##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form10-K


|  |  |                                                                                              
|- |  | ---------------------------------------------------------------------------------------------
|þ |  | ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
| 
|  |  | For the fiscal year ended March 31, 2006                                                     
| 
|o |  | TRANSITION REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-22520





Terremark Worldwide, Inc.


(Exact Name of Registrant as Specified in Its Charter)


|                                                                    |  |                                      
|------------------------------------------------------------------- |  | -------------------------------------
|Delaware                                                            |  | 84-0873124                           
|(State or Other Jurisdiction of
     Incorporation or Organization) |  | (IRS Employer
    Identification No.)

2601 S. Bayshore Drive, Miami, Florida 33133


(Address of Principal Executive Offices, Including Zip
Code)


Registrants telephone number, including area code:


(305) 856-3200


Securities registered pursuant to Section 12(b) of the
Act:


|                                         |  |                                       
|---------------------------------------- |  | --------------------------------------
|Common Stock, par value $0.001 per share |  | American Stock Exchange               
|(Title of Class)                         |  | (Name of Exchange on Which Registered)

Securities registered pursuant to Section 12(g) of the
Act:


NONE





o þ


o þ


þ o


S-K 10-K 10-K. o


12b-2


o þ o


12b-2 o þ


The aggregate market value of the registrants common
stock held by non-affiliates of the registrant on June 13,
2006 was approximately $166,092,621, based on the closing market
price of the registrants common stock ($6.11 as reported
by the American Stock Exchange on such date). For purposes of
the foregoing computation, all executive officers, directors and
five percent beneficial owners of the registrant are deemed to
be affiliates. Such determination should not be deemed to be an
admission that such executive officers, directors or five
percent beneficial owners are, in fact, affiliates of the
registrant.


The number of shares outstanding of the registrants
common stock, par value $0.001 per share, as of
May 31, 2006 was 44,570,458.










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TABLE OF CONTENTS


|                                                  |          |  |                                                                                                                      |      |  |    | 
|------------------------------------------------- | -------- |  | -------------------------------------------------------------------------------------------------------------------- | ---- |  | -- | 
|                                                  |          |  |                                                                                                                      | Page | 
|                                                  |          |  |                                                                                                                      |      | 
|Part I                                            |          |  | 2                                                                                                                    |     
|                                                  | Item 1.  |  | Business                                                                                                             |      |  | 2  | 
|                                                  | Item 1A. |  | Risk Factors                                                                                                         |      |  | 9  | 
|                                                  | Item 1B. |  | Unresolved Staff Comments                                                                                            |      |  | 15 | 
|                                                  | Item 2.  |  | Properties                                                                                                           |      |  | 15 | 
|                                                  | Item 3.  |  | Legal Proceedings                                                                                                    |      |  | 15 | 
|                                                  | Item 4.  |  | Submission of Matters to a Vote of Security
    Holders                                                              |      |  | 16 | 
|Part II                                           |          |  | 16                                                                                                                   |     
|                                                  | Item 5.  |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |      |  | 16 | 
|                                                  | Item 6.  |  | Selected Consolidated Financial Data                                                                                 |      |  | 18 | 
|                                                  | Item 7.  |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |      |  | 19 | 
|                                                  | Item 7A. |  | Quantitative and Qualitative Disclosures
    about Market Risk                                                       |      |  | 36 | 
|                                                  | Item 8.  |  | Financial Statements and Supplementary
    Data                                                                      |      |  | 37 | 
|                                                  | Item 9.  |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |      |  | 37 | 
|                                                  | Item 9A. |  | Controls and Procedures                                                                                              |      |  | 38 | 
|                                                  | Item 9B. |  | Other Information                                                                                                    |      |  | 40 | 
|Part III                                          |          |  | 40                                                                                                                   |     
|                                                  | Item 10. |  | Directors and Executive Officers of the
    Registrant                                                               |      |  | 40 | 
|                                                  | Item 11. |  | Executive Compensation                                                                                               |      |  | 43 | 
|                                                  | Item 12. |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |      |  | 49 | 
|                                                  | Item 13. |  | Certain Relationships and Related
    Transactions                                                                   |      |  | 52 | 
|                                                  | Item 14. |  | Principal Accountant Fees and Services                                                                               |      |  | 53 | 
|Part IV                                           |          |  | 56                                                                                                                   |     
|                                                  | Item 15. |  | Exhibits and Financial Statements                                                                                    |      |  | 56 | 
|Signatures                                        |          |  | 59                                                                                                                   |     
|Agreement                                        
|Subsidiaries of the Company                      
|Consent of PricewaterhouseCoopers LLP            
|Consent of KPMG LLP                              
|Section 302 Chief Executive Officer Certification
|Section 302 Chief Financial Officer Certification
|Section 906 Chief Executive Officer Certification
|Section 906 Chief Financial Officer Certification



1



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##### Table of Contents






PART I







|        |          
|------- | ---------
|ITEM 1. | BUSINESS.

The words Terremark, we,
our, ours, and us refer to
Terremark Worldwide, Inc. All statements in this discussion that
are not historical are forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of
1934, as amended, including statements regarding
Terremarks expectations, beliefs,
hopes, intentions,
strategies or the like. Such statements are based on
managements current expectations and are subject to a
number of factors and uncertainties that could cause actual
results to differ materially from those described in the
forward-looking statements. Terremark cautions investors that
actual results or business condition may differ materially from
those projected or suggested in such forward-looking statements
as a result of various factors, including, but not limited to,
the risk factors discussed in this Annual Report on
Form 10-K.
Terremark expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in
Terremarks expectations with regard thereto or any change
in events, conditions, or circumstances on which any such
statements are based.


Recent Events




Our Business








| |   |                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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, dedicated hosting and
    remote monitoring.

2



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Industry








3



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Value Proposition






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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% uptime
    for power and cooling capabilities. Additionally, our Miami
    facility is designed to withstand a category 5 hurricane and
    houses equipment only above the first 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 90 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




Deepen our relationships with existing customers.


