Attached files

file filename
EX-32.2 - EXHIBIT 32.2 - ASTA FUNDING INCex32-2.htm
EX-32.1 - EXHIBIT 32.1 - ASTA FUNDING INCex32-1.htm
EX-31.2 - EXHIBIT 31.2 - ASTA FUNDING INCex31-2.htm
EX-31.1 - EXHIBIT 31.1 - ASTA FUNDING INCex31-1.htm

Table of Contents



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, 2017

 

OR

 

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

 

For the transition period from                      to                     

 

Commission file number: 001-35637

 

 


 

ASTA FUNDING, INC.

(Exact name of registrant as specified in its charter)

 


 

 

Delaware

 

22-3388607

(State or other jurisdiction
of incorporation or organization)

 

(IRS Employer
Identification No.)

 

 

210 Sylvan Ave., Englewood Cliffs, New Jersey

 

07632

(Address of principal executive offices)

 

(Zip Code)

 

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

 


 

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

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes       No  

 

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

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

    (Do not check if a smaller reporting company)

  

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 8, 2017, the registrant had 6,623,815 common shares outstanding.

 



 

 

ASTA FUNDING, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

 

Part I-FINANCIAL   INFORMATION

3

 

 

Item 1. Financial Statements

3

 

 

Consolidated Balance Sheets as of June 30, 2017 (unaudited) and September 30, 2016  

3

 

 

Consolidated Statements of Operations for the three and nine months ended June 30, 2017 and 2016 (unaudited)

4

 

 

Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended June 30, 2017 and 2016 (unaudited)

5

 

 

Consolidated Statements of Stockholders’ Equity for the nine months ending June 30, 2017 and 2016 (unaudited)

6

 

 

Consolidated Statements of Cash Flows for the nine months ended June 30, 2017 and 2016 (unaudited)

7

 

 

Notes to Consolidated Financial Statements (unaudited)

8

 

 

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

34

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

47

 

 

Item 4. Controls and Procedures

47

 

 

Part II-OTHER INFORMATION

48

 

 

Item 1. Legal Proceedings

48

 

 

Item 1A. Risk Factors

48

 

 

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

48

 

 

Item 3. Defaults Upon Senior Securities

48

 

 

Item 4. Mine Safety Disclosures

48

 

 

Item 5. Other Information

48

 

 

Item 6. Exhibits

49

 

 

Signatures

50

 

 

Exhibit 31.1

 

Exhibit 31.2

 

Exhibit 32.1

 

Exhibit 32.2

 

 

 

PART I. FI NAN CIAL INFORMATION

 

Item  1. Financial Statements

 

ASTA FUNDING, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

 

   

(Unaudited)

         
   

June 30,
2017

   

September 30,
2016

 

ASSETS

               

Cash and cash equivalents

  $ 16,570,000     $ 18,526,000  

Restricted cash

    35,248,000        

Available for sale investments (at fair value)

    5,500,000       56,764,000  

Consumer receivables acquired for liquidation (at net realizable value)

    9,118,000       13,671,000  

Structured settlements (at fair value)

    89,045,000       85,708,000  

Investment in personal injury claims

    27,538,000       48,289,000  

Other investments, net

          3,590,000  

Due from third party collection agencies and attorneys

    1,367,000       1,005,000  

Prepaid and income taxes receivable

    4,836,000       880,000  

Furniture and equipment, net

    178,000       243,000  

Deferred income taxes

    18,940,000       15,530,000  

Goodwill

    2,770,000       2,770,000  

Other assets

    5,102,000       8,423,000  
                 

Total assets

  $ 216,212,000     $ 255,399,000  
                 

LIABILITIES

               

Line of credit

  $ 9,600,000     $  

Other debt – CBC (including non-recourse notes payable of $72.1 million at June 30, 2017 and $57.3 million at September 30, 2016)

    76,435,000       67,435,000  

Other liabilities

    8,272,000       5,974,000  

Income taxes payable

          252,000  
                 

Total liabilities

    94,307,000       73,661,000  
                 

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 13,398,108 at June 30, 2017 and 13,336,508 at September 30, 2016; and outstanding 6,623,815 at June 30, 2017 and 11,876,224 at September 30, 2016

    134,000       133,000  

Additional paid-in capital

    67,467,000       67,026,000  

Retained earnings

    122,669,000       128,063,000  

Accumulated other comprehensive income (loss)

    (968,000

)

    86,000  

Treasury stock (at cost) 6,774,293 shares at June 30, 2017 and 1,460,284 shares at September 30, 2016

    (67,128,000

)

    (12,925,000

)

Non-controlling interest

    (269,000

)

    (645,000

)

                 

Total stockholders’ equity

    121,905,000       181,738,000  
                 

Total liabilities and stockholders’ equity

  $ 216,212,000     $ 255,399,000  

 

See Notes to Consolidated Financial Statements

 

 

ASTA FUNDING, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

(rounded to the nearest thousands, except share data)

 

   

Three Months

   

Three Months

   

Nine Months

   

Nine Months

 
   

Ended

   

Ended

   

Ended

   

Ended

 
   

June 30, 2017

   

June 30, 2016

   

June 30, 2017

   

June 30, 2016

 

Revenues:

                               

Finance income, net

  $ 3,980,000     $ 4,612,000     $ 11,999,000     $ 14,668,000  

Personal injury claims income

    5,569,000       9,838,000       10,017,000       14,769,000  

Unrealized gain on structured settlements

    7,531,000       1,422,000       5,238,000       4,586,000  

Interest income on structured settlements

    1,923,000       1,765,000       5,765,000       4,473,000  

Loss on sale of structured settlements

    (5,353,000

)

          (5,353,000

)

     

Disability fee income

    1,134,000       1,169,000       3,990,000       2,700,000  

Total revenues

    14,784,000       18,806,000       31,656,000       41,196,000  

Other income (loss) - includes ($18,000) and ($32,000) during the three month periods ended June 30, 2017 and 2016, and ($1,011,000) and ($63,000) during the nine month periods ended June 30, 2017 and 2016, respectively, of accumulated other comprehensive loss reclassification for securities sold

    98,000       215,000       (31,000

)

    1,108,000  
      14,882,000       19,021,000       31,625,000       42,304,000  

Expenses:

                               

General and administrative

    9,349,000       10,591,000       36,327,000       32,039,000  

Interest

    1,123,000       832,000       3,039,000       2,348,000  

Impairment of consumer receivables

    148,000             148,000       124,000  
      10,620,000       11,423,000       39,514,000       34,511,000  

Income (loss) before income tax

    4,262,000       7,598,000       (7,889,000

)

    7,793,000  

Income tax (benefit)/expense - includes tax expense/(benefit) of $7,000 and ($13,000) during the three month periods ended June 30, 2017 and 2016 and $404,000 and ($24,000) during the nine month periods ended June 30, 2017 and 2016, respectively, of accumulated other comprehensive income reclassifications for unrealized net gains / (losses) on available for sale securities

    1,700,000       2,853,000       (3,237,000

)

    2,461,000  

Net income (loss)

    2,562,000       4,745,000       (4,652,000

)

    5,332,000  

Less: net income attributable to non-controlling interests

    730,000       1,549,000       742,000       2,161,000  

Net income (loss) attributable to Asta Funding, Inc.

