SAN DIEGO -- Sorrento Networks Corp. (Nasdaq NM: FIBR - News), a supplier of optical networking equipment for carriers and enterprises worldwide, today announced financial results for its second quarter of fiscal year 2004.

For the quarter ended July 31, 2003, the company reported revenues of $4.5 million, a 14% decrease from revenues of $5.2 million in the second quarter of fiscal 2003. For the six months ended July 31, 2003, the company reported revenues of $12.4 million, a 10% increase from revenues of $11.2 million in the first six months of the prior fiscal year.

Gross margin in the second quarter of fiscal 2004 improved to 30% as compared to gross margin of 25% in the first quarter of fiscal 2004. The improvement can be primarily attributed to the continued focus on operations overhead reductions.

Operating expenses for the quarter declined to $5.5 million, a 2% improvement over $5.6 million in the previous quarter and a 55% improvement over $12.1 million in the second quarter of fiscal 2003. The company completed its $81 million capital restructuring program during the quarter with its Series A Preferred Shareholders and Senior Convertible Debenture Holders. The capital restructuring successfully converted existing debt obligations into common stock and an extended $13.1 million convertible debenture due in August 2007. Capital restructuring costs, primarily legal expenses, continued to be incurred in the second quarter.

Net loss from operations for the second quarter of fiscal year 2004 improved by 72% to $4.1 million compared to $14.4 million for the same quarter of fiscal 2003. For the six months ended July 31, 2003, the company reported net loss from operations of $7.7 million, a 63% improvement from a net loss of $20.9 million in the first six months of the prior fiscal year.

The company reported net income applicable to common shares of $12.5 million, or $2.13 per common share, for the second quarter, primarily the result of other income recognized on the retirement of the company's old debentures in its restructuring and $4.0 million in gain on sale of marketable securities. This compares to a net loss of $15.8 million, or $21.35 per common share, in the second quarter of fiscal 2003.

Another significant improvement during the quarter was the increase in stockholders' equity to $13.1 million as compared to negative stockholders' equity of $39.6 million for the period ending April 30, 2003.

"We had major achievements in this quarter, including the completion of our capital restructuring, our acquisition of LuxN and our continued control of expenses," said Phil Arneson, chairman and chief executive of Sorrento Networks. "Sales were down from the first quarter as the telecom business remains difficult, but we are excited about the potential from the addition of the LuxN product line and the forthcoming introduction of VOD products."

Sorrento Networks Corp.