Sean Peasgood, President & CEO

Marcel Valentin, Vice President

www.SophicCapital.com

YOU GOTTA C THIS How the Type-C Connector Could Revolutionize

Electronic Devices

March 24, 2015

Apple’s decision to replace three legacy ports on its next

generation MacBook with the USB Type-C connector is

evidence that this connector is about to disrupt the consumer

electronics industry. Google then announced dual Type C ports

on its Chromebook Pixel. The Type-C’s smaller connector and

its thinner cable allow for not only a streamlined physical profile

but also faster data rates (10Gbps) and up to 100W of power.

Rumour has it that Microsoft will introduce Type-C connectivity

for Windows 10 systems. Whether or not the rumour is true, we

believe that Apple’s and Google’s commitments to Type-C will

force consumer electronics manufacturers to look at this

connector in order to satisfy consumer belief that “thinner is

better.”

One way to invest in the Type-C theme is via Spectra7

Microsystems (TSXV:SEV, OTC:SPVNF), a Sophic Capital

Client. Spectra7 Microsystems’ family of ultra-thin, active-C

cables allow consumer hardware manufacturers to implement

Type-C connectors without compromising data integrity or form

factor.

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Sean Peasgood, www.SophicCapital.com March 24, 2015 - 2

Introduction

Universal Serial Bus (USB) cables are ubiquitous with consumer electronic devices. Whether

you use a tablet, mobile phone, or camera, chances are you can plug a USB cable into them. But

USB has a new standard (version 3.1) that could revolutionize the electronics industry. This

standard and the new USB Type-C cable offer the potential to reduce the number of connections

required for many types of electronic devices. With Apple’s launch of the new MacBook, which

has a single Type-C port, we believe the benefits of the cable will spur industry adoption. We also

believe that Spectra7 Microsystems (TSXV:SEV, OTC:SPVNF), a Sophic Capital client, is set to

take advantage of this shift. On March 5, 2015, the Company announced its new Active-C

interconnectivity chips that facilitate ultra-thin implementations of USB 3.1.

Apple and Google will use it. Rumours abounded for months that Apple would replace several

legacy connectors (ports) with the Type-C on the next MacBook Airi ii. Well Apple confirmed the

rumours; on March 9, 2015, Apple announcediii a new 12 inch MacBook that replaces Thunderbolt,

the SD card slot, and power connector with a single Type-C connector. Three days later, Google

announced that its Chromebook Pixel will ship with two Type-C connectors (the MacBook Air

only has one). We believe the benefits of the cable and its adoption by two major hardware OEMs

will spur industry adoption.

But Nokia was first. Back in November, 2014, and to much less fanfare, Nokia (NYSE:NOK)

announced that its N1 tablet would ship with a Type-C connectoriv.

Phil Schiller, Apple's SVP Marketing Source: The Wall Street Journal

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Microsoft: another potential catalyst. A rumourv exists about Microsoft Windows 10 supporting

USB 3.1 Type-C. Whether or not the Microsoft rumour is true, the fact that Apple, Google, and

Nokia have adopted the Type-C connector validates our belief that Type-C will be one of the

biggest consumer device disrupters.

A Brief History of the USB Connector

In the old days of computing, several ports were required to connect essential devices like

printers, a mouse, and display monitor. In many cases, this limited the ways someone could

connect these devices to their computers. This

led to the development of the USB, which

simplified the connection and configuration of

these devices to her computer. USB provided a

standardized interface, hot-pluggability

(connecting devices without shutting down the

computer), plug and play (the operating system

automatically detects and configures the

device), and the liberation of a

computer’s resources. Compaq, Digital

Equipment Corporation, IBM, Intel, and

Microsoft started defining the USB

specification, and Hewlett-Packard, Lucent, and

Philips later joinedvi.

The Different Flavours of USB

Like many things, USB’s shape, (known as

“type”) has evolved over the past two

decades. The familiar rectangular USB

connector that plugs into computers is known as

a Type-A connector. Type-A connectors plug

into devices that supply power to the peripherals.

