Sony BMG Suing Maker of CD Technology

By ALEX VEIGA 07.11.07, 7:34 PM ET

Sony BMG Music Entertainment is suing a company that developed antipiracy software for CDs, claiming the technology was defective and cost the record company millions of dollars to settle consumer complaints and government investigations.

Sony (nyse: SNE - news - people ) BMG filed a summons in a New York state court against The Amergence Group Inc., formerly SunnComm (other-otc: SUNX.PK - news - people ) International, which developed the MediaMax CD copy-protection technology.

Sony BMG is seeking to recover some $12 million in damages from the Phoenix-based technology company, according to court papers filed July 3.

The music company accuses Amergence of negligence, unfair business practices and breaching the terms of its license agreement by delivering software that "did not perform as warranted."

In a statement, The Amergence Group vowed to fight what it described as unwarranted allegations by Sony BMG.

The company also suggested that lawsuits against Sony BMG over CD copy-protection primarily stemmed from Sony's use of another technology.

New York-based Sony BMG, a joint venture of Sony Corp. and Bertelsmann AG, declined to elaborate on the suit. Sony BMG is home to names such as Bruce Springsteen, Carrie Underwood and Modest Mouse.

It began including MediaMax on some of its compact discs in August 2003 and shipped about 4 million CDs equipped with the technology in 2005.

The program restricted the number of copies of a CD that a user could make. Some users reported problems when the CDs were played on their computers.

The record company also drew complaints over another type of copy-protection software that restricted CD duplication.

The fallout over the copy-protected CDs sparked lawsuits and investigations.

Last fall, the company agreed to pay a total of $5.75 million to settle the litigation and resolve investigations by officials in several states.

http://www.forbes.com/feeds/ap/2007/07/11/ap3905696.html

Sony-BMG Files Suit Against Amergence Group

Wednesday July 11, 10:30 am ET

Amergence and Its Sales Agent, MediaMax Technology, Intend to Employ All Defenses at Their Disposal to Defend Themselves Against What They Believe Are Unwarranted Allegations by the Entertainment Giant

PHOENIX, AZ--(MARKET WIRE)--Jul 11, 2007 -- On Monday (July 9, 2007) The Amergence Group, Inc. (Other OTC:AMNG.PK - News) (formerly SunnComm International), and its sales agent, MediaMax Technology (Other OTC:MMXT.PK - News), were unexpectedly served with a summons in a civil lawsuit brought by Sony-BMG. The suit alleges, among other things, that SunnComm's CD copy protection component, called MediaMax, was defective and that the small Phoenix-based company has a contractual obligation to indemnify the entertainment giant against consumer actions which Amergence believes resulted primarily from 1) Sony's under-tested release of a competitor's technology, and 2) BMG's "final authority" input in determining the functional specifications of the MediaMax copy protection.

ABOUT THE AMERGENCE GROUP

The Amergence Group (Other OTC:AMNG.PK - News) identifies, nurtures, and expands selected emerging companies across a wide range of industries and disciplines. The primary goal of new business development enterprise (BDE) is to coordinate services and activities that foster and promote a business environment capable of accelerating the growth of innovative companies. The Company attracts new and early growth businesses that wish to take advantage of resources not generally available to them, such as mission-critical capital, in addition to legal, accounting, and public relations resources. In exchange, the Company will retain a small minority ownership position in the promising new business. The Company is currently reviewing comprehensive due diligence packages from a number of potential target companies, ranging from the medical, legal, and entertainment industries.

