MathStar

MathStar, Inc.

Company type	Public
Industry	Semiconductor
Founded	January 1, 1999 (1999-01-01) in Minneapolis, Minnesota, United States
Founder	Douglas Pihl, Robert Warren Johnson
Defunct	2010 (2010)
Fate	Reverse merger with Sajan, Inc.
Headquarters	Hillsboro, Oregon , United States
Area served	Worldwide
Key people	Douglas Pihl (founder and CEO until 2009)
Products	Field programmable object array (FPOA) chip
Number of employees	56 (2006)

MathStar, Inc. operated as a fabless semiconductor firm headquartered in Oregon. Established in Minnesota in 1999 by Douglas Pihl alongside Robert Warren Johnson, the enterprise engineered a distinctive digital signal processor (DSP) chip grounded in Johnson's exclusive algorithms. Following its move to the Portland metropolitan region, MathStar stayed there until its 2010 reverse merger with Sajan, Inc. Although the company secured $137 million through multiple NASDAQ stock offerings, it never achieved profitability. Its only product was a field programmable object array (FPOA) chip.

History

In 2000, Johnson and Pihl launched MathStar in Minneapolis, successfully raising $18 million by September with a workforce of roughly 15 employees. The company’s processor design integrated proprietary algorithms directly into the chip architecture. Subsequent funding rounds included $15.3 million in 2002 and $6 million in 2003. MathStar initiated initial processor production in 2003 but encountered technical challenges necessitating redesigns and additional financing, including $10 million raised in 2004.

By May 2005, MathStar declared intentions for a $28 million initial public offering (IPO), pricing shares at $6 each by October and generating $24 million to reduce liabilities and fund research and development. That same year, the company inaugurated an Oregon office and resolved to transfer its headquarters to Hillsboro to tap into Silicon Forest’s microprocessor expertise, expanding its Oregon staff to 22 while maintaining operations in Minnesota. The market capitalization at that time approached $93 million.

In March 2006, MathStar officially relocated to Hillsboro with a team of 35 employees and plans to recruit an additional 15 staff members. Nonetheless, auditors raised concerns about the company's sustainability as a going concern. To counter this, MathStar secured $12.6 million through stock sales and warrants in September 2006, growing its workforce to 56 and completing its initial chip production run via Taiwan Semiconductor Manufacturing Company.

Early in 2007, MathStar collaborated with Mentor Graphics to create design tools tailored for its FPOA chip. Despite these collaborations, fiscal year 2006 revenues amounted to merely $53,000 against losses of $22.5 million. Throughout 2007, the company sought further capital: announcing plans for a $40 million stock offering in March; another $25 million by May due to shrinking operating funds; and additional offerings nearing $30 million by June amid NASDAQ delisting warnings related to equity thresholds. During this period, key sales executive Glen R. Wiley exited the firm.

Collapse

In January 2008, MathStar received a Nasdaq delisting notice. By February, it had finalized chip development for a transcoder system designed by South Korea’s LG Electronic that converted MPEG4 video into MPEG2 format aimed at hotel industry applications. In May 2008, MathStar declared it would halt chip development efforts and search for a buyer. Its shares were removed from NASDAQ trading in October 2008.

Revenues rose to $588,000 in 2007 while losses marginally decreased to $20.4 million. A reverse stock split executed in May 2008 (five shares consolidated into one) temporarily elevated share prices and restored Nasdaq compliance. By October 2008, MathStar was actively marketing its technology and received an unsolicited all-stock bid from PureChoice Inc., which intended to leverage MathStar’s accumulated losses for tax benefits. This offer was declined as CEO Pihl pursued a merger with a financially stronger partner despite some shareholders advocating liquidation.

PureChoice’s subsequent bid was also turned down in November 2008. In February 2009, shareholders requested a vote on liquidation. Fiscal year 2008 reported losses of $14.6 million on revenues of $536,000. By May 2009, shareholder Joe Gensor pressured the board toward liquidation or legal measures; MathStar again refused PureChoice’s merger proposal.

Toward late May 2009, Tiberius Capital II LLC proposed $1.15 per share; however, MathStar urged shareholders to reject this amid ongoing merger discussions with another private entity or potential operational revival plans. PureChoice countered with a $1.28 per share offer days later but was also rebuffed. A shareholder vote on liquidation was postponed in June 2009.

Tiberius increased its offer in July 2009 intending to acquire all outstanding shares; yet MathStar’s board declined this proposal as well. Later that month, merger negotiations commenced with Sajan Inc., coinciding with CEO Pihl’s resignation. In August, Tiberius raised its bid to $1.35 per share but remained unsuccessful.

Tiberius’s acquisition attempts failed amid allegations of securities fraud involving both MathStar and Sajan during merger discussions; both companies subsequently filed lawsuits against Tiberius's principal John Fife. On February 23, 2010, MathStar and Sajan completed their merger agreement, retaining the MathStar name but adopting Sajan’s product portfolio and services. Shortly thereafter, the company rebranded officially as Sajan, Inc., appointing Shannon Zimmerman as president and CEO.

Legacy

Although MathStar never reached a profitable status, it secured $137 million in funding throughout its lifespan. The company’s only product was a field programmable object array (FPOA) integrated circuit. Its headquarters were located at 19075 NW Tanasbourne Drive, Suite 200, in Hillsboro. Afterward, founder Sajan went on to create online language translation software designed for business use.

See also

• Lattice Semiconductor
• Silicon Forest