  $ 1,832,000     $ 3,196,000     $ (5,394,000

)

  $ 3,171,000  

Net income (loss) per share attributable to Asta Funding, Inc.:

                               

Basic

  $ 0.28     $ 0.27     $ (0.57

)

  $ 0.26  

Diluted

  $ 0.27     $ 0.26     $ (0.57

)

  $ 0.26  

Weighted average number of common shares outstanding:

                               

Basic

    6,577,784       11,897,139       9,389,864       12,023,156  

Diluted

    6,879,082       12,433,424       9,389,864       12,294,073  

 

See Notes to Consolidated Financial Statements

 

 

ASTA FUNDING, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

June 30, 2017 and 2016

(Unaudited)

 

   

Three Months
Ended
June 30, 2017

   

Three Months
Ended
June30, 2016

   

Nine Months
Ended
June 30, 2017

   

Nine Months
Ended
June 30, 2016

 

Comprehensive income (loss) is as follows:

                               

Net income (loss)

  $ 2,562,000     $ 4,745,000     $ (4,652,000

)

  $ 5,332,000  

Net unrealized securities gain (loss), net of tax (expense)/benefit of $(12,000) and ($364,000) during the three month periods ended June 30, 2017 and 2016, respectively, and $11,000 and ($647,000) during the nine month periods ended June 30, 2017 and 2016, respectively.

    18,000       543,000       (17,000

)

    1,046,000  

Reclassification adjustments for securities sold, net of tax benefit of $7,000 and $13,000 during the three month periods ended June 30, 2017 and 2016, and $404,000 and $24,000 during the nine month periods ended June 30, 2017 and 2016, respectively.

    (11,000

)

    (19,000

)

    (607,000

)

    (39,000

)

Foreign currency translation, net of tax (expense)/benefit of $166,000 and $93,000 during the three month periods ended June 30, 2017 and 2016, respectively, and $287,000 and $650,000 during the nine month periods ended June 30, 2017 and 2016, respectively.

    (249,000

)

    9,000       (430,000

)

    505,000  

Other comprehensive income (loss)

    (242,000

)

    533,000       (1,054,000

)

    1,512,000  

Total comprehensive income (loss)

  $ 2,320,000     $ 5,278,000     $ (5,706,000

)

  $ 6,844,000  

 

See Notes to Consolidated Financial Statements

 

 

ASTA FUNDING, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

(Unaudited)

 

   

Common Stock

   

Additional

           

Accumulated
Other

           

Non-

   

Total

 
   

Issued
Shares

   

Amount

   

Paid-in
Capital

   

Retained
Earnings

   

Comprehensive Income (Loss)

   

Treasury
Stock

   

Controlling
Interests

   

Stockholders’
Equity

 

Balance, September 30, 2016

    13,336,508       133,000       67,026,000       128,063,000       86,000       (12,925,000

)

    (645,000

)

    181,738,000  

Exercise of options

                                               

Stock based compensation expense

                38,000                               38,000  

Net (loss) income

                      (5,394,000

)

                742,000       (4,652,000

)

Amount reclassified from other comprehensive (loss) income

                            (607,000

)

                (607,000

)

Unrealized loss on marketable securities, net

                            (17,000

)

                (17,000

)

Purchase of treasury stock

                                  (54,203,000

)

          (54,203,000

)

Foreign currency translation, net

                            (430,000

)

                (430,000

)

Issuance of unrestricted stock

    61,600       1,000       403,000                               404,000  

Distributions to non-controlling interest

                                        (366,000

)

    (366,000

)

Balance, June 30, 2017

    13,398,108     $ 134,000     $ 67,467,000     $ 122,669,000     $ (968,000

)

  $ (67,128,000

)

  $ (269,000

)

  $ 121,905,000  

 

 

   

Common Stock

   

Additional

           

Accumulated
Other

           

Non-

   

Total

 
   

Issued
Shares

   

Amount

   

Paid-in
Capital

   

Retained
Earnings

   

Comprehensive
Income (Loss)

   

Treasury
Stock

   

Controlling
Interests

   

Stockholders’
Equity

 

Balance, September 30, 2015

    13,061,673     $ 131,000     $ 65,011,000     $ 120,611,000     $ (1,685,000

)

  $ (1,751,000

)

  $ (997,000

)

  $ 181,320,000  

Exercise of options

    107,531       1,000       871,000                                       872,000  

Stock based compensation expense

                567,000                               567,000  

Restricted stock

    5,000                                            

Net income

                      3,171,000                   2,161,000       5,332,000  

Unrealized gain on marketable securities, net

                            1,007,000                   1,007,000  

Purchase of treasury stock

                                  (11,174,000

)

          (11,174,000

)

Foreign currency translation, net

                            505,000                   505,000  

Purchase of subsidiary shares from non-controlling interest

                (873,000

)

                      (927,000

)

    (1,800,000

)

Issuance of restricted stock to purchase subsidiary shares from non-controlling interest

    123,304       1,000       999,000                               1,000,000  

Distributions to non-controlling interest

                                        (1,139,000

)

    (1,139,000

)

Balance, June 30, 2016

    13,297,508     $ 133,000     $ 66,575,000     $ 123,782,000     $ (173,000

)

  $ (12,925,000

)

  $ (902,000

)

  $ 176,490,000  

 

See Notes to Consolidated Financial Statements

 

 

ASTA FUNDING, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

 

   

Nine Months
Ended
June 30, 2017

   

Nine Months
Ended
June 30, 2016

 

Cash flows from operating activities :

               

Net (loss) income

  $ (4,652,000

)

  $ 5,332,000  

Adjustments to reconcile net (loss) income to net cash used in operating activities:

               

Depreciation and amortization

    267,000       442,000  

Deferred income taxes

    (2,994,000

)

    (662,000

)

Impairment of consumer receivables acquired for liquidation

    148,000       124,000  
Bad debt recovery     (242,000 )      

Stock based compensation

    81,000       567,000  

Loss on sale of available-for-sale securities

    1,011,000       63,000  

Structured settlements – accrued interest

    (4,760,000

)

    (3,907,000

)

Structured settlements – unrealized gains

    (5,238,000

)

    (4,586,000

)

Realized loss on sale of structured settlements

    5,353,000        

Unrealized gain on other investments

          (246,000

)

Unrealized foreign exchange loss on other investments

          59,000  

Reserve for loss on other investments

          1,000,000  

Loss on other investments

    3,590,000        

Operating lease adjustment

          21,000  

Changes in:

               

Prepaid and income taxes receivable

    (3,956,000

)

    2,064,000  

Due from third party collection agencies and attorneys

    (362,000

)

    341,000  

Other assets

    3,140,000       (964,000

)

Income taxes payable

    (252,000

)

     

Other liabilities

    2,229,000       2,686,000  

Net cash (used in)/ provided by operating activities

    (6,637,000

)

    2,334,000  

Cash flows from investing activities:

            ,  

Purchase of consumer receivables acquired for liquidation

    (2,213,000

)

    (6,470,000

)

Principal collected on receivables acquired for liquidation

    6,618,000       7,414,000  

Purchase of available-for-sale securities

    (13,193,000

)

    (11,704,000

)

Proceeds from sale of available-for-sale securities

    62,406,000       16,302,000  

Purchase of non-controlling interest

          (800,000

)

Investments in personal injury claims – advances

    (14,624,000

)

    (27,689,000

)

Investments in personal injury claims – receipts

    35,375,000       20,673,000  

Capital expenditures

    (21,000

)

    (123,000

)