This news release contains predictions, projections, and other statements about the future that may or may not be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (collectively, "forward-looking statements"). Forward-looking statements relate to various aspects of the Company's operations and strategies, including but not limited to the effects of having experienced significant losses in the past and the risk that the Company may incur losses in the future; the Company's limited liquidity and significant indebtedness; its sales forecasts for future periods not being; the Company's marketing, product development, acquisition investments, licensing and other strategies not being successful; possible future issuances of debt or equity securities; new business development and industry trends; the possible need to raise additional capital in order to meet the Company's obligations and most other statements that are not historical in nature. Important factors that could cause actual results to differ materially from those described in the forward-looking statements are described in cautionary statements included in this news release. In assessing forward-looking statements, readers are urged to consider carefully these cautionary statements. Forward-looking statements speak only as of the date of this news release, and the Company disclaims any obligations to update such statements.

http://biz.yahoo.com/iw/070711/0276538.html

So Peter's claim that it acts as a poison pill doesn't make sense then. They can prevent any hostile takeover without the preference shares.

Correct flydoc

We DID get to vote on share/dilution issues a while back, maybe 3 years, I'm guessing.

I remember when reading through posts I saw it discussed as an agenda item for a shareholder meeting a few years ago. But that was the only time it was put to outside shareholders, at least in the last 4 or 5 years. The remaining times, the shareholders were informed only after the increase had already taken place.

That is why I was saying last week that any claim that reducing the authorized in line with the RS prevented dilution was not correct, as the authorized could just as easily be increased again without requesting the consent of or informing the outside shareholders.

re: Concerning MediaMax....

MediaMax Technology has the status DEFAULT for the Nevada Corporate Search

https://esos.state.nv.us/SOSServices/AnonymousAccess/CorpSearch/CorpDetails.aspx?lx8nvq=7kCm9No4%252bbwoMC%252faKAzNVw%253d%253d

Although the two companies are unrelated now, we, at Amergence, know that MediaMax is attempting to maximize shareholder value by adapting itself to accomodate a merger with or acquisiton of a company with high potential. They have a high degree of confidence they can achieve this goal within the next few months. The marketplace is swollen with potential candidates so I wouldn´t call the cmopany "over and done" just yet.

I thought Scott was President/CEO of MediaMax. Has he moved to the Amergence Group or has he dual roles? TIA

Stingray. Who else is in the management team of Amergence with Peter? How many employees are there, not including management?

TIA

My thinking is that that management will produce...

Who is current management of The Amergence Group? Peter and ?

How many employees?

During this transition, the stock price falls back to almost nothing. Very importantly in this case, the authorized shares are seldom rolled back in tandem with the outstanding shares leaving a majority of shares still authorized but, as yet, unissued. A formula that spells trouble for the old shareholders.

Agan he, as do several posters here, refuses to acknowledge that he can increase the authorized at any time without even requesting the consent of or informing outside shareholders. He, and the others, talk as if the current authorized is somehow set in stone and cannot be changed.

If he was genuinely concerned about the fear of dilution, he should state exactly what the preference shares entitle and he should put on record that he will not allow the preference shares to be issued or the authorized of the ordinaries increased without the consent of a majority of "outside" shareholders.

If the reductionn in authorized had not occured, then we would be negatively impacted. Because the percentage of the company the individual stockholders owned would have been reduced. That however is not the case. So monetarily there is no loss from thes split.

The reduction in authorized has no impact on ownership, just as an increase in authorized has no impact on ownership. It is the number of shares issued that determines how much you own of the company. Your ownership is "your holding"/"number issued"

Reducing the authorized in line with the RS means they cannot issue more shares without increasing the authorized again. But we all know they can do that at anytime without informing outside shareholders as they have done many times previously. Just as they can issue some or all of the preference shares at any time without needing the votes of outside shareholders.

How on earth do you think all this happened without the votes or consent of outside shareholders? They can do what they like and you either trust that they acting in your interest or you don't. Pretending that they somehow or other are restricted in what they can do gets people nowhere.

Corey,

Good point. Many have held on because it simply wasn't worth selling at the sub-penny range. And shorts had no interest in that range also, as there was little upside potential (falling sp) for them but massive downside potential (rising sp). This will now completely change for shorts, as there is no reason that this couldn't be driven back to the sub-penny range unless there is a quick turn-around. Long holders will also now feel that there is a greater probability that they could have 90%+ losses from $4 compared to from 0.4 cents.

