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 June 30, 2019

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

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

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   ☒

As of August 13, 2019, the registrant had 6,568,815 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 June 30, 2019 (unaudited) and September 30, 2018	3
Condensed Consolidated Statements of Operations for the three and nine months ended June 30, 2019 (unaudited) and 2018 (unaudited)	4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended June 30, 2019 (unaudited) and 2018 (unaudited)	5
Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended June 30, 2019 (unaudited) and 2018 (unaudited)	6
Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2019 (unaudited) and 2018 (unaudited)	7
Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 4. Controls and Procedures	44
Part II-OTHER INFORMATION	44
Item 1. Legal Proceedings	44
Item 1A. Risk Factors	44
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3. Defaults Upon Senior Securities	44
Item 4. Mine Safety Disclosures	45
Item 5. Other Information	45
Item 6. Exhibits	45
Signatures	47

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ASTA FUNDING, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

	June 30, 2019 (Unaudited)			September 30, 2018
ASSETS
Cash and cash equivalents	$	2,898,000		$	6,284,000
Available for sale debt securities (at fair value)		50,286,000			38,054,000
Investments in equity securities (at fair value)		8,032,000			—
Consumer receivables acquired for liquidation (at cost)		2,184,000			3,749,000
Investment in personal injury claims, net		5,909,000			10,745,000
Due from third party collection agencies and attorneys		813,000			755,000
Accounts receivable, net		235,000			—
Prepaid and income taxes receivable, net		4,456,000			5,387,000
Furniture and equipment, net of accumulated depreciation of $1.9 million at June 30, 2019 and $1.8 million at September 30, 2018		145,000			100,000
Equity method investment		207,000			236,000
Note receivable		—			4,313,000
Settlement receivable		1,990,000			3,339,000
Deferred income taxes		10,360,000			10,940,000
Goodwill		1,410,000			1,410,000
Other assets		1,443,000			1,003,000
Total assets	$	90,368,000		$	86,315,000
LIABILITIES
Accounts payable and accrued expenses	$	1,208,000		$	2,281,000
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 June 30, 2019 and September 30, 2018; and outstanding 6,605,915 at June 30, 2019 and 6,685,415 at September 30, 2018		135,000			135,000
Additional paid-in capital		68,558,000			68,551,000
Retained earnings		87,956,000			82,441,000
Accumulated other comprehensive income, net of taxes		199,000			35,000
Treasury stock (at cost) 6,853,793 shares at June 30, 2019 and 6,774,293 at September 30, 2018		(67,688,000	)		(67,128,000	)
Total stockholders’ equity		89,160,000			84,034,000
Total liabilities and stockholders’ equity	$	90,368,000		$	86,315,000

See accompanying notes to condensed consolidated financial statements

3

ASTA FUNDING, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months		Three Months		Nine Months		Nine Months
	Ended		Ended		Ended		Ended
	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
Revenues:
Finance income, net	$	3,684,000	$	4,509,000	$	10,659,000	$	12,795,000
Personal injury claims income		439,000		1,557,000		1,608,000		2,167,000
Disability fee income		1,175,000		1,188,000		3,732,000		3,248,000
Total revenues		5,298,000		7,254,000		15,999,000		18,210,000
Gain on settlements		273,000		—		596,000		—
Other income, net		855,000		76,000		1,395,000		179,000
		6,426,000		7,330,000		17,990,000		18,389,000
Expenses:
General and administrative		2,980,000		4,201,000		10,301,000		11,712,000
Loss on acquisition of minority interest		—		—		—		1,420,000
Interest		—		17,000		—		19,000
Impairment		100,000		100,000		100,000		100,000
Loss (earnings) from equity method investment		5,000		—		91,000		(845,000	)
		3,085,000		4,318,000		10,492,000		12,406,000
Income from continuing operations before income tax		3,341,000		3,012,000		7,498,000		5,983,000
Income tax expense		1,037,000		1,055,000		2,146,000		5,595,000
Net income from continuing operations		2,304,000		1,957,000		5,352,000		388,000
Net loss from discontinued operations, net of income tax		—		—		—		(80,000	)
Net income	$	2,304,000	$	1,957,000	$	5,352,000	$	308,000
Net income (loss) per basic shares:
Continuing operations	$	0.35	$	0.29	$	0.80	$	0.06
Discontinued operations		—		—		—		(0.01	)
	$	0.35	$	0.29	$	0.80	$	0.05
Net income (loss) per diluted shares:
Continuing operations	$	0.35	$	0.29	$	0.80	$	0.06
Discontinued operations		—		—		—		(0.01	)
	$	0.35	$	0.29	$	0.80	$	0.05
Weighted average number of common shares outstanding:
Basic		6,666,012		6,685,415		6,678,947		6,654,911
Diluted		6,666,231		6,685,628		6,679,260		6,657,840

See accompanying notes to condensed consolidated financial statements

4

ASTA FUNDING, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

June 30, 2019 and 2018

(Unaudited)

	Three Months Ended June 30, 2019			Three Months Ended June 30, 2018		Nine Months Ended June 30, 2019		Nine Months Ended June 30, 2018
Comprehensive income is as follows:
Net income	$	2,304,000		$	1,957,000	$	5,352,000	$	308,000
Net unrealized debt securities gain (loss), net of tax (expense)/benefit of $46,000 and ($4,000) during the three months ended June 30, 2019 and 2018, respectively, and ($40,000) and $2,000 during the nine months ended June 30, 2019 and 2018, respectively.		(121,000	)		9,000		102,000		(2,000	)
Foreign currency translation, net of tax (expense) / benefit of ($6,000) and ($27,000) during the three months ended June 30, 2019 and 2018, respectively, and ($14,000) and ($13,000) during the nine months ended June 30, 2019 and 2018, respectively.		16,000			50,000		52,000		27,000
Other comprehensive income (loss)		(105,000	)		59,000		154,000		25,000
Total comprehensive income	$	2,199,000		$	2,016,000	$	5,506,000	$	333,000

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, 2018		13,459,708	$	135,000	$	68,551,000	$	82,441,000		$	35,000		$	(67,128,000	)	$	84,034,000
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	$	82,604,000		$	45,000		$	(67,128,000	)	$	84,207,000
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	$	83,879,000		$	260,000		$	(67,128,000	)	$	85,704,000
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	$	85,652,000		$	304,000		$	(67,128,000	)	$	87,521,000
Net income		—		—		—		2,304,000			—			—			2,304,000
Unrealized loss on debt securities, net		—		—		—		—			(121,000	)		—			(121,000	)
Foreign currency translation, net		—		—		—		—			16,000			—			16,000
Treasury Stock purchased (79,500 shares)		—		—		—		—			—			(560,000	)		(560,000	)
Balance, June 30, 2019		13,459,708	$	135,000	$	68,558,000	$	87,956,000		$	199,000		$	(67,688,000	)	$	89,160,000

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, 2017		13,398,108	$	134,000	$	68,047,000	$	113,736,000		$	18,000		$	(67,128,000	)	$	114,807,000
Stock based compensation expense		—		—		79,000		—			—			—			79,000
Net loss		—		—		—		(2,669,000	)		—			—			(2,669,000	)
Unrealized loss on marketable securities, net		—		—		—		—			(7,000	)		—			(7,000	)
Foreign currency translation, net		—		—		—		—			29,000			—			29,000
Balance, December 31, 2017		13,398,108	$	134,000	$	68,126,000	$	111,067,000		$	40,000		$	(67,128,000	)	$	112,239,000
Exercise of options		61,600		1,000		398,000		—			—			—			399,000
Stock based compensation expense		—		—		10,000		—			—			—			10,000
Net income		—		—		—		1,020,000			—			—			1,020,000
Unrealized loss on marketable securities, net		—		—		—		—			(4,000	)		—			(4,000	)
Foreign currency translation, net		—		—		—		—			(52,000	)		—			(52,000	)
Dividends paid		—		—		—		(35,352,000	)		—			—			(35,352,000	)
Balance, March 31, 2018		13,459,708	$	135,000	$	68,534,000	$	76,735,000		$	(16,000	)	$	(67,128,000	)	$	78,260,000
Stock based compensation expense		—		—		9,000		—			—			—			9,000
Net income		—		—		—		1,957,000			—			—			1,957,000
Unrealized gain on marketable securities, net		—		—		—		—			9,000			—			9,000
Foreign currency translation, net		—		—		—		—			50,000			—			50,000
Balance, June 30, 2018		13,459,708	$	135,000	$	68,543,000	$	78,692,000		$	43,000		$	(67,128,000	)	$	80,285,000

See accompanying notes to condensed consolidated financial statements

6

ASTA FUNDING, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited) 

	Nine Months Ended
	June 30, 2019			June 30, 2018
Cash flows from operating activities:
Net income from continuing operations	$	5,352,000		$	388,000
Net loss from discontinued operations		—			(80,000	)
Net income	$	5,352,000		$	308,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		72,000			46,000
Deferred income taxes		540,000			3,513,000
Impairment of consumer receivables acquired for liquidation		100,000			100,000
Stock based compensation		7,000			98,000
Unrealized loss on equity securities		(53,000	)		—
Provision (recoveries) for bad debts – personal injury claims, net		(90,000	)		837,000
Loss (recoveries) from equity method investment		91,000			(845,000	)
Changes in:
Receipt of income tax carry-back claim		3,231,000			—
Prepaid and income taxes receivable		(2,300,000	)		2,051,000
Due from third party collection agencies and attorneys		(69,000	)		34,000
Accounts receivable		(62,000	)		—
Other assets		(440,000	)		(380,000	)
Other liabilities		(1,021,000	)		(3,201,000	)
Net cash provided by operating activities of discontinued operations		—			710,000
Net cash provided by operating activities		5,358,000			3,271,000
Cash flows from investing activities:
Principal collected on receivables acquired for liquidation		1,373,000			2,069,000
Principal collected on consumer receivable accounts represented by account sales		—			3,000
Purchase of available for sale debt securities and investments in equity securities		(92,194,000	)		(3,069,000	)
Proceeds from sale of available for sale debt securities		72,125,000			—
Purchase of non-controlling interest		—			(1,800,000	)
Proceeds from sale of CBC		—			4,491,000
Proceeds from note receivable		4,313,000			958,000
Proceeds from settlement receivable		1,349,000			—
Personal injury claims - advances		(123,000	)		(60,000	)
Personal injury claims - receipts		5,049,000			3,705,000
Acquisition of personal injury claims portfolios		—			(14,571,000	)
Decrease (increase) in equity method investment		(62,000	)		53,119,000
Capital expenditures		(117,000	)		(26,000	)
Net cash used in investing activities of discontinued operations		—			(1,538,000	)
Net cash (used in) provided by investing activities		(8,287,000	)		43,281,000
Cash flows from financing activities:
Proceeds from exercise of stock options		—			399,000
Dividends paid		—			(35,352,000	)
Purchase of treasury stock		(560,000	)		—
Net cash provided by financing activities of discontinued operations		—			1,387,000
Net cash used in financing activities		(560,000	)		(33,566,000	)
Foreign currency effect on cash		103,000			58,000
Net (decrease) increase in cash and cash equivalents including cash and cash equivalents classified within assets related to discontinued operations		(3,386,000	)		13,044,000
Less: net decrease in cash and cash equivalents classified within assets related to discontinued operations		—			(316,000	)
Net (decrease) increase in cash and cash equivalents		(3,386,000	)		12,728,000
Cash and cash equivalents at beginning of period		6,284,000			17,591,000
Cash and cash equivalents at end of period	$	2,898,000		$	30,319,000
Supplemental disclosure of cash flow information:
Continuing operations:
Cash paid for: Interest		—			19,000
Cash paid for: Income taxes	$	4,000,000		$	—
Discontinued operations:
Cash paid for: Interest	$	—		$	824,000
Supplemental disclosure of non-cash investing:
Continuing operations:
Note receivable	$	—		$	5,750,000

See accompanying notes to condensed consolidated financial statements

7

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Business and Basis of Presentation   

Business  

Asta Funding, Inc. (“Asta”), a Delaware Corporation, 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 (“ASFI”), 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 (the “Company,” “we” or “us”), is engaged in several business segments in the financial services industry including servicing 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 charged off consumer receivables, including charged off receivables, and semi-performing receivables. 

For the period October 1, 2017 to January 12, 2018, Pegasus was 80% owned, but not controlled, and accounted for under the equity method. On January 12, 2018 (“Date of Acquisition”), the Company acquired the remaining 20% minority interest and a controlling financial interest, in Pegasus, and changed its name to Sylvave. Commencing on the Date of Acquisition, the Company consolidated the financial results of this entity. 

We operate principally in the United States in three reportable business segments: consumer receivables, social security disability advocacy and personal injury claims. We previously operated a fourth segment when we engaged in the structured settlements business through our wholly owned subsidiary CBC Settlement Funding, LLC (“CBC”), which we sold on December 13, 2017.

As a result of the sale of CBC, all periods presented in the Company's condensed consolidated financial statements account for CBC as a discontinued operation. This determination resulted in the reclassification of the historical assets and liabilities comprising the structured settlement business to assets and liabilities related to discontinued operations in the condensed consolidated balance sheets, and a corresponding adjustment to our condensed consolidated statements of operations to reflect discontinued operations for all periods presented. See Note 7 - Discontinued Operations. 

Consumer receivables

This segment is engaged in the business of purchasing, managing for its own account and servicing distressed charged off consumer receivables, including charged off receivables, and semi-performing 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. Claims 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, Practical Funding on March 16, 2018, to continue in the personal injury claims funding business. On April 8, 2018, Practical Funding changed its name to Arthur Funding, LLC. Arthur Funding began funding advances on personal injury claims in May 2019; see Note 5.

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 Company accounted for its investment in Sylvave under the equity method of accounting through January 12, 2018, and for subsequent periods the Company includes the financial results of Sylvave in its consolidated statement of operations. Simia and Sylvave are not funding any new advances, but continue to collect on outstanding personal claim advances in the ordinary course. 

8

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Business and Basis of Presentation (Continued)

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 and Veterans Administration.

Basis of Presentation 

The consolidated balance sheet as of June 30, 2019, the consolidated statements of operations for the three and nine months ended June 30, 2019 and 2018, the consolidated statements of comprehensive income (loss) for the three and nine months ended June 30, 2019 and 2018, the consolidated statements of stockholders’ equity as of and for the three and nine months ended June 30, 2019 and 2018, and the consolidated statements of cash flows for the nine months ended June 30, 2019 and 2018, are unaudited. The September 30, 2018 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, 2018. In the opinion of management, all adjustments necessary to present fairly our financial position at June 30, 2019, the results of operations for the three and nine months ended June 30, 2019 and 2018, the statement of comprehensive income (loss) for the three and nine months ended June 30, 2019 and 2018, the statement of stockholders' equity for the three and nine months ended June 30, 2019 and 2018 and cash flows for the nine months ended June 30, 2019 and 2018 have been made. The results of operations for the three and nine months ended June 30, 2019 and 2018 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 Form 10-K for the fiscal year ended September 30, 2018 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 (“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.

 Liquidity

 At June 30, 2019, the Company had $2.9 million in cash and cash equivalents, as well as $58.3 million in investments in debt and equity securities on hand and no debt.  In addition, the Company had $89.2 million in stockholders' equity at June 30, 2019.

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

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 cash balances with two banks at June 30, 2019 that each exceeded the balance insured by the FDIC by approximately $0.1 million. Additionally, three foreign banks with an aggregate $1.5 million in cash balances are not FDIC insured. The Company does not believe it is exposed to any significant credit risk due to concentration of cash.  

9

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) 

Note 1—Business and Basis of Presentation (Continued)

Investments in Equity Securities  

The Company adopted Accounting Standard Update (“ASU”) No. 2016-01 on October 1, 2018, which requires substantially all equity investments in nonconsolidated entities to be 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 consolidated statements of operations.   

Available-for-Sale Debt Securities    

Non-equity 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.  

Equity method investments 

Investee companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company exercises significant influence with respect to an investee depends on an evaluation of several factors including, among others, representation on the investee company's board of directors and ownership level, which is generally a 20% to 50% interest in voting securities of the investee company. Under the equity method of accounting, an investee company's accounts are not reflected within the Company's consolidated balance sheets and statements of operations; however, the Company's share of the earnings of the investee company is reflected as earnings and loss from equity method investment in the Company's consolidated statement of operations. The Company's carrying value in an equity method investee company is reflected on the Company's consolidated balance sheet, as equity method investment. 

When the Company's carrying value in an equity method investee company is reduced to zero, no further losses are recorded in the Company's consolidated financial statements unless the Company guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized. There were no impairment losses recorded on our equity method investments for the three and nine months ended June 30, 2019 and 2018.

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. 

10

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—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”), 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 310-30, 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. In this case, 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. For the three and nine months ended June 30, 2019, the Company recorded a $0.1 million impairment on an international portfolio. For the three and nine months ended June 30, 2018, the Company recorded a $0.1 million impairment on a domestic portfolio.

Income Recognition - Social Security Disability Advocacy

Effective October 1, 2018, the Company adopted ASC 606 - “Revenue from Contracts with Customer” (“ASC 606”), which was effective for annual periods beginning on or after December 15, 2017. ASC 606 introduced a five-step approach to revenue recognition. See “Recent Accounting Pronouncements” for a discussion of ASC 606.

The Company applied ASC 606 in accordance with the modified retrospective transitional approach recognizing the cumulative effect of initially applying the revenue standard as an adjustment to the opening balance of retained earnings during this period (October 1, 2018). Comparative prior year periods were not adjusted. In applying the modified retrospective approach, we elected practical expedients for (a) completed contracts as described in ASC 606-10-65-1-c(2), and (b) contract modifications as described in ASC 606-10-65-1-f(4), allowing (a) the application of the revenue standard only to contracts that were not completed as of the date of initial application, and (b) to reflect the aggregate effect of all modifications that occur before the adoption date in accordance with the new standard when: (i) identifying the satisfied and unsatisfied performance obligations, (ii) determining the transaction price, and (iii) allocating the transaction price to the satisfied and unsatisfied performance obligations. We believe that the impact on the opening balance of retained earnings during the period (October 1, 2018) would not have been significantly different had we not elected to use the practical expedients.

11

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Business and Basis of Presentation (Continued)

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 Veterans Administration 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 consolidated financial statements include estimated fair value information regarding its available-for-sale debt securities and investments in equity securities as of June 30, 2019, 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.

Reclassification 

Certain prior period amounts in the accompanying condensed consolidated financial statements have been reclassified to conform to the current year presentation. These reclassifications had no effect on previously reported net income or stockholders' equity.  

12

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Business and Basis of Presentation (Continued)

Recent Accounting Pronouncements

Adopted During The Nine Months Ended June 30, 2019   

On October 1, 2018, the Company adopted FASB update ASC 606 that requires use of a single principles-based model for recognition of revenue from contracts with customers. The core principle of the model is to recognize revenue upon transfer of promised goods or services to customers, in an amount that reflects the entitled consideration received in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the customer contracts. The Company adopted the new guidance using the modified retrospective approach which did not require the restatement of prior periods, and recognized a cumulative effect adjustment resulting in an increase in total assets and retained earnings of $173,000, net of taxes of $80,000.

The most significant impact of ASC 606 relates to the Company's accounting for its revenue associated with disability claimant's contracts. Previously, the Company recognized disability fee income when the disability claimants cases closed with the social security administration and the applicable fees were collected. Under the new guidance, the Company determined that the various advocacy services, performed on behalf of a claimant, constitute one performance obligation as they represent an integrated set of services designed to provide a claimant with a successful award. It was also determined that the benefit of these services is conveyed to the claimant at the point in time that the award is determined to be successful. In addition, the Company has made estimates of variable consideration under the expected value method. Therefore, for these arrangements, the Company will recognize revenue when each case is closed, when cash is received or when the Company receives a notice of award, stipulating the Company's fee earned on each case directly from the social security administration.

The primary impact of adopting the new standard results in acceleration of revenues for the aforementioned contractual arrangements, which relate to the social security disability advocacy segment. Disability fee income represents approximately 22.2% and 23.3% of the Company’s total consolidated revenues for the three and nine months ended June 30, 2019.

The following line items in our consolidated statements of operations and comprehensive income for the current reporting period and condensed consolidated balance sheet as of June 30, 2019 have been provided to reflect both the adoption of ASC 606 as well as a comparative presentation in accordance with ASC 605 previously in effect:

Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) for the three months ended June 30, 2019	As Reported (in accordance with ASC 606)		Balances Without Adoption of ASC 606		Impact of Adoption Higher/(Lower)
Disability fee income	$	1,175,000	$	1,322,000	$	(147,000	)
Income from continuing operations before income tax	$	3,341,000	$	3,488,000	$	(147,000	)

Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) for the nine months ended June 30, 2019	As Reported (in accordance with ASC 606)		Balances Without Adoption of ASC 606		Impact of Adoption Higher/(Lower)
Disability fee income	$	3,732,000	$	3,750,000	$	(18,000	)
Income from continuing operations before income tax	$	7,498,000	$	7,516,000	$	(18,000	)

13

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Business and Basis of Presentation (Continued)

	As of June 30, 2019
Condensed Consolidated Balance Sheet	As Reported (in accordance with ASC 606)		Balances Without Adoption of ASC 606		Impact of Adoption Higher/(Lower)
Asset
Accounts receivable	$	235,000	$	—	$	235,000
Stockholders' equity
Retained earnings	$	87,956,000	$	87,703,000	$	253,000	(1)

(1) Does not include the tax impact of $80,000

On October 1, 2018, the Company adopted FASB ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The main provision of this guidance requires certain investments in equity securities to be measured at fair value with changes in fair value recognized in net earnings; separate presentation in other comprehensive income for changes in fair value of financial liabilities measured under the fair value option that are due to instrument-specific credit risk; and changes in disclosures associated with the fair value of financial instruments. Upon adoption of this ASU, the Company's investments in equity securities are no longer classified as available for sale, and changes in fair value are reflected in other income, net on the Company's condensed consolidated statement of operations. In conjunction with this adoption, the Company recorded a cumulative effect adjustment with a decrease to opening retained earnings of $10,000 and an increase to opening accumulated other comprehensive income of $10,000, net of tax benefit of $5,000.

In August 2016, the FASB issued ASU No. 2016-15 "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments."  This ASU made eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2017. Early adoption was permitted. The new standard required adoption on a retrospective basis unless it impracticable to apply, in which case the Company would have been required to apply the amendments prospectively as of the earliest date practicable. The Company's adoption of the ASU did not have a material effect on the Company’s condensed consolidated statements of cash flows.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” The new rules provide for the application of a screen test to consider whether substantially all the fair value of the assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen test determines this to be true, the set is not a business. The new standard was effective for the Company in the first quarter of 2019. The adoption of the new accounting rules did not have a material impact on the Company’s consolidated financial condition, results of operations or cash flows.

In March 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718) Improvements to Employee Share Based Payment Accounting, to simplify and improve areas of generally accepted accounting principles for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The effective date for this update was for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The adoption of this update did not have a material impact on the Company's consolidated financial statements.

14

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Business and Basis of Presentation (Continued)

Recent Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) 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 periods 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 No. 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to ASC 842. ASU No. 2018-01 was issued to address concerns about the cost and complexity of complying with the transition provisions of ASU No. 2018-01. 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 No. 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 becomes effective in for fiscal years beginning after December 15, 2019 and interim periods within those years, and early adoption is permitted. The Company believes that the adoption of this ASU will not have a material impact on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 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, 2019. Upon adoption, the Company expects that it will accelerate the recording of its credit losses in its financial statements. 

In January 2017, the FASB issued ASU No. 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 February 2018, the FASB issued ASU No. 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 will be effective for the Company's fiscal year beginning October 1, 2019, with early adoption permitted, and should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Act is recognized.  The adoption of this ASU is not expected to have a material impact on the Company's 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. 

15

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2—Investments in Debt and Equity Securities

Investments in Equity Securities  

Investments of equity securities at June 30, 2019 and September 30, 2018, consists of mutual funds valued at $8.0 million and $7.6 million, respectively. See (1) below.

Net gains and losses recognized on investments in equity securities for the three and nine months ended June 30, 2019 are as follows:

	For the Three Months Ended June 30, 2019		For the Nine Months Ended June 30, 2019
Net gains and losses recognized during the period on equity securities	$	32,000	$	53,000
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	$	32,000	$	53,000

Available for Sale Debt Securities

Available for sale debt securities at June 30, 2019 and September 30, 2018, consist of the following:

June 30, 2019	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Available for sale debt securities	$	50,144,000	$	142,000	$	—	$	50,286,000

At June 30, 2019, the Company had $50.3 million in U.S. Treasury Bills, classified as available-for-sale debt securities on the Company's condensed consolidated balance sheet.  These treasury bills had $102,000 (net of tax expense of $40,000) in unrealized gains that were recorded in other comprehensive income for the nine months ended June 30, 2019.

September 30, 2018 (1)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Available for sale debt securities	$	30,479,000	$	—	$	—	$	30,479,000

(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.

At September 30, 2018, the Company had $30.5 million in U.S. Treasury Bills, which are carried at fair value, and are classified as available for sale debt securities. Both the mutual funds and the U.S. Treasury Bills are deemed to be level 2 assets, none of which were in an unrealized loss position that had existed for 12 months or more. In addition, management had the ability but did not believe it would be required to sell those investments in debt securities for a period of time sufficient to allow for an anticipated recovery or maturity. Should the impairment of any of those securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period in which the other-than-temporary impairment were identified.   

Unrealized holding gains and losses on available for sale 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).   

16

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)  

Note 3—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 Company aggregates portfolios of receivables acquired sharing specific common characteristics which were acquired within a given quarter. In addition, the Company uses a variety of qualitative and quantitative factors to estimate collections and the timing thereof. The Company obtains and utilizes, as appropriate, input, including but not limited to, monthly collection projections and liquidation rates, from third party collection agencies and attorneys, as further evidentiary matter, to assist in evaluating and developing collection strategies and in evaluating and modeling the expected cash flows for a given portfolio. 