Investments in structured settlements – advances

    (13,363,000

)

    (12,264000

)

Investments in structured settlements – receipts

    7,186,000       5,508,000  

Proceeds from sale of structured settlements

    7,727,000        

Net cash provided by/(used in) investing activities

    75,898,000       (9,153,000

)

Cash flows from financing activities:

               

Proceeds from exercise of stock options

          872,000  

Purchase of treasury stock

    (54,203,000

)

    (11,174,000

)

Change in restricted cash

    (35,248,000

)

     

Distribution to non-controlling interest

    (366,000

)

    (1,139,000

)

Borrowings from line of credit

    9,600,000        

Borrowings of other debt – CBC

    30,632,000       14,431,000  

Repayment of other debt – CBC

    (21,632,000

)

    (3,375,000

)

Net cash used in financing activities

    (71,217,000

)

    (385,000

)

Net decrease in cash and cash equivalents

    (1,956,000

)

    (7,204,000

)

Cash and cash equivalents at beginning of period

    18,526,000       24,315,000  

Cash and cash equivalents at end of period

  $ 16,570,000     $ 17,111,000  
                 

Supplemental disclosure of cash flow information :

               

Cash paid for:

               

Interest

  $ 3,031,000     $ 2,353,000  

Taxes

    6,046,000        

Supplemental disclosure of non-cash flow investing activities :

               

Issuance of restricted stock to purchase subsidiary shares from non-controlling interest

  $     $ 1,000,000  

Issuance of unrestricted stock

  $ 404,000        

 

See Notes to Consolidated Financial Statements

 

 

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1—Business and Basis of Presentation

 

Business

 

Asta Funding, Inc., together with its wholly owned significant operating subsidiaries Palisades Collection, LLC, Palisades Acquisition XVI, LLC (“Palisades XVI”), VATIV Recovery Solutions LLC (“VATIV”), ASFI Pegasus Holdings, LLC (“APH”), Fund Pegasus, LLC (“Fund Pegasus”), GAR Disability Advocates, LLC (“GAR Disability Advocates”), Five Star Veterans Disability, LLC (“Five Star”), CBC Settlement Funding, LLC (“CBC”), Simia Capital, LLC (“Simia”) 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 structured settlements through our wholly owned subsidiary CBC, funding of personal injury claims, through our 80% owned subsidiary Pegasus Funding, LLC (“Pegasus”) and our wholly owned subsidiary Simia, social security and disability advocacy through our wholly owned subsidiaries GAR Disability Advocates and Five Star and the business of purchasing, managing for its own account and servicing distressed consumer receivables, including charged off receivables, and semi-performing receivables.

 

  Consumer receivables  

 

The Company started out in the consumer receivables business in 1994. Recently, our efforts have been in the international areas (mainly South America), as we have not purchased consumer receivables in the United States since 2010. We define consumer receivables as primary charged-off, semi-performing and distressed depending on their collectability. 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

 

Pegasus conducts its business solely in the United States. Prior to 2017, Pegasus obtained its business from external brokers and internal sales professionals soliciting individuals with personal injury claims. Business was also obtained from the Pegasus website and through attorneys.

 

In November 2016, the Company formed Simia, a 100% owned subsidiary. Simia commenced funding personal injury settlement claims in January 2017. Simia was formed in response to the Company’s decision not to renew its joint venture with Pegasus Legal Funding, LLC (“PLF”), which expired at the end of December 2016. Pegasus continues to remain in operation to collect its current portfolio of advances, and has not funded any new advances after December 28, 2016 (see Note 7 – Litigation Funding).

 

Structured settlements

 

CBC purchases structured settlement and annuity policies through privately negotiated direct consumer purchases and brokered transactions across the United States. CBC funds the purchases primarily from cash, its revolving line of credit, and its securitized debt, issued through its Blue Bell Receivables (“BBR”) subsidiaries.

 

Social security and Veteran’s benefit advocacy

 

GAR Disability Advocates and Five Star provide its disability advocacy services for individuals and veterans throughout the United States. It relies upon search engine optimization (“SEO”) to bring awareness to its intended market.

 

Basis of Presentation

 

The consolidated balance sheet as of June 30 2017, the consolidated statements of operations for the three and nine month periods ended June 30, 2017 and 2016, the consolidated statements of comprehensive income (loss) for the three and nine month periods ended June 30, 2017 and 2016, the consolidated statements of stockholders’ equity as of and for the nine months ended June 30, 2017 and 2016, and the consolidated statements of cash flows for the nine month periods ended June 30, 2017 and 2016, are unaudited. The September 30, 2016 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, 2016. In the opinion of management, all adjustments necessary to present fairly our financial position at June 30, 2017, the results of operations for the three and nine month periods ended June 30, 2017 and 2016 and cash flows for the nine month periods ended June 30, 2017 and 2016 have been made. The results of operations for the three and nine month periods ended June 30, 2017 and 2016 are not necessarily indicative of the operating results for any other interim period or the full fiscal year.

 

 

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 Note 1—Business and Basis of Presentation (continued)

 

Basis of Presentation (continued) 

 

 The accompanying unaudited 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 the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016 filed with the Securities and Exchange Commission. 

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“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.

 

Concentration of Credit Risk – Cash and Restricted Cash

 

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 and restricted cash balances with 13 banks at June 30, 2017 that exceeded the balance insured by the FDIC by approximately $35 million. Additionally, two foreign banks with an aggregate $2.2 million balances are not FDIC insured. There is a $10 million aggregate balance in a domestic bank that is not FDIC insured and has been reclassified to restricted cash in the balance sheet since these assets serve as collateral for the Bank of Hapoalim line of credit (see Note 9– Non Recourse Debt ). The Company does not believe it is exposed to any significant credit risk due to concentration of cash. 

 

Goodwill 

 

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination, and is accounted for under ASC 350. Goodwill has an indefinite useful life and is evaluated for impairment at the reporting-unit level on an annual basis during the fourth quarter or more frequently if events or changes in circumstances indicate potential impairment between annual measurement dates. The Company has the option of performing a qualitative assessment of impairment to determine whether any further quantitative testing for impairment is necessary. The initial qualitative approach assesses whether the existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company determines it is more likely than not that the fair value is less than carrying value, a two step quantitative impairment test is performed. A step 1 analysis involves calculating the fair value of the associated reporting unit and comparing it to the reporting unit’s carrying value. If the fair value of the reporting unit exceeds the carrying value of the reporting unit including goodwill and the carrying value of the reporting unit is positive, goodwill is considered not to be impaired and no further analysis is required. If the fair value of the reporting unit is less than its carrying value, step 2 of the impairment test must be performed. Step 2 involves calculating and comparing the implied fair value of the reporting unit’s goodwill with its carrying value. Impairment is recognized if the estimated fair value of the reporting unit is less than its net book value. Such loss is calculated as the difference between the estimated impaired fair value of goodwill and its carrying amount. The goodwill of the Company consists of $2.8 million of which approximately $1.4 million is from the purchase of CBC and the remaining $1.4 million from the purchase of VATIV. 

 

Recent Accounting Pronouncements 

 

In May 2014, the FASB issued an update to ASC 606, Revenue from Contracts with Customers that will supersede virtually all existing revenue guidance. Under this update, an entity is required to recognize revenue upon transfer of promised goods or services to customers, in an amount that reflects the 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. This update is effective for annual reporting periods beginning after December 15, 2017 including interim periods within that reporting period. Early application is permitted for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Based on the Company’s evaluation, the Company does not believe this new standard will impact the accounting for its revenues.

