC is prepared to immediately negotiate a confidentiality agreement, commence due diligence and begin negotiation of definitive documentation for a transaction. RBF Capital, LLC is open to a co-investment with the Stern Investor Group as part of their buyout proposal, if the members of the Stern family wish to retain their equity in the Company. The RBF Capital Proposal does not purport to be complete and RBF Capital, LLC reserves the right to modify the RBF Capital Proposal in any way, to extend or discontinue discussions regarding the same, or to withdraw the RBF Capital Proposal at any time. RBF Capital, LLC may, directly or indirectly, take such additional steps from time to time as it may deem appropriate to further the RBF Capital Proposal as may be modified from time to time, including, without limitation, (a) engaging in discussions regarding the same with the Company, other shareholders advisors, and other relevant parties, and (b) entering into other agreements, arrangements and understanding as may be appropriate in connection with its RBF Capital Proposal, as may be modified from time to time. The Special Committee is evaluating the RBF Capital Proposal.

During the three and six months ended March 31, 2020, the Company incurred fees and expenses in connection with the Merger of $531,000 and $785,000, respectively, included in general and administrative expenses on the accompanying consolidated statement of operations.

10

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2—Business and Basis of Presentation (Continued) 

  Risks and Uncertainties 

Current economic uncertainty brought about as a result of the coronavirus 2019 (“COVID-19”) global pandemic may adversely impact the results of operations and liquidity of the Company overall and its business units to varying degrees over the near and longer term, particularly if the economic effects of the pandemic worsen or persist for an extended period of time. 

A contributing factor to this expected near-term impact is that the COVID-19 pandemic has significantly impacted the ability of many consumers to pay their charged-off consumer receivable balances.  In addition, the world-wide effect of this pandemic has been to drastically reduce employment both in the U.S. and abroad, and because employment is the greatest predictor of a consumer debtor to fulfill his or her obligations, diminished cash flows are probable in this segment. Our Personal Injury claims business relies on the adjudication of personal injury claims for which we purchase an interest in 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 claim. Most courthouses have temporarily closed and lawsuits are not being adjudicated.  It is unclear as to when there will be a full reopening of the court system, and, as such, many cases will be held in abeyance as part of an already long-standing backlog.

While it is premature to quantify the impact of the evolving effects of COVID-19 and the effectiveness of measures taken by global governments to mitigate the pandemic and its economic impact, we expect COVID-19 will negatively impact the Company’s results of operations and its cash flows across both the consumer receivable and personal injury claim segments.  The nature,  extent and duration of the impact to the Company’s businesses will depend on implications to the  general economic and financial markets, changes in economic variables, such as the availability of consumer credit, the ability of consumers to pay amounts owed to us; the effect on the housing market; the rate of unemployment; the number and size of personal bankruptcy filings;the effect on energy costs;  the levels of consumer confidence and consumer debt; investor sentiment; and any closures to our offices. Additionally, government actions in response to the pandemic may hinder our collection activities or result in increased expenses. 

Management is actively monitoring the impact of the global situation on our financial condition, liquidity, operations, and workforce. Given the daily evolution of the COVID-19 pandemic and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 pandemic on its results of operations, financial condition, or liquidity for fiscal year 2020.

Concentration of Credit Risk – Cash and cash equivalents

The Company considers all highly liquid investments with a maturity date 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 had a cash balance with one bank at March 31, 2020 that exceeded the balance insured by the FDIC by approximately $5.3 million. Additionally, three foreign banks with an aggregate $2.3 million balances are not FDIC insured. The Company does not believe it is exposed to any significant credit risk due to concentration of cash. 

Investments in Equity Securities  

 All equity investments in nonconsolidated entities are measured at fair value with changes recognized in earnings, except for those accounted for using the equity method of accounting. Changes in the fair value of equity securities are included in other income, net on the condensed consolidated statement of operations.

Available-for-Sale Debt Securities   

Debt investments that the Company intends to hold for an indefinite period of time, but not necessarily to maturity, are classified as available-for-sale debt securities and are carried at fair value. Unrealized gains and losses on available-for-sale debt securities are determined using the specific-identification method. Unrealized gains/losses are recorded in other comprehensive income (loss).

Declines in the fair value of individual available-for-sale debt securities below their respective costs that are other than temporary will result in write-downs of the individual securities to their fair value. Factors affecting the determination of whether an other-than-temporary impairment has occurred include: a downgrading of the 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 security for a period of time sufficient to allow for any anticipated recovery in fair value.  

Personal Injury Claim Advances and Impairments

The Company accounts for its investments in personal injury claims at an agreed upon fee, in anticipation of a future settlement. Purchased personal injury claim advances consists of the right to receive from a claimant part of the proceeds or recoveries which such claimant receives by reason of a settlement, judgment or reward with respect to such claimant’s claim. Open case revenue is estimated, recognized and accrued based on the expected realization and underwriting guidelines and facts and circumstances for each individual case. These personal injury claims are non-recourse. When a case is closed and the cash is received for the advance provided to a claimant, revenue is recognized based upon the contractually agreed upon fee, and, if applicable, adjusted for any changes due to a settled amount and fees charged to the claimant.

Management assesses the quality of the personal injury claims portfolio through an analysis of the underlying personal injury fundings on a case by case basis. Cases are reviewed through periodic updates with attorneys handling the cases, as well as with third party research tools which monitor public filings, such as motions or judgments rendered on specific cases. The Company specifically reserves for those fundings where the underlying cases are identified as uncollectible, due to anticipated non-favorable verdicts and/or settlements at levels where recovery of the advance outstanding is unlikely. For cases that have not exhibited any specific negative collection indicators, the Company establishes reserves based on the historical collections of the fee income. Fee income on advances is reserved for on all cases where a specific reserve is established on the initially funded amount. In addition, management also monitors its historical collection on fee income and establishes reserves on fee income consistent with the historically experienced collection rates. Management regularly analyzes and updates the historical collection of its initially funded cases as well as its fee income.

11

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2—Business and Basis of Presentation (Continued) 

Income Recognition - Consumer Receivables 

The Company accounts for certain of its investments in consumer receivables using the guidance of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 310, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310”). Under the guidance of ASC 310, static pools of accounts are established. These pools are aggregated based on certain common risk criteria. Each static pool is recorded at cost and is accounted for as a single unit for the recognition of income, principal payments and loss provision. Due to the substantial reduction of portfolios reported under the interest method, and the inability to reasonably estimate cash collections required to account for those portfolios under the interest method the Company concluded the cost recovery method is the appropriate accounting method under the circumstances.

Under the guidance of ASC 310, the Company must analyze a portfolio upon acquisition 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 recovery method, no income is recognized until the cost of the portfolio has been fully recovered. A pool can become fully amortized (zero carrying balance on the balance sheet) while still generating cash collections. At such time, all cash collections are recognized as revenue when received.

Impairments - Consumer Receivables 

The Company accounts for its impairments in accordance with ASC 310, which provides guidance on how to account for differences between contractual and expected cash flows from an investor’s initial investment in loans or debt securities acquired in a transfer if those differences are attributable, at least in part, to credit quality. The recognition of income under ASC 310 is dependent on the Company having the ability to develop reasonable expectations of both the timing and amount 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 expected to 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 between the carrying value at the time of the forecast and the corresponding estimated remaining future collections. The Company believes it has significant experience in acquiring certain distressed consumer receivable portfolios at a significant discount to the amount actually owed by underlying customers. The Company invests 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 it believes its estimated cash flow offers an adequate return on acquisition costs after servicing expenses. Additionally, when considering larger portfolio purchases of accounts, or portfolios from issuers with whom the Company has limited experience, it has the added benefit of soliciting its third party collection agencies and attorneys for their input on liquidation rates and, at times, incorporates such input into the estimates it uses for its expected cash flows, and the Company’s ability to recover their cost basis.

Income Recognition - Social Security Disability Advocacy 

 In accordance with FASB ASC 606, Revenue from Contracts with Customers, the Company recognizes disability fee income for GAR Disability Advocates and Five Star when disability claimant’s cases close, when cash is received or when the Company receives a notice of award from the Social Security Administration (“SSA”) or the Department of Veterans Affairs that stipulates the amount of fee approved by the SSA to be paid to the Company. The Company establishes a reserve for the differentials in amounts awarded by the SSA compared to the actual amounts received by the Company. Fees paid to the Company are withheld by the SSA against the claimant's disability claim award, and are remitted directly to the Company from the SSA.

Commissions and fees   

Commissions and fees are the contractual commissions earned by third party collection agencies and attorneys, and direct costs associated with the collection effort, generally court costs and asset searches. The Company utilizes third party collection agencies and attorney networks. 

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 intangibles resulting in timing differences between financial accounting and tax reporting; (iv) stock based compensation; and (v) partnership investments.

12

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2—Business and Basis of Presentation (Continued) 

Fair Value Hierarchy 

FASB ASC 825, Financial Instruments, (“ASC 825”), requires disclosure of fair value information about financial instruments, whether or not recognized on 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 assets and liabilities, fair value estimates are based upon judgments regarding credit risk, investor expectation of economic conditions, normal cost of administration and other 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 Company records its available-for-sale debt securities and investments in equity securities at estimated fair value on a recurring basis. The accompanying condensed consolidated financial statements include estimated fair value information regarding its available-for-sale debt securities and investments in equity securities as of March 31, 2020, as required by FASB ASC 820, Fair Value Measurements 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 exit price) in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s level within the fair value hierarchy 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 that are 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 the full 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 developed using the reporting entities’ estimates and assumptions, which reflect those that market participants would use. 

ASC 825 requires disclosure of fair value information about financial instruments, whether or not recognized on 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 assets and liabilities, fair value estimates are based upon judgments regarding credit risk, investor expectation of economic conditions, normal cost of administration and other 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.

Recent Accounting Pronouncements  

Adopted During the Six Months Ended March 31, 2020

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”) which requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. For a lease with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize a right-of-use asset and lease liability. Additionally, when measuring assets and liabilities arising from a lease, optional payments should be included only if the lessee is reasonably certain to exercise an option to extend the lease, exercise a purchase option or not exercise an option to terminate the lease. In January 2018, the FASB issued ASU 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842 (“ASU 2018-01”). ASU 2018-01 was issued to address concerns about the cost and complexity of complying with the transition provisions of ASU 2016-02. Additionally, in July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements, which provides an alternative transition method that permits an entity to use the effective date of ASU 2016-02 as the date of initial application through the recognition of a cumulative effect adjustment to the opening balance of retained earnings upon adoption. The standard became effective in for fiscal years beginning after December 15, 2018 and interim periods within those years, and early adoption is permitted (see Note 8 – Right of Use Assets). 

13

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2—Business and Basis of Presentation (Continued)

Recent Accounting Pronouncements (continued)

The Company adopted the lease accounting standard using the modified retrospective transition option on adoption on October 1, 2019, which had an immaterial impact to the Company’s condensed consolidated balance sheet. Upon adoption, the Company recorded additional lease liabilities of approximately $636,000 attributable to the Company’s operating leases based on the present value of the remaining minimum lease payments with an increase to right-of-use assets of approximately $636,000. The Company used 3.5% as its incremental borrowing rate to calculate the net present value of its leases at October 1, 2019, based on the Company's estimated borrowing rate for a collateralized loan. The Company had no debt outstanding as of October 1, 2019.

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows a reclassification from accumulated other comprehensive income (loss) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act enacted on December 22, 2017, and requires certain disclosures about stranded tax effects. ASU 2018-02 was effective for the Company's fiscal year beginning October 1, 2019, with early adoption permitted, and was applied in the period of adoption in which the effect of the change in the U.S. federal corporate income tax rate in the Act was recognized. The adoption of this accounting update did not have a material impact on the Company’s condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. For the Company, this update will be effective for interim periods and annual periods beginning after December 15, 2022. Upon adoption, the Company will accelerate the recording of its credit losses and is continuing to assess the impact on its consolidated financial statements. 

In January 2017, the FASB issued ASU 2017-04 Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The objective of this update is to simplify the subsequent measurement of goodwill, by eliminating step 2 from the goodwill impairment test. The amendments in this update are effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company does not believe this update will have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements on fair value measurements. The ASU removes the requirement to disclose: the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level 3 fair value measurements. The ASU requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.  

 In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for the Company beginning in fiscal 2022. The Company is evaluating the impact of the adoption of ASU 2019-12 on its financial statements, but does not expect such adoption to have a material impact.

14

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) 

Note 3—Investments in Debt and Equity Securities

Investments in Equity Securities  

Investments of equity securities at March 31, 2020 and September 30, 2019, consist of mutual funds valued at $8.1 million and $8.1 million, respectively.

Net gains and losses recognized on investments in equity securities for the three and six months ended March 31, 2020 and 2019 are as follows:

	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019		Six Months Ended March 31, 2020			Six Months Ended March 31, 2019
Net gains and (losses) recognized during the period on equity securities	$	(172,000	)	$	50,000	$	(162,000	)	$	21,000
Less: Net gains and (losses) recognized during the period on equity securities sold during the period		—					—
Unrealized gains and (losses) recognized during the reporting period on equity securities still held at the reporting date	$	(172,000	)	$	50,000	$	(162,000	)	$	21,000

Available for Sale Debt Securities

Available for sale debt securities at March 31, 2020 and September 30, 2019, consist of the following:

March 31, 2020	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Available for sale debt securities	$	55,488,000	$	204,000	$	—	$	55,692,000

September 30, 2019	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Available for sale debt securities	$	55,946,000	$	178,000	$	1,000	$	56,123,000

Unrealized holding gains and losses on available for sale debt securities are included in other comprehensive income (loss) within stockholders’ equity. Realized gains (losses) on available for sale debt securities are included in other income (loss) and, when applicable, are reported as a reclassification adjustment in other comprehensive income (loss).  

Note 4—Consumer Receivables Acquired for Liquidation

Accounts acquired for liquidation are stated at cost and consist primarily of defaulted consumer loans of individuals primarily, throughout the United States and South America.

15

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)  

Note 4—Consumer Receivables Acquired for Liquidation (Continued) 

The following tables summarize the changes in the condensed consolidated balance sheet account of consumer receivables acquired for liquidation during the following periods:

	For the Three Months Ended March 31,
	2020			2019
Balance, beginning of period	$	1,448,000		$	3,071,000
Net cash collections		(2,975,000	)		(3,889,000	)
Effect of foreign currency translation		(88,000	)		(37,000	)
Finance income recognized		2,808,000			3,481,000
Balance, end of period	$	1,193,000		$	2,626,000
Finance income as a percentage of collections		94.4	%		89.5	%

	For the Six Months Ended March 31,
	2020			2019
Balance, beginning of year	$	1,668,000		$	3,749,000
Net cash collections from collection of consumer receivables acquired for liquidation		(6,350,000	)		(7,914,000	)
Impairment		(23,000	)
Effect of foreign currency translation		(42,000	)		(184,000	)
Finance income recognized		5,940,000			6,975,000
Balance, end of period	$	1,193,000		$	2,626,000
Finance income as a percentage of collections		93.5	%		88.1	%

 During the three and six months ended March 31, 2020 and 2019 the Company did not purchase any new portfolios.

As of March 31, 2020, the Company held consumer receivables acquired for liquidation from Peru and Colombia of $0.8 million and $0.2 million, respectively. The total amount of foreign consumer receivables acquired for liquidation was $1.0 million, or 81.7% of the $1.2 million in total consumer receivables held at March 31, 2020. Of the total consumer receivables held domestically and internationally 3 individual portfolios comprise 26.3%, 18.3% and 14.5% of the overall asset balance at March 31, 2020.

As of September 30, 2019, the Company held consumer receivables acquired for liquidation from Peru and Colombia of $1.1 million and $0.3 million, respectively. The total amount of foreign consumer receivables acquired for liquidation was $1.4 million, or 83.8% of the total consumer receivables held of $1.7 million at September 30, 2019. Of the total consumer receivables held domestically and internationally 4 individual portfolios comprise 23.9%, 16.2%, 14.1% and 11.0% of the overall asset balance at September 30, 2019.

As of March 31, 2020, and September 30, 2019, 1.1% and 1.5% of the Company's total assets were related to its international operations, respectively. For the three and six months ended March 31, 2020 and 2019, 5.5% and 4.9%, respectively, and 5.9% and 4.9%, respectively, of the Company's total revenue were related to its international operation.

At March 31, 2020, approximately 34% of the Company’s portfolio face value was serviced by five collection organizations.  At September 30, 2019, approximately 28% of the Company’s portfolio face value was serviced by five collection organizations. The Company has servicing agreements in place with these five collection organizations, as well as all of the Company’s other third-party collection agencies and attorneys that cover standard contingency fees and servicing of the accounts. While the 5 collection organizations represent only 34% and 28% as of March 31, 2020 and September 30, 2019, respectively, of the Company’s portfolio face value, it does represent approximately 89% and 86% of the Company’s portfolio face value at all third-party collection agencies and attorneys as of March 31, 2020 and September 30, 2019, respectively.

16

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 4—Consumer Receivables Acquired for Liquidation (Continued) 

The following table summarizes collections received by the Company’s third-party collection agencies and attorneys, less commissions and direct costs, for the three and six months ended March 31, 2020 and 2019, respectively. 

	For the Three Months Ended March 31,						For the Six Months Ended March 31,
	2020			2019			2020			2019
Gross collections (1)	$	5,701,000		$	7,362,000		$	12,251,000		$	15,582,000
Commissions and fees (2)		(2,726,000	)		(3,473,000	)		(5,901,000	)		(7,668,000	)
Net collections	$	2,975,000		$	3,889,000		$	6,350,000		$	7,914,000

(1)

Gross collections include collections from third party collection agencies and attorneys, collections from in-house efforts and collections represented by account sales.

(2)

Commissions are earned by third party collection agencies and attorneys, and include direct costs associated with the collection effort, generally court costs. In December 2007 an arrangement was consummated with one servicer who also received a 3% fee on gross collections received by the Company in connection with the related portfolio purchase.  The fee is charged for asset location and skip tracing in connection with this portfolio purchase.

  Note 5—Equity Method Investments

Serlefin Peru is a joint venture in which the Company has a 49% ownership interest. The other 51% is owned by three individuals who share common ownership with Serlefin BPO&O Serlefin S.A. (“Serlefin”). Each owner maintains voting rights equivalent to their share ownership, and the 51% shareholders collectively manage the operations of the business. Based on the Company's ownership and voting rights, the Company lacks requisite control of Serlefin Peru, and therefore accounts for its investment in Serlefin Peru under the equity method of accounting. Under the joint venture agreement, the Company is entitled to a management fee from Serlefin Peru in connection with certain payments made to Serlefin Peru. In light of the novel coronavirus (“COVID-19”) pandemic, the Company agreed to delay the reimbursement of management fees due in April and May 2020.

Additionally, the Company and Serlefin jointly purchase international consumer debt portfolios under a purchase agreement. The Company and Serlefin purchase the portfolios on a pro-rata basis of 80% and 20%, respectively. The purchased portfolios are transferred to an administrative and payment trust, where the Company and Serlefin are trustees. Serlefin provides collection services to the trust, and receives a performance fee determined by the parties for each loan portfolio acquired. Serlefin received approximately $0.4 million and $0.2 million, and $0.7 million and $0.5 million in performance fees for the three and six months ended March 31, 2020 and 2019, respectively.

The carrying value of the investment in Serlefin Peru was $223,000 and $280,000 as of March 31, 2020 and September 30, 2019, respectively. The cumulative net loss from our investment in Serlefin Peru from the date of the initial investment through March 31, 2020 was approximately $308,000, and was not significant to the Company's condensed consolidated statement of operations. The Company has determined that there is no impairment of this investment at March 31, 2020.

Note 6—Personal Injury Claims Funding 

Simia and Sylvave

As of March 31, 2020, Simia had a personal injury claims portfolio of $1.0 million, and recognized revenue for the three and six months then ended of $55,000 and $71,000, respectively.  As of September 30, 2019, Simia had a personal injury claims portfolio of $1.3 million, and recognized revenue of $15,000 and $29,000, respectively, for the three and six months ended March 31, 2019.

 As of March 31, 2020, Sylvave had a personal injury claims portfolio of $2.4 million, and recognized revenue for the three and six months then ended of $94,000 and $440,000, respectively.  As of September 30, 2019, Sylvave had a personal injury claims portfolio of $3.7 million, and recognized revenue of $441,000 and $1,140,000, respectively, for the three and six months ended March 31, 2019.

Simia and Sylvave remain in operation to continue to collect on their outstanding personal injury claim portfolios, but will not be funding any new advances to claimants. 

17

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)  

Note 6—Personal Injury Claims Funding (Continued)

Arthur Funding

Arthur Funding began funding advances on personal injury claims in May 2019. As of March 31, 2020, Arthur Funding had a personal injury claims portfolio of $0.4 million, and recognized revenue for the three and six months then ended of $16,000 and $30,000, respectively. As of September 30, 2019, Arthur Funding had a personal injury claims portfolio of $0.2 million, and no revenue was recognized for the three and six months ended March 31, 2019.   

The following tables summarize the changes in the balance sheet account of personal injury claim portfolios held by Simia, Sylvave and Arthur Funding, net of reserves, for the following periods: 

	For the Three Months ended March 31,
	2020			2019
Balance, beginning of period	$	4,533,000		$	8,813,000
Personal injury claim advances		67,000			—
(Write offs) recoveries		(243,000	)		45,000
Personal injury claims income		165,000			456,000
Personal injury claims receipts		(813,000	)		(2,684,000	)
Balance, end of period	$	3,709,000		$	6,630,000

	For the Six Months ended March 31,
	2020			2019
Balance, beginning of year	$	5,190,000		$	10,745,000
Personal claim advances		116,000			—
(Write offs) recoveries		60,000			(158,000	)
Personal injury claims income		541,000			1,169,000
Personal injury claims receipts		(2,198,000	)		(5,126,000	)
Balance, end of period	$	3,709,000		$	6,630,000

 The Company recognized personal injury claims income of $0.2 million and $0.5 million for the three months ended March 31, 2020 and 2019, respectively, and $0.5 million and $1.2 million for the six months ended March 31, 2020 and 2019, respectively. The Company has recorded a net reserve against its investment in personal injury claims of $1.4 million as of March 31, 2020 and $1.2 million as of September 30, 2019. During the quarter and six months ended March 31, 2020, the Company incurred personal injury bad debt expense (recovery) of $243,000 and ($60,000), respectively, as compared with ($45,000) and $158,000 in the comparable periods of fiscal 2019, respectively.

Note 7—Non-Recourse Debt

Non-Recourse Debt –Bank of Montreal (“BMO”)

As of March 31, 2020 and September 30, 2019, the Company recorded a liability to BMO of approximately $96,000 and $22,000, respectively, which has been recorded in accounts payable and accrued expenses on the Company’s consolidated balance sheet. The funds were subsequently remitted to BMO on April 10, 2020 and October 10, 2019, respectively. The liability to BMO is recorded when actual collections are received.

18

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 8 – Right of Use Assets and Liabilities

Effective October 1, 2019, the Company adopted ASU 2016-02, and all subsequent ASUs that modified Topic 842. For the Company, Topic 842 affected the accounting treatment for operating lease agreements in which the Company is the lessee by recognizing lease assets and liabilities on the balance sheet. The Company leases the premises for two New Jersey office facilities under operating lease agreements expiring in various years through 2023. The Company is responsible to pay all insurance, utilities, maintenance and repairs on the office spaces. All of the Company’s leases are classified as operating leases.

On October 1, 2019, the Company recorded lease liabilities of approximately $636,000 attributable to the Company’s operating leases based on the present value of the remaining minimum lease payments along with right-of-use assets of approximately $636,000. The Company used 3.5% as its incremental borrowing rate to calculate the net present value of its leases on October 1, 2019. As of March 31, 2020, the Company’s operating lease right-of-use assets and operating lease liabilities were approximately $454,000 and $456,000, respectively.

The Company leases office space in Englewood Cliffs, New Jersey and subleases office space in Fort Lee, New Jersey under agreements classified as operating leases.

The lease agreement in Englewood Cliffs, New Jersey expires on August 31, 2020 and does not include any renewal option. The lease agreement provides for an initial monthly base amount plus annual escalations through the term of the lease.

The sublease agreement in Fort Lee, New Jersey expires on March 31, 2023 and does not include any renewal option. The lease agreement provides for an initial monthly base amount plus certain additional amounts pursuant to the leasing arrangement between the landlord and sublessor.

In adopting the new accounting guidance, the Company used the following practical expedients for transitional relief as provided for in ASU 2018-01:

●An entity need not reassess whether any expired or existing contracts are or contain leases.

●An entity need not reassess the lease classification for any expired or existing leases.

●An entity need not reassess initial direct costs for any existing leases.

●An entity may elect to apply hindsight to leases that existed during the period from the beginning of the earliest period presented in the financial statements until the effective date.

The Company also elected not to include short-term leases (i.e., leases with initial terms of twelve months or less) or insignificant equipment leases on the condensed consolidated balance sheet as provided for in the accounting guidance.

The following provides additional information about the Company’s operating leases:

As of March 31, 2020:

Weighted average remaining lease term (in years)	2.35
Weighted average discount rate	3.5	%

19

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 8 – Right of Use Assets and Liabilities (Continued)

As of March 31, 2020, the future minimum payments for the fiscal years are as follows: 

2020	$	159,000
2021		122,000
2022		131,000
2023		65,000
Thereafter		–
Total lease payments		477,000
Less interest		(21,000	)
Operating lease liability	$	456,000

 The Company leases its facilities in (i) Englewood Cliffs, New Jersey, and (ii) Fort Lee, New Jersey. Rent expense for the three and six months ended March 31, 2020 and 2019 was $0.1 million and $0.1 million and $0.2 million and $0.1 million, respectively.  

Note 9– Settlements

In August 2014, the Company filed a lawsuit in Delaware state court against a third-party servicer arising from the third-party servicer’s failure to pay the Company certain amounts that are due the Company under a servicing agreement. The third-party servicer filed a counterclaim in the Delaware action alleging that the Company owes certain amounts to the third-party servicer for court costs pursuant to an alleged arrangement between the companies. On or about July 12, 2018, the parties agreed to settle the action pursuant to a settlement agreement and release, which provides for, among other things, the payment by the third-party servicer of $4.4 million to the Company pursuant to an agreed upon schedule with a lump sum payment to be made at the third anniversary of the agreement.

These fee-based settlements are required to total $2.4 million and $4.4 million by the second and third anniversaries, respectively. To the extent that these fee-based settlement fees are less than these amounts, the servicer is required to make lump sum true-up payments.

The Company determined the fair value of this settlement using (i) historical collection history to estimate the fee based settlement fees that are expected to be received each month from the servicer; (ii) the contractual true-up dates, discussed above, in order to estimate the anticipated true-up payments that will be received from the servicer on the second and third anniversaries; and (iii) an imputed interest rate of 8.5%.

As of March 31, 2020, and September 30, 2019, the Company has a settlement receivable due from this third-party servicer of $0.8 million and $1.6 million, respectively. During the six months ended March 31, 2020, the Company received $0.4 million in payments from this third-party servicer. For the three and six months ended March 31, 2020 and 2019, the Company recorded $33,000 and $58,000 and $72,000 and $126,000, respectively, in interest income, which is included in other income on the Company's condensed consolidated statements of operations. 