Gregg99, I think its your calculator that is out. 100,000 shares will net you just 100 after the RS, so all things being equal, the new sp would be $4 as Three said.

I think you will find that the 30,000,000 preference shares is the vehicle through which they obtain finance for the company. What other collateral do they have to offer?

Ordinary shareholders collectively will eventually be the proud owners of 2.8% of The Amergence Group.

So Bleu, are you saying management does not have the voting power to issue those preferred shares to whomever they wish without first obtaining the consent of the "outside" owners of the 870K ordinary shares?

The response from Peter means absolutely nothing. Just because the preferred shares are allocated to treasury, doesn't mean they cannot be distributed at any later time. It is just as meaningless as the statement: All additional shares - outstanding or authorized - following the roll back must go through their own separate authorization process.. Of course that is true, but what practical difference does it make when the preferred shares can be voted by management to increase the authorized without consulting the other shareholders. Even without the voting power of the preferred shares, management already had majority voting power as evidensed by their ability to amend the authorized several times in the past without prior consultation.

What other rights attach to the preferred shares? Do they attract a dividend? Are they cumulative preferred shares, which mean that dividends owed to the preferred shareholders that cannot be paid because of non-profitability will be accrued and paid to them before any ordinary shareholders if profitability is ever reached. I know profitability is not something to worry about at the moment, but you may find that if positive earnings ever eventuate, many many years of positive earnings may be allocated to just back paying accrued dividends for the preference shareholders.

To say that this is non-dilutative is far stretched. Yes it is non-dilutative as long as those shares remain in treasury, as technically they are owned by the company and the ownership of the company is just distributed among those shares of the 870,000 that are issued. But there is nothing stopping management issuing those preferred shares to themselves or others at any time for whatever purpose they deem fit. We know they already have the voting power to do that without consulting the minority shareholders. If just one million of these shares are issued, then ownership by ordinary shareholders drops to under 50%.

I think a full desription of the preference shares, as they are described in the company's articles, should be put on the public record. Otherwise people are investing blindfolded.

14th June was just the filing date. The effective date may be some time later.

What I think is extremely worrying for AMGG shareholders is the 30,000,000 authorized shares at par value $0.01 that were part of the 12/29/06 amendment. These haven't been talked about up to now, but the presence of this other class of share may have diluted ordinary AMGG shareholders out of existense.

If these shares have the same status as the other (870M, now 870K) authorized shares, say for instance in entitlement to dividends, then this is what has happened since just before 12/29.

Prior to 12/29 there were 540M authorized shares of the type people here were buying/selling. I think all of these were issued, so these 540M shares represented 100% ownership of AMGG (SCMI then). The 12/29 amendment authorized 330M more shares of this type and also 30M shares of a type we have no information on. So the collective owners of the 540M issued shares will own just 540M/900M of AMGG once these additional authorized shares are issued. That is 60% before the RS.

But what is interesting about the RS from last week is that there has been no reverse split of the 30M other class shares. So after the RS, the collective owners of the original 540M shares (as of 12/28) now only own 540,000/30,870,000 of AMGG. In other words, they have gone from 100% ownership 6 months ago to 1.75% today. That is a staggering dilution.

A reverse split normally has no impact on the percentage ownership of the company that a shareholding represents, as you have less but now bigger slices of the pie. But when there is another class of share and that share class does not undergo the same reverse split, then that other class of share ends up with a lot more of the pie. So for normal reverse splits if your total number of shares in the company represented 1% ownership of the company, then you would still have 1% ownership after the RS. But in this case here, if your holding represented 1% of AMGG on 12/28, today it only represents 0.0175% of AMGG. In other words, if you had valued your shares based on a certain projected earnings of AMGG, earnings now have to be 57 times greater for you to arrive at the same value per share.

