Spectra7 Microsystems Inc.(SEV.CA) is a high-performance analog semiconductor company delivering unprecedented bandwidth, speed, and resolution to enable disruptive industrial design for leading electronics manufacturers in data centers, 5G infrastructure, virtual and augmented reality, and other connectivity markets.
Spectra7 is based in San Jose (CA) with a design center in Cork, Ireland and technical support in Dongguan, China.
News Releases
Mar. 3 - Demonstrate 400G Switch-to-Switch Active Copper Interconnects with Arista and Juniper
Spectra7’s GaugeChangerTM technology is used with 400G interconnects between Arista’s DCS-7280DR3-24 switch and Juniper’s PTX10001-36MR switch as well as interconnects to Keysight’s test equipment.
Mar. 7 - Demonstrate 200G Active Copper Interconnects with Arista and Spirent at OFC
Demo featuring Spectra7’s GaugeChangerTM enabled 200G Active Copper Cables (ACCs). Spectra7 enabled ACCs will be featured connecting Arista’s DCS-7280DR3-24 switch and Spirent test equipment.
Spectra7 estimates that Tencent is reducing their interconnect CAPEX spending by about 50% by using ACCs instead of AOC. Additionally, power consumption is dramatically reduced making Spectra7’s technology a smart choice.
Mar. 7 - Demonstrate New GC1122 Chip Recovering 112Gbps PAM4 Signal Over 3 Meters of 30AWG Copper Cable.
Spectra7’s new 112G PAM4 GaugeChangerTM chip intended for next generation 800Gbps data center interconnects.
As the industry moves to 800Gbps it will adopt 112Gbps PAM4 per lane signaling over 8 lanes. At these ultra-high signal rates, traditional passive copper cables will struggle to reach beyond 1.5 meters.
Active Copper Cables (ACCs) enabled with Spectra7’s GC1122 solution will extend copper cable reach 2.5 times, up to 4.5 meters at a fraction of the cost of optics. Critically, at a time when Hyperscale operators are struggling with power consumption and carbon emissions, ACCs using the Spectra7 technology will consume only 200mW of power per channel, which is up to 12 times lower power than optical solutions. The GC1122 is the latest addition to the GaugeChangerTM product line and extends the data rate from 56Gbps PAM4 to 112Gbps PAM4 per lane
April 4 - Demonstrate 200Gbps Server Connectivity using Active Copper Cables with Broadcom Network Switch and NIC at DesignCon: The Company will be demonstrating Active Copper Cables from cable partners Amphenol and Luxshare with Broadcom’s TD4-X9 switch and Broadcom’s BCM957508-P2100G Network Interface Card (NIC).
April 6 - Spectra7 and Volex Demonstrate 112G PAM4 Signaling over 4 Meters of 28AWG Copper Cable at DesignCon:
The demonstration will highlight the performance of Spectra7’s new GC1122 chip compensating for 112Gbps PAM4 signal loss over 4m of Volex 28AWG high-speed twin-ax cable.
May 2 - Announces Fourth Quarter and Fiscal Year 2021 Financial Results: The Company reiterated from its April 7, 2022 news release that revenue for the first half of fiscal 2022 is expected in the range of $5.5 to $7.0 million.
May 5 - Top Global Virtual Reality Gaming Company Chooses Spectra7 Chipset to Power its Head Mounted Display:
Spectra7 DreamWeVRTM Chipset Shipments Ramping; Program Duration Anticipated to Be Over Multiple Years.
May 30 - Announces First Quarter 2022 Financial Results:
June 10 - Announces Results of its 2022 Annual and Special Meeting of Shareholders: The Amended Equity Incentive Plans reserve for issuance up to 6,710,018 common shares of the Company, being approximately 20% of the current issued and outstanding shares of the Company. The Amended Equity Incentive Plans are effective immediately following the shareholders’ meeting. Prior to the amendments taking effect, Spectra7’s board of directors approved the grant of an aggregate of 227,882 restricted share units to certain directors and service providers of the Company.
June 22 - Expands Availability of Active Copper Cables with new Design-in with ACES to Deliver 200 and 400Gbps Interconnects for Data Center Markets: Announced that ACES Electronics Co., Ltd (“ACES”), a leading Taiwan-based connector and cable supplier, will offer Active Copper Cable (ACC) assemblies to Hyperscalers and OEM/ODMs that will include Spectra7’s 56G PAM4 GC2502 GaugeChangerTM chips.
Spectra7’s GC2502 is in full production and is being deployed in volume now. ACES anticipates delivering cable sample to their customers for qualification in the second half of 2022.
July 8 - Announces Proposed Amendments and Extension of Convertible Debentures: Announced that it has received commitments from a requisite percentage of debenture holders to amend and extend the Company’s existing $6.8 million of 7% unsecured convertible debentures due to mature on July 9, 2022.
