Terremark Worldwide S-1 IPO registration

As filed with the Securities and Exchange Commission on February 3, 2005

Registration No. 333-            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Terremark Worldwide, Inc.

(Exact name of registrant as specified in its charter)

Delaware	4813	84-0873124
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

2601 South Bayshore Drive
Miami, Florida 33133
(305) 856-3200
(Address, including zip code, and telephone number, including area
code, of registrant’s principal executive offices) Fern S. Watts, Esq.
Chief Legal Officer
2601 South Bayshore Drive
Miami, Florida 33133
(305) 856-3200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

Copies To:

Paul Berkowitz, Esq.
Greenberg Traurig, P.A.
1221 Brickell Avenue
Miami, Florida 33131
(305) 579-0500 William F. Schwitter, Esq.
Paul, Hastings, Janofsky & Walker LLP
75 East 55th Street
New York, New York 10022
(212) 318-6000

    Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

    If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.    o

    If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o                            

    If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o                            

    If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o                            

    If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.    o                            

CALCULATION OF REGISTRATION FEE

	Proposed Maximum
Title of Each Class of	Aggregate Offering	Amount of Registration
Securities to be Registered	Price(1)	Fee
Common Stock, par value $0.001 per share	$30,000,000	$3,531.00

(1)  Estimated solely for the purpose of determining the registration fee pursuant to Rule 457 under the Securities Act of 1933, as amended.

    The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

PROSPECTUS (Subject to Completion)

DATED FEBRUARY 3, 2005

                            Shares

Terremark Worldwide, Inc.

Common Stock

We are offering                  shares of our common stock. Our common stock is listed on the American Stock Exchange, or AMEX, under the symbol “TWW.” On February 2, 2005, the closing price of our common stock on the AMEX was $0.67 per share.

Our business and an investment in our common stock involve significant risks. These risks are described under the caption “Risk Factors” beginning on page 6 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

	Per Share	Total
Public offering price	$	$
Underwriting discounts and commissions	$	$
Proceeds, before expenses, to us	$	$

The underwriters may also purchase up to           shares of our common stock from us at the public offering price, less underwriting discounts and commissions, to cover over-allotments.

The underwriters expect to deliver the shares of common stock in New York, New York on or about                   , 2005.

SG Cowen & Co.

February       , 2005.

TABLE OF CONTENTS

Guaranty of Nonrecourse Obligation

Subsidiaries of the Company

Consent of PricewaterhouseCoopers LLP

Consent of Gifford Fong Associates

TABLE OF CONTENTS

	Page
Prospectus Summary		1
Risk Factors		6
Use of Proceeds		15
Market for Registrant’s Common Equity and Related Stockholder Matters		15
Capitalization		19
Dilution		20
Selected Consolidated Financial Data		21
Cautionary Note Regarding Forward-Looking Statements		24
Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Quantitative and Qualitative Disclosures About Market Risk		45
Business		48
Directors and Executive Officers of the Registrant		56
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		64
Description of Capital Stock		68
Certain Relationships and Related Transactions		71
Certain United States Federal Tax Consequences		73
Underwriting		77
Interests of Named Experts and Counsel		78
Legal Matters		78
Experts		78
Where You Can Find Additional Information		79
Index to Financial Statements		F-1

     You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information that is different. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our common stock.

PROSPECTUS SUMMARY

     The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements and the related notes included in this prospectus. Before you decide to invest in our common stock, you should read the entire prospectus carefully, including the risk factors and consolidated financial statements and the related notes included in this prospectus. Unless otherwise indicated, all information in this prospectus assumes no exercise of the underwriters’ over-allotment option. All references to “we,” “us,” “our,” the “Company,” or “Terremark” are to Terremark Worldwide, Inc. and its consolidated subsidiaries.

The Company

Our Business

     We operate Internet exchange points from which we provide colocation, interconnection and managed services to the government and commercial sectors. Our Internet exchange point facilities, or IXs, are strategically located in Miami, Florida, Santa Clara, California, Madrid, Spain and Sao Paulo, Brazil and allow networks to interconnect and exchange Internet and telecommunications traffic. Our flagship facility, the NAP of the Americas, in Miami, Florida was designed and built to disaster-resistant standards with maximum security to house mission-critical systems infrastructure. Our secure presence in Miami, a key gateway to North American, Latin American and European telecommunications networks, has enabled us to establish customer relationships with U.S. Federal Government agencies, including the Department of State and the Department of Defense. We have been awarded sole-source contracts with the U.S. Government which we believe will allow us to both penetrate further the government sector and continue to attract federal information technology providers. As a result of our fixed cost operating model, we believe that incremental customers and revenues will result in improved operating margins and increased profitability.

     We generate revenue by providing high quality Internet infrastructure on a platform designed to reduce network connectivity costs. We provide our customers with the following:

•  space to house equipment and network facilities in immediate proximity to Internet and communications networks;

•  the platform to exchange telecommunications and Internet traffic and access to network-based services; and

•  related professional and managed services such as our network operations center, outsourced storage and remote monitoring.

     We differentiate ourselves from our competitors through the security and strategic location of our facilities and our carrier-neutral model, which provides access to a critical mass of Internet and telecommunications connectivity. We are certified by the U.S. Government to house several “Secured Compartmentalized Information Facilities,” or “SCIFs,” which are facilities that comply with federal government security standards and are staffed by our employees. Approximately 21% of our employees maintain an active federal government security clearance.

     The immediate proximity of our facilities to major fiber routes with access to North America, Latin America and Europe has attracted numerous telecommunications carriers, such as AT&T, Global Crossing, Latin America Nautilus (a business unit of Telecom Italia), Progress Telecom, Sprint Communications and T-Systems (a business unit of Deutsche Telecom), to colocate their equipment with us in order to better service their customers. This network density, which allows our customers to reduce their connectivity costs, combined with the security of our facilities, has attracted government sector customers, including Blackbird Technologies, the City of Coral Gables, Florida, the Diplomatic Telecommunications Service — Program Office (DTS-PO, a division of the U.S. Department of State), Miami-Dade County, Florida, SRA International and the United States Southern Command. Additionally, we have had success in attracting content providers and enterprises such as Google,

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Internap, Miniclip, NTT/ Verio, VeriSign, Voiceglo, Bacardi USA, Corporacion Andina de Fomento, Florida International University, Intrado, Jackson Memorial Hospital of Miami and Steiner Leisure.

Our Strategy

     Key components of our strategy include the following:

     Deepen our relationships with existing customers.We currently have over 180 customers based in our NAP of the Americas facility and over 230 customers worldwide, including key contracts with agencies of the U.S. Government and major enterprises. Due to the difficulties inherent in obtaining the qualifications and certifications required to conduct business with the U.S. Government, we believe there are significant barriers to entry for competition which, coupled with our proven ability to secure government business through publicly awarded and sole-sourced contracts, increases the likelihood that we will be awarded additional contracts in the future. We also seek to enhance our relationships with our existing enterprise customers by selling additional colocation space, interconnections and related professional and managed services both directly and indirectly through partnerships and joint-ventures.

     Penetrate new sectors.Since 2000, we have built a strong customer base in the government, telecommunications carrier and information technology service provider sectors. In order to continue growing our revenues, we are targeting additional customer sectors, such as financial services, healthcare, technology and media and communications, to which we can provide colocation, connectivity and exchange services as well as professional and managed services. We believe that our opportunity to penetrate these sectors is particularly strong due to specified information technology related requirements of new laws such as the Health Insurance Portability and Accountability Act, the USA Patriot Act and the Sarbanes-Oxley Act of 2002.

     Establish insertion points for network-based services. The combination of our core infrastructure, comprised of state-of-the-art facilities with substantial fiber connectivity, our technology and our customer base provides us with the ability to directly connect multiple network service providers to our platform giving them access to a wide array of managed services. We define these combinations as Services Insertion Point^TM locations. Our Services Insertion Point^TM locations allow network service providers to reduce the capital and operational costs for the delivery of their services while maintaining a high degree of quality and availability. They also provide technology manufacturers and service providers with the ability to deploy their technology in a centralized fashion, reducing the capital and operational costs of reaching multiple network service providers, enterprises and end consumers. The ability to access multiple carriers in a single location, or “zero mile connectivity,” available via our Exchange Point Services Platform, allows all our customers to be pre-connected to one another and insert and deliver services in a real time and cost effective manner.

     Maintain and establish a presence in strategic locations.In addition to our NAP of the Americas facility in Miami, Florida, we operate regional IXs in Madrid, Spain, Santa Clara, California, and Sao Paulo, Brazil. In comparison to our facility in Miami, our regional locations are smaller in size, representing in the aggregate less than 10% of the footprint of our Miami facility. These regional IXs are centrally managed from our Miami facility and require less capital to establish and manage than our primary facility. Our regional IXs enable us to offer enhanced services to existing customers by making colocation space, exchange point services and managed services available in more immediate proximity to their locations around the world. In addition, we are in the process of establishing operations in the Washington, D.C. area to support our customer-driven initiatives with the U.S. Government. In response to the needs of our customers, we may establish and maintain Internet exchange points in additional locations deemed to be strategic.

Recent Events

     Acquisition of the building that houses the NAP of the Americas.During July 2004, we determined that an acquisition of the entity that owns the TECOTA, or Technology Center of the Americas, building, home of our flagship NAP of the Americas, was strategically important for us and would allow us to:

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•  provide significant room for expansion by more than doubling our footprint in Miami;

•  have complete control over the building, allowing us to maintain the high security standards of our customers; and

•  increase our operating margin through the reduction of rent expense.

     On December 31, 2004, we completed the acquisition of TECOTA. We paid $40.0 million for the equity interests in Technology Center of the Americas, LLC and repaid $35.0 million in debt. We financed the purchase through multiple sources, including a $49.0 million first mortgage loan from Citigroup Global Markets Realty Corp., the issuance of $30.0 million in senior secured notes and the sale of 3,060,444 shares of our common stock valued at $2.0 million to Falcon Mezzanine Partners, LP and its co-investment partners, Stichting Pensioenfonds Voor De Gezond-Heid Geestelijke En Maatschappelijke Belangen and Stichting Pensioenfonds ABP, two funds affiliated with AlpInvest Partners, or collectively the Falcon investors. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and pages F-1 to F-6 for pro forma financial information related to the acquisition of TECOTA.

Our History

     We were formed in 1982 as Terremark Holdings, Inc., a Florida corporation, and, along with our subsidiaries, were engaged in the development, sale, leasing, management and financing of various real estate projects. We provided these services to private and institutional investors, as well as for our own account. The real estate projects with which we were involved included retail, high-rise office buildings, mixed-use projects, condominiums, hotels and governmental assisted housing. We were also involved in a number of ancillary businesses that complemented our core development operations. Specifically, we engaged in brokering financial services, property management, construction management, condominium hotel management, residential sales and commercial leasing and brokerage, and advisory services.

     On April 28, 2000, Terremark Holdings, Inc. completed a reverse merger with AmTec, Inc., a public company. Contemporaneous with the reverse merger, we changed our corporate name to Terremark Worldwide, Inc. and adopted “TWW” as our trading symbol on the American Stock Exchange. Historical information of the surviving company contained in this prospectus is that of Terremark Holdings, Inc. In conjunction with our development of the NAP of the Americas, we began to redefine and focus our strategy on providing housing and management of Internet and telecommunications infrastructure and began implementing a plan to exit all lines of business and real estate activities not directly related to the Internet exchange point strategy. Lines of business discontinued include IP fax services, unified messaging services, and telephony. Non-core real estate activities exited include real estate development, property management, financing and the ancillary businesses that complemented the real estate development operations. Our real estate activities currently include construction work at our facilities. As of March 31, 2002, we had completed our exit from lines of business and real estate activities not related to our Internet exchange point strategy.

Company Information

     Our principal executive office is located at 2601 South Bayshore Drive, Miami, Florida 33133 and our telephone number is (305) 856-3200. Our website is located at www.terremark.com and contains all of the annual, quarterly and special reports, proxy statements and other information we file with the Securities and Exchange Commission. However, information contained on our website is not part of this prospectus.

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The Offering

Common Stock offered by us	shares
Common Stock to be outstanding after the offering	shares
Use of proceeds	We intend to use the net proceeds of this offering for general corporate purposes to support the growth of our business, which may include capital investments to build-out our existing facilities and potential acquisitions of complementary businesses. See “Use of Proceeds.”
American Stock Exchange symbol	“TWW”
Reverse stock split	We intend to propose to our stockholders a reverse stock split of our common stock. Our proposal and implementation of this reverse stock split will be dependent upon market conditions, the trading price and liquidity of our stock and the approval of our stockholders. See “Market for Registrant’s Common Equity and Related Stockholder Matters.”

     Except as otherwise noted, the number of shares to be outstanding after this offering excludes:

•  30,880,867 shares of common stock reserved for issuance upon the exercise of outstanding options, 14,347,845 of which were exercisable as of December 31, 2004 at a weighted average exercise price of $1.37, and for future issuances under our equity incentive compensation plans;

•  15,524,098 shares of common stock issuable upon conversion of our outstanding convertible preferred stock, at a weighted average conversion price of $0.85, and 69,000,000 shares of common stock issuable upon conversion of our 9% senior convertible notes due 2009; and

•  27,024,357 shares of common stock issuable upon the exercise of outstanding warrants, which are exercisable at a weighted average exercise price of $0.83.

     Except as otherwise noted, all information in this prospectus assumes that the underwriters do not exercise their over-allotment option.

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Summary Consolidated Financial Data

    The following provides summary consolidated financial statement data as of and for each of the fiscal years in the three-year period ended March 31, 2004 and for each of the six months ended September 30, 2003 and 2004. The financial statement data as of and for each of the fiscal years in the three-year period ended March 31, 2004 have been derived from our audited consolidated financial statements. The financial statement data for the six months ended September 30, 2003 and September 30, 2004 have been derived from our unaudited consolidated financial statements included in this prospectus. In the opinion of management, such unaudited interim financial statements have been prepared on the same basis as the audited financial statements and reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial information for such periods. The data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included in this prospectus.

											Six Months Ended
		Twelve Months Ended March 31,									September 30,
		2002			2003			2004			2003			2004
		(dollars in thousands, except per share data)
Results of operations:
Data center		$	3,216		$	11,033	(1)	$	17,034	(1)	$	7,243		$	15,026
Real estate services			12,656			3,661			1,179			247			1,088
	Total revenue		15,872			14,694			18,213			7,490			16,114
Data center operations expenses			11,231			11,235			16,413			6,507			12,201
Construction contract expenses			7,398			2,968			918			109			948
Other expenses			54,615			41,718			23,373			8,752			727
	Total expenses		73,244			55,921			40,704			15,368			13,876
Net income (loss)			(57,372	)		(41,227	)		(22,491	)		(7,878	)		2,238
Non-cash preferred dividend			(160	)		(160	)		(1,158	)		(80	)		(487	)
Net income (loss) attributable to common shareholders		$	(57,532	)	$	(41,387	)	$	(23,649	)	$	(7,958	)	$	1,751
Income (loss) from operations per common share		$	(0.29	)	$	(0.18	)	$	(0.08	)	$	(0.03	)	$	0.01
Net income (loss) per common share		$	(0.29	)	$	(0.18	)	$	(0.08	)	$	(0.03	)	$	0.01
Financial condition(2):
Property and equipment, net		$	61,089		$	54,483		$	53,898		$	53,059		$	56,884
Total assets			81,024			69,602			77,433			71,401			106,958
Long-term obligations(3)(4)			38,210			74,524			78,525			69,019			87,421
Stockholders’ equity (deficit)			(49,276	)		(46,461	)		(22,720	)		(19,020	)		951

(1)	Amount includes contract termination fees for the years ended March 31, 2003 and 2004 of $1,095 and $422, respectively.
(2)	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and pages F-1 to F-6 for pro forma financial information regarding subsequent events.
(3)	Long-term obligations include convertible debt less current portion, estimated fair value of derivatives embedded within convertible debt, deferred rent, deferred revenue, notes payable less current portion, redeemable preferred stock, and capital lease obligations less current portion.
(4)	Long-term obligations as of September 30, 2003 and 2004 and as of March 31, 2002, 2003 and 2004 include $500 in redeemable convertible preferred stock plus accrued dividends.

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RISK FACTORS

     Investing in our common stock involves a high degree of risk. You should carefully consider the following risks and all other information contained in this prospectus before purchasing our common stock. If any of the following risks actually occur, our business, consolidated financial conditions and results of operations could be materially and adversely affected, the value of our stock could decline, and you may lose part or all of your investment. The risks and uncertainties described below are those that we currently believe may materially affect our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business operations.

Risks Related to Our Business

We have a history of losses, expect future losses and may not achieve or sustain profitability.

     We have incurred losses from operations in each quarterly and annual period since our April 28, 2000 merger with AmTec, Inc. We incurred net losses of $57.4 million, $41.2 million and $22.5 million for the years ended March 31, 2002, 2003 and 2004, respectively. As of September 30, 2004, our accumulated deficit was $234.6 million. We expect to incur additional operating losses for the foreseeable future, and we cannot guarantee that we will become profitable. Even if we achieve profitability, given the evolving nature of the industry in which we operate, we may not be able to sustain or increase profitability on a quarterly or annual basis, and our failure to do so would adversely affect our business, including our ability to raise additional funds.

We may not be able to compete effectively in the market for data center services.

     The market for data center services is extremely competitive and is subject to rapid technological change. Our current and potential competitors include providers of data center services, global, regional and local telecommunications companies and information technology outsourcing firms. Many of our existing competitors have a greater market presence and financial and personnel resources than we do. Our competitors include Internet data centers operated by established communications carriers such as AT&T, Level 3, MCI and Qwest. We also compete with providers of data services centers and companies that offer Internet access and information technology outsourcing firms. The principal competitive factors in our market include:

•  ability to deliver services when requested by the customer;

•  Internet system engineering and other professional services expertise;

•  customer service;

•  network capability, reliability, quality of service and scalability;

•  variety of managed services offered;

•  access to network resources, including circuits, equipment and interconnection capacity to other networks;

•  broad geographic presence;

•  price;

•  ability to maintain and expand distribution channels;

•  brand name recognition;

•  timing of introductions of new services;

•  physical and network security;

•  financial resources; and

•  customer base.

     Some of our competitors may be able to develop and expand their data center services faster, devote greater resources to the marketing and sale of their products and adopt more aggressive pricing policies than we can. In

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addition, these competitors have entered and will likely continue to enter into business relationships to provide additional services that compete with the services we provide. As a result, our competitors may have significant advantages over us. Increased competition could adversely affect our business, results of operations and financial condition.

We anticipate that an increasing portion of our revenues will be from contracts with agencies of the United States government, and uncertainties in government contracts could adversely affect our business.

     Generally, U.S. Government contracts are subject to oversight audits by government representatives, to profit and cost controls and limitations, and to provisions permitting modification or termination, in whole or in part, without prior notice, at the government’s convenience. In some cases, government contracts are subject to the uncertainties surrounding congressional appropriations or agency funding. Government contracts are subject to specific procurement regulations. Failure to comply with these regulations and requirements could lead to suspension or debarment from future government contracting for a period of time, which could limit our growth prospects and adversely affect our business, results of operations and financial condition.

We derive a significant portion of our revenues from a few clients; accordingly, a reduction in our clients’ demand for our services or the loss of clients would likely impair our financial performance.

     During the six months ended September 30, 2004, we derived approximately 22% and 17% of our data center revenues from two customers. During the six months ended September 30, 2003, we derived approximately 11% of our data center revenues from one customer. Because we derive a large percentage of our revenues from a few major customers, our revenues could significantly decline if we lose one or more of these customers or if the amount of business we obtain from them is reduced. See “Business — Customers.”

We have significant debt service obligations which will require the use of a substantial portion of our available cash.

     We are a highly leveraged company. As of September 30, 2004, our total liabilities were approximately $105.9 million. Our total indebtedness, as of September 30, 2004, of $95.0 million as a percentage of our capitalization was approximately 99.0%. See “Capitalization.” As of September 30, 2004, our total stockholders’ equity was $1.0 million. In addition, in connection with our purchase on December 31, 2004 of the remaining 99.16% equity interests in TECOTA not already owned by us and the repayment of the mortgage on the TECOTA building, we obtained a $49.0 million first mortgage loan from Citigroup Global Markets Realty Corp. and simultaneously issued senior secured notes in an aggregate principal amount equal to $30.0 million to Falcon Mezzanine Partners, LP and its co-investment partners, Stichting Pensioenfonds Voor De Gezond-Heid Geestelijke En Maatschappelijke Belangen and Stichting Pensioenfonds ABP, two funds affiliated with AlpInvest Partners. These loans are, collectively, secured by substantially all of our assets. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

     Each of these obligations requires significant amounts of liquidity. Should we need additional capital or financing, our ability to arrange financing and the cost of this financing will depend upon many factors, including:

•  general economic and capital markets conditions, and in particular the non-investment grade debt market;

•  conditions in the Internet infrastructure market;

•  credit availability from banks or other lenders;

•  investor confidence in the telecommunications industry generally and our company specifically; and

•  the success of our facilities.

     We may be unable to find additional sources of liquidity on terms acceptable to us, if at all, which could adversely affect our business, results of operations and financial condition. Also, a default could result in acceleration of our indebtedness. If this occurs, our business and financial condition would be adversely affected.

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The mortgage loan with Citigroup and our senior secured notes contain numerous restrictive covenants.

     Our mortgage loan with Citigroup and our senior secured notes contain numerous covenants imposing restrictions on our ability to, among other things:

•  incur more debt;

•  pay dividends, redeem or repurchase our stock or make other distributions;

•  make acquisitions or investments;

•  enter into transactions with affiliates;

•  merge or consolidate with others;

•  dispose of assets or use asset sale proceeds;

•  create liens on our assets; and

•  extend credit.

     Our failure to comply with the obligations in our mortgage loan with Citigroup and our senior secured notes could result in an event of default under the mortgage loan or the senior secured notes, which, if not cured or waived, could permit acceleration of the indebtedness or our other indebtedness, or result in the same consequences as a default in payment. If the acceleration of the maturity of our debt occurs, we may not be able to repay our debt or borrow sufficient funds to refinance it on terms that are acceptable to us, which could adversely impact our business, results of operations and financial condition.

Our substantial leverage and indebtedness could adversely affect our financial condition, limit our growth and prevent us from fulfilling our debt obligations.

     Our substantial indebtedness could have important consequences to us and may, among other things:

•  limit our ability to obtain additional financing to fund our growth strategy, working capital, capital expenditures, debt service requirements or other purposes;

•  limit our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to make principal payments and fund debt service requirements;

•  cause us to be unable to satisfy our obligations under our existing or new debt agreements;

•  make us more vulnerable to adverse general economic and industry conditions;

•  limit our ability to compete with others who are not as highly leveraged as we are; and

•  limit our flexibility in planning for, or reacting to, changes in our business, industry and market conditions.

     In addition, subject to restrictions in our existing debt instruments, we may incur additional indebtedness. If new debt is added to our current debt levels, the related risks that we now face could intensify. Our growth plans and our ability to make payments of principal or interest on, or to refinance, our indebtedness, will depend on our future operating performance and our ability to enter into additional debt and/or equity financings. If we are unable to generate sufficient cash flows in the future to service our debt, we may be required to refinance all or a portion of our existing debt, to sell assets or to obtain additional financing. We may not be able to do any of the foregoing on terms acceptable to us, if at all.

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Our management believes that certain weaknesses in our system of internal controls constitute material weaknesses and has concluded that our internal controls and procedures are ineffective as of September 30, 2004. We may also be unable to complete all of the work necessary for us to present our report on internal controls required by Section 404 of the Sarbanes-Oxley Act of 2002 or for us to conclude that our internal controls are effective. Our inability to present our report on internal controls or conclude that our internal controls are effective could cause a loss of confidence in our financial reporting and negatively impact our stock price.

     Section 404 of the Sarbanes-Oxley Act of 2002 requires that we establish and maintain an adequate internal control structure and procedures for financial reporting and assess on an on-going basis the design and operating effectiveness of our internal control structure and procedures for financial reporting. In connection with the preparation of our Form 10-Q for the quarter ended June 30, 2004, our independent auditors identified certain adjustments that were required to be recorded within that Form 10-Q. Our management believes that the failure of our internal controls to identify these adjustments indicates the existence of certain material weaknesses in our system of internal controls, including the manner in which we gather, consolidate and report data regarding issuances of our securities, including the number of our potentially dilutive securities. As a result of the existence of those material weaknesses, our management concluded that our internal controls and procedures were ineffective as of September 30, 2004.

     Section 404 of the Sarbanes-Oxley Act also requires that our Annual Report on Form 10-K for the year ending March 31, 2005 include a report containing management’s assessment of our internal controls over financial reporting and a related attestation of management’s assessment and an opinion on the effectiveness of our internal controls by our independent registered public accounting firm. We are documenting and evaluating our internal controls over financial reporting and seeking to remediate matters as necessary or appropriate. We are incurring, and will continue to incur, substantial additional expense and diversion of management’s time as a result of performing the internal control systems evaluation, testing and remediation required in order to comply with the requirements of Section 404 of the Sarbanes-Oxley Act.

     Although we have substantially completed the documentation of our internal controls, we have not, as of December 31, 2004, completed our evaluation and testing of our internal controls. While we expect to complete our evaluation and testing of our internal controls by the time that we must file our Form 10-K for the year ending March 31, 2005, we may be required to remediate our internal controls as a result of such evaluation and testing. If, after the completion of our evaluation, testing and remediation efforts, we have any material weakness, we will not be permitted to conclude that our internal controls are effective.

     Even if we are able to take remedial actions to correct the identified material weaknesses described above and any other material weaknesses identified as the evaluation and testing process is completed, there may be insufficient time for the remediated controls to be in operation to permit our independent registered public accounting firm to conclude that the remediated controls are effective. Thus, our independent registered public accounting firm may provide an adverse opinion to the effect that our internal controls are ineffective as of March 31, 2005, or may decline to issue an opinion as to the effectiveness of our internal controls.

     If we are unable to conclude that our internal controls over financial reporting are effective as of March 31, 2005, or if our independent registered public accounting firm concludes that our internal controls are ineffective, or is unable to conclude that our assessment is fairly stated or is unable to express an opinion on the effectiveness of our internal controls, our ability to obtain additional financing on favorable terms could be materially and adversely affected, which, in turn, could materially and adversely affect our business, our financial condition and the market value of our securities.

The restatement of our financial statements for the quarter ended June 30, 2004 could cause a loss of confidence in our financial reporting, which would harm our business and the trading price of our stock.

     Our inability to support our original valuation for the derivatives embedded within our 9% senior convertible notes led to the restatement of our financial statements for the quarter ended June 30, 2004. Our valuation, as originally reported, incorrectly used a volatility of approximately 17% as an input in estimating the fair value of

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the embedded derivatives. A subsequent valuation by Gifford Fong Associates concluded that because the notes are not actively traded and we are not able to find other comparable market data, we did not have sufficient quantitative and qualitative market data to support the volatility assumption used in our initial valuation. Therefore, until an active market develops for the 9% senior convertible notes or we are able to find comparable market data, we must use a theoretical model to estimate the value of the embedded derivatives based on the historical volatility over the past year (approximately 80% as of June 30, 2004), which resulted in a requirement that we restate our financial statements for the quarter ended June 30, 2004. As a result of this restatement, current and potential stockholders could lose confidence in our financial reporting.

If the price of our shares remains low or our financial condition deteriorates, we may be delisted by the American Stock Exchange and our stockholders could find it difficult to sell our common stock.

     Our common stock currently trades on the American Stock Exchange, or AMEX. The AMEX requires companies to fulfill specific requirements in order for their shares to continue to be listed. Our securities may be considered for delisting if:

•  our financial condition and operating results appear to be unsatisfactory;

•  it appears that the extent of public distribution or the aggregate market value of the securities has become so reduced as to make further dealings on the AMEX inadvisable; or

•  we have sustained losses which are so substantial in relation to our overall operations or our existing financial condition has become so impaired that it appears questionable whether we will be able to continue operations and/or meet our obligations as they mature.

     For example, the AMEX may consider suspension or delisting of a stock if the stock has been selling for a substantial period of time at a low price per share. Our common stock has been trading at relatively low prices, and we have sustained net losses for the past five fiscal years. Therefore, our common stock is at risk of being delisted by the AMEX. If our shares are delisted from the AMEX, our stockholders could find it difficult to sell our stock. To date, we have had no communication from the AMEX regarding delisting. If our common stock is delisted from the AMEX, we may apply to have our shares quoted on NASDAQ’s Bulletin Board or in the “pink sheets” maintained by the National Quotation Bureau, Inc. The Bulletin Board and the “pink sheets” are generally considered to be less efficient markets than the AMEX. In addition, if our shares are no longer listed on the AMEX or another national securities exchange in the United States, our shares may be subject to the “penny stock” regulations. If our common stock were to become subject to the penny stock regulations it is likely that the price of our common stock would decline and that our stockholders would find it difficult to sell their shares.

We are dependent on key personnel and the loss of these key personnel could have a material adverse effect on our success.

     We are highly dependent on the skills, experience and services of key personnel, particularly Manuel D. Medina, our Chairman, President and Chief Executive Officer. The loss of Mr. Medina or other key personnel could have a material adverse effect on our business, operating results or financial condition. Our potential growth and expansion are expected to place increased demands on our management skills and resources. Therefore, our success also depends upon our ability to recruit, hire, train and retain additional skilled and experienced management personnel. Employment and retention of qualified personnel is important due to the competitive nature of our industry. Our inability to hire new personnel with the requisite skills could impair our ability to manage and operate our business effectively.

Our business could be harmed by prolonged electrical power outages or shortages, or increased costs of energy.

     Substantially all of our business is dependent upon the continued operation of the TECOTA building. The TECOTA building and our other IX facilities are susceptible to regional costs of power, electrical power shortages and planned or unplanned power outages caused by these shortages. A power shortage at an IX facility may result in an increase of the cost of energy, which we may not be able to pass on to our customers. We

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attempt to limit exposure to system downtime by using backup generators and power supplies. Power outages, which last beyond our backup and alternative power arrangements, could harm our customers and our business.

Brazilian political and economic conditions may have an adverse impact on our operations.

     Our results of operations and financial condition may be affected by inflation in each country in which we manage a facility. We maintain operations in Brazil, which has had in the past, and may now or in the future have, a highly inflationary economy, defined as cumulative inflation of about 100% or more over a three calendar year period. Future increases in our costs may exceed the rate of inflation or the amounts, if any, which we may be able to recover from our customers.

We have acquired and may acquire other businesses, and these acquisitions involve numerous risks.

     As part of our strategy, we may pursue additional acquisitions of complementary businesses, products services and technologies to enhance our existing services, expand our service offerings and enlarge our customer base. If we complete future acquisitions, we may be required to incur or assume additional debt and make capital expenditures and issue additional shares of our common stock or securities convertible into our common stock as consideration, which will dilute our existing stockholders’ ownership interest and may adversely affect our results of operations. Our ability to grow through acquisitions involves a number of additional risks, including the following:

•  the ability to identify and consummate complementary acquisition candidates;

•  the possibility that we may not be able to successfully integrate the operations, personnel, technologies, products and services of the acquired companies in a timely and efficient manner;

•  diversion of management’s attention from normal daily operations to negotiate acquisitions and integrate acquired businesses;

•  insufficient revenues to offset significant unforeseen costs and increased expenses associated with the acquisitions;

•  challenges in completing products associated with in-process research and development being conducted by the acquired businesses;

•  risks associated with our entrance into markets in which we have little or no prior experience and where competitors have a stronger market presence;

•  deferral of purchasing decisions by current and potential customers as they evaluate the likelihood of success of our acquisitions;

•  issuance by us of equity securities that would dilute ownership of our existing stockholders;

•  incurrence and/or assumption of significant debt, contingent liabilities and amortization expenses; and

•  loss of key employees of the acquired companies.

     Failure to manage effectively our growth through acquisitions could adversely affect our growth prospects, business, results of operations and financial condition.

Risks Related to the Offering of our Common Stock

The public sale of our common stock by existing stockholders, the exercise of options and warrants we have outstanding and the conversion of our various series of convertible preferred stock and our 9% senior convertible notes may result in significant dilution, which would depress the market price of our common stock.

     The market price of our common stock could decline as a result of market sales by our existing stockholders after this offering or the perception that these sales will occur. These sales also might make it difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. For more information, please see “Underwriting.” In addition, holders of our series G, H and I convertible preferred stock, our 9%

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senior convertible notes and outstanding options and warrants may convert their shares or notes to common stock or exercise their options or warrants to purchase our common stock, which would increase the number of outstanding shares of common stock in the future. As of December 31, 2004 we had the following outstanding:

•  20 shares of series G convertible preferred stock, which are convertible into an aggregate of 2,229,838 shares of our common stock;

•  294 shares of series H convertible preferred stock, which are convertible into an aggregate of 294,000 shares of our common stock;

•  390 shares of series I preferred stock, which are convertible into an aggregate of 13,000,260 shares of our common stock;

•  options to purchase an aggregate of 23,917,820 shares of our common stock at a weighted average exercise price of $1.37;

•  warrants to purchase 27,024,357 shares of our common stock at a weighted average exercise price of $0.83; and

•  9% senior convertible notes which are convertible into an aggregate of 69,000,000 shares of our common stock.

     As of December 31, 2004, if all outstanding shares of our series G, H and I convertible preferred stock and all of the outstanding 9% senior convertible notes were converted and all options and warrants were exercised, our outstanding shares of common stock would increase from approximately 354,455,181 shares to approximately 498,573,472 shares, an increase of approximately 40.1% in the number of shares of common stock outstanding. The issuance of our common stock upon the conversion of series G, H and I convertible preferred stock or the exercise of options and warrants could depress the market price of the common stock by increasing the number of shares of common stock outstanding on an absolute basis or as a result of the timing of additional shares of common stock becoming available on the market. For more information, please see “Dilution” and “Description of Capital Stock.”

Purchasers of our common stock in this offering will be subject to immediate and substantial dilution of $          per share of common stock.

     The public offering price of our common stock in this offering will be substantially higher than the net tangible book value per share of our outstanding common stock. As a result, purchasers of our common stock in this offering will incur immediate and substantial dilution in the amount of $           in the net tangible book value per share of common stock based on an assumed public offering price of $           per share of common stock. Accordingly, purchasers of our common stock in this offering will pay a price per share that substantially exceeds the book value of our tangible assets after subtracting our liabilities. For more information, please see “Dilution” and “Description of Capital Stock.”

Our charter documents, Delaware law and specified change in control repurchase obligations provided for in the terms of our 9% senior convertible notes and other debt instruments may inhibit a takeover, which may cause a decline in the value of our stock.

     Provisions of our amended and restated certificate of incorporation, our bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing the transaction would be beneficial to our stockholders. Our board of directors’ authority to issue preferred stock and the lack of cumulative voting in our amended and restated certificate of incorporation may have the effect of delaying, deferring or preventing a change in control, may discourage bids for our common stock at a premium over its market price and may adversely affect the market price of our common stock. For more information, please see “Description of Capital Stock — Anti-Takeover Effects of Provisions of the Charter and Bylaws and of Delaware Law.” In addition, under the terms of our 9% senior convertible notes, if there is a change in control, the holders of these notes have the right to require us to repurchase their notes. Also, under the terms of our mortgage loan with Citigroup Global Markets Realty Corp., a change in control could allow the lenders to demand repayment of the loan.

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Under the terms of the senior secured notes issued to the Falcon investors, if there is a change in control, the holders of these notes will have the right to require us to repurchase their notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest. Any of these events could have the effect of delaying, deferring or preventing a change in control. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

We will have significant discretion over the use of proceeds of this offering because a large portion of the proceeds is allocated to working capital. We may apply the net proceeds of this offering to uses that do not improve our operating results or increase the value of your investment.

     While we intend to use the net proceeds of the offering as described in the “Use of Proceeds” section of this prospectus, we will have broad discretion to adjust the application and allocation of the net proceeds in order to address changed circumstances and opportunities. You will not have the opportunity as part of your investment decision to assess how the proceeds will be used. The success of our operations that are influenced by working capital allocations will be substantially dependent upon the discretion and judgment of our management with respect to the application and allocation of the net proceeds. The net proceeds may be used for corporate purposes that do not improve our operating results or market value, and you will not have the opportunity to evaluate the economic, financial or other information on which we base our decisions on how to use the proceeds. For more information, please see “Use of Proceeds.”

The holders of our series G, H and I convertible preferred stock have payment rights that are senior to holders of our common stock.

     In the event of a liquidation, dissolution or winding up of Terremark, holders of our series G, H and I convertible preferred stock will have claims against our assets that are senior to any claims of the holders of our common stock. More specifically, the holders of our series G convertible preferred stock would be entitled to receive an amount equal to $100,000 for each outstanding share of series G convertible preferred stock and an amount equal to 8% of the original issuance price per annum, without compounding for the period that has passed since March 16, 1999, the date of issuance of the series G convertible preferred stock. The holders of our series H convertible preferred stock would be entitled to receive an amount equal to $1,700 per share of series H convertible preferred stock plus any accrued or declared and unpaid dividends thereon. The holders of our series I convertible preferred stock would be entitled to receive an amount equal to $25,000 per share of series I convertible preferred stock plus any accrued or declared and unpaid dividends thereon.

     For series H and I convertible preferred stock, a consolidation or merger of Terremark with or into any other corporation which results in the shareholders of Terremark owning less than 50% of the surviving entity, or a sale, conveyance or disposition of all or substantially all of the assets of Terremark, is deemed to be a liquidation, dissolution or winding up of Terremark. Under applicable Delaware law, these consolidations, mergers or sales, conveyances or dispositions of all or substantially all of our assets would require the approval of our board of directors.

The holders of our preferred stock, as a group, through their ownership of preferred stock and common stock, have the ability to influence the outcome of matters brought before our stockholders.

     The holders of our preferred stock, as a group, through their ownership of series G, H and I convertible preferred stock and common stock, have voting power with respect to matters brought before our stockholders and may have interests that are adverse to those of our common stockholders. This voting power includes the right to vote equally with holders of our common stock in all matters brought before our stockholders. As of December 31, 2004, the holders of series G, H and I convertible preferred stock, through their series G, H and I convertible preferred stock holdings, represented 4.0% of our voting power.

Our common shares are thinly traded and, therefore, relatively illiquid.

     As of December 31, 2004, we had 354,455,181 common shares outstanding (                    shares after this offering, assuming no exercise of the underwriters’ over-allotment option). While our common shares trade on the

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American Stock Exchange, our stock is thinly traded (less than 0.1% traded on an average daily basis during the three months ended December 31, 2004) and you may have difficulty in reselling your shares quickly. The low trading volume of our common stock is outside of our control, and we cannot guarantee that the trading volume will increase in the near future or that, even if it does increase in the future, it will be maintained. Without a higher trading volume, our common stock is less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stock may be more volatile. In addition, in the absence of an active public trading market, an investor may be unable to liquidate his investment in us.

Our stock price may be volatile, and you could lose all or part of your investment.

     The market for our equity securities has been extremely volatile. Our stock price could suffer in the future as a result of any failure to meet the expectations of public market analysts and investors about our results of operations from quarter to quarter. The following factors could cause the price of our common stock in the public market to fluctuate significantly from the price you will pay in this offering:

•  actual or anticipated variations in our quarterly results of operations;

•  changes in market valuations of companies in our industry;

•  changes in expectations of future financial performance or changes in estimates of securities analysts;

•  fluctuations in stock market prices and volumes;

•  future issuances of common stock or other securities;

•  the addition or departure of key personnel; and

•  announcements by us or our competitors of acquisitions, investments or strategic alliances.

     Volatility in the market price of our common stock may prevent investors from being able to sell their common stock at or above the public offering price.

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USE OF PROCEEDS

     We estimate that we will receive net proceeds from the sale of the                     shares of common stock we are offering of approximately $           million based on an assumed offering price of $           per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters fully exercise the over-allotment option, the net proceeds from the sale of shares will be approximately $           million.

     We intend to use the net proceeds of this offering for general corporate purposes to support the growth of our business, which may include capital investments to build-out our existing facilities and potential acquisitions of complementary businesses. Pending such use of the net proceeds, we intend to invest the net proceeds from this offering in accordance with our investment policy, which includes investments in short-term, interest-bearing, investment-grade securities or guaranteed obligations of the United States or other governments or their agencies.

     We estimate that our expenses in connection with this offering will be approximately $          .

MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Common Stock and Preferred Stock Information

     Our common stock, par value $0.001 per share, is quoted under the symbol “TWW” on the American Stock Exchange. As of December 31, 2004, under our amended and restated certificate of incorporation, we had the authority to issue:

•  600,000,000 shares of common stock, par value $0.001 per share; and

•  10,000,000 shares of preferred stock, par value $0.001 per share, which are issuable in series on terms to be determined by our board of directors, of which 20 shares are designated as series G convertible preferred stock, 5,882 shares are designated as series H convertible preferred stock and 600 shares are designated as series I convertible preferred stock.

     As of December 31, 2004:

•  354,455,181 shares of our common stock were outstanding;

•  20 shares of our series G convertible preferred stock were outstanding and held by Communications Investors Group, an entity in which Manuel Medina, our Chairman, President and Chief Executive Officer, owns a 50% interest. Each share of series G convertible preferred stock may be converted into 111,492 shares of our common stock;

•  294 shares of our series H convertible preferred stock were outstanding and held by one holder of record. Each share of series H convertible preferred stock may be converted into 1,000 shares of our common stock; and

•  390 shares of our series I convertible preferred stock were outstanding. Each share of series I convertible preferred stock may be converted into 33,334 shares of our common stock.

     We believe that, as of December 31, 2004, there were at least 6,800 beneficial owners of our common stock and approximately 370 holders of record.

     The following table sets forth, for the fiscal quarters indicated, the high and low sales prices for our common stock on the American Stock Exchange. Quotations are based on actual transactions and not bid prices.

	Prices
Fiscal Year 2005
Quarter Ended	High		Low
June 30, 2004	$	1.09	$	0.61
September 30, 2004		0.84		0.60
December 31, 2004		0.73		0.62
March 31, 2005 (through February 2, 2005)		0.67		0.59

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	Prices
Fiscal Year 2004
Quarter Ended	High		Low
June 30, 2003	$	1.21	$	0.33
September 30, 2003		1.00		0.53
December 31, 2003		0.78		0.55
March 31, 2004		0.94		0.60

	Prices
Fiscal Year 2003
Quarter Ended	High		Low
June 30, 2002	$	0.73	$	0.25
September 30, 2002		0.77		0.31
December 31, 2002		0.71		0.22
March 31, 2003		0.49		0.22

     We intend to propose to our stockholders a reverse stock split of our common stock. This stock split would cause the number of shares of our common stock which are outstanding to decrease by a proportion equal to the ratio our board of directors determines to use. The change in the price of our common stock after the split may not be directly proportional to the ratio of the split. If the split is approved, we do not intend to issue fractional shares. Instead, it is likely that fractional shares will be sold by our transfer agent on behalf of stockholders entitled to receive them. Our proposal and implementation of this reverse stock split will be dependent upon market conditions, the trading price and liquidity of our stock and the approval of our stockholders.

Dividend Policy

     Holders of our common stock are entitled to receive dividends or other distributions when and if declared by our board of directors. The right of our board of directors to declare dividends, however, is subject to any rights of the holders of other classes of our capital stock and the availability of sufficient funds under Delaware law to pay dividends. Our mortgage loan with Citigroup and the terms of our senior secured notes limit our ability to pay dividends. We do not anticipate paying cash dividends on our common stock in the foreseeable future.

Recent Sales of Unregistered Securities

     On December 31, 2004, as part of the financing for our purchase of TECOTA, we issued and sold 3,060,444 shares of our common stock valued at $2.0 million to Falcon Mezzanine Partners, L.P. and its co-investment partners, Stichting Pensioenfonds Voor De Gezond-Heid Geestelijke En Maatschappelijke Belangen and Stichting Pensioenfonds ABP, two funds affiliated with AlpInvest Partners. We refer to Falcon and its co-investors, collectively, as the Falcon investors. Also, in connection with these financings, we issued to Citigroup Global Markets Realty Corp., our senior lender, for no additional consideration, warrants to purchase an aggregate of five million shares of our common stock. These warrants expire on December 31, 2011 and are divided into four equal tranches that differ only in respect of the applicable exercise prices, which are $0.68, $0.74, $0.81 and $0.87, respectively. We also issued to the Falcon investors, for no additional consideration, warrants to purchase an aggregate of 15 million shares of our common stock. These warrants expire on December 30, 2011 and are divided into four equal tranches that differ only in respect of the applicable exercise prices, which are $0.69, $0.75, $0.82 and $0.88, respectively. We have granted to Citigroup and the Falcon investors registration rights in connection with the shares of common stock issued to the Falcon investors, the warrants issued to Citigroup and the Falcon investors and the shares of our common stock into which these warrants are exercisable, including the right to have these warrants and shares registered by June 29, 2005.

     On September 24, 2004, we entered into an agreement with Manuel D. Medina, our Chairman, President and Chief Executive Officer, regarding Mr. Medina’s repayment of an outstanding note in the principal amount of $5,000,000 owed by Mr. Medina to us which matured on September 30, 2004. Mr. Medina agreed to sell and transfer to us, on or prior to the note’s maturity date, 7,737,351 shares of our common stock at $0.65 per share and to apply such purchase price to the repayment of the outstanding principal and interest due on the note. The

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terms of the agreement were approved by our board of directors at a meeting held on September 28, 2004. On September 29, 2004, Mr. Medina completed the transfer of the shares to us.

     On June 14, 2004, we privately placed $86.25 million in aggregate principal amount of 9% senior convertible notes due June 15, 2009 at 100% of the face value of the notes. The initial purchaser was McMahan Securities Co. L.P. We used a portion of the net proceeds from this offering to pay all of our previously outstanding debt. The balance of the proceeds will be used for possible acquisitions and for general corporate purposes, including working capital and capital expenditures. The notes are convertible at the option of the holders into our common stock at $1.25 per share. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for the impact of this transaction on our financial condition. We agreed to file a registration statement to cover resales of the notes and the common stock issuable upon conversion of the notes by September 12, 2004 and to have that registration statement declared effective by December 11, 2004. We filed a registration statement covering the notes and the common stock with the Securities and Exchange Commission on December 10, 2004, which was declared effective by the commission on December 21, 2004. As a result, we were required to pay liquidated damages to the noteholders equal to one-half of one percent (50 basis points) per annum per $1,000 principal amount of the notes. These damages stopped accruing on December 10, 2004, but resumed when the registration statement was not declared effective by December 11, 2004 and extended to December 21, 2004. Ultimately, we incurred and paid approximately $118,000 of damages due to the late filing of this registration statement. In connection with the offering, we paid McMahan Securities Co. L.P. approximately $5.3 million in fees and commissions and delivered to it a warrant to purchase 1,815,789 shares of our common stock at $0.95 per share, which expires on June 14, 2007.

     In May 2004, we issued three senior secured promissory notes in favor of Veritas High Yield Arbitrage I Fund, LLC, Veritas High Yield Arbitrage II Fund, LLC, and Veritas High Yield Arbitrage Fund, (Bermuda) Ltd., whom we refer to as the Veritas lenders, for the aggregate amount of $5.2 million. The notes accrued interest at 12% per annum, were payable monthly based on original face amount, and were set to mature on October 29, 2004, with prepayment permitted without penalty after the first month. The notes were paid in full in June 2004. In connection with the issuance of these secured notes, we also issued warrants to purchase 200,000 shares of our common stock in favor of the Veritas lenders with a strike price of $0.01, which expire two years after the effective date of the registration statement for the underlying common stock. We agreed to file a registration statement covering the shares of common stock underlying the warrants and to use our best efforts to cause the registration statement to become effective by August 15, 2004. Since we had not filed this registration statement as of August 15, 2004, we were required by the terms of the warrants to place 200,000 registered shares of common stock in escrow. Prior to our being able to arrange this escrow, the Veritas lenders exercised their warrants. In order to comply with the warrant exercise, we asked Miguel Rosenfeld, one of our directors, to transfer 200,000 registered shares to the Veritas lenders in exchange for our agreement to issue to him 200,000 unregistered shares which we agreed to register in the future. We paid a finder’s fee of $130,000 to McMahan Securities Co. L.P. in connection with the issuance of notes and warrants to the Veritas lenders. There is certain common ownership between the Veritas lenders and McMahan Securities Co. L.P.