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

	For the Three Months Ended June 30,
	2019			2018
Balance, beginning of period	$	2,626,000		$	5,525,000
Net cash collections from collection of consumer receivables acquired for liquidation		(4,112,000	)		(5,146,000	)
Net cash collections represented by account sales of consumer receivables acquired for liquidation		—			(1,000	)
Impairment		(100,000	)		(100,000	)
Effect of foreign currency translation		86,000			(167,000	)
Finance income recognized		3,684,000			4,509,000
Balance, end of period	$	2,184,000		$	4,620,000
Finance income as a percentage of collections		89.6	%		87.6	%

	For the Nine Months Ended June 30,
	2019			2018
Balance, beginning of period	$	3,749,000		$	6,841,000
Net cash collections from collection of consumer receivables acquired for liquidation		(12,026,000	)		(14,844,000	)
Net cash collections represented by account sales of consumer receivables acquired for liquidation		—			(3,000	)
Impairment		(100,000	)		(100,000	)
Effect of foreign currency translation		(98,000	)		(69,000	)
Finance income recognized		10,659,000			12,795,000
Balance, end of period	$	2,184,000		$	4,620,000
Finance income as a percentage of collections		88.6	%		86.2	%

During the three and nine months ended June 30, 2019 and 2018 the Company did not purchase any new portfolios. 

As of June 30, 2019, the Company held consumer receivables acquired for liquidation from Peru and Colombia of $1.3 million and $0.5 million, respectively. The total amount of internationally held consumer receivables acquired for liquidation was $1.8 million, or 84.3% of the $2.2 million in total consumer receivables held at June 30, 2019. Of the total consumer receivables four individual portfolios comprise 25.0%, 15.7%, 12.6% and 10.0% of the overall asset balance at June 30, 2019. 

As of September 30, 2018, the Company held consumer receivables acquired for liquidation from Peru and Colombia of $2.0 million and $1.3 million, respectively. The total amount of internationally held consumer receivables acquired for liquidation was $3.3 million, or 88.7% of the total consumer receivables held of $3.7 million at September 30, 2018. Of the total consumer receivables three individual portfolios comprise 20%, 11% and 11% of the overall asset balance at September 30, 2018. 

As of June 30, 2019, and September 30, 2018, 4.3% and 5.9% of the Company's total assets were related to its international operations, respectively. For the three and nine months ended June 30, 2019 and 2018, 3.9% and 3.1%, respectively, and 4.6% and 2.8%, respectively, of the Company's total revenue were related to its international operations.

17

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 3—Consumer Receivables Acquired for Liquidation (Continued)

At June 30, 2019, and September 30, 2018, approximately 26% 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 five collection organizations represent only 26% as of June 30, 2019 and 31% as of September 30, 2018, of the Company’s portfolio face value, it does represent approximately 85% and 87% of the Company’s portfolio face value at all third-party collection agencies and attorneys as of June 30, 2019 and September 30, 2018, 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 nine months ended June 30, 2019 and 2018, respectively. 

	For the Three Months Ended June 30,						For the Nine Months Ended June 30,
	2019			2018			2019			2018
Gross collections (1)	$	7,680,000		$	9,551,000		$	23,262,000		$	27,134,000
Commissions and fees (2)		(3,568,000	)		(4,404,000	)		(11,236,000	)		(12,287,000	)
Net collections	$	4,112,000		$	5,147,000		$	12,026,000		$	14,847,000

(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 4—Equity Method Investments

Acquisition of Equity Method Investment

On December 28, 2011, the Company entered into a joint venture, Pegasus Funding, LLC ("Pegasus"), with Pegasus Legal Funding, LLC (“PLF”). The Company had an 80% non-controlling interest in the joint venture from the date of formation through January 12, 2018. During this time period the Company had operational disagreements with PLF, resulting in the amendment of the Pegasus operating agreement, the execution of a liquidation agreement and finally the filing of an arbitration against PLF by the Company.

On January 12, 2018, the Company, ASFI and Fund Pegasus entered into a Settlement Agreement and Release (the “Settlement Agreement”) by and among the Company, ASFI, Fund Pegasus, Pegasus, PLF, Max Alperovich, Alexander Khanas, Larry Stoddard, III, Louis Piccolo and A.L. Piccolo & Co., Inc., a New York corporation. The Settlement Agreement releases certain claims in exchange for, among other things, the parties' entry into the Purchase Agreement (defined below).

On January 12, 2018, ASFI entered into a Membership Interest Purchase Agreement (the “Purchase Agreement) with PLF. Under the Purchase Agreement, ASFI bought PLF’s ownership interests of Pegasus, which was 20% of the issued and outstanding limited liability company interests of Pegasus, for an aggregate purchase price of $1.8 million. As a result of the execution of the Purchase Agreement, ASFI became the owner of 100% of the limited liability company interests of Pegasus, and recognized a loss on acquisition of $1.4 million, which is recorded in the Company’s consolidated financial statements. Immediately on acquisition, the Company changed the name from Pegasus to Sylvave.

The fair values of the assets acquired and liabilities assumed at the acquisition date are as follows:

	Fair Value
Cash	$	5,748,000
Personal injury claim advances portfolio		14,571,000
Accounts payable and accrued expenses		(664,000	)
Total net assets acquired	$	19,655,000

18

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 4—Equity Method Investments (continued)

As a result of the purchase of PLF’s 20% interest in Pegasus on January 12, 2018, under the Purchase Agreement, beginning on January 13, 2018, the Company consolidated the financial statements of Sylvave.

The results of operations of the Company’s historical equity method investment in Pegasus prior to acquisition on January 12, 2018 were as follows:

	Condensed Statement of Operations Information
	For the Period October 1, 2017 to January 12, 2018
Personal injury claims income	$	671,000
Operating expenses		(386,000	)
Income from operations	$	1,057,000
Earnings from equity method investment	$	845,000

Serlefin 

Serlefin Peru is the Company's 49% owned joint venture. 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.  

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 $0.2 million and $0.7 million in performance fees for the three and nine months ended June 30, 2019, respectively. Serlefin received approximately $0.3 million and $0.8 million in performance fees for the three and nine months ended June30, 2018, respectively. 

The carrying value of the investment in Serlefin Peru was $0.2 million as of June 30, 2019 and September 30, 2018. The cumulative net loss from our investment in Serlefin Peru from the date of the initial investment through June 30, 2019 was approximately $0.3 million, and was not significant to the Company's consolidated statement of operations.

Note 5—Personal Injury Claims Funding 

Simia and Sylvave 

On November 11, 2016, the Company formed Simia, a wholly owned subsidiary, to continue its personal injury claims funding business following the Company's decision not to renew its joint venture with PLF.  Simia commenced operation in January 2017.  As of June 30, 2019, Simia had a personal injury claims portfolio of $1.5 million, and recognized revenue for the three and nine months then ended of $31,000 and $60,000, respectively.  As of September 30, 2018, Simia had a personal injury claims portfolio of $2.3 million, and recognized revenue of $53,000 and $300,000, respectively, for the three and nine months ended June 30, 2018. 

As of June 30, 2019, Sylvave had a personal injury claims portfolio of $4.3 million, and recognized revenue for the three and nine months then ended of $406,000 and $1,546,000, respectively.   As of September 30, 2018, Sylvave had a personal injury claims portfolio of $8.4 million. For the three and nine months ended June 30, 2018, Sylvave recognized revenue of $1.5 million and $1.9 million respectively.   

As noted in Note 4 - Equity Method Investments, effective January 12, 2018, the Company accounts for Sylvave, its wholly owned subsidiary, on a consolidated basis. 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. 

19

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 5—Personal Injury Claims Funding (continued)

Arthur Funding

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.

As of June 30, 2019, Arthur Funding had a personal injury claims portfolio of $125,000 and recorded revenue for the three and nine months ended June 30, 2019 of $2,000.

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 June 30,
	2019			2018
Balance, beginning of period	$	6,630,000		$	15,994,000
Personal claim advances		123,000			—
Provision for losses		(141,000	)		(6,000	)
(Write offs) recoveries		389,000			(408,000	)
Personal injury claims income		439,000			1,557,000
Personal injury claims receipts		(1,531,000	)		(3,344,000	)
Balance, end of period	$	5,909,000		$	13,793,000

	For the Nine Months ended June 30,
	2019			2018
Balance, beginning of period	$	10,745,000		$	3,704,000
Acquisition of personal injury funding portfolio (1)		—			14,571,000
Personal claim advances		123,000			60,000
Provision for losses		(299,000	)		(465,000	)
(Write offs) recoveries		389,000			(371,000	)
Personal injury claims income		1,608,000			2,167,000
Personal injury claims receipts		(6,657,000	)		(5,872,000	)
Balance, end of period	$	5,909,000		$	13,793,000

(1) Fully acquired through the acquisition of Pegasus.

 The Company recognized personal injury claims income of $0.4 million and $1.6 million for the three months ended June 30, 2019 and 2018, respectively, and $1.6 million and $2.2 million for the nine months ended June 30, 2019 and 2018, respectively. The Company has recorded a reserve on principle fundings in personal injury claims of $1.2 million as of June 30, 2019 and $0.5 million as of September 30, 2018.

Note 6—Non-Recourse Debt

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

In March 2007, Palisades XVI borrowed approximately $227 million under a Receivables Financing Agreement, as amended in July 2007, December 2007, May 2008, February 2009, October 2010 and August 2013 (the “RFA”) from BMO, in order to finance the Portfolio Purchase which had a purchase price of $300 million. The original term of the agreement was three years. This term was extended by each of the Second, Third, Fourth and Fifth Amendments and the most recent agreement signed in August 2013.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 6—Non-Recourse Debt (continued)

On August 7, 2013, Palisades XVI, a 100% owned bankruptcy remote subsidiary, entered into a Settlement Agreement and Omnibus Amendment (the “BMO Settlement Agreement”) with BMO as an amendment to the RFA. In consideration for a $15 million prepayment funded by the Company, BMO agreed to significantly reduce minimum monthly collection requirements and the interest rate. If and when BMO receives the next $15 million of collections from the Portfolio Purchase or from voluntary prepayments by the Company, less certain credits for payments made prior to the consummation of the BMO Settlement Agreement (the “Remaining Amount”), Palisades XVI and its affiliates would be automatically released from liability in connection with the RFA (subject to customary exceptions). A condition on the release was Palisades XVI’s agreement to grant BMO, as of the time of the payment of the Remaining Amount, the right to receive 30% of net collections from the Portfolio Purchase once Palisades XVI has received from future net collections, the sum of $15 million plus voluntary prepayments included in the payment of the Remaining Amount (the “Income Interest”). On June 3, 2014, Palisades XVI paid the Remaining Amount. The final principal payment of $2.9 million included a voluntary prepayment of $1.9 million provided from funds of the Company. Accordingly, Palisades XVI was entitled to receive $16.9 million of future collections from the Portfolio Purchase before BMO would be entitled to receive any payments with respect to its Income Interest.

During the month of June 2016, the Company received the balance of the $16.9 million and, as of June 30, 2019 and September 30, 2018, the Company recorded a liability to BMO of approximately $120,000 and $121,000, 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 July 10, 2019 and October 10, 2018, respectively. The liability to BMO is recorded when actual collections are received. 

Note 7—Discontinued Operations

On December 31, 2013, the Company acquired 80% ownership of CBC and its affiliate, CBC Management Services, LLC for approximately $5.9 million.

On December 31, 2015, the Company acquired the remaining 20% ownership of CBC for $1.8 million, through the issuance of restricted stock valued at approximately $1.0 million and $0.8 million in cash. Each of the two original principals of CBC received 61,652 shares of restricted stock at a fair market value of $7.95 per share and $0.4 million in cash. An aggregate of 123,304 shares of restricted stock were issued as part of the transaction.

On January 1, 2016, the Company renewed the expiring two-year employment agreements of the two CBC principals for one-year terms. The employment contracts of the original two principals expired at the end of December 2016. The Company did not renew those contracts. Ryan Silverman was appointed CEO/General Counsel effective January 1, 2017.

During November 2017, a competitor of CBC alleged that CBC had unlawfully purchased certain of the competitor's trade secrets and customer lists from intermediaries who allegedly arranged and/or paid for said materials from the competitor.  CBC denied any wrongdoing and disclaimed liability.  The parties settled the matter for a payment of $0.5 million on or about November 22, 2017, in exchange for a complete release.

On December 13, 2017, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement) with CBC Holdings LLC, a Delaware limited liability company (the “Buyer”). Under the Securities Purchase Agreement, the Company sold all of the issued and outstanding equity capital of CBC for an aggregate purchase price of approximately $10.3 million. Of the aggregate purchase price, approximately $4.5 million was paid in cash, and $5.8 million was paid under a promissory note at an annual interest rate of 7% to be paid quarterly to the Company and secured by a first priority security interest in and lien on such Buyer’s affiliates’ rights to certain servicing fees. See Note 8 - Note Receivable. The remaining amount of the aggregate purchase price was paid as reimbursement of certain invoices of CBC. The Company recognized a loss of approximately $2.4 million on the above sale of CBC as of September 30, 2017.

As a result of the sale of CBC, all prior periods presented in the Company's consolidated financial statements will account for CBC as a discontinued operation. This determination resulted in the reclassification of the assets and liabilities comprising the structured settlement business to assets related to discontinued operations in the consolidated balance sheets, and a corresponding adjustment to our consolidated statements of operations to reflect discontinued operations for all periods presented.

As of June 30, 2019, and September 30, 2018, the Company had no assets or liabilities designated as discontinued operations. For the three and nine months ended June 30, 2019 and 2018, the components of the Company designated as discontinued operations reported a loss, net of income tax benefit of $0 and $80,000, respectively.

21

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 7—Discontinued Operations (Continued) 

The following table presents the operating results for the three and nine months ended June 30, 2019 and 2018, for the components of the Company designated as discontinued operations:

	For the Three Months ended				For the Nine Months ended
	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
Revenues:
Unrealized gain on structured settlements	$	—	$	—	$	—	$	244,000
Interest income on structured settlements		—		—		—		2,005,000
Total revenues		—		—		—		2,249,000
Other income		—		—		—		11,000
		—		—		—		2,260,000
Expenses:
General and administrative expenses		—		—		—		1,560,000
Interest expense		—		—		—		824,000
		—		—		—		2,384,000
Loss from discontinued operations before income tax		—		—		—		(124,000	)
Income tax benefit from discontinuing operations		—		—		—		(44,000	)
Loss from discontinued operations, net of income tax	$	—	$	—	$	—	$	(80,000	)

Prior to its sale, we, through CBC, purchased periodic payments under structured settlements and annuity policies from individuals in exchange for a lump sum payment. The Company elected to carry the structured settlements at fair value. Unearned income on structured settlements is recognized as interest income using the effective interest method over the life of the related structured settlement. Changes in fair value are recorded in unrealized gain (loss) on structured settlements in the Company’s statements of operations. Unrealized gains on structured settlements is comprised of both unrealized gains resulting from fair market valuation at the date of acquisition of the structured settlements and the subsequent fair value adjustments resulting from the change in the discount rate. Of the $0.2 million of unrealized gains recognized for the nine months ended June 30, 2018, approximately $0.2 million is due to day one gains on new structured settlements financed during the period. There were no other changes in assumptions during the period. 

Note 8 —Note Receivable

Pursuant to the Securities Purchase Agreement, CBC sold to the Buyer all of the issued and outstanding equity capital of CBC for $10.3 million. In conjunction with this sale the Company received $4.5 million in cash, and a Promissory Note (the “Note”) for $5.8 million from the Buyer. The Note bears interest at 7% per annum, payable in quarterly installments of principle and interest through December 13, 2020, and is secured pursuant to a Security Agreement (the “Security Agreement”) with an affiliate of the Buyer. Under the Security Agreement the Company has a first priority security interest and lien on all servicing fees received by the affiliate. The payment due from the Buyer on March 13, 2019 was not received by the Company, and accordingly, the Buyer was not current on its obligations under the Note at June 30, 2019. On April 11, 2019, the Company signed a forbearance agreement with the Buyer, whereby the Company agreed to forbear from exercising any enforcement remedies with respect to the loan documents, as long as payment in full of all amounts due were received by the Company no later than April 15, 2019. The principle amount outstanding on this Note at June 30, 2019 and September 30, 2018 was $0.0 million and $4.3 million, respectively. For the three and nine months ended June 30, 2019 and 2018, the Company recorded $68,000 and $92,000, respectively, and $224,000 and $193,000, respectively, in interest income, which has been classified as other income in the Company’s consolidated statements of operations, associated with this note. See Note 7 - Discontinued Operations.

On April 15, 2019, the Company received a lump sum payment of $4 million from the buyer, consisting of $3.8 million in principle and $0.2 million in interest income. Effective April 15, 2019, the Note was paid in full, and the security interests that were secured by the Security Agreement were released by the Company back to the Buyer.

22

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 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 June 30, 2019, and September 30, 2018, the Company has a settlement receivable due from this third-party servicer of $2.0 million and $3.3 million, respectively. During the nine months ended June 30, 2019, the Company received $1.5 million in payments from this third-party servicer. For the three and nine months ended June 30, 2019 and 2018, the Company recorded $53,000 and $0, respectively, and $180,000 and $0, respectively, in interest income, which is included in other income on the Company's consolidated statements of operations. 

Additionally, on March 31, 2019 the Company recorded a settlement receivable due from a third-party servicer of $0.2 million in the Company's consolidated balance sheet, in conjunction with prior overcharges billed to the Company in excess of contractually permitted amounts.  For the three and nine months ended June 30, 2019, the Company recognized $0 and $0.3 million in settlement income associated with the excess charges, and has recorded as a gain on settlement in the Company's 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. The Company has recognized a gain on settlement of $25,000 for the three and nine months ended June 30, 2019 in its consolidated statements of operations.

On June 30, 2017, GAR Disability Advocates, filed a complaint against a former employee, Pamela Hofer ("Hofer"), and others in the United States Court for the District of New Jersey (the "Action"), asserting claims of conversion and tortious interference with existing business relationships. On May 22, 2018, the Action was transferred to the Eastern District of Kentucky.

On May 7, 2019, GAR agreed to dismiss and settle the Action for a payment from Hofer in the amount of $47,500, payable to GAR no later than May 8, 2019.

23

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 Note 9 — Settlements (Continued) 

On May 8, 2019, GAR received the payment from Hofer, and delivered to Hofer an executed Stipulation of Dismissal of the Action. The Company recognized a gain on settlement of $47,500 for the three and nine months ended June 30, 2019 in its consolidated statements of operations.

On May 15, 2019, the Company received $0.2 million from the bankruptcy trustee in New Jersey, associated with the bankruptcy filing of Axiant, LLC, a previous third party servicer. The Company recorded a gain on settlement of $0.2 million for the three and nine months ended June 30, 2019 in its consolidated statements of operations.

 Note 10 — Other Income

The following tables summarize other income for the three and nine months ended June 30, 2019 and 2018:

	For the Three Months Ended June 30,
	2019		2018
Interest and dividend income	$	821,000	$	111,000
Unrealized gain		33,000		—
Other		1,000		(35,000	)
	$	855,000	$	76,000

	For the Nine Months Ended June 30,
	2019		2018
Interest and dividend income	$	1,274,000	$	235,000
Realized gain		25,000		—
Unrealized gain		53,000		—
Other		43,000		(56,000	)
	$	1,395,000	$	179,000

Note 11—Commitments and Contingencies   

Leases   

The Company leases its facilities in Englewood Cliffs, NJ, Houston, TX, and Louisville, KY. The lease in Louisville, KY expired in December 2018 and was not renewed. Rent expense for the three and nine months ended June 30, 2019 and 2018 was $69,000 and $94,000 and $209,000 and $281,000 respectively.

On July 15, 2019, GAR entered into a sublease agreement with a third party for office space in Fort Lee, NJ. The agreement expires in April 2023, with future minimum lease payments of $0.3 million.

Legal Matters 

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.  

24

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 12—Income Taxes   

 At the end of each interim reporting period, the Company estimates its effective income tax rate expected to be applicable for the full year. The estimate is used in providing for income taxes on a year-to-date basis and may change in subsequent interim periods. The Company’s effective tax rate from operations for the three and nine months ended June 30, 2019 was 29% and 28%, respectively, compared to 35% for the same periods in the prior year. The effective rate for fiscal 2019 and 2018 differed from the U.S. federal statutory rate of 21% and 28%, respectively, primarily due to state income taxes, other permanent differences, and the first full year the reduced federal tax rate of 21% was applicable.

On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was enacted into law in the United States. The Tax Act significantly revises corporate income tax law by, among other things, lowering the corporate income tax rates from 35% to 21%. Under GAAP, deferred taxes must be adjusted for enacted changes in tax laws or rates during the period in which new tax legislation is enacted. During the year ended September 30, 2018, tax expense of approximately $4.4 million was recorded, representing the revaluation of deferred tax assets and liabilities as a result of the lower corporate tax rate established by the Tax Act.  

 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. The Company is no longer subject to examination by U.S federal income tax authorities for tax years prior to 2016.  The Company has closed the Internal Revenue Service audit of its federal tax returns for years September 30, 2014 and 2015.  Effective March 21, 2019, the Company received an approval of its 2014 carry-back claim of $3.2 million as part of this audit, which was received by the Company on May 28, 2019. In addition, the Company received $0.2 million in interest income on its 2014 carry-back claim, which has been booked as other income in the consolidated statement of operations for the three and nine months ended June 30, 2019. On July 19, 2019, the Company received $4.7 million from the Internal Revenue Service for its 2016 carry-back claim.

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.  

25

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 13—Net Income (Loss) per Share (Continued) 

The following table presents the computation of basic and diluted per share data for the three and nine months ended June 30, 2019 and 2018:

	For the Three Months Ended June 30, 2019		For the Three Months Ended June 30, 2018		For the Nine Months Ended June 30, 2019		For the Nine Months Ended June 30, 2018
Income from continuing operations	$	2,304,000	$	1,957,000	$	5,352,000	$	388,000
Loss from discontinued operations		—		—		—		(80,000	)
Net Income	$	2,304,000	$	1,957,000	$	5,352,000	$	308,000
Basic earnings per common share from continuing operations	$	0.35	$	0.29	$	0.80	$	0.06
Basic loss per common share from discontinued operations		—		—		—		(0.01	)
Basic earnings per share	$	0.35	$	0.29	$	0.80	$	0.05
Diluted earnings per common share from continuing operations	$	0.35	$	0.29	$	0.80	$	0.06
Diluted loss per common share from discontinuing operations		—		—		—		(0.01	)
Diluted earnings per share	$	0.35	$	0.29	$	0.80	$	0.05
Weighted average number of common shares outstanding:
Basic		6,666,012		6,685,415		6,678,947		6,654,911
Dilutive effect of stock options		219		213		313		2,929
Diluted		6,666,231		6,685,628		6,679,260		6,657,840

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 111,868 options, leaving 1,325,443 shares available as of June 30, 2019. At June 30, 2019, 53 of the Company’s employees were able to participate in the 2012 Plan.

26

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) 

Note 14 —Stock Option Plans (Continued)

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.

Stock Based Compensation 

The Company accounts for stock-based employee compensation under ASC No. 718, Compensation — Stock Compensation (“ASC 718”). ASC 718 requires that compensation expense associated with stock options and other stock-based awards be recognized in the condensed consolidated statement of operations.

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. 

27

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 14—Stock Option Plans (Continued)

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 June 30,
	2019					2018
	Number Of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Outstanding options at the beginning of period		726,767		$	8.17		796,767		$	8.16
Options exercised		—			—		—			—
Options forfeited/cancelled		(1,200	)		2.95		(200	)		7.93
Outstanding options at the end of period		725,567		$	8.18		796,567		$	8.16
Exercisable options at the end of period		725,567		$	8.18		778,394		$	8.16

	For the Nine Months Ended June 30,
	2019					2018
	Number Of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Outstanding options at the beginning of period		728,867		$	8.17		880,567		$	8.05
Options exercised		—			—		(61,600	)		6.48
Options forfeited/cancelled		(3,300	)		6.27		(22,400	)		8.39
Outstanding options at the end of period		725,567		$	8.18		796,567		$	8.16
Exercisable options at the end of period		725,567		$	8.18		778,394		$	8.16

The following table summarizes information about the Plans outstanding options as of June 30, 2019:

			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
$2.8751	-	$5.7500		—		—	$	—		—	$	—
$5.7501	-	$8.6250		616,067		2.95		7.97		616,067		7.97
$8.6251	-	$11.5000		109,500		3.58		9.37		109,500		9.37
				725,567			$	8.18		725,567	$	8.18

The Company recognized $0 and $7,000 of compensation expense related to the stock options vested during the three and nine months ended June 30, 2019, respectively. The Company recognized $9,000 and $98,000 of compensation expense related to the stock option grants during the three and nine months ended June 30, 2018, respectively. As of June 30, 2019, there was no unrecognized compensation cost related to stock option awards.

The intrinsic value of the outstanding and exercisable options as of June 30, 2019 was approximately $1,000. The weighted average remaining contractual life of exercisable options is three years. There were no options exercised during the three and nine months ended June 30, 2019. There were 61,600 options exercised during the three and nine months ended June 30, 2018 for $399,000. The fair value of the stock options that vested during the three and nine months ended June 30, 2019 was approximately $0 and $126,000, respectively. The fair value of the stock options that vested during the three and nine months ended June 30, 2018 was approximately $0 and $222,000, respectively. There were no options granted during the three and nine months ended June 30, 2019 and 2018. 

28

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 14—Stock Option Plans (Continued)

The Company did not grant any restricted stock awards during the three and nine months ended June 30, 2019 and 2018. As of June 30, 2019, and September 30, 2018, 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 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 June 30, 2019 and 2018.

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 June 30, 2019, there were no such restrictions. No dividends were declared during the three and nine months ended June 30, 2019. On February 5, 2018, the Board of Directors of the Company declared a special cash dividend in the amount of $5.30 per share with respect to its Common Stock, payable on February 28, 2018 to holders of record of the Company’s Common Stock at the close of business on February 16, 2018, with an ex-dividend date of March 1, 2018. The aggregate payment to shareholders was approximately $35 million.

On May 17, 2019, the Board of Directors approved the repurchase of up to $10.5 million of the Company’s common stock and authorized management of the Company to enter into the Shares Repurchase Plan under Sections 10b-18 and 10(b)5-1 of the Securities and Exchange Act (the “Shares Repurchase Plan”). The Shares Repurchase Plan is effective through August 17, 2019. For the three months ended June 30, 2019, the Company purchased 79,500 shares at an aggregate cost of approximately $0.6 million. The remaining authorization under the Shares Repurchase Plan at June 30, 2019 was approximately $9.9 million.

Through August 12, 2019, the Company purchased approximately 116,600 shares at an aggregate cost of approximately $0.8 million under the Shares Repurchase Plan.

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:

	June 30, 2019				September 30, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Cash equivalents (Level 1)	$	20,000	$	20,000	$	1,786,000	$	1,786,000
Investments in equity securities (Level 1)		8,032,000		8,032,000		7,575,000		7,575,000	(1)
Available-for-sale debt securities (Level 2)		50,286,000		50,286,000		30,479,000		30,479,000
Consumer receivables acquired for liquidation (Level 3)		2,184,000		27,889,000		3,749,000		27,574,000	(1)

(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 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.