Jul. 26 - Announces Completion of Debenture Amendments: Entered into a third supplemental convertible debenture indenture on July 26, 2022 to bring into effect the previously announced amendments to the Company’s existing $6.8 million of 7% unsecured convertible debentures. All dollar amounts referenced are in Canadian dollars.
Pursuant to the Supplemental Indenture, the maturity date of the Debentures has been extended to September 9, 2022. The Company has agreed to pay 20% of the outstanding principal amount together with the 10% bonus principal outstanding on the Debentures on August 2, 2022, including accrued and unpaid interest earned thereon. As consideration for the amendments, the Company will pay a non-convertible extension bonus at maturity to the Debenture holders equal to 3.688% of the principal outstanding, after the repayment.
Jul. 26 - Announces $8.0 Million Convertible Debenture Financing; Closing of First Tranche: Proposed non-brokered private placement basis up to $8.0 million of 14% unsecured convertible debentures and the closing of the first tranche of the Offering consisting of the issuance of $3,809,000 principal amount of Debentures for gross proceeds of $3,732,820. All dollar amounts referenced in this release are in Canadian dollars
Each $1,000 principal amount of Debentures will be sold at a subscription price of $980 for expected gross proceeds of up to $7,840,000. The Debentures shall mature on December 31, 2024 and the principal amount of each Debenture will be convertible into common shares at the option of the holder at any time prior to the close of business on the last business day immediately preceding the Maturity Date, at a conversion price of $1.02 per Common Share.
The net proceeds from the Offering will be used for the repayment of the existing convertible debentures of the Company. Insiders of the Company participated in the first tranche of the Offering purchasing an aggregate of $506,000 principal amount of Debentures. Pursuant to Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101"), the Offering constitutes a "related party transaction" as insiders of the Company are expected to subscribe for up to 25% of the Debentures.
Aug. 23 - Announces Upsizing of Convertible Debenture Financing to $9.0 Million
Aug. 25 - Announces Closing of the Upsized Convertible Debenture Financing of $8.9 Million: Announced today the closing of the second tranche of its private placement of 14% unsecured convertible debentures. The closing of the second tranche of the Offering, which was upsized, consisted of the issuance of $5,064,000 principal amount of Debentures for gross proceeds of $4,962,720. Together with the first tranche, the Company has issued a total of $8,873,000 principal amount of Debentures for gross proceeds of $8,695,540.
“The new Debentures also permit us to borrow senior debt of up to $5 million which was not available under the previous convertible debentures. This available capacity could provide for additional working capital to help satisfy more of our confirmed orders.” - Bonnie Tomei, Chief Financial Officer.
Each $1,000 principal amount of Debentures was sold at a subscription price of $980. The Debentures mature on December 31, 2024 and the principal amount of each Debenture will be convertible into common shares of the Company at the option of the holder at any time prior to the close of business on the last business day immediately preceding the Maturity Date, at a conversion price of $1.02 per Common Share.
Insiders of the Company participated in the second tranche of the Offering purchasing an aggregate of $1,531,000 principal amount of Debentures. Pursuant to Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101"), the Offering constitutes a "related party transaction" as insiders of the Company subscribed for a total of $2,037,000 of the Debentures.
Repayment of the previous convertible debentures: The Company is expected to repay its 7% unsecured convertible debentures in full on September 2, 2022, which includes $5,422,400 principal amount and $65,370 of accrued and unpaid interest thereon as well as $199,978 of extension bonus and $1,438 of associated interest.
Aug. 29 - Announces Second Quarter 2022 Financial Results: Expects to generate record revenue in 2022. The current outlook for revenue in the second half of 2022 is in the range of $4.6 million to $6.0 million the projected full year results represent an annual revenue of over $11.0 million, which would be double the revenue generated in 2021.
Sep. 13 - Spectra7 and Elka Achieve Production Status with JVCKENWOOD in Automotive Application:
Spectra7 HDMI IC Embedded in Car Entertainment Active Cable Harness:
Spectra7’s HDMI redriver IC allows Elka to create a long, thin, low power and light weight interconnect solution for connecting rear seat displays to the entertainment center in the vehicle.
By using Spectra7’s IC, the cable gauge (AWG) and conductor weight is reduced nearly 10x compared to a passive cable solution. The solution supports HDMI resolutions up to 1080p at 60Hz.
Oct. 13 - Announces Preliminary Third Quarter 2022 Revenue and Second Half 2022 Outlook:
Nov. 29 -Announces Third Quarter 2022 Financial Results
Jan. 5 - Spectra7, ACON, and Mo-Link to Demonstrate Thunderbolt 4 Active Copper Cables at CES 2023: Advanced-Connectek USA Inc. ("ACON"), a leading connector and cable supplier, and Mo-Link Technologies Limited ("Mo-Link"), a global provider of fiber optic, copper, and wireless connectivity solutions, will be demonstrating a Thunderbolt 4 Active Copper Cable employing Spectra7's GC2502 GaugeChanger™ ICs at the Consumer Electronics Show (CES).