     On March 31, 2004, we issued 400 shares of series I convertible preferred stock for $7.8 million in cash and $2.2 million in promissory notes, together with warrants to purchase 2.8 million shares of our common stock. We have collected all amounts due under the promissory notes. The series I preferred stock is convertible into shares of our common stock at $0.75 per share. In January 2007, the series I preferred stock dividend rate will increase to 10% per year until January 2009 when it increases to 12%. Dividends are payable quarterly, at our discretion, in shares of our common stock or cash. We have the right to redeem the series I preferred stock at $25,000 per share plus accrued dividends at any time after December 31, 2004. As of December 31, 2004, holders of an aggregate of 10 shares of the series I preferred stock have converted their shares into 333,340 shares of our common stock.

     On April 30, 2003, we issued 10% subordinated secured convertible debentures due April 30, 2006 for an aggregate principal amount of $25.0 million. The debentures are convertible into shares of our common stock at $0.50 per share. Interest is payable quarterly beginning July 31, 2003. The debentures were issued in exchange for $10.3 million in cash, $9.5 million in a promissory note due in full August 15, 2003 and $5.2 million of notes

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converted to the subordinated debentures. Included in the $5.2 million is $2.0 million of cash received in March 2003 in anticipation of the debenture transaction. As of June 1, 2004, all holders of the 10% debentures converted their debentures into shares of our common stock. See discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

     During the quarter ended December 31, 2002, debt holders entered into irrevocable agreements to convert approximately $17.1 million of debt and accrued interest into our common stock at $0.75 per share. The debt holders included Miguel Rosenfeld and Joseph Wright, members of our board of directors, who each converted approximately $517,000 in debt. This transaction closed in January 2003 and resulted in a $4.9 million inducement charge. At closing, we issued 22.8 million shares of our common stock.

     In August 2002, we issued warrants to purchase 100,000 shares of our common stock in a private offering to accredited investors for an aggregate purchase price of $61,000 pursuant to Section 4(2) and/or 3(b) of the Securities Act and Regulation D promulgated thereunder. The warrants were subsequently converted into 100,000 shares of our common stock.

     In June 2002, the NAP de las Americas — Madrid purchased 5 million shares of our common stock at $1.00 per share. The shares were sold pursuant to Section 4(2) and/or 3(b) of the Securities Act and Regulation S promulgated thereunder. In the Share Purchase Agreement with the NAP de las Americas — Madrid, we agreed that if prior to June 13, 2003 we issued any shares of common stock for a purchase price of less than $1.00 per share, the anti-dilution price, we would issue to the NAP de las Americas — Madrid that number of additional shares of common stock determined by dividing 5,000,000 by the anti-dilution price, and subtracting from the quotient thereof the number of shares previously issued to the NAP de las Americas — Madrid in respect of the Share Purchase Agreement. In August 2002, we sold approximately 17.6 million shares at $0.58 per share, and, as a result NAP de las Americas — Madrid had the right to invoke the anti-dilution provision of the Share Purchase Agreement and request that we issue additional shares to NAP de las Americas — Madrid in accordance with the anti-dilution adjustments described above. NAP de las Americas — Madrid did not request those shares until July 2003 and, as a result, we issued an additional 3,652,016 shares of common stock to the NAP de las Americas — Madrid.

     In April 2002, we received a binding commitment from a group, including Miguel Rosenfeld and Guillermo Amore, members of our board of directors, and Manuel D. Medina, our Chairman, President and Chief Executive Officer, for the purchase of $7.5 million of common stock at $0.75 per share. The shares were sold pursuant to Section 4(2) and/or 3(b) of the Securities Act and Regulation D promulgated thereunder. In May 2002, we issued 10 million shares of our common stock for $3.6 million in cash and the conversion of $3.9 million in short term promissory notes to equity. Mr. Rosenfeld purchased 1,668,000 shares for $1,251,000, Mr. Amore purchased 1,501,502 shares for $1,126,127 and Mr. Medina purchased 1,134,667 shares for $851,000.

     In April 2002, we entered into a put and warrant purchase agreement with TD Global Finance, or TDGF. In July 2002, we exercised our right to sell to TDGF 17,648,842 common shares for $0.58 per share for a total of $10.2 million. During August 2002, we received $10.2 million in related cash. In conjunction with the sale, we issued three call warrants, each granting TDGF the right to purchase 1,176,588 shares of our common stock. The shares and the warrants were sold pursuant to Section 4(2) and/or 3(b) of the Securities Act and Regulation D promulgated thereunder. The warrants expired without exercise on January 20, 2003.

     These offers and sales of our securities were exempt from the registration requirements of the Securities Act, as the securities were sold to accredited investors pursuant to Regulation D and to non-United States persons in offshore transactions pursuant to Regulation S.

18

CAPITALIZATION

     The following table sets forth our capitalization as of September 30, 2004 on an actual basis, on a pro forma basis after giving effect to the acquisition of TECOTA and on a pro forma as adjusted basis to reflect our receipt of the estimated net proceeds from the sale by us of                     shares of common stock offered in this prospectus at an offering price of $           per share, after deducting underwriting discounts and commissions and estimated offering expenses.

     You should read the capitalization table in conjunction with the sections of this prospectus entitled “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto included elsewhere in this prospectus.

			September 30, 2004
									Pro Forma
			Actual			Pro Forma			As Adjusted
Cash and cash equivalents			$	21,831,286		$	23,742,601		$
Indebtedness:
	9% senior convertible notes due 2009(1)		$	73,775,488		$	73,775,488
	Citigroup mortgage loan			—			49,000,000
	Senior secured notes			—			30,000,000
	Other indebtedness(2)			21,268,345			24,132,259
		Total Indebtedness		95,043,833			176,907,747
Stockholders’ equity:
	Series G convertible preferred stock: $.001 par value, 20 shares issued and outstanding (liquidation value of approximately $2.9 million)			1			1			1
	Series I convertible preferred stock: $.001 par value, 390 shares issued and outstanding (liquidation value of approximately $10.2 million)			1			1			1
	Common stock: $.001 par value, 500,000,000 shares authorized; 359,761,034 shares issued; 351,109,018 shares outstanding(3)			359,761			359,761
Common stock warrants				4,933,016			13,715,949			13,715,949
Common stock options				1,545,375			1,545,375			1,545,375
Additional paid-in capital				236,023,806			238,023,806
Accumulated deficit				(234,577,155	)		(234,577,155	)		(234,577,155	)
Accumulated other comprehensive income				(112,876	)		(112,876	)		(112,876	)
Treasury stock: 8,652,016 shares				(7,220,637	)		(7,220,637	)		(7,220,637	)
Total stockholders’ equity				951,292			11,734,225
		Total capitalization	$	95,995,125		$	188,641,972		$

(1)	Includes estimated fair value of derivatives embedded within our convertible debt, which, as of September 30, 2004, equalled $21,804,000.
(2)	Other indebtedness at September 30, 2004 includes all short-term and long-term debt, deferred rent and deferred revenue, capital lease obligations and the $601,711 liquidation value of the 294 shares of our Series H Redeemable Convertible Preferred Stock, $.001 par value outstanding as of September 30, 2004.
(3)	On October 18, 2004, our stockholders approved an amendment to our amended and restated certificate of incorporation, which increased the number of authorized shares of our common stock to 600,000,000.

     Our capitalization information represented above excludes 69,000,000 shares that are issuable upon conversion of our outstanding 9% senior convertible notes.

19

DILUTION

     Our net tangible book value as of September 30, 2004 was a deficit of approximately $9.0 million, or $0.03 per share of common stock. Net tangible book value per share represents our total tangible assets less our total liabilities, divided by the aggregate number of shares of our common stock outstanding. Dilution in net tangible book value per share represents the difference between the amount per share paid by purchasers of our common stock in this offering and the net tangible book value per share of our common stock immediately after this offering. After (i) giving effect to the sale of the                      shares of our common stock in this offering at an assumed public offering price of $           per share, the last reported sale price of our common stock on                     , 2005 on the American Stock Exchange, and (ii) deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us, our net tangible book value at September 30, 2004 would have been approximately $ or $           per share. This represents an immediate increase in net tangible book value of $          per share of common stock to existing stockholders and an immediate dilution of $           per share to new investors. Dilution per share represents the difference between the amount per share paid by the new investors in this offering and the net tangible book value per share at September 30, 2004, giving effect to this offering. Purchasers of our common stock offered pursuant to this prospectus will suffer immediate and substantial dilution in net tangible book value per share. The following table illustrates this per share dilution to new investors.

Public offering price per share					$	—
	Net tangible book value per share as of September 30, 2004	$	(0.03	)
	Increase in net tangible book value per share attributable to new investors		—
Net tangible book value per share as of September 30, 2004 after giving effect to this offering						—
Dilution per share to new investors					$	—

These calculations assume no issuance of shares of our common stock through the exercise of stock options and warrants or conversion of our 9% senior convertible notes, various series of convertible preferred stock or other convertible securities outstanding as of September 30, 2004. As of September 30, 2004, there were options and warrants outstanding to purchase an aggregate of 26,394,692 shares of our common stock at a weighted average exercise price of $1.30 per share. To the extent all of these options and warrants had been exercised and all of the 9% senior convertible notes, convertible preferred stock and other convertible securities were converted as of September 30, 2004, our net tangible book value per share of common stock would have further decreased and the dilution per share of common stock to new investors in this offering would have further increased.

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SELECTED CONSOLIDATED FINANCIAL DATA

    The following provides selected consolidated financial statement data as of and for each of the fiscal years in the five-year period ended March 31, 2004 and for each of the six months ended September 30, 2003 and 2004. The financial statement data as of and for each of the fiscal years in the five-year period ended March 31, 2004 have been derived from our audited consolidated financial statements. The financial statement data for the six months ended September 30, 2003 and September 30, 2004 have been derived from our unaudited consolidated financial statements included in this prospectus. In the opinion of management, such unaudited interim financial statements have been prepared on the same basis as the audited financial statements and reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial information for such periods. The data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included in this prospectus.

																	Six Months Ended
		Twelve Months Ended March 31,															September 30,
		2000			2001			2002			2003			2004			2003			2004
		(dollars in thousands, except per share data)
Results of operations:
Data center		$	—		$	253		$	3,216		$	11,033	(1)	$	17,034	(1)	$	7,243		$	15,026
Real estate services			15,390			39,894			12,656			3,661			1,179			247			1,088
	Total revenue		15,390			40,147			15,872			14,694			18,213			7,490			16,114
Data center operations expenses			—			1,223			11,231			11,235			16,413			6,507			12,201
Construction contract expenses			555			20,347			7,398			2,968			918			109			948
Other expenses			20,868			39,950			54,615			41,718			23,373			8,752			727
	Total expenses		21,423			61,520			73,244			55,921			40,704			15,368			13,876
Net income (loss)			(6,033	)		(21,373	)		(57,372	)		(41,227	)		(22,491	)		(7,878	)		2,238
Loss from discontinued operations			—			(82,627	)		—			—			—			—			—
Non-cash preferred dividend			(160	)		(160	)		(160	)		(160	)		(1,158	)		(80	)		(487	)
Net income (loss) attributable to common shareholders		$	(6,193	)	$	(104,160	)	$	(57,532	)	$	(41,387	)	$	(23,649	)	$	(7,958	)	$	1,751
Income (loss) from continuing operations per common share		$	(0.09	)	$	(0.11	)	$	(0.29	)	$	(0.18	)	$	(0.08	)	$	(0.03	)	$	0.01
Loss from discontinued operations per common share			—			(0.44	)		—			—			—			—			—
Net income (loss) per common share		$	(0.09	)	$	(0.55	)	$	(0.29	)	$	(0.18	)	$	(0.08	)	$	(0.03	)	$	0.01
Financial condition(2):
Property and equipment, net			1,011		$	25,066		$	61,089		$	54,483		$	53,898		$	53,059		$	56,884
Real estate inventory			11,797			—			—			—			—			—			—
Total assets			77,998			78,069			81,024			69,602			77,433			71,401			106,958
Long-term obligations(3)(4)			28,632			16,462			38,210			74,524			78,525			69,019			87,421
Stockholders’ equity (deficit)(5)			476			11,163			(49,276	)		(46,461	)		(22,720	)		(19,020	)		951

(1)	Amount includes contract termination fees for the years ended March 31, 2003 and 2004 of $1,095 and $422, respectively.
(2)	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and pages F-1 to F-6 for pro forma financial information regarding subsequent events.
(3)	Long-term obligations include convertible debt less current portion, estimated fair value of derivatives embedded within convertible debt, deferred rent, deferred revenue, notes payable less current portion, redeemable preferred stock, and capital lease obligations less current portion.
(4)	Long-term obligations as of September 30, 2003 and 2004 and as of March 31, 2002, 2003 and 2004 include $500 in redeemable convertible preferred stock plus accrued dividends.
(5)	Stockholders’ equity as of March 31, 2000 includes approximately $4,777 in convertible preferred stock.

21

    The quarterly selected financial statement data set forth below have been derived from our unaudited condensed consolidated financial statements. The data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and the related notes included in this prospectus.

     The “as restated” amounts set forth below for the three months ended June 30, 2004 reflect our November 2004 restatement of our June 30, 2004 financial statements which restate certain amounts associated with the valuation of our 9% senior convertible notes and the related derivative embedded within these notes.

Year ending March 31, 2005:

		Three Months Ended
		June 30,
		2004			September 30,
		(As restated)			2004
		(dollars in thousands, except per share data)
Data center		$	7,111		$	7,915
Real estate services			785			303
	Total revenue		7,896			8,218
Data center operations expense			5,737			6,464
Construction contract expense			705			243
Other (income) expenses			2,031			(1,303	)
	Total expenses		8,473			5,404
Net income (loss)			(577	)		2,814
Non-cash preferred dividend			(242	)		(245	)
Net income (loss) attributable to common shareholders		$	(819	)	$	2,569
Net income (loss) per common share		$	0.00		$	0.01

Year ended March 31, 2004:

		Three Months Ended
		June 30,			September 30,			December 31,			March 31,
		2003			2003			2003			2004
		(dollars in thousands, except per share data)
Data center(1)		$	3,302		$	3,941		$	4,592		$	5,199
Real estate services			139			108			273			659
	Total revenue		3,441			4,049			4,865			5,858
Data center operations expenses			2,556			3,950			4,664			5,243
Construction contract expenses			46			62			229			581
Other expenses (income)			(2,091	)		10,844			9,124			5,496
	Total expenses		511			14,856			14,017			11,320
Net (loss) income			2,930			(10,807	)		(9,152	)		(5,462	)
Non-cash preferred dividend			(40	)		(40	)		(40	)		(1,038	)
Net (loss) income attributable to common shareholders		$	2,890		$	(10,847	)	$	(9,192	)	$	(6,500	)
Net (loss) income per common share		$	0.01		$	(0.04	)	$	(0.03	)	$	(0.02	)

22

Year ended March 31, 2003:

		Three Months Ended
		June 30,			September 30,			December 31,			March 31,
		2002			2002			2002			2003
		(dollars in thousands, except per share data)
Data center(1)		$	3,150		$	2,424		$	2,557		$	2,902
Real estate services			2,033			1,268			276			84
	Total revenue		5,183			3,692			2,833			2,986
Data center operations expenses			3,095			2,769			2,768			2,603
Construction contract expenses			1,834			938			134			62
Other (income) expenses			8,226			9,403			14,110			9,979
	Total expenses		13,155			13,110			17,012			12,644
Net loss			(7,972	)		(9,418	)		(14,179	)		(9,658	)
Non-cash preferred dividend			(40	)		(40	)		(40	)		(40	)
Net loss attributable to common shareholders		$	(8,012	)	$	(9,458	)	$	(14,219	)	$	(9,698	)
Net loss per common share		$	(0.04	)	$	(0.04	)	$	(0.06	)	$	(0.04	)

(1)  Amount includes a one time contract termination fee of $1,095, $292 and $130 for the three months ended June 30, 2002, June 30, 2003, and December 31, 2003, respectively.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This prospectus contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 based on our current expectations, assumptions, and estimates about us and our industry. These forward-looking statements involve risks and uncertainties. Words such as “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “will,” “may,” and other similar expressions identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. All statements other than statements of historical facts, including, among others, statements regarding our future financial position, business strategy, projected levels of growth, projected costs and projected financing needs, are forward-looking statements. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of several factors more fully described in “Risk Factors” and elsewhere in this prospectus. The forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely upon forward-looking statements as predictions of future events. Except as required by applicable law, including the securities laws of the United States, and the rules and regulations of the Securities and Exchange Commission, we do not plan to publicly update or revise any forward-looking statements contained herein after we distribute this prospectus, whether as a result of any new information, future events or otherwise.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion of results of operations and financial condition is based upon and should be read in conjunction with our consolidated financial statements and related notes included in this prospectus.

Recent Events

     From February 23, 2001 until December 31, 2004, we owned a 0.84% interest in Technology Center of the Americas, LLC, which we refer to as TECOTA, the entity that owns the building in which the NAP of the Americas is housed, which we refer to as the TECOTA building. In July 2004, we entered into an agreement under which we assumed the obligation to purchase the other outstanding equity interests in TECOTA. On December 31, 2004, we purchased the remaining 99.16% equity interests of TECOTA such that TECOTA became our wholly-owned subsidiary. In connection with this purchase, we paid approximately $40.0 million for the equity interests and repaid an approximately $35.0 million mortgage to which the TECOTA building was subject. We financed the purchase and payment of the mortgage from two sources. We obtained a $49.0 million first mortgage loan from Citigroup Global Markets Realty Corp., of which $4.0 million is restricted and can only be used to fund customer related improvements made to the NAP of the Americas in Miami. Simultaneously, we issued senior secured notes in an aggregate principal amount equal to $30.0 million and sold 3,060,444 shares of our common stock valued at $2.0 million to Falcon Mezzanine Partners, LP and its co-investment partners, Stichting Pensioenfonds Voor De Gezond-Heid Geestelijke En Maatschappelijke Belangen and Stichting Pensioenfonds ABP, two funds affiliated with AlpInvest Partners. We refer to Falcon and its co-investors, collectively, as the Falcon investors. The $49.0 million loan by Citigroup is secured by a first mortgage on the TECOTA building and a security interest in all then existing building improvements that we have made to the building, certain of our deposit accounts and any cash flows generated from customers by virtue of their activity at the TECOTA building. The mortgage loan bears interest at a rate per annum equal to the greater of (a) 6.75% and (b) LIBOR plus 4.75% and matures in February 2009. The senior secured notes are secured by substantially all of our assets other than the TECOTA building, including the equity interests of our subsidiaries, bear cash interest at 9.875% per annum and “payment in kind” interest at 3.625% per annum subject to adjustment upon satisfaction of specified financial tests, and mature in March 2009. In connection with these financings, we issued to these lenders warrants to purchase an aggregate of 20 million shares of our common stock at an average exercise price equal to $0.78 per share. See pages F-1 to F-6 for pro forma financial information related to this transaction.

     In June 2002, we entered into an exclusive agreement with the Comunidad Autonoma de Madrid, which we refer to as the Comunidad, to develop and operate carrier-neutral Internet exchange points, or IXs, in Spain. As part of that agreement, the parties formed NAP de las Americas — Madrid S.A., which we refer to as NAP Madrid, to own and operate carrier-neutral IXs in Spain, modeled after the NAP of the Americas. The shareholders were the Comunidad through its Instituto Madrileno de Desarrollo, the Camara Oficial de Comercio e Industria de Madrid, Red Electrica Telecomunicaciones, S.A., Telvent Sistemas y Redes S.A., a subsidiary of Abengoa S.A., and Centro de Transportes de Coslada, S.A. At March 31, 2003, we owned 10% of NAP Madrid’s equity.

     In May 2004, we purchased the 20% interest in NAP Madrid owned by Telvent Sistemas y Redes S.A. for approximately $550,000. In June 2004, we purchased the 20% interest in this entity owned by Red Electrica Telecomunicaciones, S.A. for approximately $634,000. In July 2004, we purchased the 30% interest in NAP Madrid owned by CTC and IMADE for approximately $1.4 million. As a result of these transactions, we own an 80% equity interest in NAP Madrid. Our accounts as of September 30, 2004, included the assets and liabilities of NAP Madrid, as well as the 20% minority interest. The assets of NAP Madrid include 8.7 million shares of Terremark common stock, which are accounted for as treasury stock at cost, and de minimus operating assets. The liabilities of NAP Madrid consist primarily of a bank loan with a balance of 3.3 million Euros ($3.9 million) at September 30, 2004. The results of NAP Madrid from July 1, 2004 have been included in our statement of operations.

25

     Because NAP Madrid had not commenced significant operations and had no customers or employees when the above transactions were consummated, we concluded that the assets acquired do not constitute a business. We allocated the purchase price based upon the fair value of assets acquired and liabilities assumed. The following is a final allocation of the purchase price:

Assets
	Equipment	$	204,040
	Terremark stock		7,220,637
Liabilities
	Notes payable, current		(3,708,705	)
	Accounts payable and accrued expenses		(677,444	)
Minority interest			(167,466	)
Net assets		$	2,871,062
Previous equity ownership			(333,435	)
Investment amount		$	2,537,627

Critical Accounting Policies and Estimates

     Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

     Management believes the following significant accounting policies, among others, affect its judgments and estimates used in the preparation of its consolidated financial statements:

•  revenue recognition and allowance for bad debt;

•  accounting for income taxes;

•  impairment of long-lived assets; and

•  goodwill.

     Revenue Recognition and Allowance for Bad Debts

     Currently, we derive our revenues from monthly recurring fees for colocation and exchange point services and managed services. We also receive non-recurring installation fees for colocation and exchange point services and for construction activities. Revenues from colocation, exchange point services and managed services are billed monthly and recognized ratably over the term of the contract. Installation fees are generally billed in the period in which the installation is performed but deferred and recognized ratably over the term of the related contract. Managed services fees are billed and recognized in the period in which the services are provided. From time to time, we provide installation and other outsourcing services under government contracts that include procurement and leasing of equipment. Due to the typical short-term nature of these types of services, we record revenues and related expenses under the completed contract method, whereby related amounts are deferred in the balance sheet until services are delivered and accepted by the government. Contract costs deferred are costs incurred for assets, such as costs for the purchase of materials and production equipment, under fixed-price contracts. For these types of services, labor and other general and administrative costs are not significant and are included as period charges.

26

     Revenue is recognized as service is provided when there is persuasive evidence of an arrangement, the fee is fixed or determinable and collection of the receivable is reasonably assured. We assess collection based on a number of factors, including transaction history with the customer and the credit-worthiness of the customer. We do not request collateral from customers. If we determine that collection is not reasonably assured, we defer the fee and recognize revenue at the time collection becomes reasonably assured, which is generally upon receipt of cash. We account for data center revenues in accordance with Emerging Issues Task Force Issue No. 00-21 “Revenue Arrangements with Multiple Deliverables” which provides guidance on separating multiple element revenue arrangements into separate units of accounting. As of March 31, 2004 and 2003, our accounts receivable amounted to $3,214,101 and $494,736, respectively, and were net of allowance for doubtful accounts of approximately $200,000 and $120,340, respectively.

     Revenues from construction contracts are recognized on the percentage-of-completion method, measured by the percentage of costs incurred to date to total estimated costs for each contract. This method is used because management considers costs incurred to be the best measure of progress on these contracts. The duration of a construction contract generally exceeds one year. Billings in excess of costs and estimated earnings on uncompleted contracts are classified as other liabilities and represent billings in excess of revenues recognized. Construction contract expense costs include all direct material and labor costs and indirect costs related to contract performance such as indirect labor, supplies, tools, repairs, bad debt and depreciation. Provisions for estimated losses on uncompleted contracts are made in the period in which losses are determined. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income and are recognized in the period in which the revisions can be reasonably estimated. Accordingly, it is possible that our current estimates relating to completion cost and profitability of our uncompleted contracts will vary from actual results. Excluding depreciation, profit margins (construction contract revenue less construction contract expenses) on construction contracts for the years ended March 31, 2004, 2003 and 2002 were $22,432, $315,658 and $857,163, respectively.

     We analyze current economic news and trends, historical bad debts, customer concentrations, customer credit-worthiness and changes in customer payment terms when evaluating revenue recognition and the adequacy of our allowance for bad debts.

     Derivatives

     We do not hold or issue derivative instruments for trading purposes. However, our 9% senior convertible notes due June 15, 2009 contain embedded derivatives that require separate valuation from the notes. We recognize these derivatives as liabilities on our balance sheet and measure them at their estimated fair value, and recognize changes in their estimated fair value in earnings in the period of change. We estimated that the embedded derivatives had an initial estimated fair value of approximately $35,480,000 and as of September 30, 2004 estimated fair value of approximately $21,804,000. The embedded derivatives derive their value primarily based on changes in the price and volatility of our common stock. The closing price of our common stock decreased to $0.64 as of September 30, 2004 from $0.93 per share as of the initial valuation date. As a result, during the six months ended September 30, 2004, we recognized a $13.7 million change in estimated fair value of the embedded derivatives.

     With the assistance of a third party, Gifford Fong Associates, we estimate the fair value of our embedded derivatives using available market information and appropriate valuation methodologies. These embedded derivatives derive their value primarily based on changes in the price and volatility of our common stock. Over the life of the notes, given the historical volatility of our common stock, changes in the estimated fair value of the embedded derivatives are expected to have a material effect on our results of operations. Furthermore, we have estimated the fair value of these embedded derivatives using a theoretical model based on the historical volatility of our common stock of 80% over the past year. If an active trading market develops for the notes or we are able to find comparable market data, we may in the future be able to use actual market data to adjust the estimated fair value of these embedded derivatives. Such adjustment could be significant and would be accounted for prospectively.

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     Accounting for Income Taxes

     Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce tax assets to the amounts expected to be realized.

     Our accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of our deferred tax assets. To support our conclusion that a 100% valuation allowance was required, we primarily considered such factors as our history of operating losses, the nature of our deferred tax assets and the absence of taxable income in prior carryback years. Although our operating plans assume taxable and operating income in future periods, our evaluation of all the available evidence in assessing the realizability of the deferred tax assets indicates that such plans are not considered sufficient to overcome the available negative evidence.

     Our federal and state net operating loss carryforwards, amounting to approximately $137 million, begin to expire in 2011. Utilization of the net operating losses generated prior to the AmTec merger may be limited by the Internal Revenue Code. Should we determine that we would be able to realize our deferred tax assets in the foreseeable future, an adjustment to the deferred tax assets would increase income in the period such determination is made.

     Impairment of Long-Lived Assets

     We account for impairment of long-lived assets in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which we adopted in fiscal 2003. This standard requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Such events and circumstances include, but are not limited to, prolonged industry downturns, significant decline in our market value and significant reductions in our projected cash flows. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to estimated undiscounted future net cash flows expected to be generated by the asset. Significant judgments and assumptions are required in the forecast of future operating results used in the preparation of the estimated future cash flows, including long-term forecasts of the number of additional customer contracts, profit margins, terminal growth rates and discounted rates. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Prior to adoption of SFAS No. 144, we accounted for long-lived assets in accordance with SFAS No. 121, “Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of.”

     As of March 31, 2004 and 2003, our long-lived assets, including property and equipment, net and identifiable intangible assets and goodwill, totaled $63,897,586 and $64,482,834, respectively. For the years ended March 31, 2004, 2003 and 2002, we recognized impairment charges amounting to $0, $4,020,300, and $18,973,670, respectively.

Goodwill

     We account for goodwill in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). SFAS 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets. Under SFAS 142, goodwill and intangible assets that have indefinite lives are not amortized but rather are tested at least annually for impairment or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable. The goodwill impairment test involves a two-step approach. Initially the fair value of the reporting units are compared with their carrying amount, including goodwill, to identify potential impairment. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized for the excess, if any, of the carrying value

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of goodwill over the implied fair value of goodwill. Intangible assets that have finite useful lives continue to be amortized over their useful lives.

     Prior to the adoption of SFAS 142, intangible assets were generally amortized on the straight-line method over five years. In accordance with SFAS 142, we ceased amortization of our intangible assets with indefinite lives and completed an initial impairment test of intangible assets as of April 1, 2002. Management determined in the initial impairment test that these assets were not impaired based on their fair values. Fair value was estimated using the expected present value of future cash flows and the assumed market capitalization at the reporting unit level.

     During the three months ended March 31, 2004, we performed our annual test for impairment and concluded that there were no impairments.

Results of Operations

Overview

     For the six months ended September 30, 2004, approximately 93% of our total revenues were generated from data center operations. The remainder was substantially related to construction work. For the year ended March 31, 2004, approximately 94% of our total revenues were generated from data center operations. The remainder was substantially related to construction work. For the year ended March 31, 2003, approximately 75% of our total revenues were generated from data center operations. The remainder was substantially related to construction work. For the year ended March 31, 2002, approximately 20% of our total revenues were generated from data center operations, approximately 52% were from real estate projects and construction work, and approximately 28% were from property and construction management. During the past three years, our results of operations have been significantly impacted by:

•  our shift in focus to the housing and management of Internet infrastructure after the NAP of the Americas became operational in July 2001;

•  the sale of our telecom facilities management operations in February 2001; and

•  our exit from non-core real estate activities by March 31, 2002. Non-core real estate activities included real estate development, property management, financing and other ancillary businesses that complemented the development operations. Our real estate activities currently include construction work and management of the property where the NAP of the Americas is located.

Results of Operations for the Six Months Ended September 30, 2004 as Compared to the Six Months Ended September 30, 2003

     Revenue. The following charts provide certain information with respect to our revenues:

	For the Six
	Months Ended
	September 30,
	2004		2003
Revenue
U.S.		99%		99%
Outside U.S.		1%		1%
		100%		100%
Data Center		93%		97%
Construction Work		6%		1%
Property and Construction Management		1%		2%
		100%		100%

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     Data center revenues consist of:

	For the Six Months Ended September 30,
	2004			2003
Colocation	$	9,728,114	65%	$	4,371,741	60%
Exchange point services		2,125,842	14%		1,253,890	17%
Managed and professional services		3,171,041	21%		1,325,657	18%
Contract termination fee		918	0%		291,537	5%
	$	15,025,915	100%	$	7,242,825	100%

     The increase in data center revenue was primarily the result of growth in our deployed customer base from 119 customers as of September 30, 2003 to 167 customers as of September 30, 2004. Data center revenues consist of:

•  colocation services, such as leasing of space and provisioning of power;

•  exchange point services, such as peering and cross connects; and

•  managed and professional services, such as network management, network monitoring, procurement and installation of equipment and procurement of connectivity, managed router services, technical support and consulting.

     Our utilization of total net colocation space increased to 14.6% as of September 30, 2004 from 7.8% as of September 30, 2003. Our utilization of total net colocation space represents the percentage of space billed versus total space available for customers. Although the lease for the third floor space in the TECOTA building commenced in November 2003, for comparative purposes, total space available for customers includes the third floor for both September 30, 2004 and 2003. Cross-connects billed to customers increased to 2,039 as of September 30, 2004 from 839 as of September 30, 2003. Data center — contract termination fee represents amounts received from customers for the termination of their contracted services. Contract termination fees are recognized upon contract termination when there are no remaining contingencies or obligations on our part.

     We anticipate an increase in revenue from colocation, exchange point and managed services as we add more customers to our network of IXs, sell additional services to existing customers and introduce new products and services. We have commenced a technology infrastructure installation under government contracts aggregating $14.8 million accounted for under the completed contract method. We anticipate completing this installation on schedule by January 2005.

     Property and Construction Management Revenues. Development, commission and construction fees were $0 and $41,000 for the six months ended September 30, 2004 and 2003, respectively. We do not expect any revenues from development, commission and construction fees in the foreseeable future.

     Management Fees: Management fees decreased $16,000 to $91,000 for the six months ended September 30, 2004 from $107,000 for the six months ended September 30, 2003. The only facility we currently manage is the TECOTA building, the property in which the NAP of the Americas is located. We collect a monthly management fee from TECOTA equal to the greater of approximately $8,000 or 3% of cash collected by TECOTA. Although in the future, we may manage properties where our centers are located, we anticipate that management fees will not be a significant source of revenue in the foreseeable future.

     Construction Contract Revenue. Construction contract revenue increased $898,000 to $997,000 for the six months ended September 30, 2004 from $99,000 for the six months ended September 30, 2003. As of September 30, 2004, we have one construction contract in process. Due to our opportunistic approach to our construction business, we expect revenues from construction contracts to significantly fluctuate from quarter to quarter. We anticipate focusing our efforts on obtaining construction contracts for projects related to technology infrastructure.

     Data Center Operations Expenses. Data center operations expenses increased $5.7 million to $12.2 million for the six months ended September 30, 2004 from $6.5 million for the six months ended September 30, 2003.

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Data center operations expenses consist mainly of rent, operations personnel, property taxes, electricity, chilled water, procurement of equipment and connectivity and security services. The increase in total data center operations expenses is mainly due to an increase of approximately $2.7 million in rent, an increase of approximately $1.7 million in personnel costs and an increase of approximately $640,000 in costs related to the procurement of connectivity under a U.S. Federal government contract. The increase in rent expense is mainly due to the July 2003 opening of our NAP-West facilities in Santa Clara, California, the leasing of an additional 120,000 square feet of space in the third floor of the TECOTA building, which commenced in November 2003, and the extension of the lease for the second floor of the TECOTA building. We have been paying rent for our NAP-West facilities since January 2001. Before we opened these facilities in July 2003, related expenses were recorded as impairment charges. Our base rent expenses increased approximately $1.8 million, $242,000 and $450,000 for the third and second floor of the TECOTA building and our NAP-West facilities, respectively, during the six months ended September 30, 2004. Rent expense is being recorded on the straight-line method based on contractual amounts even though actual payments for the third floor of the TECOTA building will not commence until April 2005. The increase in personnel costs is mainly due to staff increases and the grant of an annual incentive bonus. Our staff levels increased to 100 employees as of September 30, 2004 from 64 as of September 30, 2003, which resulted in a $1.2 million increase in base payroll and relocation expenses of $156,000. The increase in employees is mainly attributable to the hiring of personnel with the required security clearances to work under existing and anticipated government contracts. We also paid incentive bonuses to eligible employees totaling approximately $238,000. We anticipate that some data center expenses, principally electricity, chilled water, and costs related to managed services, will increase as we provide additional services to existing customers and introduce new products and services. Payroll will also increase as we continue to increase our team of employees with government security clearances.

     In connection with the infrastructure installation under government contracts aggregating $14.8 million accounted for under the completed contract method, we anticipate an increase in data center operations expenses between approximately $11.1 million and $11.8 million by January 2005.

     Construction Contract Expenses. Construction contract expenses increased $840,000 to $949,000 for the six months ended September 30, 2004 from $109,000 for the six months ended September 30, 2003. This increase is consistent with the increase in construction contracts revenues discussed above. We do not currently anticipate losses on our construction contract.

     General and Administrative Expense. Excluding non-cash stock-based compensation charges of $1.8 million in the quarter ended September 30, 2003, general and administrative expenses increased $1.4 million, or 24.6%, to $7.0 million for the six months ended September 30, 2004 from $5.7 million for the six months ended September 30, 2003. General and administrative expenses consist primarily of payroll and related expenses, professional service fees, travel, and other general. This increase was due to an increase of $563,000 in professional services, an increase of $303,000 in travel expenses, and an increase of $325,000 in payroll and related benefits. Professional services include increases of approximately $290,000 in consulting and accounting fees and $182,000 in recruiting fees. The increase in consultant and accounting fees is mainly due to additional SEC reporting and Sarbanes-Oxley compliance work. The increase in recruiting fees resulted from hiring additional employees for data center services. Travel expenses increased by $303,000 due to increased travel to our facilities in Madrid and Sao Paulo. The increase in payroll and related benefits was primarily due to incentive bonuses totaling $233,000 paid to eligible employees, whose salaries are included in general and administrative expenses. We also increased our headcount from 46 at September 30, 2003 to 47 at September 30, 2004.

     We recognized a non-cash, stock-based compensation charge of $1.8 million in the six months ended September 30, 2003 in connection with the change in our employment relationship with Brian K. Goodkind, our former Executive Vice President and Chief Operating Officer and strategic advisor to our Chief Executive Officer until June 2004.

     We anticipate an increase in general and administrative expenses as a result of our Sarbanes-Oxley compliance efforts.

     Sales and Marketing Expenses. Sales and marketing expenses increased $500,000 to $2.0 million for the six months ended September 30, 2004 from $1.5 million for the six months ended September 30, 2003. The most

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significant components of sales and marketing expenses are payroll and related benefits. The increase was due to a $289,000 increase in payroll mainly due to the addition of five employees and the grant of incentive bonuses totaling $47,283 to eligible employees whose salaries are included in sales and marketing expenses. Commission and travel expenses also increased by $45,000 and $57,000, respectively, consistent with our increase in revenues.

     Depreciation and Amortization Expense. Depreciation and amortization expense increased $221,000 to $2.6 million for the six months ended September 30, 2004 from $2.4 million for the six months ended September 30, 2003. The increase was due to additions to property and equipment.

     Change in Fair Value of Derivatives Embedded within Convertible Debt. Our 9% senior convertible notes due June 15, 2009 contain embedded derivatives that require separate valuation from the notes. We recognize these embedded derivatives as a liability in our balance sheet, measure them at their estimated fair value and recognize changes in the estimated fair value of the derivative instruments in earnings. We estimated that the embedded derivatives had an initial estimated fair value of approximately $35,480,000 and a September 30, 2004 estimated fair value of approximately $21,804,000. The embedded derivatives derive their value primarily based on changes in the price and volatility of our common stock. The closing price of our common stock decreased to $0.64 as of September 30, 2004 from $0.93 per share as of the initial valuation date. As a result, during the six months ended September 30, 2004, we recognized a $13.7 million change in estimated fair value of the embedded derivatives. Over the life of the notes, given the historical volatility of our common stock, changes in the estimated fair value of the embedded derivatives are expected to have a material effect on our results of operations. The estimated fair value of the embedded derivatives increases as the price of our common stock increases. Please see “Quantitative and Qualitative Disclosures about Market Risk” for more information. Furthermore, we have estimated the fair value of these embedded derivatives using a theoretical model based on the historical volatility of our common stock of 80% over the past year. If an active market develops for our notes or we are able to find comparable market data, we may be able to use in the future market data to adjust our historical volatility by other factors such as trading volume and our estimated fair value of these embedded derivatives could be significantly different. Any such adjustment would be made prospectively. During the six months ended September 30, 2003, we did not have any embedded derivatives.

     Gain on Debt Restructuring and Conversion. During the six months ended September 30, 2004, as a result of the extinguishment of notes payable and convertible debentures, we recognized a gain totaling $3.4 million, representing the recognition of the unamortized balance of a debt restructuring deferred gain and the write off of debt issuance costs, net of an early redemption premium payment. During the six months ended September 30, 2003, we recognized a non-cash gain of $8.5 million related to financing transactions whereby $21.6 million of our construction payables plus $1.0 million in accrued interest was converted to 30.1 million shares of our common stock with a $14.1 million market value upon conversion.

     Interest Expense. Excluding non-cash charges of $1.4 million, interest expense decreased $1.2 million from $6.2 million for the six months ended September 30, 2003 to $5.0 million for the six months ended September 30, 2004. This increase was due to the payoff of old debt at interest rates ranging from 10% to 15% and the addition of new debt at an interest rate of 9%. Non-cash charges to interest expense mainly result from accretion of the difference between the face value of our 9% notes and their carrying value and from the amortization of debt issuance costs.

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     Net Income(loss). Net income (loss) for our reportable segments was as follows:

	For the Six Months Ended
	September 30,
	2004			2003
Data Center Operations(1)		2,298,518			(7,617,564	)
Real Estate Services		(60,956	)		(260,025	)
		2,237,562			(7,877,589	)

(1)  Amount includes a gain on debt restructuring and extinguishment of $3.4 million and $8.5 million for the six months ended September 30, 2004 and 2003, respectively.

     Excluding the gain on debt restructuring and extinguishment and the change in the estimated fair value of the embedded derivatives, net loss from data center operations totaled approximately $16.8 million and $600,000 for the six months ended September 30, 2004 and 2003, respectively. The net loss from data center operations is primarily the result of insufficient revenues to cover our operating and interest expenses. We expect to generate net losses until we reach required levels of monthly revenues.

     Although we had a net operating loss for the current period in our real estate activities, we anticipate these activities will generate sufficient revenues to cover their operating expenses.

Results of Operations for the Year Ended March 31, 2004 as Compared to the Year Ended March 31, 2003

     Revenue.The following charts provide certain information with respect to our revenues:

		For the Twelve
		Months Ended
		March 31,
		2004			2003
Revenue
	U.S.		99	%		98	%
	Outside U.S.		1	%		2	%
			100	%		100	%
	Data Center		94	%		75	%
	Construction Work		5	%		22	%
	Property and Construction Management		1	%		3	%
			100	%		100	%

     Data center revenues consist of:

		For the Twelve Months Ended March 31,
		2004				2003
Colocation		$	9,861,638	58	%	$	6,020,779	55	%
Exchange point services			3,571,709	21	%		2,125,370	19	%
Managed and professional services			3,179,264	19	%		1,791,750	16	%
Contract termination fee			421,766	2	%		1,095,086	10	%
	Data center revenue	$	17,034,377	100	%	$	11,032,985	100	%

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     The increase in data center revenues was primarily the result of growth in our deployed customer base from 86 customers as of March 31, 2003 to 152 customers as of March 31, 2004. Data center revenues consist of:

•  colocation services, such as leasing of space and provisioning of power;

•  exchange point services, such as peering and cross connects; and

•  managed and professional services, such as network management, network monitoring, procurement and installation of equipment and procurement of connectivity, managed router services, technical support and consulting.

     Our utilization of total net colocation space increased to 13.2% as of March 31, 2004 from 6.3% as of March 31, 2003. Our utilization of total net colocation space represents the percentage of space billed versus total space available for customers. For comparative purposes total space available for customers includes third floor space in the TECOTA building for both March 31, 2004 and 2003. Cross connects billed to customers increased to 1,417 as of March 31, 2004 from 662 as of March 31, 2003. Data center — contract termination fee represents amounts received from two customers for the termination of their contracted services with the NAP of the Americas. As a result of these contract terminations, we experienced a decrease in monthly recurring revenues of approximately $14,000. Contract termination fees are recognized upon contract termination when there are no remaining contingencies or obligations on our part.

     We anticipate an increase in revenue from colocation, exchange point and managed services as we add more customers to our network of IXs, sell additional services to existing customers and introduce new products and services. We also expect managed and professional services to become an important source of revenue and increase as a proportion of data center-services.

     Development, commission and construction fees decreased $156,000 to $41,000 for the twelve months ended March 31, 2004 from $197,000 for the twelve months ended March 31, 2003. We do not expect any revenues from development, commission and construction fees in the foreseeable future.

     Management fees increased $18,000 to $198,000 for the twelve months ended March 31, 2004 from $180,000 for the twelve months ended March 31, 2003. The only facility we currently manage is the TECOTA building, the property in which the NAP of the Americas is located. We collect a monthly management fee from TECOTA equal to the greater of approximately $8,000 or 3% of cash collected by TECOTA. Although in the future, we may manage properties where our centers are located including the TECOTA building, we anticipate that management fees will not be a significant source of revenue in the foreseeable future.

     Construction contract revenue decreased $2.4 million to $940,000 for the twelve months ended March 31, 2004 from $3.3 million for the twelve months ended March 31, 2003. During the twelve months ended March 31, 2004 and 2003, we completed three and eleven construction contracts, respectively. As of March 31, 2004, we have one construction contract in process. Due to our opportunistic approach to our construction business, we expect revenues from construction contracts to significantly fluctuate from quarter to quarter. We anticipate focusing our efforts on obtaining construction contracts for projects related to technology infrastructure.

     Data Center Operations Expenses.Data center operations expenses increased $5.2 million, or 46.4%, to $16.4 million for the twelve months ended March 31, 2004 from $11.2 million for the twelve months ended March 31, 2003. Data center operations expenses consist mainly of rent, operations personnel, property taxes, electricity, chilled water, procurement of equipment and connectivity and security services. The increase in total data center operations expenses is due to an increase of $3.1 million in rent, an increase of $376,000 in electricity and chilled water, an increase of $526,000 in personnel costs and an increase of $717,000 in costs related to the procurement of equipment and connectivity under a U.S. Federal government contract. The increase in rent expense is due to the July 2003 opening of our NAP-West facilities in Santa Clara, California and the leasing of an additional 120,000 square feet of space in the third floor of the TECOTA building, which commenced in November 2003. We have been paying rent for our NAP-West facilities since January 2001 but before we opened these facilities in July 2003, related expenses were recorded as impairment charges. Rent expense is being recorded on the straight-line method based on contractual amounts even though actual payments for the third

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floor of the TECOTA building will not commence until April 2005. The increase in personnel costs is mainly attributable to staff increase from 60 operations employees in fiscal year 2003 to 75 for fiscal year 2004. We anticipate that some data center expenses, principally electricity, chilled water, payroll and costs related to managed services, will increase as we provide additional services to existing customers and introduce new products and services.

     Contract Construction Expenses.Contract construction expenses decreased approximately $2.0 million to $918,000 for the twelve months ended March 31, 2004 from $3.0 million for the twelve months ended March 31, 2003. This decrease is a result of the decrease in number of construction contracts and average dollar amount of those contracts as discussed above in “construction contract revenue.” We do not currently anticipate losses on any of the individual construction contracts.

     General and Administrative Expense.Excluding non-cash charges of $2.2 million for stock-based compensation, general and administrative expenses decreased $1.4 million, or 10.4%, to $11.1 million for the twelve months ended March 31, 2004 from $12.5 million for the twelve months ended March 31, 2003. General and administrative expenses consist primarily of salaries and related expenses, professional service fees, rent and other general corporate expenses. The decrease in general and administrative expenses is due to a decrease in payroll of $709,000. In connection with the modification to our employment relationship with three employees, we accelerated the vesting on their outstanding stock options, awarded new stock options and/or extended the life of their outstanding stock options. As a result, we recognized a non-cash, stock-based compensation charge of approximately $2.2 million in the year ended March 31, 2004. The decrease in payroll is mainly due to a reduction in staff levels. The average number of employees whose salaries are included in general and administrative expenses decreased from 60 for the twelve months ended March 31, 2003 to 50 for the twelve months ended March 31, 2004.

     Sales and Marketing Expenses.Sales and marketing expenses decreased $800,000, or 19.0%, to $3.4 million for the twelve months ended March 31, 2004 from $4.2 million for the twelve months ended March 31, 2003. The significant components of sales and marketing expenses are payroll and benefits. The decrease in sales and marketing expenses is due to decreases in investor relations of $442,000, in travel and entertainment of $172,000, and in payroll and benefits of $89,000. During the twelve months ended March 31, 2003, we issued warrants valued at $442,000 to Strategic Growth International for investor relations services. The decrease in payroll is mainly due to staff level reductions. The number of employees whose salaries are included in sales and marketing expenses were 20 and 21 as of March 31, 2004 and 2003, respectively. The decrease in travel and entertainment is the result of overall reduction in spending due to cost containment efforts.

     Depreciation and Amortization Expense.Depreciation and amortization expense decreased $400,000 to $4.7 million for the twelve months ended March 31, 2004 from $5.1 million for the twelve months ended March 31, 2003. The decrease was due to reductions in property and equipment resulting primarily from impairment charges recorded during the year ended March 31, 2003, which in turn decreased depreciation expense.