 

  In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The main objective in developing this update is enhancing the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The amendments in this update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The effective date for this update is for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company is currently evaluating the impact this update will have on its consolidated financial statements.

 

 

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) 

Note 1—Business and Basis of Presentation (continued) 

 

  Recent Accounting Pronouncements (continued) 

 

In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842) to amend lease accounting requirements and requires entities to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use assets. The new standard will require significant additional disclosures about the amount, timing and uncertainty of cash flows from leases. The standard update is effective for fiscal years beginning after December 15, 2018 and interim periods within those years and early adoption is permitted. The standard is to be applied using a modified retrospective approach and includes a number of optional practical expedients that entities may elect to apply. The Company is currently evaluating the impact of adopting this update on its consolidated financial statements and expects that most of its operating leases will be subject to the accounting standard update and will recognize as operating lease liabilities and right-of-use assets upon adoption. 

 

  In March 2016, the FASB issued ASU No. 2016-09, 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, 2016, including interim periods within that reporting period. The Company is currently evaluating the impact this update will have on its consolidated financial statements.  

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Additionally, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.  For the Company, this update will be effective for interim periods and annual periods beginning after December 15, 2019. Upon adoption, the Company will accelerate the recording of its credit losses in its financial statements. 

 

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.  This ASU will make 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 is permitted. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to apply the amendments prospectively as of the earliest date practicable. The Company is in the process of evaluating the provisions of the ASU, but does not expect it to have a material effect on the Company’s consolidated statements of cash flows. 

 

Note 2—Principles of Consolidation 

 

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

 

Note 3—Available-for-Sale Investments

 

Investments classified as available-for-sale at June 30, 2017 and September 30, 2016, consist of the following:

 

   

Amortized
Cost

   

Unrealized
Gains

   

Unrealized
Losses

   

Fair Value

 

June 30, 2017

  $ 5,500,000     $ -     $ -     $ 5,500,000  

September 30, 2016

  $ 55,724,000     $ 1,089,000     $ (49,000

)

  $ 56,764,000  

 

The available-for-sale investments do not have any contractual maturities. The Company sold six investments during the nine months ended June 30, 2017, with a realized loss of $1,011,000. The Company received $177,000 in capital gains distributions during the nine months ended June 30, 2017. For the nine months ended June 30, 2016, the Company sold three investments with a realized loss of $63,000 and also received $47,000 in capital gains distributions during that period. The Company recorded an aggregate realized loss of $834,000 related to its available-for-sale securities for the first nine months ended June 30, 2017 compared to an aggregate realized loss of $16,000 for the nine month period ended June 30, 2016. The Company sold three investments during the three months ended June 30, 2017 with a realized loss of $18,000. For the three months ended June 30, 2016, the Company sold one investment with a realized loss of $32,000. 

 

At June 30, 2017, there was one investment without any recognized unrealized gain or loss. This security is considered to be an acceptable credit risk. Based on the evaluation of the available evidence, including recent changes in market rates and credit rating information, management believes if any decline in fair value for these instruments is temporary. In addition, management has the ability to hold this investment security for a period of time sufficient to allow for an anticipated recovery or maturity. Should the impairment of any security 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 is identified. 

 

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

 

 

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) 

 

Note 4—Consumer Receivables Acquired for Liquidation

 

Accounts acquired for liquidation are stated at their net estimated realizable value and consist primarily of defaulted consumer loans to individuals primarily throughout the United States and South America.

 

The Company may account for its investments in consumer receivable portfolios, using either:

 

 

the interest method; or

 

 

the cost recovery method.

 

Prior to October 1, 2013, the Company accounted for certain of its investments in finance receivables using the interest method in accordance with the guidance of ASC 310, Receivables. Under the guidance of ASC 310-30, 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. Effective October 1, 2013, due to the substantial reduction of portfolios reported under the interest method, and the ability 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 in the circumstances. 

 

Although the Company has switched to the cost recovery method on its current inventory of portfolios, the Company must still analyze a portfolio 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. 

 

The Company has extensive liquidating experience in the field of distressed credit card receivables, telecommunication receivables, consumer loan receivables, retail installment contracts, consumer receivables, and auto deficiency receivables. 

 

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

 

 

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 4—Consumer Receivables Acquired for Liquidation (continued)

 

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

 

   

For the Three Months Ended June 30,

 
   

2017

   

2016

 

Balance, beginning of period

  $ 11,651,000     $ 16,784,000  

Acquisitions of receivable portfolio

          329,000  

Net cash collections from collection of consumer receivables acquired for liquidation

    (6,100,000

)

    (7,095,000

)

Net cash collections represented by account sales of consumer receivables acquired for liquidation

    (1,000

)

    (83,000

)

Impairment

    (148,000

)

     

Effect of foreign currency translation

    (264,000

)

    (7,000

)

Finance income recognized

    3,980,000       4,612,000  

Balance, end of period

  $ 9,118,000     $ 14,540,000  

Finance income as a percentage of collections

    65.2

%

    64.3

%

 

 

   

For the Nine Months Ended June 30,

 
   

2017

   

2016

 

Balance, beginning of period

  $ 13,671,000     $ 15,608,000  

Acquisitions of receivable portfolio

    2,213,000       6,470,000  

Net cash collections from collection of consumer receivables acquired for liquidation

    (18,288,000

)

    (21,869,000

)

Net cash collections represented by account sales of consumer receivables acquired for liquidation

    (191,000

)

    (83,000

)

Impairment

    (148,000

)

    (124,000

)

Effect of foreign currency translation

    (138,000

)

    (130,000

)

Finance income recognized

    11,999,000       14,668,000  

Balance, end of period

  $ 9,118,000     $ 14,540,000  

Finance income as a percentage of collections

    64.9

%

    66.8

%

 

During the three and nine month periods ended June 30, 2017, the Company purchased $0.0 million and $35.0 million, respectively, of face value portfolios at a cost of $0.0 million and $2.2 million, respectively. During the three and nine month periods ended June 30, 2016, the Company purchased $2.2 million and $123.2 million, respectively, of face value portfolios at a cost of $0.3 million and $6.5 million, 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 month periods ended June 30, 2017 and 2016, respectively.

 

   

For the Three Months Ended June 30,

   

For the Nine Months Ended June 30,

 
   

2017

   

2016

   

2017

   

2016

 

Gross collections (1)

  $ 10,618,000     $ 11,097,000       32,736,000       33,965,000  

Commissions and fees (2)

    4,517,000       3,919,000       14,257,000       12,013,000  

Net collections

  $ 6,101,000     $ 7,178,000     $ 18,479,000     $ 21,952,000  

 

(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 and fees are the contractual commission earned by third party collection agencies and attorneys, and direct costs associated with the collection effort, generally court costs. Includes a 3% fee charged by a servicer on gross collections received by the Company in connection with certain portfolios. The fee is charged for asset location, skip tracing and ultimately suing debtors in connection with this portfolio purchase.

   

 

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 5—Acquisition of CBC

 

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 $1,800,000, through the issuance of restricted stock valued at approximately $1,000,000 and $800,000 in cash. Each of the two original principals received 61,652 shares of restricted stock at a fair market value of $7.95 per share and $400,000 in cash. An aggregate of 123,304 shares of restricted stock were issued as part of the transaction. These shares are subject to a one year lock-up period in which the holders cannot sell the shares. In addition, the shares are subject to certain sales restrictions following the initial lock-up period, which expired on December 31, 2016 (see Note 15 – Stock Based Compensation).  