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.

29

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

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, 2018. The Company had no Level 3 available-for-sale investments during the three and nine months ended June 30, 2019.

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 July of 2019 through December of 2024. These cash flows are then fair valued using a discount rate of 21%.  

Note 17—Related Party

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, the Company's 49% owned joint venture.  For the three and nine months ended June 30, 2019, the Company paid this consultant $12,000 and $60,000, respectively, and for the three and nine months ended June 30, 2018, $24,000 and $72,000, 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 June 30, 2019 and September 30, 2018. 

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 $1.8 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. 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 Company accounted for its investment in Sylvave under the equity method of accounting through January 12, 2018, for subsequent periods the Company includes the financial results of Sylvave in its consolidated statement of operations. Simia and Sylvave are not funding any new advances, but continue to collect on outstanding personal injury claim advances in the ordinary course.

30

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, a note receivable, property and equipment, goodwill, deferred taxes and other assets.

The following table shows results by reporting segment for the three and nine months ended June 30, 2019 and 2018:

(Dollars in millions)	Consumer Receivables		Social Security Disability Advocacy		Personal Injury Claims (2)		Corporate (3)			Total
Three Months Ended June 30,
2019:
Revenues	$	3.7	$	1.2	$	0.4	$	—		$	5.3
Other income		0.2		—		—		0.9			1.1
Segment profit (loss)		3.3		0.4		0.6		(1.0	)		3.3
2018:
Revenues		4.5		1.1		1.6		—			7.2
Other income		—		—		—		0.1			0.1
Segment profit (loss)		3.6		0.3		1.1		(2.0	)		3.0
Nine Months Ended June 30,
2019:
Revenues		10.7		3.7		1.6		—			16.0
Other income		0.7		—		—		1.3			2.0
Segment profit (loss)		9.9		1.2		1.5		(5.1	)		7.5
Segment Assets (1)		9.1		0.6		6.2		74.5			90.4
2018:
Revenues		12.8		3.2		2.2		—			18.2
Other income		—		—		—		0.2			0.2
Segment profit (loss)		11.4		0.5		1.9		(7.8	)		6.0
Segment Assets (1)		27.1		3.2		20.6		31.1			82.0

The Company does not have any intersegment revenue transactions.

(1)	Includes other amounts in other line items on the consolidated balance sheet.
(2)	The Company recorded Pegasus as an equity investment in its consolidated financial statements through January 12, 2018. Commencing on January 13, 2018, Sylvave is consolidated in the Company’s financial statements. For segment reporting the Company has included its pro-rated share of the earnings and losses from its investment under the Personal Injury Claims segment.
(3)	Corporate is not part of the three reportable segments, as certain expenses and assets are not earmarked to any specific operating segment.

31

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 19 - Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) consists of:

	For the Nine Months Ended June 30, 2019							For the Year Ended September 30, 2018
	Unrealized gain (loss) on marketable securities			Foreign currency translation, net		Total		Unrealized gain (loss) on marketable securities			Foreign currency translation, net		Total
Beginning Balance	$	(10,000	)	$	45,000	$	35,000	$	7,000		$	11,000	$	18,000
Cumulative effect adjustment for adoption of ASU No. 2016-01, net of tax of $5,000		10,000			-		10,000		-			-		-
Adjusted opening balance	$	-		$	45,000	$	45,000	$	7,000		$	11,000	$	18,000
Change in unrealized gains on foreign currency translation, net of tax benefit/(expense) of ($14,000) and ($17,000) at June 30, 2019, and September 30, 2018, respectively.		-			52,000		52,000		-			34,000		34,000
Change in unrealized gains (losses) on marketable securities, net of tax benefit/ (expense) of ($40,000) and $9,000 at June 30, 2019, and September 30, 2018, respectively.		102,000			-		102,000		(17,000	)		-		(17,000	)
Net current-period other comprehensive income (loss)		102,000			52,000		154,000		(17,000	)		34,000	$	17,000
Ending balance	$	102,000		$	97,000	$	199,000	$	(10,000	)	$	45,000	$	35,000

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

Caution Regarding Forward Looking Statements

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 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, 2018.

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. (“Asta”), a Delaware Corporation, 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 (“ASFI”), 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 (the “Company,” “we” or “us”), are engaged in several business segments in the financial services industry including funding of personal injury claims, through the 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. 

For the period October 1, 2017 to January 12, 2018, Pegasus was 80% owned, but not controlled, and accounted for under the equity method. On January 12, 2018 (“Date of Acquisition”), we acquired the remaining 20% minority interest and a controlling financial interest, in Pegasus and changed its name to Sylvave and now own 100% of Sylvave. Commencing on the Date of Acquisition, we consolidated the financial results of this entity. 

We operate principally in the United States in three reportable business segments: consumer receivables, social security disability advocacy and personal injury claims. We previously operated a fourth segment when we engaged in the structured settlements business through our wholly owned subsidiary CBC Settlement Funding, LLC (“CBC”), which we sold on December 13, 2017. 

As a result of the sale of CBC, all periods presented in our consolidated financial statements account for CBC as a discontinued operation. This determination resulted in the reclassification of the historical assets and liabilities comprising the structured settlement business to assets and liabilities related to discontinued operations in the condensed consolidated balance sheets, and a corresponding adjustment to our condensed consolidated statements of operations to reflect discontinued operations for all periods presented. See Note 7 - Discontinued Operations in our notes to condensed consolidated financial statements.

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

33

Financial Information About Operating Segments

The consumer receivables segment, personal injury claims segment and the social security benefit advocacy segment each accounted for 10% or more of consolidated net revenue for the three and nine months ended June 30, 2019 and 2018. 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 nine months ended June 30, 2019 and 2018:

	For the Three Months Ended June 30,						For the Nine Months Ended June 30,
	2019			2018			2019			2018
Finance income (consumer receivables)		69.5	%		62.2	%		66.6	%		70.3	%
Personal injury claims income		8.3			21.4			10.1			11.9
Disability fee income		22.2			16.4			23.3			17.8
Total revenues		100.0	%		100.0	%		100.0	%		100.0	%

Information about the results of each of our reportable segments for the three and nine months ended June 30, 2019 and June 30, 2018, 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 (2)		Corporate (3)			Total
Three Months Ended June 30,
2019:
Revenues	$	3.7	$	1.2	$	0.4	$	—		$	5.3
Other income		0.2		—		—		0.9			1.1
Segment profit (loss)		3.3		0.4		0.6		(1.0	)		3.3
2018:
Revenues		4.5		1.1		1.6		—			7.2
Other income		—		—		—		0.1			0.1
Segment profit (loss)		3.6		0.3		1.1		(2.0	)		3.0
Nine Months Ended June 30,
2019:
Revenues		10.7		3.7		1.6		—			16.0
Other income		0.7		—		—		1.3			2.0
Segment profit (loss)		9.9		1.2		1.5		(5.1	)		7.5
Segment Assets (1)		9.1		0.6		6.2		74.5			90.4
2018:
Revenues		12.8		3.2		2.2		—			18.2
Other income		—		—		—		0.2			0.2
Segment profit (loss)		11.4		0.5		1.9		(7.8	)		6.0
Segment Assets (1)		27.1		3.2		20.6		31.1			82.0

We do not have any intersegment revenue transactions.

(1)	Includes other amounts in other line items on the consolidated balance sheet.
(2)	We recorded Pegasus as an equity method investment in our consolidated financial statements through January 12, 2018. Commencing on January 13, 2018, Sylvave is consolidated in our financial statements. For segment reporting we have included our pro-rated share of the earnings and losses from its investment under the Personal Injury Claims segment.
(3)	Corporate is not part of our three reportable segments, as certain expenses and assets are not earmarked to any specific operating segment

34

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.

Litigation Funding 

On December 28, 2011, we entered into a joint venture, Pegasus Funding, LLC ("Pegasus"), with Pegasus Legal Funding, LLC (“PLF”). We had an 80% non-controlling interest in the joint venture from the date of formation through January 12, 2018. During this time period we had operational disagreements with PLF, resulting in the amendment of the Pegasus operating agreement, the execution of a liquidation agreement and finally our filing of an arbitration against PLF.

On January 12, 2018, we, ASFI and Fund Pegasus entered into a Settlement Agreement and Release (the “Settlement Agreement”) by and among the parties, ASFI, Fund Pegasus, Pegasus, the Seller, Max Alperovich, Alexander Khanas, Larry Stoddard, III, Louis Piccolo and A.L. Piccolo & Co., Inc., a New York corporation. The Settlement Agreement releases certain claims in exchange for, among other things, the parties' entry into the Purchase Agreement (defined below).

On January 12, 2018, ASFI entered into a Membership Interest Purchase Agreement (the “Purchase Agreement) with PLF. Under the Purchase Agreement, ASFI bought PLF’s ownership interests of Pegasus, which was 20% of the issued and outstanding limited liability company interests of Pegasus, for an aggregate purchase price of $1.8 million. As a result of the execution of the Purchase Agreement, ASFI became the owner of 100% of the limited liability company interests of Pegasus, and recognized a loss on acquisition of $1.4 million, which is recorded in our condensed consolidated financial statements. Immediately on acquisition, we changed the name from Pegasus to Sylvave.

As of January 12, 2018, we owned 100% of Pegasus, and commencing in the quarter ending March 31, 2018, the financial activity of Pegasus was consolidated into our financial statements. As of January 12, 2018, we were entitled to 100% of all distributions made from Pegasus.

On November 11, 2016, we formed Simia, a wholly owned subsidiary. Simia commenced funding personal injury settlement claims in January 2017. Simia was formed in response to our decision not to renew our joint venture with PLF. As of June 30, 2019, Sylvave’s net investment in personal injury claim advances were approximately $4.3 million, and Simia's personal injury claim advances were approximately $1.5 million.

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 commenced funding personal injury settlement claims in May 2019. As of June 30, 2019, Arthur Funding’s net investment in personal injury claim advances were approximately $0.1 million.

35

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”), 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.

Personal Injury Claim Advances and Impairments

We account for our investments in personal injury claims at an agreed upon fee, 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 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 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 on fee income and establish reserves on fee income consistent with the historically experienced collection. We regularly analyze and update the historical collection of our initially funded cases as well as our fee income.

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Income Recognition - Social Security Disability Advocacy

Effective October 1, 2018, we adopted ASC 606 - “Revenue from Contracts with Customer,” which is effective for annual periods beginning on or after December 15, 2017. ASC 606 introduced a five-step approach to revenue recognition. Details of the new requirements as well as the impact on our unaudited condensed consolidated financial statements are described below.

We applied ASC 606 in accordance with the modified retrospective transitional approach recognizing the cumulative effect of initially applying the revenue standard as an adjustment to the opening balance of retained earnings during this period (October 1, 2018). Comparative prior year periods were not adjusted. In applying the modified retrospective approach, we elected practical expedients for (a) completed contracts as described in ASC 606-10-65-1-c(2), and (b) contract modifications as described in ASC 606-10-65-1-f(4), allowing (a) the application of the revenue standard only to contracts that were not completed as of the date of initial application, and (b) to reflect the aggregate effect of all modifications that occur before the adoption date in accordance with the new standard when: (i) identifying the satisfied and unsatisfied performance obligations, (ii) determining the transaction price, and (iii) allocating the transaction price to the satisfied and unsatisfied performance obligations. We believe that the impact on the opening balance of retained earnings during the period (October 1, 2018) would not have been significantly different had we not elected to use the practical expedients.

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    

Nine Months Ended June 30, 2019, Compared to the Nine Months Ended June 30, 2018

Finance income. For the nine months ended June 30, 2019, finance income decreased $2.1 million, or 16.4%, to $10.7 million from $12.8 million for the nine months ended June 30, 2018. During the nine months ended June 30, 2019 and 2018 the Company did not purchase any consumer portfolios. Net collections for the nine months ended June 30, 2019 decreased 18.9% to $12.0 million from $14.8 million for the same prior year period. During the first nine months of fiscal year 2019, gross collections decreased 14.3% or $3.8 million to $23.3 million from $27.1 million for the nine months ended June 30, 2018. Commissions and fees associated with gross collections from our third-party collection agencies and attorneys decreased $1.1 million, or 8.6%, to $11.2 million for the nine months ended June 30, 2019 from $12.3 million for the nine months ended June 30, 2018. Commissions and fees amounted to 48.3% of gross collections for the nine months ended June 30, 2019, compared to 45.0% in the same period of the prior year, due to a higher percentage of commissionable collections in the current year period.

Disability fee income. For the nine months ended June 30, 2019, disability fee income increased $0.5 million, or 14.9%, to $3.7 million as compared to $3.2 million for the nine months ended June 30, 2018, due to the increase in the number of disability claimant cases closed with the Social Security Administration during the current period.

Earnings (loss) from equity method investee. Earnings from equity method investment decreased by $0.9 million to a loss of $91,000 for the nine months ended June 30, 2019 from income of $0.8 million during the nine months ended June 30, 2018 due to the acquisition of the remaining 20% interest in Pegasus and Sylvave now being consolidated in our financial statements.

Gain on Settlement. For the nine months ended June 30, 2019, the Company recognized $0.6 million in gain on settlement associated with prior overcharges billed to the Company by a third-party servicer in excess of contractually permitted amounts, a bankruptcy settlement from a previous third party service provider, a gain on settlement associated with Balance Point Divorce Funding and Stacey Napp and a gain on settlement associated with a complaint against a former employee.

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Other income (loss), net. The following table summarizes other income (loss) for the nine months ended June 30, 2019 and 2018:

	For the Nine Months Ended June 30,
	2019		2018
Interest and dividend income	$	1,274,000	$	235,000
Realized gain		25,000		—
Unrealized gain		53,000		—
Other		43,000		(56,000	)
	$	1,395,000	$	179,000

During the nine months ended June 30, 2019, interest income was primarily earned on the Company's note receivable from its sale of CBC, settlement interest, interest income from available for sale investments and interest received from IRS. During the nine months ended June 30, 2018, interest income was primarily earned on the Company's note receivable from its sale of CBC.

General and administrative expenses. For the nine months ended June 30, 2019, general and administrative expense decreased $1.4 million, or 12.0%, to $10.3 million from $11.7 million for the nine months ended June 30, 2018, primarily due to a decrease in bad debt expense of $1.1 million and decrease in professional fees of $0.3 million.

Interest expense. For the nine months ended June 30, 2019, there was no interest expense as compared to interest expense of $19,000 for the nine months ended June 30, 2018.

Segment profit – Consumer Receivables. For the nine months ended June 30, 2019, segment profit decreased $1.5 million to $9.9 million from $11.4 million for the nine months ended June 30, 2018, primarily due the decrease in revenue of $2.1 million, and an unfavorable foreign exchange of $0.1 million offset by an increase in other income of $0.7 million.

Segment profit – Personal Injury Claims. For the nine months ended June 30, 2019, segment profit was $1.5 million as compared to segment profit of $1.9 million for the nine months ended June 30, 2018. The decrease is attributable to decrease in revenue of $0.6 million offset by various higher operating expenses.

Segment profit – Social Security Benefit Advocacy. For the nine months ended June 30, 2019, segment profit was $1.2 million as compared to $0.5 million for the same period in the prior year. The increase in profit of $0.7 million in the current period is primarily the result of increased revenues of $0.5 million and a reduction in overhead expenses of $0.2 million.

Income tax (benefit) expense. Income tax expense, consisting of federal and state components, for nine months ended June 30, 2019, was $2.1 million, as compared to an income tax expense for continuing and discontinued operations, consisting of federal and state income taxes, of $5.6 million for the nine months ended June 30, 2018. In response to the Tax Cuts and Jobs Act signed in December 2017, we remeasured our U.S. federal and state deferred tax assets and liabilities, which resulted in a decrease in our net deferred tax assets by approximately $3.5 million. This adjustment was recorded as a one-time charge to income taxes for the three months ended December 31, 2017. For the nine months ended June 30, 2019 and 2018, we recorded $2.1 million and $2.1 million, respectively, of income tax expense after removing the December 31, 2017 one-time charge of $3.5 million.

Income (loss) from continuing operations. As a result of the above, the Company had a net income from continuing operations for the nine months ended June 30, 2019 of $5.4 million compared to $0.4 million for the nine months ended June 30, 2018.

Loss from discontinued operations. As a result of the sale of CBC on December 13, 2017, the Company had no income or loss from discontinued operations for the nine months ended June 30, 2019, compared to $0.1 million of net loss from discontinued operations for the nine months ended June 30, 2018.

Structured settlement income of $2.2 million includes $0.2 million of unrealized losses and $2.0 million of interest income for the nine months ended June 30, 2018. Unrealized gains on structured settlements is comprised of both unrealized gains resulting from fair market valuation at the date of acquisition of the structured settlements. Of the $0.2 million of unrealized gains recognized for the nine months ended June 30, 2018, approximately $0.2 million is due to day one gains on new structured settlements financed during the period.

Net income (loss). As a result of the above, the Company had a net income for the nine months ended June 30, 2019 of $5.4 million compared to $0.3 million net income for the nine months ended June 30, 2018.

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Three Months Ended June 30, 2019, Compared to the Three Months Ended June 30, 2018  

Finance income. For the three months ended June 30, 2019, finance income decreased $0.8 million, or 18.3%, to $3.7 million from $4.5 million for the three months ended June 30, 2018. The decrease in finance income is due to reduction in the collections on portfolios during the three months ended June 30, 2019 compared to the three months ended June 30, 2018 and the overall age of the portfolios. During the three months ended June 30, 2019 and 2018, the Company did not purchase any consumer portfolios. Net collections for the three months ended June 30, 2019 decreased 20.1% to $4.1 million from $5.1 million for the three months ended June 30, 2018.  For the three months ended June 30, 2019 gross collections decreased 19.6%, or $1.9 million, to $7.7 million from $9.6 million for the three months ended June 30, 2018. For the three months ended June 30, 2019 commissions and fees associated with gross collections from our third-party collection agencies and attorneys decreased 19.0% or $0.8 million to $3.6 million from $4.4 million for the three months ended June 30, 2018. Commissions and fees amounted to 46.5% of gross collections for the three months ended June 30, 2019, compared to 46.1% for the three months ended June 30, 2018 resulting from higher percentage of commissionable collections in the current year period.  

Social security benefit advocacy fee income. Disability fee income remained the same at $1.2 million for the three months ended June 30, 2019 and June 30, 2018. 

Earnings (loss) from equity method investee. Earnings from equity method investment was a loss of $5,000 for the three months ended June 30, 2019. No earnings from equity method investment were recorded during the three months ended June 30, 2018 due to the acquisition of the remaining 20% of the non-controlling interest in Pegasus on January 12, 2018 and subsequent income being recorded as part of our personal injury claims income in the consolidated statement of operations.

Gain on Settlement. For the three months ended June 30, 2019, the Company recognized $0.3 million in gain on settlement associated with a bankruptcy settlement from a previous third-party servicer, a gain on settlement with Balance Point Divorce Funding and Stacey Napp and a gain on settlement with a former employee.

Other income, net. The following table summarizes other income for the three months ended June 30, 2019 and 2018:

	For the Three Months Ended June 30,
	2019		2018
Interest and dividend income	$	821,000	$	111,000
Unrealized gain		33,000		—
Other		1,000		(35,000	)
	$	855,000	$	76,000

During the three months ended June 30, 2019, interest income was primarily earned on the Company's note receivable from its sale of CBC, settlement interest, interest income from available for sale investments and interest received from IRS. During the three months ended June 30, 2018, interest income was primarily earned on the Company's note receivable from its sale of CBC.

General and administrative expenses.  For the three months ended June 30, 2019, general and administrative expenses decreased $1.2 million, or 29.1%, to $3.0 million from $4.2 million for the three months ended June 30, 2018, primarily due to an decrease in bad debt expense of $0.5 million, professional fees of $0.4 million and a favorable foreign exchange variance of $0.3 million.

Segment profit – Consumer Receivables. Segment profit decreased $0.3 million to $3.3 million for the three months ended June 30, 2019 from $3.6 million for the three months ended June 30, 2018. This decrease in profitability is a result of decreased revenue of $0.8 million offset by a foreign exchange gain of $0.4 million, and other income of $0.2 million.

Segment profit – Personal Injury Claims. Segment profit decreased $0.5 million to $0.6 million for the three months ended June 30, 2019, from $1.1 million for the three months ended June 30, 2018. This decrease in profitability is primarily due to decreased revenue of $1.1 million offset by decrease in bad debt expense of $0.5 million.

Segment profit – GAR Disability Advocates . The Segment profit was $0.4 million for the three months ended June 30, 2019 as compared $0.3 million for the three months ended June 30, 2018. The increase in profitability of $0.1 million in the current fiscal year is primarily the result of a decrease in professional fees of $0.1 million.

Discontinued Operations – The Company had no income or loss from discontinued operations during the three months ended June 30, 2019 and 2018 as a result of the sale of CBC on December 13, 2017.  

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Income tax expense – Income tax expense, consisting of federal and state components, for three months ended June 30, 2019, was $1.0 million, as compared to $1.1 million for the three months ended June 30, 2018.

Net income (loss) – As a result of the above, we generated net income for the three months ended June 30, 2019 of $2.3 million, compared to $2.0 million for the three months ended June 30, 2018.

Liquidity and Capital Resources

At June 30, 2019, the Company had $2.9 million in cash and cash equivalents, as well as $58.3 million in investments in debt and equity securities on hand and no debt.  In addition, the Company had $89.2 million in stockholders' equity at June 30, 2019.

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.

Receivables Financing Agreement

 In March 2007, Palisades XVI borrowed approximately $227 million under the Receivables Financing Agreement, as amended in July 2007, December 2007, May 2008, February 2009, October 2010 and August 2013 (the “RFA”) from BMO, in order to finance the Portfolio Purchase which had a purchase price of $300 million. The original term of the agreement was three years. This term was extended by each of the Second, Third, Fourth, Fifth Amendments and the most recent agreement signed in August 2013.

Financing Agreement . August 7, 2013, Palisades XVI, a 100% owned bankruptcy remote subsidiary, entered into a Settlement Agreement (the “BMO Settlement Agreement”) with BMO as an amendment to the RFA. In consideration for a $15 million prepayment funded by the Company, BMO has agreed to significantly reduce minimum monthly collection requirements and the interest rate. If and when BMO were to receive the next $15 million of collections from the Portfolio Purchase, (the “Remaining Amount”) less certain credits for payments made prior to the consummation of the BMO Settlement Agreement, Palisades XVI would be entitled to recover from future net collections the $15 million prepayment that it funded. Thereafter, BMO would have the right to receive 30% of future net collections. Upon repayment of the Remaining Amount to BMO, Palisades XVI would be released from the remaining contractual obligation of the RFA. 

On June 3, 2014, Palisades XVI finished paying the Remaining Amount. The final principal payment of $2.9 million included a voluntary prepayment of $1.9 million provided from funds of the Company. Accordingly, Palisades XVI was entitled to receive $16.9 million of future collections from the Portfolio Purchase before BMO is entitled to receive any payments with respect to its Income Interest. During the month of June 2016, we received the balance of the $16.9 million, and, as of June 30, 2019, we recorded a liability to BMO of approximately $0.1 million. The funds were subsequently remitted to BMO on July 10, 2019. The liability to BMO is recorded when actual collections are received. 

Discontinued Operations – Structured Settlements

On December 13, 2017, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement) with CBC Holdings LLC, a Delaware limited liability company (the “Buyer”). Under the Securities Purchase Agreement, the Company sold all of the issued and outstanding equity capital of CBC, our wholly owned subsidiary engaging in structured settlements, for an aggregate purchase price of approximately $10.3 million. Of the aggregate purchase price, approximately $4.5 million was paid in cash, and $5.8 million was paid under a promissory note at an annual interest rate of 7% to be paid quarterly to us and secured by a first priority security interest in and lien on such Buyer’s affiliates’ rights to certain servicing fees. The remaining amount of the aggregate purchase price was paid as reimbursement of certain invoices of CBC. The payment due under the promissory note from the Buyer on March 13, 2019 was not received by the Company, and accordingly, the Buyer was not current on its obligations under the Note at March 31, 2019. On April 11, 2019, the Company signed a forbearance agreement with the Buyer, whereby the Company agreed to forbear from exercising any enforcement remedies with respect to the loan documents, as long as payment in full of all amounts due were received by the Company no later than April 15, 2019. On April 15, 2019, the Company received a lump sum payment of $4 million from the buyer, consisting of $3.8 million in principle and $0.2 million in interest income. Effective April 15, 2019, the Note was paid in full, and the security interests that were secured by the Security Agreement were released by the Company back to the Buyer.

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Cash Flow  

At June 30, 2019, our cash decreased $3.4 million to $2.9 million from $6.3 million at September 30, 2018. Our cash and cash equivalents, available for sale securities and investments in equity securities in the aggregate increased $16.9 million to $61.2 million at June 30, 2019, compared to $44.3 million at September 30, 2018.

Net cash provided by operating activities was $5.4 million during the nine months ended June 30, 2019, as compared to $3.3 million provided by operating activities for the nine months ended June 30, 2018, primarily resulting from the net income of $5.4 million in the current period compared to a net income of $0.3 million in the prior year period. Net cash used in investing activities was $8.3 million during the nine months ended June 30, 2019, as compared to $43.3 million provided by investing activities during the nine months ended June 30, 2018. The change in cash used in investing activities is primarily due to the net purchase of available for sale debt securities and investments in equity securities of $20.1 million offset by proceeds from notes receivable of $4.3 million, settlement receivable of $1.3 million and personal injury claims receipt of $5.0 million in the current period compared to proceeds from the sale of CBC of $4.5 million received in the prior period, decrease in equity method investment of $53.1 million partially offset by acquisition of personal injury claims portfolios of $14.6 million and investing activities of the discontinued operations of $1.5 million in the prior period. Cash used in financing activities during the nine months ended June 30, 2019 was $0.6 million, as compared to $33.6 million used in financing activities in the same prior year period. The cash used in financing activities during the current year is due to the purchase of treasury stock of $0.6 million. The prior year use of cash was the result of the special dividend paid to stockholders of $35 million.

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 of Directors. 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 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 do not expect to incur any material capital expenditures during 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. The outcome of any future transaction(s) 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 Nine Months Ended June 30, 2019   

On October 1, 2018, we adopted FASB update ASC 606, “Revenue from Contracts with Customers,” that requires use of a single principles-based model for recognition of revenue from contracts with customers. The core principle of the model is to recognize revenue upon transfer of promised goods or services to customers, in an amount that reflects the entitled consideration received in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the customer contracts. We adopted the new guidance using the modified retrospective approach which did not require the restatement of prior periods, and recognized a cumulative effect adjustment resulting in an increase in total assets and retained earnings of $173,000, net of taxes of $80,000.

