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CORRESP
 1
 filename1.htm

 atlc20250319_corresp.htm

 March 19, 2025

 FOIA CONFIDENTIAL TREATMENT REQUEST

 Annex A to this letter omits confidential information included in

 the unredacted version of such document that was delivered to the Staff.

 Redacted information is reflected with an “[*****].”

 VIA EDGAR

 United States Securities and Exchange Commission

 Division of Corporation Finance

 100 F Street, N.E.

 Washington, D.C. 20549

 Attn: William Schroeder and Michael Volley

 Re:

 Atlanticus Holdings Corporation

 Form 10-K for Fiscal Year Ended December 31, 2023

 Form 10-Q for the Quarter Ended September 30, 2024

 File No. 001-40485

 Dear Mr. Schroeder and Mr. Volley:

 In response to your request, please find attached hereto as Annex A the SAB 99 Materiality Assessment related to the Fair Value of Loans Receivable Valuation Misstatement (the “SAB 99 Memo”) of Atlanticus Holdings Corporation (the “Company”).

 Because of the commercially sensitive nature of certain information contained in the SAB 99 Memo, this submission is accompanied by a request for confidential treatment for certain portions of the SAB 99 Memo. We have filed a separate letter with the Office of Freedom of Information and Privacy Act Operations (the “FOIA Office”) in connection with the confidential treatment request, pursuant to Rule 83 of the SEC’s Rules on Information and Requests [17 C.F.R. § 200.83] (“Rule 83”). For the Staff’s reference, we have enclosed a copy of our letter to the FOIA Office (the “Request”) with this copy of the correspondence marked to show the portions redacted from the version filed via EDGAR and for which the Company is requesting confidential treatment.

 In accordance with Rule 83, the Company requests confidential treatment of (a) the marked portions (the “Confidential Information”) of the SAB 99 Memo and (b) the accompanying Request (collectively, the “Confidential Material”). Please promptly inform the undersigned of any request for disclosure of the Confidential Material made pursuant to the Freedom of Information and Privacy Act or otherwise so that the undersigned may substantiate the Request for confidential treatment in accordance with Rule 83.

 In accordance with Rule 83, the SAB 99 Memo also has been clearly marked with the legend “Confidential Treatment Requested by Atlanticus Holdings Corporation” and each page is marked for the record with the identifying numbers and code “AHC2 – 001” through “AHC2 – 0012.”

 If you have any questions, please do not hesitate to call me at (404) 885-3310.

 Sincerely,

 /s/ Paul Davis Fancher

 Paul Davis Fancher

 cc:

 William R. McCamey (Atlanticus Holdings Corporation)

 Mitchell C. Saunders (Atlanticus Holdings Corporation)

 Annex A

 Document Title:

 SAB 99 Materiality Assessment related to the Fair Value of Loans Receivable Valuation Misstatement

 Effective Dates:

 For the year ending 31 Dec 2024

 Version Date:

 13 March 2025

 FOIA CONFIDENTIAL TREATMENT REQUEST
This memorandum omits confidential information included in the unredacted version of this memorandum that was delivered to the Staff.
Redacted information is reflected with an “[*****].”

 I. Background and Purpose

 The purpose of this memorandum is to provide management's assessment of the impact of the fair value of loans receivable misstatement for prior periods.

 II. Summary of Misstatement

 During FY2024, the Company received inquiries from the SEC regarding our accounting for the Loans receivable at fair value, specifically related to the company’s fair value methodology whereby expected subsequent purchases (and future merchant fees) have been included in our fair value measurement for receivables. In the first quarter of 2025, Management identified errors in the model methodology used to determine the fair value of loans receivable. These errors impacted the balance sheet and income statement and required a revision in the model methodology to correct the cumulative impact of the error in the measurement of our Loans receivable at fair value at December 31, 2024.

 A response from the SEC on this matter included the following information:

 We note your response to prior comment 5 regarding the inclusion of expected subsequent purchases (and future merchant fees) in your fair value measurement for receivables. In your response, you refer to the guidance in ASC 820-10-35-10E and 35-11A as support for the inclusion of expected subsequent purchases in the fair measurement for your receivables. However, this guidance is not applicable for the measurement of financial assets. As discussed in paragraphs BC46 and BC47 of ASU 2011-04, the FASB Board does not believe the concepts of highest and best use and valuation premise are relevant when measuring the fair value of financial assets, at least in part due to the fact that financial assets do not have alternative uses because a financial asset has specific contractual terms and can have a different use only if the characteristics of the financial asset (that is, the contractual terms) are changed. Furthermore, a change in characteristics causes that particular asset to become a different asset, and the objective of a fair value measurement is to measure the asset that exists at the measurement date. Furthermore, you also state in your response that you do not believe you have a contractual right (i.e., firm commitment) related to subsequent purchases that would be eligible for fair value measurement under ASC 825. For these reasons, we do not believe the inclusion of expected subsequent purchases (and future merchant fees) in your fair value measurement is consistent with the guidance in ASC 820 and ASC 825. Please advise or revise your methodology to comply with the guidance in ASC 820.

