Quarterly report pursuant to Section 13 or 15(d)

PROPERTY, PLANT AND EQUIPMENT

v3.21.2
PROPERTY, PLANT AND EQUIPMENT
6 Months Ended
Jun. 30, 2021
Property, Plant and Equipment [Abstract]  
PROPERTY, PLANT AND EQUIPMENT
NOTE C – PROPERTY, PLANT AND EQUIPMENT
 
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) 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 was 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 June 30, 2021 and December 31, 2020 are as follows:
 
 
 
June 30, 2021
 
 
December 31, 2020
 
Land
 
$
7,584,961
 
 
$
7,584,961
 
Office Equipment
 
 
62,506
 
 
 
61,078
 
Buildings
 
 
2,053,570
 
 
 
2,053,570
 
Refinery and Industrial Equipment
 
 
122,353,287
 
 
 
86,019,130
 
Transportation Equipment
 
 
136,237
 
 
 
-
 
Construction in Process
 
 
67,566,616
 
 
 
33,212,695
 
Construction
P
eriod
I
nterest
 
 
22,099,706
 
 
 
10,220,766
 
Total Cost
 
$
221,856,883
 
 
$
139,152,200
 
Less
A
ccumulated
D
epreciation
 
 
(233,241
)
 
 
(179,525
)
Property and equipment, net
 
$
221,623,642
 
 
$
138,972,675
 
 
Depreciation expense for property and equipment was approximately $
28,000
and $
27,000
for the quarters ended June 30, 2021 and June 30, 2020, respectively and $
54,000
and $
27,000
for the six months ending June 30, 2021 and June 30, 2020, respectively.