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The most significant impact of ASC 606 relates to our accounting for revenue associated with disability claimant's contracts. Previously we recognized disability fee income when the disability claimants’ cases closed with the social security administration and the applicable fees were collected. Under the new guidance we determined that the various advocacy services, performed on behalf of a claimant, constitute one performance obligation as they represent an integrated set of services designed to provide a claimant with a successful award. It was also determined that the benefit of these services is conveyed to the claimant at the point in time that the award is determined to be successful. In addition, we have made estimates of variable consideration under the expected value method. Therefore, for these arrangements, we will recognize revenue when each case is closed, when cash is received or when we receive a notice of award, stipulating our fees earned on each case directly from the social security administration or Veterans Administration.

The primary impact of adopting the new standard results in acceleration of revenues for the aforementioned contractual arrangements, which relate to the social security disability advocacy segment. Disability fee income represents approximately 22.2% and 23.3% of total consolidated revenues for the three and nine months ended June 30, 2019.

The following line items in our consolidated statement of operations and comprehensive income for the current reporting period and condensed consolidated balance sheet as of June 30, 2019 have been provided to reflect both the adoption of ASC 606 as well as a comparative presentation in accordance with ASC 605 previously in effect:

Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) for the three months ended June 30, 2019:	As Reported (in accordance with ASC 606)		Balances Without Adoption of ASC 606		Impact of Adoption Higher/(Lower)
Disability fee income	$	1,175,000	$	1,322,000	$	(147,000	)
Income from continuing operations before income tax	$	3,341,000	$	3,488,000	$	(147,000	)

Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) for the nine months ended June 30, 2019:	As Reported (in accordance with ASC 606)		Balances Without Adoption of ASC 606		Impact of Adoption Higher/(Lower)
Disability fee income	$	3,732,000	$	3,750,000	$	(18,000	)
Income from continuing operations before income tax	$	7,498,000	$	7,516,000	$	(18,000	)

	As of June 30, 2019
Condensed Consolidated Balance Sheet	As Reported (in accordance with ASC 606)		Balances Without Adoption of ASC 606		Impact of Adoption Higher/(Lower)
Asset
Accounts receivable	$	235,000	$	-	$	235,000
Stockholders' equity
Retained earnings	$	87,956,000	$	87,703,000	$	253,000	(1)

(1) Does not include the tax impact of $80,000

On October 1, 2018, we adopted FASB Update No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The main provision of this guidance requires certain equity investments to be measured at fair value with changes in fair value recognized in net earnings; separate presentation in other comprehensive income for changes in fair value of financial liabilities measured under the fair value option that are due to instrument-specific credit risk; and changes in disclosures associated with the fair value of financial instruments. Upon adoption of this ASU, our investments in equity securities are no longer classified as available for sale, and changes in fair value are reflected in other income, net on our condensed consolidated statement of operations. In conjunction with this adoption we recorded a cumulative effect adjustment with a decrease to opening retained earnings of $10,000 and an increase to opening accumulated other comprehensive income of $10,000, net of tax benefit of $5,000.

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In August 2016 the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments."  This ASU made eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The new standard was effective for fiscal years beginning after December 15, 2017. Early adoption was permitted. The new standard required adoption on a retrospective basis unless it was impracticable to apply, in which case the Company would have been required to apply the amendments prospectively as of the earliest date practicable. Our adoption of the ASU did not have a material effect on the Company’s consolidated statements of cash flows. 

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” The new rules provide for the application of a screen test to consider whether substantially all the fair value of the assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen test determines this to be true, the set is not a business. The new standard was effective for the Company in the first quarter of 2019. The adoption of the new accounting rules did not have a material impact on the Company’s consolidated financial condition, results of operations or cash flows.

In March 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718) Improvements to Employee Share Based Payment Accounting, to simplify and improve areas of generally accepted accounting principles for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The effective date for this update is for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The adoption of this update did not have a material impact on our consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) 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 No. 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to ASC 842. ASU No. 2018-01 was issued to address concerns about the cost and complexity of complying with the transition provisions of ASU No. 2018-01. 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 No. 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 becomes effective for fiscal years beginning after December 15, 2019 and interim periods within those years, and early adoption is permitted. The Company believes that the adoption of this ASU will not have a material impact on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 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.  This update will be effective for interim periods and annual periods beginning after December 15, 2019. Upon adoption, we expect that we will accelerate the recording of our credit losses in our financial statements. 

In January 2017, the FASB issued ASU No. 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. We do not believe this update will have a material impact on our condensed consolidated financial statements.

In February 2018, the FASB issued ASU No. 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 No. 2018-02 will be effective for the Company's fiscal year beginning October 1, 2019, with early adoption permitted, and should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Act is recognized.  The adoption of this ASU is not expected to have a material impact on our condensed consolidated financial statements.

43

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. We are currently evaluating the impact this guidance will have on our condensed consolidated financial statements. 

Item 4. Controls and Procedures

Changes in Internal Controls over Financial Reporting.

As discussed in Item 9A. of our Annual Report on Form 10-K for the year ended September 30, 2018, management identified control deficiencies that constituted material weaknesses in our internal control over financial reporting as of September 30, 2018. Management concluded that our disclosure controls and procedures over financial reporting were not effective as of June 30, 2019.

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 third quarter of fiscal year 2019 that have materially, or are reasonably likely to affect our internal control over financial reporting.

During the third quarter of fiscal year 2019, the Company has updated its financial reporting procedures and established controls to continue our remediation efforts over the material weaknesses associated with foreign transactions, the social security disability business, third party service providers, financial statement disclosures and other complex accounting transactions.

The Company, also implemented and trained staff on a new contract management system, as well as developed related procedures and controls to continue our remediation efforts over the material weakness associated with related party transactions.

Additionally, the Company has migrated its accounting software to a virtual environment, with refined user roles and responsibilities within the application.

Management has concluded that there have been no other changes, other than those discussed above, that occurred during such quarter that have materially affected, or are 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. 

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.

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, 2018 filed with the SEC on December 21, 2018. There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K. 

44

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

On May 17, 2019, the Board of Directors approved the repurchase of up to $10.5 million of the Company’s common stock and authorized management of the Company to enter into the Shares Repurchase Plan under Sections 10b-18 and 10(b)5-1 of the Securities and Exchange Act (the “Shares Repurchase Plan”). The Shares Repurchase Plan is effective through August 17, 2019. During the quarter ended June 30, 2019, the Company purchased 79,500 shares pursuant to the terms of the share repurchase program.

The following table contains information about purchases by us of our common stock during the quarter ended June 30, 2019:

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans
April 1- 30, 2019	-	$	-	-	$	-
May 1- 31, 2019	11,700	$	7.05	11,700	$	10,417,246
June 1- 30, 2019	67,800	$	7.02	67,800	$	9,939,750
Quarter ended June 30, 2019	79,500	$	7.03	79,500	$	9,939,750

Item 3. Default Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None 

Item 6. Exhibits

(a) Exhibits.

2.1#	Membership Interest Purchase Agreement, dated December 31, 2013, by and among CBC Settlement Funding, LLC, CBC Management Services Group, LLC, Asta Funding, Inc. and the other parties thereto (incorporated by reference to Exhibit 10.1 to Asta Funding, Inc.’s Current Report on Form 8-K filed January 7, 2014).
2.2	Securities Purchase Agreement, dated December 13, 2017, by and between Asta Funding, Inc., and CBC Holdings LLC (incorporated by reference to Exhibit 10.1 to Asta Funding, Inc.’s Current Report on Form 8-K filed December 19, 2017).
2.3#	Membership Interest Purchase Agreement, dated January 12, 2018, by and between ASFI Pegasus Holdings, LLC and Pegasus Legal Funding, LLC (incorporated by reference to Exhibit 10.1 to Asta Funding, Inc.’s Current Report on Form 8-K filed January 18, 2018).
2.4#	Term Sheet, dated November 8, 2016, by and among Asta Funding, Inc., ASFI Pegasus Holdings, LLC, Fund Pegasus, LLC, Pegasus Funding, LLC, Pegasus Legal Funding, LLC, Max Alperovich and Alexander Khanas (incorporated by reference to Exhibit 10.1 to Asta Funding, Inc.’s Current Report on Form 8-K filed November 15, 2016).
3.1	Certificate of Incorporation of Asta Funding, Inc. (incorporated by reference to Exhibit 3.1 to Asta Funding, Inc.’s Quarterly Report on Form 10-Q filed August 9, 2016).
3.2	Certificate of Amendment to Certificate of Incorporation of Asta Funding, Inc. (incorporated by reference to Exhibit 3.1(a) to Asta Funding, Inc.’s Quarterly Report on Form 10-QSB filed May 15, 2002).
3.3	Certificate of Designation of Series A Junior Preferred Stock of Asta Funding, Inc. (incorporated by reference to Exhibit 3.1 to Asta Funding, Inc.’s Current Report on Form 8-K filed August 24, 2012).

45

3.4	Certificate of Elimination of the Series A Junior Preferred Stock of Asta Funding, Inc. (incorporated by reference to Exhibit 3.1 to Asta Funding, Inc.’s Current Report on Form 8-K filed on May 5, 2017).
3.5	Certificate of Designation of Series A Junior Participating Preferred Stock of Asta Funding, Inc. (incorporated by reference to Exhibit 3.2 to Asta Funding, Inc.’s Current Report on Form 8-K filed on May 5, 2017).
3.6	Amended and Restated By-laws of Asta Funding, Inc. (incorporated by reference to Exhibit 3.3 to Asta Funding, Inc.’s Quarterly Report on Form 10-Q filed August 9, 2016).
3.7	Amendment to Amended and Restated By-laws of Asta Funding, Inc. (incorporated by reference to Exhibit 3.1 to Asta Funding, Inc.’s Current Report on Form 8-K filed January 9, 2017).
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  Bruce R. Foster, 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  Bruce R. Foster, 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.
**	This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act.
#	Indicates schedules have been omitted pursuant to Item 6.01(b)(2) of Regulation S-K. Asta Funding Inc. agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.

46

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: August 13, 2019	By:	/s/ Gary Stern
		Gary Stern, President, Chief Executive Officer
		(Principal Executive Officer)
Date: August 13, 2019	By:	/s/ Bruce R. Foster
		Bruce R. Foster, Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

47

EXHIBIT INDEX

Exhibit Number	Description
2.1#	Membership Interest Purchase Agreement, dated December 31, 2013, by and among CBC Settlement Funding, LLC, CBC Management Services Group, LLC, Asta Funding, Inc. and the other parties thereto (incorporated by reference to Exhibit 10.1 to Asta Funding, Inc.’s Current Report on Form 8-K filed January 7, 2014).
2.2	Securities Purchase Agreement, dated December 13, 2017, by and between Asta Funding, Inc., and CBC Holdings LLC (incorporated by reference to Exhibit 10.1 to Asta Funding, Inc.’s Current Report on Form 8-K filed December 19, 2017).
2.3#	Membership Interest Purchase Agreement, dated January 12, 2018, by and between ASFI Pegasus Holdings, LLC and Pegasus Legal Funding, LLC (incorporated by reference to Exhibit 10.1 to Asta Funding, Inc.’s Current Report on Form 8-K filed January 18, 2018).
2.4#	Term Sheet, dated November 8, 2016, by and among Asta Funding, Inc., ASFI Pegasus Holdings, LLC, Fund Pegasus, LLC, Pegasus Funding, LLC, Pegasus Legal Funding, LLC, Max Alperovich and Alexander Khanas (incorporated by reference to Exhibit 10.1 to Asta Funding, Inc.’s Current Report on Form 8-K filed November 15, 2016).
3.1	Certificate of Incorporation of Asta Funding, Inc. (incorporated by reference to Exhibit 3.1 to Asta Funding, Inc.’s Quarterly Report on Form 10-Q filed August 9, 2016).
3.2	Certificate of Amendment to Certificate of Incorporation of Asta Funding, Inc. (incorporated by reference to Exhibit 3.1(a) to Asta Funding, Inc.’s Quarterly Report on Form 10-QSB filed May 15, 2002).
3.3	Certificate of Designation of Series A Junior Preferred Stock of Asta Funding, Inc. (incorporated by reference to Exhibit 3.1 to Asta Funding, Inc.’s Current Report on Form 8-K filed August 24, 2012).
3.4	Certificate of Elimination of the Series A Junior Preferred Stock of Asta Funding, Inc. (incorporated by reference to Exhibit 3.1 to Asta Funding, Inc.’s Current Report on Form 8-K filed on May 5, 2017).
3.5	Certificate of Designation of Series A Junior Participating Preferred Stock of Asta Funding, Inc. (incorporated by reference to Exhibit 3.2 to Asta Funding, Inc.’s Current Report on Form 8-K filed on May 5, 2017).
3.6	Amended and Restated By-laws of Asta Funding, Inc. (incorporated by reference to Exhibit 3.3 to Asta Funding, Inc.’s Quarterly Report on Form 10-Q filed August 9, 2016).
3.7	Amendment to Amended and Restated By-laws of Asta Funding, Inc. (incorporated by reference to Exhibit 3.1 to Asta Funding, Inc.’s Current Report on Form 8-K filed January 9, 2017).
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 Bruce R. Foster, 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 Bruce R. Foster, 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.
**	This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act.
#	Indicates schedules have been omitted pursuant to Item 6.01(b)(2) of Regulation S-K. Asta Funding Inc. agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.

48

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: August 13, 2019

/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, Bruce R. Foster, 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: August 13, 2019

/s/ Bruce R. Foster

Bruce R. Foster

Chief Financial Officer and Chief 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 June 30, 2019, 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: August 13, 2019

/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 June 30, 2019, filed with the Securities and Exchange Commission (the “Report”), I, Bruce R. Foster, 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: August 13, 2019 

/s/ Bruce R. Foster

Bruce R. Foster

Chief Financial Officer and Chief Accounting Officer

XML

Document And Entity Information - shares	9 Months Ended
	Jun. 30, 2019	Aug. 13, 2019
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 Common Stock, Shares Outstanding (in shares)		6,568,815
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Amendment Flag	false
Title of 12(b) Security	Common Stock

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Jun. 30, 2019	Sep. 30, 2018
ASSETS
Cash and cash equivalents	$ 2,898,000	$ 6,284,000
Available for sale debt securities (at fair value)	50,286,000	38,054,000
Investments in equity securities (at fair value)	8,032,000
Consumer receivables acquired for liquidation (at cost)	2,184,000	3,749,000
Investment in personal injury claims, net	5,909,000	10,745,000
Due from third party collection agencies and attorneys	813,000	755,000
Accounts receivable, net	235,000
Prepaid and income taxes receivable, net	4,456,000	5,387,000
Furniture and equipment, net of accumulated depreciation of $1.9 million at June 30, 2019 and $1.8 million at September 30, 2018	145,000	100,000
Equity method investment	207,000	236,000
Note receivable		4,313,000
Settlement receivable	1,990,000	3,339,000
Deferred income taxes	10,360,000	10,940,000
Goodwill	1,410,000	1,410,000
Other assets	1,443,000	1,003,000
Total assets	90,368,000	86,315,000
LIABILITIES
Accounts payable and accrued expenses	1,208,000	2,281,000
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Preferred stock
Common stock, $.01 par value, authorized 30,000,000 shares; issued 13,459,708 at June 30, 2019 and September 30, 2018; and outstanding 6,605,915 at June 30, 2019 and 6,685,415 at September 30, 2018	135,000	135,000
Additional paid-in capital	68,558,000	68,551,000
Retained earnings	87,956,000	82,441,000
Accumulated other comprehensive income, net of taxes	199,000	35,000
Treasury stock (at cost) 6,853,793 shares at June 30, 2019 and 6,774,293 at September 30, 2018	(67,688,000)	(67,128,000)
Total stockholders’ equity	89,160,000	84,034,000
Total liabilities and stockholders’ equity	90,368,000	86,315,000
Series A Junior Participating Preferred Stock [Member]
STOCKHOLDERS’ EQUITY
Preferred stock

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Jun. 30, 2019	Sep. 30, 2018
Furniture and equipment, accumulated depreciation	$ 1,900,000	$ 1,800,000
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)	6,605,915	6,685,415
Treasury stock, shares (in shares)	6,853,793	6,774,293
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

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues:
Revenues	$ 5,298,000	$ 7,254,000	$ 15,999,000	$ 18,210,000
Gain on settlements	273,000		596,000
Other income, net	855,000	76,000	1,395,000	179,000
	6,426,000	7,330,000	17,990,000	18,389,000
Expenses:
General and administrative	2,980,000	4,201,000	10,301,000	11,712,000
Loss on acquisition of minority interest				1,420,000
Interest		17,000		19,000
Impairment of consumer receivables acquired for liquidation	100,000	100,000	100,000	100,000
Loss (earnings) from equity method investment	5,000		91,000	(845,000)
	3,085,000	4,318,000	10,492,000	12,406,000
Income from continuing operations before income tax	3,341,000	3,012,000	7,498,000	5,983,000
Income tax expense	1,037,000	1,055,000	2,146,000	5,595,000
Net income from continuing operations	2,304,000	1,957,000	5,352,000	388,000
Net loss from discontinued operations, net of income tax				(80,000)
Net income	$ 2,304,000	$ 1,957,000	$ 5,352,000	$ 308,000
Net income (loss) per basic shares:
Continuing operations (in dollars per share)	$ 0.35	$ 0.29	$ 0.80	$ 0.06
Discontinued operations (in dollars per share)				(0.01)
(in dollars per share)	0.35	0.29	0.80	0.05
Net income (loss) per diluted shares:
Continuing operations (in dollars per share)	0.35	0.29	0.80	0.06
Discontinued operations (in dollars per share)				(0.01)
(in dollars per share)	$ 0.35	$ 0.29	$ 0.80	$ 0.05
Weighted average number of common shares outstanding:
Basic (in shares)	6,666,012	6,685,415	6,678,947	6,654,911
Diluted (in shares)	6,666,231	6,685,628	6,679,260	6,657,840
Finance Income, Net [Member]
Revenues:
Revenues	$ 3,684,000	$ 4,509,000	$ 10,659,000	$ 12,795,000
Personal Injury Claims Income [Member]
Revenues:
Revenues	439,000	1,557,000	1,608,000	2,167,000
Disability Fee Income [Member]
Revenues:
Revenues	$ 1,175,000	$ 1,188,000	$ 3,732,000	$ 3,248,000

XML

Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Comprehensive income is as follows:
Net income	$ 2,304,000	$ 1,957,000	$ 5,352,000	$ 308,000
Net unrealized debt securities gain (loss), net of tax (expense)/benefit of $46,000 and ($4,000) during the three months ended June 30, 2019 and 2018, respectively, and ($40,000) and $2,000 during the nine months ended June 30, 2019 and 2018, respectively.	(121,000)	9,000	102,000	(2,000)
Foreign currency translation, net of tax (expense) / benefit of ($6,000) and ($27,000) during the three months ended June 30, 2019 and 2018, respectively, and ($14,000) and ($13,000) during the nine months ended June 30, 2019 and 2018, respectively.	16,000	50,000	52,000	27,000
Other comprehensive income (loss)	(105,000)	59,000	154,000	25,000
Total comprehensive income	$ 2,199,000	$ 2,016,000	$ 5,506,000	$ 333,000

XML

Condensed Consolidated Statements of Comprehensive Income (Unaudited) (Parentheticals) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Unrealized gain (loss) on marketable securities, tax	$ 46,000	$ (4,000)	$ (40,000)	$ 2,000
Foreign currency translation, tax benefit (expense)	$ (6,000)	$ (27,000)	$ (14,000)	$ (13,000)

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Treasury Stock [Member]	Total
Balance (in shares) at Sep. 30, 2017	13,398,108
Balance at Sep. 30, 2017	$ 134,000	$ 68,047,000	$ 113,736,000	$ 18,000	$ (67,128,000)	$ 114,807,000
Adjusted opening equity at Sep. 30, 2017				18,000
Stock based compensation expense		79,000				79,000
Net Income			(2,669,000)			(2,669,000)
Unrealized gain (loss) on debt securities, net				(7,000)		(7,000)
Foreign currency translation, net				29,000		29,000
Balance (in shares) at Dec. 31, 2017	13,398,108
Balance at Dec. 31, 2017	$ 134,000	68,126,000	111,067,000	40,000	(67,128,000)	112,239,000
Balance (in shares) at Sep. 30, 2017	13,398,108
Balance at Sep. 30, 2017	$ 134,000	68,047,000	113,736,000	18,000	(67,128,000)	114,807,000
Adjusted opening equity at Sep. 30, 2017				18,000
Net Income						308,000
Foreign currency translation, net						$ 27,000
Exercise of options (in shares)						61,600
Balance (in shares) at Jun. 30, 2018	13,459,708
Balance at Jun. 30, 2018	$ 135,000	68,543,000	78,692,000	43,000	(67,128,000)	$ 80,285,000
Balance (in shares) at Dec. 31, 2017	13,398,108
Balance at Dec. 31, 2017	$ 134,000	68,126,000	111,067,000	40,000	(67,128,000)	112,239,000
Stock based compensation expense		10,000				10,000
Net Income			1,020,000			1,020,000
Unrealized gain (loss) on debt securities, net				(4,000)		(4,000)
Foreign currency translation, net				(52,000)		(52,000)
Exercise of options (in shares)	61,600
Exercise of options	$ 1,000	398,000				399,000
Dividends paid			(35,352,000)			(35,352,000)
Balance (in shares) at Mar. 31, 2018	13,459,708
Balance at Mar. 31, 2018	$ 135,000	68,534,000	76,735,000	(16,000)	(67,128,000)	78,260,000
Stock based compensation expense		9,000				9,000
Net Income			1,957,000			1,957,000
Unrealized gain (loss) on debt securities, net				9,000		9,000
Foreign currency translation, net				50,000		$ 50,000
Exercise of options (in shares)						61,600
Balance (in shares) at Jun. 30, 2018	13,459,708
Balance at Jun. 30, 2018	$ 135,000	68,543,000	78,692,000	43,000	(67,128,000)	$ 80,285,000
Balance (in shares) at Sep. 30, 2018	13,459,708
Balance at Sep. 30, 2018	$ 135,000	68,551,000	82,441,000	35,000	(67,128,000)	84,034,000
Cumulative effect adjustment for adoption of new accounting principle (Accounting Standards Update 2014-09 [Member]) at Sep. 30, 2018			173,000			173,000
Cumulative effect adjustment for adoption of new accounting principle (Accounting Standards Update 2016-01 [Member]) at Sep. 30, 2018			(10,000)	10,000
Cumulative effect adjustment for adoption of new accounting principle at Sep. 30, 2018				10,000
Adjusted opening equity (in shares) at Sep. 30, 2018	13,459,708
Adjusted opening equity at Sep. 30, 2018	$ 135,000	68,551,000	82,604,000	45,000	(67,128,000)	84,207,000
Stock based compensation expense		7,000				7,000
Net Income			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
Balance (in shares) at Dec. 31, 2018	13,459,708
Balance at Dec. 31, 2018	$ 135,000	68,558,000	83,879,000	260,000	(67,128,000)	85,704,000
Balance (in shares) at Sep. 30, 2018	13,459,708
Balance at Sep. 30, 2018	$ 135,000	68,551,000	82,441,000	35,000	(67,128,000)	84,034,000
Cumulative effect adjustment for adoption of new accounting principle (Accounting Standards Update 2014-09 [Member]) at Sep. 30, 2018			173,000			173,000
Cumulative effect adjustment for adoption of new accounting principle (Accounting Standards Update 2016-01 [Member]) at Sep. 30, 2018			(10,000)	10,000
Cumulative effect adjustment for adoption of new accounting principle at Sep. 30, 2018				10,000
Adjusted opening equity (in shares) at Sep. 30, 2018	13,459,708
Adjusted opening equity at Sep. 30, 2018	$ 135,000	68,551,000	82,604,000	45,000	(67,128,000)	84,207,000
Net Income						5,352,000
Foreign currency translation, net						$ 52,000
Exercise of options (in shares)						0
Balance (in shares) at Jun. 30, 2019	13,459,708
Balance at Jun. 30, 2019	$ 135,000	68,558,000	87,956,000	199,000	(67,688,000)	$ 89,160,000
Balance (in shares) at Dec. 31, 2018	13,459,708
Balance at Dec. 31, 2018	$ 135,000	68,558,000	83,879,000	260,000	(67,128,000)	85,704,000
Net Income			1,773,000			1,773,000
Unrealized gain (loss) on debt securities, net				88,000		88,000
Foreign currency translation, net				(44,000)		(44,000)
Balance (in shares) at Mar. 31, 2019	13,459,708
Balance at Mar. 31, 2019	$ 135,000	68,558,000	85,652,000	304,000	(67,128,000)	87,521,000
Net Income			2,304,000			2,304,000
Unrealized gain (loss) on debt securities, net				(121,000)		(121,000)
Foreign currency translation, net				16,000		16,000
Treasury Stock purchased (79,500 shares)					(560,000)	$ (560,000)
Exercise of options (in shares)						0
Balance (in shares) at Jun. 30, 2019	13,459,708
Balance at Jun. 30, 2019	$ 135,000	$ 68,558,000	$ 87,956,000	$ 199,000	$ (67,688,000)	$ 89,160,000

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) (Parentheticals)	3 Months Ended
	Jun. 30, 2019 shares
Treasury stock purchased, shares (in shares)	79,500

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities:
Net income from continuing operations	$ 5,352,000	$ 388,000
Loss from discontinued operations		(80,000)
Net income	5,352,000	308,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	72,000	46,000
Deferred income taxes	540,000	3,513,000
Impairment of consumer receivables acquired for liquidation	100,000	100,000
Stock based compensation	7,000	98,000
Unrealized loss on equity securities	(53,000)
Provision (recoveries) for bad debts – personal injury claims, net	(90,000)	837,000
Loss (recoveries) from equity method investment	91,000	(845,000)
Changes in:
Receipt of income tax carry-back claim	3,231,000
Prepaid and income taxes receivable	(2,300,000)	2,051,000
Due from third party collection agencies and attorneys	(69,000)	34,000
Accounts receivable	(62,000)
Other assets	(440,000)	(380,000)
Other liabilities	(1,021,000)	(3,201,000)
Net cash provided by operating activities of discontinued operations		710,000
Net cash provided by operating activities	5,358,000	3,271,000
Cash flows from investing activities:
Principal collected on receivables acquired for liquidation	1,373,000	2,069,000
Principal collected on consumer receivable accounts represented by account sales		3,000
Purchase of available for sale debt securities and investments in equity securities	(92,194,000)	(3,069,000)
Proceeds from sale of available for sale debt securities	72,125,000
Purchase of non-controlling interest		(1,800,000)
Proceeds from sale of CBC		4,491,000
Proceeds from note receivable	4,313,000	958,000
Proceeds from settlement receivable	1,349,000
Personal injury claims - advances	(123,000)	(60,000)
Personal injury claims - receipts	5,049,000	3,705,000
Acquisition of personal injury claims portfolios		(14,571,000)
Decrease (increase) in equity method investment	(62,000)	53,119,000
Capital expenditures	(117,000)	(26,000)
Net cash used in investing activities of discontinued operations		(1,538,000)
Net cash (used in) provided by investing activities	(8,287,000)	43,281,000
Cash flows from financing activities:
Proceeds from exercise of stock options		399,000
Dividends paid		(35,352,000)
Purchase of treasury stock	(560,000)
Net cash provided by financing activities of discontinued operations		1,387,000
Net cash used in financing activities	(560,000)	(33,566,000)
Foreign currency effect on cash	103,000	58,000
Net (decrease) increase in cash and cash equivalents including cash and cash equivalents classified within assets related to discontinued operations	(3,386,000)	13,044,000
Less: net decrease in cash and cash equivalents classified within assets related to discontinued operations		(316,000)
Net (decrease) increase in cash and cash equivalents	(3,386,000)	12,728,000
Cash and cash equivalents at beginning of period	6,284,000	17,591,000
Cash and cash equivalents at end of period	2,898,000	30,319,000
Supplemental disclosure of cash flow information:
Cash paid for: Interest		19,000
Cash paid for: Income taxes	4,000,000
Cash paid for: Interest		824,000
Note receivable		$ 5,750,000

XML

Note 1 - Business and Basis of Presentation

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

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

Note

1—Business

and Basis of Presentation

  

Business

  

Asta Funding, Inc. (“Asta”), a Delaware Corporation, 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 (“ASFI”), 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 (the “Company,” “we” or “us”), is engaged in several business segments in the financial services industry including servicing 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 charged off consumer receivables, including charged off receivables, and semi-performing receivables. 