 1

 Confidential Treatment Requested by Atlanticus Holdings Corporation

 AHC2 - 001

 The Company revised the fair value model methodology to comply with the guidance in ASC 820 as of December 31, 2024, to measure and present the fair value of loans receivable using this revised methodology. Within this memo, we are including a consideration of the materiality of the uncorrected misstatements in prior periods. The table below represents the iron curtain impact of the change in loan value for each period.

 FSLI

 ABCOT

 Q3 2024

 Q2 2024

 Q1 2024

 Q4 2023

 Dr. Loans receivable at fair value

 Asset

 [*****]

 [*****]

 [*****]

 [*****]

 Cr. Changes in fair value of loans (YTD $ )

 Expense

 [*****]

 [*****]

 [*****]

 [*****] 1

 III. Guidance Considerations

 In evaluating the misstatements below, management considered guidance from multiple sources to ascertain whether the misstatements are material to financial statement users (and thus for prior period filings with identified misstatements), and whether amounts would require revision through a “Big R” restatement, “Little R” restatement, and/or current period cumulative entry under ASC 250.

 A.

 Materiality Guidance

 ●

 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 250, Accounting Changes and Error Corrections

 ●

 SEC Staff Accounting Bulletin (“SAB”) Topics 1.M and 1.N (formerly referred to as SAB Nos. 99 and 108, respectively) [Link]

 o

 SAB Topic 1.M (SAB 99) — states that the assessment of the materiality of errors should consider both qualitative and quantitative considerations and discusses more specific aspects of the qualitative considerations.

 o

 SAB Topic 1.N (SAB 108) — addresses quantifying the financial statement effects of errors (i.e., the quantitative analysis) and provides guidance on the correction of errors, including the correction of immaterial errors existing in prior period financial statements.

 ●

 KPMG’s Handbook: Accounting changes and error corrections

 ●

 BDO’s guide: Accounting Changes and Error Corrections

 1 [*****] Omitted and provided under separate cover to the Staff pursuant to Rule 83.

 2

 Confidential Treatment Requested by Atlanticus Holdings Corporation

 AHC2 - 002

 ●

 Statement released by SEC Acting Chief Accountant Paul Munter on March 9, 2022 , Assessing Materiality: Focusing on the Reasonable Investor When Evaluating Errors

 Materiality Considerations

 As summarized in the guidance referenced above, the following materiality factors were considered

 ●

 When an error is identified, the accounting and reporting conclusions are dependent on the materiality of the error(s) to the financial statements.

 ●

 An item is considered material if there is “a substantial likelihood that the…fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available.”

 ●

 Companies (particularly SEC registrants) are directed to consider both the quantitative and qualitative considerations outlined in the extensive materiality guidance set forth in SEC Staff Accounting Bulletin (“SAB”) Topics 1.M and 1.N (formerly referred to as SAB Nos. 99 and 108, respectively).

 ●

 Materiality should be assessed with respect to the misstatement’s impact on prior period financial statements and, in the event prior period financial statements are not restated or adjusted, with respect to the impact of the misstatement’s correction on the current period financial statements.

 ●

 Management should also consider whether the correction (or non-correction) of errors would result in other potential impacts such as compliance with debt or other covenants that could be affected by the error.

 Management has evaluated extensively the quantitative and qualitative considerations listed in SAB Topic 1.M (SAB 99) and 1.N (SAB 108), and we have considered the potential impact to users of our prior period financial information in the event the error remains unadjusted. Documentation of this assessment is below.

 IV. Evaluation of the Materiality of the Misstatements

 A.