Penetrate new sectors.


Establish insertion points for network-based services. state-of


4



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Maintain and establish a presence in strategic locations.


Customers






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






|  |                                                                                                        
|- | -------------------------------------------------------------------------------------------------------
|* | 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






| |                     
| | --------------------
| | Colocation Services:



5



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| |                        
| | -----------------------
| | Exchange Point Service:





| |   |                          
| | - | -------------------------
| |  | 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 allow 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 Outsourcing



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our Network Operations Center, or NOC, service is a
    customer-outsourced service providing continuous
    24-hour support,
    monitoring and managing 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

6



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| |                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------
| | fully staffed NOCs, one serving our commercial sector customers
    and the other serving our Federal government sector customers.



| |   |                       
| | - | ----------------------
| |  | 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
    per day, 7 days per 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.



| |   |                          
| | - | -------------------------
| |  | Dedicated Managed Hosting



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We provide managed dedicated, secure hosting services to
    enterprise customers, e-commerce marketplaces, system
    integrators, ASPs and web designers using proprietary
    technology. Through the development of proprietary technology,
    we have integrated managed hosting procedures into an automated
    environment using strict, ITIL-based, procedures and standards.
    Our solution allows for the rapid integration and deployment of
    these products in each of our IXs around the world.



| |   |                            
| | - | ---------------------------
| |  | Secure Information Services



| |                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our Secure Information Services Group provides professional and
    managed information assurance services to our customers. This
    Group provides a suite of services, including vulnerability

7



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | assessments and penetration tests, secure information systems
    design and implementation, information security policy and
    procedure development and review, incident preparation and
    response. This service offering helps safeguard customer
    networks and systems located in our facilities and extend to our
    customers premises. We are currently using the market
    knowledge generated from our professional services engagements
    to develop a portfolio of Secure Information Managed Services.

Sales and Marketing




Government and Federal Information Technology Service
Providers.


Commercial.




Marketing.


Competition






Internet data centers operated by established U.S., Brazilian
and Spanish communications carriers such as AT&T, Embratel
and Telefonica.


8



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U.S. IXs such as MAE West and carrier operated IXs. 24-hour


Vertically integrated web site hosting companies, colocation
companies and Internet service providers such as Navisite and
Savvis.


Neutral colocation and Internet exchange services companies
such as Switch and Data and Equinix.


Employees






Where You Can Find Additional Information


1-800-SEC-0330 http://www.sec.gov http://www.terremark.com 10-K.





ITEM 1A.     RISK FACTORS.






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



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| |                                                                                       
| | --------------------------------------------------------------------------------------
| | We may not be able to compete successfully against current
    and future competitors.







| |                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.



10



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| |                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.





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







| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | 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.                                                                              





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





| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | 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                                               

11



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| |   |               
| | - | --------------
| |  | extend credit.





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





| |   |                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.                                                                                                 





| |                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If 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 financial condition and operating results appear to be
    unsatisfactory;                                                                                                                                                                                                            
|
| |  | 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.



12



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





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





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





| |   |                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.                                                                                                                                                        

13



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##### Table of Contents







| |                                                                   
| | ------------------------------------------------------------------
| | We may encounter difficulties implementing our expansion
    plan.





| |   |                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | identify and take advantage of locations in which we believe
    there is sufficient demand for our services;                             
|
| |  | generate sufficient cash flow from operations or through
    additional debt or equity financings to support these expansion
    plans;   
|
| |  | hire, train and retain sufficient additional financial reporting
    management, operational and technical employees; and                 
|
| |  | install and implement new financial and other systems,
    procedures and controls to support this expansion plan with
    minimal delays.





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





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

52-week




| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
| |  | 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.            



14



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| |                                                  
| | -------------------------------------------------
| | You may not receive dividends on our common stock








|         |                           
|-------- | --------------------------
|ITEM 1B. | UNRESOLVED STAFF COMMENTS.








|        |            
|------- | -----------
|ITEM 2. | PROPERTIES.



|                             |  |                            |  |               |  |         |         |     |        |                    
|---------------------------- |  | -------------------------- |  | ------------- |  | ------- | ------- | --- | ------ | -------------------
|                             |  |                            |  | Lease Expires |  |         |         |    
|                             |  |                            |  | (reflecting   |  | Area    |         |     |       
|                             |  |                            |  | all Options)  |  | (Square |         |     | Annual
|Description                  |  | Location                   |  | (M/Yr)        |  | Feet)   |         |     | Rent  
|                             |  |                            |  |               |  |         |         |     |       
|NAP of the Americas Facility |  | Miami, Florida             |  | Owned         |  |         | 750,000 |     |        | N/A                
|Principal executive offices  |  | Miami, Florida             |  | April 2008    |  |         | 16,900  |     |        | $542,000(1)        
|Hewlett Packard data center  |  | Sao Paulo, Brazil          |  | October 2021  |  |         | 3,400   |     |        | $50,000            
|Colocation Facility          |  | Santa Clara, California    |  | January 2021  |  |         | 40,000  |     |        | $1,500,000(2)      
|Data Center                  |  | Herndon, Virginia          |  | February 2015 |  |         | 18,600  |     |        | $204,000 - $264,000
|                             |  |                            |  |               |  |         |         |     |        | (1)(3)             
|NAP of the Americas- Madrid  |  | Madrid, Spain              |  | December 2015 |  |         | 26,000  |     |        | 800,000 Euros (4)  
|Data Center                  |  | London, England            |  | March 2009    |  |         | 500     | (5) |        | $158,400           
|Data Center                  |  | Frankfurt, Germany         |  | March 2009    |  |         | 500     | (5) |        | $129,732           
|Data Center                  |  | Gent, Belgium              |  | January 2007  |  |         |        | (6) |        | $230,400           
|Data Center                  |  | Amsterdam, The Netherlands |  | January 2007  |  |         |        | (6) |        | $400,000           
|Data Center                  |  | Hong Kong, China           |  | July 2008     |  |         | 1,155   |     |        | $114,000           
|Data Center                  |  | Singapore                  |  | July 2007     |  |         | 260     |     |        | $72,000            






