Deal Box TriTerra Fund Deal Box Ventures LLC formed me LP, a Delaware limited partnership (“the Partnership”), a Delaware limited liability company (the “General Partner”), a wholly-owned subsidiary of Deal Box, Inc., a Nevada corporation (” Deal Box”) and seeks to raise to $10,000,000 for the sole purpose of pooling capital and investing in Limited Partnership Units of TriTerra Holdings LP., a Delaware limited partnership (“TriTerra”). The General Partner believes that the Partnership will provide investors with access to a “double bottom line” investment that may offer both a financial return and measurable social impact. The Partnership will not be responsible for the oversight or management of TriTerra, does not currently have any operations, and will not have any future procedures.

The principal of the General Partner is John Nance, a Director of Deal Box, Inc.

Why Invest in Cannabis Property? Why Now?

We believe the growing demand for cannabis, coupled with increasing legalization (creation of legally controlled markets for marijuana) at the state level, will present investors with unique real estate development opportunities to purchase property assets with inherent economic value.

Efficient premium upgrading of cannabis license-worthy property with unrealized economic value will provide (1) periodic cash flow during the year; (2) appreciated property value after development; and (3) capital preservation. The GP will initially focus on developing cannabis cultivation and industrial real estate assets leased to tenants in the regulated California cannabis industry.

Our business plan takes advantage of the rapidly growing cannabis industry that, due to heavy regulation, currently struggles with obtaining funding for expansion through traditional pathways. As with any nascent but growing industry, operational and business practices evolve and become more sophisticated over time. We believe that industry participants’ quality and experience and the development of sound business, operational and compliance practices have strengthened significantly over time, increasing the attractiveness for investment in the regulated California cannabis industry.

Cannabis Demand

The general cannabis market continues to grow, and operators are showing impressive results in 2020 despite disadvantages that include exclusion from national banking and capital markets, punitive federal tax treatment, burdensome state and local excise taxes and regulations, and the inability of institutional investors to buy their equity.

According to Arcview Market Research and BDS Analytics, state-legal cannabis sales in the United States grew to an estimated $12.2 billion in 2019, an increase of 34% over 2018’s total of $9.1 billion, and will grow over $31 billion by 2024. A growing number of states have passed ordinances concerning cannabis.

Greater growth is anticipated in the extract market (the cannabis product mix shows large increases in vape consumption and edibles vs. flower) for medicinal cannabis. In addition to smoking and vaporizing of dried leaves, cannabis can be extracted and incorporated into a variety of edibles, pills, spray products, transdermal patches, and topicals, including salves, ointments, lotions, and sprays with low or high levels of delta-9-tetrahydrocannabinol (“THC”), the principal psychoactive constituent of the cannabis plant.

The changing perspective of healthcare practitioners regarding safer ingestion techniques such as oral consumption or in the form of beverages or gummies is anticipated to drive product demand, and the majority of producers have started expanding their portfolios in extracts. These products are marketed with specific information on the content of THC and CBD or sole CBD for medical purposes.

In a March 2020 Grand View Research report, “Cannabis Extract Market Size, Share & Trends Analysis Report By Product (Tinctures, Oils), By Extract Type (Full Spectrum, Isolates), By Country, Competitive Landscape, And Segment Forecasts, 2020 – 2027,” the authors noted that the oil segment held the largest revenue share in the cannabis extract market and was valued at $4.8 billion in 2019. The authors noted that this segment of the market is anticipated to witness the fastest CAGR over the forecast period, primarily due to increasing medical applications of the product and a preference for cannabis oils and extracts due to increased ease of tracking the accurate consumption of prescribed dosage that includes THC, CBD, and other components.

Another formulation with anticipated growth is marijuana tinctures, which are consumed sublingually and are prepared by dissolving the drug in alcohol. Tinctures can start working within 15 minutes, which is faster than oils, which take around 45 minutes to start working. The tinctures segment is expected to register a CAGR of 14.5% over the forecast period.

Cannabis sales have remained strong even during the COVID pandemic shutdowns. As noted in Barron’s article by Bill Alpert, “As the Covid-19 Crisis Deepens, U.S. Pot Producers Prosper”, “Cannabis operations in every state that allows them to operate are reporting a rush on dispensaries, which have been deemed ‘essential services’ as states close other retail activities.