     Impairment of Long-Lived Assets and Goodwill.During the three months ended March 31, 2004, we performed our annual test for impairment and concluded that these assets were not impaired.

     Debt Restructuring. During the twelve months ended March 31, 2004, we incurred a non-cash gain of $8.5 million related to financing transactions whereby $21.6 million of our construction payables plus $1.0 million in accrued interest was converted to 30.1 million shares of our common stock with a $14.1 million market value upon conversion.

     Interest Expense.Excluding non-cash charges, interest expense decreased to $7.1 million from $11.0 million for the years ended March 31, 2004 and 2003, respectively. We reduced the interest expense as a result of a reduction in the principal balance outstanding and a reduction in the interest rates. Due to the conversion of some of our debt and construction payables to equity which was partially offset by the issuance of new debt, our principal balance outstanding decreased to $77.7 million from $101.7 million as of March 31, 2004 and 2003, respectively. In addition our average interest rate on our debt decreased to 8.1% from 9.8% for the years ended March 31, 2004 and 2003, respectively. Net non-cash charges of approximately $7.5 million

35

represent the amortization of a beneficial conversion feature as additional interest expense partially offset by the amortization of a debt restructuring gain as reductions to interest expense.

     Other income (expenses).On November 10, 2003, a developer agreed to pay us a $3.8 million non-refundable fee to develop a facility in Australia. The developer paid us $500,000 upon execution of the agreement and the remaining balance of $3.3 million on December 10, 2003. On February 11, 2004, the developer notified us it did not wish to proceed with negotiations regarding the construction of a TerreNAP Center in Australia. On February 19, 2004, we acknowledged receipt of the developer’s notification, and terminated the agreement with the developer. As required by the agreement, we did not conduct any business related to the operation or management of data centers in Australia until the agreement was terminated. We have no further obligations in connection with the agreement with the developer and as a result recognized the $3.8 million non-refundable fee in the quarter ended March 31, 2004.

     Net Loss.Net loss for our reportable segments was as follows:

	For the Twelve Months
	Ended March 31,
	2004			2003
Data center operations	$	(22,152,261	)	$	(37,565,136	)
Real estate services		(338,316	)		(3,662,169	)
	$	(22,490,577	)	$	(41,227,305	)

     The net loss from data center operations is primarily the result of insufficient revenues to cover our operating and interest expenses. We expect to generate net losses until we reach required levels of monthly revenues. Although we had a net operating loss for the current period, we anticipate that our real estate activities will generate sufficient revenues to cover their operating expenses and we do not expect to fund more than $200,000 per year of operating losses from our real estate activities in the foreseeable future.

Results of Operations for the Year Ended March 31, 2003 as Compared to the Year Ended March 31, 2002

     Revenue. Total revenue decreased $1.2 million, or 7.5%, to $14.7 million for the year ended March 31, 2003 from $15.9 million for the year ended March 31, 2002. The decrease is due to a reduction in our development, management and construction contracts revenue of approximately $9.0 million partially offset by an increase in data center revenue, including contract termination fee, of approximately $7.8 million.

     Data center revenue increased $6.7 million to $9.9 million for the year ended March 31, 2003 from $3.2 million for the year ended March 31, 2002. Revenues consisted of recurring revenues of $8.4 million and $2.9 million respectively, for the years ended March 31, 2003 and 2002, primarily from charges for colocation, power, peering and some managed services. Non-recurring revenues were $1.5 million and $355,000, respectively, for the years ended March 31, 2003 and 2002, primarily related to managed services and the recognized portion of deferred installation revenue. Installation fees are recognized ratably over the term of the contract. The increase in revenues was primarily the result of an increase in orders from existing customers and growth in our deployed customer base from 40 customers as of March 31, 2002 to 86 customers as of March 31, 2003. We anticipate an increase in revenues from colocation, power and peering and revenues from managed services as we add more customers to the NAP of the Americas, sell additional services to existing customers and introduce new products and services.

     Data center services revenues consist of colocation services, such as leasing of space and provisioning of power; exchange point services, such as peering and interconnection; and managed and professional services, such as network management, procurement and installation of equipment and procurement of connectivity, managed router services, technical support and consulting. We anticipate an increase in revenue from colocation and exchange point services as we add more customers to our network of IXs, sell additional services to existing customers and introduce new products and services. We also expect managed and professional services to

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become an important source of revenue and increase as a percentage of data center-services. For the years ended March 31, 2003 and 2002, data center services revenues consisted of the following:

	2003				2002
Colocation and exchange point services	$	8,146,149	82	%	$	2,967,207	92	%
Managed and professional services		1,791,750	18	%		248,690	8	%
	$	9,937,899	100	%	$	3,215,897	100	%

     Data center — contract termination fee was $1.1 million for the year ended March 31, 2003 and represents amounts received from two customers for the termination of their contracted services with the NAP of the Americas. No fees were received during the year ended March 31, 2002. Contract termination fees are recognized upon contract termination when there are no remaining contingencies or obligations on our part.

     Development, commission and construction fees decreased $3.0 million, or 93.8%, to $197,000 for the year ended March 31, 2003 from $3.2 million for the year ended March 31, 2002. The decrease in development, commission and construction fees is primarily the result of our exiting of the underlying non-core real estate activities. We do not expect any significant amount of revenues from development, commission and construction fees.

     Management fees decreased $1.0 million, or 83.3%, to $200,000 for the year ended March 31, 2003 from $1.2 million for the year ended March 31, 2002. The decrease is a result of our exiting the management of commercial and residential properties. The only facility we currently manage is the TECOTA building, the property in which the NAP of the Americas is located. We collect from TECOTA a monthly management fee of approximately $8,000 or 3% of cash collected by TECOTA, whichever is greater. During the fiscal year ended March 31, 2002, we managed approximately 10 properties. Because we do not plan to manage properties other than the TECOTA building, we anticipate that management fees will not be a significant source of revenues in the future.

     Construction contract revenue decreased $5.0 million, or 60.2%, to $3.3 million for the year ended March 31, 2003 from $8.3 million for the year ended March 31, 2002. During the year ended March 31, 2003 we completed eleven contracts and, as of March 31, 2003, had two construction contracts in process. During the year ended March 31, 2002, we completed two contracts and, as of March 31, 2002, we had five construction contracts in process. The decrease in revenues from construction contracts is due to a decrease in the average revenue per contract, which went from average revenue per contract of $3.6 million in fiscal year 2002 to average revenue per contract of $500,000 in fiscal year 2003. Due to our opportunistic approach to our construction business, we expect revenues from construction contracts to significantly fluctuate from quarter to quarter. We anticipate focusing our efforts on obtaining construction contracts for projects related to technology infrastructure.

     Data Center Operations Expenses. Excluding depreciation, data center operations expenses remained constant at $11.2 million for the years ended March 31, 2003 and 2002. Data center operations consist mainly of rent, operations personnel, electricity, chilled water and security services. With the exception of electricity and chilled water, the majority of these expenses are fixed in nature. However, commencing in fiscal year 2004, we anticipate that certain data center expenses, principally costs related to managed services, will increase as we provide additional services to existing customers and introduce into the market new products and services. We also expect that our costs of electricity and chilled water costs will increase in the future as we add more customers to the NAP of the Americas. The number of employees whose salaries are included in data center operations remained constant at 60 during the years ended March 31, 2003 and 2002.

     Contract Construction Expenses. Contract construction expenses decreased $4.4 million, or 59.5%, to $3.0 million for the year ended March 31, 2003 from $7.4 million for the year ended March 31, 2002. This decrease is a result of the decrease in number of contracts and dollar amount of those projects as discussed above in “revenues from construction contracts.” We do not currently anticipate losses on any of the individual contracts.

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     Start-up Costs — Data Centers. There were no start-up costs for the year ended March 31, 2003.Start-up costs for the year ended March 31, 2002 primarily relate to the NAP of the Americas in Miami, Florida, and were approximately $3.4 million.

     General and Administrative Expenses.General and administrative expenses decreased $3.1 million, or 19.9%, to $12.5 million for the year ended March 31, 2003 from $15.6 million for the year ended March 31, 2002. General and administrative expenses consist primarily of salaries and related expenses, professional service fees, rent and other general corporate expenses. The decrease in general and administrative expenses is mainly due to decreases in rent of $1.9 million and payroll of $1.0 million.

     Carrying costs, including rent, for our Corvin facility in Santa Clara, California for the year ended March 31, 2003 were reflected in the facility’s impairment charge in the previous year. In accordance with SFAS No. 121, we recognized as of March 31, 2002 an impairment charge of $5.5 million, including $1.5 million in expected lease carrying costs for the period of time until the facility could be sublet. During the second quarter ended September 30, 2002, an additional $350,000 in expected lease carrying costs were recognized and included as part of impairment of long-lived assets. During the year ended March 31, 2002, the rent for the Corvin facility for that year was included in general and administrative expenses.

     The decrease in payroll is mainly attributable to staff reductions. The number of employees whose salaries are included in general and administrative expenses decreased from 63 for the year ended March 31, 2002 to 50 for the year ended March 31, 2003.

     The remaining period over period decrease in general and administrative expenses is mainly attributable to a decrease in general corporate overhead resulting from our exit of non-core real estate activities in the year ended March 31, 2002.

     Sales and Marketing Expenses. Sales and marketing expenses increased $600,000, or 16.7%, to $4.2 million for the year ended March 31, 2003 from $3.6 million for the year ended March 31, 2002. The significant components of sales and marketing expenses are salaries, commissions, provision for bad debt expenses and marketing. The increase in sales and marketing expenses was mainly attributable to an increase in investor relations expense of $442,000 and an increase in provision for bad debt expenses of approximately $265,000. We issued warrants valued at approximately $442,000 to a third party for investor relations services. Provision for bad debt expense consists of full provisions related to eight customers. We have commenced legal action against many of these customers. The number of employees whose salaries are included in sales and marketing expenses increased slightly from 21 as of March 31, 2002 to 22 as of March 31, 2003.

     Depreciation and Amortization Expense. Depreciation and amortization expense decreased $2.2 million, or 30.1%, to $5.1 million for the year ended March 31, 2003 from $7.3 million for the year ended March 31, 2002. This decrease in depreciation and amortization expense was mainly due to the cessation of $3.5 million in amortization of goodwill and intangible assets in accordance with current accounting standards and a decrease in depreciation of approximately $0.4 million related to our colocation facility in Santa Clara, California and non core assets. The decrease was partially offset by an increase in depreciation of approximately $1.7 million primarily from assets of the NAP of the Americas that were put in service during fiscal year 2002 and had a full year of depreciation in fiscal year 2003.

     Impairment of Long-Lived Assets. Due principally to the decline and uncertainty of the telecommunications and Internet infrastructure markets, we recognized the following impairment charges:

	Fiscal year ended March 31,
Asset	2003		2002
Facility in Santa Clara, California	$	350,000	$	11,983,670
Post Shell goodwill		2,315,336		3,190,000
TECOTA promote interest		904,964		3,800,000
Equipment		450,000		—
	$	4,020,300	$	18,973,670

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     As a result of impairment charges in the years ended March 31, 2003 and 2002, the long-lived assets described in the table above became fully impaired.

     Due to our unsuccessful efforts to lease space at our colocation facility in Santa Clara, California, during the quarter ended September 30, 2001, we granted an option to one of our vendors (a contractor involved with the facility’s build-out) to purchase the leasehold improvements and assume the existing lease for approximately $4.0 million. Based on this option, we recorded a $6.6 million impairment charge in the quarter ended September 30, 2001 to write the improvements down to the option amount. Subsequently, we continued to search for alternatives, which included subleasing or selling our leasehold improvements. In the quarter ended March 31, 2002, upon expiration of the option, we listed our leasehold improvements for sale, indicating a definite change in the strategy. We are now actively looking for a buyer to assume the existing lease or sublease all or a substantial portion of the space. The existing lease is $118,000 per month, with scheduled annual increases, for a twenty-year term ending in 2020. We believe that the most likely outcome is that the property will be subleased or leased from the landlord to a third party and that we will receive no consideration for the leasehold improvements. Based on this most likely scenario, in the quarter ended March 31, 2002, we recorded an additional $5.5 million impairment, resulting in the asset being fully reserved. We also established as of March 31, 2002 reserves for leasehold carrying costs, consisting primarily of monthly rent. As of March 31, 2003, we had approximately $1.4 million in related reserves which we anticipate will carry the facility through March 2004.

     The decline in the telecommunications industry and resulting decline in related real estate construction and leasing activities caused us to perform, during the years ended March 31, 2003 and 2002, impairment analyses of our promote interests in TECOTA acquired in the telecom facilities management operations and the goodwill related to the Post Shell acquisition. Our analyses were based on estimated fair value determined by the discounted future expected cash flows method. The analyses anticipated obtaining additional construction contracts for Post Shell and additional tenants for the TECOTA building. We determined that the assets, which are included in our telecom facilities management and real estate services segments, were impaired as of March 31, 2002 by approximately $3.8 million and $3.2 million, respectively. During the year ended March 31, 2003, no significant contracts were awarded to Post Shell and no tenants were added to the TECOTA building. As a result, we impaired the remaining $905,000 in TECOTA promote interests and $2.3 million in Post Shell goodwill.

     During the fiscal year ended March 31, 2003, we wrote off $450,000 related to equipment that has been held for installation for more than one year and is considered obsolete.

     On October 15, 2002, we entered into a joint venture agreement to develop and operate a HIPAA compliant network access point at the NAP of the Americas in Miami, Florida. We acquired a 10% interest in the joint venture company by issuing a $1.0 million promissory note. As the joint venture was not fully funded by December 31, 2002, we determined that our joint venture interest was impaired. Therefore, we recognized a $1.0 million impairment as of December 31, 2002. Effective March 31, 2003, we and the other joint venture partner entered into an agreement to declare void all the then current agreements and contracts, including the joint venture agreement. As a result, we were no longer obligated under the promissory note. The results of operations present, on a net basis, the effects of the formation and the dissolution of the joint venture and accordingly no gain or loss was recognized as a result of these transactions.

     Interest Income. Interest income increased $39,000, or 40.2%, to $136,000 for the year ended March 31, 2003 from $97,000 for the year ended March 31, 2002. The increase was due to the recording of interest income on a $5.0 million note receivable from our Chief Executive Officer which began accruing interest in September 2002.

     Inducement on Debt Conversion. During the year ended March 31, 2003, we incurred a non-cash expense of $5.0 million related to the $15.8 million of our convertible debt that was converted into 22.0 million shares of our common stock. The debt was converted at $0.75 per share, which was approximately 50% below the stated conversion price. This expense represents the fair value of the additional common shares issued by us as a result of the lower conversion price.

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     Interest Expense. Interest expense increased $1.2 million, or 12.2%, to $11.0 million for the year ended March 31, 2003 from $9.8 million for year ended March 31, 2002. The increase was due to an increase of $33.0 million in the average debt balance outstanding. The increase was offset by the conversion of $15.8 million in convertible debt during the quarter ended December 31, 2002 and reduction in the interest rate of the Ocean Bank loan from 9.25% to 7.50%. Based on the April 30, 2003 transactions, we expect cash interest payments to be reduced by approximately $900,000 for the year ended March 31, 2004.

     Gain On the Sale of Real Estate Held for Sale. In July 2001, we sold Fortune House II for $17.2 million and recorded a gain of approximately $3.9 million. During the year ended March 31, 2002, we also sold six condominium units and recorded a net gain of $0.3 million. The last condominium unit was sold in the quarter ended March 31, 2002.

     Net Loss. Net loss (income) for our reportable segments was as follows:

	For the Year Ended March 31,
	2003		2002
Data center operations	$	37,565,136	$	34,971,359
Telecom facilities management		—		16,682,059
Real estate services		3,662,169		5,718,797
	$	41,227,305	$	57,372,215

     The net loss for the year ended March 31, 2003 is mainly due to non-cash items, including impairment charges of long-lived assets of approximately $4.0 million and depreciation and amortization expense of approximately $5.1 million, interest expense of approximately $11.0 million, and approximately $11.2 million of expenses generated from the operations of the NAP of the Americas. The net loss for our data center operations segment is primarily the result of insufficient revenues at the NAP of the Americas to cover our operating and interest expenses. We expect to continue generating net losses from the data center operations segment until we reach required levels of monthly revenues. The net loss from our telecom facilities management segment for the year ended March 31, 2002 resulted primarily from impairment, interest and general expenses from our collocation facility in Santa Clara, California. There were no revenues generated from the facility during the period. For the year ended March 31, 2003, the losses related to the facility were insignificant and included in data center operations. The net loss from real estate activities for the years ended March 31, 2003 and 2002 resulted from insufficient revenues to support general and interest costs and impairments. Due to our exit of real estate activities not related to our strategy, we anticipate that the significance of the real estate activities to our overall operations will decrease.

Liquidity and Capital Resources

          Liquidity and Recent Developments

     On December 31, 2004, we purchased the remaining 99.16% equity interests of TECOTA that were not owned by us such that TECOTA became our wholly-owned subsidiary. In connection with this purchase, we paid approximately $40.0 million for the equity interests and repaid an approximately $35.0 million mortgage to which the TECOTA building was subject. We financed the purchase and payment of the mortgage from two sources. We obtained a $49.0 million first mortgage loan from Citigroup Global Markets Realty Corp., $4.0 million of the proceeds of which are restricted and can only be used to fund customer related improvements made to the NAP of the Americas in Miami. Simultaneously, we issued senior secured notes in an aggregate principal amount equal to $30.0 million and sold 3,060,444 shares of our common stock valued at $2.0 million to the Falcon investors. The $49.0 million loan by Citigroup is secured by a first mortgage on the TECOTA building and a security interest in all then existing building improvements that we have made to the building, certain of our deposit accounts and any cash flows generated from customers by virtue of their activity at the TECOTA building. The mortgage loan matures in February 2009 and bears interest at a rate per annum equal to the greater of (a) 6.75% and (b) LIBOR plus 4.75%. In addition, if an event of default occurs under the mortgage loan agreement, we must pay interest at a default rate equal to 5% per annum on any amount we owe to the lenders but have not paid when due until that

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amount is paid in full. The terms of the mortgage loan agreement require us to deposit $5,668,992 with TECOTA as annual rent until May 31, 2006. The senior secured notes are secured by substantially all of our assets other than the TECOTA building, including the equity interests in our subsidiaries, bear cash interest at 9.875% per annum and “payment in kind” interest at 3.625% per annum, and mature in March 2009. In the event we achieve specified leverage ratios, the interest rate applicable to the senior secured notes will be reduced to 12.5% but will be payable in cash only. Overdue payments under the senior secured notes bear interest at a default rate equal to 2% per annum. Our obligations under the senior secured notes are guaranteed by substantially all of our subsidiaries. In connection with these financings, we issued to Citigroup Global Markets Realty Corp., for no additional consideration, warrants to purchase an aggregate of 5 million shares of our common stock. These warrants expire on December 31, 2011 and are divided into four equal tranches that differ only in respect of the applicable exercise prices, which are $0.68, $0.74, $0.81 and $0.87, respectively. We also issued to the Falcon investors, for no additional consideration, warrants to purchase an aggregate of 15 million shares of our common stock. These warrants expire on December 30, 2011 and are divided into four equal tranches that differ only in respect of the applicable exercise prices, which are $0.69, $0.75, $0.82 and $0.88, respectively.

     We may redeem some or all of the senior secured notes for cash at any time after December 31, 2005. If we redeem the notes during the twelve month period commencing on December 31, 2005 or the six month period commencing on December 31, 2006, June 30, 2007, or December 31, 2007, the redemption price equals 115.0%, 107.5%, 105.0%, and 102.3%, respectively, of their principal amount, plus accrued and unpaid interest, if any, to the redemption date. After June 30, 2008, the redemption price equals 100% of their principal amounts. Also, if there is a change in control, the holders of these notes will have the right to require us to repurchase their notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest.

     Our new mortgage loan and our senior secured notes include numerous covenants imposing significant financial and operating restrictions on our business. The covenants place restrictions on our ability to, among other things:

•  incur more debt;

•  pay dividends, redeem or repurchase our stock or make other distributions;

•  make acquisitions or investments;

•  enter into transactions with affiliates;

•  merge or consolidate with others;

•  dispose of assets or use asset sale proceeds;

•  create liens on our assets; and

•  extend credit.

     Also, a change in control without the prior consent of the lenders could allow the lenders to demand repayment of the loan. Our ability to comply with these and other provisions of the new mortgage loan can be affected by events beyond our control. Our failure to comply with the obligations in the new mortgage loan could result in an event of default under the new mortgage loan, which, if not cured or waived, could permit acceleration of the indebtedness or other indebtedness which could have a material adverse effect on us.

     We also have a bank loan with an outstanding balance of 3.3 million Euros ($3.9 million) at September 30, 2004. On December 23, 2004, the maturity date of the loan was extended through June 2005. In connection with the extension, we deposited 1,250,000 Euros ($1,692,000 at the December 31, 2004 exchange rate) with the lender as security for the loan.

     In June 2004, we privately placed $86.25 million in aggregate principal amount of 9% senior convertible notes due June 15, 2009 to qualified institutional buyers. The notes bear interest at a rate of 9% per annum, payable semi-annually, beginning December 15, 2004 and are convertible at the option of the holders at $1.25 per share. We utilized net proceeds of $81.0 million to pay approximately $46.3 million of outstanding loans and

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convertible debt. The balance of the proceeds will be used for possible acquisitions and for general corporate purposes, including working capital and capital expenditures.

     The notes rank pari passu with all existing and future unsecured and unsubordinated indebtedness, senior in right of payment to all existing and future subordinated indebtedness, and rank junior to any future secured indebtedness.

     If there is a change in control, the holders of the 9% senior convertible notes have the right to require us to repurchase their notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest. If a change of control occurs and at least 50% of the consideration for our common stock consists of cash, the holders of the 9% senior convertible notes may elect to receive the greater of the repurchase price described above or the total redemption amount. The total redemption amount will be equal to the product of (x) the average closing prices of our common stock for the five trading days prior to the announcement of the change of control and (y) the quotient of $1,000 divided by the applicable conversion price of the 9% senior convertible notes, plus a make-whole premium of $225 per $1,000 of principal if the change of control takes place before June 16, 2005, reducing to $45 per $1,000 of principal if the change of control takes place between June 16, 2008 and December 15, 2008. If we issue a cash dividend on our common stock, we will pay contingent interest to the holders equal to the product of the per share cash dividend and the number of shares of common stock issuable upon conversion of each holder’s note.

     We may redeem some or all of the 9% senior convertible notes for cash at any time on or after June 15, 2007 if the closing price of our common shares has exceeded 200% of the applicable conversion price for at least 20 trading days within a period of 30 consecutive trading days ending on the trading day before the date we mail the redemption notice. If we redeem the 9% senior convertible notes during the twelve month period commencing on June 15, 2007 or 2008, the redemption price equals 104.5% or 102.25%, respectively, of their principal amount, plus accrued and unpaid interest, if any, to the redemption date, plus an amount equal to 50% of all remaining scheduled interest payments on the 9% senior convertible notes from, and including, the redemption date through the maturity date.

     The 9% senior convertible notes contain an early conversion incentive for holders to convert their notes into shares of common stock on or after December 16, 2004, but before June 15, 2007. If exercised, the holders will receive the number of shares of our common stock to which they are entitled and an early conversion incentive payment in cash or stock, at our option, equal to one-half the aggregate amount of interest payable through July 15, 2007.

     On May 17, 2004, we provided certain debenture holders with notice of our intent to redeem $25.0 million of our 10% convertible debentures and $2.8 million of our 13.125% convertible debentures, effective May 31, 2004. As of May 31, 2004, all of the holders of our 10% convertible debentures and $2.5 million in principal of our 13.125% convertible debentures opted to convert their debentures into an aggregate of 54,726,427 shares of our common stock. In June 2004, the remaining holders of our 13.125% convertible debentures redeemed their debentures for cash. In addition, in June and July 2004, the remaining holders of our 13% convertible debentures redeemed their debentures for an aggregate of $10.3 million.

     Historically, we have financed our operations and capital requirements primarily through credit facilities, the issuance of debt instruments, the private sale of common and preferred stock and vendor financing, including construction payables and capital lease obligations. As of September 30, 2004, our total liabilities were approximately $105.9 million.

     We have incurred losses from operations in each quarter and annual period since our merger with AmTec, Inc. Our cash flows from operations for the six months ended September 30, 2004 and 2003 were negative. Due to the issuance of our 9% senior convertible notes, our working capital increased from a $10.3 million deficit, as of March 31, 2004, to a $10.1 million surplus, as of September 30, 2004.

     As of December 31, 2004, our principal source of liquidity was our $15.8 million in cash and cash equivalents and $4.0 million of restricted cash which, under the terms of our mortgage loan, can be used to fund customer related improvements made to the NAP of the Americas in Miami. We anticipate that this cash coupled

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with our anticipated cash flows generated from operations will be sufficient to meet our capital expenditures, working capital, debt service and corporate overhead requirements to meet our currently identified business objectives. Based on customer contracts signed as of December 31, 2004, expected expansions of customers under contract and anticipated future contracts from potential customers in the sales pipeline, we project that our cash flow from operations will be positive by the end of the fiscal year ending March 31, 2005. Our projected revenues and cash flows depend on several factors, some of which are beyond our control, including the rate at which we provide services, the timing of exercise of expansion options by customers under existing contracts, the rate at which new services are sold to the government sector and the commercial sector, the ability to retain the customer base, the willingness and timing of potential customers in outsourcing the housing and management of their technology infrastructure to us, the reliability and cost-effectiveness of our services and our ability to market our services. Although our real estate activities had a net loss of approximately $60,900 for the six months ended September 30, 2004, we anticipate that these activities will generate enough revenues to cover operating expenses. If revenues for real estate activities are below amounts anticipated, cash needs are not expected to exceed $200,000 for the next twelve months.

Sources and Uses of Cash

     Cash used in operations for the six months ended September 30, 2004 was approximately $9.2 million compared to cash used in operations of $13.8 million for the six months ended September 30, 2003, a decrease of $4.6 million. This decrease was primarily due to a decrease in our net loss.

     Cash used in investing activities for the six months ended September 30, 2004 was $10.5 million compared to cash used in investing activities of $867,000 for the six months ended September 30, 2003, an increase of $9.6 million. This increase is due to purchases of property, plant and equipment of $5.6 million and the acquisition of additional equity interest in NAP Madrid.

     Cash provided by financing activities for the six months ended September 30, 2004 was $37.2 million compared to cash provided by financing activities of $16.7 million for the six months ended September 30, 2003 an increase of $20.5 million. For the six months ended September 30, 2004, cash provided by financing activities includes net proceeds of $81.0 million of convertible debt financing, net of debt issuance costs of $5.2 million, partially offset by $47.0 million in payments for loans and convertible debt. For the six months ended September 30, 2003, cash provided by financing activities included $20.3 million of new borrowings, partially offset by $3.2 million in payments of debt.

Guarantees and Commitments

     From February 3, 2001 until December 31, 2004, we owned a 0.84% interest in Technology Center of the Americas, LLC, which we refer to as TECOTA, the entity that owns the 750,000 square foot building in which the NAP of the Americas is housed. On December 31, 2004, we purchased the remaining 99.16% equity interests in TECOTA that were not already owned by us such that TECOTA became our wholly-owned subsidiary. Prior to this acquisition, we leased the 120,000 square foot second floor of the building. The term of this lease commenced in October 2001 and is for 20 years. Monthly base rent under the lease was approximately $216,000. We were also responsible for our pro rata share of common area maintenance expenses and real estate taxes under the lease, which amount to approximately $40,000 per month. In addition, on November 3, 2003, we entered into an agreement to lease an additional 120,000 square feet of space on the third floor of the building, and extended our existing lease for the second floor to co-terminate with the third floor lease on May 31, 2025. Annual base rent for the third floor was approximately $2.4 million with monthly base rent payments scheduled to commence in April 2005. We were also responsible for our pro rata share of common area maintenance expenses and real estate taxes under this third lease.

     Terremark Worldwide, Inc. has agreed to guarantee TECOTA’s obligation, as borrower, to make payments of principal and interest under the senior loan with Citigroup Global Markets Realty Group to the extent any of the following events shall occur:

•  TECOTA files for bankruptcy or a petition in bankruptcy is filed against TECOTA with TECOTA’s or Terremark’s consent;

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•  Terremark pays a cash dividend or makes any other cash distribution on its capital stock (except with respect to its outstanding preferred stock);

•  Terremark makes any repayments of its outstanding debt other than the scheduled payments provided in the terms of the debt;

•  Terremark pledges the collateral it has pledged to the lenders as collateral for another loan; or

•  Terremark repurchases any of its common stock.

     In addition Terremark has agreed to assume liability for any losses incurred by the lenders under the credit facility related to or arising from:

•  any fraud, misappropriation or misapplication of funds;

•  any transfers of the collateral held by the lenders in violation of the Citigroup credit agreement;

•  failure to maintain TECOTA as a “single purpose entity;”

•  TECOTA obtaining additional financing in violation of the terms of the Citigroup credit agreement;

•  intentional physical waste of TECOTA’s assets that have been pledged to the lenders;

•  breach of any representation, warranty or covenant provided by or applicable to TECOTA and Terremark which relates to environmental liability;

•  improper application and use of security deposits received by TECOTA from tenants;

•  forfeiture of the collateral pledged to the lenders as a result of criminal activity by TECOTA;

•  attachment of liens on the collateral in violation of the terms of the Citigroup credit agreement;

•  TECOTA’s contesting or interfering with any foreclosure action or other action commenced by lenders to protect their rights under the credit facility (except to the extent TECOTA is successful in these efforts);

•  any costs incurred by the lenders to enforce their rights under the credit facility; or

•  failure to pay assessments made against or to adequately insure the assets pledged to the lenders.

     We lease space for our operations, office equipment and furniture under non-cancelable operating leases. Some equipment is also leased under capital leases, which are included in leasehold improvements, furniture and equipment.

     The following table represents the minimum future operating and capital lease payments for these commitments, as well as the combined aggregate maturities for the following obligations for each of the twelve months ended:

	Capital
	Lease		Operating		Convertible		Mortgage
	Obligations		Leases		Debt		Payable		Notes Payable		Total
2005	$	1,051,239	$	2,775,791	$	—	$	680,303	$	4,775,400	$	9,282,732
2006		107,481		3,001,906		—		731,440		—		3,840,827
2007		29,880		2,958,793		—		786,420		—		3,775,093
2008		—		2,911,028		—		835,715		—		3,746,743
2009		—		2,990,832		86,257,312		45,966,122		30,000,000		165,214,266
Thereafter		—		30,656,340		—		—		—		30,656,340
	$	1,188,600	$	45,294,689	$	86,257,312	$	49,000,000	$	34,775,400	$	216,516,001

New Accounting Pronouncements

     In May 2003, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 150, “Accounting for Certain Financial Instruments with Characteristics of

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both Liabilities and Equity.” This Statement requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances) because that financial instrument embodies an obligation of the issuer. In November 2003, the FASB issued FASB Staff Position No. FASB 150-3 which deferred the measurement provisions of SFAS No. 150 indefinitely for certain mandatorily redeemable non-controlling interests that were issued before November 5, 2003. The FASB plans to reconsider implementation issues and, perhaps, classification or measurement guidance for those non-controlling interests during the deferral period. In 2003, we applied certain disclosure requirements of SFAS No. 150. To date, the impact of the effective provisions of SFAS No. 150 has been the presentation of Series H redeemable preferred stock as a liability. While the effective date of certain elements of SFAS No. 150 has been deferred, the adoption of SFAS No. 150 when finalized is not expected to have a material impact on our financial position, results of operations or cash flows.

     In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment.” This Statement revises FASB Statement No. 123, “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123(R) focuses primarily on the accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123(R) requires companies to recognize in the statement of operations the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards (with limited exceptions). This Statement is effective as of the first reporting period that begins after June 15, 2005. Accordingly, we will adopt SFAS 123(R) in the second quarter of our fiscal year ending March 31, 2006. We are currently evaluating the provisions of SFAS 123(R) and have not yet determined the impact that this Statement will have on our results of operations or financial position; however, it may have a significant impact on our consolidated statement of operations as we will be required to expense the fair value of stock option grants and stock purchases under employee stock option plans.

     In April 2004, the Emerging Issues Task Force of the FASB approved EITF Issue 03-6 “Participating Securities and the Two-Class Method under FAS 128.” EITF Issue 03-6 supersedes the guidance in Topic No. D-95, “Effect of Participating Convertible Securities on the Computation of Basic Earnings per Share,” and requires the use of the two-class method of participating securities. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. In addition, EITF Issue 03-6 addresses other forms of participating securities, including options, warrants, forwards and other contracts to issue an entity’s common stock, with the exception of stock-based compensation (unvested options and restricted stock) subject to the provisions of Opinion No. 25 and FASB 123. EITF Issue 03-6 is effective for reporting periods beginning after March 31, 2004 and should be applied by restating previously reported earnings per share. The adoption of EITF Issue 03-6 did not have a material impact on our financial position or results of operations for the six months ended September 30, 2004.

     Our 9% senior convertible notes contain contingent interest provisions which allow the holders of the notes to participate in any dividends declared on our common stock. Accordingly, our notes are considered participating securities under EITF Issue 03-6. As a result of the number of shares of our common stock currently outstanding, the notes and their treatment under EITF Issue 03-6 will have a dilutive effect only when we have net income of $0.01 per common share or more.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We have not entered into any financial instruments for trading purposes. We currently use derivatives to hedge against increases in interest rates. We formally document the relationship between the hedging instrument and the hedged items, as well as the risk management objective and strategy for the use of the hedging instrument. This documentation includes linking the derivatives that are designated as cash flow hedges to specific assets or liabilities on the balance sheet, commitments or forecasted transactions. When we enter into a derivative contract, and at least quarterly, we assess whether the derivative item is effective in offsetting the changes in fair value or cash flows. Any change in fair value resulting from ineffectiveness, as defined by SFAS No. 133, is recognized in current period endings. For derivative instruments that are designated and qualify

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as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is recorded in Accumulated Other Comprehensive Loss, a separate component of Stockholders’ Equity, and reclassified into earnings in the period during which the hedge transaction affects earnings.

     Our carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are reasonable approximations of their fair value.

     Our exposure to market risk resulting from changes in interest rates results from our variable rate of our mortgage loan, as an increase in interest rates would result in lower earnings and increased cash outflows. The interest rate on our mortgage loan is payable at variable rates indexed to LIBOR. To partially mitigate the interest rate risk on our mortgage loan, we entered into a rate cap protection agreement on December 31, 2004. The rate cap protection agreement locked in the following rates on $49.0 million of debt for the four-year period for which the rate cap protection agreement is in effect:

•  5.0% per annum, starting January 4, 2005;

•  5.75% per annum, starting August 11, 2005;

•  6.5% per annum, starting February 11, 2006;

•  7.25% per annum, starting August 11, 2006; and

•  7.72% per annum, starting February 11, 2007 until the termination date of the rate cap protection agreement.

The effect of each 1% increase in interest on our mortgage loan would result in an annual increase in interest expense of approximately $475,000.

     Our 9% senior convertible notes and our senior secured notes have fixed interest rates and, accordingly, are not as subject to exposure market risk resulting from changes in interest rates. However, the fair market value of our long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair market value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. These interest rate changes may affect the fair market value of the fixed interest rate debt but do not impact our earnings or cash flows.

     The estimated fair value of the derivatives embedded within our 9% senior convertible notes creates a market risk exposure resulting from changes in the price of our common stock. These embedded derivatives derive their value primarily based on the price and volatility of our common stock; however, we do not expect significant changes in the near term in the one-year historical volatility of our common stock used to calculate the estimated fair value of the embedded derivatives. Other factors being equal, as of September 30, 2004, the table below provides information about the estimated fair value of the derivatives embedded within our notes and the effect that changes in the price of our common stock are expected to have on the estimated fair value of the embedded derivatives:

	Estimated Fair Value
Price Per Share of Common Stock	of Embedded Derivatives
$0.44	$	13,662,000
$0.64	$	21,804,000
$0.84	$	29,937,000
$1.04	$	37,717,000
$1.24	$	44,841,000

As noted above, the estimated fair value of the embedded derivatives increases as the price of our common stock increases. These changes in estimated fair value will affect our results of operations but will not impact our cash flows.

     To date, over 99% of our recognized revenue has been denominated in U.S. dollars, generated mostly from customers in the U.S., and our exposure to foreign currency exchange rate fluctuations has been minimal. In the future, a larger portion of our revenues may be derived from operations outside of the U.S. and may be

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denominated in foreign currency. As a result, our operating results or cash flows may be impacted due to currency fluctuations relative to the U.S. dollar.

     Furthermore, to the extent we engage in international sales that are denominated in U.S. dollars, an increase in the value of the U.S. dollar relative to foreign currencies could make our services less competitive in the international markets. Although we will continue to monitor our exposure to currency fluctuations, and when appropriate, may use financial hedging techniques in the future to minimize the effect of these fluctuations, we cannot conclude that exchange rate fluctuations will not adversely affect our financial results in the future.

     Some of our operating costs are subject to price fluctuations caused by the volatility of underlying commodity prices. The commodity most likely to have an impact on our results of operations in the event of significant price change is electricity. We are closely monitoring the cost of electricity. To the extent that electricity costs continue to rise, we are investigating opportunities to pass these additional power costs onto our customers that utilize this power. We do not employ forward contracts or other financial instruments to hedge commodity price risk.

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BUSINESS

Our Business

     We operate Internet exchange points from which we provide colocation, interconnection and managed services to the government and commercial sectors. Our Internet exchange point facilities, or IXs, are strategically located in Miami, Florida, Santa Clara, California, Madrid, Spain and Sao Paulo, Brazil and allow networks to interconnect and exchange Internet and telecommunications traffic. Our flagship facility, the NAP of the Americas, in Miami, Florida was designed and built to disaster-resistant standards with maximum security to house mission-critical systems infrastructure. Our secure presence in Miami, a key gateway to North American, Latin American and European telecommunications networks, has enabled us to establish customer relationships with U.S. Federal Government agencies, including the Department of State and the Department of Defense. We have been awarded sole-source contracts with the U.S. Government which we believe will allow us to both penetrate further the government sector and continue to attract federal information technology providers. As a result of our fixed cost operating model, we believe that incremental customers and revenues will result in improved operating margins and increased profitability.

     We generate revenue by providing high quality Internet infrastructure on a platform designed to reduce network connectivity costs. We provide our customers with the following:

•  space to house equipment and network facilities in immediate proximity to Internet and communications networks;

•  the platform to exchange telecommunications and Internet traffic and access to network-based services; and

•  related professional and managed services such as our network operations center, outsourced storage and remote monitoring.

     We differentiate ourselves from our competitors through the security and strategic location of our facilities and our carrier-neutral model, which provides access to a critical mass of Internet and telecommunications connectivity. We are certified by the U.S. Government to house several “Secured Compartmentalized Information Facilities,” or “SCIFs,” which are facilities that comply with federal government security standards and are staffed by our employees. Approximately 21% of our employees maintain an active federal government security clearance.

     The immediate proximity of our facilities to major fiber routes with access to North America, Latin America and Europe has attracted numerous telecommunications carriers, such as AT&T, Global Crossing, Latin America Nautilus (a business unit of Telecom Italia), Progress Telecom, Sprint Communications and T-Systems (a business unit of Deutsche Telecom), to colocate their equipment with us in order to better service their customers. This network density, which allows our customers to reduce their connectivity costs, combined with the security of our facilities, has attracted government sector customers, including Blackbird Technologies, the City of Coral Gables, Florida, the Diplomatic Telecommunications Service — Program Office (DTS-PO, a division of the U.S. Department of State), Miami-Dade County, Florida, SRA International and the United States Southern Command. Additionally, we have had success in attracting content providers and enterprises such as Google, Internap, Miniclip, NTT/ Verio, VeriSign, Voiceglo, Bacardi USA, Corporacion Andina de Fomento, Florida International University, Intrado, Jackson Memorial Hospital of Miami and Steiner Leisure.

Recent Events

     Acquisition of the building that houses the NAP of the Americas.During July 2004, we determined that an acquisition of the entity that owns the TECOTA, or Technology Center of the Americas, building, home of our flagship NAP of the Americas, was strategically important for us and would allow us to:

•  provide significant room for expansion by more than doubling our footprint in Miami;

•  have complete control over the building, allowing us to maintain the high security standards of our customers; and

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•  increase our operating margins through the reduction of rent expense.

     On December 31, 2004, we completed the acquisition of TECOTA. We paid $40.0 million for the equity interests in Technology Center of the Americas, LLC and repaid $35.0 million in debt. We financed the purchase through multiple sources, including a $49.0 million first mortgage loan from Citigroup Global Markets Realty Corp., the issuance of $30.0 million in senior secured notes and the sale of 3,060,444 shares of our common stock valued at $2.0 million to Falcon Mezzanine Partners, LP and its co-investment partners, Stichting Pensioenfonds Voor De Gezond-Heid Geestelijke En Maatschappelijke Belangen and Stichting Pensioenfonds ABP, two funds affiliated with AlpInvest Partners. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and pages F-1 to F-6 for pro forma financial information related to the acquisition of TECOTA.

Industry

     The Internet is a collection of many independent networks interconnected with each other to form a network of networks. Information that is to be transported over the Internet is divided into discreet identical sized packets that are transmitted over the primary Internet networks, known as backbones, and then reassembled at their destination where they are presented to the end user in the same form as the original information. However, not all Internet backbones reach all locations on the Internet. Therefore, users on different networks need to communicate with each other and transmit packets to each other through interconnection between these networks. To accommodate the fast growth of traffic over the Internet, an organized approach for network interconnection was needed. The exchange of traffic between these networks without payment became known as “peering”. When a fee is paid, it is referred to as “transit.” The points and places where these networks exchange traffic, or peer, with each other are known as Internet Exchanges, or IXs.

     Internet Exchanges, or IXs, are locations where two or more networks meet to interconnect and exchange Internet and data traffic (data, voice, images, video and all forms of digital telecommunications), much like air carriers meet at airports to exchange passengers and cargo. Instead of airlines and transportation companies, however, participation in IXs comes from telecommunications carriers, Internet service providers and large telecommunications and Internet users. Tier-1 IXs are locations where the primary Internet networks meet to access, exchange and distribute Internet traffic and, following the airport analogy, operate much like large, international airport passenger and cargo transportation terminals or “hubs.”

     Since the beginning of the Internet, major traffic aggregation and exchange points have developed around the world. The first four Tier-1 IXs were built in the United States in the early 1990’s to serve the northern part of the country, from East Coast to West Coast, and are located in New York, Washington D.C., Chicago and San Francisco. These IXs were built with sponsorship from the National Science Foundation in order to promote Internet development and used the existing infrastructures of telecommunication companies, to which ownership of the IXs was eventually transferred. These four Tier-1 IXs offered only connectivity services. Since that time, privately owned IXs have been developed, including the NAP of the Americas.

     PriMetrica (formerly Telegeography), a researcher and publisher of international telecom statistics, in its Global Internet Geography 2004, ranked Miami, the home of the NAP of the Americas, as the number one international Internet Hub City for Latin America and the Caribbean, and ranked Sao Paulo, where the NAP do Brasil is located, as second. The San Francisco Bay area, where our NAP of the Americas/ West facility is located, and Madrid, where our NAP de las Americas is located, are ranked fifth and twenty-first, respectively, in the Top 50 Interregional Internet Hub Cities in the world.

Our Solution

     The combination of connectivity, neutrality and the quality of our facilities allows us to provide the following value proposition to our customers:

•  State-of-the-art facilities.Our facilities are constructed in order to meet high standards of security and provide 24x7 monitoring, on-site technical support and service level agreements that guarantee 100%

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	uptime for power and cooling capabilities. Additionally, our Miami facility is designed to withstand a category 5 hurricane and houses equipment only above the second floor in order to prevent flood damage.
•	Carrier-neutrality.Carriers and other customers are willing to locate their equipment within our facility and use our professional managed services because we neither discriminate against nor give preference to any individual or group of customers.
•	Connectivity.Our customers can access any of the more than 89 network providers present at our facilities.
•	“Zero-Mile” Access.Because our facilities provide carrier-grade colocation space directly adjacent to the point at which the traffic is exchanged, there is effectively “zero” distance between the peering point and customers’ equipment, which reduces costs and points of failure and increases efficiency.
•	Outsourcing of Services.Because of our staff’s expertise, our customers find it more cost effective to contract us to design, deploy, operate, monitor and manage their equipment and networks at our facilities than to hire dedicated staff to perform those functions.
•	Lower Costs, Increased Efficiency and Quality of Service.The combination of these attributes helps our customers reduce their total costs by eliminating local loop charges to connect their facility to the peering point, backhaul charges to and from connecting points, and the cost of redundancy to mitigate risks associated with increased points of failure along these routes.

Our Strategy

     Key components of our strategy include the following:

     Deepen our relationships with existing customers.We currently have over 180 customers based in our NAP of the Americas facility and over 230 customers worldwide, including key contracts with agencies of the U.S. Government and major enterprises. Due to the difficulties inherent in obtaining the qualifications and certifications required to conduct business with the U.S. Government, we believe there are significant barriers to entry for competition which, coupled with our proven ability to secure government business through publicly awarded and sole-sourced contracts, increases the likelihood that we will be awarded additional contracts in the future. We also seek to enhance our relationships with our existing enterprise customers by selling additional colocation space, interconnections and related professional and managed services both directly and indirectly through partnerships and joint-ventures.

     Penetrate new sectors.Since 2000, we have built a strong customer base in the government, telecommunications carrier and information technology service provider sectors. In order to continue growing our revenues, we are targeting additional customer sectors, such as financial services, healthcare, technology and media and communications to which we can provide colocation, connectivity and exchange services as well as professional and managed services. We believe that our opportunity to penetrate these sectors is particularly strong due to specified information technology related requirements of new laws such as the Health Insurance Portability and Accountability Act, the USA Patriot Act and the Sarbanes-Oxley Act of 2002.

     Establish insertion points for network-based services. The combination of our core infrastructure, comprised of state-of-the-art facilities with substantial fiber connectivity, our technology and our customer base provides us with the ability to directly connect multiple network service providers to our platform giving them access to a wide array of managed services. We define these combinations as Services Insertion Point^TM locations. Our Services Insertion Point^TM locations allow network service providers to reduce the capital and operational costs for the delivery of their services while maintaining a high degree of quality and availability. They also provide technology manufacturers and service providers with the ability to deploy their technology in a centralized fashion, reducing the capital and operational costs of reaching multiple network service providers, enterprises and end consumers. The ability to access multiple carriers in a single location, or “zero mile connectivity,” available via our Exchange Point Services Platform, allows all our

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customers to be pre-connected to one another and insert and deliver services in a real time and cost effective manner.

     Maintain and establish a presence in strategic locations.In addition to our NAP of the Americas facility in Miami, Florida, we operate regional IXs in Madrid, Spain, Santa Clara, California, and Sao Paulo, Brazil. In comparison to our facility in Miami, our regional locations are smaller in size, representing in the aggregate less than 10% of the footprint of our Miami facility. These regional IXs are centrally managed from our Miami facility and require less capital to establish and manage than our primary facility. Our regional IXs enable us to offer enhanced services to existing customers by making colocation space, exchange point services and managed services available in more immediate proximity to their locations around the world. In addition, we are in the process of establishing operations in the Washington, D.C. area to support our customer-driven initiatives with the U.S. Government. In response to the needs of our customers, we may establish and maintain Internet exchange points in additional locations deemed to be strategic.

Customers

     Our customer contracts have terms of between one year and twenty years, with an average of 2.5 years. Our customer contracts do not allow for early termination before the stated maturity date and typically provide for penalties if they are cancelled prior to expiration. As of December 31, 2004, we had over 180 customers based in our NAP of the Americas and over 230 customers in total. During the six months ended September 30, 2004, two of our customers, Blackbird Technologies and the U.S. Government, constituted 22% and 17%, respectively, of our data center revenues.

