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Stingray Digital calls Music Choice lawsuit incomplete, unfounded

MONTREAL – The president and CEO of Stingray Digital Group Inc. says a lawsuit recently filed against the digital music distributor is an indication of the progress it has made in the U.S. market.

Music Choice launched the legal action in Texas last week, accusing Montreal-based Stingray of patent infringements.

The U.S.-based company alleges in court documents that Stingray appropriated various technologies after receiving privileged information in 2013 as it was seeking to acquire Music Choice.

Stingray CEO and co-founder Eric Boyko says the lawsuit is incomplete and incoherent.

“Our American clients who have seen this (the lawsuit) believe it’s an act of despair on the part of Music Choice,” Boyko said on a conference call Thursday to discuss the company’s fourth-quarter-results.

Stingray will fight the allegations in court and isn’t ruling out its own legal action.

“They allege we have servers in Texas that use the technology in question but we don’t have any equipment there,” Boyko said.

“Our understanding is that the management team, which is not the shareholder of the company, decided to pursue legal action without speaking to shareholders.”

Boyko added that one of Stingray’s partners is Comcast, which he described as “our competitor’s biggest client.”

Earlier in the day, Stingray reported fourth-quarter net income of $3.2 million or six cents a share, a hike of 69 per cent from a year earlier.

Net income for the year ended March 31 soared to $13.9 million or 29 cents a share, from $6.6 million, a jump of 110.1 per cent.

Fourth-quarter revenues climbed 30.6 per cent to $25.7 million from $19.6 million, while 12-month revenues increased 26.7 per cent to $89.9 million from $71 million.

The higher numbers were primarily due to acquisitions, combined with growth in international markets and non-recurring revenues related to installation and equipment sales.

The company also received a boost from the exchange rate between the Canadian and U.S. dollars.

“We completed our first fiscal year as a public company with several accomplishments to report,” said Boyko.

“As planned, we have been active on the acquisition front with four acquisitions representing investments of $33.1 million, including contingent considerations.

“We enter the new fiscal year with great confidence considering . . . (our) well-diversified business, our scale, a solid balance sheet and many opportunities to grow through acquisitions and organically.”