To prevent connecting the Type-A into a device

that draws power, the square Type-B connector

was created. But there was a problem with Types

A and B: Their physical sizes made them

difficult to plug into smaller devices like cell

phones and cameras. This led to Mini USB

connectors (both A and B versions to ensure

proper connectivity of the device supplying

power). The Mini A connector was discontinued in 2007 due to some mechanical flaws (poor

insertion lifecycle). However, the Micro-USB connector was introduced prior to the Mini A

connector’s demise and is now common on smartphones and tablets. All-in-all, there are

approximately 2 billion legacy wired USB connections in the world todayvii.

USB also got faster over time. The number that you see after “USB” refers to the data transfer

standard (the speed). USB 1.0 allowed for data rates up to 12Mbit/s; version 2.0 provided for

480Mbit/s, and version 3.0 up to 5 Gbit/s. USB version 3.1 is capable of a theoretical 10Gbit/s

potential, doubling the data rate transfer of its version 3.0 predecessor. Version 3.1 also supports

Source: Dhanbadbiz

Type-A on the left, and Type-B on the right Source: AllUSB

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power delivery of up to 100 watts, which will be useful for charging devices that operate on five,

12, or 20 volt suppliesviii.

Type-C Connector – One Plug to Connect Everything

The Type-C connector could become the king of connectors. It has the potential to connect

everything (including keyboards, mouse, display, and external storage devices) to a PC, laptop, or

tablet. And as an added bonus, the Type-C connector is symmetrical, meaning that you won’t have

to worry about bashing the connector into your PC’s USB receptacle anymore before you realize

that it’s upside down1.

The Type-C connector has a downside. The connector won’t be compatible with legacy

equipment. However, we envision that some companies will develop cross-type USB converters.

A Way to Invest in Type-C Connector Technology

We recommend that investors seeking to invest in Type-C connector technology should

consider Spectra7 Microsystems (TSXV:SEV, OTC:SPVNF), a Sophic Capital client.

Spectra7 doesn’t actually make USB cables. However, on March 5, 2015, the Company announced

the industry’s first active chipset family for ultra-thin implementations of USB 3.12 consumer

interconnects. So why is this important?

Physically, active USB Type-C is 65% smaller than USB Type-A (each cable conductor has a

90% reduced cross-sectional area). Standard USB Type A cables may have up to 9 wires in the

cable. A Type-C cable may have 17 wires making the cable larger in diameter and stiffer (less

flexible) than a Type-A cable. The Type-C cable plug strain relief for a full featured (all wires)

Type-C could be thicker than the Type-C connector. An ultra-thin device requiring a Type-C cable

would sit lopsided when the device would be placed on a desk or other flat surface if the connector

used a standard Type-C cable. If this device was a tablet or laptop, this tilt would result in an

1 To plug a Type A connector correctly, insert the plug so that the USB logo faces upwards (assuming the

plug has a logo). 2 On March 10, 2015, Spectra7 announced the appointment of Jim McGrath, Director of Marketing. Mr.

McGrath worked on the establishment of the USB Type-C standard.

Source: Computerworld

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awkward work environment. Plus, the connector would endure a mechanical strain that could break

the cable’s conductors. Active Type-C cables with Spectra7’s TC7108, TC7216 and the TC7050

reduce cable diameter such that a device using a USB Type-C cable can lay flat.

As far as we know, Spectra7 is the only company that has the interconnectivity expertise and

products to consolidate numerous cables into a Type-C connector. This is not a trivial feat.

Separately, higher frequencies and smaller conductors create numerous electrical engineering

problems. Combine the two, and you’ll have to pay a lot of money for analog design engineers with

decades of experience who know how to maintain signal integrity (high frequency signals

propagating through a cable are sensitive to a host of factors). Add power and ground lines inside

the cable and most companies would move onto the next project. Not Spectra7; they’ve conquered

a host of complex electromagnetic forces of nature that would not seem evident in something that

you and I plug into a computer and then ignore. This is cutting edge stuff, and perusing competitor

datasheets, we haven’t seen anything similar at NXP, Texas Instruments, and Linear Technology.