On January 22, 2018, DLCA, LLC (“DLCA”), a Delaware limited liability company and a wholly owned subsidiary of the Company, filed a complaint against Balance Point Divorce Funding, LLC. (“Balance Point”) and Stacey Napp (“Napp”) in the United States District Court of New Jersey, asserting various claims including breach of contract, conversion, unjust enrichment and fraud associated with a loan made to Balance Point and Napp in May 2012.

On May 22, 2019, Napp and DLCA entered into a Settlement Agreement that settled the action as well as all other claims for monies and/or other obligations owed as and between the parties.

Napp agreed to pay the sum of $1.4 million (the “Settlement Amount”), the payment terms of which are between May 21, 2019 and January 12, 2022.

The Company has previously reviewed the financial condition of both Balance Point and Napp, and has concluded that neither entity currently has assets sufficient to honor the obligations set forth in the Settlement Agreement. Therefore, due to the uncertainty of collecting the Settlement Amount from either Balance Point or Napp, the Company will realize the gain on this settlement, as the Company receives the cash proceeds. Napp missed the $25,000 due in December 2019 and made a $30,000 payment in February 2020. The Company has recognized a gain on settlement of $30,000 for the three and six months ended March 31, 2020 in its condensed consolidated statements of operations.

20

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 10 – Interest, Dividend and Other Income

The following tables summarize interest, dividend and other income for the three and six month periods ended March 31, 2020 and 2019:

	For the Three Months ended March 31,					For the Six Months ended March 31,
	2020			2019		2020			2019
Interest and dividend income	$	320,000		$	255,000		649,000		$	454,000
Realized gain		—			—	––				25,000
Unrealized gain (loss)		(172,000	)		50,000		(162,000	)		21,000
Other	––				1,000		1,000			40,000
	$	148,000		$	306,000	$	488,000		$	540,000

Note 11—Commitments and Contingencies 

Legal Matters

On November 7, 2019, a shareholder of the Company filed a verified shareholder derivative complaint in the Court of Chancery of the State of Delaware against certain current and former officers and directors of the Company, and named the Company as a nominal defendant, alleging that certain actions taken by management constituted a violation of fiduciary duty to the Company. The Company believes the lawsuit is without merit and intends to vigorously defend the matter. On or about January 8, 2020, a motion to dismiss the complaint was filed on behalf of all individual defendants and the Company as nominal defendant. In light of the execution of the merger agreement, the parties to the lawsuit entered into a joint stipulation and submitted a proposed order to stay proceedings in the lawsuit until the earlier of: (i) an announcement by the Company of the completion or cancellation of the merger, or (ii) June 30, 2020. On April 14, 2020, the court granted the parties’ stipulation and proposed order.

In the ordinary course of our business, we are involved in numerous legal proceedings. We regularly initiate collection lawsuits, using our network of third-party law firms, against consumers. Also, consumers occasionally initiate litigation against us, in which they allege that we have violated a federal or state law in the process of collecting their account. We do not believe that these ordinary course matters are material to our business and financial condition. The Company is not involved in any other material litigation in which we are a defendant. 

 Note 12—Income Taxes

The Company’s effective rate for the three months ended March 31, 2020 differed from the U.S. federal statutory rate of 21%, primarily due to changes in forecasted income, income from foreign operations resulting in tax expense of $62,000, and state income taxes. The Company’s effective tax rate from operations for the six months ended March 31, 2020 differed from the U.S. federal statutory rate of 21%, primarily due to income from foreign operations, state income taxes and other differences discrete to the quarter.

The Company files income tax returns in the U.S federal jurisdiction, various state jurisdictions, and various foreign countries. The Company does not have any uncertain tax positions. 

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was signed into law.  The CARES Act contains several new or changed income tax provisions, including but not limited to the following: increased limitation threshold for determining deductible interest expense, class life changes to qualified improvements (in general, from 39 years to 15 years), and the ability to carry back net operating losses incurred from tax years 2018 through 2020 up to the five preceding tax years. The income tax provisions of the CARES Act had limited applicability to the Company as of March 31, 2020, and therefore, the enactment of the CARES Act did not have a material impact on the Company’s condensed consolidated financial statements as of, and for the three and six months ended, March 31, 2020. We will continue to evaluate the impact of tax legislation and will update our disclosures as additional information and interpretive guidance becomes available.

21

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 Note 13—Net Income (Loss) per Share

Basic per share data is determined by dividing net income (loss) by the weighted average shares outstanding during the period. Diluted per share data is computed by dividing net income (loss) by the weighted average shares outstanding, assuming all dilutive

potential common shares were issued. The assumed proceeds from the exercise of dilutive options are calculated using the treasury stock method based on the average market price for the period.

The following table presents the computation of basic and diluted per share data for the three and six months ended March 31, 2020 and 2019:

	For the Three Months Ended March 31, 2020			For the Three Months Ended March 31, 2019		For the Six Months Ended March 31, 2020		For the Six Months Ended March 31, 2019
Net Income (Loss)	$	(72,000	)	$	1,773,000	$	973,000	$	3,048,000
Basic earnings (loss) per common share	$	(0.01	)	$	0.27	$	0.15		0.46
Diluted earnings per common share	$	(0.01	)	$	0.27	$	0.15		0.46
Weighted average number of common shares outstanding:
Basic		6,567,765			6,685,415		6,567,765		6,685,415
Dilutive effect of stock options	––				412		87,108		360
Diluted		6,567,765			6,685,827		6,654,873		6,685,775

At March 31, 2020 there were no stock options outstanding that were anti-dilutive. At March 31, 2019 there were 725,567 stock options outstanding that could have an effect on the future computation of dilution per common share, had their effect not been anti-dilutive.

Note 14—Stock Option Plans 

2012 Stock Option and Performance Award Plan 

On February 7, 2012, the Company adopted the 2012 Stock Option and Performance Award Plan (the “2012 Plan”), which was approved by the stockholders of the Company on March 21, 2012. The 2012 Plan replaced the Equity Compensation Plan (as defined below). 

The 2012 Plan provides the Company with flexibility with respect to equity awards by providing for grants of stock awards (i.e. restricted or unrestricted), 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. Under the 2012 Plan, the Company has granted options to purchase an aggregate of 540,800 shares, awarded 245,625 shares of restricted stock, and has cancelled 118,568 options, leaving 1,332,143 shares available as of March 31, 2020. At March 31, 2020, 49 of the Company’s employees were able to participate in the 2012 Plan. 

Equity Compensation Plan 

On December 1, 2005, the Company adopted the Equity Compensation Plan (the “Equity Compensation Plan”), which was approved by the stockholders of the Company on March 1, 2006. The Equity Compensation Plan was adopted to supplement the Company’s 2002 Stock Option Plan (as defined below). 

In addition to permitting the grant of stock options as are permitted under the 2002 Stock Option Plan, the Equity Compensation Plan allowed the Company flexibility with respect to equity awards by also providing for grants of stock awards (i.e. restricted or unrestricted), stock purchase rights and stock appreciation rights.  

The Company authorized 1,000,000 shares of Common Stock for issuance under the Equity Compensation Plan. As of March 21, 2012, no more awards could be issued under this plan. 

2002 Stock Option Plan 

On March 5, 2002, the Company adopted the 2002 Stock Option Plan (the “2002 Plan”), which was approved by the stockholders of the Company on May 1, 2002. The 2002 Plan was adopted in order to attract and retain qualified directors, officers and employees of, and consultants to, the Company. 

22

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) 

Note 14—Stock Option Plans (Continued)

The 2002 Plan authorized the granting of incentive stock options (as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”)) and non-qualified stock options to eligible employees of the Company, including officers and directors of the Company (whether or not employees) and consultants of the Company.  

The Company authorized 1,000,000 shares of Common Stock under the 2002 Plan. As of March 5, 2012, no more awards could be issued under this plan.

Summary of the Plans

Compensation expense for stock options and restricted stock is recognized over the requisite vesting or service period. Compensation expense for restricted stock is based upon the market price of the shares underlying the awards on the grant date. 

The following table summarizes stock option transactions under the 2012 Plan, the Equity Compensation Plan and the 2002 Plan (collectively the “Plans”):

	For the Three Months Ended March 31,
	2020					2019
	Number Of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Outstanding options at the beginning of period		670,167		$	8.19		728,533		$	8.17
Options exercised		—					—
Options forfeited/cancelled		(3,300	)		8.21		(1,766	)		8.21
Outstanding options at the end of period		666,867		$	8.19		726,767		$	8.17
Exercisable options at the end of period		666,867		$	8.19		726,767		$	8.17

	For the Six Months Ended March 31,
	2020					2019
	Number Of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Outstanding options at the beginning of period		722,567		$	8.18		728,867		$	8.17
Options exercised		—			—		—			—
Options forfeited/cancelled		(55,700	)		8.08		(2,100	)		8.17
Outstanding options at the end of period		666,867		$	8.19		726,767		$	8.17
Exercisable options at the end of period		666,867		$	8.19		726,767		$	8.17

The following table summarizes information about the Plans outstanding options as of March 31, 2020:

			Options Outstanding						Options Exercisable
Range of Exercise Price			Number of Shares Outstanding		Weighted Remaining Contractual Life (in Years)		Weighted Average Exercise Price		Number of Shares Exercisable		Weighted Average Exercise Price
$5.7501	-	$8.6250		557,367		2.4	$	7.96		557,367	$	7.96
$8.6251	-	$11.5000		109,500		2.8		9.37		109,500		9.37
				666,867		2.5	$	8.19		666,867	$	8.19

23

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 14—Stock Option Plans (Continued)

The Company did not recognize any compensation expense related to the stock option grants during the three and six months ended March 31, 2020. The Company recognized $0 and $7,000 of compensation expense related to the stock options vested during the three and six months ended March 31, 2019, respectively. As of March 31, 2020, there was no unrecognized compensation cost related to stock option awards.

The intrinsic value of the outstanding and exercisable options as of March 31, 2020 was approximately $124,000. The weighted average remaining contractual life of exercisable options is 2.5 years. There were no options exercised during the three and six months ended March 31, 2020 and 2019. The fair value of the stock options that vested during the three and six months ended March 31, 2020 was approximately $0 for both periods. The fair value of the stock options that vested during the three and six months ended March 31, 2019 was approximately $0 and $84,000, respectively. There were no options granted during the three and six months ended March 31, 2020 and 2019. 

The Company did not grant any restricted stock awards during the three and six months ended March 31, 2020 and 2019. As of March 31, 2020, and September 30, 2019, there was no unrecognized compensation cost related to restricted stock awards.

Note 15—Stockholders’ Equity

 The Company has 5,000,000 authorized preferred shares with a par value of $0.01 per share.  The Board of Directors of the Company (the “Board”) are authorized to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all other series and classes.

There were no shares of preferred stock issued and outstanding as of March 31, 2020 and 2019.

Dividends are declared at the discretion of the Board and depend upon the Company’s financial condition, operating results, capital requirements and other factors that the Board deems relevant. In addition, agreements with the Company’s lenders may, from time to time, restrict the ability to pay dividends. As of March 31, 2020, there were no such restrictions, as there were no lending agreements in place. No dividends were declared during the three and six months ended March 31, 2020.  

Note 16—Fair Value of Financial Measurements and Disclosures  

Fair Value of Financial Instruments 

The estimated fair value of the Company’s financial instruments is summarized as follows:

	March 31, 2020				September 30, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Cash equivalents (Level 1)	$	5,398,000	$	5,398,000	$	64,000	$	64,000
Investments in equity securities (Level 1)		8,111,000		8,111,000		8,136,000		8,136,000
Available-for-sale debt securities (Level 2)		55,692,000		55,692,000		56,123,000		56,123,000
Consumer receivables acquired for liquidation (Level 3)		1,193,000		26,154,000		1,668,000		25,783,000

Disclosure of the estimated fair values of financial instruments often requires the use of estimates. The Company uses the following methods and assumptions to estimate the fair value of financial instruments:

Cash equivalents - The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. The carrying amount of cash equivalents approximates fair value.

Investments in equity securities - The investments in equity consist of mutual funds that are valued based on quoted prices in active markets.

Available-for-sale debt securities - The available-for-sale debt securities consist of U.S. treasury bills that are valued based on quoted prices in active markets. The U.S. treasury bills have been classified as available for sale by the Company, as they are deemed to be short term investments, and can be liquidated as needed by the Company. 

24

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 16—Fair Value of Financial Measurements and Disclosures (Continued) 

The Company’s investments in equity securities and available-for-sale debt securities are classified as Level 1 and Level 2 financial instruments, respectively, based on the classifications described above. The Company did not have any transfers into (out of) Level 1 investments during the fiscal year ended September 30, 2019. The Company had no Level 3 available-for-sale investments during the three and six months ended March 31, 2020.

Consumer receivables acquired for liquidation - The Company computed the fair value of the consumer receivables acquired for liquidation using its proprietary forecasting model. The Company’s forecasting model utilizes a discounted cash flow analysis. The Company’s cash flows are an estimate of monthly collections for consumer receivables over the estimated collection period, which is currently April of 2020 through March of 2029. These cash flows are then fair valued using a discount rate of 20%. See Note 4 for the rollforward of Level 3 activity. 

Note 17—Related Party Transactions

The Company utilizes the services of a consultant in conjunction with its international operations. The consultant is the spouse of one of the owners of Serlefin Peru. For the three and six months ended March 31, 2020 and 2019, the Company paid this consultant $12,500 and $25,000, and $25,239 and $50,478, respectively. The Company does not have a formal agreement in place for these services, and the Company had no amounts due to this consultant as of March 31, 2020 and September 30, 2019.

On August 15, 2019, the Company and Lou Piccolo, a non-independent member of the Company’s Board of Directors, entered into a new one-year, $30,000 contract, pursuant to which Mr. Piccolo will provide consulting services. The compensation is to be paid quarterly. The Company recorded an expense of $7,500 and $15,000 for the three and six months ended March 31, 2020. There were no amounts due to Mr. Piccolo at March 31, 2020 and September 30, 2019.

Note 18—Segment Reporting

The Company operates through strategic business units that are aggregated into three reportable segments: Consumer receivables, personal injury claims and social security disability advocacy. The three reportable segments consist of the following:

• Consumer receivables - This segment is engaged in the business of purchasing, managing for its own account and servicing distressed consumer receivables, including judgment receivables, charged off receivables and semi-performing receivables.  Judgment receivables are accounts where outside attorneys have secured judgments directly against the consumer. Primary charged-off receivables are accounts that have been written-off by the originators and may have been previously serviced by collection agencies. Semi-performing receivables are accounts where the debtor is currently making partial or irregular monthly payments, but the accounts may have been written-off by the originators. Distressed consumer receivables are the unpaid debts of individuals to banks, finance companies and other credit providers. A large portion of our distressed consumer receivables are MasterCard®, Visa® and other credit card accounts which were charged-off by the issuers or providers for non-payment. We acquire these and other consumer receivable portfolios at substantial discounts to their face values. The discounts are based on the characteristics (issuer, account size, debtor location and age of debt) of the underlying accounts of each portfolio. Recently, the Company's efforts have been in the international areas (mainly South America), as we have curtailed our active purchasing of consumer receivables in the United States. The Company holds consumers receivable acquired for liquidation in both Colombia and Peru of approximately $1.0 million. The business conducts its activities primarily under the name Palisades Collection, LLC.

• Personal injury claims – This segment is comprised of purchased interests in personal injury claims from claimants who are a party in personal injury litigation or claims. The Company advances to each claimant funds on a non-recourse basis at an agreed upon interest rate, in anticipation of a future settlement. The interest in each claim purchased 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 claim. The Company historically funded personal injury claims in Simia and Sylvave. The Company formed a new wholly owned subsidiary, Arthur Funding, on March 16, 2018 to continue in the personal injury claims funding business. Arthur Funding began funding advances on personal injury claims in May 2019. Arthur Funding, Simia and Sylvave conduct its businesses solely in the United States and obtains business from external brokers and internal sales professionals soliciting attorneys and law firms who represent claimants who have personal injury claims. Business is also obtained from its website and through attorneys. Simia and Sylvave are not funding any new advances, but continue to collect on outstanding personal injury claim advances in the ordinary course.

25

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 18—Segment Reporting (Continued)

• Social Security benefit advocacy – GAR Disability and Five Star are advocacy groups representing individuals throughout the United States in their claims for social security disability and supplemental security income benefits from the Social Security and Veterans Administration.

Certain non-allocated administrative costs, interest income and various other non-operating income and expenses are reflected in Corporate. Corporate assets include cash and cash equivalents, investments in equity securities and available-for-sale debt securities, settlement receivable, property and equipment, goodwill, deferred taxes and other assets.

The following table shows results by reporting segment for the three and six months ended March 31, 2020 and 2019:

(Dollars in millions)	Consumer Receivables		Social Security Disability Advocacy		Personal Injury Claims			Corporate (2)			Total
Three Months Ended March 31,
2020:
Revenues	$	2.8	$	0.9	$	0.2		$	—		$	3.9
Other income	0.1			—		—			0.1			0.2
Segment profit (loss)		2.2		0.1		(0.2	)		(2.0	)	0.1
2019:
Revenues	$	3.5	$	1.3	$	0.4		$	—		$	5.2
Other income		0.4		—		—			0.2			0.6
Segment profit (loss)		3.6		0.4		0.4			(2.0	)		2.4
Six Months Ended March 31,
2020:
Revenues	$	5.9	$	1.7	$	0.6		$	—		$	8.2
Other income		0.1		—		—			0.4			0.5
Segment profit (loss)		5.1		0.2		0.4			(4.2	)		1.5
Segment Assets (1)		7.0		0.9		4.2			80.3			92.4
2019:
Revenues	$	7.0	$	2.6	$	1.1		$	—		$	10.7
Other income		0.5		—		—			0.3			0.8
Segment profit (loss)		6.5		0.8		0.9			(4.1	)		4.1
Segment Assets (1)		10.0		0.9		7.1			71.1			89.1

The Company does not have any intersegment revenue transactions.

(1)	Includes other amounts in other line items on the condensed consolidated balance sheet.
(2)	Corporate is not part of the three reportable segments, as certain expenses and assets are not earmarked to any specific operating segment.

Note 19—Subsequent Events

On April 10, 2020, the Company applied for a $1.1 million Paycheck Protection Program (“PPP”) loan under the CARES Act. The proceeds of the loan are intended to be used to retain the Company’s employees, maintain payroll and make lease and utility payments. The Company received approval for a PPP loan from the Small Business Administration. On May 11, 2020, the Company signed a PPP loan note with an interest rate of 1% and a May 11, 2022 maturity date, though PPP loans may be forgiven if certain conditions are met. The PPP loan was funded on May 20, 2020.

26

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

Caution Regarding Forward Looking Statements

The “COVID-19” pandemic, and measures taken to mitigate the pandemic, could cause actual results to differ materially from those set forth in the forward-looking statements, particularly if the pandemic persists for an extended period of time both domestically and internationally. While it is difficult to predict the extent to which the evolving effects of COVID-19 and measures taken to mitigate the pandemic, they may impact us, they could have an adverse effect on our results of operations and cash flows, particularly as they affect general economic and financial markets, changes in economic variables, such as the availability of consumer credit, the ability of consumers to pay amounts owed to us, the housing market, energy costs, the number and size of personal bankruptcy filings, the rate of unemployment, the levels of consumer confidence and consumer debt, and investor sentiment. Additionally, government actions in response to the pandemic may hinder our collection activities or result in increased expenses.

This Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21 E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included or incorporated by reference in this report, including without limitation, statements regarding our future financial position, business strategy, budgets, projected revenues, projected costs and plans and objective of management for future operations, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expects,” “intends,” “plans,” “projects,” “estimates,” “anticipates,” or “believes” or the negative thereof or any variation there on or similar terminology or expressions.

We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Important factors which could materially affect our results and our future performance include, without limitation, the impact of the COVID-19 pandemic on general political and economic conditions, including as a result of efforts by governmental authorities to mitigate the COVID-19 pandemic, such as travel bans, shelter in place orders and third-party business closures and resource allocations, our ability to execute our business continuity as well as our operational and budget plans in light of the COVID-19 pandemic, our ability to consummate the proposed Merger, satisfaction of closing conditions to the consummation of the proposed Merger, the impact of the announcement or the closing of the Merger on the Company’s relationships with its employees, existing customers or potential future customers, the ability to realize anticipated benefits of the proposed Merger, the restatement of previously issued financial statements, the identified material weaknesses in our internal control over financial reporting and our ability remediate those material weaknesses, our ability to purchase defaulted consumer receivables at appropriate prices, changes in government regulations that affect our ability to collect sufficient amounts on our defaulted consumer receivables, our ability to employ and retain qualified employees, changes in the credit or capital markets, changes in interest rates, deterioration in economic conditions, negative press regarding the debt collection industry which may have a negative impact on a debtor’s willingness to pay the debt we acquire, and statements of assumption underlying any of the foregoing, as well as other factors set forth under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019.

All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the foregoing. Except as required by law, we assume no duty to update or revise any forward-looking statements.

Overview

Asta Funding, Inc., a Delaware Corporation (the “Company,” “we” or “us”), together with our wholly owned significant operating subsidiaries Palisades Collection, LLC, Palisades Acquisition XVI, LLC (“Palisades XVI”), Palisades Acquisition XIX, LLC (“Palisades XIX”), Palisades Acquisition XXIII, LLC (“Palisades XXIII”), VATIV Recovery Solutions LLC (“VATIV”), ASFI Pegasus Holdings, LLC (“APH”), Fund Pegasus, LLC (“Fund Pegasus”), GAR Disability Advocates, LLC (“GAR Disability Advocates”), Five Star Veterans Disability, LLC (“Five Star”), EMIRIC, LLC (“EMIRIC”), Simia Capital, LLC (“Simia”), Sylvave, LLC (“Sylvave”) (formerly known as Pegasus Funding, LLC (“Pegasus”)), Arthur Funding LLC (“Arthur Funding”) (formerly known as Practical Funding, LLC (“Practical Funding”)), and other subsidiaries, which are not all wholly owned, are engaged in several business segments in the financial services industry including funding of personal injury claims, through our wholly owned subsidiaries Sylvave, Simia and Arthur Funding, social security disability advocacy through our wholly owned subsidiaries GAR Disability Advocates and Five Star and the business of purchasing, managing for our own account and servicing distressed consumer receivables, including charged off receivables, and semi-performing receivables. 

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We operate principally in the United States in three reportable business segments: consumer receivables, social security disability advocacy and personal injury claims.

For a detailed description of our segments, please read Note 18 – Segment Reporting, in our notes to condensed consolidated financial statements.

Pending Transactions 

On April 8, 2020 the Company announced that it has entered into a definitive merger agreement (the “Merger Agreement”) under which the Stern Group, comprised of Gary Stern, Chairman, President and Chief Executive Officer of the Company, Ricky Stern and certain related parties, will acquire all of the issued and outstanding shares of common stock of the Company through the merger of the Company with a wholly-owned subsidiary of Asta Finance Acquisition Inc. (“Parent”), with the Company surviving as a wholly-owned subsidiary of Parent (the “Merger”).

Each share of outstanding common stock will be purchased for $11.47 in cash.

The Merger was unanimously approved by the board of directors of Asta (the “Board”), acting on the unanimous recommendation of a special committee of independent and disinterested directors (the “Special Committee”) that was granted full authority to conduct a comprehensive strategic review and evaluate, and if warranted, negotiate an acquisition proposal. The Merger is subject to the satisfaction of customary closing conditions as well as the approval by the Company’s stockholders other than the Stern Group. Upon closing, the Company will become a privately held company and as such, the Company’s shares of common stock will no longer be listed or traded on the Nasdaq Global Select Market.

Subsequent to the approval of the Merger by the Board, on May 22, 2020, RBF Capital, LLC notified the Company’s Board of Directors, of its proposal to acquire all of the outstanding shares of the Company not currently held by RBF Capital, LLC for a price of $13.00 per share in cash (the “RBF Capital Proposal”), representing a 13% premium to the Stern Investor Group’s proposed purchase price of $11.47 per share. RBF Capital, LLC intends to finance the proposed acquisition with internal cash. RBF Capital, LLC is prepared to immediately negotiate a confidentiality agreement, commence due diligence and begin negotiation of definitive documentation for a transaction. RBF Capital, LLC is open to a co-investment with the Stern Investor Group as part of their buyout proposal, if the members of the Stern family wish to retain their equity in the Company. The RBF Capital Proposal does not purport to be complete and RBF Capital, LLC reserves the right to modify the RBF Capital Proposal in any way, to extend or discontinue discussions regarding the same, or to withdraw the RBF Capital Proposal at any time. RBF Capital, LLC may, directly or indirectly, take such additional steps from time to time as it may deem appropriate to further the RBF Capital Proposal as may be modified from time to time, including, without limitation, (a) engaging in discussions regarding the same with the Company, other shareholders advisors, and other relevant parties, and (b) entering into other agreements, arrangements and understanding as may be appropriate in connection with its RBF Capital Proposal, as may be modified from time to time. The Special Committee is evaluating the RBF Capital Proposal.

During the three and six months ended March 31, 2020, the Company incurred fees and expenses in connection with the Merger of $531,000 and $785,000, respectively, included in general and administrative expenses on the accompanying consolidated statement of operations. 

Risks and Uncertainties

The novel coronavirus 2019 (“COVID-19”) outbreak emerged in late 2019 and was declared a global pandemic by the World Health Organization on March 11, 2020.  Current economic uncertainty brought about as a result of COVID-19 global pandemic may adversely impact the results of operations and liquidity of the Company overall and its business units to varying degrees over the near and longer term, particularly if the economic effects of the pandemic worsen or persist for an extended period of time. 

A contributing factor to this expected near-term impact is that the COVID-19 pandemic has significantly impacted the ability of many consumers to pay their charged-off consumer receivable balances.  In addition, the world-wide effect of this pandemic has been to drastically reduce employment both in the U.S. and abroad, and because employment is the greatest predictor of a consumer debtor to fulfill his or her obligations, diminished cash flows are probable in this segment. Accordingly, while we cannot quantify the expected effects, we believe revenues and cash collections generated by our Consumer Receivables business are likely to be below our budgeted expectations for at least the remainder of 2020.  

Our Personal Injury clams business relies on the adjudication of personal injury claims for which we purchase an interest in 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 claim.Most courthouses have temporarily closed and lawsuits are not being adjudicated.  It is unclear as to when there will be a full reopening of the court system, and, as such, many cases will be held in abeyance as part of an already long-standing backlog. While we cannot quantify the effects of this downward trend, we believe COVID 19 may negatively impact the results of future operations and cash flows related to this segment.

While it is premature to quantify the impact of the evolving effects of COVID-19 and the effectiveness of measures taken by global governments to mitigate the pandemic and its economic impact, we expect COVID-19 will negatively impact the Company’s results of operations and its cash flows.  The nature,  extent and duration of the impact to the Company’s businesses will depend on implications to the  general economic and financial markets, changes in economic variables, such as the availability of consumer credit, the ability of consumers to pay amounts owed to us; the effect on the housing market; the rate of unemployment; the number and size of personal bankruptcy filings;the effect on energy costs;  the levels of consumer confidence and consumer debt; investor sentiment; and any closures to our offices. Additionally, government actions in response to the pandemic may hinder our collection activities or result in increased expenses. 