 

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 (see Note 11 – Commitments and Contingencies).

 

Note 6—Structured Settlements (At Fair Value)

 

CBC purchases 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 $5.2 million of unrealized gains recognized in the nine month period ended June 30, 2017, approximately $5.9 million is due to day one gains on new structured settlements financed during the period, $0.8 million gain due to a change in the discount rate, offset by a decrease of $1.5 million in realized gains recognized as realized interest income on structured settlements during the period. There were no other changes in assumptions during the period.

 

We elected the fair value treatment under ASC 825-10-50-28 through 50-32 to be transparent to the user regarding the underlying fair value of the structured settlement which collateralizes the debt of CBC. The Company believes any change in fair value is driven by market risk as opposed to credit risk associated with the underlying structured settlement annuity issuer.

 

The purchased personal injury structured settlements result in payments over time through an annuity policy. Most of the annuities acquired involve guaranteed payments with specific defined ending dates. CBC also purchases a small number of life contingent annuity payments with specific ending dates but the actual payments to be received could be less due to the mortality risk associated with the measuring life. CBC records a provision for loss each period. The life contingent annuities are not a material portion of assets at June 30, 2017.

 

 On April 28, 2017, CBC entered into an Assignment Agreement (the “Assignment Agreement”) by and among CBC and an unrelated third party (Assignee”). The Assignment Agreement provided for the sale of a portion of the Company’s life contingent asset portfolio included in the Company’s structured settlements to the Assignee for a purchase price of $7.7 million. The Company realized a loss from the sale of $5.3 million for the three months and nine months ended June 30, 2017.

 

 

  ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 6—Structured Settlements (At Fair Value) (continued)

 

Structured settlements consist of the following as of June 30, 2017 and September 30, 2016:

 

   

June 30,

2017

   

September 30,

2016

 

Maturity (1) (2)

  $ 135,132,000     $ 133,059,000  

Unearned income

    (46,087,000

)

    (47,351,000

)

Structured settlements, net

  $ 89,045,000     $ 85,708,000  

 

(1)

The maturity value represents the aggregate unpaid principal balance at June 30, 2017 and September 30, 2016.

(2)

There are no amounts of structured settlements that are past due, or in nonaccrual status at June 30, 2017 and September 30, 2016.

 

Encumbrances on structured settlements as of June 30, 2017 and September 30, 2016 are as follows:

 

   

June 30,

2017

   

September 30,

2016

 

Notes payable secured by settlement receivables with principal and interest outstanding payable until June 2025 (3)

  $ 1,716,000     $ 1,862,000  

Notes payable secured by settlement receivables with principal and interest outstanding payable until August 2026 (3)

    3,947,000       4,242,000  

Notes payable secured by settlement receivables with principal and interest outstanding payable until April 2032 (3)

    3,907,000       3,987,000  

Notes payable secured by settlement receivables with principal and interest outstanding payable until February 2037 (3)

    17,765,000       18,978,000  

Notes payable secured by settlement receivables with principal and interest outstanding payable until March 2034 (3)

    13,780,000       14,507,000  

Notes payable secured by settlement receivables with principal and interest outstanding payable until February 2043 (3)

    13,259,000       13,705,000  

Notes payable secured by settlement receivables with principal and interest outstanding payable until January 2069 (3)

    17,761,000        

$25,000,000 revolving line of credit (3)

    4,300,000       10,154,000  

Encumbered structured settlements

    76,435,000       67,435,000  

Structured settlements not encumbered

    12,610,000       18,273,000  

Total structured settlements

  $ 89,045,000     $ 85,708,000  

 

(3)

See Note 10 – Other Debt – CBC

 

At June 30, 2017, the expected cash flows of structured settlements based on maturity value are as follows:

 

September 30, 2017 (3 months)

  $ 2,679,000  

September 30, 2018

    9,020,000  

September 30, 2019

    9,312,000  

September 30, 2020

    8,989,000  

September 30, 2021

    9,474,000  

Thereafter

    95,658,000  

Total

  $ 135,132,000  

 

 

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) 

Note 7—Litigation Funding

 

Personal Injury Claims

 

On December 28, 2011, the Company entered into a joint venture with Pegasus Legal Funding, LLC (“PLF”) in the operating subsidiary of Pegasus. Pegasus purchases interests in claims from claimants who are a party to personal injury litigation. Pegasus advances, to each claimant, funds, on a non-recourse basis at an agreed upon interest rate, in anticipation of a future settlement. The interest in each claim purchased by Pegasus consists of the right to receive, from such claimant, part of the proceeds or recoveries which such claimant receives by reason of a settlement, judgment or award with respect to such claimant’s claim. The wholly owned subsidiary, Simia, which commenced operations in January 2017, also engages in the personal injury claims business. The Company earned $10.0 million and $5.6 million in interest and fees during the nine and three month periods ending June 30, 2017, respectively, compared to $14.8 million and $9.8 million, respectively, during the nine and three month periods ending June 30, 2016. The Company had a net invested balance of $27.5 million and $48.3 million on June 30, 2017 and September 30, 2016, respectively. The Company records reserves for bad debts, which, at June 30, 2017 and 2016, amounted to $10.7 million and $7.0 million, as follows:

 

   

Three Months

Ended June 30, 2017

   

Three Months

Ended June 30, 2016

   

Nine Months

Ended June 30, 2017

   

Nine Months

Ended June 30, 2016

 

Balance at beginning of period

  $ 10,652,000     $ 6,175,000     $ 8,542,000     $ 5,459,000  

Provisions for losses

    1,247,000       1,087,000       4,521,000       2,223,000  

Write offs

    (1,195,000

)

    (268,000

)

    (2,359,000

)

    (688,000

)

Balance at end of period

  $ 10,704,000     $ 6,994,000     $ 10,704,000     $ 6,994,000  

 

 On November 8, 2016, the Company entered into a binding Term Sheet (the “Term Sheet”) with ASFI Pegasus Holdings, LLC, Fund Pegasus, LLC, Pegasus Funding, LLC, Pegasus Legal Funding, LLC, Max Alperovich and Alexander Khanas. Pegasus is currently the Company’s personal injury claims funding business and is a joint venture that is 80% owned by the Company and 20% owned by PLF. The Company and PLF decided not to renew the Pegasus joint venture that, by its terms, terminated on December 28, 2016. The Term Sheet amends certain provisions to Pegasus’ operating agreement dated as of December 28, 2011 (as amended, the “Operating Agreement”) and governs the terms relating to the collection of its existing Pegasus portfolio (the “Portfolio”).   

 

Pursuant to the Term Sheet, the parties agreed that Pegasus will continue in existence in order to collect advances on its existing Portfolio. The Company will fund overhead expenses relating to the collection of its Portfolio based on a budget agreed upon by the Company and PLF. Any cash received by Pegasus will be distributed to its members in the order provided for in the Operating Agreement. The Company will be repaid an amount equal to 20% of all principal collected on each investment paid back beginning October 1, 2016 and continuing through the collection of the Portfolio, which will be applied against the outstanding balance of overhead expenses previously advanced by the Company to Pegasus. Since January 2, 2017, additional overhead expenses advanced are being paid back monthly as incurred by the Company prior to the calculation and distribution of any profits.  