For the period

October 1, 2017

to

January 12, 2018,

Pegasus was

80%

owned, but

not

controlled, and accounted for under the equity method. On

January 12, 2018 (

“Date of Acquisition”), the Company acquired the remaining

20%

minority interest and a controlling financial interest, in Pegasus, and changed its name to Sylvave. Commencing on the Date of Acquisition, the Company consolidated the financial results of this entity. 

We operate principally in the United States in

three

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

fourth

segment when we engaged in the structured settlements business through our wholly owned subsidiary CBC Settlement Funding, LLC (“CBC”), which we sold on

December 13, 2017.

As a result of the sale of CBC, all periods presented in the Company's condensed consolidated financial statements account for CBC as a discontinued operation. This determination resulted in the reclassification of the historical assets and liabilities comprising the structured settlement business to assets and liabilities related to discontinued operations in the condensed consolidated balance sheets, and a corresponding adjustment to our condensed consolidated statements of operations to reflect discontinued operations for all periods presented. See Note

7

- Discontinued Operations. 

Consumer receivables

This segment is engaged in the business of purchasing, managing for its own account and servicing distressed charged off consumer receivables, including charged off receivables, and semi-performing 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. Claims 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, Practical Funding on

March 16, 2018,

to continue in the personal injury claims funding business. On

April 8, 2018,

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

May 2019;

see Note

5

.

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 Company accounted for its investment in Sylvave under the equity method of accounting through

January 12, 2018,

and for subsequent periods the Company includes the financial results of Sylvave in its consolidated statement of operations. 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 and Veterans Administration.

Basis of Presentation

The consolidated balance sheet as of

June 30, 2019,

the consolidated statements of operations for the

three

and

nine

months ended

June 30, 2019

and

2018,

the consolidated statements of comprehensive income (loss) for the

three

and

nine

months ended

June 30, 2019

and

2018,

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

three

and

nine

months ended

June 30, 2019

and

2018,

and the consolidated statements of cash flows for the

nine

months ended

June 30, 2019

and

2018,

are unaudited. The

September 

30,

2018

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, 2018.

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

June 30, 2019,

the results of operations for the

three

and

nine

months ended

June 30, 2019

and

2018,

the statement of comprehensive income (loss) for the

three

and

nine

months ended

June 30, 2019

and

2018,

the statement of stockholders' equity for the

three

and

nine

months ended

June 30, 2019

and

2018

and cash flows for the

nine

months ended

June 30, 2019

and

2018

have been made. The results of operations for the

three

and

nine

months ended

June 30, 2019

and

2018

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 Form

10

-K for the fiscal year ended

September 30, 2018

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 (“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.

Liquidity

 At

June 30, 

2019,

the Company had

$2.9

million in cash and cash equivalents, as well as

$58.3

million in investments in debt and equity securities on hand and

no

debt.  In addition, the Company had

$89.2

million in stockholders' equity at

June 30, 

2019.

We believe that our available cash resources and expected cash inflows from operations will be sufficient to fund operations for at least the next

twelve

months.

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 cash balances with

two

banks at

June 30, 2019

that each exceeded the balance insured by the FDIC by approximately

$0.1

million. Additionally,

three

foreign banks with an aggregate

$1.5

million in cash 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

The Company adopted Accounting Standard Update (“ASU”)

No.

2016

-

01

on

October 1, 2018,

which requires substantially all equity investments in nonconsolidated entities to be 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 consolidated statements of operations.   

Available-for-Sale Debt Securities

Non-equity 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.  

Equity method investments

Investee companies that are

not

consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or

not

the Company exercises significant influence with respect to an investee depends on an evaluation of several factors including, among others, representation on the investee company's board of directors and ownership level, which is generally a

20%

to

50%

interest in voting securities of the investee company. Under the equity method of accounting, an investee company's accounts are

not

reflected within the Company's consolidated balance sheets and statements of operations; however, the Company's share of the earnings of the investee company is reflected as earnings and loss from equity method investment in the Company's consolidated statement of operations. The Company's carrying value in an equity method investee company is reflected on the Company's consolidated balance sheet, as equity method investment. 

When the Company's carrying value in an equity method investee company is reduced to zero,

no

further losses are recorded in the Company's consolidated financial statements unless the Company guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports income, the Company will

not

record its share of such income until it equals the amount of its share of losses

not

previously recognized. There were

no

impairment losses recorded on our equity method investments for the

three

and

nine

months ended

June 30, 2019

and

2018.

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”), 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

-

30

,

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. In this case, 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. For the

three

and

nine

months ended

June 30, 2019,

the Company recorded a

$0.1

million impairment on an international portfolio. For the

three

and

nine

months ended

June 30, 2018,

the Company recorded a

$0.1

million impairment on a domestic portfolio.

Income Recognition - Social Security Disability Advocacy

Effective

October 1, 2018,

the Company adopted ASC

606

- “Revenue from Contracts with Customer” (“ASC

606”

), which was effective for annual periods beginning on or after

December 15, 2017.

ASC

606

introduced a

five

-step approach to revenue recognition. See “Recent Accounting Pronouncements” for a discussion of ASC

606.

The Company applied ASC

606

in accordance with the modified retrospective transitional approach recognizing the cumulative effect of initially applying the revenue standard as an adjustment to the opening balance of retained earnings during this period (

October 1, 2018).

Comparative prior year periods were

not

adjusted. In applying the modified retrospective approach, we elected practical expedients for (a) completed contracts as described in ASC

606

-

10

-

65

-

1

-c(

2

), and (b) contract modifications as described in ASC

606

-

10

-

65

-

1

-f(

4

), allowing (a) the application of the revenue standard only to contracts that were

not

completed as of the date of initial application, and (b) to reflect the aggregate effect of all modifications that occur before the adoption date in accordance with the new standard when: (i) identifying the satisfied and unsatisfied performance obligations, (ii) determining the transaction price, and (iii) allocating the transaction price to the satisfied and unsatisfied performance obligations. We believe that the impact on the opening balance of retained earnings during the period (

October 1, 2018)

would

not

have been significantly different had we

not

elected to use the practical expedients.

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 Veterans Administration 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 consolidated financial statements include estimated fair value information regarding its available-for-sale debt securities and investments in equity securities as of

June 30, 2019,

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.

Reclassification

Certain prior period amounts in the accompanying condensed consolidated financial statements have been reclassified to conform to the current year presentation. These reclassifications had

no

effect on previously reported net income or stockholders' equity.  

Recent Accounting Pronouncements

Adopted During The

Nine

Months Ended

June 30

,

2019

On

October 1, 2018,

the Company adopted FASB update ASC

606

that requires use of a single principles-based model for recognition of revenue from contracts with customers. The core principle of the model is to recognize revenue upon transfer of promised goods or services to customers, in an amount that reflects the entitled consideration received in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the customer contracts. The Company adopted the new guidance using the modified retrospective approach which did

not

require the restatement of prior periods, and recognized a cumulative effect adjustment resulting in an increase in total assets and retained earnings of

$173,000,

net of taxes of

$80,000.

The most significant impact of ASC

606

relates to the Company's accounting for its revenue associated with disability claimant's contracts. Previously, the Company recognized disability fee income when the disability claimants cases closed with the social security administration and the applicable fees were collected. Under the new guidance, the Company determined that the various advocacy services, performed on behalf of a claimant, constitute

one

performance obligation as they represent an integrated set of services designed to provide a claimant with a successful award. It was also determined that the benefit of these services is conveyed to the claimant at the point in time that the award is determined to be successful. In addition, the Company has made estimates of variable consideration under the expected value method. Therefore, for these arrangements, the Company will recognize revenue when each case is closed, when cash is received or when the Company receives a notice of award, stipulating the Company's fee earned on each case directly from the social security administration.

The primary impact of adopting the new standard results in acceleration of revenues for the aforementioned contractual arrangements, which relate to the social security disability advocacy segment. Disability fee income represents approximately

22.2%

and

23.3%

of the Company’s total consolidated revenues for the

three

and

nine

months ended

June 30, 2019.

The following line items in our consolidated statements of operations and comprehensive income for the current reporting period and condensed consolidated balance sheet as of

June 30, 2019

have been provided to reflect both the adoption of ASC

606

as well as a comparative presentation in accordance with ASC

605

previously in effect:

Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) for the three months ended June 30 , 2019	As Reported (in accordance with ASC 606)		Balances Without Adoption of ASC 606		Impact of Adoption Higher/(Lower)
Disability fee income	$	1,175,000	$	1,322,000	$	(147,000	)
Income from continuing operations before income tax	$	3,341,000	$	3,488,000	$	(147,000	)

Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) for the nine months ended June 30 , 2019	As Reported (in accordance with ASC 606)		Balances Without Adoption of ASC 606		Impact of Adoption Higher/(Lower)
Disability fee income	$	3,732,000	$	3,750,000	$	(18,000	)
Income from continuing operations before income tax	$	7,498,000	$	7,516,000	$	(18,000	)

	As of June 30 , 2019
Condensed Consolidated Balance Sheet	As Reported (in accordance with ASC 606)		Balances Without Adoption of ASC 606		Impact of Adoption Higher/(Lower)
Asset
Accounts receivable	$	235,000	$	—	$	235,000
Stockholders' equity
Retained earnings	$	87,956,000	$	87,703,000	$	253,000	(1)

(

1

) Does

not

include the tax impact of

$80,000

On

October 1, 2018,

the Company adopted FASB ASU

No.

2016

-

01,

Recognition and Measurement of Financial Assets and Financial Liabilities, to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The main provision of this guidance requires certain investments in equity securities to be measured at fair value with changes in fair value recognized in net earnings; separate presentation in other comprehensive income for changes in fair value of financial liabilities measured under the fair value option that are due to instrument-specific credit risk; and changes in disclosures associated with the fair value of financial instruments. Upon adoption of this ASU, the Company's investments in equity securities are

no

longer classified as available for sale, and changes in fair value are reflected in other income, net on the Company's condensed consolidated statement of operations. In conjunction with this adoption, the Company recorded a cumulative effect adjustment with a decrease to opening retained earnings of

$10,000

and an increase to opening accumulated other comprehensive income of

$10,000,

net of tax benefit of

$5,000.

In

August 2016,

the FASB issued ASU

No.

2016

-

15

"Statement of Cash Flows (Topic

230

): Classification of Certain Cash Receipts and Cash Payments."  This ASU made

eight

targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The new standard is effective for fiscal years beginning after

December 15, 2017.

Early adoption was permitted. The new standard required adoption on a retrospective basis unless it impracticable to apply, in which case the Company would have been required to apply the amendments prospectively as of the earliest date practicable. The Company's adoption of the ASU did

not

have a material effect on the Company’s condensed consolidated statements of cash flows.

In

January 2017,

the FASB issued ASU

No.

2017

-

01,

“Business Combinations (Topic

805

): Clarifying the Definition of a Business.” The new rules provide for the application of a screen test to consider whether substantially all the fair value of the assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen test determines this to be true, the set is

not

a business. The new standard was effective for the Company in the

first

quarter of

2019.

The adoption of the new accounting rules did

not

have a material impact on the Company’s consolidated financial condition, results of operations or cash flows.

In

March 2017,

the FASB issued ASU

No.

2017

-

09,

Compensation - Stock Compensation (Topic

718

) Improvements to Employee Share Based Payment Accounting, to simplify and improve areas of generally accepted accounting principles for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The effective date for this update was for annual reporting periods beginning after

December 15, 2017,

including interim periods within that reporting period. The adoption of this update did

not

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

Recent Accounting Pronouncements

Not

Yet Adopted

In

February 2016,

the FASB issued ASU

No.

2016

-

02,

Leases (Topic

842

) 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 periods 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

No.

2018

-

01,

Leases (Topic

842

): Land Easement Practical Expedient for Transition to ASC

842.

ASU

No.

2018

-

01

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

No.

2018

-

01.

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

No.

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 becomes effective in for fiscal years beginning after

December 15, 2019

and interim periods within those years, and early adoption is permitted. The Company believes that the adoption of this ASU will

not

have a material impact on its consolidated financial statements.

In

June 2016,

the FASB issued ASU

No.

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, 2019.

Upon adoption, the Company expects that it will accelerate the recording of its credit losses in its financial statements. 

In

January 2017,

the FASB issued ASU

No.

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

February 2018,

the FASB issued ASU

No.

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

will be effective for the Company's fiscal year beginning

October 1, 2019,

with early adoption permitted, and should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Act is recognized.  The adoption of this ASU is

not

expected to have a material impact on the Company's 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. 

XML

Note 2 - Investments in Debt and Equity Securities

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

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

Note

2—Investments

in Debt and Equity Securities

Investments in Equity Securities

Investments of equity securities at

June 30, 2019

and

September 30, 2018,

consists of mutual funds valued at

$8.0

million and

$7.6

million, respectively. See (

1

) below.

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

three

and

nine

months ended

June 30, 2019

are as follows:

	For the Three Months Ended June 30 , 2019		For the Nine Months Ended June 30 , 2019
Net gains and losses recognized during the period on equity securities	$	32,000	$	53,000
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	$	32,000	$	53,000

Available for Sale Debt Securities

Available for sale debt securities at

June 30, 2019

and

September 

30,

2018,

consist of the following:

June 30, 2019	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Available for sale debt securities	$	50,144,000	$	142,000	$	—	$	50,286,000

At

June 30, 2019,

the Company had

$50.3

million in U.S. Treasury Bills, classified as available-for-sale debt securities on the Company's condensed consolidated balance sheet.  These treasury bills had

$102,000

(net of tax expense of

$40,000

) in unrealized gains that were recorded in other comprehensive income for the

nine

months ended

June 30, 2019.

September 30, 2018 (1)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Available for sale debt securities	$	30,479,000	$	—	$	—	$	30,479,000

(

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.

At

September 

30,

2018

,

 the Company had

$30.5

million in U.S. Treasury Bills, which are carried at fair value, and are classified as available for sale debt securities. Both the mutual funds and the U.S. Treasury Bills are deemed to be level

2

assets,

none

of which were in an unrealized loss position that had existed for

12

months or more. In addition, management had the ability but did

not

believe it would be required to sell those investments in debt securities for a period of time sufficient to allow for an anticipated recovery or maturity. Should the impairment of any of those securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period in which the other-than-temporary impairment were identified.

Unrealized holding gains and losses on available for sale 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).   

XML

Note 3 - Consumer Receivables Acquired for Liquidation

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

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

Note

3—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 Company aggregates portfolios of receivables acquired sharing specific common characteristics which were acquired within a given quarter. In addition, the Company uses a variety of qualitative and quantitative factors to estimate collections and the timing thereof. The Company obtains and utilizes, as appropriate, input, including but

not

limited to, monthly collection projections and liquidation rates, from

third

party collection agencies and attorneys, as further evidentiary matter, to assist in evaluating and developing collection strategies and in evaluating and modeling the expected cash flows for a given portfolio. 

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

	For the Three Months Ended June 30 ,
	2019			2018
Balance, beginning of period	$	2,626,000		$	5,525,000
Net cash collections from collection of consumer receivables acquired for liquidation		(4,112,000	)		(5,146,000	)
Net cash collections represented by account sales of consumer receivables acquired for liquidation		—			(1,000	)
Impairment		(100,000	)		(100,000	)
Effect of foreign currency translation		86,000			(167,000	)
Finance income recognized		3,684,000			4,509,000
Balance, end of period	$	2,184,000		$	4,620,000
Finance income as a percentage of collections		89.6	%		87.6	%

	For the Nine Months Ended June 30 ,
	2019			2018
Balance, beginning of period	$	3,749,000		$	6,841,000
Net cash collections from collection of consumer receivables acquired for liquidation		(12,026,000	)		(14,844,000	)
Net cash collections represented by account sales of consumer receivables acquired for liquidation		—			(3,000	)
Impairment		(100,000	)		(100,000	)
Effect of foreign currency translation		(98,000	)		(69,000	)
Finance income recognized		10,659,000			12,795,000
Balance, end of period	$	2,184,000		$	4,620,000
Finance income as a percentage of collections		88.6	%		86.2	%

During the

three

and

nine

months ended

June 30, 2019

and

2018

the Company did

not

purchase any new portfolios. 

As of

June 30, 2019,

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

$1.3

million and

$0.5

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

$1.8

million, or

84.3%

of the

$2.2

million in total consumer receivables held at

June 30, 2019.

Of the total consumer receivables

four

individual portfolios comprise

25.0%,

15.7%,

12.6%

and

10.0%

of the overall asset balance at

June 30, 2019. 

As of

September 30, 2018,

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

$2.0

million and

$1.3

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

$3.3

million, or

88.7%

of the total consumer receivables held of

$3.7

million at

September 30, 2018.

Of the total consumer receivables

three

individual portfolios comprise

20%,

11%

and

11%

of the overall asset balance at

September 30, 2018. 

As of

June 30, 2019,

and

September 30, 2018,

4.3%

and

5.9%

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

three

and

nine

months ended

June 30, 2019

and

2018,

3.9%

and

3.1%,

respectively, and

4.6%

and

2.8%,

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

At

June 30, 2019,

and

September 

30,

2018,

approximately

26%

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

five

collection organizations represent only

26%

as of

June 30, 2019

and

31%

as of

September 30, 2018,

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

85%

and

87%

of the Company’s portfolio face value at all

third

-party collection agencies and attorneys as of

June 30, 2019

and

September 30, 2018,

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

nine

months ended

June 30, 2019

and

2018,

respectively. 

	For the Three Months Ended June 30 ,						For the Nine Months Ended June 30 ,
	2019			2018			2019			2018
Gross collections (1)	$	7,680,000		$	9,551,000		$	23,262,000		$	27,134,000
Commissions and fees (2)		(3,568,000	)		(4,404,000	)		(11,236,000	)		(12,287,000	)
Net collections	$	4,112,000		$	5,147,000		$	12,026,000		$	14,847,000

( 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 4 - Equity Method Investments

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Equity Method Investments and Joint Ventures Disclosure [Text Block]

Note

4—Equity

Method Investments

Acquisition of Equity Method Investment

On

December 

28,

2011,

the Company entered into a joint venture, Pegasus Funding, LLC ("Pegasus"), with Pegasus Legal Funding, LLC (“PLF”). The Company had an

80%

non-controlling interest in the joint venture from the date of formation through

January 12, 2018.

During this time period the Company had operational disagreements with PLF, resulting in the amendment of the Pegasus operating agreement, the execution of a liquidation agreement and finally the filing of an arbitration against PLF by the Company.

On

January 12, 2018,

the Company, ASFI and Fund Pegasus entered into a Settlement Agreement and Release (the “Settlement Agreement”) by and among the Company, ASFI, Fund Pegasus, Pegasus, PLF, Max Alperovich, Alexander Khanas, Larry Stoddard, III, Louis Piccolo and A.L. Piccolo & Co., Inc., a New York corporation. The Settlement Agreement releases certain claims in exchange for, among other things, the parties' entry into the Purchase Agreement (defined below).

On

January 12, 2018,

ASFI entered into a Membership Interest Purchase Agreement (the “Purchase Agreement) with PLF. Under the Purchase Agreement, ASFI bought PLF’s ownership interests of Pegasus, which was

20%

of the issued and outstanding limited liability company interests of Pegasus, for an aggregate purchase price of

$1.8

million. As a result of the execution of the Purchase Agreement, ASFI became the owner of

100%

of the limited liability company interests of Pegasus, and recognized a loss on acquisition of

$1.4

million, which is recorded in the Company’s consolidated financial statements. Immediately on acquisition, the Company changed the name from Pegasus to Sylvave.

The fair values of the assets acquired and liabilities assumed at the acquisition date are as follows:

	Fair Value
Cash	$	5,748,000
Personal injury claim advances portfolio		14,571,000
Accounts payable and accrued expenses		(664,000	)
Total net assets acquired	$	19,655,000

As a result of the purchase of PLF’s 

20%

interest in Pegasus on

January 12, 2018, 

under the Purchase Agreement, beginning on

January 13, 2018,

the Company consolidated the financial statements of Sylvave.

The results of operations of the Company’s historical equity method investment in Pegasus prior to acquisition on

January 12, 2018

were as follows:

	Condensed Statement of Operations Information
	For the Period October 1, 2017 to January 12, 2018
Personal injury claims income	$	671,000
Operating expenses		(386,000	)
Income from operations	$	1,057,000
Earnings from equity method investment	$	845,000

Serlefin

 

Serlefin Peru is the Company's

49%

owned joint venture. 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.  

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

$0.2

million and

$0.7

 million in performance fees for the

three

and

nine

months ended

June 30, 2019,

respectively. Serlefin received approximately

$0.3

million and

$0.8

 million in performance fees for the

three

and

nine

months ended

June30,

2018,

respectively. 

The carrying value of the investment in Serlefin Peru was

$0.2

million as of

June 30, 2019

and

September 30, 2018.

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

June 30, 2019

was approximately

$0.3

million, and was

not

significant to the Company's consolidated statement of operations.

XML

Note 5 - Personal Injury Claims Funding

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Personal Injury Claims [Text Block]

Note

5—Personal

Injury Claims Funding

 

Simia and Sylvave

 

On

November 11, 2016,

the Company formed Simia, a wholly owned subsidiary, to continue its personal injury claims funding business following the Company's decision

not

to renew its joint venture with PLF.  Simia commenced operation in

January 2017. 

As of

June 30, 2019,

Simia had a personal injury claims portfolio of

$1.5

million, and recognized revenue for the

three

and

nine

months then ended of

$31,000

and

$60,000,

respectively.  As of

September 30, 2018,

Simia had a personal injury claims portfolio of

$2.3

million, and recognized revenue of

$53,000

and

$300,000,

respectively, for the

three

and

nine

months ended

June 30, 2018. 

As of

June 30, 2019,

Sylvave had a personal injury claims portfolio of

$4.3

million, and recognized revenue for the

three

and

nine

months then ended of

$406,000

and

$1,546,000,

respectively.   As of

September 30, 2018,

Sylvave had a personal injury claims portfolio of

$8.4

million. For the

three

and

nine

months ended

June 30, 2018,

Sylvave recognized revenue of

$1.5

million and

$1.9

million respectively.   

As noted in Note

4

- Equity Method Investments, effective

January 12, 2018,

the Company accounts for Sylvave, its wholly owned subsidiary, on a consolidated basis. 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

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.

As of

June 30, 2019,

Arthur Funding had a personal injury claims portfolio of

$125,000

and recorded revenue for the

three

and

nine

months ended

June 30, 2019

of

$2,000

.

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 June 3 0 ,
	2019			2018
Balance, beginning of period	$	6,630,000		$	15,994,000
Personal claim advances		123,000			—
Provision for losses		(141,000	)		(6,000	)
(Write offs) recoveries		389,000			(408,000	)
Personal injury claims income		439,000			1,557,000
Personal injury claims receipts		(1,531,000	)		(3,344,000	)
Balance, end of period	$	5,909,000		$	13,793,000

	For the Nine Months ended June 3 0 ,
	2019			2018
Balance, beginning of period	$	10,745,000		$	3,704,000
Acquisition of personal injury funding portfolio (1)		—			14,571,000
Personal claim advances		123,000			60,000
Provision for losses		(299,000	)		(465,000	)
(Write offs) recoveries		389,000			(371,000	)
Personal injury claims income		1,608,000			2,167,000
Personal injury claims receipts		(6,657,000	)		(5,872,000	)
Balance, end of period	$	5,909,000		$	13,793,000

(

1

) Fully acquired through the acquisition of Pegasus.

 The Company recognized personal injury claims income of

$0.4

million and

$1.6

million for the

three

months ended

June 30, 2019

and

2018,

respectively, and

$1.6

million and

$2.2

million for the

nine

months ended

June 30, 2019

and

2018,

respectively. The Company has recorded a reserve on principle fundings in personal injury claims of

$1.2

million as of

June 30, 2019

and

$0.5

million as of

September 30, 2018.

XML

Note 6 - Non-recourse Debt

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Debt Disclosure [Text Block]

Note

6—Non

-Recourse Debt

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

In

March 2007,

Palisades XVI borrowed approximately

$227

 million under a Receivables Financing Agreement, as amended in

July 2007,

December 2007,

May 2008,

February 2009,

October 2010

and

August 2013 (

the “RFA”) from BMO, in order to finance the Portfolio Purchase which had a purchase price of

$300

million. The original term of the agreement was

three

years. This term was extended by each of the Second, Third, Fourth and Fifth Amendments and the most recent agreement signed in

August 2013.