Management is actively monitoring the impact of the global situation on our financial condition, liquidity, operations, and workforce. Given the daily evolution of the COVID-19 pandemic and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 pandemic on its results of operations, financial condition, or liquidity for fiscal year 2020.

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 Financial Information About Operating Segments

The consumer receivables segment and the social security benefit advocacy segment each accounted for 10% or more of consolidated net revenue for the three and six months ended March 31, 2020 and 2019. The personal injury claims segment accounted for its investment in Sylvave under the equity method of accounting through January 12, 2018, for subsequent periods we included the financial results of Sylvave in our consolidated statement of operations, while Simia is a consolidated entity. The following table summarizes total revenues by percentage from our three lines of business for the three and six months ended March 31, 2020 and 2019:

	For the Three Months Ended March 31,						For the Six Months Ended March 31,
	2020			2019			2020			2019
Finance income (consumer receivables)		72.5	%		66.5	%		72.5	%		65.2	%
Personal injury claims income		4.3			8.7			6.6			10.9
Disability fee income		23.2			24.8			20.9			23.9
Total revenues		100.0	%		100.0	%		100.0	%		100.0	%

Information about the results of each of our reportable segments for the three and six months ended March 31, 2020 and, 2019, reconciled to the consolidated results, are set forth below. Separate segment MD&A is not provided, as segment revenue corresponds to the revenue presented in our condensed consolidated statement of operations, and material expense items are not allocable to any specific segment.

(Dollars in millions)	Consumer Receivables		Social Security Disability Advocacy		Personal Injury Claims			Corporate (2)			Total
Three Months Ended March 31,
2020:
Revenues	$	2.8	$	0.9	$	0.2		$	—		$	3.9
Other income	0.1			—		—			0.1			0.2
Segment profit (loss)		2.2		0.1		(0.2	)		(2.0	)	0.1
2019:
Revenues	$	3.5	$	1.3	$	0.4		$	—		$	5.2
Other income		0.4		—		—			0.2			0.6
Segment profit (loss)		3.6		0.4		0.4			(2.0	)		2.4
Six Months Ended March 31,
2020:
Revenues	$	5.9	$	1.7	$	0.6		$	—		$	8.2
Other income		0.1		—		—			0.4			0.5
Segment profit (loss)		5.1		0.2		0.4			(4.2	)		1.5
Segment Assets (1)		7.0		0.9		4.2			80.3			92.4
2019:
Revenues	$	7.0		2.6	$	1.1		$	—		$	10.7
Other income		0.5		—		—			0.3			0.8
Segment profit (loss)		6.5		0.8		0.9			(4.1	)		4.1
Segment Assets (1)		10.0		0.9		7.1			71.1			89.1

We do not have any intersegment revenue transactions.  

(1)	Includes other amounts in other line items on the condensed consolidated balance sheet.
(2)	Corporate is not part of our three reportable segments, as certain expenses and assets are not earmarked to any specific operating segment

Consumer Receivables  

The 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 by the originators.

 We acquire these consumer receivable portfolios at a significant discount to the amount actually owed by the borrowers. We acquire these portfolios after a qualitative and quantitative analysis of the underlying receivables and calculate the purchase price so that our estimated cash flow offers us an adequate return on our investment after servicing expenses. After purchasing a portfolio, we actively monitor its performance and review and adjust our collection and servicing strategies accordingly.  

We purchase receivables from credit grantors and others through privately negotiated direct sales, brokered transactions and auctions in which sellers of receivables seek bids from several pre-qualified debt purchasers. We pursue new acquisitions of consumer receivable portfolios on an ongoing basis through:

• 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.

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Personal Injury Claims

This Company’s personal injury claims business segment is comprised of purchased interests in personal injury claims from claimants who are a party in personal injury litigation or claims. The Company advances to each claimant funds on a non-recourse basis at an agreed upon interest rate, in anticipation of a future settlement. The interest in each claim purchased 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 claim. The Company historically funded personal injury claims in Simia and Sylvave. The Company formed a new wholly owned subsidiary, Arthur Funding, on March 16, 2018 to continue in the personal injury claims funding business. Arthur Funding began funding advances on personal injury claims in May 2019. Arthur Funding, Simia and Sylvave conduct its businesses solely in the United States and obtains business from external brokers and internal sales professionals soliciting attorneys and law firms who represent claimants who have personal injury claims. Business is also obtained from its website and through attorneys. Simia and Sylvave are not funding any new advances, but continue to collect on outstanding personal injury claim advances in the ordinary course.

Disability Advocacy Business

GAR Disability Advocates and Five Star are disability advocacy groups, which for a fee obtain and represent individuals in their claims for social security disability, supplemental security income benefits from the Social Security Administration and veterans benefits with the Veteran's Administration.

Critical Accounting Policies

Income Recognition - Consumer Receivables   

We account for certain of our investments in consumer receivables using the guidance of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 310, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310”). Under the guidance of ASC 310, static pools of accounts are established. These pools are aggregated based on certain common risk criteria. Each static pool is recorded at cost and is accounted for as a single unit for the recognition of income, principal payments and loss provision. Due to the substantial reduction of portfolios reported under the interest method, and the inability to reasonably estimate cash collections required to account for those portfolios under the interest method, we concluded the cost recovery method is the appropriate accounting method under the circumstances. 

Under the guidance of ASC 310-30, we must analyze a portfolio upon acquisition 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).  

We use the cost recovery method when collections on a particular pool of accounts cannot be reasonably predicted. Under the cost recovery method, no income is recognized until the cost of the portfolio has been fully recovered. A pool can become fully amortized (zero carrying balance on the balance sheet) while still generating cash collections. In this case, all cash collections are recognized as revenue when received. 

Impairments - Consumer Receivables

We account for our impairments in accordance with ASC 310, which provides guidance on how to account for differences between contractual and expected cash flows from an investor’s initial investment in loans or debt securities acquired in a transfer if those differences are attributable, at least in part, to credit quality. The recognition of income under ASC 310 is dependent on us having the ability to develop reasonable expectations of both the timing and amount of cash flows to be collected. In the event we cannot develop a reasonable expectation as to both the timing and amount of cash flows expected to be collected. ASC 310 permits the change to the cost recovery method. We will recognize income only after we have recovered our 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 between the carrying value at the time of the forecast and the corresponding estimated remaining future collections. We believe we have significant experience in acquiring certain distressed consumer receivable portfolios at a significant discount to the amount actually owed by underlying customers. We invest 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 it believes its estimated cash flow offers an adequate return on acquisition costs after servicing expenses. Additionally, when considering larger portfolio purchases of accounts, or portfolios from issuers with whom we have limited experience, it has the added benefit of soliciting its third-party collection agencies and attorneys for their input on liquidation rates and, at times, incorporates such input into the estimates it uses for its expected cash flows, and our ability to recover our cost basis. For the three and six months ended March 31, 2020, we recorded impairment of our international portfolios by $0 and $23,000, respectively.For the three and six months ended March 31, 2019, we did not record any impairments on our domestic or international portfolios. 

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Personal Injury Claim Advances and Impairments 

We account for our investments in personal injury claims at an agreed upon interest rate, in anticipation of a future settlement. Our interest purchased in personal injury claim advances consists of the right to receive from a claimant part of the proceeds or recoveries which such claimant receives by reason 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 the expected realization and underwriting guidelines and facts and circumstances for each individual case. These personal injury claims are non-recourse. When a case is 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, if applicable, adjusted for any changes due to a settled amount and fees charged to the claimant. 

We assess the quality of the personal injury claims portfolio through an analysis of the underlying personal injury fundings on a case by case basis. Cases are reviewed through periodic updates with attorneys handling the cases, as well as with third party research tools which monitor public filings, such as motions or judgments rendered on specific cases. We specifically reserve for those fundings where the underlying cases are identified as uncollectible, due to anticipated non-favorable verdicts and/or settlements at levels where recovery of the advance outstanding is unlikely. For cases that have not exhibited any specific negative collection indicators, we establish reserves based on the historical collection rates of our fundings. Fee income on advances is reserved for on all cases where a specific reserve is established on the initially funded amount. In addition, we also monitor our historical collection rates on fee income and establish reserves on fee income consistent with the historically experienced collection rates. We regularly analyze and update the historical collection rates of our initially funded cases as well as our fee income. 

 Income Recognition - Social Security Disability Advocacy  

In accordance with FASB ASC 606, Revenue from Contracts with Customers, we recognize disability fee income for GAR Disability Advocates and Five Star when disability claimant’s cases close, when cash is received, or when we receive a notice of award from the Social Security Administration (“SSA”) that stipulates the amount of fee approved by the SSA to be paid to us. We establish a reserve for the differentials in amounts awarded by the SSA and Veterans Administration compared to the actual amounts received by us. Fees paid to us are withheld by the SSA and Veterans Administration against the claimant's disability claim award, and are remitted directly to us from the SSA and Veterans Administration. 

In the following discussions, most percentages and dollar amounts have been rounded to aid in the presentation. As a result, all figures are approximations. 

Results of Operations    

Six Months Ended March 31, 2020, Compared to the Six Months Ended March 31, 2019

Finance income. For the six months ended March 31, 2020, finance income decreased $1.1 million, or 14.8%, to $5.9 million from $7.0 million for the six months ended March 31, 2019. The decrease in finance income was due to reduction in the collections on portfolios during the six months ended March 31, 2020 compared to the six months ended March 31, 2019 and the overall age of the portfolios. During the six months ended March 31, 2020 and 2019 the Company did not purchase any consumer portfolios. Net collections for the six months ended March 31, 2020 decreased 19.8% to $6.4 million from $7.9 million for the same prior year period. During the first six months of fiscal year 2020, gross collections decreased 21.4% or $3.3 million to $12.3 million from $15.6 million for the six months ended March 31, 2019. Commissions and fees associated with gross collections from our third-party collection agencies and attorneys decreased $1.8 million, or 23.0%, to $5.9 million for the six months ended March 31, 2020 from $7.7 million for the six months ended March 31, 2019. Commissions and fees amounted to 48.2% of gross collections for the six months ended March 31, 2020, compared to 49.2% in the same period of the prior year, due to a lower percentage of commissionable collections in the current year period.

Management’s outlook for our Consumer Receivables business segment is that we expect that Finance income may continue to decline due to the continued aging of our existing credit card portfolios. Although we may purchase new portfolios in future periods, we may not be able to purchase consumer receivable portfolios domestically at favorable prices or on sufficient terms. The expected decline in our future Finance income may have a negative impact on our Consumer Receivables business segment and our consolidated pre-tax profits in fiscal 2020 and future periods.

Personal Injury Claims income. Personal injury claims income decreased 53.7% or $0.6 million to $0.6 million for the six months ended March 31, 2020 from $1.2 million for the six months ended March 31, 2019 as a result of lower new advances in Arthur Funding partially offset by continued collections on historical personal injury claims.

Social security benefit advocacy fee income.For the six months ended March 31, 2020, disability fee income decreased $0.9 million, or 33.2%, to $1.7 million as compared to $2.6 million for the six months ended March 31, 2019, due to decreases in average fees per case earned for the disability claimants’ cases closed with the Social Security and Veterans Administration during the current period.

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Management’s outlook for our Social Security Disability Advocacy business segment is that revenue and segment profitability may be lower for the full year of fiscal 2020 as compared with the full year of fiscal 2019. This full year outlook for fiscal 2020 is attributable to the decline in our first and second quarter revenues and segment profits in the first two quarters of fiscal 2020 as compared with the first two quarters of fiscal 2019 and the fourth quarter of fiscal 2019.

Earnings (loss) from equity method investee. Loss from equity method investment decreased by $29,000 to a loss of $57,000 for the six months ended March 31, 2020 from a loss of $86,000 during the six months ended March 31, 2019.

Gain on Settlement. For the six months ended March 31, 2020, the Company recognized a gain on settlement associated with Balance Point Divorce Funding and Stacey Napp of $30,000. For the six months ended March 31, 2019, the Company recognized $0.3 million in gain on settlement associated with prior overcharges billed to the Company by a third-party servicer in excess of contractually permitted amounts. 

Interest and dividend income. Interest and dividend income increased $0.1 million, or 43% to $0.6 million for the six months ended March 31, 2020 from $0.5 million for the three months ended March 31, 2019, due primarily to higher balances in U.S. Treasury securities.

Other income (loss), net. The following table summarizes other income (loss) for the six months ended March 31, 2020 and 2019:

	For the Six Months Ended March 31,
	2020			2019
Realized gain	––				25,000
Unrealized (loss) gain on equity securities		(162,000	)		21,000
Other		1,000			40,000
	$	(161,000	)	$	86,000

General and administrative expenses. For the six months ended March 31, 2020, general and administrative expense decreased $0.2 million, or 3.0%, to $7.1 million from $7.3 million for the six months ended March 31, 2019, primarily due to an increase in cost of outside services of $0.8 million (costs related to the Merger), offset by decreased professional fees of $0.4 million and payroll expenses of $0.3 million.

Segment profit – Consumer Receivables. For the six months ended March 31, 2020, segment profit decreased $1.4 million to $5.1 million from $6.5 million for the six months ended March 31, 2019, primarily due the decrease in revenue of $1.1 million, decrease in other income of $0.4 million offset by a favorable foreign exchange variance of $0.1 million.

Segment profit – Personal Injury Claims. For the six months ended March 31, 2020, segment profit was $0.4 million as compared to segment profit of $0.9 million for the six months ended March 31, 2019. The decrease was attributable to the decrease in earning of interest and fees on portfolios of $0.6 million offset by reduction in various overhead expenses of $0.1 million.

Segment profit – Social Security Disability Advocates. For the six months ended March 31, 2020, segment profit was $0.2 million as compared to $0.8 million for the same period in the prior year. The decrease in profit of $0.6 million in the current period was primarily the result of decreased revenues of $0.8 million partially offset by a reduction in overhead expenses of $0.2 million.

Income tax expense. Income tax expense, consisting of federal and state components, for six months ended March 31, 2020, was $0.6 million, as compared to an income tax expense, consisting of federal and state income taxes, of $1.1 million for the six months ended March 31, 2019. The decrease in income tax expense in the current year was primarily related to lower profit during current year partially offset by an increase in foreign tax expense.

Net income. As a result of the above, the Company had a net income for the six months ended March 31, 2020 of $1.0 million compared to $3.0 million for the six months ended March 31, 2019.

Three Months Ended March 31, 2020, Compared to the Three Months Ended March 31, 2019  

Finance income. For the three months ended March 31, 2020, finance income decreased $0.7 million, or 19.3%, to $2.8 million from $3.5 million for the three months ended March 31, 2019. The decrease in finance income was due to reduction in the collections on portfolios during the three months ended March 31, 2020 compared to the three months ended March 31, 2019 and the overall age of the portfolios. During the three months ended March 31, 2020 and 2019, the Company did not purchase any consumer portfolios. Net collections for the three months ended March 31, 2020 decreased 23.5% to $3.0 million from $3.9 million for the three months ended March 31, 2019.  For the three months ended March 31, 2020 gross collections decreased 22.6%, or $1.7 million, to $5.7 million from $7.4 million for the three months ended March 31, 2019. For the three months ended March 31, 2020 commissions and fees associated with gross collections from our third-party collection agencies and attorneys decreased 21.5% or $0.8 million to $2.7 million from $3.5 million for the three months ended March 31, 2019. Commissions and fees amounted to 47.8% of gross collections for the three months ended March 31, 2020, compared to 47.2% for the three months ended March 31, 2019 resulting from higher percentage of commissionable collections in the current year period.  

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Personal Injury Claims income. Personal injury claims income decreased 63.8% or $0.3 million to $0.2 million for the three months ended March 31, 2020 from $0.5 million for the three months ended March 31, 2019 as a result of lower new advances in Arthur Funding partially offset by continued collections on historical personal injury claims.

Social security benefit advocacy fee income. Disability fee income decreased $0.4 million, or 30.6%, to $0.9 million for the three months ended March 31, 2020 from $1.3 million for the three months ended March 31, 2019, due to decreases in average fees per case earned for the disability claimants’ cases closed with the Social Security and Veterans Administration during the current period. 

Earnings (loss) from equity method investee. Loss from equity method investment decreased by $3,000 to a loss of $53,000 for the three months ended March 31, 2020 from $56,000 during the three months ended March 31, 2019. 

Gain on Settlement. For the three months ended March 31, 2020, the Company recognized a gain on settlement associated with Balance Point Divorce Funding and Stacey Napp of $30,000. For the three months ended March 31, 2019, the Company recognized $0.3 million in gain on settlement associated with prior overcharges billed to the Company by a third-party servicer in excess of contractually permitted amounts.

Interest and dividend income. Interest and dividend income increased $65,000, or 25.5% to $320,000 for the three months ended March 31, 2020 from $255,000 for the three months ended March 31, 2019, due to higher balances in U.S. Treasury securities. 

Other income, net. The following table summarizes other income for the three months ended March 31, 2020 and 2019:

	For the Three Months Ended March 31,
	2020			2019
Unrealized (loss) gain on equity securities		(172,000	)		50,000
Other	––				1,000
	$	(172,000	)	$	51,000

General and administrative expenses.  For the three months ended March 31, 2020, general and administrative expenses increased $0.5 million, or 15.1%, to $3.9 million from $3.4 million for the three months ended March 31, 2019, primarily due to an increase in cost of outside services of $0.5 million (costs related to the Merger), increase in bad debt expense of $0.3 million, unfavorable foreign exchange variance of $0.4 million, partially offset by a decrease in salaries of $0.4 million and professional fees of $0.2 million.

Segment profit – Consumer Receivables. Segment profit decreased $1.4 million to $2.2 million for the three months ended March 31, 2020 from $3.6 million for the three months ended March 31, 2019. This decrease in profitability was a result of decreased revenue of $0.7 million, decrease in other income of $0.3 million, and unfavorable foreign exchange variance of $0.4 million.

Segment profit – Personal Injury Claims. Segment profit decreased $0.6 million to a loss of $0.2 million for the three months ended March 31, 2020, from a profit of $0.4 million for the three months ended March 31, 2019. This decrease in profitability was a result of decreased revenue of $0.3 million and an increase in bad debt expense of $0.3 million.

Segment profit – Social Security Disability Advocates. The Segment profit was $0.1 million for the three months ended March 31, 2020 as compared $0.4 million for the three months ended March 31, 2019. The decrease in profitability of $0.3 million in the current fiscal year was primarily the result of decreased revenue of $0.4 million partially offset by decrease in various overhead expenses of $0.1 million.

Income tax expense. Income tax expense, consisting of federal and state components, for three months ended March 31, 2020, was $0.2 million, as compared to $0.6 million for the three months ended March 31, 2019, primarily due to lower income in the current year period partially offset by income from foreign operations resulting in tax expense of $0.1 million.

Net income (loss). As a result of the above, we generated net loss for the three months ended March 31, 2020 of $0.1 million, compared to net income of $1.8 million for the three months ended March 31, 2019.

Liquidity and Capital Resources

We manage our liquidity and capital resources to fund our operating and investing activities. We rely on cash flows from operations as the main source for liquidity. 

33

Our primary source of cash from operations is collections on the receivable portfolios we have acquired and the funds generated from the liquidation of our personal injury claim portfolios.

Our primary uses of cash include costs involved in the collection of consumer receivables, the liquidation of our personal injury portfolio, and the costs to run our disability advocacy business.

At March 31, 2020, the Company had $9.0 million in cash and cash equivalents, as well as $63.8 million in investments in debt and equity securities.  The Company had no outstanding debt as of March 31, 2020.

Current economic uncertainty brought about as a result of the coronavirus 2019 (“COVID-19”) global pandemic may adversely impact the results of operations and liquidity of the Company overall and its business units to varying degrees over the near term, particularly if the economic effects of the pandemic worsen or persist for an extended period of time.  As a result of the evolving effects of the COVID-19 on our businesses, we are continuing to evaluate our liquidity position and cash flows to ensure we are judiciously utilizing our cash. 

In recognition of expected reductions in future operating cash flows, on April 10, 2020, the Company applied for a $1.1 million Paycheck Protection Program (“PPP”) loan under the CARES Act. The proceeds of the loan are intended to be used to retain the Company’s employees, maintain payroll and make lease and utility payments. The Company received approval for a PPP loan from the Small Business Administration. On May 11, 2020, the Company signed a PPP loan note with an interest rate of 1% and a May 11, 2022 maturity date, though PPP loans may be forgiven if certain conditions are met. The PPP loan was funded on May 20, 2020.

Receivables Financing Agreement

As of March 31, 2020, we recorded a liability to BMO of approximately $0.1 million. The funds were subsequently remitted to BMO on April 10, 2020. The liability to BMO is recorded when actual collections are received.

Cash Flow  

At March 31, 2020, our cash increased $4.7 million to $9.0 million from $4.3 million at September 30, 2019. Our cash balance remained consistent; due to the fact we invested all excess cash in U.S. Treasury bills, which are accounted for as available for sale debt securities on our condensed consolidated balance sheet.

Net cash provided by operating activities was $1.5 million during the six months ended March 31, 2020, as compared to $0.9 million used in operating activities for the six months ended March 31, 2019, primarily resulting from the net income of $1.0 million in the current period compared to $3.0 million in the prior year period, change in prepaid and income taxes receivable of $3.3 million, change in deferred tax of ($0.1) million and change in other liabilities of $1.3 million in the current year period. Net cash provided by investing activities was $3.1 million during the six months ended March 31, 2020, as compared to net cash used in investing activities of $1.8 million during the six months ended March 31, 2019. The change in cash provided by (used in) investing activities was primarily due to the net purchase of available for sale debt securities and investments in equity securities of $0.3 million in the current period compared to ($8.0) million in the prior period, lower collection from receivables acquired for liquidation and personal injury claims of ($3.0) million and proceeds from notes receivable of $0.5 million in the prior year period. There was no cash provided by financing activities during the six months ended March 31, 2020 and in the same prior year period.

Our cash requirements have been and will continue to be significant to operate our various lines of business. Significant requirements include costs involved in the collections of consumer receivables, investment in consumer receivable portfolios and investment in personal injury claims. In addition, dividends could be declared and paid if and when approved by the Board. Acquisitions recently have been financed through cash flows from operating activities. We believe we will not be dependent on a credit facility in the short-term, as our cash balances will be sufficient to invest in personal injury claims, purchase portfolios and finance the disability advocacy business.

We do not expect to incur any material capital expenditures during the next twelve months.

We believe our available cash resources and expected cash flows from operations will be sufficient to fund operations for at least the next twelve months.

We are cognizant of the current market fundamentals in the debt purchase and company acquisition markets which, because of significant supply and tight capital availability, could result in increased buying opportunities.

34

The outcome of any future transactions is subject to market conditions. In addition, due to these opportunities, we may seek opportunities with banking organizations and others on a possible financing loan facility.

Off Balance Sheet Arrangements 

We do not have any off-balance sheet arrangements.

Additional Supplementary Information:

We do not anticipate collecting the majority of the purchased principal amounts of our various portfolios. Accordingly, the difference between the carrying value of the portfolios and the gross receivables is not indicative of future revenues from these accounts acquired for liquidation. Since we purchased these accounts at significant discounts, we anticipate collecting only a portion of the face amounts. 

For additional information regarding our methods of accounting for our investment in finance receivables, the qualitative and quantitative factors we use to determine estimated cash flows, and our performance expectations of our portfolios, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies” above.

Recent Accounting Pronouncements

Adopted During The Six Months Ended March 31, 2020 

 In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”) which requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. For a lease with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize a right-of-use asset and lease liability. Additionally, when measuring assets and liabilities arising from a lease, optional payments should be included only if the lessee is reasonably certain to exercise an option to extend the lease, exercise a purchase option or not exercise an option to terminate the lease. In January 2018, the FASB issued ASU 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842 (“ASU 2018-01”). ASU 2018-01 was issued to address concerns about the cost and complexity of complying with the transition provisions of ASU 2016-02. Additionally, in July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements, which provides an alternative transition method that permits an entity to use the effective date of ASU 2016-02 as the date of initial application through the recognition of a cumulative effect adjustment to the opening balance of retained earnings upon adoption. The standard became effective in for fiscal years beginning after December 15, 2018 and interim periods within those years, and early adoption is permitted (see Note 8 – Right of Use Assets). 

The Company adopted the lease accounting standard using the modified retrospective transition option on adoption on October 1, 2019, which had an immaterial impact to the Company’s condensed consolidated balance sheet. Upon adoption, the Company recorded additional lease liabilities of approximately $636,000 attributable to the Company’s operating leases based on the present value of the remaining minimum lease payments with an increase to right-of-use assets of approximately $636,000. The Company used 3.5% as its incremental borrowing rate to calculate the net present value of its leases at October 1, 2019, based on the Company's estimated borrowing rate for a collateralized loan. The Company had no debt outstanding as of October 1, 2019.

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows a reclassification from accumulated other comprehensive income (loss) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act enacted on December 22, 2017 (“Tax Act”), and requires certain disclosures about stranded tax effects. ASU 2018-02 was effective for the Company's fiscal year beginning October 1, 2019, with early adoption permitted, and was applied in the period of adoption in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act was recognized. The adoption of this accounting update did not have a material impact on the Company’s condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. For the Company, this update will be effective for interim periods and annual periods beginning after December 15, 2022. Upon adoption, the Company will accelerate the recording of its credit losses and is continuing to assess the impact on its consolidated financial statements. 

35

In January 2017, the FASB issued ASU 2017-04 Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The objective of this update is to simplify the subsequent measurement of goodwill, by eliminating step 2 from the goodwill impairment test. The amendments in this update are effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company does not believe this update will have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements on fair value measurements. The ASU removes the requirement to disclose: the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level 3 fair value measurements. The ASU requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.  

 In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for the Company beginning in fiscal 2022. The Company is evaluating the impact of the adoption of ASU 2019-12 on its financial statements, but does not expect such adoption to have a material impact.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2020. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2020 due to the existence of the material weaknesses in internal control over financial reporting described below (which we view as an integral part of our disclosure controls and procedures).

We did not design and implement effective control over our control environment, risk assessment, control activities and monitoring activities with regard to our processes and procedures commensurate with our financial reporting requirements which we determined to be material weaknesses. Specifically, our control deficiencies are in the following areas:

Control Environment and Risk Assessment:

● The Company did not design and implement a sufficient level of formal financial reporting and operating policies and procedures that define how transactions are initiated, processed, approved, recorded and appropriately reported and disclosed within the annual and interim consolidated financial statements.

● The Company did not maintain sufficient policies and procedures to ensure that financial statement disclosures are complete, accurate and comply with professional standards.

● The Company did not maintain a sufficient number of personnel with the necessary level of accounting knowledge, experience, and training in the application of U.S. GAAP commensurate with its financial reporting requirements and the complexity of the Company’s operations and transactions.

Control Activities:

● The Company did not maintain and document control activities designed and implemented to identify, review and report, on a timely basis, related party transactions, and account for unusual, non-recurring complex transactions and income taxes.

● The Company did not maintain and document internal controls with sufficient precision designed to provide reasonable assurance related to third party service providers and third-party advocates providing cash collection and advocacy services including the completeness and accuracy of related information.

36

Monitoring Activities:

The Company did not maintain effective monitoring and review activities including communicating deficiencies in a timely manner to those parties responsible for taking corrective action.

Changes in Internal Controls over Financial Reporting.