     Selected customers include:

Government and
Federal Information Technology	Carriers and Network	Content and
Service Providers	Providers	Service Providers	Enterprises
Blackbird Technologies City of Coral Gables, Florida DTS-PO* Miami-Dade County, Florida SRA International United States Southern Command	AT&T Global Crossing Latin America Nautilus** Progress Telecom Sprint Communications T-Systems***	Google Internap Miniclip NTT/Verio VeriSign Voiceglo	Bacardi USA Corporacion Andina de Fomento Florida International University Intrado Jackson Memorial Hospital Steiner Leisure

     *  Diplomatic Telecommunications Service — Program Office, a division of the U.S. Department of State.

  **  A business unit of Telecom Italia.

***  A business unit of Deutsche Telecom.

Products and Services

     Our products and services are comprised of three types: Colocation, Exchange Point, and Managed Services.

Colocation Services:

     Our facilities provide the physical environment necessary to keep a customer’s Internet and telecommunications equipment up and running 24 hours a day, seven days a week. Our facilities are custom designed to exceed industry standards for electrical and environmental systems. In addition, we offer a wide range of physical security features, including biometric scanners, man traps, smoke detection, fire suppression systems, motion sensors, secured access, video camera surveillance and security breach alarms. High levels of reliability are achieved through a number of redundant subsystems including power and fiber connections from multiple sources. Depending on customer requirements, open racks, cabinets, or customized caged floor spaces are available to our customers for the housing of their mission critical equipment. We also offer SCIFs, which are facilities that comply with U.S. federal government security standards.

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Exchange Point Service:

     Our Exchange Point Service Platform is designed to allow our customers to connect their networks and equipment with that of others in a flexible and cost-effective manner. Doing so allows them to reduce costs while enhancing the reliability and performance associated with the exchange of Internet and telecommunications traffic. Our Exchange Point Service Platform consists of a number of high speed optical/digital switches and routers, combined to create a total switching capacity that can grow to over 4.0 terabits per second. Our customers connect to the platform at speeds and protocols best suited to meet their particular needs. In addition to facilitating peering and transit agreements among our customers, our Exchange Point Platform allows our customers and partners to insert their managed services into the carrier networks connected to the platform. We currently offer the following Exchange Point Services:

     • Ethernet Exchange Service

Our Exchange Point Service Platform features a redundant and expandable Ethernet switch. This fully distributed switch promotes predictable application performance, increased network availability and decreased costs generated by the peering and transit agreements between and among our customers.

     • Optical Exchange Service

Our customers may choose to establish peering and transit relationships via private cross-connects on our advanced optical/digital switch.

     • Muxing and De-muxing Services

The transmission of multiple data signals over a single communication circuit is known as multiplexing or muxing. The separation of two or more signals previously combined by compatible multiplexing equipment is known as de-muxing. Our Muxing and De-muxing service allows customers to terminate any interface on the optical switch, regardless of their peering or transit agreements or cross-connect needs. This provides flexibility and growth in their network design.

     • International Gateway Services

Our Exchange Point Service Platform supports both foreign and domestic communications protocols which allows service providers the ability to transparently cross-connect data signals from around the globe, regardless of local country format.

Managed and Professional Services

     Our Managed Services are designed to support the core needs of network based systems, supplying performance monitoring, systems management and mission critical Internet protocol infrastructure. Our Professional Services focus on producing faster network response times, reducing implementation timelines, assisting customers in the provisioning process and with troubleshooting and maintenance. We currently offer the following Managed and Professional Services:

     • Network Operations Center (NOC) Outsourcing

Our Network Operations Center, or NOC, service is a customer-outsourced service providing continuous 24-hour support, monitoring and management of all elements in our customer’s computing network. The service allows our customers to benefit from our investment in hardware, software tools and expertise, thereby allowing our customers to be supported by a NOC without requiring them to make significant investments in equipment and dedicated staff. The NAP of the Americas is equipped with two fully staffed NOCs, one serving our commercial sector customers and the other serving our Federal government sector customers.

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     • Managed Router Service

Our Managed Router Service, or MRS, provides customers with an avenue for outsourcing their router management thereby eliminating the need for in-house router expertise and costly capital and maintenance expenses.

     • Managed Storage Service

Our Managed Storage Service is a fully managed Storage Area Network, or SAN, service. It provides our customers with an outsourced primary storage solution without the need for additional capital expenditures or in house staff expertise.

     • Managed Optical Extension Service

Our Managed Optical Extension Service provides all the network management and monitoring benefits of our Exchange Point Service Platform to remote customer locations. This includes remote configuration, alarm and performance management.

     • Advanced Network Monitoring Services

Advanced Network Monitoring Services provides continuous in-service monitoring of network performance for detecting degradation and its corresponding impact on the delivered quality of service.

     • Professional Outsourced Services

Our staff can provide full integration activities for all aspects of a customer-outsourced global project. Along with the planning, design and engineering related to the network and the general program management to control the project, we manage vendors, purchase equipment, receive, store and manage inventory, provision, test, ship, track, install, turn up, monitor and manage performance of the network and monitor and maintain equipment and services.

     • Installation Services

Our installation services specialists provide basic installation of our customers’ equipment. This service reduces our customers’ implementation times, and increases the productivity of our customers’ technical personnel, by avoiding costly downtime due to lack of materials and equipment management and project coordination.

     • Remote Hands and Smart Hands Service

Remote Hands and Smart Hands assists customers that need to remotely access their equipment to perform simple troubleshooting or minor maintenance tasks on a 24 hours a day, 7 days a week basis that do not require tools or equipment. Smart Hands enhances the Remote Hands service with more complex remote assistance using industry certified engineers for troubleshooting and maintenance. Remote Hands and Smart Hands services are available on demand or per contract.

Sales and Marketing

     Our sales and marketing objective is to achieve market penetration and brand name recognition by directly and indirectly targeting government and commercial customers.

     Government and Federal Information Technology Service Providers.We sell our products and services to the Federal, state and local governments and various Federal information technology service providers through our direct sales force. A number of our senior executives and sales professionals have Federal security government clearance and experience selling products and services in the public sector. Our relationships with Federal information technology service providers allow us to partner with them to provide our services to an expanded universe of potential public sector customers and have led to increased customers and revenues for us.

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     Commercial.Our commercial sales effort is comprised of both direct and indirect sales channels. Our direct sales force is organized by industry sectors such as carriers and network providers, content and service providers and enterprises. We also have sales representatives at our facilities in Miami, Florida, Santa Clara, California, Sao Paulo, Brazil, and Madrid, Spain. We complement our direct sales operation through utilizing sales channels developed in partnership with certain of our customers and partners. Network service providers and carriers, for example, are given incentives to sell our products and services to their existing clients as a means to increasing the Internet or telecommunications traffic that travels across their own networks already located at our facilities.

     We also have a channel marketing program to promote our products and services to enterprises in various geographic locations. This sales force is supported by a team of trained support engineers who work with our sales executives and their customers to respond to customer questions and design a package of services that best meets the customer’s needs.

     Marketing.Our marketing activities are designed to drive awareness of our products and services, and generate qualified sales opportunities through various direct marketing and event driven campaigns. Our marketing team is responsible for providing our sales force with product brochures, collateral and relevant sales tools to improve their sales effectiveness. Our marketing organization also is responsible for our product strategy and direction based upon primary and secondary market research and the advancement of new technologies. We participate in a variety of Internet, computer and financial industry conferences and place our officers and employees in keynote speaking engagements at these conferences. In addition to these activities, we build recognition through sponsoring or leading industry technical forums and participating in Internet industry standard-setting bodies.

Competition

     Unlike many IXs in the United States, we combine exchange point services (to facilitate peering) with carrier-grade colocation space and managed services in carrier neutral facilities. Consequently, we believe that our facilities are competitively unique and can only be replicated through the expenditures of significant funds over a lengthy period, an unlikely event in today’s telecommunications environment.

     We believe that carriers and Internet service providers have no need to be in two different Tier-1 IXs serving the same geographic area. Therefore, to the extent that carriers are located in our facilities and have already invested significant funds to establish their presence at those facilities, this is an incentive for them to remain our customers. In addition, a competing Tier-1 IX would require the backing of carriers and Internet service providers serving this area, many of which are already our customers.

     However, our current and potential competition includes:

•  Internet data centers operated by established U.S., Brazilian and Spanish communications carriers such as AT&T, Qwest, Embratel and Telefonica.Unlike the major network providers, which constructed data centers primarily to help sell bandwidth, we have aggregated multiple networks in one location, which we believe provides diversity, competitive prices and high performance. Carrier operated data centers only provide one choice of carrier and generally require capacity minimums as part of their pricing structures. Our IXs provide access to a choice of carriers and allow our customers to negotiate the best prices with a number of carriers resulting in better economics and redundancy.

•  U.S. IXs such as MAE West and carrier operated IXs.IXs are typically older facilities, and their operators may lack the incentive to upgrade the infrastructure in order to scale with traffic growth. In contrast, we provide secure facilities with 24-hour support and a full range of network and managed services.

•  Vertically integrated web site hosting companies, colocation companies and Internet service providers such as Navisite and Globix.Some managed service providers require that customers purchase their entire network and managed services directly from them. We are a network and service provider aggregator and allow our customers to contract directly with the networks and web-hosting partner best suited for their business.

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•  Neutral colocation and Internet exchange services companies such as Equinix.Geographic location tends to be an important factor in determining where networks will meet to create neutral points of connectivity. The location available may not be where potential buyers need capacity or where demand exists. Also, much of the older data center capacity cannot support current blade server technology that requires much more intensive cooling and power density. Our facilities are neutral connectivity points in their respective geographic areas. We believe that this creates a natural barrier to entry to competitors, as our large customers would likely not incur the expense to relocate or deploy similar infrastructure in other centers within our geographic regions. For this reason, we believe that we have positioned our company as a leader in carrier neutral exchange points connecting the United States and Europe to Latin American markets.

Employees

     As of December 31, 2004, we had 192 full-time employees in the United States. Of these employees, 118 were in data center operations, 27 were in sales and marketing and 47 were in general and administrative. We also have four sales and administrative representatives in Brazil.

     Our employees are not represented by a labor union and are not covered by a collective bargaining agreement. We believe that our relations with our employees are good.

Properties

     From February 3, 2001 until December 31, 2004, we owned a 0.84% interest in Technology Center of the Americas, LLC, which we refer to as TECOTA, the entity that owns the 750,000 square foot building in which the NAP of the Americas is housed. On December 31, 2004, we purchased the remaining 99.16% equity interests in TECOTA that were not already owned by us such that TECOTA became our wholly-owned subsidiary. Prior to this acquisition, we leased the 120,000 square foot second floor of the building. The term of this lease commenced in October 2001 and is for 20 years. Monthly base rent under the lease was approximately $216,000. We were also responsible for our pro rata share of common area maintenance expenses and real estate taxes under the lease, which amount to approximately $40,000 per month. In addition, on November 3, 2003, we entered into an agreement to lease an additional 120,000 square feet of space on the third floor of the building, and extended our existing lease for the second floor to co-terminate with the third floor lease on May 31, 2025. Annual base rent for the third floor was approximately $2.4 million with the monthly base rent payments scheduled to commence in April 2005. We were also responsible for our pro rata share of common area maintenance expenses and real estate taxes under this third lease.

     In Sao Paulo, Brazil, we lease approximately 5,500 feet at a Hewlett Packard data center. Annual rent is approximately $50,000. The term of the lease commenced in October 2003 and is for 18 years.

     In Santa Clara, California, we also lease approximately 40,000 square feet for a colocation facility. The term of the lease commenced in January 2001 and is for 20 years. Annual rent is approximately $1,500,000. We are responsible for real estate taxes and property and casualty insurance expenses which in the aggregate amount to approximately $46,000 annually.

     We also lease approximately 14,660 square feet for our corporate office in Miami, Florida. The term of the lease commenced in April 2000 and is for five years. Annual rent is approximately $440,000. We are also responsible for our share of common area maintenance expenses and real estate taxes.

     Additionally, we lease approximately 12,000 square feet for office space in Miami, Florida. Annual rent is approximately $220,000. The term of the lease commenced in February 2001 and is for five years.

     Our principal executive office is located at 2601 South Bayshore Drive, Miami, Florida 33133. Our telephone number is (305) 856-3200.

Legal Proceedings

     We are not currently subject to any litigation which individually or in the aggregate could reasonably be expected to have a material adverse effect on our financial condition or results of operations.

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DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Our executive officers and directors and their ages as of December 31, 2004, are as follows:

Name	Age		Principal Position
Manuel D. Medina		52	Chairman of the Board, President and Chief Executive Officer
Joseph R. Wright, Jr.		66	Vice Chairman of the Board
Guillermo Amore		65	Director
Timothy Elwes		69	Director
Antonio S. Fernandez		65	Director
Fernando Fernandez-Tapias		66	Director
Arthur L. Money		64	Director
Marvin S. Rosen		64	Director
Miguel J. Rosenfeld		55	Director
Rodolfo A. Ruiz		56	Director
Jamie Dos Santos		42	Chief Marketing Officer
Jose E. Gonzalez		44	Senior Vice President — Business Affairs
Jose A. Segrera		34	Chief Financial Officer
Fern S. Watts		46	Chief Legal Officer and Secretary
Marvin Wheeler		50	Chief Operations Officer

     Manuel D. Medina has served as our Chairman of the Board, President and Chief Executive Officer since April 28, 2000, the date of our merger, and as that of Terremark since its founding in 1982. In addition, Mr. Medina is a managing partner of Communications Investors Group, the holder of the Series G preferred stock. Mr. Medina has been a director of Fusion Telecommunications International since December 14, 1998. Before founding Terremark, Mr. Medina, a certified public accountant, worked with PricewaterhouseCoopers LLP. Subsequently, he established and operated an independent financial and real estate consulting company. Mr. Medina earned a Bachelors of Science degree in Accounting from Florida Atlantic University in 1974.

     Joseph R. Wright, Jr. has served as our Vice Chairman of the Board since April 28, 2000. Mr. Wright currently is Chief Executive Officer and a director of PanAmSat, a global provider of satellite-based communication services. He is also a director of Scientific Games Corp. From 1997 to 2000, Mr. Wright served as Chairman of the Board of GRC International, Inc., a United States public company that provides technical information technology support to government and private entities. From 1995 to 2003, Mr. Wright also served as Co-Chairman of Baker & Taylor Holdings, Inc., an international book and video distribution company, and Vice Chairman of Jefferson Consulting Group, a Washington D.C. consulting firm. From 1989 to 1994, Mr. Wright served as Executive Vice President, Vice Chairman and Director of W.R. Grace & Co., an international chemicals and health care company, President of Grace Energy Corporation and Chairman of Grace Environmental Company. From 1982 to 1989, Mr. Wright held the positions of Director and Deputy Director of the Office of Management and Budget, The White House, and was a member of President Reagan’s cabinet. Before 1982, he served as Deputy Secretary, United States Department of Commerce, President of Citicorp Retail Services and Retail Consumer Services, held posts in the United States Department of Agriculture and the United States Department of Commerce, and was Vice President and Partner of Booz Allen & Hamilton, a management consulting firm.

     Guillermo Amore has served as a member of our board of directors since February 2001. From August 2000 to February 2001, Mr. Amore served as the President and Chief Operating Officer of our wholly-owned subsidiary, Terremark Latin America, Inc., prior to which, he served as Chairman and Chief Executive Officer of Spectrum Telecommunications Corporation until its acquisition. Mr. Amore has nearly 35 years of telecommunications experience, much of it focused on the developing markets of Latin America and the Caribbean. During his tenure at GTE Corporation he built an extensive network of contacts in the region. These contacts served him well in business development and regulatory affairs during his stewardship of Grupo Isacell

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S.A. of Mexico and of Spectrum Telecommunications. Mr. Amore holds an MBA from Harvard University and a Bachelors degree in Science in Electrical Engineering from Pontificia Universidad Javeriana, Colombia.

     Timothy Elwes has served as a member of our board of directors since April 2000. Mr. Elwes also served as member of the board of directors of Timothy Elwes & Partners Ltd., a financial services company, from May 1978 until October 1994, the business of which was merged into Fidux Trust Co. Ltd. in December 1995. He has been a non-executive director of Partridge Fine Arts plc, a public company since 1989. Since December 2000 he has served as a director of Timothy Elwes & Partners Ltd., a financial services company.

     Antonio S. Fernandez was elected to our Board Directors in September 2003. In 1970, Mr. Fernandez worked as a Systems Engineering Manager at Electronic Data Systems (EDS). In 1971, Mr. Fernandez joined duPont Glore Forgan as a Vice-President in Operations. In 1974, he joined Thomson McKinnon as Director of Operations and Treasurer. In 1979, he worked at Oppenheimer & Co. Inc. as Director of Operations and Treasurer where he also served as Chief Financial Officer from 1987 until 1994 and a member of the Board of Directors from 1991 until 1998. In 1991, Mr. Fernandez founded and headed the International Investment Banking Department at Oppenheimer & Co. and served in that capacity until 1999. Mr. Fernandez served on the Board of Banco Latinoamericano de Exportaciones from 1992 until 1999. He also served as Trustee of Mulhenberg College, PA from 1995 until 1998. He graduated from Pace University, NY in 1968 with a B.B.A.

     Fernando Fernandez-Tapias has served as a member of our board of directors since March 31, 2003. Since May 1991, Mr. Fernandez-Tapias has served as the President of Naviera F. Tapias. Mr. Fernandez-Tapias has also served as a board member of Union Fenosa. In addition, Mr. Fernández-Tapias founded Roll-On Roll-Off, Interpuertos, Spain Shipping, Naviera Amura and Naviera Roda. Mr. Fernández-Tapias currently serves as the President of the Cámara Oficial de Comercio e Industria de Madrid (Official Chamber of Commerce and Industry of Madrid). Mr. Fernández-Tapias holds a degree from the Instituto Internacional de Empresas de la Universidad Comercial de Deusto.

     Arthur L. Money has served as a member of our board of directors since May 2003. Since September 2002, Mr. Money has been a member of the board of directors of Rainbow Technologies, Inc., a provider of Information Technology security solutions. From 1999 to 2001, Mr. Money was the Assistant Secretary of Defense (C3I) and Department of Defense CIO. Prior to this, Mr. Money served as the Assistant Secretary of the Air Force for Research, Development, and Acquisition, and was Vice President and Deputy General Manager of TRW. From 1989 to 1995, Mr. Money was President of ESL, Inc. He has received distinguished public service awards from the U.S. Department of Defense (Bronze Palm), the U.S. Air Force, and the U.S. Navy. He is currently President of ALM Consulting specializing in command control and communications, intelligence, signal processing, and information processing. Mr. Money received his Master of Science Degree in Mechanical Engineering from the University of Santa Clara and his Bachelor of Science Degree in Mechanical Engineering from San Jose State University.

     Marvin S. Rosen has served as a member of our board of directors since April 2000. Mr. Rosen is a co-founder of Fusion Telecommunications International and served as its Vice Chairman from December 1998 to April 2000 and has served as its Chief Executive Officer since April 2000. From September 1995 through January 1997, Mr. Rosen served as the Finance Chairman of the Democratic National Committee. Mr. Rosen currently serves on the Board of Directors of the Robert F. Kennedy Memorial, since 1995, Bio-Medical Disposal, Inc., since 1998 and Fusion Telecommunications International, Inc., since 1997, where he has also been Vice-Chairman since December 1998. Mr. Rosen received his Bachelor of Science degree in Commerce from the University of Virginia, his LL.B. from Dickinson School of Law and his LL.M. in Corporations from New York University Law School.

     Miguel J. Rosenfeld has served as a member of our board of directors since April 2000. Since November 1991, he has also served as a Senior Vice President of Delia Feallo Productions, Inc., where he has been responsible for the development of soap opera productions in Latin America. From January 1995 until May 1998, he was the Director of Affiliates and Cable for Latin America for Protele, a division of Televisa International LLC. From December 1984 until September 1998, he was a sales manager for Capitalvision International Corporation. Mr. Rosenfeld holds a Bachelors degree in Administration from the University of Buenos Aires which he earned in 1975.

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     Rodolfo A. Ruiz has served as a member of our Board of Directors since July 2003. Since 2004, Mr. Ruiz has served as Executive Vice President — Spirits for Southern Wine and Spirits of America, Inc. From 1999 to 2003, Mr. Ruiz served as the President and CEO of Bacardi U.S.A. and held a series of senior management positions within the Bacardi organization since 1979, inclusive of having served as President and CEO of Bacardi Global Brands, President and CEO of Bacardi Asia/Pacific Region, and several senior executive sales, marketing, financial and operations positions within Bacardi USA. Prior to joining Bacardi, from 1966 to 1979, Mr. Ruiz, in his capacity as a certified public accountant, served as a Senior Auditor, Senior Internal Auditor, and Audit Manager with Price Waterhouse & Co. for a wide variety of public and private clients and projects in the United States and Mexico, as well as throughout Latin America, interspersed by a term, from 1973 to 1975, with International Basic Economy Corp, otherwise known as IBEC/Rockefeller Group. Mr. Ruiz holds a Bachelor of Business degree, Cum Laude, from the University of Puerto Rico.

     Jamie Dos Santos has served as our Chief Marketing Officer since March 2003. From April 2001 to March 2003, Ms. Dos Santos served as Senior Vice President Global Sales. From 1981 to April 2001, Ms. Dos Santos worked with the Bell System. Ms. Dos Santos held various positions during her tenure with Telcordia/Bell Systems including Director of Professional Services Latin America, Regional Account Director starting her career as a Business Service Representative prior to divestiture. Ms. Dos Santos attended the University of Florida and Bellcore’s elite Technical training curriculum receiving various degrees in telecommunications.

     Jose E. Gonzalez has served as our Senior Vice President — Business Affairs since October 2004. Previously he served as our Chief Legal Officer and Secretary from November 2003 through October 2004 and as Senior Vice President, General Counsel and Secretary from January 2001 until November 2003. Prior to joining Terremark, Mr. Gonzalez served as the Vice President and Regional Counsel for Sunbeam Corporation, responsible for legal affairs throughout Canada, Latin America/Caribbean and Asia. From 1995 to 1998, Mr. González was Assistant General Counsel, International, responsible for the international legal affairs of Blockbuster Entertainment, a subsidiary of Viacom, Inc. From 1990 to 1995 Mr. González was a member of the General Counsel’s Office of the American Express Company, where he served as Regional Counsel for Latin America and the Caribbean. Mr. González received his Bachelors of Arts degree from Fordham University in 1982 and his Juris Doctor from Fordham University School of Law in 1985. He is a member of the Bar of the State of New York and certified to practice as in-house counsel by the Bar of the State of Florida.

     Jose A. Segrera has served as our Chief Financial Officer since September 2001. From September 2000 to June 2001, Mr. Segrera served as our Vice President — Finance. From January 2000 to September 2000, Mr. Segrera served as the interim Chief Financial Officer of FirstCom Corporation. From June 1996 to November 1997, Mr. Segrera was a manager in the assurance practice at KPMG Peat Marwick LLP. Mr. Segrera received his Bachelors in Business Administration and his Masters in Professional Accounting from the University of Miami.

     Fern S. Watts has served as our Chief Legal Officer and Secretary since October 2004. Prior to joining Terremark, Ms. Watts practiced law for more than 20 years. Ms. Watts joined the law firm of Greenberg Traurig, P.A. in March 1992 and was a shareholder of that firm for almost nine years until joining Terremark. At Greenberg Traurig, P.A., Ms. Watts represented public and private companies in connection with various corporate transactions, including mergers and acquisitions, securities offerings and commercial borrowings. Ms. Watts received her B.A. from Barnard College, Columbia University and her J.D. from Harvard Law School. She is a member of the Bar of the States of New York and Florida.

     Marvin Wheeler has served as our Chief Operations Officer since November 2003. Previously he served as our Senior Vice President, Worldwide Operations since March 2003. From March 2001 to March 2003, Mr. Wheeler served as Senior Vice President of Operations and General Manager of the NAP of the Americas. From June 1978 to March 2000, Mr. Wheeler managed the Data Center and WAN/LAN Operations for BellSouth, Mr. Wheeler graduated from the University of Florida, where he earned a degree in Business Administration with a concentration in marketing.

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Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Securities Exchange Act of 1934 requires our officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than 10% shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

     Based solely on our review of the copies of the forms furnished to us and written representations of the reporting persons, we believe that during the fiscal year ended March 31, 2004, all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with, except Aviva Budd filed a late Form 4 reporting two transactions; Antonio S. Fernandez was late in filing a Form 3 when he became a director; and Jose Maria Figueres-Olsen filed a late Form 4 reporting three transactions.

Executive Compensation

Summary Compensation Table

     The following table presents information concerning compensation for our chief executive officer and the four most highly compensated executive officers, which we refer to as our named executive officers, for services in all capacities during the fiscal years indicated.

							Long Term
							Compensation
	Annual Compensation						Awards
	Fiscal		Salary		Commissions		Options/
Name and Principal Position	Year		($)		($)		SARS (#)
Manuel D. Medina		2004		350,000		—		—
Chairman of the Board, President and		2003		350,000		—		—
Chief Executive Officer		2002		350,000		—		100,000
Jamie Dos Santos		2004		250,000		104,000		200,000
Chief Marketing Officer		2003		250,000		23,000		275,000
		2002		175,000		75,000		200,000
Jose A. Segrera		2004		195,000		—		100,000
Chief Financial Officer		2003		170,000		—		100,000
		2002		170,000		—		200,000
Marvin Wheeler		2004		195,000		—		200,000
Chief Operations Officer		2003		175,000		—		100,000
		2002		135,000		—		105,000
Jose E. Gonzalez		2004		185,000		—		50,000
Chief Legal Officer		2003		185,000		—		75,000
and Secretary		2002		175,000		—		200,000

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Option/SAR Grants In Last Fiscal Year

     The following table sets forth information concerning grants of stock options made during the fiscal year ended March 31, 2004 to our named executive officers. No stock appreciation rights were granted during the fiscal year ended March 31, 2004.

										Potential Realizable
										Value At Assumed
										Annual Rates Of
										Stock Price
										Appreciation For
Individual Grants										Option Term(1)
	Number of		% of Total
	Securities		Options Granted			Exercise
	Underlying Options		to Employees in			Price		Expiration		5%		10%
Name	Granted(#)		Fiscal Year			($/Sh)		Date		($)		($)
Manuel D. Medina		—		—			—		—		—		—
Jose A. Segrera		100,000		2	%		0.33		4/1/13		18,194		44,812
Jose E. Gonzalez		50,000		1	%		0.33		4/1/13		9,097		22,406
Jamie Dos Santos		200,000		4	%		0.33		4/1/13		36,388		89,625
Marvin Wheeler		200,000		4	%		0.33		4/1/13		36,388		89,625

(1)  These amounts are based on assumed appreciation rates of 5% and 10% set by the Securities and Exchange Commission rules and are not intended to forecast possible future appreciation, if any, of our stock price.

Aggregated Options Exercises In Last Fiscal Year and Fiscal Year-End Option Values

     The following table sets forth information regarding option exercises by our named executive officers during the fiscal year ended March 31, 2004 and options they held on March 31, 2004. No stock appreciation rights were granted during the fiscal year ended March 31, 2004.

					Number of Securities				Value of Unexercised
					Underlying Unexercised				In-the-Money Options
	Shares				Options at Fiscal Year End				at Fiscal Year End(1)
	Acquired on		Value
Name	Exercise		Realized		Exercisable		Unexercisable		Exercisable		Unexercisable
Manuel D. Medina		—		—		200,000		—		—		—
Jose A. Segrera		—		—		383,334		166,666	$	33,667	$	36,333
Jose E. Gonzalez		—		—		350,000		125,000	$	23,667	$	21,583
Jamie Dos Santos		—		—		533,000		291,667	$	71,167	$	74,583
Marvin Wheeler		—		—		255,001		199,999	$	43,334	$	60,666

(1)  Based on a per share price of $0.72, the closing price of the common stock as reported on the American Stock Exchange on March 31, 2004, minus the exercise price of the option, multiplied by the number of shares underlying the option.

Compensation of Directors

     We maintain a policy of compensating our directors using stock option grants. Upon their election as a member of our board of directors, each director received options to purchase 100,000 shares of our common stock. Our employee directors receive the same compensation as our non-employee directors. The options granted to our directors vest as follows: one-third of the shares vest as of the date of grant, one-third on the first anniversary of the date of grant, and one-third on the second anniversary of the date of grant. On January 21, 2005, our board of directors approved a grant of additional options to purchase 100,000 shares of our common stock to each of our directors at an exercise price equal to $0.63 per share. These options vest 10% for each meeting attended by the respective director during the 18-month period commencing on the date of grant. Any options not vested by the end of this 18-month period are deemed to be forfeited by that director and cancelled. We reimburse our directors for all out-of-pocket expenses incurred in the performance of their duties as directors. We currently do not pay fees to our directors for attendance at meetings. We entered into an agreement with

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Joseph Wright, Jr., one of our directors, commencing September 21, 2001, engaging Mr. Wright as an independent consultant. The agreement is for a term of one year after which it renews automatically for successive one-year periods. Either party may terminate the agreement by providing 90 days notice. The agreement provides for an annual compensation of $100,000, payable monthly.

Employment Agreements

     Manuel D. Medina entered into a one year agreement, commencing March 10, 2000, employing him as our President and Chairman of the Board. On September 6, 2001, in consideration of Mr. Medina agreeing to repay his indebtedness to Ocean Bank earlier than otherwise required, pledging a certificate of deposit to the bank and personally guaranteeing our credit facility and approximately $21 million of construction payables, Mr. Medina’s employment agreement was amended and restated. The term of the amended and restated agreement commenced April 28, 2001 and employs Mr. Medina as our President, Chief Executive Officer and Chairman of the Board. The amended and restated agreement is for a term of twelve months and automatically renews for successive one year terms until either party gives written notice of its intention not to renew. The amended and restated agreement provides for an annual base salary of $350,000 and is subject to increases. Pursuant to the terms of his agreement, Mr. Medina is prohibited from competing with us for a one year period following termination of his employment, unless this termination is by us without cause or by him for “good reason” as specified in the employment agreement.

     Jamie Dos Santos has entered into an agreement, commencing November 1, 2002, employing her as our Senior Vice President of Global Initiatives. The agreement is effective until either party gives written notice of its intention to terminate. The agreement provides for an annual base salary of $250,000 and is subject to increases. Pursuant to the terms of her agreement, Ms. Dos Santos is prohibited from competing with us for a one year period following termination of her employment, unless this termination is by us without cause or by her for “good reason” as specified in the employment agreement. In April 2003, Ms. Dos Santos became our Chief Marketing Officer.

     Jose E. Gonzalez has entered into an agreement, commencing March 3, 2003, employing him as our Senior Vice President and General Counsel. The agreement is for an indefinite term until either party gives written notice of its intention to terminate. The agreement provides for an annual base salary of $185,000 and is subject to increases. Pursuant to terms of this agreement, Mr. Gonzalez is prohibited from competing with us for a one year period following termination of his employment, unless this termination is by us without cause or by him for “good reason” as specified in the employment agreement.

     Jose A. Segrera has entered into a one year employment agreement, commencing September 25, 2001, employing him as our Chief Financial Officer. The agreement automatically renews for successive one year terms until either party gives written notice of its intention not to renew. In June 2001, Mr. Segrera’s title was changed to Senior Vice President and Chief Financial Officer. The agreement provides for an annual base salary of $150,000, which has been increased to $200,000, and is subject to further increases. Pursuant to the terms of his agreement, Mr. Segrera is prohibited from competing with us for a one year period following termination of his employment, unless this termination is by us without cause or by him for “good reason” as specified in the employment agreement.

     Fern S. Watts has entered into an agreement, commencing October 18, 2004, employing her as our Chief Legal Officer. The agreement is effective until either party gives written notice of its intention to terminate. The agreement provides for an annual base salary of $250,000 and is subject to increases. The agreement also provides for the grant of options to purchase 200,000 shares of our common stock on the commencement date with an exercise price equal to the fair market value of our common stock on that date. Ms. Watts is prohibited from competing with us for a one year period following termination of her employment, unless this termination is by us without cause or by her for “good reason” as specified in the employment agreement.

     Marvin Wheeler has entered into an agreement, commencing November 1, 2002, employing him as our Senior Vice President of Operations. The agreement is effective until either party gives written notice of its intention to terminate. The agreement provides for an annual base salary of $175,000 and is subject to increases. Pursuant to the terms of his agreement, Mr. Wheeler is prohibited from competing with us for a one year period following termination of his employment, unless this termination is by us without cause or by his for “good

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reason” as specified in the employment agreement. In November 2003, Mr. Wheeler became our Chief Operations Officer.

     If the employment of either Manuel D. Medina or Jose A. Segrera is terminated without cause by us or by them for “good reason”, each is entitled to continue to receive his annual base salary through the date his employment would have ended under the terms of his agreement, but in no event for more than six months, together with certain other benefits.

     If the employment of Jamie Dos Santos, Jose E. González, Fern Watts or Marvin Wheeler is terminated without cause by us or by them for “good reason”, each is entitled to continue to receive his or her annual base salary together with certain other benefits for a period of six months from the date of termination.

     If the employment of any of Manuel D. Medina, Jamie Dos Santos, Jose E. Gonzalez, Jose A. Segrera, Fern Watts or Marvin Wheeler is terminated within one year of a change in control, each is entitled to continue to receive a payment equal to the sum of two times his or her annual base salary, incentive compensation, and the value of any fringe benefits plus any accrued incentive compensation through the date of termination and other benefits. The definition of a “change in control” in the applicable employment agreements includes the resignation of Manuel D. Medina as both our Chairman and Chief Executive Officer, his death, or his absence from the day to day business affairs of the Company for more than 90 consecutive days due to disability or incapacity.

Compensation Committee Interlocks and Insider Participation

     The following directors served as members of our compensation committee during the 2004 fiscal year: Timothy Elwes, Miguel J. Rosenfeld and Antonio S. Fernandez. No member of the compensation committee is now or ever was an officer or an employee of ours. No executive officer of ours serves as a member of the compensation committee of any entity one or more of whose executive officers serves as a member of our board of directors or compensation committee. There were no compensation committee interlocks during fiscal 2004.

Indemnification of Officers and Directors

     Our certificate of incorporation and bylaws designate the relative duties and responsibilities of our officers, establish procedures for actions by directors and stockholders and other items. Our amended and restated certificate of incorporation and bylaws also contain indemnification provisions that permit us to indemnify our officers and directors to the maximum extent provided by Delaware law.

     We have entered into indemnification agreements with all of our directors and some of our officers, to provide them with the maximum indemnification allowed under our bylaws and applicable law, including indemnification for all judgments and expenses incurred as the result of any lawsuit in which such person is named as a defendant by reason of being our director, officer or employee, to the extent indemnification is permitted by the laws of Delaware. We believe that the limitation of liability provisions in our amended and restated certificate of incorporation and the indemnification agreements will enhance our ability to continue to attract and retain qualified individuals to serve as directors and officers.

Directors and Officers Liability Insurance

     We have obtained directors’ and officers’ liability insurance with an aggregate liability for the policy year, inclusive of costs of defense, in the amount of $10,000,000. This policy expires April 3, 2005.

Employee Stock Option Plans

     Under our 1995 Stock Option Plan, we have reserved for issuance an aggregate of 500,000 shares of our common stock. As of December 31, 2004, we had granted options to purchase 385,000 shares of common stock pursuant to this plan, of which 267,500 have been exercised and 117,500 are vested but have not been exercised.

     Under our 1996 Stock Option Plan, we have reserved for issuance an aggregate of 12,000,000 shares of common stock, 11,986,567 of which have been granted. As of December 31, 2004, 10,355,455 granted options have vested but remain unexercised, 1,388,912 granted options remain subject to vesting schedules and 412,935 options have been exercised.

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     Under our 2000 Stock Option Plan, we have reserved for issuance an aggregate of 15,000,000 shares of common stock. As of December 31, 2004, we had granted options to purchase 8,948,600 shares of common stock pursuant to this plan, 5,329,290 of which have vested and 1,000 of which have been exercised.

     Unless sooner terminated by the board of directors, the 1995 Stock Option Plan, the 1996 Stock Option Plan and the 2000 Stock Option Plan will terminate on February 8, 2005, May 7, 2006 and September 21, 2010, respectively, the tenth anniversary date of the effectiveness of each stock option plan.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

     The following table sets forth information regarding the beneficial ownership of shares of our capital stock as of December 31, 2004, before and as adjusted to reflect the sale of shares offered by this prospectus assuming the underwriters do not exercise the overallotment option, for:

•  each of our directors and director nominees;

•  each of our executive officers named in the Executive Compensation Table;

•  all of our directors and executive officers as a group; and

•  each person known by us to beneficially own more than 5% of our outstanding common stock, series G preferred stock, series H preferred stock or series I preferred stock.

     As of December 31, 2004, 354,455,181 shares of our common stock, 20 shares of series G convertible preferred stock, 294 shares of series H convertible preferred stock and 390 shares of series I convertible preferred stock were outstanding. The outstanding shares of series G, series H and series I convertible preferred stock, as of December 31, 2004, were convertible into 2,229,838, 294,000 and 13,000,260 shares of our common stock, respectively.

     For purposes of the following table, a person is deemed to be the beneficial owner of securities that can be acquired by the person within 60 days from December 31, 2004 upon the exercise of warrants or options or upon the conversion of debentures or preferred shares. Each beneficial owner’s percentage is determined by assuming that options, warrants or conversion rights that are held by the person, but not those held by any other person, and which are exercisable within 60 days from December 31, 2004, have been exercised. Unless otherwise indicated, we believe that all persons named in this table have sole voting power and investment power over all the shares beneficially owned by them. Unless otherwise indicated, the address of each person listed in the following table is 2601 South Bayshore Drive, Miami, Florida 33133.

								Approximate
								Percentage of
		Amount and			Amount and			Outstanding Shares
		Nature of			Nature of			Beneficially Owned
		Beneficial Ownership			Beneficial Ownership
		Before the			After the			Before the			After the
Name and Address of Beneficial Owner		Offering(1)			Offering(1)			Offering			Offering
Common Stock:
	Manuel D. Medina		37,175,277	(2)		37,175,277	(2)		10.2	%		%
	Joseph R. Wright, Jr.		4,380,042	(3)		4,380,042	(3)		1.2
	Guillermo Amore		6,063,265	(4)		6,063,265	(4)		1.7
	Marvin S. Rosen		1,477,150	(5)		1,477,150	(5)		*
	Miguel J. Rosenfeld		2,701,855	(6)		2,701,855	(6)		*
	Timothy Elwes		315,000	(7)		315,000	(7)		*
	Antonio S. Fernandez		504,384	(8)		504,384	(8)		*
	Fernando Fernandez-Tapias		181,667	(9)		181,667	(9)		*
	Arthur L. Money		149,000	(9)		149,000	(9)		*
	Rodolfo A. Ruiz		149,000	(9)		149,000	(9)		*
	Jaime Dos Santos		533,000	(9)		533,000	(9)		*
	Marvin Wheeler		255,001	(9)		255,001	(9)		*
	Jose A. Segrera		383,334	(9)		383,334	(9)		*
	Jose E. Gonzalez		350,000	(9)		350,000	(9)		*
	Francis Lee		65,022,349	(11)(12)		65,022,349	(11)(12)		17
	Ocean Bank		20,000,000	(10)		20,000,000	(10)		5.6

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								Approximate
								Percentage of
		Amount and			Amount and			Outstanding Shares
		Nature of			Nature of			Beneficially Owned
		Beneficial Ownership			Beneficial Ownership
		Before the			After the			Before the		After the
Name and Address of Beneficial Owner		Offering(1)			Offering(1)			Offering		Offering
	Sun Equity Assets Limited		40,022,349	(11)		40,022,349	(11)		9.9
	Paradise Stream (Bahamas) Limited		25,000,000	(12)		25,000,000	(12)		7.1
	All directors and executive officers as a group (13 persons)		53,636,640			53,636,640			15.1
Series G Preferred Stock:
	Communications Investors Group		20	(13)		20	(13)		100.0
Series H Preferred Stock:
	One Vision Worldwide, LLC		294	(14)		294	(14)		100.0
Series I Preferred Stock:
	Louisa Stude Sarofim 2004 Terremark Grantor Retained Annuity Trust		80	(15)		80	(15)		20.5
	Guazapa Properties, Inc.		48	(16)		48	(16)		12.3
	CRG, LLC		100	(17)		100	(17)		25.6
	Asturpizza, S.A.		20	(18)		20	(18)		5.1
	CIG Investments, LLLP		40	(19)		40	(19)		10.3
	Promociones Bursatiles, S.A.		28	(20)		28	(20)		7.2

*  Represents less than 1%.

(1)	For purposes of this table, beneficial ownership is computed pursuant to Rule 13d-3 under the Exchange Act; the inclusion of shares as beneficially owned should not be construed as an admission that such shares are beneficially owned for purposes of the Exchange Act. Under the rules of the Securities and Exchange Commission, a person is deemed to be a “beneficial owner” of a security he or she has or shares the power to vote or direct the voting of such security or the power to dispose of or direct the disposition of such security. Accordingly, more than one person may be deemed to be a beneficial owner of the same security.
(2)	Includes 315,000 shares of common stock underlying options and 889,277 shares of common stock underlying convertible debentures. As reported in Mr. Medina’s Schedule 13D, and any amendments thereto, filed with the Securities and Exchange Commission on October 4, 2002, these include 7,021,682 shares as to which Mr. Medina has sole voting power but does not have dispositive power. Includes 2,229,838 shares of common stock which may be acquired upon conversion of the series G preferred stock held by Communications Investors Group, an entity in which Mr. Medina is a partner and holds a 50% interest. See “Shareholders Agreement” below.
(3)	Includes 3,515,000 shares of common stock underlying options and 10,000 shares owned by Mr. Wright’s sibling, over which Mr. Wright has investment control. Does not include 50,000 shares held in trust for the benefit of Mr. Wright’s grandchildren with respect to which Mr. Wright disclaims beneficial ownership.
(4)	Includes 315,000 shares underlying options and 84,000 shares underlying warrants. Also includes 843,936 shares, 2,154,201 shares underlying convertible debentures, 680,014 shares which may be acquired upon the conversion of shares of series I preferred stock and 58,800 shares underlying warrants which are owned by Margui Family Partners, Ltd. with respect to which Mr. Amore disclaims beneficial ownership except to the extent of his pecuniary interest therein.
(5)	Includes 360,000 shares of common stock underlying options and 205,810 shares underlying convertible debentures.
(6)	Includes 315,000 shares of common stock underlying options and 1,137,208 shares held indirectly by Mr. Rosenfeld. Does not include 58,105 shares held by Mr. Rosenfeld’s children and mother, with respect to which Mr. Rosenfeld disclaims beneficial ownership.
(7)	Includes 315,000 shares of common stock underlying options.

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(8)	Includes 149,000 shares of common stock underlying options and 242,884 shares of common stock underlying convertible debentures held by an entity with respect to which Mr. Fernandez disclaims beneficial ownership except to the extent of his pecuniary interest therein.
(9)	Represents shares of common stock underlying options.

(10)	The address of the beneficial owner is 780 N.W. 42nd Avenue, Miami, Florida 33126.
(11)	The address of the beneficial owner is Georgetown, Tortola, B.V.I. Francis Lee is the natural person deemed to be the beneficial owner of the shares held by Sun Equity Assets Limited. See “Shareholders Agreement” below.
(12)	The address of the beneficial owner is P.O. Box N-65, Charlotte House, Charlotte Street, Nassau, Bahamas. Francis Lee is the natural person deemed to be the beneficial owner of the shares held by Paradise Stream (Bahamas) Limited. See “Shareholders Agreement” below.
(13)	Represents 20 shares of series G convertible preferred stock which are convertible into 2,229,838 shares of common stock. The partners of Communications Investors Group are Manuel D. Medina and Andres Altaba, each of whom has a 50% interest.
(14)	Represents 294 shares of series H convertible preferred stock which are convertible into, and have voting rights equivalent to, 294,000 shares of common stock.
(15)	Represents 80 shares of series I convertible preferred stock which are convertible into, and have voting rights equivalent to, 2,666,720 shares of common stock.
(16)	Represents 48 shares of series I convertible preferred stock which are convertible into, and have voting rights equivalent to, 1,600,032 shares of common stock. Heinrich Adolf Hans Herweg is the natural person with voting and investment control over the shares.
(17)	Represents 100 shares of series I convertible preferred stock which are convertible into, and have voting rights equivalent to, 3,333,400 shares of common stock. Christian Altaba is the natural person with voting and investment control over the shares.
(18)	Represents 20 shares of series I convertible preferred stock which are convertible into, and have voting rights equivalent to, 666,680 shares of common stock. Antonio De Reguero is the natural person with voting and investment control over the shares.
(19)	Represents 40 shares of series I convertible preferred stock which are convertible into, and have voting rights equivalent to, 1,333,360 shares of common stock. Vincente Perez Cisneros is the natural person with voting and investment control over the shares.
(20)	Represents 28 shares of series I convertible preferred stock which are convertible into, and have voting rights equivalent to, 933,352 shares of common stock. Roberto Solis Monsato is the natural person with voting and investment control over the shares.

Shareholders Agreement

     Under the terms of a Shareholders Agreement, dated as of May 15, 2000, among Vistagreen Holdings (Bahamas), Ltd., predecessor-in-interest to Sun Equity Assets Limited, Moraine Investments, Inc., predecessor-in-interest to Sun Equity Assets Limited, and Paradise Stream (Bahamas) Limited, on the one hand, and Brian Goodkind, Michael L. Katz, William Biondi, Edward P. Jacobsen, Irving I. Padron, Jr., Aviva Budd, TCO Company Limited, Manuel D. Medina, Willy Bermello and ATTU Services, Inc., the shareholders party to the Agreement have agreed to vote in favor of the election of two nominees of Vistagreen (now Sun Equity Assets Limited) to our board of directors and have further agreed that one of these nominees, as designated by Vistagreen, will be elected to the executive committee of our board of directors. Vistagreen has nominated Timothy Elwes to serve on our board of directors. We do not currently have an executive committee.

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Equity Compensation Plan Information

     This table summarizes share and exercise price information about our equity compensation plans as of March 31, 2004.

	Number of Securities
	to be Issued Upon
	Exercise of		Weighted Average		Number of Securities
	Outstanding		Exercise Price of		Available for Future
	Options,		Outstanding Options,		Issuance Under Equity
Plan Category	Warrants and Rights		Warrants and Rights		Compensation Plans
Equity compensation plans approved by security holders		15,852,731	$	1.96		6,647,269
Equity compensation plans not approved by security holders		900,000	$	0.6700		—

For more information regarding our equity compensation plans, see “Directors and Executive Officers of the Registrant — Executive Compensation — Employee Stock Option Plans.”

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DESCRIPTION OF CAPITAL STOCK

     The following description of the terms of our common stock sets forth certain general terms and provisions of our common stock. This section also summarizes relevant provisions of the Delaware General Corporation Law, which we refer to as “Delaware law.” The terms of our amended and restated certificate of incorporation and by-laws, as well as the terms of Delaware law, are more detailed than the general information provided below. Therefore, you should carefully consider the actual provisions of these documents.

Authorized and Outstanding Shares

     As of December 31, 2004, under our amended and restated certificate of incorporation, we had the authority to issue:

•  600,000,000 shares of common stock, par value $0.001 per share; and

•  10,000,000 shares of preferred stock, par value $0.001 per share, which are issuable in series on terms to be determined by our board of directors, of which 20 shares are designated as series G convertible preferred stock, 5,882 shares are designated as series H convertible preferred stock and 600 shares are designated as series I convertible preferred stock.