On

August 

7,

2013,

Palisades XVI, a

100%

owned bankruptcy remote subsidiary, entered into a Settlement Agreement and Omnibus Amendment (the “BMO Settlement Agreement”) with BMO as an amendment to the RFA. In consideration for a

$15

million prepayment funded bythe Company, BMO agreed to significantly reduce minimum monthly collection requirements and the interest rate. If and when BMO receives the next

$15

million of collections from the Portfolio Purchase or from voluntary prepayments by the Company, less certain credits for payments made prior to the consummation of the BMO Settlement Agreement (the “Remaining Amount”), Palisades XVI and its affiliates would be automatically released from liability in connection with the RFA (subject to customary exceptions). A condition on the release was Palisades XVI’s agreement to grant BMO, as of the time of the payment of the Remaining Amount, the right to receive

30%

of net collections from the Portfolio Purchase once Palisades XVI has received from future net collections, the sum of

$15

million plus voluntary prepayments included in the payment of the Remaining Amount (the “Income Interest”). On

June 

3,

2014,

Palisades XVI paid the Remaining Amount. The final principal payment of

$2.9

million included a voluntary prepayment of

$1.9

million provided from funds of the Company. Accordingly, Palisades XVI was entitled to receive

$16.9

million of future collections from the Portfolio Purchase before BMO would be entitled to receive any payments with respect to its Income Interest.

During the month of

June 2016,

the Company received the balance of the

$16.9

million and, as of

June 30, 2019

and

September 30, 2018,

the Company recorded a liability to BMO of approximately

$120,000

and

$121,000,

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

July 10, 2019

and

October 10, 2018,

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

XML

Note 7 - Discontinued Operations

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

Note

7—Discontinued

Operations

On

December 

31,

2013,

the Company acquired

80%

ownership of CBC and its affiliate, CBC Management Services, LLC for approximately

$5.9

million.

On

December 

31,

2015,

the Company acquired the remaining

20%

ownership of CBC for

$1.8

million, through the issuance of restricted stock valued at approximately 

$1.0

million and

$0.8

million in cash. Each of the

two

original principals of CBC received

61,652

shares of restricted stock at a fair market value of

$7.95

per share and

$0.4

million in cash. An aggregate of

123,304

shares of restricted stock were issued as part of the transaction.

On

January 

1,

2016,

the Company renewed the expiring

two

-year employment agreements of the

two

CBC principals for

one

-year terms. The employment contracts of the original

two

principals expired at the end of

December 2016.

The Company did

not

renew those contracts. Ryan Silverman was appointed CEO/General Counsel effective

January 1, 2017.

During

November 2017,

a competitor of CBC alleged that CBC had unlawfully purchased certain of the competitor's trade secrets and customer lists from intermediaries who allegedly arranged and/or paid for said materials from the competitor.  CBC denied any wrongdoing and disclaimed liability.  The parties settled the matter for a payment of

$0.5

million on or about

November 22, 2017,

in exchange for a complete release.

On

December 13, 2017,

the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement) with CBC Holdings LLC, a Delaware limited liability company (the “Buyer”). Under the Securities Purchase Agreement, the Company sold all of the issued and outstanding equity capital of CBC for an aggregate purchase price of approximately

$10.3

million. Of the aggregate purchase price, approximately

$4.5

million was paid in cash, and

$5.8

million was paid under a promissory note at an annual interest rate of

7%

to be paid quarterly to the Company and secured by a

first

priority security interest in and lien on such Buyer’s affiliates’ rights to certain servicing fees. See Note

8

- Note Receivable. The remaining amount of the aggregate purchase price was paid as reimbursement of certain invoices of CBC. The Company recognized a loss of approximately

$2.4

million on the above sale of CBC as of

September 30, 2017.

As a result of the sale of CBC, all prior periods presented in the Company's consolidated financial statements will account for CBC as a discontinued operation. This determination resulted in the reclassification of the assets and liabilities comprising the structured settlement business to assets related to discontinued operations in the consolidated balance sheets, and a corresponding adjustment to our consolidated statements of operations to reflect discontinued operations for all periods presented.

As of

June 30, 2019,

and

September 30, 2018,

the Company had

no

assets or liabilities designated as discontinued operations. For the

three

and

nine

months ended

June 30, 2019

and

2018,

the components of the Company designated as discontinued operations reported a loss, net of income tax benefit of

$0

and

$80,000

,

respectively.

The following table presents the operating results for the

three

and 

nine

months ended

June 30, 2019 

and 

2018,

for the components of the Company designated as discontinued operations:

	For the Three Months ended				For the Nine Months ended
	June 30 , 2019		June 30 , 2018		June 30 , 2019		June 30 , 2018
Revenues:
Unrealized gain on structured settlements	$	—	$	—	$	—	$	244,000
Interest income on structured settlements		—		—		—		2,005,000
Total revenues		—		—		—		2,249,000
Other income		—		—		—		11,000
		—		—		—		2,260,000
Expenses:
General and administrative expenses		—		—		—		1,560,000
Interest expense		—		—		—		824,000
		—		—		—		2,384,000
Loss from discontinued operations before income tax		—		—		—		(124,000	)
Income tax benefit from discontinuing operations		—		—		—		(44,000	)
Loss from discontinued operations, net of income tax	$	—	$	—	$	—	$	(80,000	)

Prior to its sale, we, through CBC, purchased periodic payments under structured settlements and annuity policies from individuals in exchange for a lump sum payment. The Company elected to carry the structured settlements at fair value. Unearned income on structured settlements is recognized as interest income using the effective interest method over the life of the related structured settlement. Changes in fair value are recorded in unrealized gain (loss) on structured settlements in the Company’s statements of operations. Unrealized gains on structured settlements is comprised of both unrealized gains resulting from fair market valuation at the date of acquisition of the structured settlements and the subsequent fair value adjustments resulting from the change in the discount rate. Of the

$0.2

million of unrealized gains recognized for the

nine

months ended

June 30, 2018,

approximately

$0.2

million is due to day

one

gains on new structured settlements financed during the period. There were

no

other changes in assumptions during the period. 

XML

Note 8 - Note Receivable

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Financing Receivables [Text Block]

Note

8

—Note Receivable

Pursuant to the Securities Purchase Agreement, CBC sold to the Buyer all of the issued and outstanding equity capital of CBC for

$10.3

million. In conjunction with this sale the Company received

$4.5

million in cash, and a Promissory Note (the “Note”) for

$5.8

million from the Buyer. The Note bears interest at

7%

per annum, payable in quarterly installments of principle and interest through

December 13, 2020,

and is secured pursuant to a Security Agreement (the “Security Agreement”) with an affiliate of the Buyer. Under the Security Agreement the Company has a

first

priority security interest and lien on all servicing fees received by the affiliate. The payment due from the Buyer on

March 13, 2019

was

not

received by the Company, and accordingly, the Buyer was

not

current on its obligations under the Note at

June 30, 2019.

On

April 11, 2019,

the Company signed a forbearance agreement with the Buyer, whereby the Company agreed to forbear from exercising any enforcement remedies with respect to the loan documents, as long as payment in full of all amounts due were received by the Company

no

later than

April 15, 2019.

The principle amount outstanding on this Note at

June 30, 2019

and

September 30, 2018

was

$0.0

million and

$4.3

million, respectively. For the

three

and

nine

months ended

June 30, 2019

and

2018,

the Company recorded

$68,000

and

$92,000,

respectively, and

$224,000

and

$193,000,

respectively, in interest income, which has been classified as other income in the Company’s consolidated statements of operations, associated with this note. See Note

7

- Discontinued Operations.

On

April 15, 2019,

the Company received a lump sum payment of

$4

million from the buyer, consisting of

$3.8

million in principle and

$0.2

million in interest income. Effective

April 15, 2019,

the Note was paid in full, and the security interests that were secured by the Security Agreement were released by the Company back to the Buyer.

XML

Note 9 - Settlements

9 Months Ended

Jun. 30, 2019

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

June 30, 2019,

and

September 30, 2018,

the Company has a settlement receivable due from this

third

-party servicer of

$2.0

million and

$3.3

million, respectively. During the

nine

months ended

June 30, 2019,

the Company received

$1.5

million in payments from this

third

-party servicer. For the

three

and

nine

months ended

June 30, 2019

and

2018,

the Company recorded

$53,000

and

$0,

respectively, and

$180,000

and

$0,

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

Additionally, on

March 31, 2019

the Company recorded a settlement receivable due from a

third

-party servicer of

$0.2

million in the Company's consolidated balance sheet, in conjunction with prior overcharges billed to the Company in excess of contractually permitted amounts.  For the

three

and

nine

months ended

June 30, 2019,

the Company recognized

$0

and

$0.3

million in settlement income associated with the excess charges, and has recorded as a gain on settlement in the Company's 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. The Company has recognized a gain on settlement of

$25,000

for the

three

and

nine

months ended

June 30, 2019

in its consolidated statements of operations.

On

June 30, 2017,

GAR Disability Advocates, filed a complaint against a former employee, Pamela Hofer ("Hofer"), and others in the United States Court for the District of New Jersey (the "Action"), asserting claims of conversion and tortious interference with existing business relationships. On

May 22, 2018,

the Action was transferred to the Eastern District of Kentucky.

On

May 7, 2019,

GAR agreed to dismiss and settle the Action for a payment from Hofer in the amount of

$47,500,

payable to GAR

no

later than

May 8, 2019.

On

May 8, 2019,

GAR received the payment from Hofer, and delivered to Hofer an executed Stipulation of Dismissal of the Action. The Company recognized a gain on settlement of

$47,500

for the

three

and

nine

months ended

June 30, 2019

in its consolidated statements of operations.

On

May 15, 2019,

the Company received

$0.2

million from the bankruptcy trustee in New Jersey, associated with the bankruptcy filing of Axiant, LLC, a previous

third

party servicer. The Company recorded a gain on settlement of

$0.2

million for the

three

and

nine

months ended

June 30, 2019

in its consolidated statements of operations.

XML

Note 10 - Other Income

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Other Nonoperating Income and Expense [Text Block]

 

Note

10

— Other Income

The following tables summarize other income for the

three

and

nine

months ended

June 30, 2019

and

2018:

	For the Three Months Ended June 30,
	2019		2018
Interest and dividend income	$	821,000	$	111,000
Unrealized gain		33,000		—
Other		1,000		(35,000	)
	$	855,000	$	76,000

	For the Nine Months Ended June 30,
	2019		2018
Interest and dividend income	$	1,274,000	$	235,000
Realized gain		25,000		—
Unrealized gain		53,000		—
Other		43,000		(56,000	)
	$	1,395,000	$	179,000

XML

Note 11 - Commitments and Contingencies

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note

1

1

—Commitments and Contingencies

  

Leases

  

The Company leases its facilities in Englewood Cliffs, NJ, Houston, TX, and Louisville, KY. The lease in Louisville, KY expired in

December 2018

and was

not

renewed. Rent expense for the

three

and

nine

months ended

June 30, 2019

and

2018

was

$69,000

and

$94,000

and

$209,000

and

$281,000

respectively.

On

July 15, 2019,

GAR entered into a sublease agreement with a

third

party for office space in Fort Lee, NJ. The agreement expires in

April 2023,

with future minimum lease payments of

$0.3

million.

Legal Matters

 

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.  

XML

Note 12 - Income Taxes

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

12—Income

Taxes

  

 At the end of each interim reporting period, the Company estimates its effective income tax rate expected to be applicable for the full year. The estimate is used in providing for income taxes on a year-to-date basis and

may

change in subsequent interim periods. The Company’s effective tax rate from operations for the

three

and

nine

months ended

June 30, 2019

was

29%

and

28%,

respectively, compared to

35%

for the same periods in the prior year. The effective rate for fiscal

2019

and

2018

differed from the U.S. federal statutory rate of

21%

and

28%,

respectively, primarily due to state income taxes, other permanent differences, and the

first

full year the reduced federal tax rate of

21%

was applicable.

On

December 22, 2017,

the Tax Cuts and Jobs Act (the "Tax Act") was enacted into law in the United States. The Tax Act significantly revises corporate income tax law by, among other things, lowering the corporate income tax rates from

35%

to

21%.

Under GAAP, deferred taxes must be adjusted for enacted changes in tax laws or rates during the period in which new tax legislation is enacted. During the year ended

September 30, 2018,

tax expense of approximately

$4.4

million was recorded, representing the revaluation of deferred tax assets and liabilities as a result of the lower corporate tax rate established by the Tax Act.  

 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. The Company is

no

longer subject to examination by U.S federal income tax authorities for tax years prior to

2016.

  The Company has closed the Internal Revenue Service audit of its federal tax returns for years

September 30, 2014

and

2015.

  Effective

March 21, 2019,

the Company received an approval of its

2014

carry-back claim of

$3.2

million as part of this audit, which was received by the Company on

May 28, 2019. 

In addition, the Company received

$0.2

million in interest income on its

2014

carry-back claim, which has been booked as other income in the consolidated statement of operations for the

three

and

nine

months ended

June 30, 2019. 

On

July 19, 2019,

the Company received

$4.7

million from the Internal Revenue Service for its

2016

carry-back claim.

XML

Note 13 - Net Income (Loss) Per Share

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Earnings Per Share [Text Block]

Note

1

3

—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

nine

months ended

June 30, 2019

and

2018:

	For the Three Months Ended June 30 , 2019		For the Three Months Ended June 30 , 2018		For the Nine Months Ended June 30 , 2019		For the Nine Months Ended June 30 , 2018
Income from continuing operations	$	2,304,000	$	1,957,000	$	5,352,000	$	388,000
Loss from discontinued operations		—		—		—		(80,000	)
Net Income	$	2,304,000	$	1,957,000	$	5,352,000	$	308,000
Basic earnings per common share from continuing operations	$	0.35	$	0.29	$	0.80	$	0.06
Basic loss per common share from discontinued operations		—		—		—		(0.01	)
Basic earnings per share	$	0.35	$	0.29	$	0.80	$	0.05
Diluted earnings per common share from continuing operations	$	0.35	$	0.29	$	0.80	$	0.06
Diluted loss per common share from discontinuing operations		—		—		—		(0.01	)
Diluted earnings per share	$	0.35	$	0.29	$	0.80	$	0.05
Weighted average number of common shares outstanding:
Basic		6,666,012		6,685,415		6,678,947		6,654,911
Dilutive effect of stock options		219		213		313		2,929
Diluted		6,666,231		6,685,628		6,679,260		6,657,840

XML

Note 14 - Stock Option Plans

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Stock Option Plans [Text Block]

Note

1

4

—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

111,868

options, leaving

1,325,443

shares available as of

June 30, 2019.

At

June 30, 2019,

53

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.

Stock Based Compensation

The Company accounts for stock-based employee compensation under ASC

No.

718,

Compensation — Stock Compensation (“ASC

718”

). ASC

718

requires that compensation expense associated with stock options and other stock-based awards be recognized in the condensed consolidated statement of operations.

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 June 30 ,
	2019					2018
	Number Of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Outstanding options at the beginning of period		726,767		$	8.17		796,767		$	8.16
Options exercised		—			—		—			—
Options forfeited/cancelled		(1,200	)		2.95		(200	)		7.93
Outstanding options at the end of period		725,567		$	8.18		796,567		$	8.16
Exercisable options at the end of period		725,567		$	8.18		778,394		$	8.16

	For the Nine Months Ended June 3 0 ,
	2019					2018
	Number Of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Outstanding options at the beginning of period		728,867		$	8.17		880,567		$	8.05
Options exercised		—			—		(61,600	)		6.48
Options forfeited/cancelled		(3,300	)		6.27		(22,400	)		8.39
Outstanding options at the end of period		725,567		$	8.18		796,567		$	8.16
Exercisable options at the end of period		725,567		$	8.18		778,394		$	8.16

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

June 30, 2019:

			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
$2.8751	-	$5.7500		—		—	$	—		—	$	—
$5.7501	-	$8.6250		616,067		2.95		7.97		616,067		7.97
$8.6251	-	$11.5000		109,500		3.58		9.37		109,500		9.37
				725,567			$	8.18		725,567	$	8.18

The Company recognized

$0

and

$7,000

of compensation expense related to the stock options vested during the

three

and

nine

months ended

June 30, 2019,

respectively. The Company recognized

$9,000

and

$98,000

of compensation expense related to the stock option grants during the

three

and

nine

months ended

June 30, 2018,

respectively. As of

June 30, 2019,

there was

no

unrecognized compensation cost related to stock option awards.

The intrinsic value of the outstanding and exercisable options as of

June 30, 2019

was approximately

$1,000

.

The weighted average remaining contractual life of exercisable options is

three

years. There were

no

options exercised during the

three

and

nine

months ended

June 30, 2019.

There were

61,600

options exercised during the

three

and

nine

months ended

June 30, 2018

for

$399,000

.

The fair value of the stock options that vested during the

three

and

nine

months ended

June 30, 2019

was approximately

$0

and

$126,000,

respectively. The fair value of the stock options that vested during the

three

and

nine

months ended

June 30, 2018

was approximately

$0

and

$222,000,

respectively. There were

no

options granted during the

three

and

nine

months ended

June 30, 2019

and

2018.

 

The Company did

not

grant any restricted stock awards during the

three

and

nine

months ended

June 30, 2019

and

2018.

As of

June 30, 2019,

and

September 30, 2018,

there was

no

unrecognized compensation cost related to restricted stock awards.

XML

Note 15 - Stockholders' Equity

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

Note

1

5

—Stockholders’ Equity

The Company has

5,000,000

authorized preferred shares with a par value of

$0.01

per share.  The Board of Directors 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

June 30, 2019

and

2018.

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

June 30, 2019,

there were

no

such restrictions.

No

dividends were declared during the

three

and

nine

months ended

June 30, 2019. 

On

February 5, 2018

,

the Board of Directors of the Company declared a special cash dividend in the amount of

$5.30

per share with respect to its Common Stock, payable on

February 28, 2018

to holders of record of the Company’s Common Stock at the close of business on

February 16, 2018

,

with an ex-dividend date of

March 1, 2018.

The aggregate payment to shareholders was approximately

$35

million.

On

May 17, 2019,

the Board of Directors approved the repurchase of up to

$10.5

million of the Company’s common stock and authorized management of the Company to enter into the Shares Repurchase Plan under Sections

10b

-

18

and

10

(b)

5

-

1

of the Securities and Exchange Act (the “Shares Repurchase Plan”). The Shares Repurchase Plan is effective through

August 17, 2019.

For the

three

months ended

June 30, 2019,

the Company purchased

79,500

shares at an aggregate cost of approximately

$0.6

million. The remaining authorization under the Shares Repurchase Plan at

June 30, 2019

was approximately

$9.9

million.

Through

August 12, 2019,

the Company purchased approximately

116,600

shares at an aggregate cost of approximately

$0.8

million under the Shares Repurchase Plan.

XML

Note 16 - Fair Value of Financial Measurements and Disclosures

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note

1

6

—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:

	June 30 , 2019				September 30, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Cash equivalents (Level 1)	$	20,000	$	20,000	$	1,786,000	$	1,786,000
Investments in equity securities (Level 1)		8,032,000		8,032,000		7,575,000		7,575,000	(1)
Available-for-sale debt securities (Level 2)		50,286,000		50,286,000		30,479,000		30,479,000
Consumer receivables acquired for liquidation (Level 3)		2,184,000		27,889,000		3,749,000		27,574,000	(1)

(

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 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.

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,

2018.

The Company had

no

Level

3

available-for-sale investments during the

three

and

nine

months ended

June 30, 2019.

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

July

of

2019

through

December

of

2024.

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

21%.

  

XML

Note 17 - Related Party

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

Note

1

7

—Related Party

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, the Company's

49%

owned joint venture.  For the

three

and

nine

months ended

June 30, 2019,

the Company paid this consultant

$12,000

and

$60,000,

respectively, and for the

three

and

nine

months ended

June 30, 2018,

$24,000

and

$72,000,

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

June 30, 2019

and

September 30, 2018. 

XML

Note 18 - Segment Reporting

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note

1

8

—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 $1.8 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. 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 Company accounted for its investment in Sylvave under the equity method of accounting through January 12, 2018, for subsequent periods the Company includes the financial results of Sylvave in its consolidated statement of operations. 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, a note receivable, property and equipment, goodwill, deferred taxes and other assets.

The following table shows results by reporting segment for the

three

and

nine

months ended

June 30, 2019

and

2018:

(Dollars in millions)	Consumer Receivables		Social Security Disability Advocacy		Personal Injury Claims (2)		Corporate (3)			Total
Three Months Ended June 30,
2019:
Revenues	$	3.7	$	1.2	$	0.4	$	—		$	5.3
Other income		0.2		—		—		0.9			1.1
Segment profit (loss)		3.3		0.4		0.6		(1.0	)		3.3
2018:
Revenues		4.5		1.1		1.6		—			7.2
Other income		—		—		—		0.1			0.1
Segment profit (loss)		3.6		0.3		1.1		(2.0	)		3.0
Nine Months Ended June 30,
2019:
Revenues		10.7		3.7		1.6		—			16.0
Other income		0.7		—		—		1.3			2.0
Segment profit (loss)		9.9		1.2		1.5		(5.1	)		7.5
Segment Assets (1)		9.1		0.6		6.2		74.5			90.4
2018:
Revenues		12.8		3.2		2.2		—			18.2
Other income		—		—		—		0.2			0.2
Segment profit (loss)		11.4		0.5		1.9		(7.8	)		6.0
Segment Assets (1)		27.1		3.2		20.6		31.1			82.0

The Company does

not

have any intersegment revenue transactions.

( 1 )	Includes other amounts in other line items on the consolidated balance sheet.
( 2 )	The Company recorded Pegasus as an equity investment in its consolidated financial statements through January 12, 2018. Commencing on January 13, 2018, Sylvave is consolidated in the Company’s financial statements. For segment reporting the Company has included its pro-rated share of the earnings and losses from its investment under the Personal Injury Claims segment.
( 3 )	Corporate is not part of the three reportable segments, as certain expenses and assets are not earmarked to any specific operating segment.

XML

Note 19 - Accumulated Other Comprehensive Income (Loss)

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

Note

1

9

- Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) consists of:

	For the N ine Months Ended June 3 0 , 2019							For the Year Ended September 30, 2018
	Unrealized gain (loss) on marketable securities			Foreign currency translation, net		Total		Unrealized gain (loss) on marketable securities			Foreign currency translation, net		Total
Beginning Balance	$	(10,000	)	$	45,000	$	35,000	$	7,000		$	11,000	$	18,000
Cumulative effect adjustment for adoption of ASU No. 2016-01, net of tax of $5,000		10,000			-		10,000		-			-		-
Adjusted opening balance	$	-		$	45,000	$	45,000	$	7,000		$	11,000	$	18,000
Change in unrealized gains on foreign currency translation, net of tax benefit/(expense) of ($14,000) and ($17,000) at June 30, 2019, and September 30, 2018, respectively.		-			52,000		52,000		-			34,000		34,000
Change in unrealized gains (losses) on marketable securities, net of tax benefit/ (expense) of ($40,000) and $9,000 at June 30, 2019, and September 30, 2018, respectively.		102,000			-		102,000		(17,000	)		-		(17,000	)
Net current-period other comprehensive income (loss)		102,000			52,000		154,000		(17,000	)		34,000	$	17,000
Ending balance	$	102,000		$	97,000	$	199,000	$	(10,000	)	$	45,000	$	35,000

XML

Significant Accounting Policies (Policies)

9 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

 

The consolidated balance sheet as of

June 30, 2019,

the consolidated statements of operations for the

three

and

nine

months ended

June 30, 2019

and

2018,

the consolidated statements of comprehensive income (loss) for the

three

and

nine

months ended

June 30, 2019

and

2018,

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

three

and

nine

months ended

June 30, 2019

and

2018,

and the consolidated statements of cash flows for the

nine

months ended

June 30, 2019

and

2018,

are unaudited. The

September 

30,

2018

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, 2018.

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

June 30, 2019,

the results of operations for the

three

and

nine

months ended

June 30, 2019

and

2018,

the statement of comprehensive income (loss) for the

three

and

nine

months ended

June 30, 2019

and

2018,

the statement of stockholders' equity for the

three

and

nine

months ended

June 30, 2019

and

2018

and cash flows for the

nine

months ended

June 30, 2019

and

2018

have been made. The results of operations for the

three

and

nine

months ended

June 30, 2019

and

2018

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 Form

10

-K for the fiscal year ended

September 30, 2018

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 (“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.

Liquidity Disclosure [Policy Text Block]

 

Liquidity

 At

June 30, 

2019,

the Company had

$2.9

million in cash and cash equivalents, as well as

$58.3

million in investments in debt and equity securities on hand and

no

debt.  In addition, the Company had

$89.2

million in stockholders' equity at

June 30, 

2019.

We believe that our available cash resources and expected cash inflows from operations will be sufficient to fund operations for at least the next

twelve

months.

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 cash balances with

two

banks at

June 30, 2019

that each exceeded the balance insured by the FDIC by approximately

$0.1

million. Additionally,

three

foreign banks with an aggregate

$1.5

million in cash 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

 

The Company adopted Accounting Standard Update (“ASU”)

No.

2016

-

01

on

October 1, 2018,

which requires substantially all equity investments in nonconsolidated entities to be 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 consolidated statements of operations.   

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

Available-for-Sale Debt Securities

   

Non-equity 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.  

Equity Method Investments [Policy Text Block]

Equity method investments

 

Investee companies that are

not

consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or

not

the Company exercises significant influence with respect to an investee depends on an evaluation of several factors including, among others, representation on the investee company's board of directors and ownership level, which is generally a

20%

to

50%

interest in voting securities of the investee company. Under the equity method of accounting, an investee company's accounts are

not

reflected within the Company's consolidated balance sheets and statements of operations; however, the Company's share of the earnings of the investee company is reflected as earnings and loss from equity method investment in the Company's consolidated statement of operations. The Company's carrying value in an equity method investee company is reflected on the Company's consolidated balance sheet, as equity method investment. 

When the Company's carrying value in an equity method investee company is reduced to zero,

no

further losses are recorded in the Company's consolidated financial statements unless the Company guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports income, the Company will

not

record its share of such income until it equals the amount of its share of losses

not

previously recognized. There were

no

impairment losses recorded on our equity method investments for the

three

and

nine

months ended

June 30, 2019

and

2018.