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated our internal control over financial reporting to determine whether any changes occurring during the second quarter of fiscal year 2020 that have materially affected, or are reasonably likely to affect, our internal control over financial reporting. Management has concluded that there have been no changes that occurred during such quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.  

PART II. OTHER INFORMATION

Item 1.   Legal Proceedings

In the ordinary course of our business, we are involved in numerous legal proceedings. We regularly initiate collection lawsuits, using third party law firms, against consumers. Also, consumers occasionally initiate litigation against us, in which they allege that we have violated a federal or state law in the process of collecting 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.

37

Originators, debt purchasers and third-party collection agencies and attorneys in the consumer credit industry are frequently subject to putative class action lawsuits 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.

Legal proceedings are subject to substantial uncertainties concerning the outcome of material factual and legal issues relating to the litigation. Accordingly, we cannot currently predict the manner and timing of the resolution of some of these matters and may be unable to estimate a range of possible losses or any minimum loss from such matters.

On November 7, 2019, a shareholder of the Company filed a verified shareholder derivative complaint in the Court of Chancery of the State of Delaware against certain current and former officers and directors of the Company, and named the Company as a nominal defendant, alleging that certain actions taken by management constituted a violation of fiduciary duty to the Company. The Company believes the lawsuit is without merit and intends to vigorously defend the matter. On or about January 8, 2020, a motion to dismiss the complaint was filed on behalf of all individual defendants and the Company as nominal defendant. In light of the execution of the Merger Agreement, the parties to the lawsuit entered into a joint stipulation and submitted a proposed order to stay proceedings in the lawsuit until the earlier of: (i) an announcement by the Company of the completion or cancellation of the merger, or (ii) June 30, 2020. On April 14, 2020, the court granted the parties’ stipulation and proposed order.

Item 1A.  Risk Factors

For a discussion of our potential risks and uncertainties, see the information previously disclosed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K, for the year ended September 30, 2019 filed with the SEC on December 20, 2019. With the exception of the following, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K. 

Our results of operations have been adversely affected and could in the future be materially adversely impacted by the COVID-19 pandemic

The global spread of the COVID-19 pandemic has created significant economic volatility, uncertainty and disruption. The extent to which the COVID-19 pandemic impacts our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; the impact of the pandemic on economic activity and actions taken in response; changes in economic variables, such as the availability of consumer credit; the ability of consumers to pay amounts owed to us; the effect on the housing market; the rate of unemployment; the number and size of personal bankruptcy filings; the effect on energy costs; the levels of consumer confidence and consumer debt; and investor sentiment. Additionally, government actions in response to the pandemic may hinder our collection activities or result in increased expenses.

Cyber-attacks and other malicious internet-based activity continue to increase generally, and cloud-based platform providers of software and services have been targeted. Due to the COVID-19 pandemic, many of our employees are temporarily working remotely, which may pose additional data security risks.

Management is actively monitoring the impact of the global situation on our financial condition, liquidity, operations, and workforce. Given the daily evolution of the COVID-19 pandemic and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 pandemic on its results of operations, financial condition, or liquidity for fiscal year 2020. Any of these events could cause or contribute to the risks and uncertainties enumerated in the Annual Report and could materially adversely affect our business, financial condition, results of operations and/or stock price.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 None

Item 3. Default Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

38

Item 5. Other Information

None

Item 6. Exhibits

(a) Exhibits.

31.1*	Certification of Gary Stern, Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of  Steven Leidenfrost, Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Gary Stern, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*	Certification of  Steven Leidenfrost, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance.
101.SCH	XBRL Taxonomy Extension Schema.
101.CAL	XBRL Taxonomy Extension Calculation.
101.DEF	XBRL Taxonomy Extension Definition.
101.LAB	XBRL Taxonomy Extension Labels.
101.PRE	XBRL Taxonomy Extension Presentation.

* Filed herewith.

39

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ASTA FUNDING, INC. (Registrant)
Date: May 29, 2020	By:	/s/ Gary Stern
		Gary Stern, President, Chief Executive Officer
		(Principal Executive Officer)
Date: May 29, 2020	By:	/s/ Steven Leidenfrost
		Steven Leidenfrost, Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

40

EX-31.1

 Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Gary Stern, certify that:

1. I have reviewed this quarterly report on Form 10-Q 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 the statements 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 the financial 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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act 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 and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure 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 our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in 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 the effectiveness 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 recent fiscal 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, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’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 reasonably likely 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 control over financial reporting.

Date: May 29, 2020

/s/ Gary Stern

Gary Stern

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Steven Leidenfrost, certify that:

1. I have reviewed this quarterly report on Form 10-Q 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 the statements 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 the financial 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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act 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 and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure 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 our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in 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 the effectiveness 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 recent fiscal 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, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’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 reasonably likely 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 control over financial reporting.

Date: May 29, 2020

/s/ Steven Leidenfrost

Steven Leidenfrost

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Asta Funding, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2020, filed with the Securities and Exchange Commission (the “Report”), I, Gary Stern, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted 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 the dates presented and the consolidated result of operations of the Company for the periods presented.

Date: May 29, 2020

/s/ Gary Stern

Gary Stern

Chairman, President and Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Asta Funding, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2020, filed with the Securities and Exchange Commission (the “Report”), I, Steven Leidenfrost, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted 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 the dates presented and the consolidated result of operations of the Company for the periods presented.

Dated: May 29, 2020 

/s/ Steven Leidenfrost

Steven Leidenfrost

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Revenues:
Revenues	$ 3,873,000	$ 5,233,000	$ 8,189,000	$ 10,701,000
Other Income:
Interest and dividend income	320,000	255,000	649,000	454,000
Gain on settlement	30,000	323,000	30,000	323,000
Other income (expense), net	(172,000)	51,000	(161,000)	86,000
Total other income	178,000	629,000	518,000	863,000
Revenues, Total	4,051,000	5,862,000	8,707,000	11,564,000
Expenses:
General and administrative	3,906,000	3,395,000	7,098,000	7,321,000
Impairment of consumer receivables acquired for liquidation			23,000
Loss from equity method investment	53,000	56,000	57,000	86,000
Costs and Expenses, Total	3,959,000	3,451,000	7,178,000	7,407,000
Income before income tax	92,000	2,411,000	1,529,000	4,157,000
Income tax expense	164,000	638,000	556,000	1,109,000
Net (loss) income	$ (72,000)	$ 1,773,000	$ 973,000	$ 3,048,000
Net income (loss) per share:
Basic (in dollars per share)	$ (0.01)	$ 0.27	$ 0.15	$ 0.46
Diluted (in dollars per share)	$ (0.01)	$ 0.27	$ 0.15	$ 0.46
Weighted average number of common shares outstanding:
Basic (in shares)	6,567,765	6,685,415	6,567,765	6,685,415
Diluted (in shares)	6,567,765	6,685,827	6,654,873	6,685,775
Finance Income, Net [Member]
Revenues:
Revenues	$ 2,808,000	$ 3,481,000	$ 5,940,000	$ 6,975,000
Personal Injury Claims Income [Member]
Revenues:
Revenues	165,000	456,000	541,000	1,169,000
Disability Fee Income [Member]
Revenues:
Revenues	$ 900,000	$ 1,296,000	$ 1,708,000	$ 2,557,000

XML

Note 18 - Segment Reporting

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note

18—Segment

Reporting

The Company operates through strategic business units that are aggregated into

three

reportable segments: Consumer receivables, personal injury claims and social security disability advocacy. The

three

reportable segments consist of the following:

• Consumer receivables -  This segment is engaged in the business of purchasing, managing for its own account and servicing distressed consumer receivables, including judgment receivables, charged off receivables and semi-performing receivables.  Judgment receivables are accounts where outside attorneys have secured judgments directly against the consumer. Primary charged-off receivables are accounts that have been written-off by the originators and may have been previously serviced by collection agencies. Semi-performing receivables are accounts where the debtor is currently making partial or irregular monthly payments, but the accounts may have been written-off by the originators. Distressed consumer receivables are the unpaid debts of individuals to banks, finance companies and other credit providers. A large portion of our distressed consumer receivables are MasterCard®, Visa® and other credit card accounts which were charged-off by the issuers or providers for non-payment. We acquire these and other consumer receivable portfolios at substantial discounts to their face values. The discounts are based on the characteristics (issuer, account size, debtor location and age of debt) of the underlying accounts of each portfolio. Recently, the Company's efforts have been in the international areas (mainly South America), as we have curtailed our active purchasing of consumer receivables in the United States. The Company holds consumers receivable acquired for liquidation in both Colombia and Peru of approximately $1.0 million. The business conducts its activities primarily under the name Palisades Collection, LLC.

• Personal injury claims  – This segment is comprised of purchased interests in personal injury claims from claimants who are a party in personal injury litigation or claims. The Company advances to each claimant funds on a non-recourse basis at an agreed upon interest rate, in anticipation of a future settlement. The interest in each claim purchased 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 claim. The Company historically funded personal injury claims in Simia and Sylvave. The Company formed a new wholly owned subsidiary, Arthur Funding, on March 16, 2018 to continue in the personal injury claims funding business. Arthur Funding began funding advances on personal injury claims in May 2019. Arthur Funding, Simia and Sylvave conduct its businesses solely in the United States and obtains business from external brokers and internal sales professionals soliciting attorneys and law firms who represent claimants who have personal injury claims. Business is also obtained from its website and through attorneys. Simia and Sylvave are not funding any new advances, but continue to collect on outstanding personal injury claim advances in the ordinary course.

• Social Security benefit advocacy –  GAR Disability and Five Star are advocacy groups representing individuals throughout the United States in their claims for social security disability and supplemental security income benefits from the Social Security and Veterans Administration.

Certain non-allocated administrative costs, interest income and various other non-operating income and expenses are reflected in Corporate. Corporate assets include cash and cash equivalents, investments in equity securities and available-for-sale debt securities, settlement receivable, property and equipment, goodwill, deferred taxes and other assets.

The following table shows results by reporting segment for the

three

and

six

months ended

March 31, 2020

and

2019:

(Dollars in millions)	Consumer Receivables		Social Security Disability Advocacy		Personal Injury Claims			Corporate ( 2 )			Total
Three Months Ended March 31,
2020:
Revenues	$	2.8	$	0.9	$	0.2		$	—		$	3.9
Other income	0.1			—		—			0.1			0.2
Segment profit (loss)		2.2		0.1		(0.2	)		(2.0	)	0.1
2019:
Revenues	$	3.5	$	1.3	$	0.4		$	—		$	5.2
Other income		0.4		—		—			0.2			0.6
Segment profit (loss)		3.6		0.4		0.4			(2.0	)		2.4
Six Months Ended March 31,
2020:
Revenues	$	5.9	$	1.7	$	0.6		$	—		$	8.2
Other income		0.1		—		—			0.4			0.5
Segment profit (loss)		5.1		0.2		0.4			(4.2	)		1.5
Segment Assets (1)		7.0		0.9		4.2			80.3			92.4
2019:
Revenues	$	7.0	$	2.6	$	1.1		$	—		$	10.7
Other income		0.5		—		—			0.3			0.8
Segment profit (loss)		6.5		0.8		0.9			(4.1	)		4.1
Segment Assets (1)		10.0		0.9		7.1			71.1			89.1

The Company does

not

have any intersegment revenue transactions.

( 1 )	Includes other amounts in other line items on the condensed consolidated balance sheet.
( 2 )	Corporate is not part of the three reportable segments, as certain expenses and assets are not earmarked to any specific operating segment.

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Note 14 - Stock Option Plans

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Stock Option Plans [Text Block]

Note

14—Stock

Option Plans

 

2012

Stock Option and Performance Award Plan

 

On

February 

7,

2012,

the Company adopted the

2012

Stock Option and Performance Award Plan (the

“2012

Plan”), which was approved by the stockholders of the Company on

March 

21,

2012.

The

2012

Plan replaced the Equity Compensation Plan (as defined below). 

The

2012

Plan provides the Company with flexibility with respect to equity awards by providing for grants of stock awards (i.e. restricted or unrestricted), 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. Under the

2012

Plan, the Company has granted options to purchase an aggregate of

540,800

shares, awarded

245,625

shares of restricted stock, and has cancelled

118,568

options, leaving

1,332,143

shares available as of

March 31, 2020.

At

March 31, 2020,

49

of the Company’s employees were able to participate in the

2012

Plan.

Equity Compensation Plan

 

On

December 

1,

2005,

the Company adopted the Equity Compensation Plan (the “Equity Compensation Plan”), which was approved by the stockholders of the Company on

March 

1,

2006.

The Equity Compensation Plan was adopted to supplement the Company’s

2002

Stock Option Plan (as defined below). 

In addition to permitting the grant of stock options as are permitted under the

2002

Stock Option Plan, the Equity Compensation Plan allowed the Company flexibility with respect to equity awards by also providing for grants of stock awards (i.e. restricted or unrestricted), stock purchase rights and stock appreciation rights.  

The Company authorized

1,000,000

shares of Common Stock for issuance under the Equity Compensation Plan. As of

March 

21,

2012,

no

more awards could be issued under this plan.

2002

Stock Option Plan

 

On

March 

5,

2002,

the Company adopted the

2002

Stock Option Plan (the

“2002

Plan”), which was approved by the stockholders of the Company on

May 

1,

2002.

The

2002

Plan was adopted in order to attract and retain qualified directors, officers and employees of, and consultants to, the Company. 

The

2002

Plan authorized the granting of incentive stock options (as defined in Section 

422

of the Internal Revenue Code of

1986,

as amended (the “Code”)) and non-qualified stock options to eligible employees of the Company, including officers and directors of the Company (whether or

not

employees) and consultants of the Company.  

The Company authorized

1,000,000

shares of Common Stock under the

2002

Plan. As of

March 

5,

2012,

no

more awards could be issued under this plan.

Summary of the Plans

Compensation expense for stock options and restricted stock is recognized over the requisite vesting or service period. Compensation expense for restricted stock is based upon the market price of the shares underlying the awards on the grant date. 

The following table summarizes stock option transactions under the

2012

Plan, the Equity Compensation Plan and the

2002

Plan (collectively the “Plans”):

	For the Three Months Ended March 31,
	20 20					201 9
	Number Of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Outstanding options at the beginning of period		670,167		$	8.19		728,533		$	8.17
Options exercised		—					—
Options forfeited/cancelled		(3,300	)		8.21		(1,766	)		8.21
Outstanding options at the end of period		666,867		$	8.19		726,767		$	8.17
Exercisable options at the end of period		666,867		$	8.19		726,767		$	8.17

	For the Six Months Ended March 31,
	20 20					201 9
	Number Of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Outstanding options at the beginning of period		722,567		$	8.18		728,867		$	8.17
Options exercised		—			—		—			—
Options forfeited/cancelled		(55,700	)		8.08		(2,100	)		8.17
Outstanding options at the end of period		666,867		$	8.19		726,767		$	8.17
Exercisable options at the end of period		666,867		$	8.19		726,767		$	8.17

The following table summarizes information about the Plans outstanding options as of

March 31, 2020:

			Options Outstanding						Options Exercisable
Range of Exercise Price			Number of Shares Outstanding		Weighted Remaining Contractual Life (in Years)		Weighted Average Exercise Price		Number of Shares Exercisable		Weighted Average Exercise Price
$5.7501	-	$8.6250		557,367		2.4	$	7.96		557,367	$	7.96
$8.6251	-	$11.5000		109,500		2.8		9.37		109,500		9.37
				666,867		2.5	$	8.19		666,867	$	8.19

The Company did

not

recognize any compensation expense related to the stock option grants during the

three

and

six

months ended

March 31, 2020.

The Company recognized

$0

and

$7,000

of compensation expense related to the stock options vested during the

three

and

six

months ended

March 31, 2019,

respectively. As of

March 31, 2020,

there was

no

unrecognized compensation cost related to stock option awards.

The intrinsic value of the outstanding and exercisable options as of

March 31, 2020

was approximately

$124,000.

The weighted average remaining contractual life of exercisable options is

2.5

years. There were

no

options exercised during the

three

and

six

months ended

March 31, 2020

and

2019.

The fair value of the stock options that vested during the

three

and

six

months ended

March 31, 2020

was approximately

$0

for both periods. The fair value of the stock options that vested during the

three

and

six

months ended

March 31, 2019

was approximately

$0

and

$84,000,

respectively. There were

no

options granted during the

three

and

six

months ended

March 31, 2020

and

2019.

The Company did

not

grant any restricted stock awards during the

three

and

six

months ended

March 31, 2020

and

2019.

As of

March 31, 2020,

and

September 30, 2019,

there was

no

unrecognized compensation cost related to restricted stock awards.

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Condensed Consolidated Statements of Stockholders' Equity (Unaudited) (Parentheticals) - Cumulative Effect, Period of Adoption, Adjustment [Member]	Dec. 31, 2018 USD ($)
Accounting Standards Update 2014-09 [Member]
Cumulative effect adjustment for adoption of new accounting principle, tax	$ 80,000
Accounting Standards Update 2016-01 [Member]
Cumulative effect adjustment for adoption of new accounting principle, tax	$ 5,000

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Note 18 - Segment Reporting - Schedule of Segment Reporting (Details) - USD ($)		3 Months Ended				6 Months Ended
		Mar. 31, 2020		Mar. 31, 2019		Mar. 31, 2020	Mar. 31, 2019		Sep. 30, 2019
Revenues		$ 3,873,000		$ 5,233,000		$ 8,189,000	$ 10,701,000
Other income		178,000		629,000		518,000	863,000
Segment profit (loss)		100,000		2,400,000		1,500,000	4,100,000
Segment Assets (1)		92,365,000		89,100,000	[1]	92,365,000	89,100,000	[1]	$ 90,685,000
Operating Segments [Member] | Consumer Receivables [Member]
Revenues		2,800,000		3,500,000		5,900,000	7,000,000
Other income		100,000		400,000		100,000	500,000
Segment profit (loss)		2,200,000		3,600,000		5,100,000	6,500,000
Segment Assets (1)	[1]	7,000,000		10,000,000		7,000,000	10,000,000
Operating Segments [Member] | GAR Disability Advocates [Member]
Revenues		900,000		1,300,000		1,700,000	2,600,000
Other income
Segment profit (loss)		100,000		400,000		200,000	800,000
Segment Assets (1)	[1]	900,000		900,000		900,000	900,000
Operating Segments [Member] | Personal Injury Claims [Member]
Revenues		200,000	[2]	400,000	[2]	600,000	1,100,000
Other income			[2]		[2]
Segment profit (loss)		(200,000)	[2]	400,000	[2]	400,000	900,000
Segment Assets (1)	[1],[2]	4,200,000		7,100,000		4,200,000	7,100,000
Corporate, Non-Segment [Member]
Revenues	[2]
Other income	[2]	100,000		200,000		400,000	300,000
Segment profit (loss)	[2]	(2,000,000)		(2,000,000)		(4,200,000)	(4,100,000)
Segment Assets (1)	[1],[2]	$ 80,300,000		$ 71,100,000		$ 80,300,000	$ 71,100,000

[1] Includes other amounts in other line items on the condensed consolidated balance sheet.

[2] Corporate is not part of the three reportable segments, as certain expenses and assets are not earmarked to any specific operating segment.

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Note 16 - Fair Value of Financial Measurements and Disclosures (Details Textual)	Mar. 31, 2020
Measurement Input, Discount Rate [Member]
Consumer Receivables Acquired for Liquidation, Measurement Input	0.2

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Note 14 - Stock Option Plans (Details Textual)	3 Months Ended		6 Months Ended		96 Months Ended
	Mar. 31, 2020 USD ($) shares	Mar. 31, 2019 USD ($) shares	Mar. 31, 2020 USD ($) shares	Mar. 31, 2019 USD ($) shares	Mar. 31, 2020 USD ($) shares	Sep. 30, 2019 USD ($)	Mar. 21, 2012 shares	Mar. 05, 2012 shares	Mar. 01, 2006 shares	May 01, 2002 shares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in shares)	0	0	0	0
Share-based Payment Arrangement, Expense | $	$ 0	$ 0	$ 0	$ 7,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total | $	0		0		$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value | $	$ 124,000		$ 124,000		124,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Remaining Contractual Term (Year)	2 years 182 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period (in shares)	0	0	0	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value | $	$ 0	$ 0	$ 0	$ 84,000
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)	0	0	0	0
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total | $	$ 0		$ 0		$ 0	$ 0
The 2012 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in shares)							2,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in shares)					540,800
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period (in shares)					118,568
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in shares)	1,332,143		1,332,143		1,332,143
Share-based Compensation Arrangement by Share-based Payment Award, Number of Eligible Employees	49		49		49
The 2012 Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)					245,625
Equity Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in shares)									1,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in shares)							0
The 2002 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in shares)										1,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in shares)								0

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Note 2 - Business and Basis of Presentation (Details Textual)	3 Months Ended	6 Months Ended
	Mar. 31, 2020 USD ($)	Mar. 31, 2020 USD ($)	May 22, 2020 $ / shares	Apr. 08, 2020 $ / shares	Oct. 01, 2019 USD ($)	Sep. 30, 2019 USD ($)	Mar. 31, 2019
Number of Reportable Segments		3
Cash, Uninsured Amount	$ 5,300,000	$ 5,300,000
Cash, Uninsured Amount, Foreign	2,300,000	2,300,000
Operating Lease, Liability, Total	456,000	456,000
Operating Lease, Right-of-Use Asset	454,000	454,000
Operating Lease, Weighted Average Discount Rate, Percent					3.50%		3.50%
Debt, Current, Total					$ 0
Accounting Standards Update 2016-02 [Member]
Operating Lease, Liability, Total					636,000
Operating Lease, Right-of-Use Asset					$ 636,000
Merger Agreement with Stern Group [Member] | General and Administrative Expense [Member]
Business Combination, Acquisition Related Costs	$ 531,000	$ 785,000
Subsequent Event [Member] | Merger Agreement with Stern Group [Member]
Cash Purchase Price (in dollars per share) | $ / shares				$ 11.47
Subsequent Event [Member] | Merger Agreement with RBF Capital Proposal [Member]
Cash Purchase Price (in dollars per share) | $ / shares			$ 13

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Note 4 - Consumer Receivables Acquired for Liquidation (Details Textual) - USD ($)	1 Months Ended	3 Months Ended			6 Months Ended		12 Months Ended
	Dec. 31, 2007	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019	Sep. 30, 2019
Face Value of Charged-off Consumer Receivables		$ 0		$ 0	$ 0	$ 0
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Carrying Amount, Net		$ 1,193,000			$ 1,193,000		$ 1,668,000
Foreign Consumer Receivables, Percentage of Total Consumer Receivable		81.70%			81.70%		83.80%
Percentage of Assets Related to Internationl Operation		1.10%			1.10%		1.50%
Percentage of Revenue Related to International Operation		5.50%		4.90%	5.90%	4.90%
Fee Charged on Portfolio Purchase	3.00%
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Consumer Portfolio 1 [Member]
Concentration Risk, Percentage		26.30%					23.90%
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Consumer Portfolio 2 [Member]
Concentration Risk, Percentage		18.30%					16.20%
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Consumer Portfolio 3 [Member]
Concentration Risk, Percentage		14.50%					14.10%
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Customer Receivable Portfolio 4 [Member]
Concentration Risk, Percentage							11.00%
Supplier Concentration Risk [Member] | Consumer Receivable Portfolio [Member] | Five Collection Organizations [Member]
Concentration Risk, Percentage					34.00%		28.00%
Supplier Concentration Risk [Member] | Consumer Receivable Portfolio at All Third Party Collection Agencies and Attorneys [Member] | Five Collection Organizations [Member]
Concentration Risk, Percentage			86.00%		89.00%
PERU
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Carrying Amount, Net		$ 800,000			$ 800,000		$ 1,100,000
COLOMBIA
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Carrying Amount, Net		200,000			200,000		300,000
Non-US [Member]
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Carrying Amount, Net		$ 1,000,000			$ 1,000,000		$ 1,400,000

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Note 19 - Subsequent Events (Details Textual) $ in Millions	Apr. 10, 2020 USD ($)
Subsequent Event [Member]
Proceeds from Paycheck Protection Program Under CARES Act	$ 1.1

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Note 10 - Interest Dividend and Other Income - Summary of Other Income (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Interest and dividend income	$ 320,000	$ 255,000	$ 649,000	$ 454,000
Realized gain				25,000
Unrealized gain (loss)	(172,000)	50,000	(162,000)	21,000
Other		1,000	1,000	40,000
Interest, Dividend and Other Income	$ 148,000	$ 306,000	$ 488,000	$ 540,000

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Note 8 - Right of Use Assets and Liabilities (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019	Oct. 01, 2019	Sep. 30, 2019
Operating Lease, Liability, Total	$ 456,000		$ 456,000
Operating Lease, Right-of-Use Asset	454,000		454,000
Operating Lease, Weighted Average Discount Rate, Percent		3.50%		3.50%	3.50%
Operating Lease, Expense	$ 100,000	$ 100,000	$ 200,000	$ 100,000
Accounting Standards Update 2016-02 [Member]
Operating Lease, Liability, Total					$ 636,000
Operating Lease, Right-of-Use Asset					$ 636,000

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Note 4 - Consumer Receivables Acquired for Liquidation (Tables)

6 Months Ended

Mar. 31, 2020

Notes Tables

Schedule of Consumer Receivables after Liquidation [Table Text Block]

	For the Three Months Ended March 31,
	20 20			201 9
Balance, beginning of period	$	1,448,000		$	3,071,000
Net cash collections		(2,975,000	)		(3,889,000	)
Effect of foreign currency translation		(88,000	)		(37,000	)
Finance income recognized		2,808,000			3,481,000
Balance, end of period	$	1,193,000		$	2,626,000
Finance income as a percentage of collections		94.4	%		89.5	%

	For the Six Months Ended March 31,
	20 20			201 9
Balance, beginning of year	$	1,668,000		$	3,749,000
Net cash collections from collection of consumer receivables acquired for liquidation		(6,350,000	)		(7,914,000	)
Impairment		(23,000	)
Effect of foreign currency translation		(42,000	)		(184,000	)
Finance income recognized		5,940,000			6,975,000
Balance, end of period	$	1,193,000		$	2,626,000
Finance income as a percentage of collections		93.5	%		88.1	%

Schedule of Collections on Gross Basis [Table Text Block]

	For the Three Months Ended March 31,						For the Six Months Ended March 31,
	20 20			201 9			20 20			201 9
Gross collections (1)	$	5,701,000		$	7,362,000		$	12,251,000		$	15,582,000
Commissions and fees (2)		(2,726,000	)		(3,473,000	)		(5,901,000	)		(7,668,000	)
Net collections	$	2,975,000		$	3,889,000		$	6,350,000		$	7,914,000

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Note 13 - Net Income (Loss) Per Share (Tables)

6 Months Ended

Mar. 31, 2020

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	For the Three Months Ended March 31, 2020			For the Three Months Ended March 31, 2019		For the Six Months Ended March 31, 2020		For the Six Months Ended March 31, 2019
Net Income (Loss)	$	(72,000	)	$	1,773,000	$	973,000	$	3,048,000
Basic earnings (loss) per common share	$	(0.01	)	$	0.27	$	0.15		0.46
Diluted earnings per common share	$	(0.01	)	$	0.27	$	0.15		0.46
Weighted average number of common shares outstanding:
Basic		6,567,765			6,685,415		6,567,765		6,685,415
Dilutive effect of stock options	––				412		87,108		360
Diluted		6,567,765			6,685,827		6,654,873		6,685,775

XML

Note 10 - Interest Dividend and Other Income

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Other Nonoperating Income and Expense [Text Block]

Note

10

– Interest, Dividend and Other Income

The following tables summarize interest, dividend and other income for the

three

and

six

month periods ended

March 31, 2020

and

2019:

	For the Three Months ended March 31,					For the Six Months ended March 31,
	2020			2019		2020			2019
Interest and dividend income	$	320,000		$	255,000		649,000		$	454,000
Realized gain		—			—	––				25,000
Unrealized gain (loss)		(172,000	)		50,000		(162,000	)		21,000
Other	––				1,000		1,000			40,000
	$	148,000		$	306,000	$	488,000		$	540,000

XML

Note 6 - Personal Injury Claims Funding

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Personal Injury Claims [Text Block]

Note

6—Personal

Injury Claims Funding

Simia and Sylvave

As of

March 31, 2020,

Simia had a personal injury claims portfolio of

$1.0

million, and recognized revenue for the

three

and

six

months then ended of

$55,000

and

$71,000,

respectively.  As of

September 30, 2019,

Simia had a personal injury claims portfolio of

$1.3

million, and recognized revenue of

$15,000

and

$29,000,

respectively, for the

three

and

six

months ended

March 31, 2019.