|    |                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We are also responsible for our share of common area maintenance
    expenses and real estate taxes.                                                           
|   
|(2) | We are also responsible for real estate taxes and property and
    casualty insurance expenses which in the aggregate equal
    approximately $46,000 annually.
|   
|(3) | Annual rent gradually increases with each year of the term and
    equals $264,000 during the year in which the lease expires.                                 
|   
|(4) | $966,000 at March 31, 2006 exchange rate. Annual rent is
    exclusive of value added taxes. The lessor to the lease is
    Global Switch Property Madrid, S.I.
|   
|(5) | We have an option to lease an additional 500 square feet at the
    same base rent.                                                                            
|   
|(6) | These leases are for rack space located in data centers. Each
    lease is for 49 racks.                                                                       






|        |                   
|------- | ------------------
|ITEM 3. | LEGAL PROCEEDINGS.



15



---



##### Table of Contents










|        |                                                         
|------- | --------------------------------------------------------
|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS.






PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
    STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
    SECURITIES

Common Stock and Preferred Stock Information


10-K






| |   |                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 100,000,000 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
    5,882 shares are designated as series H convertible
    preferred stock and 600 shares are designated as
    series I convertible preferred stock.





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 44,570,458 shares of our common stock were outstanding;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | 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
    100 shares of our common stock. On June 1, 2006, we
    received a notice from the holder of all 294 of our
    series H convertible preferred stock notifying us that the
    holder had exercised its right to require us to redeem all of
    these shares. We expect to redeem these shares sometime in the
    second quarter of our 2007 fiscal year; and
|
| |  | 323 shares of our series I convertible preferred stock
    were outstanding. Each share of series I convertible
    preferred stock may be converted into 3,333 shares of our
    common stock.                                                                                                                                                                                                                                                                                                                                                               





|                               |  |        |      |  |     |   |      | 
|------------------------------ |  | ------ | ---- |  | --- | - | ---- | 
|                               |  | Prices |     
|                               |  |        |     
|Fiscal Year 2006 Quarter Ended |  | High   |      |  | Low |  
|                               |  |        |      |  |     |  
|June 30, 2005                  |  | $      | 8.00 |  |     | $ | 5.60 | 
|September 30, 2005             |  |        | 7.56 |  |     |   | 3.97 | 
|December 31, 2005              |  |        | 5.04 |  |     |   | 2.60 | 
|March 31, 2006                 |  |        | 8.60 |  |     |   | 4.35 | 

16



---



##### Table of Contents



|                               |  |        |       |  |     |   |      | 
|------------------------------ |  | ------ | ----- |  | --- | - | ---- | 
|                               |  | Prices |      
|                               |  |        |      
|Fiscal Year 2005 Quarter Ended |  | High   |       |  | Low |  
|                               |  |        |       |  |     |  
|June 30, 2004                  |  | $      | 10.90 |  |     | $ | 6.10 | 
|September 30, 2004             |  |        | 8.40  |  |     |   | 6.00 | 
|December 31, 2004              |  |        | 7.50  |  |     |   | 5.50 | 
|March 31, 2005                 |  |        | 8.40  |  |     |   | 5.90 | 

Dividend Policy




Recent Sales of Unregistered Securities






17



---



##### Table of Contents








|        |                                      
|------- | -------------------------------------
|ITEM 6. | SELECTED CONSOLIDATED FINANCIAL DATA.



|                                             |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |         |        |  |   |         |        | 
|-------------------------------------------- | -------------- | -------------------------------------------- | ------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ |  | ---- | ------- | ------ |  | - | ------- | ------ | 
|                                             |                | Twelve Months Ended March 31,                |        
|                                             |                |                                              |        
|                                             |                | 2006                                         |         |        | 2005 |   |         | 2004   |  |   | 2003    |        |  | 2002 |        
|                                             |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |        
|                                             |                | (Dollars in thousands except per share data) |        
|Results of Operations:                       |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |         |        |  |   |         |       
|Data center(1)                               |                | $                                            | 62,529  |        |      | $ | 46,818  |        |  | $ | 17,034  |        |  | $    | 11,033  |        |  | $ | 3,216   |       
|Real estate services                         |                |                                              |        |        |      |   | 1,330   |        |  |   | 1,179   |        |  |      | 3,661   |        |  |   | 12,656  |       
|                                             |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |        
|                                             | Total revenue  |                                              |         | 62,529 |      |   |         | 48,148 |  |   |         | 18,213 |  |      |         | 14,694 |  |   |         | 15,872 | 
|                                             |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |        
|Data center operations expenses              |                |                                              | 38,824  |        |      |   | 36,310  |        |  |   | 16,413  |        |  |      | 11,235  |        |  |   | 11,231  |       
|Construction contract expenses               |                |                                              |        |        |      |   | 809     |        |  |   | 918     |        |  |      | 2,968   |        |  |   | 7,398   |       
|Other expenses                               |                |                                              | 60,854  |        |      |   | 20,888  |        |  |   | 23,373  |        |  |      | 41,718  |        |  |   | 54,615  |       
|                                             |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |        
|                                             | Total expenses |                                              |         | 99,678 |      |   |         | 58,007 |  |   |         | 40,704 |  |      |         | 55,921 |  |   |         | 73,244 | 
|                                             |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |        
|Net loss                                     |                |                                              | (37,149 | )      |      |   | (9,859  | )      |  |   | (22,491 | )      |  |      | (41,227 | )      |  |   | (57,372 | )     
|Non-cash preferred dividend                  |                |                                              | (727    | )      |      |   | (915    | )      |  |   | (1,158  | )      |  |      | (160    | )      |  |   | (160    | )     
|                                             |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |        
|Net loss attributable to common shareholders |                | $                                            | (37,876 | )      |      | $ | (10,774 | )      |  | $ | (23,649 | )      |  | $    | (41,387 | )      |  | $ | (57,532 | )     
|                                             |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |        
|Net loss per common share  basic            |                | $                                            | (0.88   | )      |      | $ | (0.31   | )      |  | $ | (0.78   | )      |  | $    | (1.76   | )      |  | $ | (2.90   | )     
|                                             |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |        
|Net loss per common share  diluted          |                | $                                            | (0.88   | )      |      | $ | (0.40   | )      |  | $ | (0.78   | )      |  | $    | (1.76   | )      |  | $ | (2.90   | )     
|                                             |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |        