     As of December 31, 2004:

•  354,455,181 shares of our common stock were outstanding;

•  20 shares of our series G convertible preferred stock were outstanding and held by an entity in which Manuel D. Medina, our Chairman and Chief Executive Officer, owns a 50% interest. Each share of series G convertible preferred stock may be converted into 111,492 shares of our common stock;

•  294 shares of our series H convertible preferred stock were outstanding. Each share of series H convertible preferred stock may be converted into 1,000 shares of our common stock;

•  390 shares of our series I convertible preferred stock were outstanding. Each share of series I convertible preferred stock may be converted into 33,334 shares of our common stock; and

•  approximately 135,466,275 shares of our common stock have been reserved for issuance pursuant to the convertible preferred stock discussed above and our outstanding 9% senior convertible notes, options and warrants to purchase our common stock.

     We are offering                      shares of our common stock in this offering. Upon completion of this offering,                      shares of our common stock will be issued and outstanding, or                      shares of common stock will be issued and outstanding if the underwriters exercise their over-allotment option in full.

Rights of Our Common Stock

     Preemptive Rights.The holders of our common stock do not have preemptive rights to purchase or subscribe for any stock or other securities of ours.

     Voting Rights.Each outstanding share of our common stock is entitled to one vote per share.

     Dividends.Holders of our common stock are entitled to receive dividends or other distributions when and if declared by our board of directors. The right of our board of directors to declare dividends, however, is subject to any rights of the holders of other classes of our capital stock and the availability of sufficient funds under Delaware law to pay dividends. In accordance with our mortgage loan with Citigroup and the terms of our senior secured notes, we may not pay cash or stock dividends without the written consent of Citigroup and the Falcon investors.

     Liquidation Rights.In the event of the liquidation of our company, subject to the rights, if any, of the holders of other classes of our capital stock, the holders of our common stock are entitled to receive any of our assets available for distribution to our stockholders ratably in proportion to the number of shares held by them.

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Listing

     We list our common stock on the American Stock Exchange under the symbol “TWW.”

Anti-Takeover Effects of Provisions of the Charter and Bylaws and of Delaware Law

     Our amended and restated certificate of incorporation and bylaws, contain provisions that could discourage, delay or prevent a tender offer or takeover attempt at a price which many stockholders may find attractive. The existence of these provisions could limit the price that investors might otherwise pay in the future for shares of our common stock.

Certificate of Incorporation and Bylaws

     Blank Check Preferred Stock.Our board of directors, without stockholder approval, has the authority under our amended and restated certificate of incorporation to issue preferred stock with rights superior to the rights of the holders of common stock. As a result, preferred stock could be issued quickly and easily, could impair the rights of holders of common stock and could be issued with terms calculated to delay or prevent a change of control or make removal of management more difficult.

     Election of Directors.Our amended and restated certificate of incorporation provides that a majority of directors then in office may fill any vacancy occurring on the board of directors, even though less than a quorum may then be in office. These provisions may discourage a third party from voting to remove incumbent directors and simultaneously gaining control of the board of directors by filling the vacancies created by that removal with its own nominees.

     Stockholder Action.Our amended and restated certificate of incorporation provides that stockholders may only act at meetings of stockholders and not by written consent in lieu of a stockholders’ meeting, unless the action that requires stockholder approval is approved by a majority of our continuing directors.

     Stockholder Meetings.Our bylaws provide that stockholders may not call a special meeting of the stockholders. Rather, only our board of directors, acting pursuant to a resolution of a majority of the directors then in office, will be able to call special meetings of stockholders. Our bylaws also provide that stockholders may only conduct business at special meetings of stockholders that was specified in the notice of the meeting. These provisions may discourage another person or entity from making a tender offer, even if it acquired a majority of our outstanding voting stock, because the person or entity could only take action at a duly called stockholders’ meeting relating to the business specified in the notice of meeting and not by written consent.

     Requirements for Advance Notification of Stockholder Nominations and Proposals.Our bylaws provide that a stockholder seeking to bring business before an annual meeting of stockholders, or to nominate candidates for election as directors at an annual meeting of stockholders, must provide timely notice of this intention in writing. To be timely, a stockholder must deliver or mail the notice and we must receive the notice at our principal executive offices not less than 5 days prior to the date our directors determine for proposals to be received. The bylaws also include a similar requirement for making director nominations and specify requirements as to the form and content of the stockholder’s notice. These provisions could delay stockholder actions that are favored by the holders of a majority of our outstanding stock until the next stockholders’ meeting.

     Super-Majority Voting.Delaware law generally provides that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation’s certificate of incorporation, unless a corporation’s certificate of incorporation requires a greater percentage. We have provisions in our amended and restated certificate of incorporation which require a vote of at least 66 2/3% of the stockholders entitled to vote in the election of directors to amend, alter, change or repeal certain provisions of our amended and restated certificate of incorporation.

Delaware Anti-Takeover Statute

     We are a Delaware corporation subject to Section 203 of the Delaware General Corporation Law. Under Section 203, some business combinations between a Delaware corporation whose stock generally is publicly-

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traded or held of record by more than 2,000 stockholders and an interested stockholder are prohibited for a three-year period following the date that the stockholder became an interested stockholder, unless:

•  the corporation has elected in its restated certificate of incorporation not to be governed by Section 203;

•  the board of directors of the corporation approved the transaction which resulted in the stockholder becoming an interested stockholder before the stockholder became an interested stockholder;

•  upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the commencement of the transaction, excluding voting stock owned by directors who are also officers or held in employee benefit plans in which the employees do not have a confidential right to tender stock held by the plan in a tender or exchange offer; or

•  the board of directors approves the business combination and holders of two-thirds of the voting stock which the interested stockholder did not own authorize the business combination at a meeting.

     We have not made an election in our amended and restated certificate of incorporation to opt out of Section 203. In addition to the above exceptions to Section 203, the three-year prohibition does not apply to some business combinations proposed by an interested stockholder following the announcement or notification of an extraordinary transaction involving the corporation and a person who was not an interested stockholder during the previous three years or who became an interested stockholder with the approval of a majority of the corporation’s directors. For the purposes of Section 203, a business combination generally includes mergers or consolidations, transactions involving the assets or stock of the corporation or its majority-owned subsidiaries and transactions which increase an interested stockholder’s percentage ownership of stock. Also, an interested stockholder generally includes a stockholder who becomes beneficial owner of 15% or more of a Delaware corporation’s voting stock, together with the affiliates or associates of that stockholder.

Limitation of Liability and Indemnification

     Our amended and restated certificate of incorporation limits the liability of our directors to the maximum extent permitted by Delaware law. Delaware law provides that directors will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except liability for:

•  any breach of their duty of loyalty to the corporation or its stockholders;

•  acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

•  unlawful payments of dividends or unlawful stock repurchases or redemptions; or

•  any transaction from which the director derived an improper personal benefit.

     This provision has no effect on any non-monetary remedies that may be available to us or our stockholders, nor does it relieve us or our officers or directors from compliance with federal or state securities laws.

     Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us under the provisions that we describe above or otherwise, we have been informed that in the opinion of the Securities and Exchange Commission, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

     Our bylaws also permit us to purchase and maintain insurance on behalf of any officer or director for any liability arising out of his or her actions in that capacity, regardless of whether our bylaws would otherwise permit indemnification for that liability. We have obtained liability insurance for our officers and directors in the amount of $10 million. At the present time, there is no pending litigation or proceeding involving any of our directors, officers, employees or agents in which indemnification will be required or permitted. We are not aware of any threatened litigation or proceeding which may result in a claim for indemnification.

Registration Rights

     Holders of approximately 97,152,097 shares of our common stock have registration rights with respect to those shares.

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     We are required to bear all registration expenses incurred in connection with these registrations. The holders of shares registered by us will pay all underwriting discounts and selling commissions applicable to the sale of their securities. We also agreed to indemnify these holders for any damages they suffer due to any untrue statement or omission that we make in a registration statement covering their shares.

     The registration rights of these holders will terminate when all of the registrable shares may be sold without registration under the Securities Act pursuant to Rule 144(k).

Transfer Agent and Registrar

     The transfer agent and registrar for the common stock is Mellon Bank, N.A.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     On September 24, 2004, we entered into an agreement with Manuel D. Medina, our Chairman, President and Chief Executive Officer, regarding Mr. Medina’s repayment of an outstanding note in the principal amount of $5,000,000 owed by Mr. Medina to us which matured on September 30, 2004. Per the terms of the agreement, Mr. Medina agreed to tender 7,737,351 shares of our common stock as payment of the outstanding principal and interest due on the note. The terms of the agreement were approved by our Board of Directors at a meeting held on September 28, 2004. On September 29, 2004, Mr. Medina completed the transfer of the shares to us.

     In May 2004, we issued warrants to purchase 200,000 shares of our common stock to Veritas High Yield Arbitrage I Fund, LLC, Veritas High Yield Arbitrage II Fund, LLC, and Veritas High Yield Arbitrage Fund, (Bermuda) Ltd. in connection with a $5.2 million loan from them. We agreed to file a registration statement covering the shares of common stock underlying the warrants and to use our best efforts to cause the registration statement to become effective by August 15, 2004. We were unable to cause the registration statement to be declared effective by August 15, 2004, and upon exercise of the warrants, we were required to deliver 200,000 fully registered shares of common stock to the lenders. On August 24, 2004, Miguel Rosenfeld, one of our directors, delivered 200,000 registered shares to the lenders on our behalf. In exchange, we issued Mr. Rosenfeld 200,000 unregistered shares and agreed to include the shares in this registration statement.

     On March 31, 2004, Guillermo Amore, one of our directors, purchased 12 shares of our series I convertible preferred stock, and Margui Family Partners, Ltd., an entity in which Mr. Amore has an interest, purchased 8.4 shares of our series I convertible preferred stock. As payment for the shares, Mr. Amore issued a note for $300,000 and Margui Family Partners, Ltd. issued a note for $210,000. Both notes bear interest at 10%. Mr. Amore and we have agreed to set off these notes against our debentures held by Mr. Amore. Mr. Amore has since transferred all his ownership of our series I convertible preferred stock to Margui Family Partners.

     Upon conversion of outstanding promissory notes in April 2002, two of our directors, Guillermo Amore and Miguel Rosenfeld, received 1,501,503 shares and 1,134,641 shares of our common stock, respectively. The original principal amounts of the notes converted by Messrs. Amore and Rosenfeld were $1,126,127 and $850,980, respectively. The conversion price of $0.75 per share was determined by our management and approved by the board of directors, with Messrs. Amore and Rosenfeld abstaining, after considering recent quoted market prices of our stock, recent equity transactions and our business plan and financial projections.

     We have entered into indemnification agreements with all of our directors and some of our officers, to provide them with the maximum indemnification allowed under our bylaws and applicable law, including indemnification for all judgments and expenses incurred as the result of any lawsuit in which such person is named as a defendant by reason of being one of our directors, officers or employees, to the extent such indemnification is permitted by the laws of Delaware. We believe that the limitation of liability provisions in our Amended and Restated Certificate of Incorporation and the indemnification agreements enhance our ability to continue to attract and retain qualified individuals to serve as directors and officers.

     On September 5, 2001, we closed on a $48.0 million credit facility with Ocean Bank. In addition to Mr. Medina personally guaranteeing the credit facility, and in order for us to obtain the facility, the bank further required Mr. Medina to, prior to the bank disbursing funds under the credit facility, provide a $5.0 million certificate of deposit to the bank as collateral for certain personal loans Mr. Medina has with the bank and

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commit to accelerate the maturity date of those personal loans to December 31, 2001. Subsequent to September 2001, Mr. Medina and the bank changed the maturity date on the personal loans, first to December 31, 2001 and later to July 1, 2002. Mr. Medina also agreed to subordinate debt that we owed to Mr. Medina in the event of our default under the credit facility. Mr. Medina has repaid part of those personal loans to Ocean Bank, leaving an outstanding principal balance of approximately $4.6 million as of December 31, 2003. On February 11, 2004, Mr. Medina extended one loan with a principal amount of approximately $3.3 million to February 11, 2005 and made an interest payment of $63,500. On March 8, 2004, Mr. Medina extended the maturity date on the other loan which had a principal amount of approximately $1.3 million to March 8, 2005 and made a $73,446 payment of principal and interest.

     On September 5, 2001, in consideration of Mr. Medina agreeing to repay his indebtedness to the bank earlier than otherwise required, pledging the certificate of deposit to the bank and personally guaranteeing the $48.0 million credit facility and approximately $21.0 million of construction payables, we entered into an amended and restated employment agreement with him. Under the terms of the amended and restated employment agreement we will indemnify Mr. Medina from any personal liability related to his guarantees of any of our debt, use commercially reasonable efforts to relieve Mr. Medina of all his guarantees of our debt, provide up to $6.5 million of cash collateral to the bank should Mr. Medina be unable to repay the personal loans when due and agreed to provide a non interest-bearing $5.0 million loan to Mr. Medina. Additionally, as long as Mr. Medina’s guarantees of our debt exist, we have agreed to nominate Mr. Medina to our Board of Directors and not remove Mr. Medina, unless for good cause, or remove any of our officers without Mr. Medina’s consent. There was no change in the amount or timing of Mr. Medina’s cash or non-cash compensation in connection with these agreements, nor did Mr. Medina receive any guarantee fee or other fees in connection with his guaranteeing our indebtedness. We are no longer obligated to fund the $6.5 million of cash collateral.

     No fee was paid to Mr. Medina for his guarantee of the Ocean Bank loan. In July 2002, the terms of our $5.0 million loan to Mr. Medina were amended. The amended note had a maturity date of September 30, 2004 and bore interest subsequent to September 5, 2002. On September 24, 2004, we entered into an agreement with Mr. Medina pursuant to which the $5.0 million dollar loan was repaid. Per the terms of the Agreement, Mr. Medina tendered, on September 29, 2004, 7,737,351 shares of our common stock as payment of the outstanding principal and interest due on the loan.

     We entered into an agreement with Joseph Wright, Jr., one of our directors, commencing September 21, 2001, engaging Mr. Wright as an independent consultant. The agreement is for a term of one year after which it renews automatically for successive one-year periods. Either party may terminate the agreement by providing 90 days’ notice. The agreement provides for an annual compensation of $100,000, payable monthly.

     We have also entered into consulting agreements with each of Guillermo Amore and Arthur Money, members of our board of directors, engaging them as independent consultants. Mr. Amore’s agreement provides for an annual compensation of $250,000, payable monthly. Mr. Money’s agreement provides for an annual compensation of $60,000, payable monthly.

     In April 2003, in connection with the issuance of the subordinated debentures we received $400,000 from two directors, Joseph Wright and Jose Maria Figueres-Olsen, and $50,000 from an employee and stockholder.

     On May 2003, we entered into a subcontractor agreement with Fusion Telecommunications International, Inc. to provide Internet protocol services under our agreement with the Diplomatic Telecommunications Service — Program Office for 16 U.S. embassies and consulates in Asia and the Middle East with another one scheduled to be installed. Fusion’s Chief Executive Officer, Marvin Rosen, is one of our directors. In addition, Fusion’s former Chairman, Joel Schleicher, and Kenneth Starr, one of Fusion’s other directors, formerly served on our board. Manuel Medina, our Chairman, President and Chief Executive Officer, also sits on Fusion’s board of directors and Joseph R. Wright, Jr., another director of ours, formerly served on Fusion’s board of directors. During the year ended March 31, 2004, we purchased approximately $500,000 in services from Fusion.

     Included in interest income for the years ended March 31, 2004 and 2003 are approximately $76,000 and $61,000, respectively, from a $5.0 million receivable from Mr. Medina.

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CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES

     The following is a general discussion of certain U.S. federal income and estate tax considerations relevant to a U.S. Holder or Non-U.S. Holder of our common stock. This discussion does not purport to deal with all aspects of U.S. federal income taxation that may be relevant to a particular holder in light of the holder’s circumstances (for example, a person subject to the alternative minimum tax provisions of the Internal Revenue Code of 1986, as amended). In addition, this discussion is not intended to apply in its entirety to all categories of investors, some of which (like dealers in securities, banks, insurance companies, tax-exempt organizations, persons holding our common stock as part of a “straddle”, “hedge”, “conversion transaction” or other risk reduction transaction and persons who have a “functional currency” other than the U.S. dollar) may be subject to special rules. This discussion does not address any U.S. federal tax consequences in the case of our common stock held by an entity classified as a partnership for U.S. federal income tax purposes or any U.S. federal income tax consequences to any stockholder or beneficiary of a holder. In addition, it does not address the U.S. federal tax consequences relevant to an expatriate or former long-term resident of the United States. This discussion does not constitute tax advice. Due to the complex nature of certain of the rules discussed below, the Internal Revenue Service may challenge one or more of the conclusions described below. We have not obtained, and do not intend to obtain, a ruling from the Internal Revenue Service with respect to the U.S. federal tax consequences of acquiring, holding or disposing of a share of common stock. Further, this discussion does not discuss any aspect of state, local or foreign law, or U.S. federal estate and gift tax law other than the U.S. federal estate tax consequences as set forth below.

     The following discussion is based on provisions of the Internal Revenue Code, applicable U.S. Treasury regulations and administrative and judicial interpretations, all as in effect on the date of this prospectus, and all of which are subject to change, retroactively or prospectively. The following discussion also assumes that our common stock is held as a capital asset.EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISER REGARDING THE U.S. FEDERAL, STATE, LOCAL, AND NON-U.S. INCOME AND OTHER TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF SHARES OF OUR COMMON STOCK.

U.S. Holders

     The following discussion describes the material U.S. federal income tax consequences to a beneficial owner of our common stock, referred to for purposes of this discussion as a U.S. Holder, that is:

•  a citizen or individual resident of the United States, including an individual deemed to be a resident alien under the “substantial presence” test of Section 7701(b) of the Internal Revenue Code;

•  a corporation or other entity taxable as a corporation for U.S. federal income tax purposes that is created or organized in the United States or under the law of the United States or of any State or the District of Columbia;

•  an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or

•  a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or if the trust was in existence on August 20, 1996 and properly elected to continue to be treated as a United States person.

     Distributions on common stock.A distribution, if any, paid on a share of our common stock will constitute a dividend, taxable as ordinary income, to the extent the distribution is treated as paid out of our current or accumulated earnings and profits as computed for U.S. federal income tax purposes. To the extent a distribution with respect to a share of our common stock in any taxable year is not treated as paid out of current or accumulated earnings and profits, it will be treated as a non-taxable return (and reduction) of basis in that share of common stock to the extent thereof, and if and to the extent it exceeds earnings and profits and basis, it will be treated as gain from the sale of the share of common stock. Certain dividends received by non-corporate U.S. Holders before January 1, 2009 may be subject to a reduced rate of taxation if certain holding period and other

73

requirements are met. Dividends received by a corporation are generally eligible for the dividends received deduction, subject to limitations, including the limitations under section 1059 of the Internal Revenue Code relating to extraordinary dividends.

     Sale or exchange of common stock. Upon the sale or exchange of our common stock, a U.S. Holder generally will recognize gain or loss equal to the difference between the amount of cash and fair market value of any property received upon the sale or exchange and the U.S. Holder’s adjusted tax basis in the common stock. The gain or loss generally will be long-term capital gain or loss if the U.S. Holder’s holding period in the common stock is more than one year at the time of the sale or exchange. Long-term capital gains of non-corporate taxpayers are generally taxed at a reduced maximum marginal tax rate. The deductibility of capital losses is subject to limitations.

     Backup withholding and information reporting.In general, payments made on our common stock and proceeds from the sale or other disposition of our common stock may be subject to backup withholding. In general, backup withholding will apply to a non-corporate U.S. Holder if that U.S. Holder:

•  fails to furnish, under penalties of perjury, its taxpayer identification number, or TIN (which for an individual is the holder’s social security number);

•  furnishes an incorrect TIN;

•  is notified by the Internal Revenue Service that it has failed to properly report payments of interest and dividends; or

•  under certain circumstances, fails to certify, under penalties of perjury, that it has furnished a correct TIN and is a United States person and has not been notified by the Internal Revenue Service that it is subject to backup withholding due to underreporting of interest or dividends, or otherwise fails to comply with applicable requirements of the backup withholding rules.

     Generally, any amount withheld under the backup withholding rules from a payment to a U.S. Holder that results in an overpayment of tax will be refunded, or credited against the holder’s U.S. federal income tax liability, if any, provided certain required information is furnished to the Internal Revenue Service.

     A U.S. Holder will also be subject to information reporting with respect to payments on our common stock and proceeds from the sale or other disposition of our common stock, unless the U.S. Holder is a corporation or other exempt recipient and appropriately establishes that exemption.

Non-U.S. Holders

     The following discussion describes the material U.S. federal income tax consequences to a beneficial owner of our common stock, referred to for purposes of this discussion as a Non-U.S. Holder, that is:

•  a nonresident alien individual,

•  a corporation (or an entity treated as a corporation) created or organized in or under the law of a country (or a political subdivision thereof) other than the United States,

•  a foreign estate, which generally is an estate that is not subject to U.S. federal income tax on all of its income without regard to the source of the income, or

•  a foreign trust, which generally is a trust that is not a domestic trust.

An individual may be treated as a resident of the United States in any calendar year for U.S. federal income tax purposes by, among other ways, being present in the United States on at least 31 days in that calendar year and for an aggregate of at least 183 days during that calendar year and the two immediately preceding calendar years, counting, for this purpose, all of the days present in that year, one-third of the days present in the immediately preceding year and one-sixth of the days present in the second preceding year.

     For purposes of the following discussion, “U.S. trade or business income” of a Non-U.S. Holder generally means dividend income or gain on a sale, exchange or redemption of our common stock if that dividend or gain

74

is effectively connected with trade or business conducted by the Non-U.S. Holder within the United States or, in most cases of a resident of a country with which the United States has an income tax treaty, is attributable to a permanent establishment (or fixed base) of the Non-U.S. Holder in the United States.

     Distributions on common stock.The gross amount of any dividends paid to a Non-U.S. Holder of our common stock ordinarily will be subject to withholding of U.S. federal income tax at a 30% rate, or at a lower rate if an applicable income tax treaty so provides and we have received proper certification of the application of that treaty. Dividends that constitute U.S. trade or business income are not subject to U.S. federal withholding tax (subject, however, to possible backup withholding, discussed below) but instead are taxed in the manner applicable to United States persons, and, in the case of such dividends received by a foreign corporation, under certain circumstances will be subject to an additional branch profits tax at a 30% rate or, if applicable, a lower treaty rate. To claim the benefit of an income tax treaty or to claim an exemption from U.S. federal withholding tax on dividends that are U.S. trade or business income, you must satisfy certain certification and disclosure requirements. You may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the Internal Revenue Service.

     Sale or exchange of common stock. Subject to the discussion below of backup withholding, gain recognized by a Non-U.S. Holder on a sale or exchange of our common stock generally will not be subject to U.S. federal income tax unless:

•  the gain is U.S. trade or business income of the Non-U.S. Holder,

•  subject to certain exceptions, the Non-U.S. Holder is an individual who holds the common stock as a capital asset and is present in the United States for 183 days or more in the taxable year of the disposition, or

•  we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition and the period that the Non-U.S. Holder held the common stock.

     We believe that we currently are not, and we do not anticipate becoming, a “United States real property holding corporation” for U.S. federal income tax purposes. If we are or become a United States real property holding corporation, you will be subject to U.S. federal income tax on a sale or exchange of our common stock only if, assuming our stock continues to be regularly traded on an established securities market, you hold or held (at any time during the shorter of the period you held our common stock and the five year period preceding the date of that taxable disposition) more than five percent of our common stock.

     A noncorporate Non-U.S. Holder who realizes gain described in the first bullet point above will be subject to U.S. federal income tax on his net gain for the taxable year at regular graduated U.S. federal income tax rates in the same manner as if the holder were a United States person. An individual Non-U.S. Holder described in the second bullet point above will be subject to a flat 30% U.S. federal income tax on the gain derived, which may be offset by U.S. source capital losses, even though the holder is not considered a resident of the United States. A Non-U.S. Holder that is a foreign corporation and that realizes gain described in the first bullet point above will be subject to U.S. federal income tax on his net gain for the taxable year at regular graduated U.S. federal income tax rates in the same manner as if the holder were a United States person and, in addition, under certain circumstances will be subject to an additional branch profits tax at a 30% rate or, if applicable, a lower treaty rate.

     Federal estate tax. Common stock owned or treated as owned by an individual who is not a U.S. citizen at the time of death will be included in the individual’s gross estate for U.S. federal estate tax purposes and may be subject to U.S. federal estate tax unless an applicable estate tax treaty provides otherwise. U.S. federal legislation enacted in 2001 provides for reductions in the U.S. federal estate tax through 2009 and the elimination of the estate tax entirely in 2010. Under that legislation, the U.S. federal estate tax would be fully reinstated, as in effect prior to the reductions, in 2011, unless further legislation is enacted.

     Information reporting and backup withholding. Generally, we must report annually to the Internal Revenue Service and to each Non-U.S. Holder the amount of dividends paid to that holder and the tax withheld from

75

those dividends. Copies of the information returns reporting dividends and withholding may also be available to the tax authorities in the country in which the Non-U.S. Holder is a resident under the provisions of an applicable income tax treaty or other agreement.

     Under certain circumstances, U.S. Treasury regulations require information reporting and backup withholding on specified payments on our common stock. A Non-U.S. Holder of our common stock that fails to provide certification of its status as not a United States person on the appropriate Internal Revenue Service form, satisfy certain documentary evidence requirements for establishing that it is not a United States person or otherwise establish an exemption may be subject to backup withholding and information reporting. Information reporting and backup withholding also generally will not apply to a payment of the proceeds of a sale of our common stock effected outside the United States by a foreign office of a foreign broker. However, information reporting requirements (but not backup withholding) will apply to a payment of the proceeds of a sale of our common stock effected outside the United States by a foreign office of a broker if the broker:

•  is a United States person,

•  derives 50% or more of its gross income for certain periods from the conduct of trade or business in the United States,

•  is a “controlled foreign corporation” as to the United States,

•  is a foreign partnership that, at any time during its taxable year, is more than 50% (by income or capital interest) owned by United States persons or is engaged in the conduct of trade or business in the United States, unless in any such case the broker has documentary evidence in its records that the holder is not a United States person and certain conditions are met, or the holder otherwise establishes an exemption, or

•  in some cases, is a U.S. branch of a foreign bank or insurance company.

Payment by a U.S. office of a broker of the proceeds of a sale of common stock will be subject to both backup withholding and information reporting unless the holder certifies under penalties of perjury that it is not a United States person or otherwise establishes an exemption.

     Generally, any amount withheld under the backup withholding rules from a payment to a Non-U.S. Holder that results in an overpayment of taxes will be refunded, or credited against the holder’s U.S. federal income tax liability, if any, provided certain required information is furnished to the Internal Revenue Service.

     The preceding discussion of certain U.S. federal income and estate tax consequences is for general information only and does not constitute tax advice and does not purport to deal with all aspects of U.S. federal taxation that may be relevant to a prospective investor in light of that investor’s circumstances. Accordingly, you should consult your tax adviser as to the particular tax consequences to you of purchasing, holding and disposing of our common stock, including the applicability and effect of any state, local or foreign tax laws, and of any proposed changes in applicable laws.

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UNDERWRITING

     We and the underwriters named below have entered into an underwriting agreement with respect to the common stock being offered. Subject to the terms and conditions of the underwriting agreement, the underwriters named below have severally agreed to purchase from us the number of shares of our common stock set forth opposite their names on the table below at the public offering price, less the underwriting discounts and commissions set forth on the cover page of this prospectus, as follows:

	Number of
Name	Shares
SG Cowen & Co., LLC
Total

     The underwriting agreement provides that the obligations of the underwriters to purchase the shares of common stock offered hereby are conditional and may be terminated at their discretion based on their assessment of the state of the financial markets. The obligations of the underwriters may also be terminated upon the occurrence of other events specified in the underwriting agreement. The underwriters are severally committed to purchase all of the shares of common stock being offered by us if any stock is purchased.

     The underwriters propose to offer the shares of common stock to the public at the public offering price set forth on the cover of this prospectus. The underwriters may offer the common stock to securities dealers at the price to the public less a concession not in excess of $           per share. Securities dealers may reallow a concession not in excess of $           per share to other dealers. After the shares of common stock are released for sale to the public, the underwriters may vary the offering price and other selling terms from time to time.

     We have granted to the underwriters an option, exercisable not later than           days after the date of this prospectus, to purchase up to an aggregate of                     additional shares of common stock at the public offering price set forth on the cover page of this prospectus less the underwriting discounts and commissions. The underwriters may exercise this option only to cover over-allotments, if any, made in connection with the sale of our common stock offered hereby. If the over-allotment option is exercised in full, the underwriters will purchase additional shares of common stock from us in approximately the same proportion as shown in the table above.

     The following table summarizes the compensation to be paid to the underwriters by us and the proceeds, before expenses, payable to us.

		Total
		Without	With
	Per Share	Over Allotment	Over Allotment
Public offering price	$	$	$
Underwriting discounts and commissions
Proceeds, before expenses, to us	$	$	$

     We estimate that the total expenses of this offering, excluding underwriting discounts and commissions, will be approximately $          , which includes legal, accounting and printing costs and various other fees associated with the registration and listing of our common stock.

     Our common stock is listed on the American Stock Exchange under the symbol “TWW.”

     We have agreed to indemnify the underwriters against certain civil liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect of any such liabilities.

     Our directors, executive officers and certain stockholders have agreed with the underwriters that for a period of 90 days following the date of this prospectus, they will not, directly or indirectly, offer, sell, assign, transfer, pledge, contract to sell or otherwise dispose of or enter into any swap, short sale, hedge or similar transaction with respect to any shares of our common stock or any securities convertible into, exercisable or exchangeable for

77

shares of common stock. SG Cowen & Co., LLC, on behalf of the underwriters, may, in its sole discretion, at any time without prior notice, release, or cause to be released, all or any portion of the shares of common stock from the restrictions in any such agreement. We have entered into a similar agreement with SG Cowen & Co., LLC. There are no agreements between SG Cowen & Co., LLC and any of our stockholders, optionholders or affiliates releasing them from these lock-up agreements prior to the expiration of the 90-day period.

     The underwriters may engage in over-allotment, stabilizing transactions, syndicate covering transactions, penalty bids and passive market making in accordance with Regulation M under the Securities Exchange Act. Over-allotment involves syndicate sales in excess of the offering size, which creates a syndicate short position. Covered short sales are sales made in an amount not greater than the number of shares available for purchase by the underwriters under the over-allotment option. The underwriters may close out a covered short sale by exercising their over-allotment option or purchasing shares in the open market. Naked short sales are sales made in an amount in excess of the number of shares available under the over-allotment option. The underwriters must close out any naked short sale by purchasing shares in the open market. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. Syndicate covering transactions involve purchases of the shares of common stock in the open market after the distribution has been completed in order to cover syndicate short positions. Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the shares of common stock originally sold by such syndicate member are purchased in a syndicate covering transaction to cover syndicate short positions. Penalty bids may have the effect of deterring syndicate members from selling to people who have a history of quickly selling their shares. In passive market making, market makers in the shares of common stock who are underwriters or prospective underwriters may, subject to certain limitations, make bids for or purchase of shares of our common stock until the time, if any, at which a stabilizing bid is made. These stabilizing transactions, syndicate covering transactions and penalty bids may cause the price of shares of our common stock to be higher than it would otherwise be in the absence of these transactions. These transactions may be commenced and discontinued at any time.

     A prospectus in electronic format may be made available on the websites maintained by one or more of the underwriters or selling group members, if any, participating in this offering. The representative may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Other than the prospectus in electronic format, the information on these websites is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved or endorsed by us or any underwriter in its capacity as underwriter, and should not be relied upon by investors.

     The underwriters may in the future perform investment banking and advisory services for us from time to time for which they may in the future receive customary fees and expenses. The underwriters may, from time to time, engage in transactions with or perform services for us in the ordinary course of business.

INTERESTS OF NAMED EXPERTS AND COUNSEL

     The validity of the shares of common stock being registered hereunder is being passed upon for us by Greenberg Traurig, P.A., Miami, Florida. Marvin S. Rosen, of counsel to Greenberg Traurig, is one of our directors. As of December 31, 2004, Mr. Rosen beneficially owned 1,477,180 shares of common stock, 360,000 of which are in the form of shares underlying options.

LEGAL MATTERS

     Greenberg Traurig, P.A., Miami, Florida, has passed upon the validity of the issuance of the securities and the validity of the securities being offered by this prospectus. Certain legal matters for the underwriters will be passed upon by Paul, Hastings, Janofsky & Walker LLP, New York, New York.

EXPERTS

     The consolidated financial statements of Terremark Worldwide, Inc. as of March 31, 2004 and 2003 and for each of the three years in the period ended March 31, 2004 included in this prospectus have been so included in

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reliance on the report of PricewaterhouseCoopers LLP, an independent registered certified public accounting firm, given on the authority of said firm as experts in auditing and accounting.

     The financial statements of Technology Center of the Americas, LLC as of December 31, 2003 and 2002 and for each of the two years in the period ended December 31, 2003 included in this prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, an independent registered certified public accounting firm, given on the authority of said firm as experts in auditing and accounting.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     This prospectus is part of a registration statement on Form S-1 which was filed with the Securities and Exchange Commission. This prospectus and any subsequent prospectus supplements do not contain all of the information included in the registration statement as permitted by the rules and regulations of the Securities and Exchange Commission. In addition, we file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission. You may read and copy any documents that we have filed with the Securities and Exchange Commission at the Securities and Exchange Commission’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference room. Our Securities and Exchange Commission filings are also available to the public at the Securities and Exchange Commission’s website at http://www.sec.gov. Copies of documents filed by us with the Securities and Exchange Commission are also available at the offices of The American Stock Exchange, LLC, which is located at 87 Trinity Place, New York, New York 10006. In addition, our Internet website, http://www.terremark.com, contains all of the annual, quarterly and special reports, proxy statements and other information we file with the Securities and Exchange Commission.

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INDEX TO FINANCIAL STATEMENTS

		Page
Terremark Worldwide, Inc. — Pro Forma Financial Information
	Basis of Presentation		F-1
	Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2004		F-2
	Unaudited Pro Forma Condensed Consolidated Statement of Operations for the six month period ended September 30, 2004		F-3
	Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended March 31, 2004		F-4
	Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements		F-5
Terremark Worldwide, Inc. — Historical Financial Information
	Condensed Consolidated Balance Sheets as of September 30, 2004 and March 31, 2004 (unaudited)		F-7
	Condensed Consolidated Statements of Operations for the six months ended September 30, 2004 and 2003 (unaudited)		F-8
	Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit) for the six months ended September 30, 2004 (unaudited)		F-9
	Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2004 and 2003 (unaudited)		F-10
	Notes to Condensed Consolidated Financial Statements (unaudited)		F-11
	Report of Independent Registered Certified Public Accounting Firm		F-22
	Consolidated Balance Sheets as of March 31, 2004 and 2003		F-23
	Consolidated Statements of Operations for the years ended March 31, 2004, 2003 and 2002		F-24
	Consolidated Statements of Changes in Stockholders’ Deficit for the years ended March 31, 2004, 2003 and 2002		F-25
	Consolidated Statements of Cash Flows for the years ended March 31, 2004, 2003 and 2002		F-26
	Notes to Consolidated Financial Statements		F-27
Technology Center of the Americas, LLC — Historical Financial Information
	Report of Independent Registered Certified Public Accounting Firm		F-52
	Balance Sheets as of September 30, 2004, December 31, 2003 and 2002		F-53
	Statements of Operations for the nine months ended September 30, 2004 and 2003 and the years ended December 31, 2003 and 2002		F-54
	Statements of Changes in Members’ Equity for the nine months ended September 30, 2004 and the years ended December 31, 2003 and 2002		F-55
	Statements of Cash Flows for the nine months ended September 30, 2004 and 2003 and the years ended December 31, 2003 and 2002		F-56
	Notes to Financial Statements		F-57

TERREMARK WORLDWIDE, INC.

PRO FORMA FINANCIAL INFORMATION

TERREMARK WORLDWIDE, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     The following unaudited pro forma condensed consolidated financial statements are derived from and should be read in conjunction with historical consolidated financial statements and related notes of Terremark Worldwide Inc. (“TWW”) and Technology Center of the Americas, LLC (“TECOTA”). From February 23, 2001 until December 31, 2004, TWW, through a wholly owned subsidiary, owned 0.84% equity interest in TECOTA. In July 2004, TWW entered into an agreement under which it assumed the obligation to purchase the other equity interests in TECOTA. On December 31, 2004, TWW completed this acquisition of TECOTA.

     The unaudited pro forma condensed consolidated statements of operations for the six months ended September 30, 2004, and the year ended March 31, 2004, give effect to (i) TWW’s acquisition of TECOTA; (ii) certain adjustments that are directly attributable to the acquisition of TECOTA and will have a continuing impact; and (iii) TWW’s financing of the TECOTA acquisition. The unaudited pro forma condensed combined statements of operations assume that each of these transactions was consummated at the beginning of each period presented.

     The unaudited pro forma condensed consolidated balance sheet presents the consolidated financial position of TWW and TECOTA as if TWW’s acquisition of TECOTA was consummated on September 30, 2004, and gives effect to (i) the acquisition of TECOTA; (ii) certain adjustments that are directly attributable to the acquisition of TECOTA; and (iii) the estimated incremental debt. The unaudited pro forma condensed consolidated financial statements have been prepared based upon currently available information and assumptions that are deemed appropriate by TWW’s management.

     The pro forma information is for informational purposes only and is not intended to be indicative of the actual consolidated financial position or consolidated results that would have been reported had the transactions occurred on the dates indicated, nor does the information represent a forecast of the consolidated financial position at any future date or the combined financial results of TWW and TECOTA for any for future period.

F-1

Terremark Worldwide, Inc.

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of September 30, 2004

		Historical			Historical			Pro Forma			Pro Forma
		Terremark			TECOTA			adjustments			Terremark
		(Note 1)			(Note 1)			(Note 3)
ASSETS
Current assets:
Cash and cash equivalents		$	21,831,286		$	1,011,315		$	(3,500,000	)[h]	$	23,742,601
									2,000,000	[m]
									2,400,000	[1]
Accounts receivable, net			2,207,564			—						2,207,564
Deferred rent receivable			—			11,444,733			(7,955,751	)[d]		—
									(3,488,982	)[b]
Contracts receivable			112,151			—						112,151
Prepaid and other current assets			751,720			291,134						1,042,854
Deferred costs under government contracts			3,592,328			—						3,592,328
	Total current assets		28,495,049			12,747,182						30,697,499
Investment in unconsolidated subsidiaries			391,884			—			(391,884	)[e]		—
Restricted cash			794,018			910,458			4,000,000	[a]		5,704,476
Land and building			—			66,927,819			(705,731	)[c]		66,222,088
Property and equipment, net			56,884,223			—						56,884,223
Debt issuance costs and other assets			10,392,631			3,062,609			(3,062,609	)[b]		20,275,564
									(2,400,000	)[l]
									12,282,933	[h]
Goodwill			9,999,870			—						9,999,870
	TOTAL ASSETS	$	106,957,675		$	83,648,068					$	189,783,719
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of notes payable		$	3,890,802		$	—					$	3,890,802
Construction payables			2,954,530			—						2,954,530
Accounts payable and accrued expenses			7,865,135			998,862						8,863,997
Current portion of capital lease obligations			1,272,666			—						1,272,666
Interest payable			2,459,515			—						2,459,515
	Total current liabilities		18,442,648			998,862						19,441,510
Mortgage payable			—			35,401,567			43,598,433	[a]		79,000,000
Convertible debt			51,971,488			—						51,971,488
Derivatives embedded within convertible debt			21,804,000			—						21,804,000
Deferred rent			9,716,260			—			(7,955,751	)[d]		1,760,509
Capital lease obligations, less current portion			102,335			—						102,335
Deferred revenue			3,225,056			—						3,225,056
Series H redeemable convertible preferred stock			601,711			—						601,711
	TOTAL LIABILITIES		105,863,498			36,400,429						177,906,609
Minority Interest			142,885			—						142,885
Commitments and Contingencies			—			—						—
Series G convertible preferred stock			1			—						1
Series I convertible preferred stock			1			—						1
Common stock			359,761			—						359,761
Common stock warrants			4,933,016			—			8,782,933	[h]		13,715,949
Common stock options			1,545,375			—						1,545,375
Partner’s capital			—			48,404,025			(48,404,025	)[f]		—
Additional paid-in capital			236,023,806			—			2,000,000	[m]		238,023,806
Accumulated deficit			(234,577,155	)		(1,156,386	)		1,156,386	[f]		(234,577,155	)
Accumulated other comprehensive loss			(112,876	)		—						(112,876	)
Treasury stock			(7,220,637	)		—						(7,220,637	)
	TOTAL STOCKHOLDERS’ EQUITY		951,292			47,247,639						11,734,225
	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	106,957,675		$	83,648,068					$	189,783,719

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

F-2

Terremark Worldwide, Inc

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the six month period ended September 30, 2004

				Historical			Historical			Pro Forma			Pro Forma
				Terremark			TECOTA			adjustments			Terremark
				(Note 1)			(Note 1)			(Note 3)
Revenues:
	Data center			$	15,025,915		$	—					$	15,025,915
	Rental				—			5,134,971		$	(3,878,750	)[g]		1,256,221
	Operating expense reimbursements				—			437,589			(259,135	)[g]		178,454
	Management fees				90,922			—			(90,922	)[i]		—
	Construction contracts				996,786			—						996,786
	Other income				—			24,878						24,878
		Operating revenues			16,113,623			5,597,438						17,482,254
Expenses
	Data center operations				12,200,670			—			(4,137,885	)[g]		8,062,785
	Construction contract expenses				948,813			—						948,813
	General and administrative				6,979,446			1,408,576			(90,922	)[i]		8,297,100
	Sales and marketing				2,033,119			77,648						2,110,767
	Depreciation and amortization				2,573,054			938,279			(219,273	)[j]		3,292,060
		Operating expenses			24,735,102			2,424,503						22,711,525
			Income / (Loss) from operations		(8,621,479	)		3,172,935						(5,229,271	)
Other income (expense)
	Change in estimated fair value of derivatives embedded within convertible debt				13,679,250									13,679,250
	Gain on debt restructuring				3,420,956									3,420,956
	Interest expense				(6,433,148	)		(1,105,346	)		(4,164,467	)[k]		(11,702,961	)
	Interest Income				196,243									196,243
	Other				(4,260	)		—						(4,260	)
		Total other income (expense)			10,859,041			(1,105,346	)					5,589,228
	Income before income taxes			$	2,237,562			2,067,589					$	359,957
Basic and diluted net income before income taxes per common share				$	0.01								$	0.00
Weighted average common shares outstanding					336,054,804									336,054,804

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

F-3

Terremark Worldwide, Inc

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the year ended March 31, 2004

			Historical			Historical			Pro Forma			Pro Forma
			Terremark			TECOTA			adjustments			Terremark
									(Note 3)
Revenues:
	Data center		$	17,034,377		$	—					$	17,034,377
	Rental			—			6,808,912		$	(4,304,151	)[g]		2,504,761
	Operating expense reimbursements			—			776,740			(526,767	)[g]		249,973
	Development, commission and construction fees			41,081			—						41,081
	Management fees			197,827			—			(184,133	)[i]		13,694
	Construction contracts			940,454			—						940,454
	Other income			—			81,496						81,496
		Operating revenues		18,213,739			7,667,148						20,865,836
Expenses
	Data center operations			16,413,021			—			(4,830,918	)[g]		11,582,103
	Construction contract expenses			918,022			—						918,022
	General and administrative			13,336,400			2,180,277			(184,133	)[i]		15,332,544
	Sales and marketing			3,424,411			176,001						3,600,412
	Depreciation and amortization			4,698,292			1,882,836			(444,826	) [j]		6,136,302
		Operating expenses		38,790,146			4,239,114						37,569,383
	Income / (Loss) from operations			(20,576,407	)		3,428,034						(16,703,547	)
Other income (expense)
	Gain on debt restructuring			8,475,000			—						8,475,000
	Interest expense			(14,624,922	)		(2,561,095	)		(7,978,530	)[k]		(25,164,547	)
	Interest Income			131,548			—						131,548
	Other			4,104,204			—						4,104,204
		Total other income (expense)		(1,914,170	)		(2,561,095	)					(12,453,795	)
	Income / (Loss) before income taxes		$	(22,490,577	)		866,939					$	(29,157,342	)
Basic and diluted loss before income taxes per common share			$	(0.07	)							$	(0.09	)
Weighted average common shares outstanding				305,028,194									305,028,194

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

F-4

Terremark Worldwide, Inc.

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

Note 1 — Basis of Presentation

     Historical financial information for TWW has been derived from its historical financial statements for the year ended March 31, 2004 (audited) and for the six months ended September 30, 2004 (unaudited). Historical financial information for TECOTA has been derived from its historical financial statements for the year ended December 31, 2003 (audited) and for the six months ended September 30, 2004 (unaudited). No adjustments have been made to the pro forma financial information to account for the difference between the financial reporting dates used by TECOTA and TWW due to the close proximity of the period-end dates.

Note 2 — Acquisition of TECOTA

     Terremark Worldwide, Inc. (TWW), through a wholly owned subsidiary, owns 0.84% equity interest in TECOTA. In July 2004, Terremark entered into an agreement under which it assumed the obligation to purchase the other equity interests in TECOTA for approximately $40 million. The transaction closed on December 31, 2004.

Note 3 — Pro Forma Adjustments

     Following are brief descriptions of the pro forma adjustments to reflect the acquisition of TECOTA:

(a)  Records TWW new borrowings to purchase other equity interests in TECOTA and pay off of existing mortgage. This adjustment is calculated as follows:

New borrowings	$	79,000,000
Pay off of existing mortgage		(35,401,567	)
Adjustment		43,598,433
Tenant improvement cash reserve		(4,000,000	)
Cash paid to sellers	$	39,598,433

(b)  Records purchase accounting adjustment for the elimination of deferred financing costs and deferred leasing commissions included in other assets of TECOTA. Further, records the elimination of deferred rent balances with tenants other than TWW. See (d) below.

(c)  Records purchase accounting adjustment for the allocation of the fair value of identifiable net current assets acquired over the TECOTA purchase price.

(d)  Records the elimination of deferred rent balances between TWW and TECOTA as of the balance sheet date.

(e)  Records the elimination of TWW’s ownership interest in TECOTA as of September 30, 2004.

(f)  Records the elimination of TECOTA equity accounts acquired in the purchase.

(g)	Records the elimination of transactions between TWW and TECOTA resulting from TECOTA leasing space to TWW.
(h)	Records the estimated debt issuance costs of $12,282,933, of which $8,782,933 was paid in TWW stock warrants.

(i)  Records the elimination of transactions between TWW and TECOTA resulting from TWW management fees charged to TECOTA pursuant to a property management agreement.

F-5

(j)  Records the elimination of historical depreciation and amortization expense related to TECOTA and the depreciation resulting from the allocation of the purchase price to the building using the straight-line method over a 39 year period.

	Six Months Ended			Year Ended
	September 30, 2004			March 31, 2004
Elimination of historical amounts of TECOTA	$	(938,279	)	$	(1,882,836	)
Depreciation of the cost of the acquired building (estimated to be $56,000,000) using a 39 year life		719,006			1,438,010
	$	(219,273	)	$	(444,826	)

(k)  Records the interest on new borrowings for the acquisition of TECOTA and the elimination of interest on existing debt to be repaid. Adjustment also records amortization of debt issuance costs. The adjustment is calculated as follows:

	Six Months Ended			Year Ended
	September 30, 2004			March 31, 2004
Elimination of historical amounts of TECOTA	$	(1,105,346	)	$	(2,561,095	)
Interest expense on $79 million of new borrowings at a variable rate of 9.5%		3,794,771			7,589,541
Amortization of debt issuance costs of new borrowings using a four year term		1,475,042			2,950,084
	$	4,164,467		$	7,978,530

The effect of a .0125% variance on interest expense is $46,875 and $93,750 for the six months ended September 30, 2004 and the year ended March 31, 2004, respectively.

(l)  Records the return to the company of a deposit totalling $2.4 million at September 30, 2004, for the acquisition of TECOTA.