 As of

March 31, 2020,

Sylvave had a personal injury claims portfolio of

$2.4

million, and recognized revenue for the

three

and

six

months then ended of

$94,000

and

$440,000,

respectively.  As of

September 30, 2019,

Sylvave had a personal injury claims portfolio of

$3.7

million, and recognized revenue of

$441,000

and

$1,140,000,

respectively, for the

three

and

six

months ended

March 31, 2019.

Simia and Sylvave remain in operation to continue to collect on their outstanding personal injury claim portfolios, but will

not

be funding any new advances to claimants. 

Arthur Funding

Arthur Funding began funding advances on personal injury claims in

May 2019.

As of

March 31, 2020,

Arthur Funding had a personal injury claims portfolio of

$0.4

million, and recognized revenue for the

three

and

six

months then ended of

$16,000

and

$30,000,

respectively. As of

September 30, 2019,

Arthur Funding had a personal injury claims portfolio of

$0.2

million, and

no

revenue was recognized for the

three

and

six

months ended

March 31, 2019.   

The following tables summarize the changes in the balance sheet account of personal injury claim portfolios held by Simia, Sylvave and Arthur Funding, net of reserves, for the following periods: 

	For the Three Months ended March 31,
	20 20			201 9
Balance, beginning of period	$	4,533,000		$	8,813,000
Personal injury claim advances		67,000			—
(Write offs) recoveries		(243,000	)		45,000
Personal injury claims income		165,000			456,000
Personal injury claims receipts		(813,000	)		(2,684,000	)
Balance, end of period	$	3,709,000		$	6,630,000

	For the Six Months ended March 31,
	20 20			201 9
Balance, beginning of year	$	5,190,000		$	10,745,000
Personal claim advances		116,000			—
(Write offs) recoveries		60,000			(158,000	)
Personal injury claims income		541,000			1,169,000
Personal injury claims receipts		(2,198,000	)		(5,126,000	)
Balance, end of period	$	3,709,000		$	6,630,000

 The Company recognized personal injury claims income of

$0.2

million and

$0.5

million for the

three

months ended

March 31, 2020

and

2019,

respectively, and

$0.5

million and

$1.2

million for the

six

months ended

March 31, 2020

and

2019,

respectively. The Company has recorded a net reserve against its investment in personal injury claims of

$1.4

million as of

March 31, 2020

and

$1.2

million as of

September 30, 2019.

During the quarter and

six

months ended

March 31, 2020,

the Company incurred personal injury bad debt expense (recovery) of

$243,000

and (

$60,000

), respectively, as compared with (

$45,000

) and

$158,000

in the comparable periods of fiscal

2019,

respectively.

XML

Note 2 - Business and Basis of Presentation

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

  

Note

2—Business

and Basis of Presentation

 

Business

  

The Company, Asta Funding, Inc., a Delaware Corporation (“we” or “us”), together with its wholly owned significant operating subsidiaries Palisades Collection, LLC, Palisades Acquisition XVI, LLC (“Palisades XVI”), Palisades Acquisition XIX, LLC (“Palisades XIX”), Palisades Acquisition XXIII, LLC (“Palisades XXIII”), VATIV Recovery Solutions LLC (“VATIV”), ASFI Pegasus Holdings, LLC (“APH”), Fund Pegasus, LLC (“Fund Pegasus”), GAR Disability Advocates, LLC (“GAR Disability Advocates”), Five Star Veterans Disability, LLC (“Five Star”), EMIRIC, LLC (“EMIRIC”), Simia Capital, LLC (“Simia”), Sylvave, LLC (“Sylvave”) (formerly known as Pegasus Funding, LLC (“Pegasus”)), Arthur Funding LLC (“Arthur Funding”) (formerly known as Practical Funding, LLC (“Practical Funding”)), and other subsidiaries, which are

not

all wholly owned, is engaged in several business segments in the financial services industry including funding of personal injury claims, through the Company's wholly owned subsidiaries Sylvave, Simia and Arthur Funding, social security disability advocacy through the Company's wholly owned subsidiaries GAR Disability Advocates and Five Star and the business of purchasing, managing for its own account and servicing distressed consumer receivables, including charged off receivables, and semi-performing receivables.

We operate principally in the United States in

three

reportable business segments: consumer receivables, social security disability advocacy and personal injury claims.

Consumer receivables

This segment is engaged in the business of purchasing, managing for its own account and servicing distressed charged off receivables including consumer receivables. Recently, our effort has been in the international areas (mainly South America), as we have curtailed our active purchasing of consumer receivables in the United States. We acquire these consumer receivables at substantial discounts to their face values, based on the characteristics of the underlying accounts of each portfolio. 

 

Personal injury claims

This segment is comprised of purchased interests in personal injury claims from claimants who are a party to a personal injury claim. The Company advances to each claimant funds on a non-recourse basis at an agreed upon fee, in anticipation of a future settlement. The Company capitalizes employee compensation and benefits expenses as direct costs related to the origination of personal injury advances. Claims purchased 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 award with respect to such claimant’s claim. The Company historically funded personal injury claims in Simia and Sylvave. The Company formed a new wholly owned subsidiary, Practical Funding on

March 16, 2018

to continue in the personal injury claims funding business. On

April 8, 2019,

Practical Funding changed its name to Arthur Funding, LLC. Arthur Funding began funding advances on personal injury claims in

May 2019 (

see Note

6

).

Simia commenced operations in

January 2017,

and conducts its business solely in the United States. Simia obtained its business from external brokers and internal sales professionals soliciting attorneys and law firms who represent claimants who have personal injury claims. Business was also obtained from its website and through attorneys. The personal injury claims segment includes the consolidated results of operations of Sylvave, Simia and Arthur Funding. Simia and Sylvave are

not

funding any new advances, but continue to collect on outstanding personal claim advances in the ordinary course. 

Social security disability advocacy

 

This segment consists of advocacy groups representing individuals throughout the United States in their claims for social security disability and supplemental social security income benefits from the Social Security Administration and Department of Veterans Affairs. It relies upon Search Engine Optimization (“SEO”) to bring awareness to its intended market.

Basis of Presentation

The condensed consolidated balance sheet as of

March 31, 2020,

the condensed consolidated statements of operations for the

three

and

six

months ended

March 31, 2020

and

2019,

the condensed consolidated statements of comprehensive income (loss) for the

three

and

six

months ended

March 31, 2020

and

2019,

the condensed consolidated statements of stockholders’ equity as of and for the

three

and

six

months ended

March 31, 2020

and

2019,

and the condensed consolidated statements of cash flows for the

six

months ended

March 31, 2020

and

2019,

are unaudited. The

September 

30,

2019

financial information included in this report was derived from our audited financial statements included in our Annual Report on Form

10

-K for the fiscal year ended

September 30, 2019.

In the opinion of management, all adjustments necessary to present fairly our financial position at

March 31, 2020,

the results of operations for the

three

and

six

months ended

March 31, 2020

and

2019,

the condensed consolidated statement of comprehensive income (loss) for the

three

and

six

months ended

March 31, 2020

and

2019,

the condensed consolidated statement of stockholders' equity for the

three

and

six

months ended

March 31, 2020

and

2019

and condensed consolidated cash flows for the

six

months ended

March 31, 2020

and

2019

have been made. The results of operations for the

three

and

six

months ended

March 31, 2020

and

2019

are

not

necessarily indicative of the operating results for any other interim period or the full fiscal year.  

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Rule

10

-

01

of Regulation S-

X

promulgated by the Securities and Exchange Commission and therefore do

not

include all information and note disclosures required under generally accepted accounting principles. The Company suggests that these financial statements be read in conjunction with the financial statements and notes thereto included in our

2019

Form

10

-K filed with the Securities and Exchange Commission. 

The condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and industry practices.

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates including management’s estimates of future cash flows and the resulting rates of return.

The condensed consolidated financial statements include the accounts of Asta Funding, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Pending Transactions

 

On

April 8, 2020

the Company announced that it has entered into a definitive merger agreement (the “Merger Agreement”) under which the Stern Group, comprised of Gary Stern, Chairman, President and Chief Executive Officer of the Company, Ricky Stern and certain related parties, will acquire all of the issued and outstanding shares of common stock of the Company through the merger of the Company with a wholly-owned subsidiary of Asta Finance Acquisition Inc. (“Parent”), with the Company surviving as a wholly-owned subsidiary of Parent (the “Merger”).

Each share of outstanding common stock will be purchased for

$11.47

in cash.

The Merger was unanimously approved by the board of directors of Asta (the “Board”), acting on the unanimous recommendation of a special committee of independent and disinterested directors (the “Special Committee”) that was granted full authority to conduct a comprehensive strategic review and evaluate, and if warranted, negotiate an acquisition proposal. The Merger is subject to the satisfaction of customary closing conditions as well as the approval by the Company’s stockholders other than the Stern Group. Upon closing, the Company will become a privately held company and as such, the Company’s shares of common stock will

no

longer be listed or traded on the Nasdaq Global Select Market.

Subsequent to the approval of the Merger by the Board, on

May 22, 2020,

RBF Capital, LLC notified the Company’s Board of Directors, of its proposal to acquire all of the outstanding shares of the Company

not

currently held by RBF Capital, LLC for a price of

$13.00

per share in cash (the “RBF Capital Proposal”), representing a

13%

premium to the Stern Investor Group’s proposed purchase price of

$11.47

per share. RBF Capital, LLC intends to finance the proposed acquisition with internal cash. RBF Capital, LLC is prepared to immediately negotiate a confidentiality agreement, commence due diligence and begin negotiation of definitive documentation for a transaction. RBF Capital, LLC is open to a co-investment with the Stern Investor Group as part of their buyout proposal, if the members of the Stern family wish to retain their equity in the Company. The RBF Capital Proposal does

not

purport to be complete and RBF Capital, LLC reserves the right to modify the RBF Capital Proposal in any way, to extend or discontinue discussions regarding the same, or to withdraw the RBF Capital Proposal at any time. RBF Capital, LLC

may,

directly or indirectly, take such additional steps from time to time as it

may

deem appropriate to further the RBF Capital Proposal as

may

be modified from time to time, including, without limitation, (a) engaging in discussions regarding the same with the Company, other shareholders advisors, and other relevant parties, and (b) entering into other agreements, arrangements and understanding as

may

be appropriate in connection with its RBF Capital Proposal, as

may

be modified from time to time. The Special Committee is evaluating the RBF Capital Proposal.

During the

three

and

six

months ended

March 31, 2020,

the Company incurred fees and expenses in connection with the Merger of

$531,000

and

$785,000,

respectively, included in general and administrative expenses on the accompanying consolidated statement of operations.

Risks and Uncertainties 

Current economic uncertainty brought about as a result of the coronavirus

2019

(“COVID-

19”

) global pandemic

may

adversely impact the results of operations and liquidity of the Company overall and its business units to varying degrees over the near and longer term, particularly if the economic effects of the pandemic worsen or persist for an extended period of time. 

A contributing factor to this expected near-term impact is that the COVID-

19

pandemic has significantly impacted the ability of many consumers to pay their charged-off consumer receivable balances.  In addition, the world-wide effect of this pandemic has been to drastically reduce employment both in the U.S. and abroad, and because employment is the greatest predictor of a consumer debtor to fulfill his or her obligations, diminished cash flows are probable in this segment. Our Personal Injury claims business relies on the adjudication of personal injury claims for which we purchase an interest in 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 claim. Most courthouses have temporarily closed and lawsuits are

not

being adjudicated.  It is unclear as to when there will be a full reopening of the court system, and, as such, many cases will be held in abeyance as part of an already long-standing backlog.

While it is premature to quantify the impact of the evolving effects of COVID-

19

and the effectiveness of measures taken by global governments to mitigate the pandemic and its economic impact, we expect COVID-

19

will negatively impact the Company’s results of operations and its cash flows across both the consumer receivable and personal injury claim segments.  The nature,  extent and duration of the impact to the Company’s businesses will depend on implications to the  general economic and financial markets, changes in economic variables, such as the availability of consumer credit, the ability of consumers to pay amounts owed to us; the effect on the housing market; the rate of unemployment; the number and size of personal bankruptcy filings;the effect on energy costs;  the levels of consumer confidence and consumer debt; investor sentiment; and any closures to our offices. Additionally, government actions in response to the pandemic

may

hinder our collection activities or result in increased expenses. 

Management is actively monitoring the impact of the global situation on our financial condition, liquidity, operations, and workforce. Given the daily evolution of the COVID-

19

pandemic and the global responses to curb its spread, the Company is

not

able to estimate the effects of the COVID-

19

pandemic on its results of operations, financial condition, or liquidity for fiscal year

2020.

Concentration of Credit Risk – Cash and cash equivalents

The Company considers all highly liquid investments with a maturity date 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 had a cash balance with

one

bank at

March 31, 2020

that exceeded the balance insured by the FDIC by approximately

$5.3

million. Additionally,

three

foreign banks with an aggregate

$2.3

million balances are

not

FDIC insured. The Company does

not

believe it is exposed to any significant credit risk due to concentration of cash.

Investments in Equity Securities

 

 All equity investments in nonconsolidated entities are measured at fair value with changes recognized in earnings, except for those accounted for using the equity method of accounting. Changes in the fair value of equity securities are included in other income, net on the condensed consolidated statement of operations.

Available-for-Sale Debt Securities

  

Debt investments that the Company intends to hold for an indefinite period of time, but

not

necessarily to maturity, are classified as available-for-sale debt securities and are carried at fair value. Unrealized gains and losses on available-for-sale debt securities are determined using the specific-identification method. Unrealized gains/losses are recorded in other comprehensive income (loss).

Declines in the fair value of individual available-for-sale debt securities below their respective costs that are other than temporary will result in write-downs of the individual securities to their fair value. Factors affecting the determination of whether an other-than-temporary impairment has occurred include: a downgrading of the 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 security for a period of time sufficient to allow for any anticipated recovery in fair value.  

Personal Injury Claim Advances and Impairments

The Company accounts for its investments in personal injury claims at an agreed upon fee, in anticipation of a future settlement. Purchased personal injury claim advances consists of the right to receive from a claimant part of the proceeds or recoveries which such claimant receives by reason of a settlement, judgment or reward with respect to such claimant’s claim. Open case revenue is estimated, recognized and accrued based on the expected realization and underwriting guidelines and facts and circumstances for each individual case. These personal injury claims are non-recourse. When a case is closed and the cash is received for the advance provided to a claimant, revenue is recognized based upon the contractually agreed upon fee, and, if applicable, adjusted for any changes due to a settled amount and fees charged to the claimant.

Management assesses the quality of the personal injury claims portfolio through an analysis of the underlying personal injury fundings on a case by case basis. Cases are reviewed through periodic updates with attorneys handling the cases, as well as with

third

party research tools which monitor public filings, such as motions or judgments rendered on specific cases. The Company specifically reserves for those fundings where the underlying cases are identified as uncollectible, due to anticipated non-favorable verdicts and/or settlements at levels where recovery of the advance outstanding is unlikely. For cases that have

not

exhibited any specific negative collection indicators, the Company establishes reserves based on the historical collections of the fee income. Fee income on advances is reserved for on all cases where a specific reserve is established on the initially funded amount. In addition, management also monitors its historical collection on fee income and establishes reserves on fee income consistent with the historically experienced collection rates. Management regularly analyzes and updates the historical collection of its initially funded cases as well as its fee income.

Income Recognition - Consumer Receivables

 

The Company accounts for certain of its investments in consumer receivables using the guidance of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)

310,

Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC

310”

). Under the guidance of ASC

310,

static pools of accounts are established. These pools are aggregated based on certain common risk criteria. Each static pool is recorded at cost and is accounted for as a single unit for the recognition of income, principal payments and loss provision. Due to the substantial reduction of portfolios reported under the interest method, and the inability to reasonably estimate cash collections required to account for those portfolios under the interest method the Company concluded the cost recovery method is the appropriate accounting method under the circumstances.

Under the guidance of ASC

310,

the Company must analyze a portfolio upon acquisition 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 recovery method,

no

income is recognized until the cost of the portfolio has been fully recovered. A pool can become fully amortized (

zero

carrying balance on the balance sheet) while still generating cash collections. At such time, all cash collections are recognized as revenue when received.

Impairments - Consumer Receivables

 

The Company accounts for its impairments in accordance with ASC

310,

which provides guidance on how to account for differences between contractual and expected cash flows from an investor’s initial investment in loans or debt securities acquired in a transfer if those differences are attributable, at least in part, to credit quality. The recognition of income under ASC

310

is dependent on the Company having the ability to develop reasonable expectations of both the timing and amount 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 expected to 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 between the carrying value at the time of the forecast and the corresponding estimated remaining future collections. The Company believes it has significant experience in acquiring certain distressed consumer receivable portfolios at a significant discount to the amount actually owed by underlying customers. The Company invests 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 it believes its estimated cash flow offers an adequate return on acquisition costs after servicing expenses. Additionally, when considering larger portfolio purchases of accounts, or portfolios from issuers with whom the Company has limited experience, it has the added benefit of soliciting its

third

party collection agencies and attorneys for their input on liquidation rates and, at times, incorporates such input into the estimates it uses for its expected cash flows, and the Company’s ability to recover their cost basis.

Income Recognition - Social Security Disability Advocacy

 

 In accordance with FASB ASC

606,

Revenue from Contracts with Customers, the Company recognizes disability fee income for GAR Disability Advocates and Five Star when disability claimant’s cases close, when cash is received or when the Company receives a notice of award from the Social Security Administration (“SSA”) or the Department of Veterans Affairs that stipulates the amount of fee approved by the SSA to be paid to the Company. The Company establishes a reserve for the differentials in amounts awarded by the SSA compared to the actual amounts received by the Company. Fees paid to the Company are withheld by the SSA against the claimant's disability claim award, and are remitted directly to the Company from the SSA.

Commissions and fees

   

Commissions and fees are the contractual commissions earned by

third

party collection agencies and attorneys, and direct costs associated with the collection effort, generally court costs and asset searches. The Company utilizes

third

party collection agencies and attorney networks. 

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 intangibles resulting in timing differences between financial accounting and tax reporting; (iv) stock based compensation; and (v) partnership investments.

Fair Value Hierarchy

 

FASB ASC

825,

Financial Instruments, (“ASC

825”

), requires disclosure of fair value information about financial instruments, whether or

not

recognized on 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 assets and liabilities, fair value estimates are based upon judgments regarding credit risk, investor expectation of economic conditions, normal cost of administration and other 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 Company records its available-for-sale debt securities and investments in equity securities at estimated fair value on a recurring basis. The accompanying condensed consolidated financial statements include estimated fair value information regarding its available-for-sale debt securities and investments in equity securities as of

March 31, 2020,

as required by FASB ASC

820,

Fair Value Measurements 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 exit price) in an orderly transaction between market participants on the measurement date. ASC

820

also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s level within the fair value hierarchy 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 that are

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 the full 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 developed using the reporting entities’ estimates and assumptions, which reflect those that market participants would use. 

ASC

825

requires disclosure of fair value information about financial instruments, whether or

not

recognized on 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 assets and liabilities, fair value estimates are based upon judgments regarding credit risk, investor expectation of economic conditions, normal cost of administration and other 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.

Recent Accounting Pronouncements

  

Adopted During the

Six

Months Ended

March

31,

20

20

In

February 2016,

the FASB issued ASU

2016

-

02,

Leases (Topic

842

) (“ASU

2016

-

02”

) which requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet for all leases with terms longer than

12

months. For a lease with a term of

12

months or less, a lessee is permitted to make an accounting policy election by class of underlying asset

not

to recognize a right-of-use asset and lease liability. Additionally, when measuring assets and liabilities arising from a lease, optional payments should be included only if the lessee is reasonably certain to exercise an option to extend the lease, exercise a purchase option or

not

exercise an option to terminate the lease. In

January 2018,

the FASB issued ASU

2018

-

01,

Leases (Topic

842

): Land Easement Practical Expedient for Transition to Topic

842

(“ASU

2018

-

01”

). ASU

2018

-

01

was issued to address concerns about the cost and complexity of complying with the transition provisions of ASU

2016

-

02.

Additionally, in

July 2018,

the FASB issued ASU

No.

2018

-

11,

“Leases (Topic

842

): Targeted Improvements, which provides an alternative transition method that permits an entity to use the effective date of ASU

2016

-

02

as the date of initial application through the recognition of a cumulative effect adjustment to the opening balance of retained earnings upon adoption. The standard became effective in for fiscal years beginning after

December 15, 2018

and interim periods within those years, and early adoption is permitted (see Note

8

– Right of Use Assets). 

The Company adopted the lease accounting standard using the modified retrospective transition option on adoption on

October 1, 2019,

which had an immaterial impact to the Company’s condensed consolidated balance sheet. Upon adoption, the Company recorded additional lease liabilities of approximately

$636,000

attributable to the Company’s operating leases based on the present value of the remaining minimum lease payments with an increase to right-of-use assets of approximately

$636,000.

The Company used

3.5%

as its incremental borrowing rate to calculate the net present value of its leases at

October 1, 2019,

based on the Company's estimated borrowing rate for a collateralized loan. The Company had

no

debt outstanding as of

October 1, 2019.

In

February 2018,

the FASB issued ASU

2018

-

02,

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows a reclassification from accumulated other comprehensive income (loss) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act enacted on

December 22, 2017,

and requires certain disclosures about stranded tax effects. ASU

2018

-

02

was effective for the Company's fiscal year beginning

October 1, 2019,

with early adoption permitted, and was applied in the period of adoption in which the effect of the change in the U.S. federal corporate income tax rate in the Act was recognized. The adoption of this accounting update did

not

have a material impact on the Company’s condensed consolidated financial statements.

Recent Accounting Pronouncements

Not

Yet Adopted

In

June 2016,

the FASB issued ASU

2016

-

13,

Financial Instruments-Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments. The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. For the Company, this update will be effective for interim periods and annual periods beginning after

December 15, 2022.

Upon adoption, the Company will accelerate the recording of its credit losses and is continuing to assess the impact on its consolidated financial statements. 

In

January 2017,

the FASB issued ASU

2017

-

04

Intangibles - Goodwill and Other (Topic

350

): Simplifying the Test for Goodwill Impairment. The objective of this update is to simplify the subsequent measurement of goodwill, by eliminating step

2

from the goodwill impairment test. The amendments in this update are effective for annual periods beginning after

December 15, 2019,

and interim periods within those fiscal years. The Company does

not

believe this update will have a material impact on its consolidated financial statements.

In

August 2018,

the FASB issued ASU

No.

2018

-

13,

Fair Value Measurement (Topic

820

): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements on fair value measurements. The ASU removes the requirement to disclose: the amount of and reasons for transfers between Level

1

and Level

2

of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level

3

fair value measurements. The ASU requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level

3

fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level

3

fair value measurements. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2019.

The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.  

 In

December 2019,

the FASB issued ASU

2019

-

12,

 Income Taxes (Topic

740

): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU

2019

-

12

removes certain exceptions to the general principles in Topic

740

and also clarifies and amends existing guidance to improve consistent application. ASU

2019

-

12

is effective for the Company beginning in fiscal

2022.

The Company is evaluating the impact of the adoption of ASU

2019

-

12

on its financial statements, but does

not

expect such adoption to have a material impact.

XML

Note 9 - Settlements (Details Textual) - USD ($)				1 Months Ended		3 Months Ended		6 Months Ended
	Jul. 12, 2020	Jul. 12, 2019	Jul. 12, 2018	Feb. 28, 2020	Dec. 31, 2019	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019	Sep. 30, 2019
Receivable, Settlement						$ 757,000		$ 757,000		$ 1,558,000
Gain (Loss) Related to Litigation Settlement, Total						30,000	$ 323,000	30,000	$ 323,000
Lawsuit in Delaware State Court [Member]
Loss Contingency, Damages Awarded, Value			$ 4,400,000
Litigation Settlement, Amount Awarded from Other Party		$ 2,400,000
Litigation Settlement, Imputed Interest Rate			8.50%
Receivable, Settlement						800,000		800,000		$ 1,600,000
Gain (Loss) Related to Litigation Settlement, Total								400,000
Litigation Settlement Interest						33,000	$ 72,000	58,000	$ 126,000
Lawsuit in Delaware State Court [Member] | Forecast [Member]
Litigation Settlement, Amount Awarded from Other Party	$ 4,400,000
Balance Point Divorce Funding, LLC and Stacey Napp [Member]
Litigation Settlement, Amount Awarded from Other Party				$ 30,000		1,400,000
Gain (Loss) Related to Litigation Settlement, Total					$ 25,000	$ 30,000		$ 30,000

XML

Note 7 - Non-recourse Debt (Details Textual) - USD ($)	Mar. 31, 2020	Sep. 30, 2019
Bank of Montreal [Member]
Non-Recourse Debt	$ 96,000	$ 22,000

XML

Note 6 - Personal Injury Claims Funding (Tables)

6 Months Ended

Mar. 31, 2020

Notes Tables

Personal Claims Funding [Table Text Block]

	For the Three Months ended March 31,
	20 20			201 9
Balance, beginning of period	$	4,533,000		$	8,813,000
Personal injury claim advances		67,000			—
(Write offs) recoveries		(243,000	)		45,000
Personal injury claims income		165,000			456,000
Personal injury claims receipts		(813,000	)		(2,684,000	)
Balance, end of period	$	3,709,000		$	6,630,000

	For the Six Months ended March 31,
	20 20			201 9
Balance, beginning of year	$	5,190,000		$	10,745,000
Personal claim advances		116,000			—
(Write offs) recoveries		60,000			(158,000	)
Personal injury claims income		541,000			1,169,000
Personal injury claims receipts		(2,198,000	)		(5,126,000	)
Balance, end of period	$	3,709,000		$	6,630,000

XML

Note 14 - Stock Option Plans (Tables)

6 Months Ended

Mar. 31, 2020

Notes Tables

Share-based Payment Arrangement, Option, Activity [Table Text Block]

	For the Three Months Ended March 31,
	20 20					201 9
	Number Of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Outstanding options at the beginning of period		670,167		$	8.19		728,533		$	8.17
Options exercised		—					—
Options forfeited/cancelled		(3,300	)		8.21		(1,766	)		8.21
Outstanding options at the end of period		666,867		$	8.19		726,767		$	8.17
Exercisable options at the end of period		666,867		$	8.19		726,767		$	8.17

	For the Six Months Ended March 31,
	20 20					201 9
	Number Of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Outstanding options at the beginning of period		722,567		$	8.18		728,867		$	8.17
Options exercised		—			—		—			—
Options forfeited/cancelled		(55,700	)		8.08		(2,100	)		8.17
Outstanding options at the end of period		666,867		$	8.19		726,767		$	8.17
Exercisable options at the end of period		666,867		$	8.19		726,767		$	8.17

Share-based Payment Arrangement, Option, Exercise Price Range [Table Text Block]

			Options Outstanding						Options Exercisable
Range of Exercise Price			Number of Shares Outstanding		Weighted Remaining Contractual Life (in Years)		Weighted Average Exercise Price		Number of Shares Exercisable		Weighted Average Exercise Price
$5.7501	-	$8.6250		557,367		2.4	$	7.96		557,367	$	7.96
$8.6251	-	$11.5000		109,500		2.8		9.37		109,500		9.37
				666,867		2.5	$	8.19		666,867	$	8.19

XML

Note 5 - Equity Method Investments

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Equity Method Investments and Joint Ventures Disclosure [Text Block]

  

Note

5—Equity

Method Investments

Serlefin Peru is a joint venture in which the Company has a

49%

ownership interest. The other

51%

is owned by

three

individuals who share common ownership with Serlefin BPO&O Serlefin S.A. (“Serlefin”). Each owner maintains voting rights equivalent to their share ownership, and the

51%

shareholders collectively manage the operations of the business. Based on the Company's ownership and voting rights, the Company lacks requisite control of Serlefin Peru, and therefore accounts for its investment in Serlefin Peru under the equity method of accounting. Under the joint venture agreement, the Company is entitled to a management fee from Serlefin Peru in connection with certain payments made to Serlefin Peru. In light of the novel coronavirus (“COVID-

19”

) pandemic, the Company agreed to delay the reimbursement of management fees due in

April

and

May 2020.