|                               |  |                               |         |  |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|------------------------------ |  | ----------------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                               |  | Twelve Months Ended March 31, |        
|                               |  |                               |        
|                               |  | 2006                          |         |  | 2005 |   |         | 2004 |  |   | 2003    |   |  | 2002 |        
|                               |  |                               |         |  |      |   |         |      |  |   |         |   |  |      |        
|                               |  | (Dollars in thousands)        |        
|Financial condition:(2)        |  |                               |         |  |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Property and equipment, net    |  | $                             | 129,893 |  |      | $ | 123,406 |      |  | $ | 53,898  |   |  | $    | 54,483  |   |  | $ | 61,089  |  
|Total assets                   |  |                               | 204,716 |  |      |   | 208,906 |      |  |   | 77,433  |   |  |      | 69,602  |   |  |   | 81,024  |  
|Long term obligations(3)(4)    |  |                               | 165,387 |  |      |   | 149,734 |      |  |   | 78,525  |   |  |      | 74,524  |   |  |   | 38,210  |  
|Stockholders equity (deficit) |  |                               | 13,836  |  |      |   | 40,176  |      |  |   | (22,720 | ) |  |      | (46,461 | ) |  |   | (49,276 | )






|    |                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Amount includes contract termination fees for the years ended
    March 31, 2004 and 2003 of $422 and $1,095, respectively.                                                                                                                                                                                                                                                     
|   
|(2) | See Managements discussion and Analysis of Financial
    Condition and Results of Operations  Liquidity and
    Capital Resources.                                                                                                                                                                                                                                          
|   
|(3) | Long term obligations include mortgage payable less current
    portion, convertible debt less current portion, estimated fair
    value of derivatives embedded within convertible debt, deferred
    rent, deferred revenue, unearned interest under capital lease
    obligations, capital lease obligations less current portion and
    notes payable less current portion.
|   
|(4) | Long term obligations as of March 31, 2005, 2004 and 2003
    include approximately $600 in redeemable convertible preferred
    stock plus accrued dividends.                                                                                                                                                                                                                  

18



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##### Table of Contents





|                                                      |  |                                              |         |   |              |   |        |               |  |   |          |   |  |   |         |  
|----------------------------------------------------- |  | -------------------------------------------- | ------- | - | ------------ | - | ------ | ------------- |  | - | -------- | - |  | - | ------- | -
|                                                      |  | Three Months Ended                           |        
|                                                      |  |                                              |        
|                                                      |  | March 31,                                    |         |   | December 31, |   |        | September 30, |  |   | June 30, |  
|                                                      |  | 2006                                         |         |   | 2005         |   |        | 2005          |  |   | 2005     |  
|                                                      |  |                                              |         |   |              |   |        |               |  |   |          |  
|                                                      |  | (Dollars in thousands except per share data) |        
|Data center                                           |  | $                                            | 19,015  |   |              | $ | 18,882 |               |  | $ | 13,961   |   |  | $ | 10,671  |  
|Real estate services                                  |  |                                              |        |   |              |   |       |               |  |   |         |   |  |   |        |  
|                                                      |  |                                              |         |   |              |   |        |               |  |   |          |  
|Total revenue                                         |  |                                              | 19,015  |   |              |   | 18,882 |               |  |   | 13,961   |   |  |   | 10,671  |  
|                                                      |  |                                              |         |   |              |   |        |               |  |   |          |  
|Data center operations expenses                       |  |                                              | 11,572  |   |              |   | 11,522 |               |  |   | 8,718    |   |  |   | 7,012   |  
|Other expenses                                        |  |                                              | 29,285  |   |              |   | 15,202 |               |  |   | 2,577    |   |  |   | 13,791  |  
|                                                      |  |                                              |         |   |              |   |        |               |  |   |          |  
|Total expenses                                        |  |                                              | 40,857  |   |              |   | 26,724 |               |  |   | 11,295   |   |  |   | 20,803  |  
|                                                      |  |                                              |         |   |              |   |        |               |  |   |          |  
|Net income (loss)                                     |  |                                              | (21,842 | ) |              |   | (7,842 | )             |  |   | 2,666    |   |  |   | (10,132 | )
|Non-cash preferred dividend                           |  |                                              | (170    | ) |              |   | (185   | )             |  |   | (185     | ) |  |   | (188    | )
|Earnings allocation to participating shareholders     |  |                                              |        |   |              |   |       |               |  |   | (397     | ) |  |   |        |  
|                                                      |  |                                              |         |   |              |   |        |               |  |   |          |  
|Net income (loss) attributable to common shareholders |  | $                                            | (22,012 | ) |              | $ | (8,027 | )             |  | $ | 2,084    |   |  | $ | (10,320 | )
|                                                      |  |                                              |         |   |              |   |        |               |  |   |          |  
|Net income (loss) per common share  basic            |  | $                                            | (0.50   | ) |              | $ | (0.18  | )             |  | $ | 0.05     |   |  | $ | (0.25   | )
|                                                      |  |                                              |         |   |              |   |        |               |  |   |          |  
|Net income (loss) per common share  diluted          |  | $                                            | (0.50   | ) |              | $ | (0.18  | )             |  | $ | (0.09    | ) |  | $ | (0.25   | )
|                                                      |  |                                              |         |   |              |   |        |               |  |   |          |  