Jan. 16 - Announces Return of CEO Raouf Halim to Full-Time Status: The Company is also pleased to announce the grant of 50,000 restricted share units to the Company's Chief Financial Officer.
Jan. 18 - Announces Preliminary Fourth Quarter and Annual Financial Results for the Year Ended December 31, 2022: i) Preliminary fourth quarter revenue of $3.0M, up approximately 14% YoY ii) Preliminary revenue for 2022 of $11.3 million, up approximately 106% compared to $5.5 million in the previous year1 iii) Based on current order trends and a high backlog, Spectra7 expects revenue for the first quarter of 2023 to be in the range of $3.0 million to $3.2 million.
Jan. 24 - To Exhibit at DesignCon 2023: The company plans several demonstrations to highlight their innovative Active Copper Cable products for solutions up to 800Gbps. DesignCon is the premier high speed interconnect and system design conference attended by engineers from around the world.
Jan. 31 - Partner with Volex plc ("Volex") to demonstrate Spectra7's new 112G PAM4 GaugeChanger™ chip; Intended for next generation 800Gbps data center interconnects at this year's annual DesignCon Conference.
The GC1122 is the latest addition to the GaugeChanger™ product line and extends the data rate from 56 to 112Gbps per lane. Since the GC1122 is analog and highly linear, dynamics such as line rate adjustment, multi-level signaling, intermittent line silence, transmit pre-emphasis or amplitude adjustment and receiver adaptivity are fully preserved. GC1122 chips are now sampling to leading cable partners and end customers.
Feb. 1 - to Showcase 200 and 400Gbps Connectivity using Active Copper Cables at DesignCon: Spectra7 will be showing Active Copper Cables with the Company's GaugeChanger™ chips from cable partners Molex, Amphenol and Luxshare, with Broadcom's Tomahawk® 4 switch and Broadcom's BCM957508-P2100G Network Interface Card (NIC).
"New network architectures and increased server speeds are causing the connectivity market inside the data center to embrace active solutions, By 2026, we expect over 70% of the Cloud server market to be active copper. From a revenue perspective, the market will quickly exceed US$1B and can exceed US$3B by 2026, far higher than the DAC market it will replace. Active copper cables also help support the US$20B, and growing, Ethernet market in the data center which is critical for the future growth of Cloud and AI/ML applications."- Alan Weckel, 650 Group.
Feb. 9 - Targets High Growth 800Gbps AI Server Market: AI requires massive amounts of computing power from specialized server hardware connected in clusters by a very high bandwidth and low latency interconnect fabric.
Feb. 14 - Announces New 800Gbps Design Win with ACES for North American Data Center Market: ACES Electronics Co., Ltd ("ACES"), a leading Taiwan-based connector and cable supplier, will offer 800Gbps Active Copper Cable (ACC) assemblies to Hyperscalers and OEM/ODMs that will include Spectra7's GC1122 GaugeChanger™ chips
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"Spectra7 has created an innovative and compelling solution to address the dramatically increasing power and cost of data center interconnects," said Mick Felton, Director of Engineering, ACES US. "We are seeing significant interest from our largest North American customers for 800 Gbps ACCs with Spectra7's technology"
Feb. 27 - To Participate in the KeyBanc Capital Markets 18th Annual Emerging Technology Summit Conference.
Mar. 10 - Announces Private Placement of $5.89 Million CAD: To certain institutional investors and insiders of the Company of 5,890,000 units at $1.00 per Unit (Warrants; $1.18) for aggregate gross proceeds of $5.89 million.
Pursuant to Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, The Private Placement constitutes a "related party transaction" as insiders of the Company are expected to subscribe for approximately 404,800 Units. The Placement was approved by all of the independent directors of the Company.
Mar. 13 - Announces 112G PAM4 Design-In with Zhaolong for North American and China Data Center Markets: Zhaolong Interconnect Technology Co., a leading China-based cable supplier, will offer Active Copper Cable (ACC) assemblies with 112G PAM4 signaling to Hyperscalers and OEM/ODMs in both North America and China.
"The North American and China data center markets continue to push the envelope to higher interconnect speeds, and at hyper-scale all data center customers are more sensitive to the power, routability and cost of high-speed interconnects than before," said Zhaolong Vice General Manager Tony Yao. "We are getting strong interest from them in Spectra7's technology and our significantly smaller-gauge high-speed cables known as Microlink™ technology."
Summary
Demonstrations
Spectra7 has been active at featuring their products at industry conferences.
