Quarterly report pursuant to Section 13 or 15(d)


9 Months Ended
Sep. 30, 2020
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 refinery in Bakersfield, California from Alon Paramount Holdings, Inc. (“Alon Paramount”) for a total consideration of $120.2 million. 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 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 feedstock of Camelina seed, 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 $120.2 million, and consisted of $40 million of cash, an option right of $5.5 million to the seller, and an assumption of $74.7 million of liabilities. The liabilities assumed consist of $40.7 million of Asset Retirement Obligations (ARO) and $34 million of other environmental liabilities. These liabilities are the estimated costs of clean-up, remediation and associated costs of the acquired assets in accordance with current regulations. The total consideration of the purchase was allocated to the asset categories acquired based upon their relative fair value. 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   $ 13,506,000       —       $ 13,506,000  
  Buildings     3,656,600       —         3,656,600  
  Refinery     99,614,100       3,222,449       102,836,549  
Intangible Assets     3,420,700       —         3,420,700  
   Total   $ 120,197,400     $ 3,222,449     $ 123,419,849  


Property and equipment as of September 30, 2020 and December 31, 2019 are as follows:


    September 30, 2020   December 31, 2019
Land   $ 13,506,000       —    
Office Equipment     61,078       61,078  
Buildings     3,656,600       —    
Refinery Equipment     102,836,549       —    
Construction in Process     15,457,898       —    
Construction period interest     5,461,540       —    
Total Cost   $ 140,979,665       61,078  
Less accumulated depreciation     (133,817 )     (61,078 )
Property and equipment, net   $ 140,845,848       —    


Depreciation expense for property and equipment was approximately $46,000 for the quarter and $73,000 for the nine months ended September 30, 2020. There was no depreciation for the quarter and nine months ended September 30, 2019.