|                                                      |  |                                              |        |   |              |   |        |               |  |   |          |   |  |   |       |  
|----------------------------------------------------- |  | -------------------------------------------- | ------ | - | ------------ | - | ------ | ------------- |  | - | -------- | - |  | - | ----- | -
|                                                      |  | March 31,                                    |        |   | December 31, |   |        | September 30, |  |   | June 30, |  
|                                                      |  | 2005                                         |        |   | 2004         |   |        | 2004          |  |   | 2004     |  
|                                                      |  |                                              |        |   |              |   |        |               |  |   |          |  
|                                                      |  | (Dollars in thousands except per share data) |       
|Data center                                           |  | $                                            | 13,472 |   |              | $ | 18,320 |               |  | $ | 7,915    |   |  | $ | 7,112 |  
|Real estate services                                  |  |                                              |       |   |              |   | 242    |               |  |   | 303      |   |  |   | 784   |  
|                                                      |  |                                              |        |   |              |   |        |               |  |   |          |  
|Total revenue                                         |  |                                              | 13,472 |   |              |   | 18,562 |               |  |   | 8,218    |   |  |   | 7,896 |  
|                                                      |  |                                              |        |   |              |   |        |               |  |   |          |  
|Data center operations expenses                       |  |                                              | 8,506  |   |              |   | 15,382 |               |  |   | 6,465    |   |  |   | 5,737 |  
|Construction contract expenses                        |  |                                              | (319   | ) |              |   | 180    |               |  |   | 243      |   |  |   | 705   |  
|Other expenses                                        |  |                                              | 12,094 |   |              |   | 8,288  |               |  |   | (1,304   | ) |  |   | 2,030 |  
|                                                      |  |                                              |        |   |              |   |        |               |  |   |          |  
|Total expenses                                        |  |                                              | 20,281 |   |              |   | 23,850 |               |  |   | 5,404    |   |  |   | 8,472 |  
|                                                      |  |                                              |        |   |              |   |        |               |  |   |          |  
|Net income (loss)                                     |  |                                              | (6,809 | ) |              |   | (5,288 | )             |  |   | 2,814    |   |  |   | (576  | )
|Non-cash preferred dividend                           |  |                                              | (193   | ) |              |   | (235   | )             |  |   | (245     | ) |  |   | (242  | )
|Earnings allocation to participating shareholders     |  |                                              |       |   |              |   |       |               |  |   | (488     | ) |  |   |      |  
|                                                      |  |                                              |        |   |              |   |        |               |  |   |          |  
|Net income (loss) attributable to common shareholders |  | $                                            | (7,002 | ) |              | $ | (5,523 | )             |  | $ | 2,081    |   |  | $ | (818  | )
|                                                      |  |                                              |        |   |              |   |        |               |  |   |          |  
|Net income (loss) per common share  basic            |  | $                                            | (0.19  | ) |              | $ | (0.16  | )             |  | $ | 0.06     |   |  | $ | (0.02 | )
|                                                      |  |                                              |        |   |              |   |        |               |  |   |          |  
|Net income (loss) per common share  diluted          |  | $                                            | (0.19  | ) |              | $ | (0.16  | )             |  | $ | (0.11    | ) |  | $ | (0.10 | )
|                                                      |  |                                              |        |   |              |   |        |               |  |   |          |  






|        |                                                                                           
|------- | ------------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS.

This report 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,


19



---



##### Table of Contents



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 important
factors including, without limitation, a history of losses,
competitive factors, uncertainties inherent in government
contracting, concentration of business with a small number of
clients, the ability to service debt, substantial leverage,
material weaknesses in our internal controls and our disclosure
controls, energy costs, the interest rate environment, one-time
events and other factors more fully described in Risk
Factors and elsewhere in this report. The forward-looking
statements made in this report 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 and assume no obligation to publicly update or revise any
forward-looking statements contained herein after the date of
this report, whether as a result of any new information, future
events or otherwise.


Critical Accounting Policies and Estimates








| |   |                                                
| | - | -----------------------------------------------
| |  | revenue recognition and allowance for bad debt;
|
| |  | derivatives;                                   
|
| |  | accounting for income taxes;                   
|
| |  | impairment of long-lived assets;               
|
| |  | stock-based compensation; and                  
|
| |  | goodwill.                                      



| |                                                                        
| | -----------------------------------------------------------------------
| | Revenue Recognition, Profit Recognition and Allowance for
    Bad Debts



20



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##### Table of Contents





00-21,










| |            
| | -----------
| | Derivatives







21



---



##### Table of Contents





| |                            
| | ---------------------------
| | Accounting for Income Taxes







05-8, 05-8). 05-8 05-8 05-8




| |                                
| | -------------------------------
| | Impairment of Long-Lived Assets



22



---



##### Table of Contents









| |                         
| | ------------------------
| | Stock-based Compensation









| |         
| | --------
| | Goodwill





23



---



##### Table of Contents





Results of Operations




| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | Results of Operations for the Year Ended March 31,
    2006 as Compared to the Year Ended March 31, 2005.

