Quarterly report pursuant to Section 13 or 15(d)


3 Months Ended
Mar. 31, 2021
Property, Plant and Equipment [Abstract]  



On May 7, 2020 through its subsidiary BKRF OCB, LLC, the Company purchased all of the outstanding equity interests of Alon Bakersfield Property, Inc. a company that owned a crude oil refinery in Bakersfield, California from Alon Paramount Holdings, Inc. (“Alon Paramount”) for a total consideration of $89.4 million (excluding acquisition costs). Immediately prior to the purchase, Alon Bakersfield Property Inc. was converted into a limited liability company and renamed as “Bakersfield Renewable Fuels, LLC.” The Company is now retooling the acquired crude oil refinery into a biorefinery. In accordance with ASC Topic 805, Business Combinations, the Company determined that the purchase is an asset purchase and not a business combination based the following a) substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset group, b) that the existing crude oil based (very high carbon) refinery is not able to produce renewable diesel (very low carbon) fuel, c) no refinery in the U.S. has been designed specifically around the plant oil feedstock extracted from Camelina seeds, thus the technical aspect is new and unique to the Bakersfield Biorefinery and d) the Company did not acquire an assembled workforce. Thus, the acquired asset group does not have the full inputs or substantive process to produce outputs and does not have any acquired revenue generating contractual arrangements.


The total consideration for the purchase of the Bakersfield Biorefinery was $89.4 million, and consisted of $40 million of cash, an option right valued at $5.5 million granted to the seller, and an assumption of $43.9 million of liabilities. The liabilities assumed consist of $21.9 million of asset retirement obligations (ARO) and $22 million of other environmental remediation liabilities. These liabilities are the estimated costs of clean-up, remediation and associated costs of the acquired assets in accordance with current regulations. The option right was valued using various inputs, including a volatility of 116%, a risk free rate of 0.14% and a marketability discount of 25%. The total consideration of the purchase was allocated to the asset categories acquired based upon their relative fair value, except that the fair value of the ARO were allocated to the specific assets to which they relate. The following summarizes this allocation of the purchase price and also the reclassification of the pre-acquisition costs: 


Asset Category   Capitalized Costs Based on Acquisition Valuation   Allocated Pre-Acquisition Costs   Total Capitalized Costs on Acquisition
Property and Equipment                        
  Land   $ 7,584,961       —       $ 7,584,961  
  Buildings     2,053,570       —         2,053,570  
  Refinery     77,845,201       3,222,449       81,067,650  
Intangible Assets     1,921,082       —         1,921,082  
   Total   $ 89,404,814     $ 3,222,449     $ 92,627,263  


Property and equipment as of March 31, 2021 and December 31, 2020 are as follows:


    March 31, 2021   December 31, 2020
Land   $ 7,584,961       7,584,961  
Office Equipment     61,078       61,078  
Buildings     2,053,570       2,053,570  
Refinery Equipment     103,635,160       86,019,130  
Construction in Process     41,684,071       33,212,695  
Construction period interest     15,215,073       10,220,766  
Total Cost   $ 170,233,913       139,152,200  
Less accumulated depreciation     (205,195 )     (179,525 )
Property and equipment, net   $ 170,028,718       138,972,675  


Depreciation expense for property and equipment was approximately $25,000 for the quarter ended March 31, 2021. There was no depreciation for the quarter ended March 31, 2020.