This is assuming the the class of share represented by the 30M is the same as the class represented by the 870M, now 870K shares. But worth noting is that the par value of each of the 30M shares is $0.01, but that of the 870K shares is just $0.001, so it is even possible that a share of the class of shares represented by the 30M has more value than a share of the other class. They could have 10 times the value. So instead of being devalued by a factor of 57 (57 times less), your holding may have been devalued by a factor of 570 (570 times less). All pre 12/28 shareholders may have gone from collectively holding 100% of the company to collectively owning just 0.175%. The owners of the 30M shares will own 99.825% if AMGG.

Since AMGG is non-reporting, it will be difficult to know what those 30M shares represent.

1000 to 1 reverse split?

The amendment of 6/14 looks like that to me. Is that how others see it?

Previous Stock Value:
Par Value Shares: 870,000,000 Value: $ 0.001
Par Value Shares: 30,000,000 Value: $ 0.01
No Par Value Shares: 0
Total Authorized Capital: $ 1,170,000.00

New Stock Value:
Par Value Shares: 870,000 Value: $ 0.001
Par Value Shares: 30,000,000 Value: $ 0.01
No Par Value Shares: 0
Total Authorized Capital: $ 300,870.00

https://esos.state.nv.us/SOSServices/AnonymousAccess/CorpSearch/corpActions.aspx?lx8nvq=3wR%252bT%252fJG0qZn4MUuP6wNKw%253d%253d&CorpName=THE+AMERGENCE+GROUP%2c+INC.

What is amazing and amusing is how a company who was evicted for non payment of rent and who failed to pay their accounting firm thereby causing MMXT to go pink, can 2 months later find the capital to acquire another company!

Its pretty obvious that SunnComm has no access to capital, otherwise they would have paid the relatively minor amounts needed to keep out of court for non payment of rent and paid the administrative costs necessary to keep MMXT reporting and up to date. It is not just that these payment defaults have shown them to be unreliable as a business, but just think what a statement that makes to potential clients of the new business right from the outset. They are unable to accomplish the very things that they are now trying to sell expertise in.

If financiers would not finance SunnComm/MediaMax in the past, they are unlikely to provide finance for the new venture. Few here are that naive that they believed what the read in the two Amergence PRs about providing capital, resources, expertise, etc. for startups when for 7 years they couldn't do the same for themselves. Why would financiers be any less sceptical. They have seen what has happened or not happened in the past and wouldn't provide finance then, so they are not likely to suddenly open their purse strings on the basis of a press release. What value have press releases from the company proved in the past?

If I were to hazzard a guess, I would think that SonicMountain has been purchased (or will be purchased) using the additional 300M or so shares in SunnComm that were authorized some time back. If they were valued at just $0.001 for the purpose of the transaction, that comes to about $300K. Although there have been suggestions that Odeo.Com was purchased for $1M+ just a month or two ago, from what I can gather that was just speculation. I have seen reports that it wasn't making money and that was why the previous owner decided to sell it. It also seems that SonicMountain themselves do not have any track record that would allow some sort of valuation to be put on them.

Exactly as I expected.

Lets see you or Sting explain how this new model is going to drive the PPS. Why businesses would use Amergence for these types of services to begin with. Try putting up some figures so that we can see how plausible your assumptions are.

I was getting similar criticism when I posted how SunnComm's products were receiving no interest from media companies and were aimed at a market that no longer existed. My analysis turned out to be correct.

There is no rocket science in running a business. Amergence is acting as a middle man and has nothing to offer in its repetoire that hundreds of other companies also cannot offer. In fact it has nothing to offer period. You think Peter and Mario who have failed in almost every task they set out to achieve with SunnComm, have come up with some brand new formula for running businesses that no one else has or can replicate.

And why hasn't it applied their new found acumen to SunnComm itself? How can it do for others what it cannot do for itself?