Revenue.


|                                      |  |              |     |   |      |  |     |  
|------------------------------------- |  | ------------ | --- | - | ---- |  | --- | -
|                                      |  | For the Year |    
|                                      |  | Ended        |    
|                                      |  | March 31,    |    
|                                      |  |              |    
|                                      |  | 2006         |     |   | 2005 | 
|                                      |  |              |     |   |      | 
|U.S. Operations                       |  |              | 88  | % |      |  | 99  | %
|Outside U.S.                          |  |              | 12  | % |      |  | 1   | %
|                                      |  |              |     |   |      | 
|                                      |  |              | 100 | % |      |  | 100 | %
|Data center                           |  |              | 100 | % |      |  | 97  | %
|Construction contract and fee revenue |  |              | 0   | % |      |  | 3   | %
|                                      |  |              |     |   |      | 
|                                      |  |              | 100 | % |      |  | 100 | %
|                                      |  |              |     |   |      | 



|                                    |  |                              |            |  |  |  |      |   |  |   |            |  |  |  |     |  
|----------------------------------- |  | ---------------------------- | ---------- |  |  |  | ---- | - |  | - | ---------- |  |  |  | --- | -
|                                    |  | For the Year Ended March 31, |           
|                                    |  |                              |           
|                                    |  | 2006                         |            |  |  |  | 2005 |   |  |  
|                                    |  |                              |            |  |  |  |      |   |  |  
|Colocation                          |  | $                            | 28,126,193 |  |  |  | 45   | % |  | $ | 21,402,860 |  |  |  | 61  | %
|Managed and professional services   |  |                              | 28,088,192 |  |  |  | 45   | % |  |   | 9,017,282  |  |  |  | 26  | %
|Exchange point services             |  |                              | 6,308,708  |  |  |  | 10   | % |  |   | 4,564,283  |  |  |  | 13  | %
|Other                               |  |                              | 6,189      |  |  |  | 0    | % |  |   | 918        |  |  |  | 0   | %
|                                    |  |                              |            |  |  |  |      |   |  |   |            | 
|                                    |  | $                            | 62,529,282 |  |  |  | 100  | % |  | $ | 34,985,343 |  |  |  | 100 | %
|                                    |  |                              |            |  |  |  |      |   |  |   |            | 
|Technology infrastructure buildouts |  |                              |           |  |  |  |      |   |  |   | 11,832,745 |  |  |  |     |  
|                                    |  |                              |            |  |  |  |      |   |  |   |            | 
|Total data center revenues          |  | $                            | 62,529,282 |  |  |  |      |   |  | $ | 46,818,088 |  |  |  |     |  
|                                    |  |                              |            |  |  |  |      |   |  |   |            | 





| |   |                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | colocation services, such as licensing of space and provisioning
    of power;                                                                                                                                                                                                                                                                    
|
| |  | exchange point services, such as peering and cross
    connects; and                                                                                                                                                                                                                                                                              
|
| |  | managed and professional services, such as network management,
    managed web hosting, outsourced network operating center (NOC)
    services, network monitoring, procurement and installation of
    equipment and procurement of connectivity, managed router
    services, secure information services, technical support and
    consulting.



24



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Construction Contracts and Fees.


Data Center Operations Expenses.






25



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Construction Contract Expenses.


General and Administrative Expenses.


Sales and Marketing Expenses.


Depreciation and Amortization Expenses.


Impairment of Long-lived Assets.


Change in Fair Value of Derivatives Embedded within
Convertible Debt.




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Gain on Debt Restructuring and Conversion.


Interest Expense.


Interest Income.


Net Loss.


|                       |  |                              |             |   |      |   |            |  
|---------------------- |  | ---------------------------- | ----------- | - | ---- | - | ---------- | -
|                       |  | For the Year Ended March 31, |            
|                       |  |                              |            
|                       |  | 2006                         |             |   | 2005 |  
|                       |  |                              |             |   |      |  
|Data center operations |  | $                            | (37,149,174 | ) |      | $ | (9,490,543 | )
|Real estate services   |  |                              |            |   |      |   | (368,809   | )
|                       |  |                              |             |   |      |  
|                       |  | $                            | (37,149,174 | ) |      | $ | (9,859,352 | )
|                       |  |                              |             |   |      |  







| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | Results of Operations for the Year Ended March 31,
    2005 as Compared to the Year Ended March 31, 2004.

Revenue.


|                                      |  |              |     |   |      |  |     |  
|------------------------------------- |  | ------------ | --- | - | ---- |  | --- | -
|                                      |  | For the Year |    
|                                      |  | Ended        |    
|                                      |  | March 31,    |    
|                                      |  |              |    
|                                      |  | 2005         |     |   | 2004 | 
|                                      |  |              |     |   |      | 
|U.S. Operations                       |  |              | 99  | % |      |  | 99  | %
|Outside U.S                           |  |              | 1   | % |      |  | 1   | %
|                                      |  |              |     |   |      | 
|                                      |  |              | 100 | % |      |  | 100 | %
|Data center                           |  |              | 97  | % |      |  | 94  | %
|Construction contract and fee revenue |  |              | 3   | % |      |  | 6   | %
|                                      |  |              |     |   |      | 
|                                      |  |              | 100 | % |      |  | 100 | %
|                                      |  |              |     |   |      | 

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|                                    |  |                              |            |  |  |  |      |   |  |   |            |  |  |  |     |  
|----------------------------------- |  | ---------------------------- | ---------- |  |  |  | ---- | - |  | - | ---------- |  |  |  | --- | -
|                                    |  | For the Year Ended March 31, |           
|                                    |  |                              |           
|                                    |  | 2005                         |            |  |  |  | 2004 |   |  |  
|                                    |  |                              |            |  |  |  |      |   |  |  
|Colocation                          |  | $                            | 21,402,860 |  |  |  | 61   | % |  | $ | 9,861,638  |  |  |  | 58  | %
|Exchange point services             |  |                              | 4,564,283  |  |  |  | 13   | % |  |   | 3,571,709  |  |  |  | 21  | %
|Managed and professional services   |  |                              | 9,017,282  |  |  |  | 26   | % |  |   | 3,179,264  |  |  |  | 19  | %
|Other                               |  |                              | 918        |  |  |  | 0    | % |  |   | 421,766    |  |  |  | 2   | %
|                                    |  |                              |            |  |  |  |      |   |  |   |            | 
|                                    |  | $                            | 34,985,343 |  |  |  | 100  | % |  | $ | 17,034,377 |  |  |  | 100 | %
|                                    |  |                              |            |  |  |  |      |   |  |   |            | 
|Technology infrastructure buildouts |  |                              | 11,832,745 |  |  |  |      |   |  |   |           |  |  |  |     |  
|                                    |  |                              |            |  |  |  |      |   |  |   |            | 
|Total data center revenues          |  | $                            | 46,818,088 |  |  |  |      |   |  | $ | 17,034,377 |  |  |  |     |  
|                                    |  |                              |            |  |  |  |      |   |  |   |            | 







| |   |                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | colocation services, such as licensing of space and provisioning
    of power;                                                                                                                                                    
|
| |  | exchange point services, such as peering and cross connects;                                                                                                                                                                      
|
| |  | managed and professional services, such as network management,
    network monitoring, other network operating center services,
    procurement of connectivity, managed router services, and
    technical support and consulting
|
| |  | technology infrastructure build-outs which represent turnkey
    design and installation of technology infrastructure for
    existing customers.                                                                                 