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”), 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

-

30

,

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. In this case, 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. For the

three

and

nine

months ended

June 30, 2019,

the Company recorded a

$0.1

million impairment on an international portfolio. For the

three

and

nine

months ended

June 30, 2018,

the Company recorded a

$0.1

million impairment on a domestic portfolio.

Income Recognition - Social Security Disability Advocacy

Effective

October 1, 2018,

the Company adopted ASC

606

- “Revenue from Contracts with Customer” (“ASC

606”

), which was effective for annual periods beginning on or after

December 15, 2017.

ASC

606

introduced a

five

-step approach to revenue recognition. See “Recent Accounting Pronouncements” for a discussion of ASC

606.

The Company applied ASC

606

in accordance with the modified retrospective transitional approach recognizing the cumulative effect of initially applying the revenue standard as an adjustment to the opening balance of retained earnings during this period (

October 1, 2018).

Comparative prior year periods were

not

adjusted. In applying the modified retrospective approach, we elected practical expedients for (a) completed contracts as described in ASC

606

-

10

-

65

-

1

-c(

2

), and (b) contract modifications as described in ASC

606

-

10

-

65

-

1

-f(

4

), allowing (a) the application of the revenue standard only to contracts that were

not

completed as of the date of initial application, and (b) to reflect the aggregate effect of all modifications that occur before the adoption date in accordance with the new standard when: (i) identifying the satisfied and unsatisfied performance obligations, (ii) determining the transaction price, and (iii) allocating the transaction price to the satisfied and unsatisfied performance obligations. We believe that the impact on the opening balance of retained earnings during the period (

October 1, 2018)

would

not

have been significantly different had we

not

elected to use the practical expedients.

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 Veterans Administration 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 consolidated financial statements include estimated fair value information regarding its available-for-sale debt securities and investments in equity securities as of

June 30, 2019,

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.

Reclassification, Policy [Policy Text Block]

Reclassification

 

Certain prior period amounts in the accompanying condensed consolidated financial statements have been reclassified to conform to the current year presentation. These reclassifications had

no

effect on previously reported net income or stockholders' equity.  

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

Adopted During The

Nine

Months Ended

June 30

,

2019

On

October 1, 2018,

the Company adopted FASB update ASC

606

that requires use of a single principles-based model for recognition of revenue from contracts with customers. The core principle of the model is to recognize revenue upon transfer of promised goods or services to customers, in an amount that reflects the entitled consideration received in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the customer contracts. The Company adopted the new guidance using the modified retrospective approach which did

not

require the restatement of prior periods, and recognized a cumulative effect adjustment resulting in an increase in total assets and retained earnings of

$173,000,

net of taxes of

$80,000.

The most significant impact of ASC

606

relates to the Company's accounting for its revenue associated with disability claimant's contracts. Previously, the Company recognized disability fee income when the disability claimants cases closed with the social security administration and the applicable fees were collected. Under the new guidance, the Company determined that the various advocacy services, performed on behalf of a claimant, constitute

one

performance obligation as they represent an integrated set of services designed to provide a claimant with a successful award. It was also determined that the benefit of these services is conveyed to the claimant at the point in time that the award is determined to be successful. In addition, the Company has made estimates of variable consideration under the expected value method. Therefore, for these arrangements, the Company will recognize revenue when each case is closed, when cash is received or when the Company receives a notice of award, stipulating the Company's fee earned on each case directly from the social security administration.

The primary impact of adopting the new standard results in acceleration of revenues for the aforementioned contractual arrangements, which relate to the social security disability advocacy segment. Disability fee income represents approximately

22.2%

and

23.3%

of the Company’s total consolidated revenues for the

three

and

nine

months ended

June 30, 2019.

The following line items in our consolidated statements of operations and comprehensive income for the current reporting period and condensed consolidated balance sheet as of

June 30, 2019

have been provided to reflect both the adoption of ASC

606

as well as a comparative presentation in accordance with ASC

605

previously in effect:

Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) for the three months ended June 30 , 2019	As Reported (in accordance with ASC 606)		Balances Without Adoption of ASC 606		Impact of Adoption Higher/(Lower)
Disability fee income	$	1,175,000	$	1,322,000	$	(147,000	)
Income from continuing operations before income tax	$	3,341,000	$	3,488,000	$	(147,000	)

Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) for the nine months ended June 30 , 2019	As Reported (in accordance with ASC 606)		Balances Without Adoption of ASC 606		Impact of Adoption Higher/(Lower)
Disability fee income	$	3,732,000	$	3,750,000	$	(18,000	)
Income from continuing operations before income tax	$	7,498,000	$	7,516,000	$	(18,000	)

	As of June 30 , 2019
Condensed Consolidated Balance Sheet	As Reported (in accordance with ASC 606)		Balances Without Adoption of ASC 606		Impact of Adoption Higher/(Lower)
Asset
Accounts receivable	$	235,000	$	—	$	235,000
Stockholders' equity
Retained earnings	$	87,956,000	$	87,703,000	$	253,000	(1)

(

1

) Does

not

include the tax impact of

$80,000

On

October 1, 2018,

the Company adopted FASB ASU

No.

 

2016

-

01,

Recognition and Measurement of Financial Assets and Financial Liabilities, to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The main provision of this guidance requires certain investments in equity securities to be measured at fair value with changes in fair value recognized in net earnings; separate presentation in other comprehensive income for changes in fair value of financial liabilities measured under the fair value option that are due to instrument-specific credit risk; and changes in disclosures associated with the fair value of financial instruments. Upon adoption of this ASU, the Company's investments in equity securities are

no

longer classified as available for sale, and changes in fair value are reflected in other income, net on the Company's condensed consolidated statement of operations. In conjunction with this adoption, the Company recorded a cumulative effect adjustment with a decrease to opening retained earnings of

$10,000

and an increase to opening accumulated other comprehensive income of

$10,000,

net of tax benefit of

$5,000.

In

August 2016,

the FASB issued ASU

No.

2016

-

15

"Statement of Cash Flows (Topic

230

): Classification of Certain Cash Receipts and Cash Payments."  This ASU made

eight

targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The new standard is effective for fiscal years beginning after

December 15, 2017.

Early adoption was permitted. The new standard required adoption on a retrospective basis unless it impracticable to apply, in which case the Company would have been required to apply the amendments prospectively as of the earliest date practicable. The Company's adoption of the ASU did

not

have a material effect on the Company’s condensed consolidated statements of cash flows.

In

January 2017,

the FASB issued ASU

No.

2017

-

01,

“Business Combinations (Topic

805

): Clarifying the Definition of a Business.” The new rules provide for the application of a screen test to consider whether substantially all the fair value of the assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen test determines this to be true, the set is

not

a business. The new standard was effective for the Company in the

first

quarter of

2019.

The adoption of the new accounting rules did

not

have a material impact on the Company’s consolidated financial condition, results of operations or cash flows.

In

March 2017,

the FASB issued ASU

No.

2017

-

09,

Compensation - Stock Compensation (Topic

718

) Improvements to Employee Share Based Payment Accounting, to simplify and improve areas of generally accepted accounting principles for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The effective date for this update was for annual reporting periods beginning after

December 15, 2017,

including interim periods within that reporting period. The adoption of this update did

not

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

Recent Accounting Pronouncements

Not

Yet Adopted

In

February 2016,

the FASB issued ASU

No.

2016

-

02,

Leases (Topic

842

) 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 periods 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

No.

2018

-

01,

Leases (Topic

842

): Land Easement Practical Expedient for Transition to ASC

842.

ASU

No.

2018

-

01

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

No.

2018

-

01.

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

No.

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 becomes effective in for fiscal years beginning after

December 15, 2019

and interim periods within those years, and early adoption is permitted. The Company believes that the adoption of this ASU will

not

have a material impact on its consolidated financial statements.

In

June 2016,

the FASB issued ASU

No.

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, 2019.

Upon adoption, the Company expects that it will accelerate the recording of its credit losses in its financial statements. 

In

January 2017,

the FASB issued ASU

No.

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

February 2018,

the FASB issued ASU

No.

2018

-

02,

Reclassificationof 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

will be effective for the Company's fiscal year beginning

October 1, 2019,

with early adoption permitted, and should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Act is recognized.  The adoption of this ASU is

not

expected to have a material impact on the Company's 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. 

XML

Note 1 - Business and Basis of Presentation (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block]

Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) for the three months ended June 30 , 2019	As Reported (in accordance with ASC 606)		Balances Without Adoption of ASC 606		Impact of Adoption Higher/(Lower)
Disability fee income	$	1,175,000	$	1,322,000	$	(147,000	)
Income from continuing operations before income tax	$	3,341,000	$	3,488,000	$	(147,000	)

Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) for the nine months ended June 30 , 2019	As Reported (in accordance with ASC 606)		Balances Without Adoption of ASC 606		Impact of Adoption Higher/(Lower)
Disability fee income	$	3,732,000	$	3,750,000	$	(18,000	)
Income from continuing operations before income tax	$	7,498,000	$	7,516,000	$	(18,000	)

	As of June 30 , 2019
Condensed Consolidated Balance Sheet	As Reported (in accordance with ASC 606)		Balances Without Adoption of ASC 606		Impact of Adoption Higher/(Lower)
Asset
Accounts receivable	$	235,000	$	—	$	235,000
Stockholders' equity
Retained earnings	$	87,956,000	$	87,703,000	$	253,000	(1)

XML

Note 2 - Investments in Debt and Equity Securities (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

Gain (Loss) on Securities [Table Text Block]

	For the Three Months Ended June 30 , 2019		For the Nine Months Ended June 30 , 2019
Net gains and losses recognized during the period on equity securities	$	32,000	$	53,000
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	$	32,000	$	53,000

Available-for-sale Securities [Table Text Block]

June 30, 2019	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Available for sale debt securities	$	50,144,000	$	142,000	$	—	$	50,286,000

September 30, 2018 (1)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Available for sale debt securities	$	30,479,000	$	—	$	—	$	30,479,000

XML

Note 3 - Consumer Receivables Acquired for Liquidation (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Consumer Receivables after Liquidation [Table Text Block]

	For the Three Months Ended June 30 ,
	2019			2018
Balance, beginning of period	$	2,626,000		$	5,525,000
Net cash collections from collection of consumer receivables acquired for liquidation		(4,112,000	)		(5,146,000	)
Net cash collections represented by account sales of consumer receivables acquired for liquidation		—			(1,000	)
Impairment		(100,000	)		(100,000	)
Effect of foreign currency translation		86,000			(167,000	)
Finance income recognized		3,684,000			4,509,000
Balance, end of period	$	2,184,000		$	4,620,000
Finance income as a percentage of collections		89.6	%		87.6	%

	For the Nine Months Ended June 30 ,
	2019			2018
Balance, beginning of period	$	3,749,000		$	6,841,000
Net cash collections from collection of consumer receivables acquired for liquidation		(12,026,000	)		(14,844,000	)
Net cash collections represented by account sales of consumer receivables acquired for liquidation		—			(3,000	)
Impairment		(100,000	)		(100,000	)
Effect of foreign currency translation		(98,000	)		(69,000	)
Finance income recognized		10,659,000			12,795,000
Balance, end of period	$	2,184,000		$	4,620,000
Finance income as a percentage of collections		88.6	%		86.2	%

Schedule of Collections on Gross Basis [Table Text Block]

	For the Three Months Ended June 30 ,						For the Nine Months Ended June 30 ,
	2019			2018			2019			2018
Gross collections (1)	$	7,680,000		$	9,551,000		$	23,262,000		$	27,134,000
Commissions and fees (2)		(3,568,000	)		(4,404,000	)		(11,236,000	)		(12,287,000	)
Net collections	$	4,112,000		$	5,147,000		$	12,026,000		$	14,847,000

XML

Note 4 - Equity Method Investments (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

	Fair Value
Cash	$	5,748,000
Personal injury claim advances portfolio		14,571,000
Accounts payable and accrued expenses		(664,000	)
Total net assets acquired	$	19,655,000

Equity Method Investment, Summarized Financial Information [Table Text Block]

	Condensed Statement of Operations Information
	For the Period October 1, 2017 to January 12, 2018
Personal injury claims income	$	671,000
Operating expenses		(386,000	)
Income from operations	$	1,057,000
Earnings from equity method investment	$	845,000

XML

Note 5 - Personal Injury Claims Funding (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

Personal Claims Funding [Table Text Block]

	For the Three Months ended June 3 0 ,
	2019			2018
Balance, beginning of period	$	6,630,000		$	15,994,000
Personal claim advances		123,000			—
Provision for losses		(141,000	)		(6,000	)
(Write offs) recoveries		389,000			(408,000	)
Personal injury claims income		439,000			1,557,000
Personal injury claims receipts		(1,531,000	)		(3,344,000	)
Balance, end of period	$	5,909,000		$	13,793,000

	For the Nine Months ended June 3 0 ,
	2019			2018
Balance, beginning of period	$	10,745,000		$	3,704,000
Acquisition of personal injury funding portfolio (1)		—			14,571,000
Personal claim advances		123,000			60,000
Provision for losses		(299,000	)		(465,000	)
(Write offs) recoveries		389,000			(371,000	)
Personal injury claims income		1,608,000			2,167,000
Personal injury claims receipts		(6,657,000	)		(5,872,000	)
Balance, end of period	$	5,909,000		$	13,793,000

XML

Note 7 - Discontinued Operations (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

Disposal Groups, Including Discontinued Operations [Table Text Block]

	For the Three Months ended				For the Nine Months ended
	June 30 , 2019		June 30 , 2018		June 30 , 2019		June 30 , 2018
Revenues:
Unrealized gain on structured settlements	$	—	$	—	$	—	$	244,000
Interest income on structured settlements		—		—		—		2,005,000
Total revenues		—		—		—		2,249,000
Other income		—		—		—		11,000
		—		—		—		2,260,000
Expenses:
General and administrative expenses		—		—		—		1,560,000
Interest expense		—		—		—		824,000
		—		—		—		2,384,000
Loss from discontinued operations before income tax		—		—		—		(124,000	)
Income tax benefit from discontinuing operations		—		—		—		(44,000	)
Loss from discontinued operations, net of income tax	$	—	$	—	$	—	$	(80,000	)

XML

Note 10 - Other Income (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

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

	For the Three Months Ended June 30,
	2019		2018
Interest and dividend income	$	821,000	$	111,000
Unrealized gain		33,000		—
Other		1,000		(35,000	)
	$	855,000	$	76,000

	For the Nine Months Ended June 30,
	2019		2018
Interest and dividend income	$	1,274,000	$	235,000
Realized gain		25,000		—
Unrealized gain		53,000		—
Other		43,000		(56,000	)
	$	1,395,000	$	179,000

XML

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

9 Months Ended

Jun. 30, 2019

Notes Tables

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

	For the Three Months Ended June 30 , 2019		For the Three Months Ended June 30 , 2018		For the Nine Months Ended June 30 , 2019		For the Nine Months Ended June 30 , 2018
Income from continuing operations	$	2,304,000	$	1,957,000	$	5,352,000	$	388,000
Loss from discontinued operations		—		—		—		(80,000	)
Net Income	$	2,304,000	$	1,957,000	$	5,352,000	$	308,000
Basic earnings per common share from continuing operations	$	0.35	$	0.29	$	0.80	$	0.06
Basic loss per common share from discontinued operations		—		—		—		(0.01	)
Basic earnings per share	$	0.35	$	0.29	$	0.80	$	0.05
Diluted earnings per common share from continuing operations	$	0.35	$	0.29	$	0.80	$	0.06
Diluted loss per common share from discontinuing operations		—		—		—		(0.01	)
Diluted earnings per share	$	0.35	$	0.29	$	0.80	$	0.05
Weighted average number of common shares outstanding:
Basic		6,666,012		6,685,415		6,678,947		6,654,911
Dilutive effect of stock options		219		213		313		2,929
Diluted		6,666,231		6,685,628		6,679,260		6,657,840

XML

Note 14 - Stock Option Plans (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

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

	For the Three Months Ended June 30 ,
	2019					2018
	Number Of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Outstanding options at the beginning of period		726,767		$	8.17		796,767		$	8.16
Options exercised		—			—		—			—
Options forfeited/cancelled		(1,200	)		2.95		(200	)		7.93
Outstanding options at the end of period		725,567		$	8.18		796,567		$	8.16
Exercisable options at the end of period		725,567		$	8.18		778,394		$	8.16

	For the Nine Months Ended June 3 0 ,
	2019					2018
	Number Of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Outstanding options at the beginning of period		728,867		$	8.17		880,567		$	8.05
Options exercised		—			—		(61,600	)		6.48
Options forfeited/cancelled		(3,300	)		6.27		(22,400	)		8.39
Outstanding options at the end of period		725,567		$	8.18		796,567		$	8.16
Exercisable options at the end of period		725,567		$	8.18		778,394		$	8.16

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
$2.8751	-	$5.7500		—		—	$	—		—	$	—
$5.7501	-	$8.6250		616,067		2.95		7.97		616,067		7.97
$8.6251	-	$11.5000		109,500		3.58		9.37		109,500		9.37
				725,567			$	8.18		725,567	$	8.18

XML

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

9 Months Ended

Jun. 30, 2019

Notes Tables

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

	June 30 , 2019				September 30, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Cash equivalents (Level 1)	$	20,000	$	20,000	$	1,786,000	$	1,786,000
Investments in equity securities (Level 1)		8,032,000		8,032,000		7,575,000		7,575,000	(1)
Available-for-sale debt securities (Level 2)		50,286,000		50,286,000		30,479,000		30,479,000
Consumer receivables acquired for liquidation (Level 3)		2,184,000		27,889,000		3,749,000		27,574,000	(1)

XML

Note 18 - Segment Reporting (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

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

(Dollars in millions)	Consumer Receivables		Social Security Disability Advocacy		Personal Injury Claims (2)		Corporate (3)			Total
Three Months Ended June 30,
2019:
Revenues	$	3.7	$	1.2	$	0.4	$	—		$	5.3
Other income		0.2		—		—		0.9			1.1
Segment profit (loss)		3.3		0.4		0.6		(1.0	)		3.3
2018:
Revenues		4.5		1.1		1.6		—			7.2
Other income		—		—		—		0.1			0.1
Segment profit (loss)		3.6		0.3		1.1		(2.0	)		3.0
Nine Months Ended June 30,
2019:
Revenues		10.7		3.7		1.6		—			16.0
Other income		0.7		—		—		1.3			2.0
Segment profit (loss)		9.9		1.2		1.5		(5.1	)		7.5
Segment Assets (1)		9.1		0.6		6.2		74.5			90.4
2018:
Revenues		12.8		3.2		2.2		—			18.2
Other income		—		—		—		0.2			0.2
Segment profit (loss)		11.4		0.5		1.9		(7.8	)		6.0
Segment Assets (1)		27.1		3.2		20.6		31.1			82.0

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Note 19 - Accumulated Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	For the N ine Months Ended June 3 0 , 2019							For the Year Ended September 30, 2018
	Unrealized gain (loss) on marketable securities			Foreign currency translation, net		Total		Unrealized gain (loss) on marketable securities			Foreign currency translation, net		Total
Beginning Balance	$	(10,000	)	$	45,000	$	35,000	$	7,000		$	11,000	$	18,000
Cumulative effect adjustment for adoption of ASU No. 2016-01, net of tax of $5,000		10,000			-		10,000		-			-		-
Adjusted opening balance	$	-		$	45,000	$	45,000	$	7,000		$	11,000	$	18,000
Change in unrealized gains on foreign currency translation, net of tax benefit/(expense) of ($14,000) and ($17,000) at June 30, 2019, and September 30, 2018, respectively.		-			52,000		52,000		-			34,000		34,000
Change in unrealized gains (losses) on marketable securities, net of tax benefit/ (expense) of ($40,000) and $9,000 at June 30, 2019, and September 30, 2018, respectively.		102,000			-		102,000		(17,000	)		-		(17,000	)
Net current-period other comprehensive income (loss)		102,000			52,000		154,000		(17,000	)		34,000	$	17,000
Ending balance	$	102,000		$	97,000	$	199,000	$	(10,000	)	$	45,000	$	35,000

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Note 1 - Business and Basis of Presentation (Details Textual)		3 Months Ended		9 Months Ended
	Dec. 13, 2017	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Oct. 01, 2018 USD ($)	Sep. 30, 2018 USD ($)	Jan. 12, 2018	Dec. 28, 2011
Number of Reportable Segments	4			3
Cash and Cash Equivalents, at Carrying Value, Ending Balance		$ 2,898,000		$ 2,898,000			$ 6,284,000
Available-for-sale Securities, Total		58,300,000		58,300,000
Debt, Current, Total		0		0
Stockholders' Equity Attributable to Parent, Ending Balance		89,200,000		89,200,000
Cash, Uninsured Amount		100,000		100,000
Cash, Uninsured Amount, Foreign		1,500,000		1,500,000
Equity Method Investment, Other than Temporary Impairment		$ 0	$ 0	$ 0	$ 0
Cumulative Effect of New Accounting Principle in Period of Adoption, Tax							5,000
AOCI Attributable to Parent [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption							10,000
Disability Fee Income [Member]
Percentage of Revenue		22.20%		23.30%
Accounting Standards Update 2014-09 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption						$ 173,000	173,000
Cumulative Effect of New Accounting Principle in Period of Adoption, Tax						80,000	80,000
Accounting Standards Update 2014-09 [Member] | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption							173,000
Accounting Standards Update 2016-01 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption, Tax						5,000	5,000
Accounting Standards Update 2016-01 [Member] | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption						(10,000)	(10,000)
Accounting Standards Update 2016-01 [Member] | AOCI Attributable to Parent [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption						$ 10,000	$ 10,000
Fixed Income Funds [Member]
Other than Temporary Impairment Losses, Investments, Total		$ 100,000	$ 100,000	$ 0.10	$ 0.10
Pegasus Legal Funding LLC [Member]
Business Acquisition, Percentage of Voting Interests Acquired								20.00%
Pegasus Legal Funding LLC [Member]
Equity Method Investment, Ownership Percentage								80.00%	80.00%

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Note 1 - Business and Basis of Presentation - Adoption Effect of Topic 606 on Consolidated Financial Statements (Details) - USD ($)		3 Months Ended		9 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018
Revenues		$ 5,298,000	$ 7,254,000	$ 15,999,000	$ 18,210,000
Income from continuing operations before income tax		3,341,000	3,012,000	7,498,000	5,983,000
Accounts receivable, net		235,000		235,000
Retained earnings		87,956,000		87,956,000		$ 82,441,000
Calculated under Revenue Guidance in Effect before Topic 606 [Member]
Income from continuing operations before income tax		3,488,000		7,516,000
Accounts receivable, net
Retained earnings		87,703,000		87,703,000
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member]
Income from continuing operations before income tax		(147,000)		(18,000)
Accounts receivable, net		235,000		235,000
Retained earnings	[1]	253,000		253,000
Disability Fee Income [Member]
Revenues		1,175,000	$ 1,188,000	3,732,000	$ 3,248,000
Disability Fee Income [Member] | Calculated under Revenue Guidance in Effect before Topic 606 [Member]
Revenues		1,322,000		3,750,000
Disability Fee Income [Member] | Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member]
Revenues		$ (147,000)		$ (18,000)

[1] Does not include the tax impact of $80,000

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Note 2 - Investments in Debt and Equity Securities (Details Textual) - USD ($)	9 Months Ended
	Jun. 30, 2019	Sep. 30, 2018
Equity Securities, FV-NI	$ 8,032,000
Debt Securities, Available-for-sale, Total	50,286,000	38,054,000
Mutual Funds [Member]
Equity Securities, FV-NI	8,000,000	7,600,000
US Treasury Securities [Member]
Debt Securities, Available-for-sale, Total	50,300,000
Other Comprehensive Income (Loss), Securities, Available-for-sale, Adjustment, after Tax, Total	102,000
Other Comprehensive Income (Loss), Securities, Available-for-sale, Tax, Total	$ 40,000
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss		$ 30,500,000

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Note 2 - Investments in Debt and Equity Securities - Net Gains and Losses Recognized in Equity Securities (Details) - USD ($)	3 Months Ended	9 Months Ended
	Jun. 30, 2019	Jun. 30, 2019
Net gains and losses recognized during the period on equity securities	$ 32,000	$ 53,000
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	$ 32,000	$ 53,000

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Note 2 - Investments in Debt and Equity Securities - Investments Classified as Available-for-sale (Details) - USD ($)	Jun. 30, 2019	Sep. 30, 2018
Amortized Cost	$ 50,144,000	$ 30,479,000	[1]
Unrealized Gains	142,000		[1]
Unrealized Losses			[1]
Debt Securities, Available-for-sale, Total	$ 50,286,000	$ 38,054,000

[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 3 - Consumer Receivables Acquired for Liquidation (Details Textual)	1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	Dec. 31, 2007	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Sep. 30, 2018 USD ($)
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		$ 2,184,000		$ 2,184,000		$ 3,749,000
Foreign Consumer Receivables, Percentage of Total Consumer Receivable		84.30%		84.30%		88.70%
Number of Customer Receivable Portfolios				4		3
Percentage of Assets Related to Internationl Operation		4.30%		4.30%		5.90%
Percentage of Revenue Related to International Operation		3.90%	4.60%	3.10%	2.80%
Fee Charged on Portfolio Purchase	3.00%
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Consumer Portfolio 1 [Member]
Concentration Risk, Percentage				25.00%		20.00%
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Consumer Portfolio 2 [Member]
Concentration Risk, Percentage				15.70%		11.00%
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Consumer Portfolio 3 [Member]
Concentration Risk, Percentage				12.60%		11.00%
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Consumer Portfolio 4 [Member]
Concentration Risk, Percentage				10.00%
Supplier Concentration Risk [Member] | Consumer Receivable Portfolio [Member] | Five Collection Organizations [Member]
Concentration Risk, Percentage				26.00%		31.00%
Supplier Concentration Risk [Member] | Consumer Receivable Portfolio at All Third Party Collection Agencies and Attorneys [Member] | Five Collection Organizations [Member]
Concentration Risk, Percentage				85.00%		87.00%
PERU
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Carrying Amount, Net		$ 1,300,000		$ 1,300,000		$ 2,000,000
COLOMBIA
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Carrying Amount, Net		500,000		500,000		1,300,000
Non-US [Member]
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Carrying Amount, Net		$ 1,800,000		$ 1,800,000		$ 3,300,000

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Note 3 - Consumer Receivables Acquired for Liquidation - Changes In Balance Sheet Account of Consumer Receivables Acquired for Liquidation (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Balance	$ 2,626,000	$ 5,525,000	$ 3,749,000	$ 6,841,000
Net cash collections from collection of consumer receivables acquired for liquidation	(4,112,000)	(5,146,000)	(12,026,000)	(14,844,000)
Net cash collections represented by account sales of consumer receivables acquired for liquidation		(1,000)		(3,000)
Impairment	(100,000)	(100,000)	(100,000)	(100,000)
Effect of foreign currency translation	86,000	(167,000)	(98,000)	(69,000)
Finance income recognized	3,684,000	4,509,000	10,659,000	12,795,000
Balance	$ 2,184,000	$ 4,620,000	$ 2,184,000	$ 4,620,000
Finance income as a percentage of collections	89.60%	87.60%	88.60%	86.20%

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Note 3 - Consumer Receivables Acquired for Liquidation - Collections Received Less Commissions and Direct Costs (Details) - USD ($)		3 Months Ended		9 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Gross collections (1)	[1]	$ 7,680,000	$ 9,551,000	$ 23,262,000	$ 27,134,000
Commissions and fees (2)	[2]	(3,568,000)	(4,404,000)	(11,236,000)	(12,287,000)
Net collections		$ 4,112,000	$ 5,147,000	$ 12,026,000	$ 14,847,000

[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.

