SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
March 6, 2003
Date of Report
(Date of earliest event reported)
SORRENTO NETWORKS CORPORATION
(Exact name of Registrant as specified in charter)
NEW JERSEY
(State or other jurisdiction of incorporation)
0-15810 22-2367234
(Commission File No.) (IRS Employer Identification Number)
9990 Mesa Rim Road
San Diego, California 92121
(Address of Principal Executive Office)
(858) 558-3960
(Registrant's telephone number, including area code)
ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE
Exchange Agreement and Associated Documents
We and our wholly-owned subsidiary Sorrento Networks, Inc. entered into
an Exchange Agreement, dated March 6, 2003, with the holders of our 9.75%
Senior Convertible Debentures (the "Debentures") and the Series A Convertible
Preferred Stock (the "Preferred Stock") of Sorrento Networks, Inc. The Exchange
Agreement and associated documents contemplate an exchange (the "Exchange") of
the Debentures and the Preferred Stock at a closing into shares of common
stock and $12.5 million of our new 7.5% secured convertible debentures (the
"New Debentures"). Certain holders of the Preferred Stock would also receive
additional New Debentures of approximately $600,000 to pay certain legal fees.
The shares of common stock and the New Debentures to be issued in the
Exchange will represent, in the aggregate, approximately 87.5% of our common
stock on a diluted basis. This percentage takes into account the total number
of existing shares outstanding, the shares to be issued to the holders of the
Debentures and the Preferred Stock at the closing, the shares issuable upon
conversion of $12.5 million of New Debentures, and the shares issuable upon
conversion of warrants to be issued to existing shareholders. This percentage
does not take into account new employee stock options, shares issuable upon
conversion of approximately $600,000 in New Debentures to be issued to certain
holders of the Preferred Stock to pay certain legal fees, and certain other
issuances. The exact number of shares of common stock that will be issued to
the holders of the Debentures and the Preferred Stock upon consummation of the
Exchange will depend on the conversion price of the New Debentures, which will
not be known until shortly before closing. The New Debentures that will be
issued in the Exchange (not including the New Debentures to be issued in
satisfaction of legal fees) will be convertible into not less than 8.75%,
or more than 26.25%, of our shares of common stock, calculated on the same
diluted basis.
The Exchange Agreement contemplates that our existing shareholders will
retain 7.5% of our common stock on the same diluted basis, and will receive
non-transferable warrants to purchase approximately 5% of our common stock,
exercisable beginning one year after the closing at a 10% premium over an
average closing price of our stock prior to the closing of the Exchange.
Exercise of the warrants will also be subject to the effectiveness of a
registration statement with respect to the common shares to be issued upon
exercise of the warrants.
Consummation of the Exchange is contingent upon satisfaction of the
terms and conditions described in the Exchange Agreement, including the receipt
of shareholder approval of the Exchange at the upcoming special meeting of our
shareholders and effectiveness of a registration statement covering the resale
of shares to be issued and potentially issuable in the Exchange.
The foregoing description of the Exchange is qualified in its entirety
by reference to the Exchange Agreement, a copy of which, including as exhibits
thereto, the form of 7.5% Senior Convertible Debenture, the form of Warrant,
form of Anti-Dilution Protection, and the Form of Registration Rights Agreement,
is attached hereto as Exhibit 10.1, and is incorporated herein in its entirety
by reference.
Press Release
On March 7, 2003, we issued a press release which announced the
execution of the Exchange Agreement and that we have filed a preliminary proxy
statement (the "Proxy Statement") with the Securities and Exchange Commission
with regard to our upcoming special meeting of shareholders seeking shareholder
approval of the Exchange, our reincorporation in the State of Delaware, and a
new employee equity incentive plan.
A copy of the press release announcing the execution of the Exchange
Agreement and the filing of the Proxy Statement is attached hereto as Exhibit
99.1.
This report contains forward-looking statements that are based on
current expectations, estimates, forecasts and projections about the industries
in which we operate, our beliefs and our management's assumptions. Words such as
"expects," "anticipates," "targets," "goals," "projects," "intends," "plans,"
"believes," "seeks," "estimates" and variations of such words and similar
expressions are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to predict. Therefore, actual
outcomes and results may differ materially from what is expressed or forecast in
such forward-looking statements. For a list and description of such risks and
uncertainties, see the reports filed by Sorrento Networks Corporation with the
Securities and Exchange Commission.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable
(b) Not applicable
(c) Exhibits Description
10.1 Exchange Agreement dated March 6, 2003, including, as
exhibits thereto, the form of 7.5% Senior Convertible
Debenture due August 2, 2007, the form of Warrant,
the form of Anti-Dilution Protection, and the form of
Registration Rights Agreement, incorporated by
reference to Appendix A of the Proxy Statement
filed with the Securities and Exchange Commission on
March 6, 2003.
99.1 Press Release dated March 7, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SORRENTO NETWORKS CORPORATION
DATE: March 12, 2003 By: /s/ Joe R. Armstrong
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Joe R. Armstrong, Chief Financial Officer