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Construction Contracts and Fees.


Data Center Operations Expenses.










Construction Contract Expenses.


Sales and Marketing Expenses.


General and Administrative Expenses.


29



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Depreciation and Amortization Expense.


Impairment of Long-lived Assets.


Change in Fair Value of Derivatives Embedded within
Convertible Debt.


Gain on Debt Restructuring and Conversion.


Interest Expense.


Net Loss.




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Liquidity and Capital Resources




| |          
| | ---------
| | Liquidity







| |             
| | ------------
| | Indebtedness





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| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | 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.                                                                











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Sources and Uses of Cash








Guarantees and Commitments






| |   |                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | TECOTA files for bankruptcy or a petition in bankruptcy is filed
    against TECOTA with TECOTAs or Terremarks consent;                                                     
|
| |  | 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
    or pledges any of its existing cash balances as of
    December 31, 2004 as collateral for another loan; or
|
| |  | Terremark repurchases any of its common stock.                                                                                                                                





| |   |                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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;                                                

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| |   |                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.                                                                                                                         





|           |  |               |           |  |                  |   |            |                  |  |   |                  |  |  |               |            |  |       |   |            |  |  |   |             | 
|---------- |  | ------------- | --------- |  | ---------------- | - | ---------- | ---------------- |  | - | ---------------- |  |  | ------------- | ---------- |  | ----- | - | ---------- |  |  | - | ----------- | 
|           |  | Capital Lease |           |  |                  |   |            |                  |  |   |                  |  | 
|           |  | Obligations   |           |  | Operating Leases |   |            | Convertible Debt |  |   | Mortgage Payable |  |  | Notes Payable |            |  | Total |  
|           |  |               |           |  |                  |   |            |                  |  |   |                  |  |  |               |            |  |       |  
|2007       |  | $             | 690,453   |  |                  | $ | 5,009,933  |                  |  | $ | 7,762,500        |  |  | $             | 4,219,846  |  |       | $ | 4,123,739  |  |  | $ | 21,728,291  | 
|2008       |  |               | 511,169   |  |                  |   | 4,879,272  |                  |  |   | 7,762,500        |  |  |               | 4,219,846  |  |       |   | 4,123,739  |  |  |   | 21,416,002  | 
|2009       |  |               | 223,537   |  |                  |   | 3,745,270  |                  |  |   | 7,762,500        |  |  |               | 49,414,809 |  |       |   | 34,669,953 |  |  |   | 95,795,791  | 
|2010       |  |               | 119,110   |  |                  |   | 3,726,497  |                  |  |   | 90,131,250       |  |  |               |           |  |       |   |           |  |  |   | 93,976,857  | 
|2011       |  |               | 117,340   |  |                  |   | 3,800,232  |                  |  |   |                 |  |  |               |           |  |       |   |           |  |  |   | 3,917,572   | 
|Thereafter |  |               | 16,310    |  |                  |   | 33,309,488 |                  |  |   |                 |  |  |               |           |  |       |   |           |  |  |   | 33,325,798  | 
|           |  |               |           |  |                  |   |            |                  |  |   |                  |  |  |               |            |  |       |  
|           |  | $             | 1,677,919 |  |                  | $ | 54,470,692 |                  |  | $ | 113,418,750      |  |  | $             | 57,854,501 |  |       | $ | 42,917,431 |  |  | $ | 270,160,311 | 
|           |  |               |           |  |                  |   |            |                  |  |   |                  |  |  |               |            |  |       |  

New Accounting Pronouncements




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05-6, 05-6). 05-6 05-6 05-6 05-6


05-7, 05-7). 05-7 05-7 05-7


05-8, 05-8). 05-8 05-8


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05-8




46(R)-6 46(R)-6), 46(R)-6 46(R)-6







|         |                                                                
|-------- | ---------------------------------------------------------------
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK.



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|                                |  |                         |            | 
|------------------------------- |  | ----------------------- | ---------- | 
|                                |  | Estimated Fair Value of |           
|Price Per Share of Common Stock |  | Embedded Derivatives    |           
|                                |  |                         |           
|$2.00                           |  | $                       | 2,677,346  | 
|$4.00                           |  | $                       | 8,674,892  | 
|$6.00                           |  | $                       | 15,851,837 | 
|$8.00                           |  | $                       | 22,992,648 | 
|$10.00                          |  | $                       | 30,608,051 | 




















|        |                                             
|------- | --------------------------------------------
|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE.