 

In connection with the Term Sheet, the parties also entered into a customary mutual release and non-disparagement agreement as well as a release from the non-competition obligations under the Operating Agreement.   

 

On November 11, 2016, the Company announced that it is continuing its personal injury claims funding business through the formation of a wholly owned subsidiary, Simia. On March 24, 2017, Simia purchased a portfolio of personal injury claims from a third party for approximately $3.0 million. The Company plans to grow Simia organically, but may from time to time purchase portfolio of assets from a third party if the opportunity presented aligns with the Company’s strategic growth plans.

 

The Company filed for arbitration with the American Arbitration Association ("AAA") against Pegasus in April 2017 for breaches in the Operating and Term Sheet. On April 18, 2017, the Company was granted an Emergent Award restraining the cash in Pegasus, until a formal arbitration panel is confirmed and can review the case. As of June 30, 2017 there was approximately $24.7 million in cash that was restrained under the Emergent Award, and is classified as restricted on the Company's consolidated balance sheet.

 

On July 17, 2017, an arbitration panel was confirmed, and a hearing date has been scheduled for August 25, 2017 on the Company's motion to have PLF removed from managing Pegasus and replacing them with Company designated representatives, and to permit disbursements to the Company in accordance with the Operating and Liquidation Agreements.

 

Matrimonial Claims (included in Other Assets) 

 

On May 8, 2012, the Company formed EMIRIC, LLC, a wholly owned subsidiary of the Company. EMIRIC, LLC entered into a joint venture with California-based Balance Point Divorce Funding, LLC (“BP Divorce Funding”) to create the operating subsidiary BP Case Management, LLC (“BPCM”). BPCM is 60% owned by the Company and 40% owned by BP Divorce Funding. BPCM provides non-recourse funding to a spouse in a matrimonial action. In 2012, the Company provided a $1.0 million revolving line of credit to partially fund BPCM’s operations, with such loan bearing interest at the prevailing prime rate, with an initial term of twenty-four months. In September 2014, the agreement was revised to extend the term of the loan to August 2016, increase the credit line to $1.5 million and include a personal guarantee of the principal of BP Divorce Funding. Effective August 14, 2016, the Company extended its revolving line of credit with BP Divorce Funding until March 31, 2017, at substantially the same terms as the September 2014 amendment. On April 1, 2017, BP Divorce Funding defaulted on this agreement, and as such, the loan balance of approximately $1.5 million was deemed uncollectible and was written off in general and administrative expenses on the consolidated statement of operations during the second quarter of fiscal 2017. As of June 30, 2017, the Company’s investment in cases through BPCM was approximately $1.7 million. There was no income recognized for the nine months ended June 30, 2017 and 2016 and the Company recorded bad debt expense of $0.7 million during the three months ended June 30, 2017.

 

 

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) 

 

N

ote 8—Furniture & Equipment

 

Furniture and equipment consist of the following as of the dates indicated:

 

   

June 30,

   

September 30,

 
   

2017

   

2016

 

Furniture

  $ 417,000     $ 417,000  

Equipment

    242,000       234,000  

Software

    1,363,000       1,350,000  
      2,022,000       2,001,000  

Less accumulated depreciation and amortization

    1,844,000       1,758,000  

Balance, end of period

  $ 178,000     $ 243,000  

 

Note 9—Non Recourse Debt

 

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

 

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 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 “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 Asta Funding, Inc., less certain credits for payments made prior to the consummation of the 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 to 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 $2,901,199 included a voluntary prepayment of $1,866,036 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, 2017, the Company recorded a liability to BMO of approximately $164,000, which has been recorded in other liabilities in the Company’s consolidated balance sheet. The funds were subsequently remitted to BMO on July 10, 2017. The liability to BMO is recorded when actual collections are received.

 

Bank Hapoalim B.M. (“Bank Hapoalim”) Line of Credit

 

On May 2, 2014, the Company obtained a $20 million line of credit facility from Bank Hapoalim, pursuant to a Loan Agreement (the “Loan Agreement”) among the Company and its subsidiary, Palisades Collection, LLC, as borrowers (the “Borrowers”), and Bank Hapoalim, as agent and lender. The Loan Agreement provided for a $20.0 million committed line of credit and an accordion feature providing an increase in the line of credit of up to $30 million, at the discretion of the lenders. The facility was for a term of three years at an interest rate of either LIBOR plus 275 basis points or prime, at the Company’s option. The Loan Agreement included covenants that required the Company to maintain a minimum net worth of $150 million and pay an unused line fee. The facility was secured pursuant to a Security Agreement among the parties to the Loan Agreement, with property of the Borrowers serving as collateral. On March 30, 2016, the Company signed the First Amendment to the Loan Agreement (the “First Amendment”) with Bank Hapoalim which amended certain terms of their banking arrangement. The First Amendment includes (a) the reduction of the interest rate to LIBOR plus 225 basis points; (b) a decrease in the minimum net worth requirement by $50 million, to $100 million and (c) modifies the Net Loss requirement from a quarterly to an annual basis. All other terms of the original agreement remain in effect. The Company has borrowed $9.6 million against the facility, which was outstanding as of June 30, 2017. There is a $10.0 million aggregate balance in Bank Hapoalim which has been reclassified as restricted cash in the consolidated balance sheet since these assets serve as collateral for the line of credit (see Note 1 – Business and Basis of Presentation). The line of credit facility expired on August 2, 2017 (see Note 22 – Subsequent Events). 

 

 

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 10—Other Debt—CBC 

 

The Company assumed $25.9 million of debt related to the CBC acquisition (see Note 5) on December 31, 2013, including a $12.5 million line of credit with an interest rate floor of 5.5%. Between March 27, 2014 and September 29, 2014, CBC entered into three amendments (Sixth Amendment through Eighth Amendment), resulting in the line of credit increasing to $22.0 million and the interest rate floor reduced to 4.75%. On March 11, 2015, CBC entered into the Ninth Amendment. This amendment, effective March 1, 2015, extended the maturity date on its credit line from February 28, 2015 to March 1, 2017. Additionally, the credit line was increased from $22.0 million to $25.0 million and the interest rate floor was decreased from 4.75% to 4.1%. Other terms and conditions were materially unchanged. In March 2017, the credit line was extended to April 28, 2017. On April 28, 2017, CBC entered into the Tenth Amendment, extending the credit line maturity date to June 30, 2017. On July 27, 2017 CBC entered into the Eleventh Amendment, extending the credit line maturity date to June 30, 2019 (see Note 22 – Subsequent Events). 

 

On November 26, 2014, CBC completed its fourth private placement, backed by structured settlement and fixed annuity payments. CBC issued, through its subsidiary, BBR IV, LLC, approximately $21.8 million of fixed rate asset-backed notes with a yield of 5.4%. On September 25, 2015, CBC completed its fifth private placement, backed by structured settlement and fixed annuity payments. CBC issued, through its subsidiary, BBR V, LLC, approximately $16.6 million of fixed rate asset-backed notes with a yield of 5.1%. On July 8, 2016, CBC issued, through its subsidiary, BBR VI, approximately $14.8 million of fixed rate asset-backed notes with a yield of 4.85%. On April 7, 2017, CBC completed its seventh private placement, through its subsidiary, BBR VII, and issued approximately $18.3 million of fixed rate asset-backed notes with a yield of 5.0%. 