Additionally, the Company and Serlefin jointly purchase international consumer debt portfolios under a purchase agreement. The Company and Serlefin purchase the portfolios on a pro-rata basis of

80%

and

20%,

respectively. The purchased portfolios are transferred to an administrative and payment trust, where the Company and Serlefin are trustees. Serlefin provides collection services to the trust, and receives a performance fee determined by the parties for each loan portfolio acquired. Serlefin received approximately

$0.4

million and

$0.2

million, and

$0.7

million and

$0.5

million in performance fees for the

three

and

six

months ended

March 31, 2020

and

2019,

respectively.

The carrying value of the investment in Serlefin Peru was

$223,000

and

$280,000

as of

March 31, 2020

and

September 30, 2019,

respectively. The cumulative net loss from our investment in Serlefin Peru from the date of the initial investment through

March 31, 2020

was approximately

$308,000,

and was

not

significant to the Company's condensed consolidated statement of operations. The Company has determined that there is

no

impairment of this investment at

March 31, 2020.

XML

Note 1 - Correction of Previously Issued Consolidated Financial Statements

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Accounting Changes and Error Corrections [Text Block]

   

Note

1

 – Correction of Previously Issued Consolidated Financial Statements

During the preparation of its Quarterly Report on Form

10

-Q for the

three

and

six

months ended

March 31, 2020,

Asta Funding, Inc. (the “Company”) determined that certain adjustments were needed to correct the previously issued

September 30, 2019

consolidated financial statements.  Specifically, management determined that it had understated its income taxes payable and related income tax expense from foreign operations and understated accrued professional fees and related professional fee expense as of and for the year ended

September 30, 2019.

In accordance with Securities and Exchange Commission Staff Accounting Bulletin (“SAB”)

No.

99,

Materiality

, and SAB

No.

108,

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

, we evaluated the materiality of the errors from a qualitative and quantitative perspective and concluded that the effect of the errors were

not

material to our previously issued consolidated financial statements.

As a result, the accompanying consolidated financial statements as of and for the year ended

September 30, 2019

have been revised to correct for these immaterial accounting errors. Correction of these immaterial errors resulted in an increase in income taxes payable of

$212,000

and an increase in accounts payable and accrued expenses of

$53,000

with a corresponding increase in income tax expense and general and administrative expense, respectively. The cumulative effect of these adjustments on retained earnings as of

October 1, 2019

was a reduction of

$265,000.

The following tables summarize the effects of the revisions on the Company’s previously reported consolidated financial statements in its Annual Report on Form

10

-K as of and for the fiscal year ended

September 30, 2019 (

the

“2019

Form

10

-K”).

	As of September 30, 2019
Consolidated Balance Sheet	As Previously Reported		Adjustment			As Revised
Liabilities:
Accounts payable and accrued expenses	$	941,000	$	53,000		$	994,000
Income taxes payable	$	575,000	$	212,000		$	787,000
Total liabilities	$	1,516,000	$	265,000		$	1,781,000
Stockholders' equity:
Retained earnings	$	88,172,000	$	(265,000	)	$	87,907,000
Total stockholders’ equity	$	89,169,000	$	(265,000	)	$	88,904,000

	Year Ended September 30, 2019
Consolidated Income Statement	As Previously Reported		Adjustment			As Revised
General and administrative expense	$	13,378,000	$	53,000		$	13,431,000
Total expenses	$	13,690,000	$	53,000		$	13,743,000
Income from continuing operations before income tax	$	9,754,000	$	(53,000	)	$	9,701,000
Income tax expense	$	2,579,000	$	212,000		$	2,791,000
Net income	$	7,175,000	$	(265,000	)	$	6,910,000
Net income (loss) per share:
Basic	$	1.08	$	(0.04	)	$	1.04
Diluted	$	1.08	$	(0.04	)	$	1.04

	Year Ended September 30, 2019
Consolidated Statement of Cash Flows	As Previously Reported			Adjustment			As Revised
Net income from continuing operations	$	7,175,000		$	(265,000	)	$	6,910,000
Changes in:
Accounts payable and accrued expenses	$	(1,237,000	)	$	53,000		$	(1,184,000	)
Income taxes payable	$	575,000		$	212,000		$	787,000
Net cash provided by operating activities	$	11,319,000		$	-		$	11,319,000

The correction of these errors had

no

net effect on net cash flows provided by operating activities, and

no

effect on financing or investing activities.

XML

Note 9 - Settlements

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Legal Matters and Contingencies [Text Block]

Note

9–

Settlements

In

August 2014,

the Company filed a lawsuit in Delaware state court against a

third

-party servicer arising from the

third

-party servicer’s failure to pay the Company certain amounts that are due the Company under a servicing agreement. The

third

-party servicer filed a counterclaim in the Delaware action alleging that the Company owes certain amounts to the

third

-party servicer for court costs pursuant to an alleged arrangement between the companies. On or about

July 12, 2018,

the parties agreed to settle the action pursuant to a settlement agreement and release, which provides for, among other things, the payment by the

third

-party servicer of

$4.4

million to the Company pursuant to an agreed upon schedule with a lump sum payment to be made at the

third

anniversary of the agreement.

These fee-based settlements are required to total

$2.4

million and

$4.4

million by the

second

and

third

anniversaries, respectively. To the extent that these fee-based settlement fees are less than these amounts, the servicer is required to make lump sum true-up payments.

The Company determined the fair value of this settlement using (i) historical collection history to estimate the fee based settlement fees that are expected to be received each month from the servicer; (ii) the contractual true-up dates, discussed above, in order to estimate the anticipated true-up payments that will be received from the servicer on the

second

and

third

anniversaries; and (iii) an imputed interest rate of

8.5%.

As of

March 31, 2020,

and

September 30, 2019,

the Company has a settlement receivable due from this

third

-party servicer of

$0.8

million and

$1.6

million, respectively. During the

six

months ended

March 31, 2020,

the Company received

$0.4

million in payments from this

third

-party servicer. For the

three

and

six

months ended

March 31, 2020

and

2019,

the Company recorded

$33,000

and

$58,000

and

$72,000

and

$126,000,

respectively, in interest income, which is included in other income on the Company's condensed consolidated statements of operations. 

On

January 22, 2018,

DLCA, LLC (“DLCA”), a Delaware limited liability company and a wholly owned subsidiary of the Company, filed a complaint against Balance Point Divorce Funding, LLC. (“Balance Point”) and Stacey Napp (“Napp”) in the United States District Court of New Jersey, asserting various claims including breach of contract, conversion, unjust enrichment and fraud associated with a loan made to Balance Point and Napp in

May 2012.

On

May 22, 2019,

Napp and DLCA entered into a Settlement Agreement that settled the action as well as all other claims for monies and/or other obligations owed as and between the parties.

Napp agreed to pay the sum of

$1.4

million (the “Settlement Amount”), the payment terms of which are between

May 21, 2019

and

January 12, 2022.

The Company has previously reviewed the financial condition of both Balance Point and Napp, and has concluded that neither entity currently has assets sufficient to honor the obligations set forth in the Settlement Agreement. Therefore, due to the uncertainty of collecting the Settlement Amount from either Balance Point or Napp, the Company will realize the gain on this settlement, as the Company receives the cash proceeds. Napp missed the

$25,000

due in

December 2019

and made a

$30,000

payment in

February 2020.

The Company has recognized a gain on settlement of

$30,000

for the

three

and

six

months ended

March 31, 2020

in its condensed consolidated statements of operations.

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended				6 Months Ended		9 Months Ended
	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2020	Mar. 31, 2019	Sep. 30, 2019
Cash flows from operating activities:
Net income	$ (72,000)	$ 1,045,000	$ 1,773,000	$ 1,275,000	$ 973,000	$ 3,048,000	$ 6,910,000
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization					48,000	44,000
Deferred income taxes					241,000	305,000
Impairment of consumer receivables acquired for liquidation					23,000
Stock based compensation						7,000
Unrealized (gain)loss on equity securities					162,000	(21,000)
Provision/ (recoveries) for bad debts – personal injury claims					(59,000)	158,000
Loss from equity method investment	53,000		56,000		57,000	86,000
Changes in:
Prepaid and income taxes receivable					196,000	(3,109,000)
Due from third party collection agencies and attorneys					238,000	87,000
Accounts receivable					54,000	(209,000)
Settlement receivable						(223,000)
Other assets					(619,000)	(449,000)
Other liabilities					627,000	(648,000)
Right of use assets					182,000
Right of use liabilities					(180,000)
Income taxes payable					(396,000)		11,319,000
Net cash provided by (used in) operating activities					1,547,000	(924,000)
Cash flows from investing activities:
Principal collected on receivables acquired for liquidation					411,000	1,026,000
Purchase of available for sale debt securities and investments in equity securities					(97,248,000)	(38,474,000)
Proceeds from sale of available for sale debt securities					97,569,000	30,480,000
Proceeds from note receivable						482,000
Proceeds from settlement receivable					801,000	925,000
Personal injury claims - advances					(116,000)
Personal injury claims - receipts					1,656,000	3,957,000
Change in equity method investment						(61,000)
Capital expenditures						(112,000)
Net cash (used in) provided by investing activities					3,073,000	(1,777,000)
Cash flows from financing activities:
Net cash provided by financing activities
Foreign currency effect on cash					54,000	111,000
Net increase (decrease) in cash and cash equivalents					4,674,000	(2,590,000)
Cash and cash equivalents at beginning of period		$ 4,308,000		$ 6,284,000	4,308,000	6,284,000
Cash and cash equivalents at end of period	$ 8,982,000		$ 3,694,000		8,982,000	3,694,000	$ 4,308,000
Supplemental disclosure of cash flow information:
Cash paid for: Income taxes					700,000	4,000,000
Initial recognition of right of use assets					$ 636,000

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Net income	$ (72,000)	$ 1,773,000	$ 973,000	$ 3,048,000
Net unrealized gain (loss) on debt securities, net of tax (expense)/ benefit of ($9,000) and ($35,000) during the three months ended March 31, 2020 and 2019, respectively, and $43,000 and ($87,000) during the six months ended March 31, 2020 and 2019, respectively.	21,000	88,000	(107,000)	223,000
Reclassification adjustment for securities sold, net of tax expense of ($2,000) and $0 during the three months ended March 31, 2020 and 2019, respectively, and ($50,000) and $0 during the six months ended March 31, 2020 and 2019, respectively.	5,000		127,000
Foreign currency translation, net of tax (expense) / benefit of ($43,000) and $17,000 during the three months ended March 31, 2020 and 2019, respectively, and ($31,000) and ($7,000) during the six months ended March 31, 2020 and 2019, respectively.	166,000	(44,000)	122,000	36,000
Other comprehensive income	192,000	44,000	142,000	259,000
Total comprehensive income	$ 120,000	$ 1,817,000	$ 1,115,000	$ 3,307,000

XML

Note 17 - Related Party Transactions

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

Note

17—

Related Party Transactions

The Company utilizes the services of a consultant in conjunction with its international operations. The consultant is the spouse of

one

of the owners of Serlefin Peru. For the

three

and

six

months ended

March 31, 2020

and

2019,

the Company paid this consultant

$12,500

and

$25,000,

and

$25,239

and

$50,478,

respectively. The Company does

not

have a formal agreement in place for these services, and the Company had

no

amounts due to this consultant as of

March 31, 2020

and

September 30, 2019.

On

August 15, 2019,

the Company and Lou Piccolo, a non-independent member of the Company’s Board of Directors, entered into a new

one

-year,

$30,000

contract, pursuant to which Mr. Piccolo will provide consulting services. The compensation is to be paid quarterly. The Company recorded an expense of

$7,500

and

$15,000

for the

three

and

six

months ended

March 31, 2020.

There were

no

amounts due to Mr. Piccolo at

March 31, 2020

and

September 30, 2019.

XML

Note 13 - Net Income (Loss) Per Share

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Earnings Per Share [Text Block]

 

Note

13—Net

Income (Loss) per Share

Basic per share data is determined by dividing net income (loss) by the weighted average shares outstanding during the period. Diluted per share data is computed by dividing net income (loss) by the weighted average shares outstanding, assuming all dilutive

potential common shares were issued. The assumed proceeds from the exercise of dilutive options are calculated using the treasury stock method based on the average market price for the period.

The following table presents the computation of basic and diluted per share data for the

three

and

six

months ended

March 31, 2020

and

2019:

	For the Three Months Ended March 31, 2020			For the Three Months Ended March 31, 2019		For the Six Months Ended March 31, 2020		For the Six Months Ended March 31, 2019
Net Income (Loss)	$	(72,000	)	$	1,773,000	$	973,000	$	3,048,000
Basic earnings (loss) per common share	$	(0.01	)	$	0.27	$	0.15		0.46
Diluted earnings per common share	$	(0.01	)	$	0.27	$	0.15		0.46
Weighted average number of common shares outstanding:
Basic		6,567,765			6,685,415		6,567,765		6,685,415
Dilutive effect of stock options	––				412		87,108		360
Diluted		6,567,765			6,685,827		6,654,873		6,685,775

At

March 31, 2020

there were

no

stock options outstanding that were anti-dilutive. At

March 31, 2019

there were

725,567

stock options outstanding that could have an effect on the future computation of dilution per common share, had their effect

not

been anti-dilutive.

XML

Document And Entity Information - shares	6 Months Ended
	Mar. 31, 2020	May 22, 2020
Document Information [Line Items]
Entity Registrant Name	ASTA FUNDING INC
Entity Central Index Key	0001001258
Trading Symbol	asfi
Current Fiscal Year End Date	--09-30
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding (in shares)		6,567,765
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Amendment Flag	false
Title of 12(b) Security	Common Stock, par value $.01 per share

XML

Note 15 - Stockholders' Equity (Details Textual) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	6 Months Ended
	Mar. 31, 2020	Mar. 31, 2020	Sep. 30, 2019	Mar. 31, 2019
Preferred Stock, Shares Authorized (in shares)	5,000,000	5,000,000	5,000,000
Preferred Stock, Par or Stated Value Per Share (in dollars per share)	$ 0.01	$ 0.01	$ 0.01
Preferred Stock, Shares Issued, Total (in shares)	0	0	0	0
Dividends, Total	$ 0	$ 0
Preferred Stock, Shares Outstanding, Ending Balance (in shares)	0	0	0	0

XML

Note 13 - Net Income (Loss) Per Share - Computation of Basic and Diluted Per Share Data (Details) - USD ($)	3 Months Ended				6 Months Ended		9 Months Ended
	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2020	Mar. 31, 2019	Sep. 30, 2019
Net Income (Loss)	$ (72,000)	$ 1,045,000	$ 1,773,000	$ 1,275,000	$ 973,000	$ 3,048,000	$ 6,910,000
Basic earnings (loss) per common share (in dollars per share)	$ (0.01)		$ 0.27		$ 0.15	$ 0.46	$ 1.04
Diluted earnings per common share (in dollars per share)	$ (0.01)		$ 0.27		$ 0.15	$ 0.46	$ 1.04
Basic (in shares)	6,567,765		6,685,415		6,567,765	6,685,415
Incremental Common Shares Attributable to Share-based Payment Arrangements, Total (in shares)			412		87,108	360
Diluted (in shares)	6,567,765		6,685,827		6,654,873	6,685,775

XML

Note 18 - Segment Reporting (Details Textual)	6 Months Ended
	Mar. 31, 2020 USD ($)	Sep. 30, 2019 USD ($)
Number of Reportable Segments	3
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Carrying Amount, Net	$ 1,193,000	$ 1,668,000
Colombia and Peru [Member]
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Carrying Amount, Net	$ 1,000,000

XML

Note 3 - Investments in Debt and Equity Securities (Details Textual) - USD ($)	Mar. 31, 2020	Sep. 30, 2019
Equity Securities, FV-NI	$ 8,111,000	$ 8,136,000

XML

Note 4 - Consumer Receivables Acquired for Liquidation - Changes in Balance Sheet Account of Consumer Receivables Acquired for Liquidation (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Balance	$ 1,448,000	$ 3,071,000	$ 1,668,000	$ 3,749,000
Net cash collections	(2,975,000)	(3,889,000)	(6,350,000)	(7,914,000)
Effect of foreign currency translation	(88,000)	(37,000)	(42,000)	(184,000)
Finance income recognized	2,808,000	3,481,000	5,940,000	6,975,000
Balance	$ 1,193,000	$ 2,626,000	$ 1,193,000	$ 2,626,000
Finance income as a percentage of collections	94.40%	89.50%	93.50%	88.10%
Net cash collections	$ (2,975,000)	$ (3,889,000)	$ (6,350,000)	$ (7,914,000)
Impairment			$ (23,000)

XML

Note 12 - Income Taxes (Details Textual) - USD ($)	3 Months Ended	6 Months Ended
	Mar. 31, 2020	Mar. 31, 2020
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%	21.00%
Foreign Income Tax Expense (Benefit), Continuing Operations, Total	$ 62,000

XML

Note 8 - Right of Use Assets and Liabilities - Additional Information About Operating Leases (Details)	Oct. 01, 2019	Mar. 31, 2019
Weighted average remaining lease term (in years) (Year)		2 years 127 days
Weighted average discount rate	3.50%	3.50%

XML

Note 6 - Personal Injury Claims Funding (Details Textual) - USD ($)	3 Months Ended		6 Months Ended		18 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Sep. 30, 2019
Income (Loss) from Equity Method Investments, Total	$ (53,000)	$ (56,000)	$ (57,000)	$ (86,000)
Personal Injury Claims Income	165,000	456,000	541,000	1,169,000
Personal Injury Claims, Net Reserve	1,400,000		1,400,000		$ 1,400,000	$ 1,200,000
Personal Injury Claims, (Write Offs) Recoveries	(243,000)	45,000	60,000	(158,000)
Simia Capital LLC [Member]
Income (Loss) from Equity Method Investments, Total			1,000,000
Personal Injury Claims Income	55,000	15,000	71,000	29,000
Personal Injury Claims Assets						1,300,000
Sylvave, LLC [Member]
Personal Injury Claims Income	94,000	441,000	440,000	1,140,000
Personal Injury Claims Assets	2,400,000		2,400,000		2,400,000	3,700,000
Arthur Funding [Member]
Personal Injury Claims Income	16,000	$ 0		$ 0	30,000
Personal Injury Claims Assets	$ 400,000		$ 400,000		$ 400,000	$ 200,000

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Note 7 - Non-recourse Debt

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Debt Disclosure [Text Block]

Note

7—Non

-Recourse Debt

Non-Recourse Debt –Bank of Montreal (“BMO”)

As of

March 31, 2020

and

September 30, 2019,

the Company recorded a liability to BMO of approximately

$96,000

and

$22,000,

respectively, which has been recorded in accounts payable and accrued expenses on the Company’s consolidated balance sheet. The funds were subsequently remitted to BMO on

April 10, 2020

and

October 10, 2019,

respectively. The liability to BMO is recorded when actual collections are received.

XML

Note 3 - Investments in Debt and Equity Securities

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note

3—Investments

in Debt and Equity Securities

Investments in Equity Securities

Investments of equity securities at

March 31, 2020

and

September 30, 2019,

consist of mutual funds valued at

$8.1

million and

$8.1

million, respectively.

Net gains and losses recognized on investments in equity securities for the

three

and

six

months ended

March 31, 2020

and

2019

are as follows:

	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019		Six Months Ended March 31, 2020			Six Months Ended March 31, 2019
Net gains and (losses) recognized during the period on equity securities	$	(172,000	)	$	50,000	$	(162,000	)	$	21,000
Less: Net gains and (losses) recognized during the period on equity securities sold during the period		—					—
Unrealized gains and (losses) recognized during the reporting period on equity securities still held at the reporting date	$	(172,000	)	$	50,000	$	(162,000	)	$	21,000

Available for Sale Debt Securities

Available for sale debt securities at

March 31, 2020

and

September 

30,

2019,

consist of the following:

March 31, 2020	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Available for sale debt securities	$	55,488,000	$	204,000	$	—	$	55,692,000

September 30, 2019	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Available for sale debt securities	$	55,946,000	$	178,000	$	1,000	$	56,123,000

Unrealized holding gains and losses on available for sale debt securities are included in other comprehensive income (loss) within stockholders’ equity. Realized gains (losses) on available for sale debt securities are included in other income (loss) and, when applicable, are reported as a reclassification adjustment in other comprehensive income (loss).  

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Note 3 - Investments in Debt and Equity Securities (Tables)

6 Months Ended

Mar. 31, 2020

Notes Tables

Gain (Loss) on Securities [Table Text Block]

	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019		Six Months Ended March 31, 2020			Six Months Ended March 31, 2019
Net gains and (losses) recognized during the period on equity securities	$	(172,000	)	$	50,000	$	(162,000	)	$	21,000
Less: Net gains and (losses) recognized during the period on equity securities sold during the period		—					—
Unrealized gains and (losses) recognized during the reporting period on equity securities still held at the reporting date	$	(172,000	)	$	50,000	$	(162,000	)	$	21,000

Available-for-sale Securities [Table Text Block]

March 31, 2020	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Available for sale debt securities	$	55,488,000	$	204,000	$	—	$	55,692,000

September 30, 2019	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Available for sale debt securities	$	55,946,000	$	178,000	$	1,000	$	56,123,000

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Note 10 - Interest Dividend and Other Income (Tables)

6 Months Ended

Mar. 31, 2020

Notes Tables

Schedule of Other Nonoperating Income (Expense) [Table Text Block]

	For the Three Months ended March 31,					For the Six Months ended March 31,
	2020			2019		2020			2019
Interest and dividend income	$	320,000		$	255,000		649,000		$	454,000
Realized gain		—			—	––				25,000
Unrealized gain (loss)		(172,000	)		50,000		(162,000	)		21,000
Other	––				1,000		1,000			40,000
	$	148,000		$	306,000	$	488,000		$	540,000

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Note 18 - Segment Reporting (Tables)

6 Months Ended

Mar. 31, 2020

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

(Dollars in millions)	Consumer Receivables		Social Security Disability Advocacy		Personal Injury Claims			Corporate ( 2 )			Total
Three Months Ended March 31,
2020:
Revenues	$	2.8	$	0.9	$	0.2		$	—		$	3.9
Other income	0.1			—		—			0.1			0.2
Segment profit (loss)		2.2		0.1		(0.2	)		(2.0	)	0.1
2019:
Revenues	$	3.5	$	1.3	$	0.4		$	—		$	5.2
Other income		0.4		—		—			0.2			0.6
Segment profit (loss)		3.6		0.4		0.4			(2.0	)		2.4
Six Months Ended March 31,
2020:
Revenues	$	5.9	$	1.7	$	0.6		$	—		$	8.2
Other income		0.1		—		—			0.4			0.5
Segment profit (loss)		5.1		0.2		0.4			(4.2	)		1.5
Segment Assets (1)		7.0		0.9		4.2			80.3			92.4
2019:
Revenues	$	7.0	$	2.6	$	1.1		$	—		$	10.7
Other income		0.5		—		—			0.3			0.8
Segment profit (loss)		6.5		0.8		0.9			(4.1	)		4.1
Segment Assets (1)		10.0		0.9		7.1			71.1			89.1

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Note 19 - Subsequent Events

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Subsequent Events [Text Block]

Note

19—Subsequent

Events

On

April 10, 2020,

the Company applied for a

$1.1

million Paycheck Protection Program (“PPP”) loan under the CARES Act. The proceeds of the loan are intended to be used to retain the Company’s employees, maintain payroll and make lease and utility payments. The Company received approval for a PPP loan from the Small Business Administration. On

May 11, 2020,

the Company signed a PPP loan note with an interest rate of

1%

and a

May 11, 2022

maturity date, though PPP loans

may

be forgiven if certain conditions are met. The PPP loan was funded on

May 20, 2020.