Lets see you or Sting explain how this new model is going to drive the PPS. Why businesses would use Amergence for these types of services to begin with. Try putting up some figures so that we can see how plausible your assumptions are.

Assuming they could get a PE of 20, to push the share price to just 10 cents they would need earnings of 0.5 cents per share. Assuming 1 billion shares (post merger) that means earnings of $5M p.a. (or equivalent value in shares of the clients, assuming that is how some of the payments will be made).

At 20% margin, revenue would need to be $25M.

Assuming companies would be willing to pay $25,000 for the advice of a startup with an appalling track record in the running of its own business, that would mean they would need 1000 such paying customers per year. That is 5 new fee paying customers per working day.

Think about those figures.

They aren't going anywhere unfortunately.

The above figures also assume that they have managed to pay off all the debts and fines currently owing. They also would need to obtain creditable staff who would be willing to work for IOUs for a few years.

You are also expecting customers to enter some contract with Amergence, when Amergence is on record of having breached two contracts in the past (BTEK and Cofco).

Use your own figures if you don't like mine. But the only figures that can spell survival will be from fantasy world.

Seems that they share the premises with these, or these were the previous tenants

http://www.ridefetish.com/about

Flydoc

What are the issues or factors embodied or possessed by this company that could attract potential investors in May 2007?

It would simply be impossible to attract investors to this company in the state it is in. Putting aside the inability of the company to generate revenue from its product set, any potential investor faces this reality.....

It is on public record that the company owes about $800,000 to settle both the BTEK and Cofco lawsuits, so an investor would just be acting as a sucker giving SunnComm money at this point in time. They would effectively end up paying off SunnComm's court fines.

Added to that are the unknown factors such as the ongoing lawsuit vs Kevin Clement and the what must be a substantial amount in back salaries owed to those who opted to defer 50% of their salaries.

Then should the company survive all that and proceed to merge with MediaMax as promised, we have the guaranteed payment of $1,000,000 to Peter Jacobs after 2 years as part of the agreement set up last year.

IMO it would take an investment in the region of $2,500,000 alone to pay for these liabilities and that is before one cent is allocated to actually running this business and turning it around.

Of course should the company generate revenues from their product set, then any money earned will reduce the above. Unfortunately their products are aimed at a market that has changed substantially from the time the products were developed.

The only DRM of interest today is the DRM that protects content in electronic format: Windows Media, Fairplay and some other formats that are geared to cell phones. MediaMax, aimed at physical distribution of content on optical devices, is dead. I have noticed that even Macrovision has dropped its Totalplay or CDS or whatever its last name was. SunnComm's other products seem to be just subsets of the functions that were part of MediaMax (Musicmail etc).

They really need a big investment so that they can come up with products more relevent to today's needs. But who will invest with the huge debt overhang that I mentioned above.

I said here about a year or so ago that I thought their chances of surviving at less than 5%. I still think that was an accurate forecast and at this stage is overly optimistic.

Yes that is odd. The Amergence Group was a separate entry just a few weeks ago and now it looks like it has assumed the mantle of SunnComm.

Nice of them to let investors know.

Is this a ploy to avoid paying their debts? I can't see how it would work.

Mediamax now with status DEFAULT

Nevada corporate search now shows MediaMax with the status DEFAULT as of 5/1. I assume this is because they did not provide a List of Officers, which was due on 4/30. It still shows Kevin Clement as President etc.

https://esos.state.nv.us/SOSServices/AnonymousAccess/CorpSearch/CorpDetails.aspx?lx8nvq=7kCm9No4%252bbwoMC%252faKAzNVw%253d%253d

That new contact number has been used by MediaMax in their form 15 that was submitted to the SEC on 4/20, so it is not a consequence of any event that took place over the last few days.

It's listed under the address at the start of the form:

http://www.sec.gov/Archives/edgar/data/1057024/000119983507000230/mediamax_form15.htm

480.443.1600 ???