 

As of June 30, 2017, the remaining debt amounted to $76.4 million, which consisted of $4.3 million drawdown from a line of credit from an institutional source and $72.1 million of notes payable issued by entities 100%-owned and consolidated by CBC. These entities are bankruptcy-remote entities created to issue notes secured by structured settlements. The following table details the other debt at June 30, 2017 and September 30, 2016:  

 

   

Interest Rate

   

June 30,
2017

   

September 30,
2016

 

Notes payable secured by settlement receivables with principal and interest outstanding payable until June 2025

    8.75

%

  $ 1,716,000     $ 1,862,000  

Notes payable secured by settlement receivables with principal and interest outstanding payable until August 2026

    7.25

%

    3,947,000       4,242,000  

Notes payable secured by settlement receivables with principal and interest outstanding payable until April 2032

    7.125

%

    3,907,000       3,987,000  

Notes payable secured by settlement receivables with principal and interest outstanding payable until February 2037

    5.39

%

    17,765,000       18,978,000  

Notes payable secured by settlement receivables with principal and interest outstanding payable until March 2034

    5.07

%

    13,780,000       14,507,000  

Notes payable secured by settlement receivables with principal and interest outstanding payable until February 2043

    4.85

%

    13,259,000       13,705,000  

Notes payable secured by settlement receivables with principal and interest outstanding payable until January 2069

    5.0

%

    17,761,000        

Subtotal notes payable

            72,135,000       57,281,000  

$25,000,000 revolving line of credit expiring on June 30, 2019

    4.1

%

    4,300,000       10,154,000  

Total other debt – CBC

          $ 76,435,000     $ 67,435,000  

 

 

 

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 11—Commitments and Contingencies

 

Employment Agreement 

 

The employment contracts of the original two CBC 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.   

 

As of July 17, 2017, Patrick F. Preece is no longer employed as Chief Executive Officer of Simia. On an interim basis Gary Stern, Chairman, Chief Executive Officer and President of the Company, will undertake the responsibilities of Simia’s Chief Executive Officer.

 

Leases

 

The Company leases its facilities in Englewood Cliffs, NJ, Houston, TX, New York, NY and Conshohocken, PA.

 

Legal Matters

 

In June 2015, a putative class action complaint was filed against the Company, and one of its third-party law firm servicers, alleging violation of the federal Fair Debt Collection Practices Act and Racketeer Influenced and Corrupt Organizations Act (“RICO”) and state law arising from debt collection activities and default judgments obtained against certain debtors.    

 

The Company filed a motion to strike the class action allegations and compel arbitration or, to the extent the court declines to order arbitration, to dismiss the RICO claims. On or about March 31, 2015, the court denied the Company’s motion. The Company filed an appeal with the United States Court of Appeals for the Second Circuit. A mediation session was held in July 2015, at which the Company agreed to settle the action on an individual basis for a payment of $13,000 to each named plaintiff, for a total payment of $39,000. Payment was made on or about July 24, 2015. The third-party law firm servicer has not yet settled and remains a defendant in the case.

 

The plaintiffs’ attorneys advised that they were contemplating the filing of another putative class action complaint against the Company alleging substantially the same claims as those that were asserted in this matter. In anticipation of such an eventuality, the Company agreed to non-binding mediation in order to reach a global settlement with other putative class members, which would avert the possibility of further individual or class actions with respect to the affected accounts. To date, the parties have attended two mediation sessions and are continuing to discuss a global settlement. In connection with such discussions, the parties agreed in principle to settle the action for a payment of $3.9 million (which would be split equally between the Company and the law firm servicer). The Company and law firm servicer have also agreed to cease collection activity on the affected accounts.

 

Accordingly, the Company set up a reserve for settlement costs of $2.0 million during the three months ended March 31, 2016, which was included in general and administrative expenses in the Company's consolidated statement of operations.

 

The Company reassessed the situation at September 30, 2016 and deemed that an additional $0.3 million was necessary to account for legal expenses, which was made during the three month period ended September 30, 2016. The Company reviewed the case as of June 30, 2017 and deemed that the $2.3 million reserve remains sufficient.

 

The Company is a defendant in a lawsuit filed in Montana state court alleging fraud and abuse of process arising from the Company’s business relationship with an entity that finances divorce litigation proceedings. As of June 30, 2017, and based on its assessments of current facts and circumstances, the Company believes that it has recorded adequate reserves to cover future obligations associated with this lawsuit.

 

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. The Company believes that it has meritorious defenses against this counterclaim and will continue to vigorously defend itself against any such action.

 

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. As of the date of this Form 10-Q, we are not involved in any other material litigation in which we are a defendant.

 

 

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)  

 

Note 12—Income Recognition, Impairments, and Commissions and Fees

 

 Income Recognition 

 

The Company accounts for certain of its investments in finance receivables using the guidance of FASB Accounting Standards Codification (“ASC”), Receivables — Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310”). Under the guidance of ASC 310, static pools of accounts 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.  

 

 The Company accounts for its investments in personal injury claims at an agreed upon interest rate, in anticipation of a future settlement. The interest purchased by Pegasus in each claim 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. Open case revenue is estimated, recognized and accrued at a rate based on the expected realization and underwriting guidelines and facts and circumstances for each individual case. These personal injury claims are non-recourse. When a case is closed and the cash is received for the advance provided to a claimant, revenue is recognized based upon the contractually agreed upon interest rate, and, if applicable, adjusted for any changes due to a settled amount and fees charged to the claimant. 

 

The funding of matrimonial actions is on a non-recourse basis. Revenue from matrimonial actions is recognized under the cost recovery method. 

 

CBC purchases periodic payments under structured settlements and annuity policies from individuals in exchange for a lump sum payment. The Company elected to carry 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 settlement. Changes in fair value are recorded in unrealized gain (loss) in structured settlements in our statements of operations.  

 

The Company recognizes revenue for GAR Disability Advocates and Five Star when cases close and fees are collected.

 

 Impairments 

 

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.  

 

In October 2014, the Company invested $5.0 million in Class A shares of the Topaz MP Fixed Income Fund (“Topaz Fund”), a closed end fund. The Topaz Fund invests indirectly in various portfolios of Non-Performing Small Consumer Loans. The objective of the fund is to obtain a fixed return cash flow representing interest on the invested capital. According to the investment memorandum of the fund, the Topaz Fund proposed to make semi-annual distributions of 14% annual compounded interest on June and December of each year. Since December 2015, no distribution has been received by the Company. The Company received letters from the fund’s General Partner explaining that the distributions were not made due to the negative performance of the fund for the periods. 

 

 During the fiscal year 2016, the Company recorded an impairment loss on this investment of $1.0 million, which was included in general and administrative expenses in the consolidated statements of operations. In fiscal year 2017, the Company received an announcement that the investment was being liquidated. After careful consideration, the $3.4 million carrying value of this investment was written off as of March 31, 2017.

 

 

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 12—Income Recognition, Impairments, and Commissions and Fees (continued)

 

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. The Company utilizes third party collection agencies and attorney networks.  

 

Note 13—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 months ended June 30, 2017 and nine months ended June 30, 2017 was 40% and 41% for each period, compared to 38% and 32% in the same periods of the prior year. The effective rate for fiscal 2017 differed from the U.S. federal statutory rate of 34% due to state income taxes, and other permanent differences. The effective rate for fiscal 2016 differed from the U.S. federal statutory rate of 35% primarily due to state income taxes and other permanent differences.

