EQUITY METHOD INVESTMENT

12 Months Ended

Sep. 30, 2021

EQUITY METHOD INVESTMENT.

EQUITY METHOD INVESTMENT

6. EQUITY METHOD INVESTMENT:

In April 2020, the Company completed a transaction with Chas. M. Sledd Company (“Sledd”), a West Virginia wholesale distributor serving the convenience store industry, to jointly own and operate Team Sledd, LLC (“Team Sledd”), a limited liability company formed for the purpose of owning and operating Sledd’s wholesale distribution business. Sledd contributed substantially all of its assets and stated liabilities to Team Sledd, while the Company contributed $10.0 million in cash, of which $6.5 million was structured as equity and $3.5 million was structured as a secured loan to Team Sledd which is subordinate to the liens of Team Sledd's existing secured lenders.

At September 2021 and September 2020, AMCON owned approximately 49% and 44% of Team Sledd’s outstanding equity, respectively, with a carrying value of $9.4 million and $6.7 million, respectively. The Company recognized equity in earnings (net of income taxes) from its investment in Team Sledd of approximately $3.4 million and $0.2 million during fiscal 2021 and fiscal 2020, respectively. The Company’s secured loan to Team Sledd had a carrying value of $3.5 million at both September 2021 and September 2020. As of September 2021, approximately $0.2 million of the secured loan

balance is recorded as a component of prepaid expenses and other current assets on the consolidated balance sheets. Pursuant to an operating agreement between the Company and Sledd, certain membership interests in Team Sledd may be redeemed over a period of years, with such redemptions being funded from the operations of Team Sledd. Any such redemptions would result in a corresponding increase in the percentage of the outstanding equity of Team Sledd owned by AMCON.

Team Sledd’s summarized financial data for the periods ended September 2021 and September 2020 was as follows:

	For the year ended September 2021		For the six months ended September 2020
Sales	$	684,539,392	$	350,685,407
Gross profit		34,962,326		14,218,204
Net income before income taxes		8,597,997		551,280
Net income attributable to AMCON, net of tax		3,357,978		183,579