MyDx Inc (OTCMKTS:MYDX): What We Want To See Next

MyDx Inc (OTCMKTS:MYDX) is running up on seemingly no real catalysts at the moment, with the company having gained more than 100% in its PPS across the last week or so. Management has put in some conference time this month, and the raised awareness surrounding these appearances could be what is drawing speculative volume towards the company, but whatever the near-term drivers may be, it doesn't really change the fact that MyDx still looks to be undervalued at its current capitalization.Here is what we are looking at.This is one of those companies that should have picked up any strength in the wake of the cannabis legalization ballots towards the end of last year, but didn’t. The irony is, that its lead product could genuinely become a very widely used consumer product in the sector, and have far more of an impact on the recreational cannabis space than many of the products or services of the companies that did gain strength in November last year. For whatever reason, however, markets missed this potential. Our previous highlighting of the company has been rooted in the missing of said potential, and the parallel potential for a discount entry ahead of a rebalance.For those new to the stock, MyDX's product is a kind of cannabis quality testing device. Users insert a sample of their cannabis into the product, and it reads back to them what's in the sample – contaminants, THC levels, all that sort of thing. The product generated nearly $1 million in revenues during 2016, and this should increase exponentially as recreational use expands into a freshly legalized market.It's also been modified for use in a variety of other test environments – water quality, air quality, agricultural food quality, that sort of thing – and MyDx is working to expand its footprint in these markets, concurrent to its cannabis related efforts. This isn’t something that management planed to do, but when the cannabis iteration started to take off, management moved quick to try and take advantage of the potential in other areas.The application that accompanies these devices is consistently rated at or near the top of the iOS store and the Android store for related keywords, and – and here is something we focused on previously that still doesn't seem to factor into wider markets' valuation metrics for the company – allows MyDx to collect a raft of data surrounding the quality and composition of cannabis products across the US. This is an already 30,000 data point strong bank, and will increase in both size and value as product rollout expands. This data could be more valuable than any of the assets are as income generating hardware.­So what is next?Management put out a letter to shareholders (again, this is something markets seem to be only just noticing based on message board chatter and media coverage) back in January, and as part of the letter, company CEO Yazbeck outlined some 2017 goals.Operationally, these were as we would have expected; in a nutshell, drive sales in the various iterations of the quality testing product. He also highlighted a specific focus on capital structure, however, and we see this as an important value driver throughout the remainder of this year. There are some capital structure issues here, with a reverse split possible and the likelihood of some dilutive equity issues, and these are all weighing on sentiment. Importantly, in some cases, they are likely are serving as prohibitive to buyers pulling the trigger on a speculative position.If management can address some of these concerns, and the recent communication suggests that this addressing is a core 2017 focus, then we expect MyDx will revalue to a market capitalization that is more reflective of its underlying fundamental potential (and already registered sales volume) than it is of its capital structure and dilution risk.As mentioned, a number of conference appearances near term should help to buoy the stock temporarily, but we want to see some capital structure related updates hit press as supportive of our longer-term thesis.We will be updating our subscribers as soon as we know more. For the latest updates on MYDX, sign up below!Disclosure: We have no position in MYDX and have not been compensated for this article.