 Quantitative Materiality Evaluation

 3

 Confidential Treatment Requested by Atlanticus Holdings Corporation

 AHC2 - 003

 In the assessment of quantitative materiality, management reviewed multiple indicators to align with investors’ evaluation of the total mix of information. Management believes key measures to consider in evaluating materiality include pre-tax income and total revenues. In our preliminary calculation of materiality for FY2024 based on FY2023 reported amounts, management determined that $[*****] million is an appropriate materiality threshold based on the risk profile of the Company, noting this amount represents [*****]% of FY2023 pre-tax income (“PTI”) and approximated [*****]% of FY2023 revenue. 2

 [*****] 3

 Further, management evaluated our assessed materiality based on final 2024 metrics as follows, noting that our determined materiality amount represents [*****]% of final PTI and [*****]% of total revenues. Thus the amount deemed to represent total overall materiality remains reasonable based on all metrics presented as of and for the year ended December 31, 2024. 4

 [*****] 5

 ASC 270, Interim Reporting (previously APB Opinion No. 28) describes the applicability of generally accepted accounting principles to interim financial information and indicates the types of disclosures necessary to report on a meaningful basis for a period of less than a full year. Paragraph 29 provides guidance on assessing materiality in interim periods: “In determining materiality for the purpose of reporting the cumulative effect of an accounting change or correction of an error, amounts should be related to the estimated income for the full fiscal year and also to the effect on the trend of earnings.”

 B.

 Prior Period Impact Evaluation

 The misstatements relate to the calculation of Fair Value of Receivables; specifically, the removal of future purchases, and the merchant fees associated with those purchases, from the future cash flows used to measure fair value of those receivables through a discounted cash flow analysis. The misstatements were identified based on discussions with the Staff of the Securities and Exchange Commission (“SEC”). Management reviewed periods including the year ended December 31, 2023 and the first three quarters of 2024 to evaluate the impact of the fair value of loans receivable adjustment to verify if a restatement of 2024 prior quarters or the prior year was necessary based on the materiality of the misstatements.

 2 Omitted and provided under separate cover to the Staff pursuant to Rule 83.
 3 Omitted and provided under separate cover to the Staff pursuant to Rule 83.
 4 Omitted and provided under separate cover to the Staff pursuant to Rule 83.
 5 Omitted and provided under separate cover to the Staff pursuant to Rule 83.

 4

 Confidential Treatment Requested by Atlanticus Holdings Corporation

 AHC2 - 004

 2024 Analysis

 Management assessed the impact on the financial statement line items, pre-tax and net income, total assets and liabilities, and total revenue and net margin for Q1, Q2, and Q3 2024. Refer to Appendix A for illustrative charts for the below narrative discussion of impacts.

 As shown in Appendix A, total impacts on the Loans receivable at Fair Value asset ranged from $[*****] million, or [*****]% of the financial statement line item (“FSLI”), in Q1 2024, to $[*****] million, or [*****]% of the FSLI, in Q3 2024. The change in the Fair Value of the Loan expense ranges from a decrease of [*****]% in the FSLI in Q1 2024 to a decrease of [*****]% for Q3 2024. The overall impact on Pre-tax income ranges from $[*****] million in Q1 2024, or an increase of [*****]%, to $[*****] million in Q3 2024, or an increase of [*****]%. This impact is below management’s assessed materiality for the quarter and does not have a significant impact on the mix of information available to investors.

 This evaluation is further supported by the analysis of total assets and liabilities for the first three quarters of 2024. Impacts range from increases in total assets of [*****]% in Q1 2024 to [*****]% in Q3 2024, indicating there is not a significant change in the mix of information available to investors related to total assets. Total liabilities were not impacted as a result of the misstatement. 7

 Lastly, impacts on total revenues and net margin were analyzed by management. The total misstatements impacting net margin were increases of [*****]% in Q1 2024, an increase of [*****]% in Q2 2024, and an increase of [*****]% in Q3 2024. Along with the corresponding impacts to pre-tax net income discussed above, management determined these misstatements represented an overall immaterial impact to the financial information available to investors for 2024. 8

 2023 Analysis

 As shown in Appendix A, the misstatement as of December 31, 2023 would have amounted to a $[*****] million increase in Loans receivable at Fair Value and a decrease in the expense related to Changes in the Fair Value of Loans by a corresponding amount. This would have resulted in a $[*****] million increase to Pre-Tax Income (+[*****]%) and a $[*****] million impact on net income, an increase of [*****]%. This impact is well below management’s assessed materiality for the FY2023 and does not have a significant impact on the mix of information available to investors. 9

 Furthermore, management assessed the impact on total assets and liabilities. Total assets as of December 31, 2023, would have increased by $[*****] million, or [*****]%, with no corresponding change in total liabilities. 10

 6 [*****] Omitted and provided under separate cover to the Staff pursuant to Rule 83.
 7 [*****] Omitted and provided under separate cover to the Staff pursuant to Rule 83.
 8 [*****] Omitted and provided under separate cover to the Staff pursuant to Rule 83.
 9 [*****] Omitted and provided under separate cover to the Staff pursuant to Rule 83.
 10 [*****] Omitted and provided under separate cover to the Staff pursuant to Rule 83.

 5

 Confidential