Recreational sales are up, too. ‘Like alcohol, people cope with stress by using cannabis,’ says Matt Hawkins, who runs $165 million in cannabis private-equity investments at Entourage Effect Capital.” However, the industry may experience headwinds depending upon the speed of recovery of the US economy, and cannabis businesses face unique challenges during these times as they have no access to federal relief.

The average cannabis retail consumer is remarkably price-conscious. A study from the Brightfield groupshowed that nearly 48 percent of the market’s daily cannabis consumers were making less than $30,000 per year. In light of the COVID recession, price sensitivity is expected to increase, although the volume is anticipated to remain high as cannabis consumers are likely to cut back on other items to maintain cannabis consumption.

More farms abandon their retail sales for quicker, lower overhead wholesale transactions and avoid the investment in packaging and labor required for retail products. A 2019 report from the investment bank Seaport Global noted that wholesale cannabis pricing (on a per-pound basis) had risen since April 2019 in the United States’ most mature recreational markets.

California Cannabis Demand

In their August 15, 2019 report “California: Lessons From the World’s Largest Cannabis Market,” Arcview Market Research and BDS Analytics noted that even though California experienced a rocky transition to regulated adult-use sales in 2018, California’s legal cannabis market was currently on track to grow 23% in 2019 to $3.1 billion. Consumer spending is forecast to reach $7.2 billion in 2024, a 19% compound annual growth rate (CAGR) over the next five years.

This makes California an attractive state in which to initiate TriTerra before expanding to the rest of the country. Moreover, the California cannabis market has diversified since legalization. In February 28, 2020, Forbes article, Emily Price noted, “California’s First Year of Legal Cannabis Sales Brought Increased Demand, Especially Among Seniors” based on aggregate purchase data of more than 500,000 customers of cannabis retailer Eaze across the state of California in 2019.

There was an increase in demand and consumption with a 74% increase of first-time deliveries, 105% increase in consumers aged 50 and above on the platform and an 81% increase in women on the platform. The Eaze data also demonstrated decreased use of vapes (down 15% in October 2019 due to black market vapes causing injury, which has largely reversed to date) and increased consumption of edibles (up 24% in October 2019).

TriTerra Holdings has a design-build-lease cannabis outdoor cultivation solution that addresses the need for large footprint outdoor cultivation capacity and state of the art large footprint indoor cultivations with best in class break-evens.We will leverage our team’s world-class permitting and land-use entitlements expertise to create advantaged industry cannabis real estate assets to lease to world-class operators.·

The fund will develop and manage the rental of 3-8 cannabis properties.

• Targeting 24 months to build and stabilize the properties within the fund.
• Target investor return of 12.5% to 18% with a preferred yield of 7.5%.
• Return of capital distributions anticipated to begin in year 3-4.

TriTerra Holdings LLC has built a world-class real estate development team with extensive experience in real estate and land use entitlements in the cannabis industry. This team has developed an extensive pipeline of advantaged cannabis properties that are ready for immediate development.

California Cannabis Supply Chain

In California, as of January 2020, there were 7,551 active licenses, including 4,220 cultivators, 987 manufactures, and 910 retailers, delivery services, 944 distributors, 243 microbusinesses, 129 transporters, 86 event organizers, and 32 testing laboratories.

CalCannabis Cultivation Licensing, a division of the California Department of Food and Agriculture (CDFA), is responsible for licensing cultivators of medicinal and adult-use (recreational) cannabis and implementing a track-and-trace system to record the movement of cannabis through the distribution chain (Metrc).

California cannabis license categories differentiate between outdoor, indoor, and mixed-light growth. Mixed-light facilities are generally how California describes greenhouses and other structures that use light deprivation techniques.

Relative to indoor and greenhouse facilities, outdoor growers’ production capacity is limited as they can only harvest once (at most twice) per year, and yields are generally lower given their complete reliance on Mother Nature to maintain temperature and control lighting conditions. Indoor and greenhouse growers, by contrast, can harvest multiple times a year.

However, indoor grows are the most intensive form of cultivation, with operation expenses running about six times that of outdoor expenditures, excluding development costs.