(m)  Records issuance of stock for cash as part of the TECOTA acquisition.

F-6

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

		September 30,			March 31,
		2004			2004
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	21,831,286		$	4,378,614
Accounts receivable, net of allowance for doubtful accounts of $200,000 at March and September			2,207,564			3,214,101
Note receivable			—			2,285,000
Contracts receivable			112,151			363,043
Prepaid and other current assets ($463,934 and $499,009 due from related party)			751,720			1,115,230
Deferred costs under government contracts			3,592,328			—
	Total current assets		28,495,049			11,355,988
Investment in unconsolidated entities, net			391,884			725,319
Restricted cash			794,018			789,476
Property and equipment, net			56,884,223			53,897,716
Debt issuance costs and other assets			10,392,631			664,334
Goodwill			9,999,870			9,999,870
	Total assets	$	106,957,675		$	77,432,703
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Current portion of notes payable (includes $4,325,010 due to related parties at March)		$	3,890,802		$	9,194,145
Construction payables			2,954,530			1,363,554
Accounts payable and accrued expenses			7,865,135			7,067,319
Current portion of capital lease obligations			1,272,666			1,799,726
Interest payable			2,459,515			1,952,978
Convertible debt			—			250,000
	Total current liabilities		18,442,648			21,627,722
Convertible debt			51,971,488			36,895,239
Derivatives embedded within convertible debt, at estimated fair value			21,804,000			—
Notes payable, less current portion ($31,191,967 due to related parties)			—			31,311,894
Deferred rent			9,716,260			6,938,454
Capital lease obligations, less current portion			102,335			105,886
Deferred revenue			3,225,056			2,686,396
Series H redeemable convertible preferred stock: $.001 par value, 294 shares issued and outstanding, at liquidation value			601,711			586,718
	Total liabilities		105,863,498			100,152,309
Minority interest			142,885			—
Commitments and contingencies			—			—
Stockholders’ equity (deficit):
Series G convertible preferred stock: $.001 par value, 20 shares issued and outstanding (liquidation value of approximately $2.9 million)			1			1
Series I convertible preferred stock: $.001 par value, 390 shares issued and outstanding (liquidation value of approximately $10.2 million and $10.0 million)			1			1
Common stock: $.001 par value, 500,000,000 shares authorized; 359,761,034 and 311,227,482 shares issued; 351,109,018 and 311,227,482 shares outstanding			359,761			311,227
Common stock warrants			4,933,016			3,642,006
Common stock options			1,545,375			1,545,375
Additional paid-in capital			236,023,806			213,596,501
Accumulated deficit			(234,577,155	)		(236,814,717	)
Accumulated other comprehensive loss			(112,876	)		—
Treasury stock: 8,652,016 shares			(7,220,637	)		—
Note receivable — related party			—			(5,000,000	)
	Total stockholders’ equity (deficit)		951,292			(22,719,606	)
	Total liabilities and stockholders’ equity (deficit)	$	106,957,675		$	77,432,703

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-7

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

				For the Six Months Ended
				September 30,
				2004			2003
				(Unaudited)
Revenues
	Data center			$	15,025,915		$	7,242,825
	Development, commission and construction fees				—			41,081
	Management fees				90,922			107,070
	Construction contracts				996,786			98,972
		Operating revenues			16,113,623			7,489,948
Expenses
	Data center operations, excluding depreciation (includes $3,879,189 and $1,779,098 (six months) and $1,939,594 and $1,250,098 (three months) in rent expense with a related party				12,200,670			6,506,485
	Construction contract expenses, excluding depreciation				948,813			108,655
	General and administrative				6,979,446			7,469,418
	Sales and marketing				2,033,119			1,533,310
	Depreciation and amortization				2,573,054			2,351,683
		Operating expenses			24,735,102			17,969,551
			Loss from operations		(8,621,479	)		(10,479,603	)
Other income (expenses)
	Change in estimated fair value of derivatives embedded within convertible debt				13,679,250			—
	Gain on debt restructuring and extinguishment, net				3,420,956			8,475,000
	Interest expense (includes $657,536 and $881,950 (six months) and $88,876 and $597,950 (three months) with a related party)				(6,433,148	)		(6,225,547	)
	Interest income				196,243			55,729
	Other, net				(4,260	)		296,832
		Total other income (expenses)			10,859,041			2,602,014
	Income (loss) before income taxes				2,237,562			(7,877,589	)
Income taxes					—			—
Net income (loss)					2,237,562			(7,877,589	)
Preferred dividend					(486,821	)		(80,000	)
Net income (loss) attributable to common shareholders				$	1,750,741		$	(7,957,589	)
Basic and diluted net income (loss) per common share				$	0.01		$	(0.03	)
Weighted average common shares outstanding					336,054,804			299,303,427

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-8

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

	Stockholders’ Equity (Deficit) (Unaudited)
							Common Stock
							Par Value
							$.001
																		Accumu-						Note
							Common			Common		Additional			Accumu-			lated Other						Receivable
	Issued						Stock			Stock		Paid-In			lated			Compre-			Treasury			Related
	Shares			Amount			Warrants			Options		Capital			Deficit			hensive Loss			Stock			Party
Balance at March 31, 2004		311,227,482		$	311,227		$	3,642,006		$	1,545,375	$	213,596,501		$	(236,814,717	)	$	—		$	—		$	(5,000,000	)
Conversion of debt		55,249,274			55,249			—			—		27,980,775			—			—			—			—
Conversion of preferred stock		333,340			333			—			—		(333	)		—			—			—			—
Exercise of stock options		336,667			337			—			—		122,423			—			—			—			—
Warrants issued		—			—			1,552,650			—		—			—			—			—			—
Exercise of warrants		351,622			352			(261,640	)		—		263,288			—			—			—			—
Preferred stock issuance costs		—			—			—			—		(587,860	)		—			—			—			—
Accrued dividends on preferred stock		—			—			—			—		(406,821	)		—			—			—			—
Stock tendered in payment of loan and retired		(7,737,351	)		(7,737	)		—			—		(4,944,167	)		—			—			—			5,000,000
Net assets acquired from NAP Madrid		—			—			—			—					—			—			(7,220,637	)		—
Foreign currency translation adjustment		—			—			—			—		—			—			(112,876	)		—			—
Net income		—			—			—			—		—			2,237,562			—			—			—
Balance at September 30, 2004		359,761,034		$	359,761		$	4,933,016		$	1,545,375	$	236,023,806		$	(234,577,155	)	$	(112,876	)	$	(7,220,637	)	$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-9

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

					For the Six Months Ended
					September 30,
					2004			2003
					(Unaudited)
Cash flows from operating activities:
	Net income (loss)				$	2,237,562		$	(7,877,589	)
	Adjustments to reconcile net income (loss) to net cash used in operating activities
		Depreciation and amortization of long-lived assets				2,573,054			2,351,683
		Change in estimated fair value of embedded derivatives				(13,679,250	)		—
		Accretion on convertible debt				1,197,426			—
		Amortization of beneficial conversion feature on issuance of convertible debentures				904,761			3,166,667
		Amortization of debt issuance costs				327,346			76,520
		Gain on debt restructuring and extinguishment, net				(3,626,956	)		(8,475,000	)
		Other, net				175,873			14,994
		Stock-based compensation				172,650			1,905,576
		(Increase) decrease in:
			Accounts receivable, net			1,006,537			(370,522	)
			Contracts receivable			250,892			(30,885	)
			Other assets			(1,346,785	)		(568,863	)
			Deferred costs under government contracts			(3,592,328	)		—
		Increase (decrease) in:
			Accounts payable and accrued expenses			(23,949	)		(3,973,380	)
			Interest payable			780,061			(2,160,513	)
			Deferred revenue			538,660			216,209
			Construction payables			90,976			—
			Deferred rent			2,777,806			1,900,041
				Net cash used in operating activities		(9,235,664	)		(13,825,062	)
Cash flows from investing activities:
	Restricted cash					(4,542	)		(9,060	)
	Purchases of property and equipment					(5,605,762	)		(861,645	)
	Advance for acquisition of unconsolidated entity and other					(2,413,274	)		3,324
	Acquisition of a majority interest in NAP Madrid					(2,537,627	)		—
	Proceeds from note receivable-related party					50,000			—
				Net cash used in investing activities		(10,511,205	)		(867,381	)
Cash flows from financing activities:
	Proceeds from issuance of convertible debt					86,257,312			19,550,000
	Payments on loans					(36,490,245	)		(2,168,790	)
	Payments on convertible debt					(10,131,800	)		(1,025,000	)
	Debt issuance costs					(5,255,912	)		—
	Proceeds from sale of preferred stock					2,131,800			—
	Preferred stock issuance costs					(587,860	)		—
	Net increase in construction payables					1,500,000			87,055
	Other borrowings					182,097			750,000
	Payments under capital lease obligations					(530,611	)		(460,321	)
	Proceeds from exercise of stock options and warrants					124,760			15,837
				Net cash provided by financing activities		37,199,541			16,748,781
				Net increase in cash		17,452,672			2,056,338
Cash and cash equivalents at beginning of period						4,378,614			1,408,190
Cash and cash equivalents at end of period					$	21,831,286		$	3,464,528

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-10

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

September 30, 2004

1. Business and Organization

     Terremark Worldwide, Inc. (together with its subsidiaries, the “Company” or “Terremark”) operates Internet Exchange Point facilities (“IXs”) at strategic locations in Florida, California and Sao Paulo from which the Company assists users of the Internet and large communications networks in communicating with other users and networks. The Company’s primary facility is the NAP of the Americas, a carrier-neutral Tier-1 network access point (the “NAP”) in Miami, Florida. The NAP provides exchange point, colocation and managed services to carriers, Internet service providers, network service providers, government entities, multinational enterprises and other end users.

     In June 2002, the Company entered into an exclusive agreement with the Comunidad Autonoma de Madrid (the “Comunidad”) to develop and operate carrier-neutral network access points in Spain. As part of that agreement, the parties formed NAP de las Americas — Madrid S.A. (“NAP Madrid”) to own and operate carrier-neutral IXs in Spain, modeled after the NAP of the Americas. The shareholders were the Comunidad through its Instituto Madrileno de Desarrollo (“IMADE”), the Camara Oficial de Comercio e Industria de Madrid, Red Electrica Telecomunicaciones, S.A., Telvent Sistemas y Redes S.A., a subsidiary of Abengoa S.A., and Centro de Transportes de Coslada, S.A. (“CTC”). At the time NAP Madrid was formed, the Company owned 1% of its equity, which was subsequently increased to 10%.

     In May 2004, the Company purchased the 20% of NAP Madrid owned by Telvent Sistemas y Redes S.A. for approximately $550,000. In June 2004, the Company purchased the 20% of this entity owned by Red Electrica Telecomunicaciones, S.A. for approximately $634,000. In July 2004, the Company purchased the 30% interest in NAP Madrid owned by CTC and IMADE for approximately $1.4 million. As a result of these transactions, the Company owns an 80% equity interest of NAP Madrid. The Company’s accounts as of September 30, 2004 include the assets and liabilities of NAP Madrid, as well as the 20% minority interest. The assets of NAP Madrid include 8.7 million shares of Terremark’s common stock, which are accounted for as treasury stock at cost, and de minimus operating assets. The liabilities of NAP Madrid consist primarily of a bank loan with a balance of 3.3 million Euros ($3.9 million at September 30, 2004). The results of operations of NAP Madrid from July 1, 2004 have been included in the accompanying condensed consolidated statement of operations.

     Because it had not commenced significant operations and had no customers or employees when the above transactions were consummated, the Company concluded that the assets acquired do not constitute a business. The Company allocated the purchase price based upon the fair value of assets acquired and liabilities assumed. The following is an allocation of the aggregate purchase price:

Assets
Equipment	$	204,040
Terremark stock		7,220,637
Liabilities
Notes payable, current		(3,708,705	)
Accounts payable and accrued expenses		(677,444	)
Minority Interest		(167,466	)
Net Assets	$	2,871,062
Previous equity ownership		(333,435	)
Cash paid for acquisition	$	2,537,627

     The Company currently owns a .84% interest in Technology Center of the Americas, LLC (“TECOTA”), the entity that owns the building in which the NAP of the Americas is housed. In July 2004, the Company

F-11

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

entered into an agreement under which it assumed the obligation to purchase the other equity interests in TECOTA. In connection with the agreement to purchase TECOTA, as of September 30, 2004, the Company has deposited $2.4 million, and subsequently deposited an additional $1.6 million all of which is nonrefundable except in the case of default by the sellers. The Company is currently exploring financing options for this transaction. The transaction is expected to close by December 31, 2004.

2. Summary of Significant Accounting Policies

     The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles for complete annual financial statements. The unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, which are, in the opinion of management, necessary to present fairly the financial position and the results of operations for the interim periods presented. Operating results for the quarter ended September 30, 2004 may not be indicative of the results that may be expected for the year ending March 31, 2005. Amounts as of March 31, 2004 included in the condensed consolidated financial statements have been derived from audited consolidated financial statements as of that date. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended March 31, 2004.

     The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant inter-company balances and transactions have been eliminated.

Use of estimates

     The Company prepares its financial statements in conformity with generally accepted accounting principles in the United States of America. These principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Derivatives

     The Company does not hold or issue derivative instruments for trading purposes. However, the Company’s 9% Senior Convertible Notes due June 15, 2009 (the “Senior Notes”) contain embedded derivatives that require separate valuation from the Senior Notes. The Company recognizes these derivatives as liabilities in its balance sheet and measures them at their estimated fair value, and recognizes changes in their estimated fair value in earnings in the period of change.

     The Company, with the assistance of a third party, estimates the fair value of its embedded derivatives using available market information and appropriate valuation methodologies. These embedded derivatives derive their value primarily based on changes in the price and volatility of the Company’s common stock. Over the life of the Senior Notes, given the historical volatility of the Company’s common stock, changes in the estimated fair value of the embedded derivatives are expected to have a material effect on our results of operations. Furthermore, the Company has estimated the fair value of these embedded derivatives using a theoretical model based on the historical volatility of its common stock of 80% over the past year. If an active trading market develops for the Senior Notes or the Company is able to find comparable market data, it may in the future be able to use actual market data to adjust the estimated fair value of these embedded derivatives. Such adjustment could be significant and would be accounted for prospectively.

F-12

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

     Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company may eventually pay to settle these embedded derivatives.

Installation and other outsourcing services under government contracts

     From time to time, the Company provides installation and other outsourcing services under government contracts that include procurement and leasing of equipment. Due to the typical short-term nature of these types of services, the Company records them under the completed contract method, whereby costs and related revenues are deferred in the balance sheet until services are delivered and accepted by the government. Contract costs deferred are costs incurred for assets, such as costs for the purchase of materials and production equipment, under fixed-price contracts. For these types of services, labor and other general and administrative costs are not significant and are included as period charges.

Significant concentrations

     Two customers accounted for approximately 22% and 17% of data center revenues for the six months ended September 30, 2004. One customer accounted for approximately 11% of data center revenues for the six months ended September 30, 2003.

Reclassifications

     Certain reclassifications have been made to the prior periods’ financial statements to conform with the current presentation.

Investment in unconsolidated entities

     For investments in less than majority-owned entities where the Company does not exercise significant influence, the Company uses the cost method of accounting. For investments in less than majority-owned entities where the Company exercises significant influence, the Company uses the equity method of accounting.

Stock-based compensation

     The Company uses the intrinsic value method to account for its employee stock-based compensation plans. Under this method, compensation expense is based on the difference, if any, on the date of grant, between the fair value of the Company’s shares and the option’s exercise price. The Company accounts for stock-based compensation to non-employees using the fair value method.

     The following table presents what the net loss and net loss per share would have been had the Company accounted for employee stock-based compensation using the fair value method:

	For the Six Months Ended
	September 30,
	2004			2003
Net income (loss) attributable to common shareholders as reported	$	1,750,741		$	(7,957,589	)
Stock-based compensation expense if the fair value method had been adopted		(616,609	)		(2,973,696	)
Pro forma net income (loss) attributable to common shareholders	$	1,134,132		$	(10,931,285	)
Income (loss) per common share — as reported	$	0.01		$	(0.03	)
Income (loss) per common share — pro forma	$	—		$	(0.04	)

F-13

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

     Fair value calculations for employee grants were made using the Black-Scholes option pricing model with the following weighted average assumptions:

Risk Free Rate	2.14% - 3.50%	2.14% - 2.90%
Volatility (four year historical)	150%	155%
Expected life	5 years	5 years
Expected dividends	0%	0%

Minority interest

     Minority interest is reflected in consolidation and is the portion of NAP Madrid that is not owned by the Company.

Income (loss) per share

     Basic income (loss) per share (“EPS”) equals net income (loss) divided by the number of weighted average common shares. Diluted EPS includes the effects of potentially dilutive securities such as stock options and convertible debt. For the six months ended September 30, 2004, the effect of shares issuable upon exercise of convertible debt, convertible preferred stock, warrants and stock options is anti-dilutive, except for approximately 9.9 million stock options and 1.2 million warrants whose exercise prices were lower than $0.75 per common share. The 9.9 million stock options and the 1.2 million warrants are considered dilutive but have no impact on the resulting per share calculation due to rounding; therefore, diluted income (loss) per share is not presented in a comparative format.

Comprehensive loss

     Comprehensive loss consists of net earnings and foreign currency translation adjustments, and is presented in the accompanying consolidated statement of stockholders’ equity (deficit).

Recent accounting standards

     In May 2003, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This Statement requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances) because that financial instrument embodies an obligation of the issuer. In November 2003, the FASB issued FASB Staff Position No. 150-3 which deferred the measurement provisions of SFAS No. 150 indefinitely for certain mandatory redeemable non-controlling interests that were issued before November 5, 2003. The FASB plans to reconsider implementation issues and, perhaps, classification or measurement guidance for those non-controlling interests during the deferral period. In 2003, the Company applied certain disclosure requirements of SFAS No. 150. To date, the impact of the effective provisions of SFAS No. 150 have been the presentation of the Series H redeemable preferred stock as a liability. While the effective date of certain elements of SFAS No. 150 have been deferred, the adoption of SFAS 150 when finalized is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

     In March 2004, the FASB issued a proposed Statement, “Share-Based Payment, an amendment of FASB Statements Nos. 123 and 95,” that address the accounting for share-based payment transactions in which a company receives employee services in exchange for either equity instruments of the company or liabilities that are based on the fair value of the company’s equity instruments or that may be settled by the issuance of such equity instruments. The proposed statement would eliminate the ability to account for share-based compensation transactions using the intrinsic method that the Company currently uses and generally would

F-14

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

require that such transactions be accounted for using a fair-value-based method and recognized as expenses in the consolidated statement of operations. The effective date of the proposed standard is for periods beginning after June 15, 2005. It is expected that the final standard will be issued before December 31, 2004 and should it be finalized in its current form, it may have a significant impact on the consolidated statement of operations as the Company will be required to expense the fair value of stock option grants and stock purchases under employee stock option plans.

     In April 2004, the Emerging Issues Task Force of the FASB approved EITF Issue 03-6, “Participating Securities and the Two-Class Method under FAS 128.” EITF Issue 03-6 supersedes the guidance in Topic No. D-95, “Effect of Participating Convertible Securities on the Computation of Basic Earnings per Share”, and requires the use of the two-class method for participating securities. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. In addition, EITF Issue 03-6 addresses other forms of participating securities, including options, warrants, forwards and other contracts to issue an entity’s common stock, with the exception of stock-based compensation (unvested options and restricted stock) subject to the provisions of Accounting Principles Board Opinion No. 25 and SFAS No. 123. EITF Issue 03-6 is effective for reporting periods beginning after March 31, 2004 and should be applied by restating previously reported earnings per share. The adoption of EITF Issue 03-6 did not have a material impact on the Company’s financial position or results of operations.

     The Company’s Senior Notes contain contingent interest provisions which allow the holders of the Senior Notes to participate in any dividends declared on the Company’s common stock. Further, the Company’s Series H and I preferred stock contain participation rights which entitle the holders to receive dividends in the event the Company declares dividends on its common stock. Accordingly, the Senior Notes and the Series H and I preferred stock are considered participating securities under EITF Issue 03-6. As a result of the number of shares of the Company’s common stock currently outstanding, the participation rights under the Senior Notes and the Series H and I preferred stock did not have a materially dilutive effect on the Company’s earnings per share for the six months ended September 30, 2004.

3. Deferred Costs Under Government Contract

     As of September 30, 2004, deferred costs consist mainly of equipment which has not yet been installed as part of a technology infrastructure build-out under a $6.2 million government contract, for which the Company was entitled to bill approximately $5.1 million as of September 30, 2004 and is expected to collect in November 2004. Under the completed contract method, the Company does not record such billable but unearned amounts.

F-15

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

4. Convertible Debt

	September 30,		March 31,
	2004		2004
Senior Convertible Notes, with a face value of $86.25 million, due June 15, 2009, and convertible into shares of the Company’s common stock at $1.25 per share. Interest at 9% is payable semi-annually, beginning December 15, 2004	$	51,971,488	$	—
Subordinated secured convertible debentures due April 30, 2006; converted into shares of the Company’s common stock at $0.50 per share during May 2004		—		24,095,239
Subordinated secured convertible debentures due December 31, 2005; converted into shares of the Company’s common stock at a weighted average conversion price of $2.14 per share during June 2004		—		10,300,000
Subordinated secured convertible debentures due August 30, 2004; repaid or converted into shares of the Company’s common stock at a weighted average conversion price of $0.66 per share during the period from May to July 2004		—		2,750,000
	$	51,971,488	$	37,145,239
Less: current portion of convertible debt		—		(250,000	)
Convertible debentures, less current portion	$	51,971,488	$	36,895,239

     On May 17, 2004, the Company provided certain debenture holders with notice of its intent to redeem $25.0 million of its 10% convertible debentures and $2.8 million of its 13.125% convertible debentures, effective June 1, 2004. As of June 1, 2004, the holders of all of the 10% convertible debentures and $2.5 million in principal of the 13.125% convertible debentures converted their debentures into an aggregate of 54,726,427 shares of the Company’s common stock.

     As a result of the extinguishment of notes payable and convertible debentures, the Company recognized a gain on debt restructuring and extinguishment totaling approximately $3.4 million, representing the recognition of the unamortized balance of a debt restructuring deferred gain related to the Company’s notes payables and the write-off of debt issuance costs, net of an early redemption premium payment to the 13% debenture holders.

     On June 14, 2004, the Company privately placed $86.25 million in aggregate principal amount of the Senior Notes to qualified institutional buyers. The Senior Notes bear interest at a rate of 9% per annum, payable semi-annually, beginning December 15, 2004 and are convertible at the option of the holders, into shares of the Company’s common stock at a conversion price of $1.25 per share. The Company used the net proceeds from this offering to pay notes payable amounting to approximately $36.5 million and convertible debt amounting to approximately $9.8 million. In conjunction with the offering, the Company incurred $6,635,912 in debt issuance costs, including $1,380,000 in estimated fair value of warrants issued to purchase 1,815,789 shares of the Company’s common stock at $0.95 per share.

     The Senior Notes rank pari passu with all existing and future unsecured and unsubordinated indebtedness, senior in right of payment to all existing and future subordinated indebtedness, and rank junior to any future secured indebtedness. If there is a change in control of the Company, the holders have the right to require the Company to repurchase their notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest (the “Repurchase Price”). If a change in control occurs and at least 50% of the consideration for the Company’s common stock consists of cash, the holders of the Senior Notes may elect to receive the greater of the Repurchase Price or the Total Redemption Amount. The Total Redemption Amount will be equal to the product

F-16

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

of (x) the average closing prices of the Company’s common stock for the five trading days prior to announcement of the change in control and (y) the quotient of $1,000 divided by the applicable conversion price of the Senior Notes, plus a make whole premium of between $270 per $1,000 of principal if the change in control takes place before December 15, 2004, and $45 per $1,000 of principal if the change in control takes place between June 16, 2008 and December 15, 2008. If the Company issues a cash dividend on its common stock, it will pay contingent interest to the holders of the Senior Notes equal to the product of the per share cash dividend and the number of shares of common stock issuable upon conversion of each holder’s note.

     The Company may redeem some or all of the Senior Notes for cash at any time on or after June 15, 2007, if the closing price of the Company’s common shares has exceeded 200% of the applicable conversion price for at least 20 trading days within a period of 30 consecutive trading days ending on the trading day before the date it mails the redemption notice. If the Company redeems the notes during the twelve month period commencing on June 15, 2007 or 2008, the redemption price equals 104.5% or 102.25%, respectively, of their principal amount, plus accrued and unpaid interest, if any, to the redemption date, plus an amount equal to 50% of all remaining scheduled interest payments on the notes from, and including, the redemption date through the maturity date.

     The Senior Notes contain an early conversion incentive for holders to convert their notes into shares of common stock on or after December 16, 2004, but before June 15, 2007. If exercised, the holders will receive the number of common shares to which they are entitled and an early conversion incentive payment in cash or common stock, at the Company’s option, equal to one-half the aggregate amount of interest payable through June 15, 2007.

     The conversion option, including the early conversion incentive, and the equity participation feature embedded in the Senior Notes were determined to be derivative instruments to be considered separately from the debt and accounted for separately. As a result of the bifurcation of the embedded derivatives, the carrying value of the Senior Notes at issuance was approximately $50.8 million. The Company is accreting the difference between the face value of the Senior Notes ($86.25 million) and the carrying value to interest expense under the effective interest method on a monthly basis over the life of the Senior Notes. Upon registration of the Senior Notes, the make whole premium due upon a change in control will require valuation and accounting separate from the Senior Notes.

5. Derivatives Embedded within Convertible Debt

     The Senior Notes contain two embedded derivatives that require separate valuation from the Senior Notes: a conversion option that includes an early conversion incentive and an equity participation right. Upon registration of the Senior Notes under the Securities Act of 1933, as amended, a third embedded derivative will require separate valuation for a take-over make whole premium. The Company estimated that the embedded derivative related to the equity participation rights did not have a significant value.

     The Company estimated that the embedded derivatives had an initial estimated fair value of approximately $35,483,000 and a September 30, 2004 estimated fair value of approximately $21,804,000, resulting primarily from the conversion option. The change of approximately $13,679,000 in the estimated fair value of the embedded derivative was recognized as other income in the six months ended September 30, 2004.

6. Notes Payable

     At March 31, 2004, the Company had outstanding an aggregate of $40,506,039 in notes payable which were repaid in June 2004.

F-17

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

7. Changes in Stockholders’ Equity (Deficit)

Conversion of debt to equity

     On June 1, 2004, the holders of $25.0 million of the Company’s 10% convertible debentures and the holders of $2.5 million of the Company’s 13.125% convertible debentures converted their debentures into 54,726,427 shares of the Company’s common stock. In April 2004, $262,500 of debt was converted to 350,000 shares of common stock at $0.75 per share.

Conversion of preferred stock to common stock

     During September 2004, Series I preferred stock valued at $250,000 was converted to 333,340 shares of common stock at $0.75 per share.

Grant of employee stock options

     In July 2004, the Compensation Committee of the Board of Directors approved the grant of options to certain employees, including some officers of the Company, to purchase 1,185,000 of the Company’s common stock at an exercise price of $0.65 per share, the price of the Company’s common stock on the date of the grant.

Exercise of employee stock options

     During the six months ended September 30, 2004, the Company issued 336,667 shares of its common stock in conjunction with the exercise of employee stock options at prices ranging from $0.33 to $0.74 per share.

Issuance of warrants

     In August 2004, the Company issued warrants to acquire 1,815,789 shares of the Company’s common stock at an exercise price of $0.95 per share. The warrants were issued as part of the compensation to the placement agent for the private placement of the Senior Notes, and were accounted for as debt issue costs at their estimated fair market value of $1,380,000 on the date the Company issued the Senior Notes.

     In May 2004, the Company issued warrants to acquire 250,000 shares of the Company’s common stock at an exercise price of $0.01 per share for warrants to purchase 200,000 shares at $0.70 per share for warrants to purchase 50,000 shares. The warrants were issued in conjunction with short-term borrowings and had an estimated fair value of $172,650.

Exercise of warrants

     In August 2004, warrants were exercised for 200,000 shares of common stock at $0.01 per share.

     In May 2004, warrants were exercised for 151,622 shares of common stock at $0.80 per share.

Stock tendered in payment of loan

     On September 30, 2004, the Company’s Chairman and CEO repaid his outstanding $5 million loan from the Company by tendering to the Company approximately 7.7 million shares of Terremark common stock. See Note 8.

8. Related Party Transactions

     Due to the nature of the following relationships, the terms of the respective agreements may not be the same as those that would result from transactions among wholly unrelated parties.

F-18

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

     Following is a summary of transactions for the six months ended September 30, 2004 and 2003 and balances with related parties included in the accompanying balance sheet as of September 30, 2004 and March 31, 2004.

	For the Six Months Ended
	September 30,
	2004		2003
Rent expense	$	3,879,189	$	1,779,098
Services purchased from related parties		465,865		—
Property management and construction fees		90,922		107,070
Revenues from NAP de las Americas — Madrid		—		33,240
Interest income on notes receivable — related party		50,278		35,402
Interest income from shareholder		15,032		16,154
Interest expense		657,536		881,950

	September 30,		March 31,
	2004		2004
Other assets	$	463,934	$	499,009
Note receivable — related party		—		5,000,000
Notes payable to related parties		—		35,516,977
Convertible debt		—		4,150,000

     On September 30, 2004, the Company’s Chairman and CEO repaid his outstanding $5 million loan from the Company, plus accrued interest, by tendering to the Company approximately 7.7 million shares of Terremark common stock. The 7.7 million shares tendered to the Company were immediately retired. These shares were valued at $0.65 per share by the Company’s Board of Directors. As a result, the Company recognized an expense of approximately $77,000 which represents the difference between the Company’s estimated value of the shares tendered and the $0.64 closing price of the Company’s common stock on September 28, 2004, the date the agreement to tender the 7.7 million shares was approved by the Company’s Board of Directors.

9. Data Center Revenues

     Data center revenues consist of the following:

	For the Six Months Ended
	September 30,
	2004		2003
Colocation	$	9,728,114	$	4,371,741
Exchange point services		2,125,842		1,253,890
Managed and professional services		3,171,041		1,325,657
Contract termination fee		918		291,537
	$	15,025,915	$	7,242,825

10. Information About the Company’s Operating Segments

     As of September 30, 2004 and March 31, 2004, the Company had two reportable business segments, data center operations and real estate services. The data center operations segment provides Internet infrastructure and managed services in a data center environment. The real estate services segment constructs and manages real estate projects focused in the technology sector. The Company’s reportable segments are strategic business operations that offer different products and services.

F-19

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

     The accounting policies of the segments are the same as those described in significant accounting policies. Revenues generated among segments are recorded at rates similar to those recorded in third-party transactions. Transfers of assets and liabilities between segments are recorded at cost. The Company evaluates performance based on the segments’ net operating results.

     The following presents information about reportable segments:

	Data Center			Real Estate
For the Six Months Ended September 30,	Operations			Services			Total
2004
Revenue	$	15,025,915		$	1,087,708		$	16,113,623
Loss from operations		(8,559,363	)		(62,116	)		(8,621,479	)
Net income (loss)		2,298,518			(60,956	)		2,237,562
2003
Revenue	$	7,242,825		$	247,123		$	7,489,948
Loss from operations		(10,219,446	)		(260,157	)		(10,479,603	)
Net loss		(7,617,564	)		(260,025	)		(7,877,589	)
Assets, as of
September 30, 2004	$	106,864,331		$	93,344		$	106,957,675
March 31, 2004		77,101,579		$	331,124		$	77,432,703

     The following is a reconciliation of total segment loss from operations to income (loss) before income taxes:

		For the Six Months Ended
		September 30,
		2004			2003
Total segment loss from operations		$	(8,621,479	)	$	(10,479,603	)
Change in estimated fair value of derivatives embedded within convertible debt			13,679,250			—
Debt restructuring and extinguishment			3,420,956			8,475,000
Interest expense			(6,433,148	)		(6,225,547	)
Interest income			196,243			55,729
Other income (expense)			(4,260	)		296,832
	Income (loss) before income taxes	$	2,237,562		$	(7,877,589	)

F-20

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

11. Supplemental Cash Flow Information

		For the Six Months Ended
		September 30,
		2004		2003
Supplemental disclosures of cash flow information:
	Cash paid for interest	$	2,374,223	$	5,119,769
Non-cash operating, investing and financing activities:
	Warrants issued		1,552,650		512,350
	Conversion of notes payable to convertible debt		—		5,450,000
	Beneficial conversion feature on issuance of convertible debentures and preferred stock		—		9,500,000
	Warrants exercised and converted to equity		261,640		3,971
	Conversion of debt and related accrued interest to equity		262,500		9,420,004
	Conversion of preferred stock to equity		333		—
	Conversion of construction payables and accrued interest to equity		—		14,125,000
	Conversion of convertible debt and related accrued interest to equity		27,773,524		—
	Cancellation of warrants		—		26,575
	Non-cash preferred dividend		486,821		—
	Settlement of note receivable through extinguishment of convertible debt		418,200		—
	Settlement of notes receivable — related party by tendering Terremark stock		5,000,000		—

F-21

Report of Independent Registered Certified Public Accounting Firm

To the Board of Directors and
Shareholders of Terremark Worldwide, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of changes in stockholders’ deficit and of cash flows present fairly, in all material respects, the financial position of Terremark Worldwide, Inc. and its subsidiaries at March 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2004 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PRICEWATERHOUSECOOPERS LLP

Fort Lauderdale, Florida
June 14, 2004

F-22

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

		March 31,
		2004			2003
ASSETS
Current assets:
Cash and cash equivalents		$	4,378,614		$	1,408,190
Accounts receivable, net of allowance for doubtful accounts of $200,000 and $120,340			3,214,101			494,736
Note receivable			2,285,000			—
Contracts receivable			363,043			29,204
Prepaid and other current assets ($499,009 and $471,000 due from related party)			1,115,230			760,809
	Total current assets		11,355,988			2,692,939
Investment in unconsolidated entities, net			725,319			827,667
Restricted cash			789,476			768,905
Property and equipment, net			53,897,716			54,482,964
Other assets			664,334			829,168
Goodwill			9,999,870			9,999,870
	TOTAL ASSETS	$	77,432,703		$	69,601,513
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current portion of notes payable (includes $4,325,010 and $138,000 due to related parties)		$	9,194,145		$	1,464,963
Construction payables			1,363,554			22,012,162
Accounts payable and accrued expenses			7,038,768			8,434,373
Current portion of capital lease obligations			1,799,726			2,477,467
Interest payable			1,952,978			4,492,805
Net liabilities of discontinued operations			28,551			1,199,531
Convertible debt			250,000			900,000
	Total current liabilities		21,627,722			40,981,301
Notes payable, less current portion (includes $31,191,967 and $4,100,000 due to related parties)			31,311,894			56,174,938
Convertible debt, with a face value of $37,800,000 and $14,005,000 (includes $4,150,000 and $3,450,000 due to related parties)			36,895,239			14,005,000
Deferred rent			6,938,454			2,610,623
Capital lease obligations, less current portion			105,886			762,470
Deferred revenue			2,686,396			971,150
Series H redeemable convertible preferred stock: $.001 par value, 294 shares issued and outstanding, at liquidation value			586,718			556,729
	TOTAL LIABILITIES		100,152,309			116,062,211
Commitments and contingencies (Note 16)			—			—
Series G convertible preferred stock: $.001 par value, 20 shares issued and outstanding (Liquidation value of approximately $2.8 million and $2.6 million.)			1			1
Series I convertible preferred stock: $.001 par value, 400 shares issued and outstanding (Liquidation value of approximately $10.0 million.)			1			—
Common stock: $.001 par value, 500,000,000 shares authorized; 311,227,482 and 256,276,864 shares issued and outstanding			311,227			256,277
Paid in capital			213,596,501			169,204,208
Accumulated deficit			(236,814,717	)		(214,324,140	)
Common stock warrants			3,642,006			1,857,581
Common stock options			1,545,375			1,545,375
Note receivable — related party (Note 9)			(5,000,000	)		(5,000,000	)
	TOTAL STOCKHOLDERS’ DEFICIT		(22,719,606	)		(46,460,698	)
	TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	77,432,703		$	69,601,513

The accompanying notes are an integral part of these consolidated financial statements.

F-23

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

			For the year ended March 31,
			2004			2003			2002
Revenues
	Data center		$	17,034,377		$	11,032,985		$	3,215,897
	Development, commission and construction fees			41,081			197,413			3,218,330
	Management fees			197,827			179,505			1,183,570
	Construction contracts			940,454			3,283,800			8,254,687
		Operating revenues		18,213,739			14,693,703			15,872,484
Expenses
	Data center operations, excluding depreciation (includes $5,308,272, $3,558,196 and $2,668,647 of rent expense with a related party)			16,413,021			11,234,833			11,230,513
	Start up costs-data centers			—			—			3,383,127
	Construction contract expenses, excluding depreciation			918,022			2,968,142			7,397,524
	General and administrative			13,336,400			12,507,121			15,561,042
	Sales and marketing			3,424,411			4,200,858			3,621,176
	Depreciation and amortization			4,698,292			5,092,749			7,257,151
	Impairment of long-lived assets and goodwill			—			4,020,300			18,973,670
		Operating expenses		38,790,146			40,024,003			67,424,203
	Loss from operations			(20,576,407	)		(25,330,300	)		(51,551,719	)
Other income (expenses)
	Gain on debt restructuring			8,475,000			—			—
	Inducement on debt conversion			—			(4,871,245	)		—
	Interest expense (includes $4,000,000, $3,300,000 and $1,500,000 with a related party)			(14,624,922	)		(11,007,683	)		(9,750,473	)
	Gain on sale of real estate held for sale			—			—			4,185,728
	Interest income			131,548			136,278			97,237
	Other			4,104,204			(154,355	)		(352,988	)
		Total other expenses		(1,914,170	)		(15,897,005	)		(5,820,496	)
	Loss before income taxes			(22,490,577	)		(41,227,305	)		(57,372,215	)
Income taxes				—			—			—
Net loss				(22,490,577	)		(41,227,305	)		(57,372,215	)
Non-cash preferred dividend				(1,158,244	)		(160,000	)		(160,000	)
Net loss attributable to common shareholders			$	(23,648,821	)	$	(41,387,305	)	$	(57,532,215	)
Basic and diluted net loss per common share:			$	(0.08	)	$	(0.18	)	$	(0.29	)
	Weighted average common shares outstanding			305,028,194			235,209,310			199,243,146

The accompanying notes are an integral part of these consolidated financial statements.

F-24

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

	Stockholders’ Equity
					Common Stock
					Par Value $.001
	Preferred		Preferred								Additional						Common			Common
	Stock		Stock		Issued						Paid-in			Stock			Stock			Stock			Treasury			Note Receivable			Retained
	Series G		Series I		Shares			Amount			Capital			Subscriptions			Warrants			Options			Stock			Related Party			Deficit
Balance at March 31, 2001	$	1	$	—		200,507,179		$	200,507		$	125,339,544		$	—		$	2,059,398		$	1,716,138		$	(2,428,125	)	$	—		$	(115,724,620	)
Exercise of stock options		—		—		115,000			115			40,135			—			—			—			—			—			—
Forfeiture of stock options		—		—		—			—			—			—			—			(169,337	)		—			—			—
Warrants issued		—		—		—			—			—			—			849,015			—			—			—			—
Exercise of warrants		—		—		100,000			100			29,900			—			(29,000	)		—			—			—			—
Stock options issued		—		—		—			—			—			—			—			20,000			—			—			—
Conversion of debt		—		—		160,071			160			242,540			—			—			—			—			—			—
Common stock subscriptions		—		—		—			—			—			950,000			—			—			—			—
Note receivable-related party		—		—		—			—			—			—			—			—			—			(5,000,000	)		—
Net loss		—		—		—			—			—			—			—			—			—			—			(57,372,215	)
Balance at March 31, 2002		1		—		200,882,250			200,882			125,652,119			950,000			2,879,413			1,566,801			(2,428,125	)		(5,000,000	)		(173,096,835	)
Sale of common stock		—		—		33,148,824			33,149			21,395,161			(950,000	)		—			—			—			—			—
Retirement of treasury shares		—		—		(1,400,000	)		(1,400	)		(2,426,725	)		—			—			—			2,428,125			—			—
Warrants issued		—		—		—			—			—			—			1,221,979			—			—			—			—
Exercise of warrants		—		—		818,000			818			372,100			—			(364,738	)		—			—			—			—
Conversion of debt		—		—		22,827,790			22,828			22,311,054			—			—			—			—			—			—
Warrants expired		—		—		—			—			1,879,073			—			(1,879,073	)		—			—			—			—
Forfeiture of stock options		—		—		—			—			21,426			—			—			(21,426	)		—			—			—
Net loss		—		—		—			—			—			—			—			—			—			—			(41,227,305	)
Balance at March 31, 2003		1		—		256,276,864			256,277			169,204,208			—			1,857,581			1,545,375			—			(5,000,000	)		(214,324,140	)
Conversion of debt		—		—		51,211,834			51,212			24,257,664			—			—			—			—			—			—
Exercise of stock options		—		—		77,268			77			38,328			—			—			—			—			—			—
Warrants issued		—		—		—			—			(309,998	)		—			644,597			—			—			—			—
Exercise of warrants		—		—		9,500			9			8,521			—			(3,971	)		—			—			—			—
Warrants expired		—		—		—			—			528,449			—			(528,449	)		—			—			—			—
Beneficial conversion feature on issuance of convertible debentures		—		—		—			—			9,500,000			—			—			—			—			—			—
Stock options issued		—		—		—			—			2,185,463			—			—			—			—			—			—
Series I Preferred stock issued		—		1		—			—			8,187,518			—			1,672,248			—			—			—			—
Common stock issued		—		—		3,652,016			3,652			(3,652	)		—			—			—			—			—			—
Net loss		—		—		—			—			—			—			—			—			—			—			(22,490,577	)
Balance at March 31, 2004	$	1	$	1		311,227,482		$	311,227		$	213,596,501		$	—		$	3,642,006		$	1,545,375		$	—		$	(5,000,000	)	$	(236,814,717	)

The accompanying notes are an integral part of these consolidated financial statements.

F-25

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

MARCH 31, 2004

					For the year ended March 31,
					2004			2003			2002
Cash flows from operating activities:
	Net loss				$	(22,490,577	)	$	(41,227,305	)	$	(57,372,215	)
	Adjustments to reconcile net loss to net cash used in operating activities
		Depreciation and amortization of long-lived assets				4,698,292			5,092,749			7,257,151
		Amortization of beneficial conversion feature on issuance of convertible debentures				8,595,239			—			—
		Gain on sales of real estate held for sale				—			—			(4,185,728	)
		Loss on sale of property and equipment				—			—			373,369
		Amortization of loan costs				130,483			908,321			1,097,922
		Provision for bad debt				167,135			197,774			234,767
		Equity issued for services				—			313,968			—
		Impairment of long-lived assets				—			4,020,300			18,973,670
		Stock-based compensation				2,185,463			—			—
		Inducement on debt conversion expense				—			4,871,245			—
		Gain on debt restructuring				(8,475,000	)		—			—
		Other, net				74,034			312,252			(44,167	)
		(Increase) decrease in:
			Accounts receivable			(2,886,500	)		929,468			1,014,374
			Contracts receivable			(333,839	)		1,333,632			3,275,080
			Other assets			279,530			(123,369	)		(285,764	)
		Increase (decrease) in:
			Accounts payable and accrued expenses			(1,166,016	)		649,006			(9,214,398	)
			Interest payable			(1,526,664	)		2,947,252			2,024,589
			Deferred revenue			1,715,246			155,324			531,133
			Net assets/ liabilities of discontinued operations			(1,170,980	)		175,521			(1,306,837	)
			Deferred rent			4,327,831			1,135,448			1,908,575
				Net cash used in operating activities		(15,876,323	)		(18,308,414	)		(35,718,479	)
Cash flows from investing activities:
	Restricted cash					(20,571	)		(11,332	)		(725,534	)
	Purchase of property and equipment					(4,054,741	)		(994,892	)		(45,785,047	)
	Proceeds from sale of real estate held for sale					—			—			17,046,385
	Proceeds from sale of property and equipment					—			—			30,000
	Investment in unconsolidated entities					—			(337,812	)		—
				Net cash used in investing activities		(4,075,312	)		(1,344,036	)		(29,434,196	)
Cash flows from financing activities:
	Borrowings (payments) of construction payables					1,215,505			(2,948,554	)		9,290,277
	New borrowings					750,000			10,032,220			66,750,175
	Payments on loans					(2,996,517	)		(2,295,138	)		(26,550,718	)
	Issuance of convertible debt					19,550,000			—			15,042,318
	Payments on convertible debt					(1,605,000	)		—			—
	Note receivable-related party					—			—			(5,000,000	)
	Payments under capital lease obligations					(1,334,325	)		(975,433	)		(1,162,236	)
	Sale of preferred stock					7,309,765			—			500,000
	Cash received for common stock subscriptions					—			—			950,000
	Exercise of stock options and warrants					32,631			9,180			41,250
	Sale of common stock and warrants					—			16,955,287			—
				Net cash provided by financing activities		22,922,059			20,777,562			59,861,066
				Net increase (decrease) in cash		2,970,424			1,125,112			(5,291,609	)
Cash and cash equivalents at beginning of period						1,408,190			283,078			5,574,687
Cash and cash equivalents at end of period					$	4,378,614		$	1,408,190		$	283,078

The accompanying notes are an integral part of these consolidated financial statements.

F-26

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2004

1. BUSINESS AND ORGANIZATION

     Terremark Worldwide, Inc. (together with its subsidiaries, the “Company”) operates facilities at strategic locations in Florida, California, and Sao Paulo from which the Company assists users of the Internet and large communications networks in communicating with other users and networks. The Company’s primary facility is the NAP of the Americas, a carrier-neutral Tier-1 network access point (the “NAP”) in Miami, Florida. The NAP provides exchange point, colocation and managed services to carriers, Internet service providers, network service providers, government entities, multinational enterprises and other end users. The Company’s strategy is to leverage its concentration of connectivity and carrier-neutral status to sell services to customers within and outside of the Company’s TerreNAP Data Centers.

     Prior to April 2000, the Company was engaged in the development, sales, leasing, management and financing of retail, high-rise office buildings, mixed-use projects, condominiums, hotels and government-assisted housing. The Company was also involved in a number of ancillary businesses that complemented its development operations. Specifically, the Company engaged in offering financial services, property management, construction management, condominium hotel management, residential and commercial leasing brokerage, and advisory services. By March 31, 2002, the Company had exited non-core real estate activities, real estate development, property management, financing and the ancillary businesses that complimented these real-estate development operations. The Company’s remaining real estate activities include technology construction work and management of the property where the NAP of the Americas is located.

2. LIQUIDITY AND RECENT DEVELOPMENTS

     The Company privately placed $75 million in aggregate principal amount of 9% Senior Convertible Notes due June 15, 2009 (the “Senior Notes”), to qualified institutional buyers. The Company has also granted the initial purchasers of the Senior Notes a 30-day option to purchase up to an additional $11.25 million aggregate principal amount of the Senior Notes. The Senior Notes will bear interest at a rate of 9% per annum, payable semi-annually, beginning December 15, 2004 and will be convertible at the option of the holders, at $1.25 per share. The Company will utilize the net proceeds from this offering to pay all of its outstanding debt, for possible acquisitions and for general corporate purposes, including working capital and capital expenditures.

     The Senior Notes will rank senior in priority with all existing and future unsecured and unsubordinated indebtedness and senior in right of payment to all of existing and future subordinated indebtedness, and rank junior to any future secured indebtedness. If there is a change in control, the holders have the right to require the Company to repurchase their notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest. If the Company issue a cash dividend on its common stock, it will pay contingent interest to the holders equal to the product of the per share cash dividend and the number of shares of common stock issuable upon conversion of each holder’s note.

