14 Jul MyDx Looks to Crack Open the Green Leaf
Not many companies can breeze through a value proposition—that deceptively simple statement of the reason why a company exists, and what it has to offer the consumer.
MyDx’s hardware/software ecosystem has a very easy value proposition to relay: simple, instant testing of solids, liquids and gases to measure their positive attributes, and whether there’s any pesticides or other no-gooders in your food, water and air.
Parent company MyDx, Inc. (OTCQB: MYDX), rolled out its first commercial product just last week, and it is a highly toned cannabis testing device unlike anything that has come to market yet. Whether the company can deliver on its value proposition has yet to be determined, but the company’s leader has the toolkit needed to bring this audacious and disruptive product to market.
Inside the Company
Daniel Yazbeck, CEO of MyDx, is the founder of Yazbeck Consulting & Investment Group. Yazbeck was an initial seed investor in CDx, Inc., which completed a reverse merger with MyDx earlier this year. He has a unique background that combines experience in both major pharmaceutical R&D and consumer products development. He has been a product creator as well as an operational manager, and he brings a strong intellectual property pedigree to a brand new product category for consumers.
Yazbeck’s desire to create the MyDx ecosystem came from a simple frustration and curiousity in wanting to know what it is in cannabis that gives people the results they feel. His company is making a big push on the notion that it is not THC that counts most, but the Total Chemical Profile—the whole cocktail of cannabinoids, terpenes, and flavonoids that make up the 400 chemical components of marijuana.
Yazbeck has noted the strong science his product has behind it, the extensive testing the company has put its products through, and the exciting potential for individuals to test cannabis for a broad terpene profile—by our accounts, something that has never been done before. Not content to just release a testing device, Yazbeck and his team have taken on the challenging task of releasing a cloud-based app. Available on both iOS and Android, MyDx software users can analyze their test results online and learn which strains of cannabis are best suited to their individual desired outcomes.
The Nuts & Bolts of the MyDx Ecosystem
It’s probably easiest to walk through a basic user scenario, which would progress like so: User puts a new, single-use test strip into the CannaDx analyzer, filled with a fleck of cannabis flower. The analyzer, about the size of a flash drive, slides into the MyDx portable base unit. The test takes about 3 minutes, and the results are sent via bluetooth to a paired device; through the MyDx app, the user can see the results online instantly.
The initial price of the MyDx Multi-Use Analyzer base unit will be $699 retail, and it is about the size of a smartphone.
There will be four “interchangeable pieces,”chemical analyzers, for testing cannabis, water, food and air. CannaDx, the analyzer for cannabis, is the only analyzer currently available and it retails for $69.99. Individual testing strips will be $1.49 apiece, with bulk pricing discounts up to 16% per the company’s website.
The initial testing parameters include the ubiquitous THC and CBD counts, although Yazbeck conceded that the precision on these base compounds will be less than what could be obtained by using the full laboratory services many dispensaries use to test their inventory. This is inevitable in the process of taking a $50,000 piece of chromagraphy equipment and getting it down to a sub-$700, portable testing model.
With 16 chemical vapor detection arrays expected to be available in the first round of strips, individual cannabis users and business owners can have access to information that’s rarer than a unicorn. Broad testing of other active cannabinoids, not to mention the terpene profile, marks an entry into new territory.
The final piece of the MyDx ecosystem, and hopefully MyDx’s future, is the MyDx software and mobile app, operating under the premise of “Trust & Verify” the cannabis plant right in front of you, right now.
Intellectual Property Integral to Company’s Future
MyDx has a 10-year exclusive joint development agreement with Next Dimension Technologies, the owner of a broad intellectual property portfolio of vapor detection and chemical sensing assets. NDT will help develop the sensing technology in exchange for a portion of the revenues.
Yazbeck, having been named on several patents while working for others, has a deep appreciation of the need to have a powerful IP barrier against future competition. MyDx currently has four patents pending for its delivery technologies, while the database of testing results could build over time to be an extremely valuable asset, to the company itself or to another as a buyer.
From the Investor’s Perch
MyDx, the stock, is the product of a reverse merger, and while we don’t always like to see reverse mergers, it is not fair to single out MyDx when so many others have done the same. A company like MyDx, with such broad scope and bold ambition, requires a lot of capital to get the very first product out the door. A company that services any other industry could likely obtain funding from a much longer list of venture capitalists and angel investors than MyDx can, solely because of MyDx’s involvement with cannabis.
It’s rather ironic that so few doors are held open to the legal cannabis industry’s innovators when most industry members open doors and opportunities for others.
As MYDX trades with a market capitalization of just over $22 million, a rather petite number even for the cannabis industry, investors need to be anticipating dilutive events in the near future.
Management stated that it expects the cost of the MyDx device to come down with “economies of scale.” If MyDx ever wants to hit the mass market, it will likely need to. If the MyDx unit can deliver ease, accuracy and scalability with all four testing packages, it will open up a buffet of new demographics and market opportunities.
Because it’s so small and cash-strapped, MyDx does remain vulnerable to a massive new entrant with deep pockets and equally large ambitions. But if MyDx can build good brand equity during this “first mover” phase, then it could be an attractive acquisition for a large player looking to grab hold of its intellectual property and databases.
In the short term, investors should be on the lookout for equity dilution that would come from the pending $10 million funding round. That said, the initial sales figures are bound to be the prime catalyst affecting the stock price for the remainder of the year.