RE:RE:RE:RE:RE:Bevcanna Shareholder Must Read Remember the "Water Source" valued at $14M in the acquisition - "The Company has the right to use and extract groundwater from a certain property located in the Yale Land District of British
Columbia (the “Water Source”) pursuant to a license issued under the Water Sustainability Act of British Columbia. The
Water Source is an aquifer. The bottling plant of the Company is connected to a production well and the Water Source. On
initial recognition, the Water Source was measured at $8,000,000.
The Water Source was valued using the Relief from Royalty method (the “RFR Method”), which is based on the proposition
that a company would be willing to pay a royalty in lieu of ownership, to possess the benefits of the Water Source.
The resulting cash flows are discounted using a rate to reflect the risks of achieving the projected royalty savings attributable
to the Water Source. The assumptions used to estimate the fair value of the Water Source are subjective and require
significant judgment, including estimated future volume, the royalty rate (which is estimated to be a reasonable market
royalty charge that would be charged by a licensor of the Water Source) and the risk adjusted discount rate.
Significant valuation inputs include:
Infinite useful life of the Water Source;
Projected production volume on two production lines with volumes between 8,400,000 gallons per year and
21,000,000 gallons per year;
Industry average royalty rate of 8%; and
Range of discount rates adjusted for asset-specific risks to the Water Source of 23.9% to 26.1%.
Management believes that any reasonably possible change in the key assumptions would not cause the Water Source
carrying amount to exceed its recoverable amount.
During the year ended December 31, 2020, the Company conducted impairment testing on the water source and license
assets and determined no (2019 – no) impairment charge was required. "
Note the last line also.
There was no recognized impairment even though they had already ready tried to apply for an increase in the bottled water licence and were declined. They were also aware of the fact that the "irrigation licence" could not be used for bottling purposes.