Type-C isn’t Spectra7’s first forays into active cables. The Company has a strong footprint with

active 4K HDMI cables. Monster Inc., a supplier of audio and video cables, has implemented

Spectra7 active cable technology since January 2013. Other vendors indicating that their active

HDMI cables use Spectra7 RedMere technology include: Monoprice, Samsung, VIZIO, and

Rosewill.

And also, Spectra7 also has extensive experience condensing cables for the virtual reality

(VR) industry. The company’s VR7100 DisplayDirect™ VR can condense four bulky cables

(HDMI, USB, audio, and power) into

a single, ultra-thin VR cable. Why is

this important? Many HMDs (head

mounted displays) are tethered to a

computer or other hardware, and four

cables introduce significant weight

and mobility issues. Although less is

more in terms of cabling, Spectra7’s

VR7100 does not sacrifice

performance. In fact, the VR7100

provides more performance in a

smaller package making it one of the

most important components in VR

hardware, in our opinion. But we’re

not the only people who hold this

opinion.

Spectra7 Microsystems’ VR7100

powers Oculus headsets. iFixit’s

teardownix of the Oculus Rift

uncovered the chip (right photo) and

caused them to comment that it was

“Hot stuff!” Given that the VR7100 is

part of Oculus Rift, it’s not a stretch

to think it is also designed into

Samsung’s Gear VR, which Samsung

co-developed with Oculus. This is a

Spectra7's VR7100 facilitates dramatic cabling reduction

Spectra7's VR700 inside the Oculus Rift,

Source: ifixit.com

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reason why we recommend Spectra7 for investors who want to invest in VR: Spectra7’s

interconnect chips will likely find homes in HMDs. Some HMDs will succeed; others will vanish;

and Spectra7 Microsystems will win regardless of which HMDs consumers’ purchase.

Acronyms Used in this Report

Gbit/s gigabits per second

HDMI high definition multimedia interface

Mbit/s megabits per second

OEM original equipment manufacturer

PC personal computer

Ultra HD ultra-high definition

USB universal serial bus

VR virtual reality

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References

i Mark Gurman, Apple’s next major Mac revealed: the radically new 12-inch MacBook Air, 9TO5Mac,

January 6, 2015 ii Daniel Eran Dilger, Apple's rumored 12" MacBook Air may aggressively target mobility with USB 3.1

Type-C, appleinsider, January 10, 2015 iii Brad Chacos, Apple's radical 12-inch MacBook is the slimmest, lightest MacBook ever, Macworld,

March 9, 2015 iv Vlad Savov, The Nokia N1 will be among the first devices with a reversible USB connector, The Verge,

November 18, 2014 v Brad Sams, Windows 10 to support USB 3.1 Type-C at launch, Neowin.com, February 26, 2015 vi Brief USB Overview and USB History, USBlyzer.com vii Wireless USB from the USB-IF, USB-IF, 2015 viii Brian Nadel, USB Type-C: Simpler, faster and more powerful, Computerworld, April 15, 2014 ix iFixit, Oculus Rift Development Kit 2 Teardown, March 19, 2014

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Disclaimers

The particulars contained herein were obtained from sources that we believe to be reliable, but are

not guaranteed by us and may be incomplete or inaccurate. The opinions expressed are based upon

our analysis and interpretation of these particulars and are not to be construed as a solicitation of

offer to buy or sell the securities mentioned herein. Sophic Capital Inc. (“Sophic Capital”) may act

as financial advisor, for certain of the companies mentioned herein, and may receive remuneration

for its services. Sophic Capital and/or its principals, officers, directors, representatives, and

associates may have a position in the securities mentioned herein and may make purchases and/or

sales of these securities from time to time in the open market or otherwise.