Outdoor growth costs are significantly lower due to low infrastructure, input, and labor costs. Onerous regulations or outright bans on outdoor cultivation sites by many California counties also have made it harder for outdoor grow operations to expand their footprints or for new operations to be developed. In addition, the large difference between hard costs (land and all things attached to it) versus soft costs (consulting, design, and other non-land costs) and the lower overall project values have hindered an interest in major outdoor investments except for a limited number of vertically integrated producers.

TriTerra has identified a pipeline of properties with low break evens and is prepared to match those properties to known top tier cultivators of medicinal cannabis. Its “shovel ready” projects are in Calaveras County, CA, which struggles with budget problems and has been extremely proactive in supporting the cannabis industry with a promising fast track to licensure.

It has a higher excise tax than other counties as the excise tax is based on harvest weight versus square footage, but this reduces start-up costs and aligns county incentives to finalize the licensing process. Calaveras County requires a canopy acre permit right, acquired from different land parcels, and moved. The estimated cost is $200,000-$250,000 per permit right and requires significant diligence prior to purchase as the permit purchaser is responsible for environmental remediation on the donor property. TriTerra is also looking at several distressed properties in San Luis Obispo County, CA that are a significant way to conduct the entitlement process before the current owner runs out of funds.

Most independent cultivators are priced out of developing property on their own due to lack of access to traditional business loans, the high costs of obtaining and maintaining land permits, and the long lead time in the land entitlement process. During the 9-month to 2-year complex land use permit process, the product cannot be grown, so independent cultivators must self-fund or enter into a joint venture for smaller cultivation, which cannot produce the product volume required efficiently use large scale industrial mono-crop techniques.

TriTerra will develop property assets that allow independent medicinal cannabis producers to succeed in large scale cannabis production. As such, its projects will have an advantaged position on the cannabis supply cost stack, which will provide a buffer against price volatility that will adversely affect other higher priced projects. TriTerra Management anticipates its model will generate cultivation break-evens of approximately $50-100 per pound for outdoor to $500-650 per pound for indoor on an EBITDA basis.

TriTerra’s focus on outdoor cultivation projects is designed to create real estate assets to serve the expanding extract and budget and house flower market for medicinal cannabis (e.g., edibles and concentrates that can be smoked, vaporized, or orally ingested and quality budget- to middle-grade smokable flower).

The extract market shows large increases in the consumption of vapes and edibles versus flowers for medicinal cannabis, and outdoor cultivations are well placed to serve this high growth segment of the cannabis marketplace. This is due to outdoor cultivation having lower production costs and by creating supply chain costs advantages by developing outdoor cultivation assets that will be able to produce large amounts of flower and biomass at consistent quality in the hands of cultivators that have experience in large scale commercial agriculture.

In addition, the ability to produce large amounts of the competitively priced flower will allow our tenants to obtain long term supply contracts to meet the demand for quality budget or house dispensary flower.

Creating these competitively advantaged assets will create an immediate gain in the asset once the asset is fully licensed and permitted. This gain will allow the Partnership to realize higher lease capitalization rates than REITs are currently receiving with an added margin of safety provided by the asset’s inherent gain.

In addition, TriTerra’s ability to make introductions to place tenants with buyers interested in long term large supply contracts will ensure that the product doesn’t leak into the non-white market and will provide the tenants with a greater ability to pay rent over the long-term.

Brian Shew – Attorney, CPA and Founder of Champion Resource Partners with more than 25 years’ experience in structuring complex joint-ventures, financings, and M&A transactions both for tax efficiency and optimization of project economics.

Sachin Gulaya – CEO of Alpine Vapor and Chairman of the Commerce Cannabis Association. Extensive experience in cannabis manufacturing, product development, branding, and distribution.

Karina Tiwana – experienced general counsel for inbound telecom company, with depth and expertise in developing and managing compliance systems, diligence and monitoring.

Richard D. Low Jr. – President of ADS Corporation, with extensive real estate development knowledge, well-versed in all phases of development and more than 40 years as licensed architect and general contractor.

Tony Keith – Co-Founder of GREENROAD and architect with more than 35 years’ experience managing complex, high-profile redevelopment projects in California and navigating its regulatory environment.

• TriTerra Investor Deck