Since legalization in Oklahoma in 2018, the medical marijuana (MMJ) market has exploded, jumping from $350 million in sales in 2019 to an estimated $850 million in 2020. The Oklahoma Medical Marijuana Authority (OMMA) is tasked with regulating MMJ products and keeping Oklahomans safe, relying on a network of licensed laboratories in the state to test growers' and processors' products, measuring potency and making sure they meet minimum standards for levels of heavy metals, pesticides, mycotoxins, residual solvents, and microbials. Beginning in 2020, OMMA has ratcheted up its regulatory function, making testing mandatory and raising the bar on lab certification and compliance standards. As a result, labs are struggling to keep up, for a variety of reasons...

• Unprecedented demand for lab services has stretched their facilities to the limit
• Testing turnaround times are very slow
• Lab results are inaccurate or untrustworthy 
• Episodes of outright fraud have been discovered
• Increased scrutiny by regulators and tightening of compliance standards   

What Makes HighRes Labs a Good Investment?

• Modern test equipment
• Top tier technical talent w/ extensive cannabis testing experience
• Adoption of the most rigorous testing & certification standards in the industry
• Enhanced services including accelerated reporting time, transportation & pickup, data analytics, automated test protocols, etc.

The Market - The cannabis industry is taking off!

• “Pick and Shovel” concept - Investors zeroing in on the idea of ancillary investment 
• Drive towards national legalization
• Medicinal potential/benefits – Promising research taking place re: cannabis/CBD 

The Product Offering – Unique service offerings that set us apart 

• Speed/Accuracy – Better equipment, better results
• Convenience – Think like a customer
• Reputation – Ethical business practices always 

The Team – experienced entrepreneurs, scientists and marketers

• Extensive startup experience
• Actual experience – Cannabis lab certification & testing protocols
• Marketing savvy – Establishing the HRL “brand”

Investment potential – Impressive financial performance

• Healthy margins
• Rapid revenue generation
• Significant upside - Due to expansion opportunities and/or demand factors

Other important considerations

• Commodity price immunity
• IRS rules & regs

The first potential customers for HighRes Labs’ testing services are hemp growers, CBD processors, and retail stores in Oklahoma and possibly in surrounding states (for example TX) as well. Since CBD customers want to know the contents of the products they’re purchasing and the only way to do that is by testing, it is a logical startup path for an unlicensed lab. We will call on all of the CBD stores in the local trade area first and use price as a market penetrator. This is also a great opportunity to gain valuable operating experience as we begin to establish market visibility for our brand prior to OMMA licensing.

We are currently in the midst of obtaining our ISO 17025 certification and are actively engaged in setting up the lab equipment, developing and documenting our operating procedures (SOPs), and smoothing out any kinks in our online systems. Given our current pace of activity, we expect to achieve ISO 17025 certification and receive our OMMA operating license no later than late Spring 2021.

Once our OMMA license is received, we can market our services to all 6,000 licensed growers, all 1,300 licensed processors, and all 2,000 licensed dispensaries that are listed on the OMMA website. As a result of our active involvement in a local cannabis industry trade organization, we now already know many of them and they are anxious for us to get funded and begin operations.

This chart confirms that testing follows sales growth but these estimates do not reflect the enormous potential impact if the legalization of THC-based products occurs at the national level. HighRes Labs will strive to have a substantial footprint across multiple states prior to any form of national decriminalization. 

Our strategy will be to get ahead of the curve and begin testing hemp and CBD products in states where some form of MMJ legalization is likely, and be working on compliance criteria for licensing in those states. Then, when legalization occurs, our labs will already be positioned to become a dominant player in these new MMJ markets.

Speaking of new markets, the chart above reflects the results of the recently concluded 2020 election in which a number of states approved the use of marijuana for either medical or recreational use.  Mississippi joins the list of states approving marijuana for medical use.  Arizona, Montana, New Jersey, and South Dakota have now approved marijuana for recreational use.  (CBD is legal in all 50 states with the exception of Idaho and Nebraska.)

If marijuana is decriminalized nationally, the demand for testing will increase dramatically. HighRes Labs will be positioned to meet the supply gaps and be an acquisition target for larger multiple state organizations (MSO) interested in expansion. It is our expectation that valuations will be in the 3-5x revenue range.

The market for CBD and medical marijuana (MMJ) started in 2018, and there was no time to set up professional MMJ testing labs. Very few of the existing labs in Oklahoma are set up exclusively for hemp(CBD) and MMJ testing, and many were repurposed from medical testing or oil and gas water evaluation. There will be a requirement for 2021 that every licensed MMJ lab in Oklahoma have their ISO-17025 certification, and this may eliminate some of them. Others are using testing equipment and slow operations since medical and O&G turn around times did not need to be fast. We will gain market share by being fast and accurate due to our selection of good equipment, an experienced lab director, and cloud-based operations. Growers and Processors cannot move their product without a passing score from a licensed lab, so they are anxious to get results as soon as possible. While many labs deliver testing scores in 3-5 days, we will deliver them in 2. In 4Q2020 there are only 23 licensed labs for over 7,000 Growers and Processors, and most do not have our vision to become a high technology testing operation.

There are currently shortages of capable labs with the proper certifications. Demand for testing is high, and prices are holding steady. We have the contact list for all of the CBD outlets in Oklahoma and will offer them fast accurate testing services at a market discount to get started. Our revenue will grow from the first month of operation, and will reach positive cash flow in the first year. After three months of operation, we expect to achieve the ISO-17025 certification which will attract more CBD business and qualify us for a license to test medical marijuana (MMJ). We also have all of the contact information for the 7,000 Growers and Processors in Oklahoma, and will selectively solicit business from the largest and most professional operations. Our offerings will be preferred due to our fast, accurate results. As we grow organically, we will purchase additional equipment and hire additional staff to expand our testing operations. Once we have been established as a top lab in the Oklahoma City area, we will look for new locations to start additional labs. Our primary lines of business will be CBD and MMJ testing, but we will also consider taking on paid research projects.

Dr. Q. Wang, PhD, and Post-doctor in water chemistry, Rice U.
Co-founder, CEO, Lab Director

Chemist, Environmental Engineer, Entrepreneur (2), Experienced in operation of medical marijuana testing lab with 17+ years of chemical analysis, project management and entrepreneurship. Inventor (multiple patents) and researcher with postdoctoral work at Rice University

Rick Jones, B.S. Elec. Engineering, Rice U.

Co-founder, COO-Adviser
Software Engineer, Serial Entrepreneur (4+), Notable contributions to NASA, Shell, ERCOT, and Cal-ISO. Automated O&G Major’s Geo-Chemistry database that now hosts over 2 million analyzed samples. Active investor, mentor, CxO in early-stage startups, acting as Startup Officer.

Lynn Taggart, B.S. Mech. Engineering / MBA - Finance, Univ. of Oklahoma
Branding & Marketing

Creative engineer, experienced business advisor, and Innovation Advocate. Tech Ventures at Baker Hughes, Strategic Innovation at Devon, Director of Brand & Concept Development at Sonic, America’s Drive-in.

The funds will be used to secure our original equipment lineup, rent a great first facility, and hire specialized staff.