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)	Cumulative Effect, Period of Adoption, Adjustment [Member] Retained Earnings [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member] AOCI Attributable to Parent [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member]	Cumulative Effect, Period of Adoption, Adjusted Balance [Member] Common Stock [Member]	Cumulative Effect, Period of Adoption, Adjusted Balance [Member] Additional Paid-in Capital [Member]	Cumulative Effect, Period of Adoption, Adjusted Balance [Member] Retained Earnings [Member]	Cumulative Effect, Period of Adoption, Adjusted Balance [Member] AOCI Attributable to Parent [Member]	Cumulative Effect, Period of Adoption, Adjusted Balance [Member] Treasury Stock [Member]	Cumulative Effect, Period of Adoption, Adjusted Balance [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Treasury Stock [Member]	Total
Balance, September 30, 2019 (in shares) at Sep. 30, 2018				13,459,708						13,459,708
Balance (Accounting Standards Update 2014-09 [Member]) at Sep. 30, 2018	$ 173,000		$ 173,000
Balance (Accounting Standards Update 2016-01 [Member]) at Sep. 30, 2018	(10,000)	$ 10,000
Balance at Sep. 30, 2018				$ 135,000	$ 68,551,000	$ 80,997,000	$ 45,000	$ (67,128,000)	$ 82,600,000	$ 135,000	$ 68,551,000	$ 80,834,000	$ 35,000	$ (67,128,000)	$ 82,427,000
Net Income (Loss)												1,275,000			1,275,000
Unrealized gain (loss) on debt securities, net													135,000		135,000
Foreign currency translation, net													80,000		80,000
Net income												1,275,000			1,275,000
Foreign currency translation, net of tax (expense) / benefit of ($43,000) and $17,000 during the three months ended March 31, 2020 and 2019, respectively, and ($31,000) and ($7,000) during the six months ended March 31, 2020 and 2019, respectively.													80,000		80,000
Stock based compensation expense											7,000				7,000
Unrealized gain (loss) on debt securities, net													135,000		135,000
Balance at Dec. 31, 2018										$ 135,000	68,558,000	82,272,000	260,000	(67,128,000)	84,097,000
Balance (in shares) at Dec. 31, 2018										13,459,708
Balance, September 30, 2019 (in shares) at Sep. 30, 2018				13,459,708						13,459,708
Balance (Accounting Standards Update 2014-09 [Member]) at Sep. 30, 2018	173,000		$ 173,000
Balance (Accounting Standards Update 2016-01 [Member]) at Sep. 30, 2018	$ (10,000)	$ 10,000
Balance at Sep. 30, 2018				$ 135,000	$ 68,551,000	$ 80,997,000	$ 45,000	$ (67,128,000)	$ 82,600,000	$ 135,000	68,551,000	80,834,000	35,000	(67,128,000)	82,427,000
Net Income (Loss)															3,048,000
Amount reclassified from other comprehensive income
Foreign currency translation, net															36,000
Net income															3,048,000
Foreign currency translation, net of tax (expense) / benefit of ($43,000) and $17,000 during the three months ended March 31, 2020 and 2019, respectively, and ($31,000) and ($7,000) during the six months ended March 31, 2020 and 2019, respectively.															36,000
Balance at Mar. 31, 2019										$ 135,000	68,558,000	84,045,000	304,000	(67,128,000)	85,914,000
Balance (in shares) at Mar. 31, 2019										13,459,708
Balance, September 30, 2019 (in shares) at Dec. 31, 2018										13,459,708
Balance at Dec. 31, 2018										$ 135,000	68,558,000	82,272,000	260,000	(67,128,000)	84,097,000
Net Income (Loss)												1,773,000			1,773,000
Unrealized gain (loss) on debt securities, net													88,000		88,000
Amount reclassified from other comprehensive income
Foreign currency translation, net													(44,000)		(44,000)
Net income												1,773,000			1,773,000
Foreign currency translation, net of tax (expense) / benefit of ($43,000) and $17,000 during the three months ended March 31, 2020 and 2019, respectively, and ($31,000) and ($7,000) during the six months ended March 31, 2020 and 2019, respectively.													(44,000)		(44,000)
Unrealized gain (loss) on debt securities, net													88,000		88,000
Balance at Mar. 31, 2019										$ 135,000	68,558,000	84,045,000	304,000	(67,128,000)	85,914,000
Balance (in shares) at Mar. 31, 2019										13,459,708
Balance, September 30, 2019 (in shares) at Dec. 31, 2018										13,459,708
Balance at Dec. 31, 2018										$ 135,000	68,558,000	82,272,000	260,000	(67,128,000)	84,097,000
Net Income (Loss)															6,910,000
Net income															6,910,000
Balance at Sep. 30, 2019										$ 135,000	68,558,000	87,907,000	276,000	(67,972,000)	88,904,000
Balance (in shares) at Sep. 30, 2019										13,459,708
Net Income (Loss)												1,045,000			1,045,000
Unrealized gain (loss) on debt securities, net													(128,000)		(128,000)
Amount reclassified from other comprehensive income													122,000		122,000
Foreign currency translation, net													(44,000)		(44,000)
Net income												1,045,000			1,045,000
Foreign currency translation, net of tax (expense) / benefit of ($43,000) and $17,000 during the three months ended March 31, 2020 and 2019, respectively, and ($31,000) and ($7,000) during the six months ended March 31, 2020 and 2019, respectively.													(44,000)		(44,000)
Unrealized gain (loss) on debt securities, net													(128,000)		(128,000)
Balance at Dec. 31, 2019										$ 135,000	68,558,000	88,952,000	226,000	(67,972,000)	89,899,000
Balance (in shares) at Dec. 31, 2019										13,459,708
Balance, September 30, 2019 (in shares) at Sep. 30, 2019										13,459,708
Balance at Sep. 30, 2019										$ 135,000	68,558,000	87,907,000	276,000	(67,972,000)	88,904,000
Net Income (Loss)															973,000
Amount reclassified from other comprehensive income															127,000
Foreign currency translation, net															122,000
Net income															973,000
Foreign currency translation, net of tax (expense) / benefit of ($43,000) and $17,000 during the three months ended March 31, 2020 and 2019, respectively, and ($31,000) and ($7,000) during the six months ended March 31, 2020 and 2019, respectively.															122,000
Balance at Mar. 31, 2020										$ 135,000	68,558,000	88,880,000	418,000	(67,972,000)	90,019,000
Balance (in shares) at Mar. 31, 2020										13,459,708
Balance, September 30, 2019 (in shares) at Dec. 31, 2019										13,459,708
Balance at Dec. 31, 2019										$ 135,000	68,558,000	88,952,000	226,000	(67,972,000)	89,899,000
Net Income (Loss)												(72,000)			(72,000)
Unrealized gain (loss) on debt securities, net													21,000		21,000
Amount reclassified from other comprehensive income													5,000		5,000
Foreign currency translation, net													166,000		166,000
Net income												(72,000)			(72,000)
Foreign currency translation, net of tax (expense) / benefit of ($43,000) and $17,000 during the three months ended March 31, 2020 and 2019, respectively, and ($31,000) and ($7,000) during the six months ended March 31, 2020 and 2019, respectively.													166,000		166,000
Unrealized gain (loss) on debt securities, net													21,000		21,000
Balance at Mar. 31, 2020										$ 135,000	$ 68,558,000	$ 88,880,000	$ 418,000	$ (67,972,000)	$ 90,019,000
Balance (in shares) at Mar. 31, 2020										13,459,708

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Note 15 - Stockholders' Equity

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

Note

15—Stockholders’

Equity

 The Company has

5,000,000

authorized preferred shares with a par value of

$0.01

per share.  The Board of Directors of the Company (the “Board”) are authorized to divide the authorized shares of Preferred Stock into

one

or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all other series and classes.

There were

no

shares of preferred stock issued and outstanding as of

March 31, 2020

and

2019.

Dividends are declared at the discretion of the Board and depend upon the Company’s financial condition, operating results, capital requirements and other factors that the Board deems relevant. In addition, agreements with the Company’s lenders

may,

from time to time, restrict the ability to pay dividends. As of

March 31, 2020,

there were

no

such restrictions, as there were

no

lending agreements in place.

No

dividends were declared during the

three

and

six

months ended

March 31, 2020.  

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Note 11 - Commitments and Contingencies

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note

11—Commitments

and Contingencies

 

Legal Matters

On

November 7, 2019,

a shareholder of the Company filed a verified shareholder derivative complaint in the Court of Chancery of the State of Delaware against certain current and former officers and directors of the Company, and named the Company as a nominal defendant, alleging that certain actions taken by management constituted a violation of fiduciary duty to the Company. The Company believes the lawsuit is without merit and intends to vigorously defend the matter. On or about

January 8, 2020,

a motion to dismiss the complaint was filed on behalf of all individual defendants and the Company as nominal defendant. In light of the execution of the merger agreement, the parties to the lawsuit entered into a joint stipulation and submitted a proposed order to stay proceedings in the lawsuit until the earlier of: (i) an announcement by the Company of the completion or cancellation of the merger, or (ii)

June 30, 2020.

On

April 14, 2020,

the court granted the parties’ stipulation and proposed order.

In the ordinary course of our business, we are involved in numerous legal proceedings. We regularly initiate collection lawsuits, using our network of

third

-party law firms, against consumers. Also, consumers occasionally initiate litigation against us, in which they allege that we have violated a federal or state law in the process of collecting their account. We do

not

believe that these ordinary course matters are material to our business and financial condition. The Company is

not

involved in any other material litigation in which we are a defendant. 

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Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Mar. 31, 2020	Sep. 30, 2019
Furniture and equipment, accumulated depreciation	$ 2,000,000	$ 1,900,000
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized (in shares)	5,000,000	5,000,000
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized (in shares)	30,000,000	30,000,000
Common stock, issued (in shares)	13,459,708	13,459,708
Common stock, outstanding (in shares)	6,567,765	6,567,765
Treasury stock, shares (in shares)	6,891,943	6,891,943
Series A Junior Participating Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized (in shares)	30,000	30,000
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0

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Note 1 - Correction of Previously Issued Consolidated Financial Statements - Effects of Revision (Details) - USD ($)	3 Months Ended				6 Months Ended		9 Months Ended
	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2020	Mar. 31, 2019	Sep. 30, 2019
Accounts payable and accrued expenses	$ 1,499,000				$ 1,499,000		$ 994,000
Income taxes payable	391,000				391,000		787,000
Total liabilities	2,346,000				2,346,000		1,781,000
Retained earnings	88,880,000				88,880,000		87,907,000
Total stockholders’ equity							88,904,000
General and administrative expense	3,906,000		$ 3,395,000		7,098,000	$ 7,321,000	13,431,000
Total expenses	3,959,000		3,451,000		7,178,000	7,407,000	13,743,000
Income from continuing operations before income tax	92,000		2,411,000		1,529,000	4,157,000	9,701,000
Income tax expense	164,000		638,000		556,000	1,109,000	2,791,000
Net income	$ (72,000)	$ 1,045,000	$ 1,773,000	$ 1,275,000	$ 973,000	$ 3,048,000	$ 6,910,000
Basic (in dollars per share)	$ (0.01)		$ 0.27		$ 0.15	$ 0.46	$ 1.04
Diluted (in dollars per share)	$ (0.01)		$ 0.27		$ 0.15	$ 0.46	$ 1.04
Accounts payable and accrued expenses							$ (1,184,000)
Income taxes payable					$ (396,000)		11,319,000
Previously Reported [Member]
Accounts payable and accrued expenses							941,000
Income taxes payable							575,000
Total liabilities							1,516,000
Retained earnings							88,172,000
Total stockholders’ equity							89,169,000
General and administrative expense							13,378,000
Total expenses							13,690,000
Income from continuing operations before income tax							9,754,000
Income tax expense							2,579,000
Net income							$ 7,175,000
Basic (in dollars per share)							$ 1.08
Diluted (in dollars per share)							$ 1.08
Accounts payable and accrued expenses							$ (1,237,000)
Income taxes payable							575,000
Revision of Prior Period, Adjustment [Member]
Accounts payable and accrued expenses							53,000
Income taxes payable							212,000
Total liabilities							265,000
Retained earnings							(265,000)
Total stockholders’ equity							(265,000)
General and administrative expense							53,000
Total expenses							53,000
Income from continuing operations before income tax							(53,000)
Income tax expense							212,000
Net income							$ (265,000)
Basic (in dollars per share)							$ (0.04)
Diluted (in dollars per share)							$ (0.04)
Accounts payable and accrued expenses							$ 53,000
Income taxes payable							$ 212,000

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Note 3 - Investments in Debt and Equity Securities - Investments Classified as Available-for-sale (Details) - USD ($)	Mar. 31, 2020	Sep. 30, 2019	[1]
Amortized Cost	$ 55,488,000	$ 55,946,000
Unrealized Gains	204,000	178,000
Unrealized Losses		1,000
Fair Value	$ 55,692,000	$ 56,123,000

[1] At September 30, 2018, the Company reported investments in equity securities and available for sale debt securities as a single line item on the Company's condensed consolidated balance sheet. With the Company's adoption of ASU No. 2016-01 on October 1, 2018, the Company has included the current breakout above for comparability purposes only.

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Note 5 - Equity Method Investments (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019	Sep. 30, 2019
Equity Method Investments	$ 223,000		$ 223,000		$ 280,000
Income (Loss) from Equity Method Investments, Total	$ (53,000)	$ (56,000)	$ (57,000)	$ (86,000)
Serlefin BPO&O Peru S.A.C. [Member]
Equity Method Investment, Ownership Percentage	80.00%		80.00%
Equity Method Investment, Ownership Percentage, Controlled Party	20.00%		20.00%
Noninterest Expense Related to Performance Fees	$ 400,000	$ 200,000	$ 700,000	$ 500,000
Equity Method Investments	$ 223,000		223,000		$ 280,000
Income (Loss) from Equity Method Investments, Total			(308,000)
Equity Method Investment, Other than Temporary Impairment			$ 0
Serlefin BPO&O Peru S.A.C. [Member]
Subsidiary of Limited Liability Company or Limited Partnership, Ownership Interest			49.00%
Three Individuals [Member]
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	51.00%		51.00%

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Note 16 - Fair Value of Financial Measurements and Disclosures - Fair Value of Financial Measurements (Details) - USD ($)	Mar. 31, 2020	Sep. 30, 2019
Investments in equity securities (Level 1)	$ 8,111,000	$ 8,136,000
Available-for-sale debt securities (Level 2)	55,692,000	56,123,000	[1]
Reported Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash equivalents (Level 1)	5,398,000	64,000
Investments in equity securities (Level 1)	8,111,000	8,136,000
Reported Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Available-for-sale debt securities (Level 2)	55,692,000	56,123,000
Reported Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Consumer receivables acquired for liquidation (Level 3)	1,193,000	1,668,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash equivalents (Level 1)	5,398,000	64,000
Investments in equity securities (Level 1)	8,111,000	8,136,000	[2]
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Available-for-sale debt securities (Level 2)	55,692,000	56,123,000	[2]
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Consumer receivables acquired for liquidation (Level 3)	$ 26,154,000	$ 25,783,000	[2]

[1] At September 30, 2018, the Company reported investments in equity securities and available for sale debt securities as a single line item on the Company's condensed consolidated balance sheet. With the Company's adoption of ASU No. 2016-01 on October 1, 2018, the Company has included the current breakout above for comparability purposes only.

[2] At September 30, 2018, the Company reported investments in equity securities and available-for-sale debt securities as a single line item on the Company's consolidated balance sheet. With the Company's adoption of ASU No. 2016-01 on October 1, 2018, the Company has included the current breakout above for comparability purposes only.

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Note 14 - Stock Option Plans - Summary of Stock Option Plans (Details) - $ / shares	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Outstanding options at the beginning of period (in shares)	670,167	728,533	722,567	728,867
Outstanding options at the beginning of period (in dollars per share)	$ 8.19	$ 8.17	$ 8.18	$ 8.17
Options forfeited/cancelled, shares (in shares)	(3,300)	(1,766)	(55,700)	(2,100)
Options forfeited/cancelled (in dollars per share)	$ 8.21	$ 8.21	$ 8.08	$ 8.17
Outstanding options at the end of period (in shares)	666,867	726,767	666,867	726,767
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 8.19	$ 8.17	$ 8.18	$ 8.17	$ 8.19	$ 8.17
Options Exercisable, Number of Shares Exercisable (in shares)					666,867	726,767
Exercisable options at the end of period (in dollars per share)	$ 8.19	$ 8.17	$ 8.19	$ 8.17

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (Parentheticals) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Unrealized gain (loss) on debt securities, tax	$ (9,000)	$ (35,000)	$ 43,000	$ (87,000)
Reclassification adjustment for securities sold, tax	(2,000)	0	(50,000)	0
Foreign currency translation, tax benefit (expense)	$ (43,000)	$ 17,000	$ (31,000)	$ (7,000)

XML

Note 16 - Fair Value of Financial Measurements and Disclosures

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note

16—Fair

Value of Financial Measurements and Disclosures

 

Fair Value of Financial Instruments

 

The estimated fair value of the Company’s financial instruments is summarized as follows:

	March 31, 20 20				September 30, 201 9
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Cash equivalents (Level 1)	$	5,398,000	$	5,398,000	$	64,000	$	64,000
Investments in equity securities (Level 1)		8,111,000		8,111,000		8,136,000		8,136,000
Available-for-sale debt securities (Level 2)		55,692,000		55,692,000		56,123,000		56,123,000
Consumer receivables acquired for liquidation (Level 3)		1,193,000		26,154,000		1,668,000		25,783,000

Disclosure of the estimated fair values of financial instruments often requires the use of estimates. The Company uses the following methods and assumptions to estimate the fair value of financial instruments:

Cash equivalents - The Company considers all highly liquid debt instruments purchased with an original maturity of

three

months or less to be cash equivalents. The carrying amount of cash equivalents approximates fair value.

Investments in equity securities - The investments in equity consist of mutual funds that are valued based on quoted prices in active markets.

Available-for-sale debt securities - The available-for-sale debt securities consist of U.S. treasury bills that are valued based on quoted prices in active markets. The U.S. treasury bills have been classified as available for sale by the Company, as they are deemed to be short term investments, and can be liquidated as needed by the Company. 

The Company’s investments in equity securities and available-for-sale debt securities are classified as Level

1

and Level

2

financial instruments, respectively, based on the classifications described above. The Company did

not

have any transfers into (out of) Level

1

investments during the fiscal year ended

September 

30,

2019.

The Company had

no

Level

3

available-for-sale investments during the

three

and

six

months ended

March 

31,

2020.

Consumer receivables acquired for liquidation - The Company computed the fair value of the consumer receivables acquired for liquidation using its proprietary forecasting model. The Company’s forecasting model utilizes a discounted cash flow analysis. The Company’s cash flows are an estimate of monthly collections for consumer receivables over the estimated collection period, which is currently

April

of

2020

through

March

of

2029.

These cash flows are then fair valued using a discount rate of

20%.

 See Note

4

for the rollforward of Level

3

activity. 

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Note 12 - Income Taxes

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

 

Note

12—Income

Taxes

The Company’s effective rate for the

three

months ended

March 31, 2020

differed from the U.S. federal statutory rate of

21%,

primarily due to changes in forecasted income, income from foreign operations resulting in tax expense of

$62,000,

and state income taxes. The Company’s effective tax rate from operations for the

six

months ended

March 31, 2020

differed from the U.S. federal statutory rate of

21%,

primarily due to income from foreign operations, state income taxes and other differences discrete to the quarter.

The Company files income tax returns in the U.S federal jurisdiction, various state jurisdictions, and various foreign countries. The Company does

not

have any uncertain tax positions. 

On

March 27, 

2020,

the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was signed into law.  The CARES Act contains several new or changed income tax provisions, including but

not

limited to the following: increased limitation threshold for determining deductible interest expense, class life changes to qualified improvements (in general, from

39

years to

15

years), and the ability to carry back net operating losses incurred from tax years

2018

through

2020

up to the

five

preceding tax years. The income tax provisions of the CARES Act had limited applicability to the Company as of

March 31, 2020,

and therefore, the enactment of the CARES Act did

not

have a material impact on the Company’s condensed consolidated financial statements as of, and for the

three

and

six

months ended,

March 31, 2020.

We will continue to evaluate the impact of tax legislation and will update our disclosures as additional information and interpretive guidance becomes available.

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Mar. 31, 2020	Sep. 30, 2019
ASSETS
Cash and cash equivalents	$ 8,982,000	$ 4,308,000
Available for sale debt securities (at fair value)	55,692,000	56,123,000	[1]
Investments in equity securities (at fair value)	8,111,000	8,136,000
Consumer receivables acquired for liquidation (at cost)	1,193,000	1,668,000
Investment in personal injury claims, net	3,709,000	5,190,000
Due from third party collection agencies and attorneys	345,000	596,000
Accounts receivable, net	212,000	266,000
Prepaid and income taxes receivable, net	68,000	264,000
Furniture and equipment, net of accumulated depreciation of $2.0 million at March 31, 2020 and $1.9 million at September 30, 2019	72,000	120,000
Right of use assets	454,000
Equity method investment	223,000	280,000
Settlement receivable	757,000	1,558,000
Deferred income taxes	9,383,000	9,631,000
Goodwill	1,410,000	1,410,000
Other assets	1,754,000	1,135,000
Total assets	92,365,000	90,685,000
LIABILITIES
Accounts payable and accrued expenses	1,499,000	994,000
Right of use liability	456,000
Accrued Income Taxes, Total	391,000	787,000
Liabilities, Total	2,346,000	1,781,000
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Preferred stock
Common stock, $.01 par value, authorized 30,000,000 shares; issued 13,459,708 at March 31, 2020 and September 30, 2019; and outstanding 6,567,765 at March 31, 2020 and September 30, 2019	135,000	135,000
Additional paid-in capital	68,558,000	68,558,000
Retained earnings	88,880,000	87,907,000
Accumulated other comprehensive income, net of taxes	418,000	276,000
Treasury stock (at cost) 6,891,943 shares at March 31, 2020 and September 30, 2019	(67,972,000)	(67,972,000)
Total stockholders’ equity	90,019,000	88,904,000
Total liabilities and stockholders’ equity	92,365,000	90,685,000
Series A Junior Participating Preferred Stock [Member]
STOCKHOLDERS’ EQUITY
Preferred stock

[1] At September 30, 2018, the Company reported investments in equity securities and available for sale debt securities as a single line item on the Company's condensed consolidated balance sheet. With the Company's adoption of ASU No. 2016-01 on October 1, 2018, the Company has included the current breakout above for comparability purposes only.

XML

Significant Accounting Policies (Policies)

6 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The condensed consolidated balance sheet as of

March 31, 2020,

the condensed consolidated statements of operations for the

three

and

six

months ended

March 31, 2020

and

2019,

the condensed consolidated statements of comprehensive income (loss) for the

three

and

six

months ended

March 31, 2020

and

2019,

the condensed consolidated statements of stockholders’ equity as of and for the

three

and

six

months ended

March 31, 2020

and

2019,

and the condensed consolidated statements of cash flows for the

six

months ended

March 31, 2020

and

2019,

are unaudited. The

September 

30,

2019

financial information included in this report was derived from our audited financial statements included in our Annual Report on Form

10

-K for the fiscal year ended

September 30, 2019.

In the opinion of management, all adjustments necessary to present fairly our financial position at

March 31, 2020,

the results of operations for the

three

and

six

months ended

March 31, 2020

and

2019,

the condensed consolidated statement of comprehensive income (loss) for the

three

and

six

months ended

March 31, 2020

and

2019,

the condensed consolidated statement of stockholders' equity for the

three

and

six

months ended

March 31, 2020

and

2019

and condensed consolidated cash flows for the

six

months ended

March 31, 2020

and

2019

have been made. The results of operations for the

three

and

six

months ended

March 31, 2020

and

2019

are

not

necessarily indicative of the operating results for any other interim period or the full fiscal year.  

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Rule

10

-

01

of Regulation S-

X

promulgated by the Securities and Exchange Commission and therefore do

not

include all information and note disclosures required under generally accepted accounting principles. The Company suggests that these financial statements be read in conjunction with the financial statements and notes thereto included in our

2019

Form

10

-K filed with the Securities and Exchange Commission. 

The condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and industry practices.

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates including management’s estimates of future cash flows and the resulting rates of return.

The condensed consolidated financial statements include the accounts of Asta Funding, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Business Combinations Policy [Policy Text Block]

Pending Transactions

 

On

April 8, 2020

the Company announced that it has entered into a definitive merger agreement (the “Merger Agreement”) under which the Stern Group, comprised of Gary Stern, Chairman, President and Chief Executive Officer of the Company, Ricky Stern and certain related parties, will acquire all of the issued and outstanding shares of common stock of the Company through the merger of the Company with a wholly-owned subsidiary of Asta Finance Acquisition Inc. (“Parent”), with the Company surviving as a wholly-owned subsidiary of Parent (the “Merger”).

Each share of outstanding common stock will be purchased for

$11.47

in cash.

The Merger was unanimously approved by the board of directors of Asta (the “Board”), acting on the unanimous recommendation of a special committee of independent and disinterested directors (the “Special Committee”) that was granted full authority to conduct a comprehensive strategic review and evaluate, and if warranted, negotiate an acquisition proposal. The Merger is subject to the satisfaction of customary closing conditions as well as the approval by the Company’s stockholders other than the Stern Group. Upon closing, the Company will become a privately held company and as such, the Company’s shares of common stock will

no

longer be listed or traded on the Nasdaq Global Select Market.

Subsequent to the approval of the Merger by the Board, on

May 22, 2020,

RBF Capital, LLC notified the Company’s Board of Directors, of its proposal to acquire all of the outstanding shares of the Company

not

currently held by RBF Capital, LLC for a price of

$13.00

per share in cash (the “RBF Capital Proposal”), representing a

13%

premium to the Stern Investor Group’s proposed purchase price of

$11.47

per share. RBF Capital, LLC intends to finance the proposed acquisition with internal cash. RBF Capital, LLC is prepared to immediately negotiate a confidentiality agreement, commence due diligence and begin negotiation of definitive documentation for a transaction. RBF Capital, LLC is open to a co-investment with the Stern Investor Group as part of their buyout proposal, if the members of the Stern family wish to retain their equity in the Company. The RBF Capital Proposal does

not

purport to be complete and RBF Capital, LLC reserves the right to modify the RBF Capital Proposal in any way, to extend or discontinue discussions regarding the same, or to withdraw the RBF Capital Proposal at any time. RBF Capital, LLC

may,

directly or indirectly, take such additional steps from time to time as it

may

deem appropriate to further the RBF Capital Proposal as

may

be modified from time to time, including, without limitation, (a) engaging in discussions regarding the same with the Company, other shareholders advisors, and other relevant parties, and (b) entering into other agreements, arrangements and understanding as

may

be appropriate in connection with its RBF Capital Proposal, as

may

be modified from time to time. The Special Committee is evaluating the RBF Capital Proposal.

During the

three

and

six

months ended

March 31, 2020,

the Company incurred fees and expenses in connection with the Merger of

$531,000

and

$785,000,

respectively, included in general and administrative expenses on the accompanying consolidated statement of operations.

Risks and Uncertainties [Policy Text Block]

Risks and Uncertainties 

Current economic uncertainty brought about as a result of the coronavirus

2019

(“COVID-

19”

) global pandemic

may

adversely impact the results of operations and liquidity of the Company overall and its business units to varying degrees over the near and longer term, particularly if the economic effects of the pandemic worsen or persist for an extended period of time. 

A contributing factor to this expected near-term impact is that the COVID-

19

pandemic has significantly impacted the ability of many consumers to pay their charged-off consumer receivable balances.  In addition, the world-wide effect of this pandemic has been to drastically reduce employment both in the U.S. and abroad, and because employment is the greatest predictor of a consumer debtor to fulfill his or her obligations, diminished cash flows are probable in this segment. Our Personal Injury claims business relies on the adjudication of personal injury claims for which we purchase an interest in 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 claim. Most courthouses have temporarily closed and lawsuits are

not

being adjudicated.  It is unclear as to when there will be a full reopening of the court system, and, as such, many cases will be held in abeyance as part of an already long-standing backlog.

While it is premature to quantify the impact of the evolving effects of COVID-

19

and the effectiveness of measures taken by global governments to mitigate the pandemic and its economic impact, we expect COVID-

19

will negatively impact the Company’s results of operations and its cash flows across both the consumer receivable and personal injury claim segments.  The nature,  extent and duration of the impact to the Company’s businesses will depend on implications to the  general economic and financial markets, changes in economic variables, such as the availability of consumer credit, the ability of consumers to pay amounts owed to us; the effect on the housing market; the rate of unemployment; the number and size of personal bankruptcy filings;the effect on energy costs;  the levels of consumer confidence and consumer debt; investor sentiment; and any closures to our offices. Additionally, government actions in response to the pandemic

may

hinder our collection activities or result in increased expenses. 