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Note 4 - Equity Method Investments (Details Textual) - USD ($)		3 Months Ended		9 Months Ended
	Jan. 12, 2018	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Mar. 31, 2019	Sep. 30, 2018	Dec. 28, 2011
Gain (Loss) on Acquisition of Minority Interest					$ (1,420,000)
Income (Loss) from Equity Method Investments, Total		$ (5,000)		$ (91,000)	845,000
Pegasus Legal Funding LLC [Member]
Noncontrolling Interest, Ownership Percentage by Parent	100.00%
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%
Pegasus Legal Funding LLC [Member]
Noncontrolling Interest, Decrease from Redemptions or Purchase of Interests	$ 1,800,000
Gain (Loss) on Acquisition of Minority Interest	$ 1,400,000
Pegasus Legal Funding LLC [Member]
Business Acquisition, Percentage of Voting Interests Acquired	20.00%
Pegasus Funding LLC [Member]
Business Acquisition, Percentage of Voting Interests Acquired	20.00%
Pegasus Legal Funding LLC [Member]
Equity Method Investment, Ownership Percentage	80.00%							80.00%
Serlefin BPO&O Peru S.A.C. [Member]
Equity Method Investment, Ownership Percentage						80.00%
Equity Method Investment, Ownership Percentage, Controlled Party						20.00%
Noninterest Expense Related to Performance Fees		$ 200,000	$ 300,000	$ 700,000	800,000
Income (Loss) from Equity Method Investments, Total					$ 300,000
Serlefin BPO&O Peru S.A.C. [Member] | Other Assets [Member]
Equity Method Investment, Carrying Amount		$ 200,000		$ 200,000			$ 200,000

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Note 4 - Equity Method Investments - Assets Acquired and Liabilities Assumed (Details) - Pegasus Legal Funding LLC [Member]	Jan. 12, 2018 USD ($)
Cash	$ 5,748,000
Personal injury claim advances portfolio	14,571,000
Accounts payable and accrued expenses	(664,000)
Total net assets acquired	$ 19,655,000

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Note 4 - Equity Method Investments - Equity Method Investments Financial Statements (Details) - Pegasus Legal Funding LLC [Member]	Jan. 12, 2018 USD ($)
Personal injury claims income	$ 671,000
Operating expenses	(386,000)
Income from operations	1,057,000
Earnings from equity method investment	$ 845,000

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Note 5 - Personal Injury Claims Funding (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018
Personal Injury Claims Income	$ 439,000	$ 1,557,000	$ 1,608,000	$ 2,167,000
Personal Injury Claims, Net Reserve	1,200,000		1,200,000		$ 500,000
Simia Capital LLC [Member]
Personal Injury Claims Assets	1,500,000		1,500,000		2,300,000
Personal Injury Claims Income	31,000	53,000	60,000	300,000
Sylvave, LLC [Member]
Personal Injury Claims Assets	4,300,000		4,300,000		$ 8,400,000
Personal Injury Claims Income	406,000	$ 1,500,000	1,546,000	$ 1,900,000
Arthur Funding [Member]
Personal Injury Claims Assets	125,000		125,000
Personal Injury Claims Income	$ 2,000		$ 2,000

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Note 5 - Personal Injury Claims Funding - Personal Claims Funding (Details) - USD ($)		3 Months Ended		9 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Balance, beginning of period		$ 6,630,000	$ 15,994,000	$ 10,745,000	$ 3,704,000
Personal claim advances		123,000		123,000	60,000
Provision for losses		(141,000)	(6,000)	(299,000)	(465,000)
(Write offs) recoveries		389,000	(408,000)	389,000	(371,000)
Personal injury claims income		439,000	1,557,000	1,608,000	2,167,000
Personal injury claims receipts		(1,531,000)	(3,344,000)	(6,657,000)	(5,872,000)
Balance, end of period		$ 5,909,000	$ 13,793,000	5,909,000	13,793,000
Acquisition of personal injury funding portfolio (1)	[1]				$ 14,571,000

[1] Fully acquired through the acquisition of Pegasus.

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Note 6 - Non-recourse Debt (Details Textual) - USD ($)			1 Months Ended
	Jun. 03, 2014	Aug. 07, 2013	Jun. 30, 2016	Mar. 31, 2007	Jun. 30, 2019	Sep. 30, 2018
Portfolio Purchase				$ 300,000,000
Receivables Financing Agreement Term				3 years
Percentage of Ownership in Subsidiaries		100.00%
Prepayment Fees		$ 15,000,000
Receivable Finance Agreement, Portfolio Purchase Collections, Percentage		30.00%
Debt Instrument, Final Principal Payment	$ 2,900,000
Voluntary Debt Prepayment	1,900,000
Receivable Finance Agreement, Collections from Portfolio Purchase	$ 16,900,000		$ 16,900,000
Bank of Montreal [Member]
Non-Recourse Debt					$ 120,000	$ 121,000
Receivables Financing Agreement [Member]
Non-Recourse Debt				$ 227,000,000

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Note 7 - Discontinued Operations (Details Textual) - USD ($)						3 Months Ended		9 Months Ended		12 Months Ended
	Dec. 13, 2017	Nov. 22, 2017	Jan. 01, 2016	Dec. 31, 2015	Dec. 31, 2013	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2017	Sep. 30, 2018
Competitor Alleged Former Subsidiary [Member]
Payments for Legal Settlements		$ 500,000
CBC [Member]
Equity Method Investment, Ownership Percentage					80.00%
Business Combination, Consideration Transferred, Total				$ 1,800,000	$ 5,900,000
Business Acquisition, Percentage of Voting Interests Acquired				20.00%
Payments to Acquire Businesses, Gross				$ 800,000
Employment Agreement Term			2 years
Employee Agreement Renewal Term			1 year
Disposal Group, Including Discontinued Operation, Consideration	$ 10,300,000
Disposal Group, Including Discontinued Operation, Cash Consideration	4,500,000
Disposal Group, Including Discontinued Operation, Promissory Note Consideration	$ 5,800,000
Promissory Note Interest Rate, Discontinued Operations	7.00%
Discontinued Operation, Gain (Loss) on Disposal of Discontinued Operation, Net of Tax, Total										$ 2,400,000
Disposal Group, Including Discontinued Operation, Assets, Total						$ 0		$ 0			$ 0
Discontinued Operation, Tax Effect of Discontinued Operation, Total						$ 0	$ 80,000	$ 0	$ 80,000
Structured Settlements, Unrealized Gain (Losses)									200,000
Structured Settlements, Gain on New Structured Settlements Financed									$ 200,000
CBC [Member] | Principal One [Member]
Payments to Acquire Businesses, Gross				400,000
CBC [Member] | Restricted Stock [Member]
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable				$ 1,000,000
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares				123,304
CBC [Member] | Restricted Stock [Member] | Principal One [Member]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares				61,652
Shares Issued, Price Per Share				$ 7.95

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Note 7 - Discontinued Operations - Financial Statements (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Loss from discontinued operations, net of income tax				$ (80,000)
CBC [Member]
Income tax benefit from discontinuing operations	0	80,000	0	80,000
CBC [Member] | Discontinued Operations, Disposed of by Sale [Member]
Unrealized gain on structured settlements
Interest income on structured settlements
Total revenues
Other income
General and administrative expenses
Interest expense
Loss from discontinued operations before income tax
Income tax benefit from discontinuing operations
Loss from discontinued operations, net of income tax
CBC [Member] | Discontinued Operations, Held-for-sale [Member]
Unrealized gain on structured settlements				244,000
Interest income on structured settlements				2,005,000
Total revenues				2,249,000
Other income				11,000
				2,260,000
General and administrative expenses				1,560,000
Interest expense				824,000
				2,384,000
Loss from discontinued operations before income tax				(124,000)
Income tax benefit from discontinuing operations				(44,000)
Loss from discontinued operations, net of income tax				$ (80,000)

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Note 8 - Note Receivable (Details Textual) - USD ($)			3 Months Ended		9 Months Ended
	Apr. 15, 2019	Dec. 13, 2017	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Mar. 31, 2019	Sep. 30, 2018
Financing Receivable, after Allowance for Credit Loss, Total								$ 4,313,000
Proceeds from Collection of Notes Receivable					4,313,000	$ 958,000
Buyer [Member] | Notes Receivable [Member]
Repayments of Note Receivable	$ 4,000,000
Proceeds from Collection of Notes Receivable	3,800,000
Proceeds from Interest Received	$ 200,000
CBC [Member]
Disposal Group, Including Discontinued Operation, Consideration		$ 10,300,000
Disposal Group, Including Discontinued Operation, Cash Consideration		4,500,000
Disposal Group, Including Discontinued Operation, Promissory Note Consideration		$ 5,800,000
Promissory Note Interest Rate, Discontinued Operations		7.00%
Financing Receivable, after Allowance for Credit Loss, Total							$ 0	$ 4,300,000
Investment Income, Interest			$ 68,000	$ 92,000	$ 224,000	$ 193,000

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Note 9 - Settlements (Details Textual) - USD ($)						3 Months Ended		9 Months Ended		32 Months Ended
	Jul. 12, 2020	Jul. 12, 2019	May 15, 2019	May 07, 2019	Jul. 12, 2018	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Jan. 12, 2022	Mar. 31, 2019	Sep. 30, 2018
Receivable, Settlement						$ 1,990,000		$ 1,990,000				$ 3,339,000
Gain (Loss) Related to Litigation Settlement, Total						273,000		596,000
Lawsuit in Delaware State Court [Member]
Loss Contingency, Damages Awarded, Value					$ 4,400,000
Litigation Settlement, Imputed Interest Rate					8.50%
Receivable, Settlement						2,000,000		2,000,000				$ 3,300,000
Gain (Loss) Related to Litigation Settlement, Total								1,500,000
Litigation Settlement Interest						53,000	$ 0	180,000	$ 0
Lawsuit in Delaware State Court [Member] | Prior Overcharges Billed to Company in Excess of Contractual Amounts [Member]
Receivable, Settlement											$ 200,000
Gain (Loss) Related to Litigation Settlement, Total						0		300,000
Lawsuit in Delaware State Court [Member] | Forecast [Member]
Litigation Settlement, Amount Awarded from Other Party	$ 4,400,000	$ 2,400,000
Balance Point Divorce Funding, LLC and Stacey Napp [Member]
Litigation Settlement, Amount Awarded from Other Party										$ 1,400,000
Gain (Loss) Related to Litigation Settlement, Total						25,000		25,000
Pamela Hofer and Others [Member]
Litigation Settlement, Amount Awarded from Other Party				$ 47,500
Gain (Loss) Related to Litigation Settlement, Total						47,500		47,500
Axiant, LLC [Member]
Gain (Loss) Related to Litigation Settlement, Total						$ 200,000		$ 200,000
Proceeds from Legal Settlements			$ 200,000

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Note 10 - Other Income - Summary of Other Income (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Interest and dividend income	$ 821,000	$ 111,000	$ 1,274,000	$ 235,000
Unrealized gain	33,000		53,000
Other	1,000		43,000
Other		(35,000)		(56,000)
	855,000	76,000	1,395,000	179,000
Realized gain			25,000
Other	$ 1,000		$ 43,000
Other		$ (35,000)		$ (56,000)

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Note 11 - Commitments and Contingencies (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Jul. 15, 2019
Operating Leases, Rent Expense, Total	$ 69,000	$ 94,000	$ 209,000	$ 281,000
GAR Agreement for Office Space in Fort Lee, NJ [Member] | Subsequent Event [Member]
Lessee, Operating Lease, Liability, Payments, Due, Total					$ 300,000

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Note 12 - Income Taxes (Details Textual) - USD ($) $ in Millions	3 Months Ended		9 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018	Jul. 19, 2019	May 28, 2019
Effective Income Tax Rate Reconciliation, Percent, Total	29.00%	35.00%	28.00%	35.00%
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent			21.00%		28.00%
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability					$ 4.4
Income Tax Expense, Carry-back Claim							$ 3.2
Subsequent Event [Member]
Income Tax Expense, Carry-back Claim						$ 4.7
Other Nonoperating Income (Expense) [Member]
Income Tax Expense, Carry-back Claim, Interest	$ 0.2		$ 0.2

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Note 13 - Net Income (Loss) Per Share - Computation of Basic and Diluted Per Share Data (Details) - USD ($)	3 Months Ended						9 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Jun. 30, 2019	Jun. 30, 2018
Income from continuing operations	$ 2,304,000			$ 1,957,000			$ 5,352,000	$ 388,000
Loss from discontinued operations								(80,000)
Net Income	$ 2,304,000	$ 1,773,000	$ 1,275,000	$ 1,957,000	$ 1,020,000	$ (2,669,000)	$ 5,352,000	$ 308,000
Basic earnings per common share from continuing operations (in dollars per share)	$ 0.35			$ 0.29			$ 0.80	$ 0.06
Basic loss per common share from discontinued operations (in dollars per share)								(0.01)
Basic earnings per share (in dollars per share)	0.35			0.29			0.80	0.05
Diluted earnings per common share from continuing operations (in dollars per share)	0.35			0.29			0.80	0.06
Diluted loss per common share from discontinuing operations (in dollars per share)								(0.01)
Diluted earnings per share (in dollars per share)	$ 0.35			$ 0.29			$ 0.80	$ 0.05
Weighted average number of common shares outstanding:
Basic (in shares)	6,666,012			6,685,415			6,678,947	6,654,911
Dilutive effect of stock options (in shares)	219			213			313	2,929
Diluted (in shares)	6,666,231			6,685,628			6,679,260	6,657,840

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Note 14 - Stock Option Plans (Details Textual)	3 Months Ended		9 Months Ended		87 Months Ended
	Jun. 30, 2019 USD ($) shares	Jun. 30, 2018 USD ($) shares	Jun. 30, 2019 USD ($) shares	Jun. 30, 2018 USD ($) shares	Jun. 30, 2019 USD ($) shares	Sep. 30, 2018 USD ($)	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	0	0	0	0
Share-based Payment Arrangement, Expense | $	$ 0	$ 9,000	$ 7,000	$ 98,000
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 | $	$ 1,000		$ 1,000		1,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Remaining Contractual Term			3 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period	0	61,600	0	61,600
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Fair Value | $		$ 399,000		$ 399,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value | $	$ 0	$ 0	$ 126,000	$ 222,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value | $	$ 1,000		$ 1,000		1,000
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	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							2,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross					540,800
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period					111,868
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	1,325,443		1,325,443		1,325,443
Share-based Compensation Arrangement by Share-based Payment Award, Number of Eligible Employees	53		53		53
The 2012 Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period					245,625
Equity Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized									1,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant							0
The 2002 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized										1,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant								0

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Note 14 - Stock Option Plans - Summary of Stock Option Plans (Details) - $ / shares	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Outstanding options at the beginning of period, shares (in shares)	726,767	796,767	728,867	880,567
Outstanding options at the beginning of period (in dollars per share)	$ 8.17	$ 8.16	$ 8.17	$ 8.05
Options exercised, shares (in shares)	0	(61,600)	0	(61,600)
Options exercised (in dollars per share)				$ 6.48
Options forfeited/cancelled, shares (in shares)	(1,200)	(200)	(3,300)	(22,400)
Options forfeited/cancelled (in dollars per share)	$ 2.95	$ 7.93	$ 6.27	$ 8.39
Outstanding options at the end of period, shares (in shares)	725,567	796,567	725,567	796,567
Outstanding options at the end of period (in dollars per share)	$ 8.18	$ 8.16	$ 8.18	$ 8.16
Options Exercisable, Number of Shares Exercisable (in shares)	725,567	778,394	725,567	778,394
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 8.18	$ 8.16	$ 8.18	$ 8.16

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Note 14 - Stock Option Plans - Summary of Outstanding Options (Details) - $ / shares	9 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2017
Options Outstanding, Number of Shares Outstanding (in shares)	725,567	726,767	728,867	796,567	796,767	880,567
Options Outstanding, Weighted Average Remaining Contractual Life (Year)
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 8.18	$ 8.17	$ 8.17	$ 8.16	$ 8.16	$ 8.05
Options Exercisable, Number of Shares Exercisable (in shares)	725,567			778,394
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 8.18			$ 8.16
Range One [Member]
Range of Exercise Price, Lower (in dollars per share)	2.8751
Range of Exercise Price, Upper (in dollars per share)	$ 5.75
Options Outstanding, Number of Shares Outstanding (in shares)
Options Outstanding, Weighted Average Remaining Contractual Life (Year)
Options Outstanding, Weighted Average Exercise Price (in dollars per share)
Options Exercisable, Number of Shares Exercisable (in shares)
Options Exercisable, Weighted Average Exercise Price (in dollars per share)
Range Two [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)	616,067
Options Outstanding, Weighted Average Remaining Contractual Life (Year)	2 years 346 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 7.97
Options Exercisable, Number of Shares Exercisable (in shares)	616,067
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 7.97
Range Three [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)	3 years 211 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

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Note 15 - Stockholders' Equity (Details Textual) - USD ($)				3 Months Ended	9 Months Ended
	Aug. 12, 2019	Feb. 28, 2018	Feb. 05, 2018	Jun. 30, 2019	Jun. 30, 2019	Jun. 30, 2018	May 17, 2019	Sep. 30, 2018
Preferred Stock, Shares Authorized				5,000,000	5,000,000			5,000,000
Preferred Stock, Par or Stated Value Per Share				$ 0.01	$ 0.01			$ 0.01
Preferred Stock, Shares Issued, Total				0	0			0
Dividends, Total				$ 0	$ 0
Dividends Payable, Amount Per Share			$ 5.30
Payments of Dividends, Total		$ 35,000,000				$ 35,352,000
Treasury Stock, Shares, Acquired				79,500
Treasury Stock, Value, Acquired, Cost Method				$ 560,000
Preferred Stock, Shares Outstanding, Ending Balance				0	0			0
Dividends Payable, Date Declared			Feb. 05, 2018
Dividends Payable, Date to be Paid			Feb. 28, 2018
Dividends Payable, Date of Record			Feb. 16, 2018
Shares Repurchase Plan [Member]
Stock Repurchase Program, Authorized Amount							$ 10,500,000
Treasury Stock, Shares, Acquired				79,500
Treasury Stock, Value, Acquired, Cost Method				$ 600,000
Stock Repurchase Program, Remaining Authorized Repurchase Amount				$ 9,900,000	$ 9,900,000
Shares Repurchase Plan [Member] | Subsequent Event [Member]
Treasury Stock, Shares, Acquired	116,600
Treasury Stock, Value, Acquired, Cost Method	$ 800,000

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Note 16 - Fair Value of Financial Measurements and Disclosures (Details Textual)	Jun. 30, 2019
Measurement Input, Discount Rate [Member]
Consumer Receivables Acquired for Liquidation, Measurement Input	0.21

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Note 16 - Fair Value of Financial Measurements and Disclosures - Fair Value of Financial Measurements (Details) - USD ($)	Jun. 30, 2019	Sep. 30, 2018
Investments in equity securities (Level 1)	$ 8,032,000
Available-for-sale debt securities (Level 2)	50,286,000	38,054,000
Reported Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash equivalents (Level 1)	20,000	1,786,000
Investments in equity securities (Level 1)	8,032,000	7,575,000
Reported Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Available-for-sale debt securities (Level 2)	50,286,000	30,479,000
Reported Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Consumer receivables acquired for liquidation (Level 3)	2,184,000	3,749,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash equivalents (Level 1)	20,000	1,786,000
Investments in equity securities (Level 1)	8,032,000	7,575,000	[1]
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Available-for-sale debt securities (Level 2)	50,286,000	30,479,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Consumer receivables acquired for liquidation (Level 3)	$ 27,889,000	$ 27,574,000	[1]

[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 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 17 - Related Party (Details Textual) - Consultant [Member] - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018
Joint Venture, Ownership Percentage	49.00%		49.00%
Related Party Transaction, Expenses from Transactions with Related Party	$ 12,000	$ 24,000	$ 60,000	$ 72,000
Due to Related Parties, Total	$ 0		$ 0		$ 0

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Note 18 - Segment Reporting (Details Textual)		9 Months Ended
	Dec. 13, 2017	Jun. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)
Number of Reportable Segments	4	3
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Carrying Amount, Net		$ 2,184,000	$ 3,749,000
Colombia and Peru [Member]
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Carrying Amount, Net		$ 1,800,000

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Note 18 - Segment Reporting - Schedule of Segment Reporting (Details) - USD ($)		3 Months Ended			9 Months Ended
		Jun. 30, 2019	Jun. 30, 2018		Jun. 30, 2019	Jun. 30, 2018		Sep. 30, 2018
Revenues		$ 5,298,000	$ 7,254,000		$ 15,999,000	$ 18,210,000
Other income		1,100,000	100,000		2,000,000	200,000
Segment profit (loss)		3,300,000	3,000,000		7,500,000	6,000,000
Segment Assets (1)		90,368,000	82,000,000	[1]	90,368,000	82,000,000	[1]	$ 86,315,000
Operating Segments [Member] | Consumer Receivables [Member]
Revenues		3,700,000	4,500,000		10,700,000	12,800,000
Other income		200,000			700,000
Segment profit (loss)		3,300,000	3,600,000		9,900,000	11,400,000
Segment Assets (1)	[1]	9,100,000	27,100,000		9,100,000	27,100,000
Operating Segments [Member] | GAR Disability Advocates [Member]
Revenues		1,200,000	1,100,000		3,700,000	3,200,000
Other income
Segment profit (loss)		400,000	300,000		1,200,000	500,000
Segment Assets (1)	[1]	600,000	3,200,000		600,000	3,200,000
Operating Segments [Member] | Personal Injury Claims [Member]
Revenues	[2]	400,000	1,600,000		1,600,000	2,200,000
Other income	[2]
Segment profit (loss)	[2]	600,000	1,100,000		1,500,000	1,900,000
Segment Assets (1)	[1],[2]	6,200,000	20,600,000		6,200,000	20,600,000
Corporate, Non-Segment [Member]
Revenues	[3]
Other income	[3]	900,000	100,000		1,300,000	200,000
Segment profit (loss)	[3]	(1,000,000)	(2,000,000)		(5,100,000)	(7,800,000)
Segment Assets (1)	[1],[3]	$ 74,500,000	$ 31,100,000		$ 74,500,000	$ 31,100,000

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

[2] The Company recorded Pegasus as an equity investment in its consolidated financial statements through January 12, 2018. Commencing on January 13, 2018, Sylvave is consolidated in the Company's financial statements. For segment reporting the Company has included its pro-rated share of the earnings and losses from its investment under the Personal Injury Claims segment.

[3] 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 19 - Accumulated Other Comprehensive Income (Loss) - Accumulated Other Comprehensive Income (Loss) (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018
Balance	$ 87,521,000	$ 78,260,000	$ 84,034,000	$ 114,807,000	$ 114,807,000
Adjusted opening equity			84,207,000
Change in unrealized gains (losses) on marketable securities, net of tax benefit/ (expense) of ($40,000) and $9,000 at June 30, 2019, and September 30, 2018, respectively.	(121,000)	9,000	102,000	(2,000)
Net current-period other comprehensive income (loss)	(105,000)	59,000	154,000	25,000
Balance	89,160,000	80,285,000	89,160,000	80,285,000	84,034,000
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member]
Balance			(10,000)	7,000	7,000
Cumulative effect adjustment for adoption of new accounting principle			10,000
Adjusted opening equity				7,000	7,000
Change in unrealized gains (losses) on marketable securities, net of tax benefit/ (expense) of ($40,000) and $9,000 at June 30, 2019, and September 30, 2018, respectively.			102,000		(17,000)
Net current-period other comprehensive income (loss)			102,000		(17,000)
Balance	102,000		102,000		(10,000)
Accumulated Foreign Currency Adjustment Attributable to Parent [Member]
Balance			45,000	11,000	11,000
Adjusted opening equity			45,000	11,000	11,000
Change in unrealized gains on foreign currency translation, net of tax benefit/(expense) of ($14,000) and ($17,000) at June 30, 2019, and September 30, 2018, respectively.			52,000		34,000
Change in unrealized gains (losses) on marketable securities, net of tax benefit/ (expense) of ($40,000) and $9,000 at June 30, 2019, and September 30, 2018, respectively.
Net current-period other comprehensive income (loss)			52,000		34,000
Balance	97,000		97,000		45,000
AOCI Attributable to Parent [Member]
Balance	304,000	(16,000)	35,000	18,000	18,000
Cumulative effect adjustment for adoption of new accounting principle			10,000
Adjusted opening equity			45,000	18,000	18,000
Change in unrealized gains on foreign currency translation, net of tax benefit/(expense) of ($14,000) and ($17,000) at June 30, 2019, and September 30, 2018, respectively.			52,000		34,000
Change in unrealized gains (losses) on marketable securities, net of tax benefit/ (expense) of ($40,000) and $9,000 at June 30, 2019, and September 30, 2018, respectively.			102,000		(17,000)
Net current-period other comprehensive income (loss)			154,000		17,000
Balance	$ 199,000	$ 43,000	$ 199,000	$ 43,000	$ 35,000

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Note 19 - Accumulated Other Comprehensive Income (Loss) - Accumulated Other Comprehensive Income (Loss) (Details) (Parentheticals) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Sep. 30, 2018
Cumulative effect adjustment for adoption of new accounting principle, tax			$ 5,000
Unrealized gain (loss) on foreign currency translation, tax			(14,000)		$ (17,000)
Unrealized gain (loss) on marketable securities, tax	$ 46,000	$ (4,000)	$ (40,000)	$ 2,000	$ 9,000