     The Company may redeem some or all of the notes for cash at any time on or after June 15, 2007 if the closing price of the common shares has exceeded 200% of the applicable conversion price for at least 20 trading days within a period of 30 consecutive trading days ending on the trading day before the date the Company mails the redemption notice. If the Company redeems the notes during the twelve month period commencing on June 15, 2007 or 2008, the redemption price equals 104.5% or 102.25%, respectively, of their principal amount, plus accrued and unpaid interest, if any, to the redemption date, plus an amount equal to 50% of all remaining scheduled interest payments on the notes from, and including, the redemption date through the maturity date.

     On May 17, 2004, the Company provided certain debenture holders with notice of its intent to redeem the $25.0 million 10% convertible debentures and the $2.8 million 13.125% convertible debentures, effective May 31, 2004. As of May 31, 2004, all of the holders of the 10% convertible debentures and $2.5 million in principal of the 13.125% convertible debentures opted to convert their debentures into an aggregate of

F-27

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

54,726,427 shares of the Company’s common stock. The debt conversion has effectively reduced annual cash interest payments by approximately $2.9 million.

     In May 2004, the Company issued three senior secured promissory notes in favor of Veritas High Yield Arbitrage I Fund, LLC, Veritas High Yield Arbitrage II Fund, LLC, and Veritas High Yield Arbitrage Fund, (Bermuda) Ltd. (collectively the “Lenders”) for the aggregate amount of $5.2 million. The notes accrue interest at 12% per annum, are paid monthly based on original face amount, and mature on October 29, 2004, with prepayment permitted without penalty after the first month.

     Historically, the Company has financed its operations and capital requirements primarily through the credit facility with Ocean Bank, issuance of unsecured notes, issuance of convertible debentures, private sale of common and preferred stock and vendor financing, including construction payables and capital lease obligations. As of March 31, 2003, total indebtedness was approximately $116.1 million. As of March 31, 2004, this amount was reduced to $82.1, including the conversion to equity of $15.0 million of the Ocean Bank debt and $22.6 million of certain construction payables, including accrued interest.

     From the time of the merger through March 31, 2004, the Company has incurred net operating losses of approximately $222.5 million. The Company’s cash flows from operations for the years ended March 31, 2004 and 2003 were negative and the working capital deficit was approximately $10.2 million and $38.3 million as of March 31, 2004 and 2003, respectively.

     Based on customer contracts signed as of June 14, 2004, expected expansions of customers under contract and anticipated future contracts from potential customers in the sales pipeline, the Company projects that its cash flow from operations will be positive by the end of the fiscal year ending March 31, 2005. The Company’s projected revenues and cash flows, depend on several factors, some of which are beyond the Company’s control, including the rate at which the Company provides services and these services are accepted by customers under existing contracts, the rate at which new services are sold to the government sector and the commercial sector, the ability to retain the customer base, the willingness and timing of potential customers in outsourcing the housing and management of their technology infrastructure to the Company, the reliability and cost-effectiveness of the Company’s services and the Company’s ability to market its services. Although the real estate activities had a net operating loss of approximately $338,000 for the year ended March 31, 2004, the Company anticipates that these activities will generate enough revenues to cover operating expenses. If revenues for real estate activities are below amounts anticipated, cash needs are not expected to exceed $200,000 for the next twelve months. Accordingly, the Company believes that its cash resources are sufficient to meet working capital, debt service and corporate overhead requirements associated with the Company’s operations until at least March 31, 2005.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     A summary of significant accounting principles and practices used by the Company in preparing its consolidated financial statements follows.

     The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant inter-company balances and transactions have been eliminated.

Use of estimates

     The Company prepares its financial statements in conformity with generally accepted accounting principles in the United States of America. These principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

F-28

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Reclassifications

     Certain reclassifications have been made to the prior periods’ financial statements to conform with current presentation.

Cash and cash equivalents

     The Company considers all amounts held in highly liquid instruments with an original purchased maturity of three months or less to be cash equivalents. Cash and cash equivalents include cash balances maintained in the operating and interest-bearing money market accounts at the Company’s banks.

Investment in unconsolidated entities

     For investments in less than majority-owned entities where the Company does not exercise significant influence, the Company uses the cost method of accounting. For investments in less than majority-owned entities where the Company exercises significant influence, the Company uses the equity method of accounting.

Restricted cash

     Restricted cash represents cash deposits with a financial institution collateralizing a $750,000 letter of credit issued to the lessor of the Company’s colocation facility in Santa Clara, California.

Property and equipment

     Property and equipment includes acquired assets and those accounted for under capital leases. Acquired assets are recorded at cost and capital leased assets are recorded at the net present value of minimum lease payments. Property and equipment, included in leased assets, are depreciated on the straight-line method over their estimated remaining useful lives, as follows:

Leasehold improvements	5 - 20  years
Computer software	3 years
Furniture, fixture and equipment	5 - 20  years

     Costs for improvements and betterments that extend the life of assets are capitalized. Maintenance and repair expenditures are expensed as incurred.

Prepaid and other assets

     Other assets consist of loan costs, prepaid expenses and other. Loan costs, principally loan origination and related fees, are deferred and amortized as interest expense over the life of the respective loan using the straight-line method, which approximates the effective interest method.

Goodwill and Impairment of long-lived assets and long-lived assets to be disposed of

     Goodwill represents the unamortized balance of the excess purchase price over the fair value of identifiable net assets acquired in conjunction with the acquisition of Telecom Routing Exchange Developers, Inc., a corporation holding rights to develop and manage facilities catering to the telecommunications industry.

     As of April 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). SFAS 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets. Under SFAS 142, goodwill and intangible assets that have indefinite lives are not amortized but rather are tested at least annually for impairment or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable. The goodwill impairment test involves a two-step approach. Initially the fair value of the Company’s reporting units

F-29

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

are compared with their carrying amount, including goodwill, to identify potential impairment. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized for the excess, if any, of the carrying value of goodwill over the implied fair value of goodwill. Intangible assets that have finite useful lives continue to be amortized over their useful lives.

     Prior to the adoption of SFAS 142, intangible assets were generally amortized on the straight-line method over five years. In accordance with SFAS 142, the Company ceased amortization of its intangible assets with indefinite lives and completed an initial impairment test of intangible assets as of April 1, 2002. Management determined in the initial impairment test that these assets were not impaired based on their fair values. Fair value was estimated using the expected present value of future cash flows and the assumed market capitalization at the reporting unit level.

     As of April 1, 2002, the Company accounts for impairment of long-lived assets in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. This standard requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to estimated undiscounted future net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Prior to adoption of SFAS No. 144, the Company accounted for long-lived assets in accordance with SFAS No. 121, “Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of.”

     During the three months ended March 31, 2004, the Company performed its annual test for impairment. The Company completed its evaluation and concluded that there were no impairments.

Rent expense

     Rent expense under operating leases is recorded on the straight-line method based on total contracted amounts. Differences between amounts contractually due and that reported are included in deferred rent.

Fair value of financial instruments

     The Company estimates the fair value of financial instruments through the use of public market prices, quotes from financial institutions, discounted cash flow analyses and other available information. Judgment is required in interpreting data to develop estimates of market value and, accordingly, amounts are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The Company does not hold its financial instruments for trading or speculative purposes.

     The Company’s short-term financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses and other liabilities, consist primarily of instruments without extended maturities, the fair value of which, based on management’s estimates, equaled their book value. The fair value of capital lease obligations and convertible debentures, based on management estimates equaled their book value due to obligations or borrowings with similar interest rates, maturities and extent of collateralization. The fair value of the Company’s redeemable preferred stock is estimated to be its liquidation value, which includes accumulated but unpaid dividends. The fair value of other financial instruments the Company held for which it is practicable to estimate such value is as follows:

	March 31, 2004				March 31, 2003
	Book value		Fair value		Book value		Fair value
Notes payable, including current portion	$	40,506,039	$	30,978,196	$	57,639,901	$	52,014,901
Construction payables, including accrued interest in 2003		1,363,554		1,363,554		23,009,818		13,537,162

F-30

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     As of March 31, 2004, fair value of the Company’s notes payable was based on discounted cash flows using a discount rate of 10%. As of March 31, 2003, fair value of the Company’s notes payable was based on the Company’s stock price as of the April 30, 2003 partial settlement and other reliable information.

     As of March 31, 2004, fair value of construction payables was estimated to equal their carrying value due to their short-term nature. As of March 31, 2003, fair value of construction payables, including accrued interest was determined to be $13,537,162 based on the April 30, 2003 settlement.

Stock warrants

     The Company uses the fair value method to value warrants granted to non-employees. Some warrants are vested over time and some are vested upon issuance. The Company determined the fair value for non-employee warrants using the Black-Scholes option-pricing model with the same assumption used for employee grants, except for expected life which was assumed to be between 1 and 7 years. When stock warrants are granted in connection with the issuance of debt, the fair value of stock warrants is amortized to interest expense using the effective interest rate method, over the life of the debt. When stock warrants are granted in connection with the issuance of preferred stock, the fair value of the stock warrants is recognized as a non-cash preferred dividend in determining net loss per share to common stockholders.

Revenue and profit recognition and allowance for bad debts

     Revenue is recognized as service is provided when there is persuasive evidence of an arrangement, the fee is fixed or determinable and collection of the receivable is reasonably assured. The Company assesses collection based on a number of factors, including past transaction history with the customer and the credit-worthiness of the customer. The Company does not request collateral from customers. If the Company determines that collection is not reasonably assured, the Company defers the fee and recognizes revenue at the time collection becomes reasonably assured, which is generally upon receipt of cash. The Company accounts for data center revenues in accordance with Emerging Issues Task Force Issue No. 00-21 “Revenue Arrangements with Multiple Deliverables” which provides guidance on separating multiple element revenue arrangements into separate units of accounting.

     Data center revenues consist of monthly recurring fees for colocation and exchange point services and non-recurring installation and managed services fees. Revenues from colocation and exchange point services are recognized ratably over the period of usage. Installation fees are deferred and recognized ratably over the term of the related contract. Managed services fees are recognized in the period in which the services are provided.

     Revenues from development, commission, management fees and construction fees are recognized in the period in which the services are provided.

     Revenues from construction contracts are recognized on the percentage-of-completion method, measured by the percentage of costs incurred to date to total estimated costs for each contract. This method is used because management considers cost incurred to be the best measure of progress on these contracts. Billings in excess of costs and estimated earnings on uncompleted contracts are classified as other liabilities and represent billings in excess of revenues recognized. Construction contract expenses costs include all direct material and labor costs and indirect costs related to contract performance such as indirect labor, supplies, tools, repairs, bad debt and depreciation. Provisions for estimated losses on uncompleted contracts are made in the period in which losses are determined. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions can be reasonably estimated. Accordingly, it is possible the current estimates relating to completion cost and profitability of its uncompleted contracts will vary from actual results.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Management analyzes accounts receivable and analyzes current economic news and trends, historical bad debts, customer concentrations, customer credit-worthiness and changes in customer payment terms when evaluating revenue recognition and the adequacy of the allowance for bad debts.

Income taxes

     Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce tax assets to the amounts expected to be realized.

Significant concentrations

     Two customers accounted for approximately 14% and 10% of data center revenues for the year ended March 31, 2004. Two customers accounted for approximately 14% and 10% of data center revenues for the year ended March 31, 2003.

Stock-Based Compensation

     The Company uses the intrinsic value-based method to account for its employee stock-based compensation plans. Under this method, compensation expense is based on the difference, if any, on the date of grant, between the fair value of the Company’s shares and the option’s exercise price.

     The Company has adopted the disclosure requirements of SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — An Amendment of SFAS No. 123”. The following table presents what the net loss and net loss per share would have been had the Company adopted SFAS No. 123:

		For the Twelve Months Ended March 31,
		2004			2003			2002
Net loss attributable to common shareholders as reported		$	(23,648,821	)	$	(41,387,305	)	$	(57,532,215	)
	Stock-based compensation expense included in net loss		2,185,463			—			—
	Stock-based compensation expense if SFAS No. 123 had been adopted		(3,171,514	)	$	(4,028,184	)		(4,766,190	)
	Pro forma net loss attributable to common shareholders	$	(24,634,872	)	$	(45,415,489	)	$	(62,298,405	)
Loss per common share — as reported		$	(0.08	)	$	(0.18	)	$	(0.29	)
Loss per common share — pro forma		$	(0.08	)	$	(0.19	)	$	(0.31	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Fair value calculations for employee grants were made using the Black-Scholes option pricing model with the following weighted average assumptions:

	2004		2003		2002
Risk Free Rate		2.14% - 3.50%		2.65% - 4.84%		3.91% - 6.41%
Volatility		150%		135% - 155%		80% - 139%
Expected life		5 years		5 years		5 years
Expected dividends		0%		0%		0%

Beneficial conversion feature

     When the Company issues debt or equity which is convertible into common stock at a discount from the common stock market price at the date the debt is issued, a beneficial conversion feature for the difference between the closing price and the conversion price multiplied by the number of shares issuable upon conversion is recognized. The beneficial conversion feature is presented as a discount to the related debt or equity, with an offsetting amount increasing additional paid in capital. The discount is amortized as additional interest expense or dividend from the date the instrument is issued to the date it first becomes convertible.

Loss per share

     Basic loss per share (“EPS”) equals net loss divided by the number of weighted average common shares. Diluted EPS includes potentially dilutive securities such as stock options and convertible securities. The effect of shares issuable upon exercise of convertible debt, convertible preferred stock, warrants and stock options is anti-dilutive, therefore diluted loss per share is not presented in a comparative format.

Recent accounting standards

     In December 2003, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 104, (“SAB 104”),Revenue Recognition. SAB 104 updates portions of existing interpretative guidance in order to be consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The adoption of SAB 104 did not have a material effect on the Company’s consolidated financial statements.

     In May 2003, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This Statement requires that an issuer classify financial instruments which are within its scope as a liability. Most of the guidance in SFAS No. 150 is effective for all financial instruments entered into or modified after May 31, 2003, and otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The impact of the Company’s adoption of SFAS 150 on its consolidated financial statements was to present Series H redeemable preferred stock as a liability.

     In March 2003, the FASB reached a consensus on Emerging Issues Task Force (EITF) Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables”. The consensus provides guidance on the accounting for multiple element revenue arrangements. It also provided guidance on how to separate multiple element revenue arrangements into separate units of accounting and how to measure and allocate the arrangement’s total consideration. The effective date of EITF 00-21 is for revenue arrangements entered into in fiscal periods (interim or annual) beginning after June 15, 2003. The Company’s adoption of EITF 00-21 as of July 1, 2003 has not impacted its consolidated financial statements.

     In January 2003, the FASB issued FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.” FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its

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TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

activities without additional subordinated financial support from other parties. FIN 46 is effective immediately for all new variable interest entities created or acquired after January 31, 2003. In December 2003, the FASB released a revised version of FIN 46 clarifying certain aspects of FIN 46 and providing certain entities with exemptions from the requirements of FIN 46. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period ending after March 15, 2004. NAP de las Americas-Madrid S.A. is a variable interest entity but its current relationship indicates that it does not require consolidation since the Company is not the primary beneficiary. The Company’s maximum related exposure to loss is approximately $500,000 at March 31, 2004. Management does not expect the adoption of FIN 46 to have a significant impact in the Company’s consolidated financial position or result of operations.

     In April 2002, the FASB approved SFAS 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections.” In addition to rescinding SFAS 4, 44, and 64 and amending SFAS 13, SFAS 145 establishes a financial reporting standard for classification of extinguishment of debt in the financial statements in accordance with APB 30. SFAS 145 is effective for the Company’s fiscal year ended March 31, 2004. Management does not expect the adoption of SFAS 145 to have a material effect on the Company’s financial position. However, SFAS 145 had an impact on the presentation of the results of operations for the twelve months ended March 31, 2004.

4. CONTRACTS RECEIVABLE

     Contracts receivable consist of the following:

	March 31,
	2004		2003
Completed contracts	$	—	$	7,559
Contracts in progress		303,644		21,645
Retainage		59,399		—
	$	363,043	$	29,204

5. PREPAID AND OTHER ASSETS

     Prepaid and other current assets consist of the following:

	March 31,
	2004		2003
Prepaid expenses and other	$	330,772	$	228,809
Preferred stock subscription receivable (subsequently collected)		265,000		—
Accrued interest on note receivable — related party		20,449		61,000
Receivable from related party		499,009		471,000
	$	1,115,230	$	760,809

     Other assets, long-term, consist of the following:

	March 31,
	2004		2003
Prepaid expenses and other	$	—	$	399,312
Deposits and other		488,971		343,155
Loan costs, net of accumulated amortization of $121,691 and $1,526,484, respectively		175,363		86,701
	$	664,334	$	829,168

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Receivable from related party represents a note receivable due March 31, 2004 for $360,000 from a corporation controlled by a shareholder of the Company and $139,009 of related accrued interest. Subsequent to March 31, 2004, the Company collected $50,000 and extended the maturity date on this receivable to March 31, 2005.

6. INVESTMENTS IN UNCONSOLIDATED ENTITIES, NET

     In June 2002, the Company entered into an exclusive agreement with the Comunidad Autonoma de Madrid to develop and operate carrier-neutral network access points in Spain. As part of that agreement, the parties formed NAP de las Americas — Madrid S.A. to own and operate carrier-neutral NAPs in Spain, modeled after the NAP of the Americas. The shareholders in this new company are the Comunidad through its Instituto Madrileno de Desarrollo — IMADE, the Camara Oficial de Comercio e Industria de Madrid, Red Electrica Telecomunicaciones, S.A., Telvent Sistemas y Redes S.A., a subsidiary of Abengoa S.A., and Centro de Transportes de Coslada, S.A. (CTC). At the time the NAP de las Americas — Madrid S.A. was formed, the Company owned 1% of its equity, which was subsequently increased to 10%. In May 2004, the Company purchased the 20% of this entity owned by Telvent Sistemas y Redes S.A. for approximately $550,000, and expects to exercise before June 24, 2004 its option to purchase the 30% of the interest owned by the Comunidad (CTC and IMADE) for approximately $1.2 million. The Camara has decided to retain its 20% interest. The Company expects to close on the option exercise on or before June 24, 2004. As a result of these transactions, the Company will have a 60% equity interest in NAP de las Americas — Madrid. At which time, the entity will be consolidated.

7. PROPERTY AND EQUIPMENT

     Property and equipment consist of the following:

	March 31,
	2004			2003
Leasehold improvements	$	50,992,419		$	50,105,292
Furniture, equipment and software, including $4,530,101 and $4,333,889 in capital leases		15,472,428			12,240,409
		66,464,847			62,345,701
Less accumulated depreciation, including $3,205,036 and $1,912,405 in capital leases		(12,650,402	)		(8,010,413	)
		53,814,445			54,335,288
Equipment held for installation		83,271			147,676
	$	53,897,716		$	54,482,964

     Property and equipment at March 31, 2004 and 2003 includes approximately $53.2 million and $53.7 million, respectively, in assets related to the NAP of the Americas. These amounts are net of accumulated depreciation.

     During the year ended March 31, 2003, the Company recognized an impairment charge of $450,000 related to equipment held for installation for more than one year and considered obsolete. The impairment charge reduced the carrying value of the equipment to its estimated salvage value.

     During the year ended March 31, 2003, the Company reached a compromise with vendors regarding certain billings and adjusted the asset value to the amount finally paid. As a result the Company recorded a reduction of approximately $1.3 million, in property and equipment.

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TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

8. GOODWILL

     Goodwill consists of the following:

	March 31, 2004 and 2003
	Gross Carrying		Accumulated		Net Carrying
	Amount		Amortization		Amount
NAP of the Americas	$	11,764,554	$	1,764,684	$	9,999,870

     A reconciliation of net loss and loss per share to exclude amortization expense in the prior year period follows:

	For the year ended March 31,
	2004			2003			2002
Reported net loss attributable to common shareholders	$	(23,648,821	)	$	(41,387,305	)	$	(57,532,215	)
Add back: goodwill amortization		—			—			3,458,633
Adjusted net loss attributable to common shareholders	$	(23,648,821	)	$	(41,387,305	)	$	(54,073,582	)
Basic and diluted loss per share:
Reported net loss attributable to common shareholders	$	(0.08	)	$	(0.18	)	$	(0.29	)
Goodwill amortization		—			—			0.02
Adjusted net loss attributable to common shareholders	$	(0.08	)	$	(0.18	)	$	(0.27	)

     The decline in the telecommunications industry and resulting decline in related real estate construction and leasing activities caused the Company to perform an impairment analysis during the years ended March 31, 2003 and 2002 of its promote interests in TECOTA acquired in the telecom facilities management operations sale and of its goodwill acquired in the Post Shell acquisition. The Company’s analyses were based on estimated fair value determined by the discounted future expected cash flows method and anticipated obtaining additional construction contracts for Post Shell and additional tenants for TECOTA. Based on these analyses, the Company determined that these assets, which are included in its telecom facilities management and real estate services segments, were impaired as of March 31, 2002 by approximately $3.8 million and $3.2 million, respectively. During the year ended March 31, 2003, no significant contracts were awarded to Post Shell and no tenants were added to TECOTA. As a result, the Company impaired the remaining $905,000 in TECOTA promote interests and $2.3 million in Post Shell goodwill.

9. NOTES PAYABLE

     Notes payable consist of the following:

	March 31,
	2004		2003
Notes payable to unrelated parties:
Note payable to Ocean Bank, collateralized by substantially all assets of the NAP of the Americas and a personal guaranty of the Chief Executive Officer. On April 30, 2003, the note payable to Ocean Bank was reclassified to “Notes Payable to Related Parties.”	$	—	$	43,974,553

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TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		March 31,
		2004		2003
Unsecured notes payable to two corporations, interest accrues at 10%. On April 30, 2003, $1,000,000 was converted to Subordinated debentures. Principal and interest are due on April 1, 2004.(2)			2,800,000		4,450,000
Unsecured note payable to a corporation, interest accrues at 15%. Principal and interest are due on April 1, 2004.(2)			1,000,000		1,000,000
Unsecured notes payable, interest ranges from 10% to 15%. Principal and interest are due between April 1, 2004 and March 2005.(2)			821,884		291,669
Note payable to a corporation, collateralized by certain assets of a director and certain shareholders of the Company. Interest accrues at 1% over prime, principal and interest are due on July 2004.(1)			367,178		667,178
Unsecured note payable to a corporation, interest accrues at 9%. Due on demand.			—		518,501
Unsecured note payable to a corporation, interest accrues at 10%. Principal and interest were due on May 30, 2003. On April 30, 2003, amount was converted to Subordinated Debentures.			—		1,500,000
Unsecured notes payable to individuals, interest accrues at 10%.
Principal and interest were due on March 31, 2003. On April 30, 2003, amounts were converted to Subordinated Debentures.			—		1,000,000
	Total notes payable to unrelated parties	$	4,989,062	$	53,401,901
Notes payable to related parties:
Note payable to Ocean Bank, collateralized by substantially all assets of the NAP of the Americas and a personal guaranty of the Chief Executive Officer. On April 30, 2003, the note payable to Ocean Bank was reclassified to “Notes Payable to Related Parties”. Carrying amount includes an unamortized balance of a debt restructuring gain of $4,309,764. Interest is payable quarterly at an annual rate of 5.25%. Effective May 2004 annual interest increases to 7.5%.(3)		$	33,284,317	$	—
Unsecured note payable to a corporation controlled by a shareholder, interest accrues at 15%. Principal and interest are due on April 1, 2004.(2)			1,600,000		1,600,000
Unsecured notes payable to certain executives and directors of the Company and third party corporations, interest accrues at 13%. On April 30, 2003, $700,000 was converted to Subordinated Debentures. Principal and interest are due on April 1, 2004.(2)			632,660		1,500,000
Note payable to the Chief Executive Officer. Interest accrues at 10%. Principal and interest were due on June 30, 2003. On April 30, 2003, amount was converted to Subordinated Debentures.			—		1,000,000
Unsecured note payable to the Chief Executive Officer. Interest accrues at 7.5%, payable monthly, with principal installments of $50,000 due on a quarterly basis commencing on June 26, 2002, and maturing on June 26, 2003.			—		100,000

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TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		March 31,
		2004		2003
Unsecured note payable to a shareholder, interest accrues at 10%. Due on demand.			—		38,000
	Total notes payable to related parties	$	35,516,977	$	4,238,000
		$	40,506,039	$	57,639,901
Less: current portion of notes payable			9,194,145		1,464,963
Notes payable, less current portion		$	31,311,894	$	56,174,938

(1)	Expected to be paid in full, in June 2004, with proceeds from issuance of $75.0 million Senior Notes.
(2)	The Company did not pay approximately $7.6 million in principal and interest which were due April 1, 2004 under some of its short-term notes. Accordingly, these notes were in default. The Company paid in full these short-term notes on or before June 14, 2004. There are no cross defaults with the notes payable to Ocean Bank.
(3)	Paid in full on June 14, 2004.

     On September 5, 2001, the Company borrowed $48 million from Ocean Bank. The loan is secured by all of the Company’s assets and allows for up to a $25 million junior lien position on the assets of its NAP of the Americas, Inc. subsidiary. The proceeds of the original credit facility were used to:

•  repay a $10 million short-term loan from Mr. Medina, the proceeds of which the Company had used to fund the build out of the NAP of the Americas (Mr. Medina, in turn, used the $10 million to repay a personal $10 million short-term loan from Ocean Bank);

•  repay $3.5 million of debt that the Company owed to Ocean Bank under a line of credit personally guaranteed by Mr. Medina;

•  pay $1.2 million in loan costs related to the $48 million credit facility (including $720,000 commitment fee); and

•  fund the NAP of the Americas build out costs.

     On April 30, 2003, Ocean Bank revised its loan with the Company by converting, at $.75 per common share, $15.0 million of the outstanding principal balance under the credit facility into 20 million shares of the Company’s common stock with an approximate $9.6 million market value and extending the term of the remaining $29.0 million until April 30, 2006. The resulting $5.4 million debt restructuring gain was deferred and recorded in notes payable and is being amortized as reductions in interest expense over the life of the remaining debt. Under the new terms, interest is payable quarterly at an annual stated rate of 5.25% for the first twelve months and 7.5% thereafter.

     Mr. Medina has personally guaranteed the loan with Ocean Bank. In addition to Mr. Medina’s personal guarantee of the loan, and in order to obtain the credit facility, the bank further required Mr. Medina, prior to the bank disbursing funds under the credit facility, to (i) provide a $5.0 million certificate of deposit to the bank as collateral for certain personal loans that Mr. Medina has with the bank and (ii) commit to accelerate the maturity date of those personal loans. In the event of the Company’s default under the credit facility Mr. Medina also agreed to subordinate any debt that the Company owed to Mr. Medina until the credit facility is repaid in full. Mr. Medina has repaid part of his personal loans to the bank through liquidation of the $5.0 million certificate of deposit in January 2002, leaving an outstanding principal balance of approximately $4.8 million. In July 2003, Mr. Medina exercised his option to extend the loan to December 31, 2003 and made a principal payment of $200,000 resulting in a $4.6 million balance on December 31, 2003. On February 11, 2004,

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TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Mr. Medina extended one loan with a principal amount of approximately $3.3 million to February 11, 2005 and made an interest payment of $63,500. On March 8, 2004, Mr. Medina extended the maturity date on the other loan which had a principal balance of approximately $1.3 million to March 8, 2005 and made a $73,446 payment of principal and interest.

     On September 5, 2001 and in consideration of Mr. Medina’s agreeing to repay his indebtedness to the bank earlier than otherwise required, pledging the certificate of deposit to the bank and personally guaranteeing the $48 million credit facility and approximately $21 million of construction payables, the Company entered into an amended and restated employment agreement with him. Under the terms of the amended and restated employment agreement, the Company will indemnify Mr. Medina from any personal liability related to his guarantees of the Company’s debt, use commercially reasonable efforts to relieve Mr. Medina of all his guarantees of the Company’s debt, provide up to $6.5 million of cash collateral to the bank should Mr. Medina be unable to repay the personal loans when due and agreed to provide a non interest-bearing $5.0 million loan to Mr. Medina for as long as his guarantees of the Company’s debt exist. Mr. Medina and the Company had agreed that the Company had the right to withhold payment to Mr. Medina of the $1,375,000 in convertible debt held by him until the note to the Company was repaid. The note receivable from Mr. Medina is shown as an adjustment to equity. The $48 million credit facility and the note receivable from Mr. Medina were approved by the Board of Directors. Mr. Medina’s note to the Company has a maturity date of September 30, 2004 and bears interest at 2%, the applicable federal rate. Interest is due in bi-annual installments. The Company reviews the collectibility of this note on a quarterly basis.

     Interest expense of approximately $14.6 million, $11.0 million, and $9.8 million for the years ended March 31, 2004, 2003 and 2002 were net of amounts capitalized to leasehold improvements and real estate inventories totaling $0, $0 and $891,644, respectively.

     Aggregate maturities for notes payable as of March 31, are as follows:

2005		$	9,194,145
2006			2,145,607
2007			29,142,360
2008			23,927
2009 and thereafter			—
	Total	$	40,506,039

     The weighted average interest rate on notes payables outstanding as of March 31, 2004 and maturing within one year is 10.35%.

10. CONSTRUCTION PAYABLES

     Construction payables at March 31, 2004 relate to construction at the Company’s colocation facility in Santa Clara, California and the build out of the third floor at TECOTA.

     On November 8, 2002, CRG, LLC (“CRG”), an entity newly formed by a shareholder of the Company, entered into an agreement with Cupertino Electric, Inc. to purchase the entire $18.5 million construction payable (including accrued interest) owed to Cupertino. On November 11, 2002, the Company entered into an agreement with CRG that provided the Company the option, upon the closing of the purchase of the debt by CRG from Cupertino, to repay the entire debt at a discount by either issuing shares of the Company’s common stock valued at $0.75 per share or making a cash payment of $9.9 million.

     On December 5, 2002, CRG, LLC entered into an agreement with Kinetics Mechanical Services, Inc. and Kinetics Systems Inc. to purchase the Company’s $4.1 million construction payable (including accrued interest)

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TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

to Kinetics Mechanical Services, Inc. and Kinetics Systems Inc. On December 5, 2002, the Company entered into an agreement with CRG that provided the Company with the option, upon the closing of the purchase of the debt by CRG from Kinetics Mechanical Services, Inc. and Kinetics Systems Inc., to repay the entire debt at a discount by either issuing shares of the Company’s common stock valued at $0.75 per share or making a cash payment of $2.4 million.

     On April 30, 2003, CRG, LLC completed the purchase, at a discount, of the Company’s $22.6 million construction payables (including accrued interest) to Cupertino Electric, Inc., Kinetics Mechanical Services, Inc. and Kinetics Systems Inc., all of which were construction contractors for the NAP of the Americas. At the closing, CRG’s purchased construction payables were converted at $.75 per common share into 30,133,334 shares of the Company’s common stock with an approximate $14.1 million market value in accordance with the November 11, 2002 and the December 5, 2002 option agreements. As a result of these transactions, the Company recorded a gain on debt restructuring of approximately $8.5 million.

11. CONVERTIBLE DEBT

     Convertible debt consists of the following:

	March 31,
	2004			2003
Subordinated secured convertible debentures due April 30, 2006 and convertible into shares of the Company’s common stock at $0.50 per share. Interest at 10% is payable quarterly beginning July 31, 2003. (Carrying amount is presented net of unamortized beneficial conversion feature balance of $904,761)	$	24,095,239		$	—
Subordinated secured convertible debentures due December 31, 2005 and convertible into shares of the Company’s common stock at a weighted average conversion price of $2.14 per share. Interest at 13% is payable on each calendar quarter		10,300,000			12,155,000
Subordinated secured convertible debentures due August 30, 2004 and convertible into shares of the Company’s common stock at a weighted average conversion price of $0.61 per share. Interest at 13.125% is payable on each calendar quarter		2,750,000			2,750,000
	$	37,145,239		$	14,905,000
Less: Current portion of convertible debt		(250,000	)		(900,000	)
Convertible debentures, less current portion	$	36,895,239		$	14,005,000

     The 10% debentures were issued in exchange for $10.3 million in cash, $9.5 million in a promissory note due in full May 30, 2003 and $5.2 million of notes payable converted to the 10% debentures. The maker of the $9.5 million promissory note failed to pay but agreed on June 16, 2003 to assign the note and the debenture to an entity newly formed by the son of a director of the Company. As of September 22, 2003, the Company had collected the promissory note. In connection with this transaction, the Company recognized a beneficial conversion feature of $9.5 million, based on the June 16, 2003 measurement date.

     Prepayment by the Company is permitted under the 10% debentures subsequent to April 30, 2004. Prepayment by the Company is permitted under the 13% and 13.125% debentures, but will entitle holders of the

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TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

13% debentures to principal plus warrants, or a premium over their outstanding principal and interest based upon the following schedule:

Year	Redemption Price
2004		102	%
2005		100	%

     As of March 31, 2004, the Company had not paid approximately $429,000 of accrued interest due on March 31, 2004. Subsequent to March 31, 2004, the Company paid such amounts.

12. STOCKHOLDERS’ EQUITY

     The Company entered into the following equity transactions:

Preferred stock

     The Company has the authority to issue 10,000,000 shares of preferred stock, par value $0.001 per share, which are issuable in series on terms to be determined by its board of directors.

Series H redeemable convertible preferred stock

     In May 2001, the Company issued 294 shares of Series H redeemable convertible preferred stock for $500,000. The preferred stock allows for a preferential annual dividend of $102 per share and is convertible, as of March 31, 2004, into 294,000 shares of common stock. The preferred stock is redeemable at $1,700 per share plus any unpaid dividends at the request of the holder on June 1, 2005. The Series H redeemable convertible preferred stock shall vote together with the company’s common stock based on the then current conversion ratio.

Series G convertible preferred stock

     The Company has 20 outstanding shares of Series G convertible preferred stock (“Series G Preferred”), which do not bear dividends. Conversion of the Series G Preferred into common stock is based on the issue price plus an 8% per annum non-compounding premium, divided by the lesser of: (a) $1.50 per Series G Preferred share or (b) the closing price of the Company’s common stock, as reported on the American Stock Exchange, on the business day immediately preceding the conversion. The Series G Preferred also has a stated liquidation preference value of $100,000 per share plus 8% in-kind dividends since March 1999, the date of issuance. The holders have no voting rights except with respect to matters that affect rights related to the Series G Preferred. The holder of these shares is a corporation owned by Mr. Medina, Chief Executive Officer and a shareholder of the Company. As of March 31, 2004, the Series G Preferred shares could have been converted into 2,143,492 of the Company’s common shares.

Series I convertible preferred stock

     On March 31, 2004, the Company closed on the issuance of 400 shares of Series I 8% Convertible Preferred Stock for $7.7 million in cash and $2.2 million in promissory notes, together with warrants to purchase 2.8 million shares of the Company’s common stock which are exercisable for five years at $0.90 per share. The Company has collected all amounts due under the promissory notes. The Series I Preferred Stock is convertible into shares of the Company’s common stock at $0.75 per share. In January 2007, the Series I Preferred Stock dividend rate will increase to 10% per year until January 2009 when it increases to 12%. Dividends are payable, at the Company’s discretion, in shares of the Company’s common stock or cash. The Company has the right to redeem the Series I Preferred Stock at $25,000 per share plus accrued dividends at any time after December 31, 2004. Some of the Series I Preferred Stock shares were committed on dates where the conversion price was less than market. Accordingly, the Company recognized a non-cash preferred dividend of approximately

F-41

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

$1.0 million in determining net loss per common share for the period ended March 31, 2004. The Series I Preferred Stock shall vote together with the Company’s common stock based on the then current conversion ratio.

Common Stock

Sale of common stock

     In June 2002, the NAP de las Americas — Madrid S.A. purchased 5 million shares of the Company’s common stock at $1.00 per share. In August 2003, as a result of the subsequent sale of certain common shares, the Company issued an additional 3.7 million shares of its common stock to NAP de Las Americas — Madrid S.A.

     In April 2002, the Company received a binding commitment from two directors and some shareholders for the purchase of $7.5 million of common stock at $.75 per share. In May 2002, the Company issued 10 million shares of its common stock for $3.6 million in cash and the conversion of $3.9 million in short-term promissory notes to equity.

     In April 2002, the Company entered into a Put and Warrant purchase agreement with TD Global Finance (“TDGF”). On July 19, 2002, the Company exercised its right to sell to TDGF 17,648,824 common shares for $0.58 per share for a total of $10.2 million.

Conversion of debt to equity

     In October 2003, $258,306 of debt was converted to 344,407 shares of common stock at $0.75 per share.

     In April 2003, in conjunction with the Ocean Bank debt conversion of $15.0 million in debt to equity, the Company issued 20 million shares of its common stock at $0.75 per share.

     In April 2003, in conjunction with the CRG transaction whereby $21.6 million in construction payables plus $1.0 million in accrued interest was converted to equity, the Company issued 30.1 million shares of its common stock at $0.75 per share.

     On February 19, 2002, $242,700 of convertible debt was converted to 160,071 shares of common stock at $1.52 per share.

     During the year ended March 31, 2003, holders of notes payable entered into irrevocable agreements and converted approximately $.8 million in debt and accrued interest into approximately 1.0 million shares of the Company’s common stock at $0.75 per share.

     In August 2003, $45,004 of debt was converted to 60,005 shares of common stock at $0.75 per share.

Exercise of employee stock options

     During the year ended March 31, 2004, 77,271 shares of common stock were issued in conjunction with the exercise of 77,271 employee stock options at prices ranging from $0.33 to $0.78 per share.

Exercise of warrants

     In June 2003, warrants valued at approximately $4,000 were converted to 9,500 shares of common stock at $0.48 per share.

F-42

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Stock warrants

     During the period from November 2000 through March 2004, the Company issued warrants to third parties for services and to facilitate certain debt and equity transactions. The following table summarizes information about stock warrants outstanding as of March 31, 2004:

							Estimated
	No. of shares		Exercise		Expiration		Fair Value
Issuance Date	able to purchase		Price		Date		at Issuance
March 2004		2,896,802	$	0.90		March 2009	$	1,729,845
February 2004		12,100		0.90		February 2009		7,200
January 2004		50,000		0.71		January 2009		33,750
October 2003		50,000		0.73		October 2008		33,700
July 2003		100,000		0.62		July 2008		114,400
June 2003		300,000		0.50		June 2006		220,200
June 2003		250,000		0.75		June 2006		177,750
March 2003		300,000		0.75		March 2007		110,400
December 2002		300,000		0.75		March 2007		110,400
October 2002		1,200,000		0.75		October 2004		90,000
July 2002		100,000		0.54		July 2005		20,900
April 2002		600,000		0.40		March 2007		220,800
June 2001		13,000		1.72		June 2011		22,490
January 2002		9,500		0.48		June 2011		3,971
March 2001		300,000		2.00		March 2006		352,200
November 2000		250,000		2.76		November 2008		394,000
		6,731,402					$	3,642,006

Stock Options

     The Company has three stock option plans, whereby incentive and nonqualified options and stock appreciation rights may be granted to employees, officers, directors, and consultants. There are 23,500,000 shares of common stock reserved for issuance under these plans. The exercise price of the options is determined by the Board of Directors, but in the case of an incentive stock option, the exercise price may not be less than 100% of the fair market value at the time of grant. Options vest over periods not to exceed ten years.

     On October 19, 2001, the Company issued options to purchase 100,000 shares of common stock to each member of the Company’s Board of Directors, for a total of 900,000 options. The exercise price of the options is $0.67 per share and were immediately exercisable.

F-43

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     A summary of the status of stock options is presented below:

					Weighted Average
		Number			Exercise Price
Outstanding at March 31, 2002			12,749,451		$	1.92
Granted			2,203,100			.46
Expired/ Terminated			(258,500	)		1.69
Exercised			—			—
Outstanding at March 31, 2003			14,694,051			1.70
Granted			2,379,780			.45
Expired/ Terminated			(256,166	)		.99
Exercised			(64,934	)		.49
Outstanding at March 31, 2004			16,752,731			1.89
Options exercisable at:
	March 31, 2004		12,706,018			1.86
	March 31, 2003		9,818,051			1.90
Weighted average fair value of options granted during year ended:
	March 31, 2004	$	0.41
	March 31, 2003	$	0.41

     The following table summarizes information about options outstanding at March 31, 2004:

			Average
			Remaining		Average		Number
			Contractual		Exercise		Exercisable
Range of Exercise Prices	Outstanding at		Life (Years)		Price		Options at
March 31, 2004
$0.25-0.50		4,251,580		5.0	$	0.34		2,503,500
$0.51-1.00		4,961,500		7.9		0.64		2,765,167
$1.01-1.50		1,347,500		5.1		1.41		1,327,833
$1.51-2.00		235,374		6.8		1.74		212,707
$2.01-3.00		1,489,825		3.8		2.85		1,429,858
$3.01-5.00		4,466,952		6.3		3.26		4,466,952
		16,752,731						12,706,017

     Effective July 22, 2003, Brian Goodkind stepped down as Executive Vice President and Chief Operating Officer and became a strategic advisor to the Chief Executive Officer. In connection with this modification to the employment relationship, the Company accelerated the vesting on his outstanding stock options and awarded him new stock options. As a result, the Company recognized a non-cash, stock-based compensation charge of approximately $1.8 million in the year ended March 31, 2004.

F-44

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

13. DATA CENTER REVENUES

     Data center revenues consist of:

	For the year ended March 31,
	2004		2003
Colocation	$	9,861,638	$	6,020,779
Exchange point services		3,571,709		2,125,370
Managed & professional services		3,179,264		1,791,750
Contract termination fee		421,766		1,095,086
	$	17,034,377	$	11,032,985

     During the years ended March 31, 2004 and 2003, $903,000 and $386,000 of deferred revenue were amortized into data center services.

14. OTHER INCOME (EXPENSES)

     On November 10, 2003, a developer agreed to pay the Company to develop a facility in Australia. The developer paid the Company $500,000 upon execution of the agreement and the remaining balance of $3.3 million on December 10, 2003. On February 11, 2004, the developer notified the Company it did not wish to proceed with negotiations regarding the construction of a facility in Australia. On February 19, 2004, the Company acknowledged receipt of the developer’s notification, and terminated the agreement with the developer. As required by the agreement, The Company did not conduct any business related to the operation or management of data centers in Australia until the agreement terminated. The Company has no further obligations in connection with the agreement and as a result recognized the $3.8 million non-refundable fee as other income in the quarter ended March 31, 2004.

15. INCOME TAXES

     No provision for income taxes was recorded for each of the three years ended March 31, 2004, 2003 and 2002 as the Company incurred net operating losses in each year.

     Deferred tax assets (liabilities) consists of the following:

		March 31,
		2004			2003
Deferred tax assets:
	Charitable contributions	$	223,947		$	251,010
	Capitalized start-up costs		2,063,736			2,935,612
	Allowances and other		11,246,433			6,873,925
	Net operating loss carryforwards		34,211,590			31,131,334
	Net operating loss carryforwards retained from discontinued operations		17,280,709			17,280,709
	Tax credits		245,780			245,780
Total deferred tax assets			65,272,195			58,718,370
Valuation allowance			(63,283,833	)		(58,061,244	)
Deferred tax liability:
	Other		(1,988,362	)		(657,126	)
Total deferred tax liability			(1,988,362	)		(657,126	)
Net deferred tax asset		$	—		$	—

F-45

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of the Company’s deferred tax assets. To support the Company’s conclusion that a 100% valuation allowance was required, the Company primarily considered such factors as the Company’s history of operating losses, the nature of the Company’s deferred tax assets and the absence of taxable income in prior carryback years. Although the Company’s operating plans assume taxable and operating income in future periods, the Company’s evaluation of all the available evidence in assessing the realizability of the deferred tax assets indicates that such plans are not considered sufficient to overcome the available negative evidence.

     The Company’s federal and state net operating loss carryforwards, amounting to approximately $137 million, begin to expire in 2011. Utilization of the net operating losses generated prior to the AmTec merger may be limited by the Internal Revenue Code.

     The reconciliation between the statutory income tax rate and the effective income tax rate on pre-tax (loss) income is as follows:

	For the year ended
	March 31,
	2004			2003			2002
Rate reconciliation
Statutory rate		(34.0	)%		(34.0	)%		(34.0	)%
State income taxes, net of federal income tax benefit		(3.2	)%		(3.2	)%		(3.3	)%
Permanent differences		14.0	%		6.8	%		6.2	%
Increase in valuation allowance		23.2	%		30.4	%		31.1	%
Effective tax rate		0	%		0	%		0	%

     The Company expects to pay a limited amount of tax for the years ended March 31, 2005 and 2006. The tax costs will be primarily limited to alternative minimum taxes as the Company anticipates utilizing its net operating loss carryforwards and expects to have significant tax deductions attributable to stock options exercised in the years.

16. COMMITMENTS AND CONTINGENCIES

Leasing activities

     The Company leases space for its operations, office equipment and furniture under operating leases. Certain equipment is also leased under capital leases, which are included in leasehold improvements, furniture and equipment.

     Technology Center of the Americas LLC (“TECOTA”), an entity in which the Company has a .84% member interest, owns the building which leases the space for the NAP of the Americas to the Company under a 20 year lease. Rent expense under leases amounted to approximately $5.3 million, $3.6 million and $2.7 million for the years ended March 31, 2004, 2003 and 2002.

     On November 4, 2003, the Company entered into an agreement to lease an additional 149,184 square feet of space on the third floor of TECOTA and extend the existing lease for the second floor of the same property to co-terminate with the third floor lease on May 31, 2025. Under the terms of the lease agreement, monthly base rent payments for the third floor space of approximately $2.4 million will commence in April 2005. Effective June 1, 2006 and 2009, annual base rent for the third floor space will increase to approximately $3.0 million and $3.5 million, respectively, with annual increases of 2.5% thereafter.

     The Company leases space for the colocation facility in Santa Clara, California. The lease commenced in January 2001 and is for 20 years. Annual rent is approximately $1,500,000.

F-46

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     The Company has entered into capital lease agreements with third parties for equipment related primarily to the NAP of the Americas. Generally, the lease terms are for 48 months, and the aggregate gross related assets total approximately $4.5 million.

     Operating lease expense, in the aggregate, amounted to approximately $7.8 million, $6.0 million, and $7.0 million for the years ended March 31, 2004, 2003 and 2002, respectively.

     At March 31, 2004, future minimum lease payments for each of the following five years and thereafter under non-cancellable operating and capital leases having a remaining term in excess of one year are as follows:

			Capital		Operating
			Leases		Leases
2005			$	1,987,346	$	4,750,745
2006				77,751		6,809,342
2007				30,646		7,528,228
2008				5,520		7,651,497
2009				—		7,771,067
Thereafter				—		164,136,131
	Total minimum lease payments		$	2,101,263	$	198,647,010
	Amount representing interest			195,651
		Present value of net minimum lease payments	$	1,905,612

Litigation

     From time to time, the Company is involved in various litigation relating to claims arising out of the normal course of business. These claims are generally covered by insurance. The Company is not currently subject to any litigation which singularly or in the aggregate could reasonably be expected to have a material adverse effect on the Company’s financial position or results of operations.

Guarantees

     The construction of TECOTA was funded with $48 million in equity and $61 million in construction loans from a consortium of banks. The Company guaranteed the loans during its construction of TECOTA. After TECOTA was built, certain banks released the Company from the guarantee, the result of which was to reduce the guarantee to $5.5 million. As of March 31, 2004, TECOTA debt under the construction loan was $35.4 million and is due in November 2005. The Company does not expect to fund any amounts under the guarantee.

     The Company has guaranteed $4.6 million in personal debt of Manuel D. Medina, the Company’s Chief Executive Officer and Chairman.

Other

     The Company has entered into an agreement to provide construction and management services to TECOTA for fees. For the years ended March 31, 2004, 2003 and 2002 the Company earned approximately $198,000, $510,000 and $515,000 in related fees, respectively.

     As of December 31, 2003, the Company had not paid approximately $792,000 related to its tangible property taxes. The Company negotiated a payment plan with the Miami-Dade Tax Collector and are current under the plan.