Management is actively monitoring the impact of the global situation on our financial condition, liquidity, operations, and workforce. Given the daily evolution of the COVID-

19

pandemic and the global responses to curb its spread, the Company is

not

able to estimate the effects of the COVID-

19

pandemic on its results of operations, financial condition, or liquidity for fiscal year

2020.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentration of Credit Risk – Cash and cash equivalents

The Company considers all highly liquid investments with a maturity date 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 had a cash balance with

one

bank at

March 31, 2020

that exceeded the balance insured by the FDIC by approximately

$5.3

million. Additionally,

three

foreign banks with an aggregate

$2.3

million balances are

not

FDIC insured. The Company does

not

believe it is exposed to any significant credit risk due to concentration of cash.

Equity Securities with Readily Determinable Fair Value [Policy Text Block]

Investments in Equity Securities

 

 All equity investments in nonconsolidated entities are measured at fair value with changes recognized in earnings, except for those accounted for using the equity method of accounting. Changes in the fair value of equity securities are included in other income, net on the condensed consolidated statement of operations.

Debt Securities, Available-for-sale [Policy Text Block]

Available-for-Sale Debt Securities

  

Debt investments that the Company intends to hold for an indefinite period of time, but

not

necessarily to maturity, are classified as available-for-sale debt securities and are carried at fair value. Unrealized gains and losses on available-for-sale debt securities are determined using the specific-identification method. Unrealized gains/losses are recorded in other comprehensive income (loss).

Declines in the fair value of individual available-for-sale debt securities below their respective costs that are other than temporary will result in write-downs of the individual securities to their fair value. Factors affecting the determination of whether an other-than-temporary impairment has occurred include: a downgrading of the 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 security for a period of time sufficient to allow for any anticipated recovery in fair value.  

Personal Injury Claim Advances [Policy Text Block]

Personal Injury Claim Advances and Impairments

The Company accounts for its investments in personal injury claims at an agreed upon fee, in anticipation of a future settlement. Purchased personal injury claim advances consists of the right to receive from a claimant part of the proceeds or recoveries which such claimant receives by reason of a settlement, judgment or reward with respect to such claimant’s claim. Open case revenue is estimated, recognized and accrued based on the expected realization and underwriting guidelines and facts and circumstances for each individual case. These personal injury claims are non-recourse. When a case is closed and the cash is received for the advance provided to a claimant, revenue is recognized based upon the contractually agreed upon fee, and, if applicable, adjusted for any changes due to a settled amount and fees charged to the claimant.

Management assesses the quality of the personal injury claims portfolio through an analysis of the underlying personal injury fundings on a case by case basis. Cases are reviewed through periodic updates with attorneys handling the cases, as well as with

third

party research tools which monitor public filings, such as motions or judgments rendered on specific cases. The Company specifically reserves for those fundings where the underlying cases are identified as uncollectible, due to anticipated non-favorable verdicts and/or settlements at levels where recovery of the advance outstanding is unlikely. For cases that have

not

exhibited any specific negative collection indicators, the Company establishes reserves based on the historical collections of the fee income. Fee income on advances is reserved for on all cases where a specific reserve is established on the initially funded amount. In addition, management also monitors its historical collection on fee income and establishes reserves on fee income consistent with the historically experienced collection rates. Management regularly analyzes and updates the historical collection of its initially funded cases as well as its fee income.

Income Recognition Impairments and Accretable Yield Adjustments [Policy Text Block]

Income Recognition - Consumer Receivables

 

The Company accounts for certain of its investments in consumer receivables using the guidance of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)

310,

Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC

310”

). Under the guidance of ASC

310,

static pools of accounts are established. These pools are aggregated based on certain common risk criteria. Each static pool is recorded at cost and is accounted for as a single unit for the recognition of income, principal payments and loss provision. Due to the substantial reduction of portfolios reported under the interest method, and the inability to reasonably estimate cash collections required to account for those portfolios under the interest method the Company concluded the cost recovery method is the appropriate accounting method under the circumstances.

Under the guidance of ASC

310,

the Company must analyze a portfolio upon acquisition 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 recovery method,

no

income is recognized until the cost of the portfolio has been fully recovered. A pool can become fully amortized (

zero

carrying balance on the balance sheet) while still generating cash collections. At such time, all cash collections are recognized as revenue when received.

Impairments - Consumer Receivables

 

The Company accounts for its impairments in accordance with ASC

310,

which provides guidance on how to account for differences between contractual and expected cash flows from an investor’s initial investment in loans or debt securities acquired in a transfer if those differences are attributable, at least in part, to credit quality. The recognition of income under ASC

310

is dependent on the Company having the ability to develop reasonable expectations of both the timing and amount 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 expected to 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 between the carrying value at the time of the forecast and the corresponding estimated remaining future collections. The Company believes it has significant experience in acquiring certain distressed consumer receivable portfolios at a significant discount to the amount actually owed by underlying customers. The Company invests 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 it believes its estimated cash flow offers an adequate return on acquisition costs after servicing expenses. Additionally, when considering larger portfolio purchases of accounts, or portfolios from issuers with whom the Company has limited experience, it has the added benefit of soliciting its

third

party collection agencies and attorneys for their input on liquidation rates and, at times, incorporates such input into the estimates it uses for its expected cash flows, and the Company’s ability to recover their cost basis.

Income Recognition - Social Security Disability Advocacy

 

 In accordance with FASB ASC

606,

Revenue from Contracts with Customers, the Company recognizes disability fee income for GAR Disability Advocates and Five Star when disability claimant’s cases close, when cash is received or when the Company receives a notice of award from the Social Security Administration (“SSA”) or the Department of Veterans Affairs that stipulates the amount of fee approved by the SSA to be paid to the Company. The Company establishes a reserve for the differentials in amounts awarded by the SSA compared to the actual amounts received by the Company. Fees paid to the Company are withheld by the SSA against the claimant's disability claim award, and are remitted directly to the Company from the SSA.

Commissions, Policy [Policy Text Block]

Commissions and fees

   

Commissions and fees are the contractual commissions earned by

third

party collection agencies and attorneys, and direct costs associated with the collection effort, generally court costs and asset searches. The Company utilizes

third

party collection agencies and attorney networks. 

Income Tax, Policy [Policy Text Block]

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 intangibles resulting in timing differences between financial accounting and tax reporting; (iv) stock based compensation; and (v) partnership investments.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value Hierarchy

 

FASB ASC

825,

Financial Instruments, (“ASC

825”

), requires disclosure of fair value information about financial instruments, whether or

not

recognized on 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 assets and liabilities, fair value estimates are based upon judgments regarding credit risk, investor expectation of economic conditions, normal cost of administration and other 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 Company records its available-for-sale debt securities and investments in equity securities at estimated fair value on a recurring basis. The accompanying condensed consolidated financial statements include estimated fair value information regarding its available-for-sale debt securities and investments in equity securities as of

March 31, 2020,

as required by FASB ASC

820,

Fair Value Measurements 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 exit price) in an orderly transaction between market participants on the measurement date. ASC

820

also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s level within the fair value hierarchy 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 that are

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 the full 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 developed using the reporting entities’ estimates and assumptions, which reflect those that market participants would use. 

ASC

825

requires disclosure of fair value information about financial instruments, whether or

not

recognized on 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 assets and liabilities, fair value estimates are based upon judgments regarding credit risk, investor expectation of economic conditions, normal cost of administration and other 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.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

  

Adopted During the

Six

Months Ended

March

31,

20

20

In

February 2016,

the FASB issued ASU

2016

-

02,

Leases (Topic

842

) (“ASU

2016

-

02”

) which requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet for all leases with terms longer than

12

months. For a lease with a term of

12

months or less, a lessee is permitted to make an accounting policy election by class of underlying asset

not

to recognize a right-of-use asset and lease liability. Additionally, when measuring assets and liabilities arising from a lease, optional payments should be included only if the lessee is reasonably certain to exercise an option to extend the lease, exercise a purchase option or

not

exercise an option to terminate the lease. In

January 2018,

the FASB issued ASU

2018

-

01,

Leases (Topic

842

): Land Easement Practical Expedient for Transition to Topic

842

(“ASU

2018

-

01”

). ASU

2018

-

01

was issued to address concerns about the cost and complexity of complying with the transition provisions of ASU

2016

-

02.

Additionally, in

July 2018,

the FASB issued ASU

No.

2018

-

11,

“Leases (Topic

842

): Targeted Improvements, which provides an alternative transition method that permits an entity to use the effective date of ASU

2016

-

02

as the date of initial application through the recognition of a cumulative effect adjustment to the opening balance of retained earnings upon adoption. The standard became effective in for fiscal years beginning after

December 15, 2018

and interim periods within those years, and early adoption is permitted (see Note

8

– Right of Use Assets). 

The Company adopted the lease accounting standard using the modified retrospective transition option on adoption on

October 1, 2019,

which had an immaterial impact to the Company’s condensed consolidated balance sheet. Upon adoption, the Company recorded additional lease liabilities of approximately

$636,000

attributable to the Company’s operating leases based on the present value of the remaining minimum lease payments with an increase to right-of-use assets of approximately

$636,000.

The Company used

3.5%

as its incremental borrowing rate to calculate the net present value of its leases at

October 1, 2019,

based on the Company's estimated borrowing rate for a collateralized loan. The Company had

no

debt outstanding as of

October 1, 2019.

In

February 2018,

the FASB issued ASU

2018

-

02,

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows a reclassification from accumulated other comprehensive income (loss) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act enacted on

December 22, 2017,

and requires certain disclosures about stranded tax effects. ASU

2018

-

02

was effective for the Company's fiscal year beginning

October 1, 2019,

with early adoption permitted, and was applied in the period of adoption in which the effect of the change in the U.S. federal corporate income tax rate in the Act was recognized. The adoption of this accounting update did

not

have a material impact on the Company’s condensed consolidated financial statements.

Recent Accounting Pronouncements

Not

Yet Adopted

In

June 2016,

the FASB issued ASU

2016

-

13,

Financial Instruments-Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments. The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. For the Company, this update will be effective for interim periods and annual periods beginning after

December 15, 2022.

Upon adoption, the Company will accelerate the recording of its credit losses and is continuing to assess the impact on its consolidated financial statements. 

In

January 2017,

the FASB issued ASU

2017

-

04

Intangibles - Goodwill and Other (Topic

350

): Simplifying the Test for Goodwill Impairment. The objective of this update is to simplify the subsequent measurement of goodwill, by eliminating step

2

from the goodwill impairment test. The amendments in this update are effective for annual periods beginning after

December 15, 2019,

and interim periods within those fiscal years. The Company does

not

believe this update will have a material impact on its consolidated financial statements.

In

August 2018,

the FASB issued ASU

No.

2018

-

13,

Fair Value Measurement (Topic

820

): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements on fair value measurements. The ASU removes the requirement to disclose: the amount of and reasons for transfers between Level

1

and Level

2

of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level

3

fair value measurements. The ASU requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level

3

fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level

3

fair value measurements. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2019.

The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.  

 In

December 2019,

the FASB issued ASU

2019

-

12,

 Income Taxes (Topic

740

): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU

2019

-

12

removes certain exceptions to the general principles in Topic

740

and also clarifies and amends existing guidance to improve consistent application. ASU

2019

-

12

is effective for the Company beginning in fiscal

2022.

The Company is evaluating the impact of the adoption of ASU

2019

-

12

on its financial statements, but does

not

expect such adoption to have a material impact.

XML

Note 4 - Consumer Receivables Acquired for Liquidation - Collections Received Less Commissions and Direct Costs (Details) - USD ($)		3 Months Ended		6 Months Ended
		Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Gross collections (1)	[1]	$ 5,701,000	$ 7,362,000	$ 12,251,000	$ 15,582,000
Commissions and fees (2)	[2]	(2,726,000)	(3,473,000)	(5,901,000)	(7,668,000)
Net collections		$ 2,975,000	$ 3,889,000	$ 6,350,000	$ 7,914,000

[1] Gross collections include collections from third party collection agencies and attorneys, collections from in-house efforts and collections represented by account sales.

[2] Commissions are earned by third party collection agencies and attorneys, and include direct costs associated with the collection effort, generally court costs. In December 2007 an arrangement was consummated with one servicer who also received a 3% fee on gross collections received by the Company in connection with the related portfolio purchase. The fee is charged for asset location and skip tracing in connection with this portfolio purchase.

XML

Note 1 - Correction of Previously Issued Consolidated Financial Statements (Details Textual) - USD ($)	Mar. 31, 2020	Oct. 01, 2019	Sep. 30, 2019
Accrued Income Taxes, Total	$ 391,000		$ 787,000
Accounts Payable and Accrued Liabilities, Total	1,499,000		994,000
Retained Earnings (Accumulated Deficit), Ending Balance	$ 88,880,000		$ 87,907,000
Immaterial Error [Member]
Accrued Income Taxes, Total		$ 212,000
Accounts Payable and Accrued Liabilities, Total		53,000
Retained Earnings (Accumulated Deficit), Ending Balance		$ (265,000)

XML

Note 3 - Investments in Debt and Equity Securities - Net Gains and Losses Recognized in Equity Securities (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Net gains and (losses) recognized during the period on equity securities	$ (172,000)	$ 50,000	$ (162,000)	$ 21,000
Less: Net gains and (losses) recognized during the period on equity securities sold during the period
Unrealized gains and (losses) recognized during the reporting period on equity securities still held at the reporting date	$ (172,000)	$ 50,000	$ (162,000)	$ 21,000

XML

Note 17 - Related Party Transactions (Details Textual) - USD ($)		3 Months Ended		6 Months Ended
	Aug. 15, 2019	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019	Sep. 30, 2019
Consultant [Member]
Related Party Transaction, Expenses from Transactions with Related Party		$ 12,500	$ 25,239	$ 25,000	$ 50,478
Due to Related Parties, Total		0		0		$ 0
Director [Member]
Related Party Transaction, Expenses from Transactions with Related Party		7,500		15,000
Due to Related Parties, Total		$ 0		$ 0		$ 0
Consultant Contract Value	$ 30,000

XML

Note 14 - Stock Option Plans - Summary of Outstanding Options (Details) - $ / shares	6 Months Ended
	Mar. 31, 2020	Dec. 31, 2019	Sep. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018
Options Outstanding, Number of Shares Outstanding (in shares)	666,867	670,167	722,567	726,767	728,533	728,867
Options Outstanding, Weighted Average Remaining Contractual Life (Year)	2 years 182 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 8.19	$ 8.19	$ 8.18	$ 8.17	$ 8.17	$ 8.17
Options Exercisable, Number of Shares Exercisable (in shares)	666,867			726,767
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 8.19			$ 8.17
Range One [Member]
Range of Exercise Price, Lower (in dollars per share)	5.7501
Range of Exercise Price, Upper (in dollars per share)	$ 8.625
Options Outstanding, Number of Shares Outstanding (in shares)	557,367
Options Outstanding, Weighted Average Remaining Contractual Life (Year)	2 years 146 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 7.96
Options Exercisable, Number of Shares Exercisable (in shares)	557,367
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 7.96
Range Two [Member]
Range of Exercise Price, Lower (in dollars per share)	8.6251
Range of Exercise Price, Upper (in dollars per share)	$ 11.50
Options Outstanding, Number of Shares Outstanding (in shares)	109,500
Options Outstanding, Weighted Average Remaining Contractual Life (Year)	2 years 292 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 9.37
Options Exercisable, Number of Shares Exercisable (in shares)	109,500
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 9.37

XML

Note 8 - Right of Use Assets and Liabilities - Future Minimum Payments (Details) - USD ($)	Mar. 31, 2020	Sep. 30, 2019
2020	$ 159,000
2021	122,000
2022	131,000
2023	65,000
Thereafter
Total lease payments	477,000
Less interest	(21,000)
Operating Lease, Liability, Total	$ 456,000

XML

Note 6 - Personal Injury Claims Funding - Personal Claims Funding (Details) - USD ($)	3 Months Ended		6 Months Ended		18 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020
Balance, beginning of period	$ 4,533,000	$ 8,813,000	$ 5,190,000	$ 10,745,000	$ 10,745,000
Personal injury claim advances	67,000		116,000
(Write offs) recoveries	(243,000)	45,000	60,000	(158,000)
Personal injury claims income	165,000	456,000	541,000	1,169,000
Personal injury claims receipts	(813,000)	(2,684,000)	(2,198,000)	(5,126,000)
Balance, end of period	$ 3,709,000	$ 6,630,000	$ 3,709,000	$ 6,630,000	$ 3,709,000

XML

Note 13 - Net Income (Loss) Per Share (Details Textual) - shares	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Incremental Common Shares Attributable to Share-based Payment Arrangements, Total (in shares)		412	87,108	360
Share-based Payment Arrangement, Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)	0
Incremental Common Shares Attributable to Share-based Payment Arrangements, Total (in shares)		725,567

XML

Note 8 - Right of Use Assets and Liabilities

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

Note

8

– Right of Use Assets and Liabilities

Effective

October 1, 

2019,

the Company adopted ASU

2016

-

02,

and all subsequent ASUs that modified Topic

842.

For the Company, Topic

842

affected the accounting treatment for operating lease agreements in which the Company is the lessee by recognizing lease assets and liabilities on the balance sheet. The Company leases the premises for

two

New Jersey office facilities under operating lease agreements expiring in various years through

2023.

The Company is responsible to pay all insurance, utilities, maintenance and repairs on the office spaces. All of the Company’s leases are classified as operating leases.

On

October 1, 2019,

the Company recorded lease liabilities of approximately

$636,000

attributable to the Company’s operating leases based on the present value of the remaining minimum lease payments along with right-of-use assets of approximately

$636,000.

The Company used

3.5%

as its incremental borrowing rate to calculate the net present value of its leases on

October 1, 2019.

As of

March 31, 2020,

the Company’s operating lease right-of-use assets and operating lease liabilities were approximately

$454,000

and

$456,000,

respectively.

The Company leases office space in Englewood Cliffs, New Jersey and subleases office space in Fort Lee, New Jersey under agreements classified as operating leases.

The lease agreement in Englewood Cliffs, New Jersey expires on

August 31, 2020

and does

not

include any renewal option. The lease agreement provides for an initial monthly base amount plus annual escalations through the term of the lease.

The sublease agreement in Fort Lee, New Jersey expires on

March 31, 2023

and does

not

include any renewal option. The lease agreement provides for an initial monthly base amount plus certain additional amounts pursuant to the leasing arrangement between the landlord and sublessor.

In adopting the new accounting guidance, the Company used the following practical expedients for transitional relief as provided for in ASU

2018

-

01:

●An entity need

not

reassess whether any expired or existing contracts are or contain leases.

●An entity need

not

reassess the lease classification for any expired or existing leases.

●An entity need

not

reassess initial direct costs for any existing leases.

●An entity

may

elect to apply hindsight to leases that existed during the period from the beginning of the earliest period presented in the financial statements until the effective date.

The Company also elected

not

to include short-term leases (i.e., leases with initial terms of

twelve

months or less) or insignificant equipment leases on the condensed consolidated balance sheet as provided for in the accounting guidance.

The following provides additional information about the Company’s operating leases:

As of

March 31, 

2020:

Weighted average remaining lease term (in years)	2.35
Weighted average discount rate	3.5	%

As of

March 31, 

2020,

the future minimum payments for the fiscal years are as follows: 

2020	$	159,000
2021		122,000
2022		131,000
2023		65,000
Thereafter		–
Total lease payments		477,000
Less interest		(21,000	)
Operating lease liability	$	456,000

 The Company leases its facilities in (i) Englewood Cliffs, New Jersey, and (ii) Fort Lee, New Jersey. Rent expense for the

three

and

six

months ended

March 31, 2020

and

2019

was

$0.1

million and

$0.1

million and

$0.2

million and

$0.1

million, respectively.  

XML

Note 4 - Consumer Receivables Acquired for Liquidation

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note

4—Consumer

Receivables Acquired for Liquidation

Accounts acquired for liquidation are stated at cost and consist primarily of defaulted consumer loans of individuals primarily, throughout the United States and South America.

The following tables summarize the changes in the condensed consolidated balance sheet account of consumer receivables acquired for liquidation during the following periods:

	For the Three Months Ended March 31,
	20 20			201 9
Balance, beginning of period	$	1,448,000		$	3,071,000
Net cash collections		(2,975,000	)		(3,889,000	)
Effect of foreign currency translation		(88,000	)		(37,000	)
Finance income recognized		2,808,000			3,481,000
Balance, end of period	$	1,193,000		$	2,626,000
Finance income as a percentage of collections		94.4	%		89.5	%

	For the Six Months Ended March 31,
	20 20			201 9
Balance, beginning of year	$	1,668,000		$	3,749,000
Net cash collections from collection of consumer receivables acquired for liquidation		(6,350,000	)		(7,914,000	)
Impairment		(23,000	)
Effect of foreign currency translation		(42,000	)		(184,000	)
Finance income recognized		5,940,000			6,975,000
Balance, end of period	$	1,193,000		$	2,626,000
Finance income as a percentage of collections		93.5	%		88.1	%

 During the

three

and

six

months ended

March 31, 2020

and

2019

the Company did

not

purchase any new portfolios.

As of

March 31, 2020,

the Company held consumer receivables acquired for liquidation from Peru and Colombia of

$0.8

million and

$0.2

million, respectively. The total amount of foreign consumer receivables acquired for liquidation was

$1.0

million, or

81.7%

of the

$1.2

million in total consumer receivables held at

March 31, 2020.

Of the total consumer receivables held domestically and internationally

3

individual portfolios comprise

26.3%,

18.3%

and

14.5%

of the overall asset balance at

March 31, 2020.

As of

September 30, 2019,

the Company held consumer receivables acquired for liquidation from Peru and Colombia of

$1.1

million and

$0.3

million, respectively. The total amount of foreign consumer receivables acquired for liquidation was

$1.4

million, or

83.8%

of the total consumer receivables held of

$1.7

million at

September 30, 2019.

Of the total consumer receivables held domestically and internationally

4

individual portfolios comprise

23.9%,

16.2%,

14.1%

and

11.0%

of the overall asset balance at

September 30, 2019.

As of

March 31, 2020,

and

September 30, 2019,

1.1%

and

1.5%

of the Company's total assets were related to its international operations, respectively. For the

three

and

six

months ended

March 31, 2020

and

2019,

5.5%

and

4.9%,

respectively, and

5.9%

and

4.9%,

respectively, of the Company's total revenue were related to its international operation.

At

March 31, 2020,

approximately

34%

of the Company’s portfolio face value was serviced by

five

collection organizations.  At

September 

30,

2019,

approximately

28%

of the Company’s portfolio face value was serviced by

five

collection organizations. The Company has servicing agreements in place with these

five

collection organizations, as well as all of the Company’s other

third

-party collection agencies and attorneys that cover standard contingency fees and servicing of the accounts. While the

5

collection organizations represent only

34%

and

28%

as of

March 31, 2020

and

September 30, 2019,

respectively, of the Company’s portfolio face value, it does represent approximately

89%

and

86%

of the Company’s portfolio face value at all

third

-party collection agencies and attorneys as of

March 31, 2020

and

September 30, 2019,

respectively.

The following table summarizes collections received by the Company’s

third

-party collection agencies and attorneys, less commissions and direct costs, for the

three

and

six

months ended

March 31, 2020

and

2019,

respectively. 

	For the Three Months Ended March 31,						For the Six Months Ended March 31,
	20 20			201 9			20 20			201 9
Gross collections (1)	$	5,701,000		$	7,362,000		$	12,251,000		$	15,582,000
Commissions and fees (2)		(2,726,000	)		(3,473,000	)		(5,901,000	)		(7,668,000	)
Net collections	$	2,975,000		$	3,889,000		$	6,350,000		$	7,914,000

( 1 )

Gross collections include collections from third  party collection agencies and attorneys, collections from in-house efforts and collections represented by account sales.

( 2 )

Commissions are earned by third  party collection agencies and attorneys, and include direct costs associated with the collection effort, generally court costs. In December 2007 an arrangement was consummated with  one servicer who also received a  3% fee on gross collections received by the Company in connection with the related portfolio purchase.  The fee is charged for asset location and skip tracing in connection with this portfolio purchase.

XML

Note 16 - Fair Value of Financial Measurements and Disclosures (Tables)

6 Months Ended

Mar. 31, 2020

Notes Tables

Fair Value Measurements, Recurring and Nonrecurring [Table Text Block]

	March 31, 20 20				September 30, 201 9
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Cash equivalents (Level 1)	$	5,398,000	$	5,398,000	$	64,000	$	64,000
Investments in equity securities (Level 1)		8,111,000		8,111,000		8,136,000		8,136,000
Available-for-sale debt securities (Level 2)		55,692,000		55,692,000		56,123,000		56,123,000
Consumer receivables acquired for liquidation (Level 3)		1,193,000		26,154,000		1,668,000		25,783,000

XML

Note 1 - Correction of Previously Issued Consolidated Financial Statements (Tables)

6 Months Ended

Mar. 31, 2020

Notes Tables

Schedule of Error Corrections and Prior Period Adjustments [Table Text Block]

	As of September 30, 2019
Consolidated Balance Sheet	As Previously Reported		Adjustment			As Revised
Liabilities:
Accounts payable and accrued expenses	$	941,000	$	53,000		$	994,000
Income taxes payable	$	575,000	$	212,000		$	787,000
Total liabilities	$	1,516,000	$	265,000		$	1,781,000
Stockholders' equity:
Retained earnings	$	88,172,000	$	(265,000	)	$	87,907,000
Total stockholders’ equity	$	89,169,000	$	(265,000	)	$	88,904,000

	Year Ended September 30, 2019
Consolidated Income Statement	As Previously Reported		Adjustment			As Revised
General and administrative expense	$	13,378,000	$	53,000		$	13,431,000
Total expenses	$	13,690,000	$	53,000		$	13,743,000
Income from continuing operations before income tax	$	9,754,000	$	(53,000	)	$	9,701,000
Income tax expense	$	2,579,000	$	212,000		$	2,791,000
Net income	$	7,175,000	$	(265,000	)	$	6,910,000
Net income (loss) per share:
Basic	$	1.08	$	(0.04	)	$	1.04
Diluted	$	1.08	$	(0.04	)	$	1.04

	Year Ended September 30, 2019
Consolidated Statement of Cash Flows	As Previously Reported			Adjustment			As Revised
Net income from continuing operations	$	7,175,000		$	(265,000	)	$	6,910,000
Changes in:
Accounts payable and accrued expenses	$	(1,237,000	)	$	53,000		$	(1,184,000	)
Income taxes payable	$	575,000		$	212,000		$	787,000
Net cash provided by operating activities	$	11,319,000		$	-		$	11,319,000

XML

Note 8 - Right of Use Assets and Liabilities (Tables)

6 Months Ended

Mar. 31, 2020

Notes Tables

Lease, Cost [Table Text Block]

Weighted average remaining lease term (in years)	2.35
Weighted average discount rate	3.5	%

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

2020	$	159,000
2021		122,000
2022		131,000
2023		65,000
Thereafter		–
Total lease payments		477,000
Less interest		(21,000	)
Operating lease liability	$	456,000