FY 2022
i) 400G Switch to Switch Active Copper Interconnect with Arista and Juniper (Mar, 2022)
ii) 200G Active Copper Interconnect with Arista and Spirent (Mar, 2022)
iii) 112G PAM4 GaugeChangerTM chip toward 800G over 3 meters (Mar, 2022)
iv) 200Gps Server Connectivity using Active Copper Cable with Broadom and NIC (Mar, 2022)
v) 112G PAM4 GaugeChangerTM chip over 4 meters with Volex (Apr, 2022)
FY 2023
i) GC2502 GaugeChanger™ ICs to feature Thunderbolt 4 Active Copper Cable with ACON and Mo-Link (Jan, 2023)
ii) 112G PAM4 GaugeChangerTM chip toward 800G with Volex (Jan, 2023)
iii) Showcased 200 and 400Gbps with Molex, Amphenol, Luxshare and Broadcom (Feb, 2023)
Milestones
Five key developments were reported in the past year.
i) Selected by Top Virtual Company to power its Head Mounted Display with Spectra7 DreamWeVRTM (May 2022)
ii) ACES Electronics to offer Active Copper Cable with Spectra7’s 56G PAM4 GC2502 GaugeChangerTM (June 2022)
iii) Elka achieve production status with JVCKENWOOD in Automotive Application (Sept. 2023)
Spectra7’s HDMI redriver IC allows Elka to create a long, thin, low power and light weight interconnect solution for connecting rear seat displays to the entertainment center in the vehicle.
iv) 800Gbps Design Win with ACES for North American Data Center; To offer 800Gbps Active Copper Cable (ACC) assemblies to Hyperscalers and OEM/ODMs that will include Spectra7's GC1122 GaugeChanger™ chips (Feb, 2023)
v) 112G PAM4 Design-In with Zhaolong for North American and China Data Center Markets (Mar. 2023):
Equity Incentive
Spectra7 granted up to 6.7M shares in addition to the 227,882 Restricted Share Units (June 2022)
Financing
July 2022, an amendment and extension of existing $6.8M (7%) convertible debenture to expire July 9, 2022.
The Company has agreed to pay 20% of the outstanding principal amount together with the 10% bonus principal outstanding on the Debentures on August 2, 2022, including accrued and unpaid interest earned thereon.
As consideration for the amendments, the Company will pay a non-convertible extension bonus at maturity to the Debenture holders equal to 3.688% of the principal outstanding, after the repayment.
Thereafter, the company closed $8.8M (14%) convertible debenture (as a non-brokered private placement) exercisable at $1.02 with insider participation ($2M, 23% of total amount).
“The new Debentures also permit us to borrow senior debt of up to $5 million which was not available under the previous convertible debentures. This available capacity could provide for additional working capital to help satisfy more of our confirmed orders.” - Bonnie Tomei, Chief Financial Officer.
Repayment of the previous convertible debentures: The Company is expected to repay its 7% unsecured convertible debentures in full on September 2, 2022, which includes $5,422,400 principal amount and $65,370 of accrued and unpaid interest thereon as well as $199,978 of extension bonus and $1,438 of associated interest.
Hence, the recent $5.89M financing at $1.00 (Warrants $1.18) does not comes unexpectedly .
Earnings
YTD 2022, Spectra7 revenue performance has shown a clear departure from FY2021.
Revenue guidance for FY 2022 was around $11.3M exceeding FY2021 by over 100%.
As for Q1 2023, a preliminary estimate of $3-$3.2M was provided.
If this is achieved it would exceed Q1 2022 by 50%..
YTD 2022 net losses are up by 18% which is notable given the scaling in revenues.
In short
Spectra7 seems to be at an inflection point in terms of revenue growth.
This trend is a reflection of specialization in existing segment along with growth in emerging areas.
The company offers a range of solutions targeting multiple verticals: i) Virtual Reality; ii) Augmented/Mix Reality, ii) Consumer and iv) Data Centers, Out of these, the Data Centers vertical represents a total addressable market of $1B.
Of late, the number of demonstrations and design and manufacturing wins with partners is notable.
Source: Spectra7 Investor Presentation Page 3.
GaugeChanger™ is a unique analog redriver technology that allows copper to extend to much longer lengths without the cost and power penalty of optics or DSP based retimed copper solutions. Competing technologies typically use 700 to 1000% more power than Spectra7's GaugeChanger™ technology
Source: Spectra7 Investor Presentation Page 10.
According to the recent investor presentation (p. 4) the company expect FY 2023 to be another record year.
However, the company still have an extensive number of warrants (9.3M) that seem to pre-date consolidation. These are to be noted as they can be lowered. Moreover, the recent financing at $1.00 will also add 5,890,000 units at $1.18.
Also the last debenture financing was increased from $6.8M at 7% to 8.9M at 14% includes 0.4M warrants.
However, the recent revenue performance and the potential in Data Center applications makes Spectra7 interesting.
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