F-47

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

17. RELATED PARTY TRANSACTIONS

     Due to the nature of the following relationships, the terms of the respective agreements might not be the same as those that would result from transactions among wholly unrelated parties.

     The Company’s Chief Executive Officer and other related parties have either provided or guaranteed some of the Company’s debt or equity financing. In addition, services are provided to entities in which the Company owns stock.

     Following is a summary of transactions for the year ended March 31, 2004, 2003 and 2002 and balances with related parties included in the accompanying balance sheet as of March 31, 2004 and 2003.

	March 31,
	2004		2003		2002
Rent expense	$	5,308,272	$	3,558,196	$	2,668,647
Services purchased from related parties		501,080		—		—
Property management and construction fees		198,000		510,000		516,000
Revenues from NAP de las Americas — Madrid		43,000		340,000		—
Interest income on notes receivable — related party		76,284		61,000		—
Interest income from shareholder		32,489		37,000		37,000
Interest expense		2,065,695		1,198,076		897,824
Other assets		499,009		471,000		—
Note receivable — related party		5,000,000		5,000,000		—
Notes payable to related parties		35,516,977		4,238,000		—
Convertible debt		4,150,000		3,450,000		—

     In April 2003, two directors purchased $250,000 of the 10% subordinated debentures.

     During the twelve months ended March 31, 2004, the Company purchased services from Fusion Telecommunications International, Inc. (“Fusion”). The Company’s Chief Executive Officer and Chairman of the Board of Directors has a minority ownership in Fusion and is a member of its Board of Directors.

18. INFORMATION ABOUT THE COMPANY’S OPERATING SEGMENTS

     As of March 31, 2004 and 2003, the Company had two reportable business segments, data center operations and real estate services. The data center operations segment provides Tier 1 NAP, Internet infrastructure and managed services in a data center environment. The real estate services segment constructs and manages real estate projects focused in the technology sector. The Company’s reportable segments are strategic business operations that offer different products and services.

     During the year ended March 31, 2001, the Company had an additional segment, telecom facilities management, which developed, managed and leased facilities catering primarily to the telecommunications industry. In conjunction with the Company’s change in its strategy related to its colocation facility in Santa Clara, California, the Company no longer considers the remaining operations to be separate from its other two segments. Therefore, amounts related to the colocation facility have been reclassified in the current and prior year presentations to their respective March 31, 2003 segments.

     The accounting policies of the segments are the same as those described in significant accounting policies. Revenues generated among segments are recorded at rates similar to those recorded in third-party transactions. Transfers of assets and liabilities between segments are recorded at cost. The Company evaluates performance based on the segment’s net operating results.

F-48

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     The following presents information about reportable segments:

				Telecom
	Data center			Facilities			Real estate
For the year ended March 31,	operations			Management			services			Total
2004
Revenue	$	17,034,377		$	—		$	1,179,362		$	18,213,739
Loss from operations		(20,237,820	)		—			(338,587	)		(20,576,407	)
Net loss		(22,152,261	)		—			(338,316	)		(22,490,577	)
2003
Revenue	$	11,032,984		$	—		$	3,660,719		$	14,693,703
Loss from operations		(21,658,738	)		—			(3,671,562	)		(25,330,300	)
Net loss		(37,565,136	)		—			(3,662,169	)		(41,227,305	)
2002
Revenue		3,215,897		$	—			12,656,587		$	15,872,484
Loss from operations		(26,249,509	)		(16,340,634	)		(8,961,576	)		(51,551,719	)
Net loss		(34,971,359	)		(16,682,059	)		(5,718,797	)		(57,372,215	)
Assets, as of
March 31, 2004	$	77,101,579		$	—		$	331,124		$	77,432,703
March 31, 2003	$	69,303,443		$	—		$	298,070		$	69,601,513

     A reconciliation of total segment loss from operations to loss before income taxes follows:

		For the year ended March 31,
		2004			2003			2002
Total segment loss from operations		$	(20,576,407	)	$	(25,330,300	)	$	(51,551,719	)
Debt restructuring			8,475,000			—			—
Inducement on debt conversion			—			(4,871,245	)		—
Interest income			131,548			136,278			97,237
Interest expense			(14,624,922	)		(11,007,683	)		(9,750,473	)
Gain on real estate held for sale			—			—			4,185,728
Other income (expense)			4,104,204			(154,355	)		(352,988	)
	Loss before income taxes	$	(22,490,577	)	$	(41,227,305	)	$	(57,372,215	)

F-49

TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

19. SUPPLEMENTAL CASH FLOW INFORMATION

		For the year ended March 31,
		2004			2003				2002
Supplemental disclosures of cash flow information:
	Cash paid for interest	$	7,349,467		$	7,321,545			$	5,318,320
	Taxes Paid		—			—				—
Non-cash operating, investing and financing activities:
	Warrants issued for services		644,597			612,500				944,113
	Conversion of notes payable to convertible debt		5,450,000			—				—
	Beneficial conversion feature on issuance of convertible debentures and preferred stock		10,472,021			—				—
	Assets acquired under capital leases		196,211			—				4,293,762
	Warrants exercised and converted to equity		3,971			—				29,000
	Conversion of accounts payable to equity		229,588			361,491				—
								��
	Conversion of debt and related accrued interest to equity		9,420,004			4,205,686				—
	Conversion of construction payables and accrued interest to equity		14,400,977			—				—
	Conversion of liabilities of discontinued operations to equity		—			370,000				—
	Forgiveness of construction payables		—			1,290,013				—
	Conversion of convertible debt and related accrued interest to equity		258,306			17,080,476				242,700
	Conversion of common stock subscriptions to common stock and paid in capital		—			—				—
	Issuance of note payable for other asset		—			1,000,000				—
	Cancellation of warrants		26,575			—				614,822
	Non-cash preferred dividend		(1,158,244	)		(160,000	)			(160,000	)

F-50

TECHNOLOGY CENTER OF THE AMERICAS, LLC

HISTORICAL FINANCIAL INFORMATION

F-51

Report of Independent Registered Certified Public Accounting Firm

To the Members of

Technology Center of the Americas, LLC:

     In our opinion, the accompanying balance sheets and the related statements of operations, of changes in members’ equity and of cash flows present fairly, in all material respects, the financial position of Technology Center of the Americas, LLC at December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

     The results of the Company’s leasing activities and its tenants’ financial condition are discussed in Note 1.

/s/ PricewaterhouseCoopers LLP

Fort Lauderdale, Florida

February 6, 2004, except Note 9,

which is as of December 1, 2004

F-52

TECHNOLOGY CENTER OF THE AMERICAS, LLC

BALANCE SHEETS

				December 31,
		September 30,
		2004		2003		2002
		(Unaudited)
Assets
Rental property, net		$	66,927,819	$	67,913,222	$	69,564,981
Cash and cash equivalents			1,011,315		1,364,857		2,677,869
Restricted cash			910,458		101,914		—
Tenant receivables			—		—		377,521
Deferred rents receivable			11,444,733		7,136,801		4,047,111
Deferred leasing commissions, net			2,902,589		3,055,776		3,260,288
Deferred financing costs, net			160,020		269,380		517,422
Prepaid expenses and other assets			291,134		249,876		137,567
	Total assets	$	83,648,068	$	80,091,826	$	80,582,759
Liabilities and Members’ Equity
Mortgage note payable		$	35,401,567	$	35,401,567	$	35,401,567
Accounts payable and accrued expenses			998,862		501,820		1,859,692
	Total liabilities 37,261		36,400,429 ,259		35,903,387
Commitments and contingencies			—		—		—
Members’ equity			47,247,639		44,188,439		43,321,500
	Total liabilities and members’ equity	$	83,648,068	$	80,091,826	$	80,582,759

The accompanying notes are an integral part of these financial statements.

F-53

TECHNOLOGY CENTER OF THE AMERICAS, LLC

STATEMENTS OF OPERATIONS

		For the Nine Months Ended					For the Year Ended
		September 30,					December 31,
		2004		2003			2003			2002
		(Unaudited)		(Unaudited)
Revenues
Rental		$	7,702,549	$	4,584,017		$	6,808,912		$	5,896,505
Operating expense reimbursements			656,383		686,632			776,740			1,053,599
Other income			45,661		67,207			81,496			53,399
	Total revenues		8,404,593		5,337,856			7,667,148			7,003,503
Operating Expenses
General and administrative			246,161		259,324			398,317			499,341
Security			338,857		185,307			300,446			482,988
Marketing			114,853		140,650			176,001			210,516
Utilities			263,706		261,594			338,761			358,496
Insurance			207,932		262,181			335,628			298,770
Real estate taxes			683,036		521,859			791,924			1,310,112
Real estate tax settlement			—		—			(427,200	)		—
Repairs and maintenance			244,068		173,210			236,662			220,589
Cleaning			23,160		17,575			21,606			30,910
Management fees			137,949		140,403			184,133			149,346
Write-off of straight-line rent accruals			—		—			—			1,792,888
Write-off of deferred leasing commissions			—		—			—			1,277,933
	Total operating expenses		2,259,722		1,962,103			2,356,278			6,631,889
Other Expenses
Interest expense			1,635,388		2,014,516			2,561,094			3,094,763
Depreciation and amortization			1,450,283		1,411,948			1,882,837			2,000,244
	Total other expenses		3,085,671		3,426,464			4,443,931			5,095,007
	Net income (loss)	$	3,059,200	$	(50,711	)	$	866,939		$	(4,723,393	)

The accompanying notes are an integral part of these financial statements.

F-54

TECHNOLOGY CENTER OF THE AMERICAS, LLC

STATEMENTS OF CHANGES IN MEMBERS’ EQUITY

	Class A Members
	TLAB Group
				Barrow
				Street						Calor
	Class B			TECOTA,			LA			Development,
	Member			L.P.			Group			Ltd.			Total
Members’ equity at January 1, 2002	$	402,243		$	19,913,048		$	19,913,048		$	7,816,554		$	48,044,893
Net loss		(39,545	)		(1,957,693	)		(1,957,693	)		(768,462	)		(4,723,393	)
Members’ equity at December 31, 2002		362,698			17,955,355			17,955,355			7,048,092			43,321,500
Net income		7,258			359,318			359,318			141,045			866,939
Members’ equity at December 31, 2003		369,956			18,314,673			18,314,673			7,189,137			44,188,439
Net income (Unaudited)		25,612			1,267,939			1,267,939			497,710			3,059,200
Members’ equity at September 30, 2004 (Unaudited)	$	395,568		$	19,582,612		$	19,582,612		$	7,686,847		$	47,247,639

The accompanying notes are an integral part of these financial statements.

F-55

TECHNOLOGY CENTER OF THE AMERICAS, LLC

STATEMENTS OF CASH FLOWS

					For the Nine Months Ended						For the Year Ended
					September 30,						December 31,
					2004			2003			2003			2002
					(Unaudited)			(Unaudited)
Cash flows from operating activities
	Net income (loss)				$	3,059,200		$	(50,711	)	$	866,939		$	(4,723,393	)
	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
		Depreciation and amortization				1,450,283			1,411,948			1,882,837			2,000,244
		Amortization of deferred financing costs				109,360			455,067			541,917			940,843
		Write-off of straight-line rent accruals				—			—			—			1,792,888
		Write-off of deferred leasing commissions				—			—			—			1,277,933
		Changes in assets and liabilities:
			Tenant receivables			—			383,941			377,521			(309,455	)
			Deferred rents receivable			(4,307,932	)		(1,936,916	)		(3,089,690	)		(2,836,867	)
			Deferred leasing commissions			—			—			—			(149,019	)
			Prepaid expenses and other assets			(41,258	)		(246,721	)		(112,309	)		37,703
			Accounts payable and accrued expenses			497,042			(399,231	)		(1,357,872	)		1,102,189
				Net cash provided by (used in) operating activities		766,695			(382,623	)		(890,657	)		(866,934	)
Cash flows from investing activities
	Restricted cash					(808,544	)		(1,275,000	)		(101,914	)		—
	Additions to rental property					(311,693	)		(26,566	)		(26,566	)		(509,895	)
	Construction payables					—			—			—			(971,263	)
				Net cash used in investing activities		(1,120,237	)		(1,301,566	)		(128,480	)		(1,481,158	)
Cash flows from financing activities
	Borrowings on mortgage note payable					—			—			—			4,117,725
	Payments on mortgage note payable					—			—			—			(1,190,992	)
	Additions to deferred financing costs					—			—			(293,875	)		(606,750	)
				Net cash used in (provided by) financing activities		—			—			(293,875	)		2,319,983
Net decrease in cash and cash equivalents						(353,542	)		(1,684,189	)		(1,313,012	)		(28,109	)
Cash and cash equivalents, beginning of period						1,364,857			2,677,869			2,677,869			2,705,978
Cash and cash equivalents, end of period					$	1,011,315		$	993,680		$	1,364,857		$	2,677,869
Supplemental disclosure
	Cash paid for interest				$	1,692,146		$	1,537,244		$	2,029,424		$	169,283
Non-cash transactions During 2002, the Company reduced rental property and construction payable by $132,692 based upon final settlement with a contractor.

The accompanying notes are an integral part of these financial statements.

F-56

TECHNOLOGY CENTER OF THE AMERICAS, LLC

NOTES TO FINANCIAL STATEMENTS

September 30, 2004 (Unaudited), December 31, 2003 and 2002

1. Organization

     Technology Center of the Americas, LLC (the “Company”) is a Delaware limited liability company whose Class A Members are the TLAB Group and MHLP, LLC. (collectively “the Members”). The TLAB Group consists of Class B Members, Barrow Street TECOTA, L.P. and the LA Group. At September 30, 2004, December 31, 2003 and 2002, the sole Class B member was TECOTA Services Corporation, formerly known as Telecom Routing Exchange Developers, Inc. (“Managing Member”). The LA Group consists of LA REF III Telecom Miami, LLC and LA Parallel III Telecom Miami, LLC. The Company was formed on September 5, 2000 to own and operate a telecommunications data center in Miami, Florida (the “Property”).

     The Members’ capital account is equal to each Member’s initial capital contribution and is increased by each additional contribution, less any distribution as defined in the Limited Liability Company Operating Agreement (“Agreement”). Under the terms of the Agreement, net income and losses are allocated to each Member’s capital account equal to the amount of cash the Member would receive if the Company were to immediately sell all of its assets for an amount equal to the Gross Asset Value, as defined in the Agreement, and distribute the sale proceeds in accordance with the Agreement.

     Generally, distributable cash from operations and capital transactions are distributed to the MHLP, LLC. and to the TLAB Group in proportion to their respective percentage interests. Within the groups, there are further allocations of cash based upon the provisions in the Agreement.

     The Company expects to meet its cash requirements for operations through rental income and existing cash balances. The Company’s real estate asset is located in Miami, Florida and its tenants service the telecommunications industry. Consequently, changes in this market could have an effect on the leases the Company enters into with tenants. At December 31, 2003, tenants consisted of five entities occupying approximately 395,000 square feet, or 54% of total leasable square footage. Of the total leasable square footage, approximately 40% is occupied by Terremark Worldwide, Inc., the Managing Member’s parent, an entity which has publicly disclosed that its liquidity deficit and negative cash flows raise substantial doubt about its ability to continue as a going concern. At December 31, 2003 and 2002, $4,102,264 and $2,335,712 in deferred rents receivable and $1,763,695 and $1,863,058 in deferred leasing commissions, net relate to this entity, respectively. While management believes that the other tenants are credit tenants, their leases are not sufficient to cover operating expenses. Should additional funding be required to meet obligations as they come due, the Company expects to be able to rely on additional financial support from its Members.

2. Summary of Significant Accounting Policies

     A summary of significant accounting principles and practices used in the preparation of the financial statements follows:

Basis of Financial Statement Presentation

     The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclose contingent assets and liabilities at the date of the financial statements and report amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

     The interim financial data as of September 30, 2004 and for the nine-months ended September 30, 2004 and 2003 of the Company is unaudited; however, in the opinion of Company management, the interim financial data includes all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of results of the interim period. The results of operations for the nine months ended September 30, 2004 are not necessarily indicative of the results that could be expected for the entire fiscal year ending December 31, 2004.

F-57

TECHNOLOGY CENTER OF THE AMERICAS, LLC

NOTES TO FINANCIAL STATEMENTS — (Continued)

September 30, 2004 (Unaudited), December 31, 2003 and 2002

Rental Property

     Rental property is stated at cost and consists of land, costs associated with building construction and improvements and furniture and fixtures. The building is depreciated on the straight-line method over its estimated useful life of 39 years. Tenant improvements are depreciated over the term of the related tenant lease. Furniture and fixtures and other improvements are depreciated over 5 years. Expenditures for major renewals and betterments are capitalized and depreciated over their estimated useful lives. Expenditures for repairs and maintenance are expensed when incurred.

     Management reviews its rental property for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Management determines whether impairment in value has occurred by comparing the estimated future undiscounted cash flows of the rental property, including its residual value, to its carrying value. If an impairment is indicated, the assets are adjusted to their estimated fair value.

Cash and Cash Equivalents

     The Company considers all amounts held in highly liquid instruments with original purchased maturities of three months or less as cash and cash equivalents. Cash and cash equivalents consist primarily of a demand deposit account and approximates fair value due to the relatively short period to maturity of this instrument. Management believes the credit risk associated with cash and cash equivalents is considered low due to the quality of the financial institution in which this asset is held.

Deferred Leasing Commissions

     Leasing commissions are capitalized and amortized over the initial term of the related lease using the straight-line method. Accumulated amortization was $707,777, $554,590 and $350,078 at September 30, 2004, December 31, 2003 and 2002, respectively. In connection with a lease termination and renegotiation, the Company in the year ended December 31, 2002 wrote-off $1,277,933 in deferred leasing commissions.

Deferred Financing Costs

     Deferred financing costs, principally loan origination and related fees, are deferred and amortized to interest expense on the straight-line method over the loan’s term, which approximates the effective interest method. Accumulated amortization was $135,402, $24,496 and $89,328 at September 30, 2004, December 31, 2003 and 2002, respectively.

Revenue Recognition

     Tenant leases are classified as operating leases. Base minimum rents are recognized monthly using the straight-line method. Base minimum rents in excess of actual tenant billings are classified as deferred rent receivables. Operating expense reimbursements are charged to tenants for estimated operating expenses incurred by the Company. Reimbursements for these operating expenses are billed monthly to the tenants with periodic adjustments based on actual expenses incurred. In connection with a lease termination and renegotiation, in 2002 the Company wrote-off $1,792,888 in uncollectible deferred rents receivable.

Income Taxes

     Under the provisions of the Internal Revenue Code and applicable state tax laws, the Company is not subject to taxation of income. The tax consequences of Company profits and losses accrue to the Members. Certain costs may be treated differently in the Company’s income tax return than in the accompanying financial statements.

F-58

TECHNOLOGY CENTER OF THE AMERICAS, LLC

NOTES TO FINANCIAL STATEMENTS — (Continued)

September 30, 2004 (Unaudited), December 31, 2003 and 2002

Therefore, income in the financial statements may not be the same as that reported in the Members’ income tax returns.

3. Rental Property

     Rental property is summarized as follows:

				December 31,
	September 30,
	2004			2003			2002
	(Unaudited)
Land	$	10,139,683		$	10,139,683		$	10,139,683
Building and improvements		62,190,009			61,878,316			61,878,317
Furniture and fixtures		130,981			130,981			104,414
		72,460,673			72,148,980			72,122,414
Accumulated depreciation		(5,532,854	)		(4,235,758	)		(2,557,433	)
	$	66,927,819		$	67,913,222		$	69,564,981

4. Accounts Payable and Accrued Expenses

     Accounts payable and accrued expenses are generated through the normal course of business operations and consist of the following:

			December 31,
	September 30,
	2004		2003		2002
	(Unaudited)
Real estate taxes	$	683,035	$	—	$	1,317,814
Mortgage interest		—		129,806		140,053
Tenant payable		112,963		101,674		203,214
Accounts payable and other		202,864		270,340		198,611
	$	998,862	$	501,820	$	1,859,692

     During 2003, the Company reached final settlement with local tax authorities to reduce its real estate taxes. As a result, the Company recorded $427,200 in accrued real estate taxes at December 31, 2002 as a reduction in operating expenses.

5. Mortgage Note Payable

     The Company has a mortgage note payable with a financial institution, which is secured by a first mortgage on the Property. Interest is payable monthly at Citibank, N.A.’s prime rate plus 1.5%. During 2003, the mortgage note payable maturity date was extended to November 7, 2005. The note is guaranteed to a maximum of approximately $5,500,000 by the Managing Member’s parent.

F-59

TECHNOLOGY CENTER OF THE AMERICAS, LLC

NOTES TO FINANCIAL STATEMENTS — (Continued)

September 30, 2004 (Unaudited), December 31, 2003 and 2002

6. Operating Leases

     The Company has operating leases with tenants for telecommunications/data center space, which expire over periods ranging from 10 to 20 years and contain various renewal options. Future minimum base rentals to be received under non-cancelable leases in effect at December 31, 2003 are as follows:

2004		$	4,596,211
2005			6,838,181
2006			7,986,045
2007			8,557,069
2008			8,724,495
Thereafter			163,287,730
	Total minimum base rentals	$	199,989,731

7. Transactions with Related Parties

     A summary of transactions with related parties follows:

Lease Agreements with Related party

     In November 2003, the Company entered into an agreement with its Managing Member’s parent to lease the Property’s third floor and to extend the parent’s existing second floor lease until May 2025. Commencing in April 2005, the third floor lease requires $200,000 in monthly base rent payments. At September 30, 2004, the second floor lease required approximately $211,000 in monthly base rent payments. Both leases require annual increases. Base rents contractually due from the Managing Member’s parent totaled approximately $1,899,000, $2,478,000 and $2,045,000 for the nine month period ended September 30, 2004 and the years ended December 31, 2003 and 2002, respectively.

Property Management and Leasing Agreement

     The Company has entered into an agreement with the Managing Member to manage operations of the Property for a fee. Under the terms of the agreement, fees are due monthly and are equal to the greater of $8,333 or 3.5% of gross receipts, as defined in the agreement, plus reimbursement for all or a pro rata share of direct personnel and related costs for the Managing Member’s employees devoting time to managing the Property. During the nine month period ended September 30, 2004 and the years ended December 31, 2003 and 2002, the Company incurred $137,949, $184,133 and $149,346 in management fees, respectively.

     In conjunction with the property management agreement, the Managing Member receives a leasing commission in connection with each executed lease, one half due at lease signing and one half due upon tenant occupancy. There was no commission charged for leasing in November 2003 the Property’s third floor. During the nine month period ended September 30, 2004 and the year ended December 31, 2003, the Company did not incur related commissions. During the year ended December 31, 2002, the Company incurred $99,019 in related commissions.

Construction Costs

     During the nine month period ended September 30, 2004 and the years ended December 31, 2003 and 2002, the Company paid $0, $2,000 and $470,250, respectively, to its Managing Member for building and tenant improvements.

F-60

TECHNOLOGY CENTER OF THE AMERICAS, LLC

NOTES TO FINANCIAL STATEMENTS — (Continued)

September 30, 2004 (Unaudited), December 31, 2003 and 2002

Public Relations

     During the nine month period ended September 30, 2004 and the years ended December 31, 2003 and 2002, the Company paid $56,000, $56,000 and $0, respectively, to its Managing Member for public relations services.

8. Contingencies and Commitments

     The Company is in discussions with the Property’s general contractor and certain subcontractors for future repair work required as a result of alleged substandard work relating to exterior building finishing. While the Company believes the required repair work, which could exceed $150,000, is covered under the contractors’ warranties, an unfavorable resolution could adversely impact these financial statements.

9. Subsequent Events

     Terremark Worldwide Inc. (“TWW”), currently owns a .84% interest in the Company. TWW is the Managing Member’s parent company. In July 2004, TWW entered into an agreement under which it assumed the obligation to purchase the other equity interests in the Company. In connection with the assumption of the agreement to purchase the Company, TWW has deposited $5 million which is nonrefundable except in the case of default by the sellers. TWW is currently exploring financing options for this transaction. The transaction is expected to close by December 31, 2004.

     In its June 14, 2004 report on TWW’s March 31, 2004 financial statements, TWW’s independent registered certified public accounting firm deleted the previous years’ references as to TWW’s ability to continue as a going concern.

* * * * *

F-61

                               Shares

Terremark Worldwide, Inc.

Common Stock

PROSPECTUS

SG Cowen & Co.

February             , 2005

Until         , all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This requirement is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

     The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by us in connection with the sale of notes and common stock being registered. All amounts are estimates except the Securities and Exchange Commission registration fee.

Securities and Exchange Commission registration fee	$	3,531
Printing and engraving expenses		*
Accounting fees and expenses		*
Legal fees and expenses		*
American Stock Exchange listing fees		*
Miscellaneous		*
TOTAL	$	*

*  To be filed by amendment.

Item 14. Indemnification of Directors and Officers

     Section 145 of the Delaware General Corporation Law authorizes a court to award or a corporation’s Board of Directors to grant indemnification to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities, including reimbursement for expenses incurred, arising under the Securities Act of 1933, as amended. The Registrant’s bylaws provide for mandatory indemnification of its directors and officers and permissible indemnification of employees and other agents to the maximum extent permitted by the Delaware General Corporation Law. The Registrant’s certificate of incorporation provides that, pursuant to Delaware law, its directors shall not be liable for monetary damages for breach of the directors’ fiduciary duty as our director and our stockholders. This provision in the certificate of incorporation does not eliminate the directors’ fiduciary duty, and in appropriate circumstances equitable remedies such as injunctive or other forms of non-monetary relief will remain available under Delaware law. In addition, each director will continue to be subject to liability for breach of the director’s duty of loyalty to us for acts or omissions not in good faith or involving intentional misconduct, for knowing violations of law, for actions leading to improper personal benefit to the director, and for payment of dividends or approval of stock repurchases or redemptions that are unlawful under Delaware law. The provision also does not affect a director’s responsibilities under any other law, such as the federal securities laws or state or federal environmental laws.

     We have obtained directors’ and officers’ liability insurance with an aggregate liability for the policy year, inclusive of costs of defense, in the amount of $10,000,000.

Item 15. Recent Sales of Unregistered Securities

     On December 31, 2004, as part of the financing for our purchase of TECOTA, we issued and sold 3,060,444 shares of our common stock valued at $2.0 million to Falcon Mezzanine Partners, L.P. and its co-investment partners, Stichting Pensioenfonds Voor De Gezond-Heid Geestelijke En Maatschappelijke Belangen and Stichting Pensioenfonds ABP, two fund affiliated with AlpInvest Partners. We refer to Falcon and its co-investors, collectively, as the Falcon investors. Also, in connection with these financings, we issued to Citigroup Global Markets Realty Corp., our senior lender, for no additional consideration, warrants to purchase an aggregate of five million shares of our common stock. These warrants expire on December 31, 2011 and are divided into four equal tranches that differ only in respect of the applicable exercise prices, which are $0.68, $0.74, $0.81 and $0.87, respectively. We also issued to the Falcon investors, for no additional consideration, warrants to purchase an aggregate of fifteen million shares of our common stock. These warrants expire on December 31, 2011 and

II-1

are divided into four equal tranches that differ only in respect of the applicable exercise prices, which are $0.69, $0.75, $0.82 and $0.88, respectively. We have granted to Citigroup and the Falcon investors registration rights in connection with the shares of common stock issued to the Falcon investors, the warrants issued to Citigroup and the Falcon investors and the shares of our common stock into which these warrants are exercisable, including the right to have these warrants and shares registered by June 29, 2005.

     On September 24, 2004, we entered into an agreement with Manuel D. Medina, our Chairman, President and Chief Executive Officer, regarding Mr. Medina’s repayment of an outstanding note in the principal amount of $5,000,000 owed by Mr. Medina to us which matured on September 30, 2004. Mr. Medina agreed to sell and transfer to us, on or prior to the note’s maturity date, 7,737,351 shares of our common stock at $0.65 per share and to apply such purchase price to the repayment of the outstanding principal and interest due on the note. The terms of the agreement were approved by our Board of Directors at a meeting held on September 28, 2004. On September 29, 2004, Mr. Medina completed the transfer of the shares to us.

     On June 14, 2004, we privately placed $86.25 million in aggregate principal amount of 9% senior convertible notes due June 15, 2009 at 100% of the face value of the notes. The initial purchaser was McMahan Securities Co. L.P. We used a portion of the net proceeds from this offering to pay all of our previously outstanding debt. The balance of the proceeds will be used for possible acquisitions and for general corporate purposes, including working capital and capital expenditures. The notes are convertible at the option of the holders into our common stock at $1.25 per share. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for the impact of this transaction on our financial condition. We agreed to file a registration statement to cover resales of the notes and the common stock issuable upon conversion of the notes by September 12, 2004 and to have that registration statement declared effective by December 11, 2004. We filed a registration statement covering the notes and the common stock with the Securities and Exchange Commission on December 10, 2004, which was declared effective by the commission on December 21, 2004. As a result, we were required to pay liquidated damages to the noteholders equal to one-half of one percent (50 basis points) per annum per $1,000 principal amount of the notes. These damages stopped accruing on December 10, 2004, but resumed when the registration statement was not declared effective by December 11, 2004 and extended to December 21, 2004. Ultimately, we incurred and paid approximately $118,000 of damages due to the late filing of this registration statement. In connection with the offering, we paid McMahan Securities Co. L.P. approximately $5.3 million in fees and commissions and delivered to it a warrant to purchase 1,815,789 shares of our common stock at $.95 per share, which expires on June 14, 2007.

     In May 2004, we issued three senior secured promissory notes in favor of Veritas High Yield Arbitrage I Fund, LLC, Veritas High Yield Arbitrage II Fund, LLC, and Veritas High Yield Arbitrage Fund, (Bermuda) Ltd., whom we refer to as the Veritas lenders, for the aggregate amount of $5.2 million. The notes accrued interest at 12% per annum, were payable monthly based on original face amount, and were set to mature on October 29, 2004, with prepayment permitted without penalty after the first month. The notes were paid in full in June 2004. In connection with the issuance of these secured notes, we also issued warrants to purchase 200,000 shares of our common stock in favor of the Veritas lenders with a strike price of $0.01, which expire two years after the effective date of the registration statement for the underlying common stock. We agreed to file a registration statement covering the shares of common stock underlying the warrants and to use our best efforts to cause the registration statement to become effective by August 15, 2004. Since we had not filed this registration statement as of August 15, 2004, we were required by the terms of the warrants to place 200,000 registered shares of common stock in escrow. Prior to our being able to arrange this escrow, the Veritas lenders exercised their warrants. In order to comply with the warrant exercise, we asked Miguel Rosenfeld, one of our directors, to transfer 200,000 registered shares to the Veritas lenders in exchange for our agreement to issue to him 200,000 unregistered shares which we agreed to register in the future. We paid a finder’s fee of $130,000 to McMahan Securities Co. L.P. in connection with the issuance of notes and warrants to the Veritas lenders. There is certain common ownership between the Veritas lenders and McMahan Securities Co. L.P.

     On March 31, 2004, we closed on the issuance of 400 shares of series I convertible preferred stock for $7.8 million in cash and $2.2 million in promissory notes, together with warrants to purchase 2.8 million shares of our common stock. We have collected all amounts due under the promissory notes. The series I preferred

II-2

stock is convertible into shares of our common stock at $0.75 per share. In January 2007, the series I preferred stock dividend rate will increase to 10% per year until January 2009 when it increases to 12%. Dividends are payable, at our discretion, in shares of our common stock or cash. We have the right to redeem the series I preferred stock at $25,000 per share plus accrued dividends at any time after December 31, 2004. As of December 31, 2004, holders of an aggregate of 10 shares of the series I preferred stock have converted their shares into 333,340 shares of our common stock.

     On April 30, 2003, we issued 10% subordinated secured convertible debentures due April 30, 2006 for an aggregate principal amount of $25.0 million. The debentures are convertible into shares of our common stock at $0.50 per share. Interest is payable quarterly beginning July 31, 2003. The debentures were issued in exchange for $10.3 million in cash, $9.5 million in a promissory note due in full August 15, 2003 and $5.2 million of notes payable converted to the subordinated debentures. Included in the $5.2 million is $2.0 million of cash received in March 2003 in anticipation of the debenture transaction. As of June 1, 2004, all holders of the 10% debentures converted their debentures into shares of our common stock.

     During the quarter ended December 31, 2002, debt holders entered into irrevocable agreements to convert approximately $17.1 million of debt and accrued interest into our common stock at $0.75 per share. The debt holders included Miguel Rosenfeld and Joseph Wright, members of our board of directors, who each converted approximately $517,000 in debt. This transaction closed in January 2003 and resulted in a $4.9 million inducement charge. At closing, we issued 22.8 million shares of our common stock.

     In August 2002, we issued warrants to purchase 100,000 shares of our common stock in a private offering to accredited investors for an aggregate purchase price of $61,000 pursuant to Section 4(2) and/or 3(b) of the Securities Act and Regulation D promulgated thereunder. The warrants were subsequently converted into 100,000 shares of our common stock.

     In June 2002, the NAP de las Americas-Madrid purchased 5 million shares of our common stock at $1.00 per share. The shares were sold pursuant to Section 4(2) and/or 3(b) of the Securities Act and Regulation S promulgated thereunder. In the Share Purchase Agreement with the NAP de las Americas — Madrid, we agreed that if prior to June 13, 2003 we issued any shares of common stock for a purchase price of less than $1.00 per share, the anti-dilution price, we would issue to the NAP de las Americas — Madrid that number of additional shares of common stock determined by dividing 5,000,000 by the anti-dilution price, and subtracting from the quotient thereof the number of shares previously issued to the NAP de las Americas — Madrid in respect of the Share Purchase Agreement. In August 2002, we sold approximately 17.6 million shares at $0.58 per share, and, as a result NAP de las Americas — Madrid had the right to invoke the anti-dilution provision of the Share Purchase Agreement and request that we issue additional shares to NAP de las Americas — Madrid in accordance with the anti-dilution adjustments described above. NAP de las Americas — Madrid did not request those shares until July 2003 and, as a result, we issued an additional 3,652,016 shares of common stock to the NAP de las Americas — Madrid.

     In April 2002, we received a binding commitment from a group, including Miguel Rosenfeld and Guillermo Amore, members of our board of directors, and Manuel D. Medina, our Chairman, President and Chief Executive Officer, for the purchase of $7.5 million of common stock at $0.75 per share. The shares were sold pursuant to Section 4(2) and/or 3(b) of the Securities Act and Regulation D promulgated thereunder. In May 2002, we issued 10 million shares of our common stock for $3.6 million in cash and the conversion of $3.9 million in short term promissory notes to equity. Mr. Rosenfeld purchased 1,668,000 shares for $1,251,000, Mr. Amore purchased 1,501,502 shares for $1,126,127 and Mr. Medina purchased 1,134,667 shares for $851,000.

     In April 2002, we entered into a put and warrant purchase agreement with TD Global Finance, or TDGF. In July 2002, we exercised our right to sell to TDGF 17,648,842 common shares for $0.58 per share for a total of $10.2 million. During August 2002, we received $10.2 million in related cash. In conjunction with the sale, we issued three call warrants, each granting TDGF the right to purchase 1,176,588 shares of our common stock. The shares and the warrants were sold pursuant to Section 4(2) and/or 3(b) of the Securities Act and Regulation D promulgated thereunder. The warrants expired without exercise on January 20, 2003.

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     These offers and sales of our common stock were exempt from the registration requirements of the Securities Act of 1933, as amended, as the common stock was sold to accredited investors pursuant to Regulation D and to non-United States persons in offshore transactions pursuant to Regulation S.

Item 16. Exhibits and Financial Statement Schedules

     (a) The financial statements listed in the accompanying Table of Contents to Consolidated Financial Statements and Financial Statement Schedule on page F-1 herein are filed as part of this report.

     (b) The following exhibits, which are furnished with this Registration Statement on Form S-1 or incorporated herein by reference, are filed as part of this Registration Statement on Form S-1.

Exhibit
Number		Exhibit Description
	2.1	Agreement for Sale of Assets by and between ITV Communications, Inc. and Netmatics, Inc., dated January 11, 1996, and Promissory Note and Security Agreement dated January 16, 1996 (previously filed as part of the Company’s Current Report on Form 8-K dated January 19, 1996)
	2.2	Agreement of Merger between AVIC Group International, Inc., a Colorado corporation, with and into AVIC Group International, Inc., a Delaware corporation dated July 10, 1996 (previously filed as an exhibit to the Company’s Registration Statement on Form S-3, as amended, filed on March 11, 2003)
	2.3	Agreement and Plan of Merger by and between Terremark Holdings, Inc. and AmTec, Inc., dated as of November 24, 1999, as amended by that certain Amendment to Agreement and Plan of Merger, dated as of February 11, 2000 (previously filed as part of the Company’s Definitive Proxy Statement filed on March 24, 2000)
	2.4	Letter Agreement dated January 12, 2001 among MP Telecom, LLC, Terremark Worldwide, Inc., Clifford J. Preminger, Thomas M. Mulroy and Manuel Medina (previously filed as part of the Company’s Current Report on Form 8-K dated February 28, 2001)
	3.1	Certificate of Merger of Terremark Holdings, Inc. with and into AmTec, Inc. (previously filed as an exhibit to the Company’s Registration Statement on Form S-3 filed on May 15, 2000)
	3.2	Restated Certificate of Incorporation of the Company (previously filed as an exhibit to the Company’s Registration Statement on Form S-3 filed on May 15, 2000)
	3.3	Certificate of Amendment to Certificate of Incorporation of the Company (previously filed as an exhibit to the Company’s Registration Statement on Form S-1 filed on December 21, 2004)
	3.4	Restated Bylaws of the Company (previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2002)
	3.5	Certificate of Designations of Preferences of Series G Convertible Preferred Stock of the Company (previously filed as an exhibit to the Company’s Registration Statement on Form S-3 filed on May 15, 2000)
	3.6	Certificate of Designations of Preferences of Series H Convertible Preferred Stock of the Company (previously filed as exhibit 3.5 to the Company’s Annual Report on Form 10-K filed on July 16, 2001)
	3.7	Certificate of Designations of Preferences of Series I Convertible Preferred Stock of the Company (previously filed as an exhibit to the Company’s Registration Statement on Form S-3/A filed on March 17, 2004)
	4.1	Specimen Stock Certificate (previously filed as an exhibit to the Company’s Annual Report on Form 10-KSB filed on July 15, 1997)
	4.4	Form of Warrant for the Purchase of Common Stock (previously filed as exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 15, 2003)
	4.5	Indenture dated June 14, 2004 including form of 9% Senior Convertible Note due 2009 (previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed on August 9, 2004)
	5.1	Opinion of Greenberg Traurig, P.A.*
	10.1	1995 Stock Option Plan (previously filed as part of the Company’s Transition Report on Form 10-KSB for the transition period from October 1, 1994 to March 31, 1995)

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Exhibit
Number		Exhibit Description
	10.2	1996 Stock Option Plan (previously filed as part of the Company’s Transition Report on Form 10-KSB for the transition period from October 1, 1994 to March 31, 1995)
	10.3	Form of Indemnification Agreement for directors and officers of the Company (previously filed as an exhibit to the Company’s Registration Statement on Form S-3, as amended, filed on March 11, 2003)
	10.4	Employment Agreement with Manuel Medina (previously filed as exhibit 10.6 to the Company’s Annual Report on Form 10-K filed on July 16, 2001)
	10.5	Amendment to Employment Agreement with Manuel Medina (previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2001)
	10.6	Amended and Restated Credit Agreement between the Company and Ocean Bank, dated September 5, 2001 (previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2001)
	10.7	Net Premises Lease by and between Rainbow Property Management, LLC and Coloconnection, Inc. (previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on April 15, 2003)
	10.8	Basic Lease Information Rider T-Rex Technology Center of the Americas @ Miami, dated October 16, 2000, between Technology Center of the Americas, LLC and NAP of the Americas, Inc. (previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on April 15, 2003)
	10.9	Debt Satisfaction Agreement between the Company and CRG, LLC, dated November 11, 2002 (previously filed as an exhibit to the Company’s Registration Statement on Form S-3/A filed on March 17, 2004)
	10.10	Amended and Restated Debt Satisfaction Agreement between the Registrant and CRG, LLC, dated December 5, 2002 (previously filed as an exhibit to the Company’s Registration Statement on Form S-3/A filed on March 17, 2004)
	10.11	Agreement between Terremark Technology Contractors Inc., and Kinetics Systems, Inc., dated December 28, 2000 (previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on April 15, 2003)
	10.12	Debt Conversion Agreement between the Company, NAP of the Americas and Ocean Bank, dated April 30, 2003 (previously filed as an exhibit to the Company’s Annual Report on Form 10-K filed on June 30, 2003)
	10.13	Non-qualified Stock Option Agreement with Brian K. Goodkind to purchase 1,278,205 shares of the Company’s common stock (previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2003)
	10.14	Non-qualified Stock Option Agreement with Brian K. Goodkind to purchase 1,406,795 shares of the Company’s common stock (previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2003)
	10.15	First Amendment to the Non-qualified Stock Option Agreement with Brian K. Goodkind to purchase 200,000 shares of the Company’s common stock (previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2003)
	10.16	First Amendment to the Non-qualified Stock Option Agreement with Brian K. Goodkind to purchase 115,000 shares of the Company’s common stock (previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2003)
	10.17	2000 Stock Option Plan (previously filed as an exhibit to the Company’s Registration Statement on Form S-8 filed on August 19, 2002)
	10.18	2000 Directors’ Stock Option Plan (previously filed as an exhibit to the Company’s Registration Statement on Form S-8 filed on August 19, 2002)
	10.19	Agreement between Fundacão De Amparo A Pesquisa Do Estado De São Paulo — FAPESP and Terremark Latin America (Brazil) Ltda. (previously filed as an exhibit to the Company’s Registration Statement on Form S-3/A filed on December 22, 2003)

II-5

Exhibit
Number		Exhibit Description
	10.20	Employment Agreement with José A. Segrera dated September 8, 2001 (previously filed as an exhibit to the Company’s Annual Report on Form 10-K filed June 30, 2003)
	10.21	Employment Agreement with José E. Gonzalez dated November 2002 (previously filed as an exhibit to the Company’s Annual Report on Form 10-K filed June 30, 2003)
	10.22	Share Purchase Agreement between the Company and NAP de Las Americas — Madrid, S.A. dated July 13, 2002 (previously filed as an exhibit to the Company’s Annual Report on Form 10-K filed June 30, 2003)
	10.23	Employment Agreement with Jamie Dos Santos dated November 1, 2002 (previously filed as an exhibit to the Company’s Annual Report on Form 10-K filed June 14, 2004)
	10.24	Employment Agreement with Marvin Wheeler dated November 1, 2002 (previously filed as an exhibit to the Company’s Annual Report on Form 10-K filed June 14, 2004)
	10.24	Employment Agreement dated October 18, 2004, with Fern Watts (previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed November 9, 2004)
	10.25	Fourth Amendment to Membership Interest Purchase Agreement, dated as of October 21, 2004 among the Company, LA Ref II, Telecom Miami, LLC, LA Ref III, LA Parallel II, Telecom Miami, LLC, LA Parallel III, Telecom Miami LLC (previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed November 9, 2004)
	10.26	Loan Agreement dated as of December 31, 2004 (the “Loan Agreement”), by and among Technology Center of the Americas, LLC, as Borrower, Citigroup Global Markets Realty Corp., as Agent and each Lender signatory thereto (previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on January 6, 2005)
	10.27	Form of Warrant Certificate of Terremark Worldwide, Inc. issued to Citigroup Global Markets Realty Corp. (previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on January 6, 2005)
	10.28	Purchase Agreement dated as of December 31, 2004, among Terremark Worldwide, Inc., as Issuer, the guarantors named therein, FMP Agency Services, LLC, as agent, and each of the purchasers named therein (previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on January 6, 2005)
	10.29	Security Agreement dated as of December 31, 2004, by Terremark Worldwide, Inc., as Issuer, the guarantors named therein and FMP Agency Services, LLC, as Agent (previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on January 6, 2005)
	10.30	Registration Rights Agreement dated as of December 31, 2004 among Terremark Worldwide, Inc. and Falcon Mezzanine Partners, LP, Stichting Pensioenfonds ABP and Stichting Pensioenfonds Voor De Gezondheid, Geestelijke En Maatschappelijke Belangen (the “Purchasers”) (previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on January 6, 2005)
	10.31	Form of Warrant Certificate of Terremark Worldwide, Inc. issued to the Purchasers (previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on January 6, 2005)
	10.32	Form of Note of Terremark Worldwide, Inc. issued to the Purchasers (previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on January 6, 2005)
	10.33	Guaranty of Nonrecourse Obligations executed by the Company in favor of Citigroup Global Markets Realty Corp., as agent, for the benefit of the lenders to the Loan Agreement**
	21	Subsidiaries of the Company**
	23.1	Consent of PricewaterhouseCoopers LLP**
	23.2	Consent of Greenberg Traurig P.A. (included in Exhibit 5.1)*
	23.3	Consent of Gifford Fong Associates**
	24.1	Powers of Attorney (included on signature pages hereto)**

  *  To be filed by amendment.

**  Filed herewith.

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Item 17. Undertakings

The undersigned hereby undertakes:

     (1) That, for the purpose of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as a part of this registration statement in reliance upon 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

     (2) For purposes if determining liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

     (3) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

II-7

SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Miami, State of Florida, on February 3, 2005.

TERREMARK WORLDWIDE, INC.

By:  /s/ MANUEL D. MEDINA

Manuel D. Medina

Chairman of the Board, President and Chief

Executive Officer (Principal Executive Officer)

By:  /s/ JOSE A. SEGRERA

Jose A. Segrera

Chief Financial Officer (Principal Accounting Officer)

SIGNATURES AND POWER OF ATTORNEY

     Each person whose signature appears below hereby appoints each of Manuel D. Medina and José A Segrera his true and lawful attorney-in-fact with the authority to execute in the name of each such person, and to file with the Securities and Exchange Commission, together with any exhibits thereto and other documents therewith, any and all amendments (including without limitation post-effective amendments) to this registration statement necessary or advisable to enable the registrant to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission in respect thereof, which amendments may make such other changes in the registration statement as the aforesaid attorney-in-fact executing the same deems appropriate.

     Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.

Signature	Title	Date
/s/ MANUEL D. MEDINA Manuel D. Medina	Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)	February 3, 2005
/s/ GUILLERMO AMORE Guillermo Amore	Director	February 3, 2005
/s/ TIMOTHY ELWES Timothy Elwes	Director	February 3, 2005
/s/ FERNANDO FERNANDEZ-TAPIAS Fernando Fernandez-Tapias	Director	February 3, 2005
/s/ HON. ARTHUR L. MONEY Hon. Arthur L. Money	Director	February 3, 2005

II-8

Signature	Title	Date
/s/ MARVIN S. ROSEN Marvin S. Rosen	Director	February 3, 2005
/s/ MIGUEL J. ROSENFELD Miguel J. Rosenfeld	Director	February 3, 2005
/s/ RODOLFO A. RUIZ Rodolfo A. Ruiz	Director	February 3, 2005
/s/ JOSEPH R. WRIGHT, JR. Joseph R. Wright, Jr.	Director	February 3, 2005
/s/ ANTONIO S. FERNANDEZ Antonio S. Fernandez	Director	February 3, 2005
/s/ JOSÉ A. SEGRERA José A. Segrera	Executive Vice President and Chief Financial Officer (Principal Accounting Officer)	February 3, 2005

II-9

EXHIBIT INDEX

Exhibit No.			Description
	10	.33	Guaranty of Nonrecourse obligations executed by the Company in favor of Citigroup Global Markets Realty Corp., as agent
	21		Subsidiaries of the Company
	23	.1	Consent of PricewaterhouseCoopers LLP
	23	.3	Consent of Gifford Fong Associates