Business and Professional Women (BPW) offers today’s career women opportunities for personal and professional enrichment. BPW members come from various backgrounds, but their common quality is that they strive for excellence in the workplace, at home, and in their community. For more information about BPW’s Arizona office, visit their website at www.bpwaz.org or call 480.443.1600.

http://www.azcommerce.com/BusAsst/SmallBiz/Minority+and+Women+Organizations+Cal+of+Events.htm

Greg,

.... and nothing he's said in the past 2 years has been close to accurate, I'm wondering if and why they are cutting him a check

I now believe that IS the reason they have paid him in the past and continue to pay him. It allows innuendo and false hope to be spread amongst investors, but the company need take no responsibility for what is said because nowhere is Mario listed as an official spokesperson of the company. This has been going on for years, so if the company didn't want that to happen, they would have put a stop to it a long time ago.

Flydoc,

Your Company Update is far too optimistic. Things are a lot more dire than you suggest. For instance, you have failed to mention the $600K judgement still owing to BTEK. There are also the hundreds of thousands owing to employees/execs in deferred salaries (those that took the 50% cut) and possibly liabilities to other suppliers that haven't yet resulted in court cases.

Not to mention a market that is fundamentally different to that of a year ago and a product set completely irrelevent to today's needs.

I can't see how a reverse split will solve anything. They will still have the fundamental problems of no revenue, mounting debt, no finance and a product set that no one shows any interest in. There are also the two court cases that could possibly force them into bankruptcy.

Surviving until year end would be a major feat imo.

Screamineagle

In fact, anyone can go back to my posts after I visited the co end of last year, when I talked about it. Point is, there had to be interest in order for the sample I have to have been made. How much? No way to tell

Marketing is not rocket science. Here are a few simple ways to tell.

They make a sample to show prospective buyers. A year later no one has bought. Ergo there is no interest.

Analysts talk to those in the industry and mention SunnComm's products. Those in the industry say they have no interest in the products.

The price of the companies stock plummets to near zero. There is not one company out there that thinks SunnComm product portfolio has any value so there are no attempts to make a takeover on the cheap.

Management will not personally come up with sufficient funds to even pay rent on the premises. Defaulting on rent sends a clear signal to prospective buyers that the company is likely not to be around for even the short term, never mind the long term and is a strong "stay clear" signal. If management believed there was interest in the products, they would take the risk of keeping the company afloat at their own expense while prospective buyers do their evaluations.

Screamineagle

You might want to get some better analysts.
They are ill-informed

They have been calling it right for the last few years. I can't say the same for your sources.

Flydoc,

I can tell you that some analysts that are very involved in this industry have told our investment group that

a) there is no one in the movie or music industry that have ever been approached by SunnComm or MediaMax or any associated company that has tried to sell any of the products that are currently touted in either SunnComm's or MediaMax's web site

b) even if they did, they would not be in the least bit interested in what they have to offer. Those products simple have no market.

The lack of sales of any sort have borne that out.

Yellowdog.

Have you not noticed how many shares have been sold? Not very many for a company with 850M.

Correct. Let's keep things in focus. Todays total SCMI trading amounted to less than $1,370.

They will get a shock when they stick it in their CD player and find it doesn't play!

GCRox99, thanks

Similar entries are also shown for 2/2/2006 so it would seem that they have been able to hold off seizure of assets before, if I understand it correctly. I wonder if they will be successful this time.

No, I mean the recent activity related to the court case at the link I gave. Does anyone know what the recent entries are about.

Can anyone translate this recent activity into a meaningful explanation of what is going on.

http://www.superiorcourt.maricopa.gov/docket/civil/caseInfo.asp?caseNumber=CV2002-011816

I would think having to pay the $600K outstanding (if that is what is being demanded) would be the lethal blow that sinks this ship.

mrfence

Are you sure you have the right disc? It is categorized as an Audio CD. Our product is a DVD, not an Audio CD, and cannot be played in a CD player. You have to burn a CD from the DVD first.