 

 The Company files income tax returns in the U.S federal jurisdiction, various state jurisdictions, and various foreign countries. The tax returns for the 2014 through 2015 fiscal years are currently under examination by the Internal Revenue Service. The Company does not have any uncertain tax positions.

 

 

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 14—Net Income (Loss) per Share

 

Basic per share data is calculated by dividing net income (loss) by the weighted average shares outstanding during the period. Diluted earnings per share is calculated similarly, except that it includes the dilutive effect of the assumed exercise of securities, including the effect of shares issuable under the Company’s stock based compensation plans. With respect to the assumed proceeds from the exercise of dilutive options, the treasury stock method is calculated using the average market price for the period.

 

The following table presents the computation of basic and diluted per share data for the three months ended June 30, 2017 and 2016 (rounded to the nearest thousands, except share data):

 

   

Three Months Ended June 30, 2017

   

Three Months Ended June 30, 2016

 
   

Net
Income

   

Weighted
Average
Shares

   

Per
Share
Amount

   

Net
Income

   

Weighted
Average
Shares

   

Per
Share
Amount

 

Basic

  $ 1,832,000       6,577,784     $ 0.28     $ 3,196,000       11,897,139     $ 0.27  

Effect of Dilutive Stock

            301,298       (0.01

)

            536,285       (0.01

)

Diluted

  $ 1,832,000       6,879,082     $ 0.27     $ 3,196,000       12,433,424     $ 0.26  

 

 

The following table presents the computation of basic and diluted per share data for the nine months ended June 30, 2017 and 2016 (rounded to the nearest thousands, except share data):

 

   

Nine Months Ended June, 2017

   

Nine Months Ended June 30, 2016

 
   

Net
Loss

   

Weighted
Average
Shares

   

Per
Share
Amount

   

Net
Income

   

Weighted
Average
Shares

   

Per
Share
Amount

 

Basic

  $ (5,394,000

)

    9,389,864     $ (0.57

)

  $ 3,171,000       12,023,156     $ 0.26  

Effect of Dilutive Stock

                                  270,917        

Diluted

  $ (5,394,000

)

    9,389,864     $ (0.57

)

  $ 3,171,000       12,294,073     $ 0.26  

 

 

For the three months ended June 30, 2017, 942,067 options at a weighted average exercise price of $8.15 were not included in the diluted earnings per share calculation as they were antidilutive.

  

For the three months ended June 30, 2016, 56,007 options at a weighted average exercise price of $12.55 were not included in the diluted earnings per share calculation as they were antidilutive

 

For the nine months ended June 30, 2016, 186,082 options at a weighted average exercise price of $10.88 were not included in the diluted earnings per share calculation as they were antidilutive

 

 

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 15—Stock Based Compensation 

 

The Company accounts for stock-based employee compensation under ASC 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 statement of operations, rather than a disclosure in the notes to the Company’s consolidated financial statements. 

 

On December 16, 2015, the Compensation Committee of the Board (“Compensation Committee”) granted 67,100 stock options to non-officer employees of the Company, of which 9,100 options vested immediately and the remaining 58,000 stock options vest in three equal annual installments and accounted for as one graded vesting award. The exercise price of these options was at the market price on that date. The weighted average assumptions used in the option pricing model were as follows:

 

Risk-free interest rate

    0.24

%

Expected term (years)

    6.25  

Expected volatility

    23.4

%

Dividend yield

    0.00

%

 

 On December 16, 2015, the Compensation Committee granted 5,000 restricted shares to a non-officer employee of the Company. These shares vested fully in March 2016. On December 31, 2015, the Company issued an aggregate of 123,304 shares to the two former CBC principals (see Note 5 – Acquisition of CBC). These shares are subject to a one year lock up period in which the holders cannot sell the shares. In addition, the shares are subject to certain sales restrictions following the initial lock-up period which expired on December 31, 2016 (see Note 5 – Acquisition of CBC).

 

On June 8, 2017, the Compensation Committee granted 56,600 stock options to an officer and employees of the Company, of which 10,000 options vested immediately, 10,000 options vest on January 1, 2018, 10,000 options vest on January 1, 2019 and the remaining 26,600 stock options vest in three equal annual installments and accounted for as one graded vesting award. The exercise price of these options was at the market price on that date. The weighted average assumptions used in the option pricing model were as follows:

 

Risk-free interest rate

    1.86

%

Expected term (years)

    5.97  

Expected volatility

    26.27

%

Forfeiture rate

    3.49

%

Dividend yield

    0.00

%

 

Note 16—Stock Option Plans

 

2012 Stock Option and Performance Award Plan 

 

On February 7, 2012, the Board adopted the Company’s 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 replaces 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, an award of 245,625 shares of restricted stock, and has cancelled 67,868 options, leaving 1,281,443 shares available as of June 30, 2017. As of June 30, 2017, approximately 88 of the Company’s employees were able to participate in the 2012 Plan.

 

Equity Compensation Plan 

 

On December 1, 2005, the Board adopted the Company’s 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 allows 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 may be issued under this plan.

 

 

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 16—Stock Option Plans

 

2002 Stock Option Plan

 

On March 5, 2002, the Board adopted the Company’s 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 authorizes the granting of incentive stock options (as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”)) and non-qualified stock options to eligible employees of the Company, including officers and directors of the Company (whether or not employees) and consultants of the Company.

 

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

 

Summary of the Plans

 

Compensation expense for stock options and restricted stock is recognized over the vesting 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 2002 Plan, and the Equity Compensation Plan:

 

   

Nine Months Ended June 30,

 
   

2017

   

2016

 
   

Number
Of
Shares

   

Weighted
Average
Exercise
Price

   

Number
of
Shares

   

Weighted
Average
Exercise
Price

 

Outstanding options at the beginning of period

    949,667     $ 8.47       1,043,566     $ 8.47  

Options granted

    56,600       6.55       67,100       7.93  

Options exercised

                (107,531

)

    8.11  

Options forfeited/cancelled

    (53,800

)

    14.01       (8,300

)

    8.14  

Outstanding options at the end of period

    952,467     $ 8.05       994,835     $ 8.47  

Exercisable options at the end of period

    867,195     $ 8.13       874,826     $ 8.51  

 

   

Three Months Ended June 30,

 
   

2017

   

2016

 
   

Number
Of
Shares

   

Weighted
Average
Exercise
Price

   

Number
of
Shares

   

Weighted
Average
Exercise
Price

 

Outstanding options at the beginning of period

    896,867     $ 8.14       1,094,867     $ 8.45  

Options granted

    56,600       6.55              

Options exercised

                (100,032

)

    8.24  

Options forfeited/cancelled

    (1,000

)

    7.93              

Outstanding options at the end of period

    952,467     $ 8.05       994,835     $ 8.47  

Exercisable options at the end of period

    867,195     $ 8.13       874,826     $ 8.51  

 

 

ASTA FUNDING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 16—Stock Option Plans (continued)

 

The following table summarizes information about the 2012 Plan, 2002 Plan, and the Equity Compensation Plan outstanding options as of June 30, 2017:

 

          Options Outstanding     Options Exercisable  

Range of Exercise

Price

    Number
of Shares
Outstanding
    Weighted
Remaining
Contractual
Life (in Years)
    Weighted
Average
Exercise
Price