10-Q 8-K







|         |                        
|-------- | -----------------------
|ITEM 9A. | CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures


13a-15(e) 15d-15(e) 13a-15(e) 15d-15(e)


Managements Report on Internal Control Over
Financial Reporting


To the Shareholders of Terremark Worldwide, Inc.:


13a-15(f) 15d-15(f)








38



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Changes in Internal Control Over Financial
Reporting


10-K, 10-K/ 10-K/ 10-K/




| |   |                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We have restricted access to key financial information systems
    and data, particularly for employees with purchase order
    approval and check signing authority.                                                                                                                                                                                 
|
| |  | We have segregated the custody of payments received by mail from
    the processing of customer payments and from reconciliation of
    bank accounts.                                                                                                                                                                                                
|
| |  | We have engaged additional accounting personnel with appropriate
    experience and qualifications to perform additional quality
    review procedures and have implemented the use of financial
    checklists specific to the documentation and evaluation of the
    applicable accounting treatment for the calculation of earnings
    per share.
|
| |  | We have upgraded our main financial information system to be
    able to effectively monitor activities of database and system
    administrators.                                                                                                                                                                                                    
|
| |  | We have set up a lockbox with our bank and our customers are
    making payments directly to the lockbox.                                                                                                                                                                                                                                             
|
| |  | We have reconciled customer billing to customer contracts and
    other source documents, including a physical observation of
    actual services being provided.                                                                                                                                                                                     



Limitations on Effectiveness




39



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ITEM 9B. OTHER INFORMATION.







PART III







|         |                                                    
|-------- | ---------------------------------------------------
|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.



|                          |  |     |    |  |                    |                                                             
|------------------------- |  | --- | -- |  | ------------------ | ------------------------------------------------------------
|Name                      |  | Age |    |  | Principal Position
|                          |  |     |    |  |                   
|Manuel D. Medina          |  |     | 53 |  |                    | Chairman of the Board, President and Chief Executive Officer
|Joseph R. Wright, Jr.     |  |     | 68 |  |                    | Vice Chairman of the Board                                  
|Guillermo Amore           |  |     | 67 |  |                    | Director                                                    
|Timothy Elwes             |  |     | 70 |  |                    | Director                                                    
|Antonio S. Fernandez      |  |     | 66 |  |                    | Director                                                    
|Fernando Fernandez-Tapias |  |     | 67 |  |                    | Director                                                    
|Arthur L. Money           |  |     | 66 |  |                    | Director                                                    
|Marvin S. Rosen           |  |     | 64 |  |                    | Director                                                    
|Miguel J. Rosenfeld       |  |     | 56 |  |                    | Director                                                    
|Rodolfo A. Ruiz           |  |     | 57 |  |                    | Director                                                    
|Jamie Dos Santos          |  |     | 45 |  |                    | Chief Marketing Officer                                     
|John Neville              |  |     | 47 |  |                    | Senior Vice President  Sales                               
|Jose A. Segrera           |  |     | 35 |  |                    | Chief Financial Officer                                     
|Marvin Wheeler            |  |     | 52 |  |                    | Chief Operations Officer                                    

Manuel D. Medina


Joseph R. Wright, Jr.


40



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##### Table of Contents





Guillermo Amore


Timothy Elwes


Antonio S. Fernandez


Fernando Fernandez-Tapias


Arthur L. Money


Marvin S. Rosen co-founder


41



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##### Table of Contents





Miguel J. Rosenfeld


Rodolfo A. Ruiz


Jamie Dos Santos


John Neville


Jose A. Segrera


Marvin Wheeler


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##### Table of Contents



Section 16(a) Beneficial Ownership Reporting
Compliance






| |   |                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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, 2006
    all Section 16(a) filing requirements applicable to our
    officers, directors and greater than 10% beneficial owners were
    in compliance.






|         |                       
|-------- | ----------------------
|ITEM 11. | EXECUTIVE COMPENSATION

Summary Compensation Table




|                            |                               |                     |      |      |              |  |         |             |  |  |         |         |  |                   |   |        |  |  |        |        | 
|--------------------------- | ----------------------------- | ------------------- | ---- | ---- | ------------ |  | ------- | ----------- |  |  | ------- | ------- |  | ----------------- | - | ------ |  |  | ------ | ------ | 
|                            |                               | Annual Compensation |      |      | Long Term    | 
|                            |                               |                     |      |      | Compensation | 
|                            |                               | Fiscal              |      |      | Salary       |  |         | Commissions |  |  | Bonus   |         |  |                   |  
|Name and Principal Position |                               | Year                |      |      | ($)          |  |         | ($)         |  |  | ($)     |         |  | Options/ SARS (#) |  
|                            |                               |                     |      |      |              |  |         |             |  |  |         |         |  |                   |  
|Manuel D. Medina            |                               |                     | 2006 |      |              |  | 350,000 |             |  |  |        |         |  |                   |  |        |  |  |       |       
|                            | Chairman of the Board,        |                     |      | 2005 |              |  |         | 350,000     |  |  |         |        |  |                   |   |       |  |  |        | 21,500 | 
|                            | President and                 |                     |      | 2004 |              |  |         | 350,000     |  |  |         |        |  |                   |   |       |  |  |        |       | 
|                            | Chief Executive Officer       |                     |      |      |              |  |         |             |  |  |         |         |  |                   |   |        |  |  |        |        | 
|Jamie Dos Santos            |                               |                     | 2006 |      |              |  | 250,000 |             |  |  | 280,000 |         |  |                   |  |        |  |  | 10,000 |       
|                            | Chief Marketing Officer       |                     |      | 2005 |              |  |         | 250,000     |  |  |         | 239,000 |  |                   |   |       |  |  |        | 10,000 | 
|                            |                               |                     |      | 2004 |              |  |         | 250,000     |  |  |         | 104,000 |  |                   |   |       |  |  |        | 20,000 | 
|Jose A. Segrera             |                               |                     | 2006 |      |              |  | 200,000 |             |  |  |        |         |  |                   |  |        |  |  | 10,000 |       
|                            | Chief Financial Officer       |                     |      | 2005 |              |  |         | 200,000     |  |  |         |        |  |                   |   | 50,000 |  |  |        | 10,000 | 
|                            |                               |                     |      | 2004 |              |  |         | 195,000     |  |  |         |        |  |                   |   |       |  |  |        | 10,000 | 
|Marvin Wheeler              |                               |                     | 2006 |      |              |  | 200,000 |             |  |  |        |         |  |                   |  |        |  |  | 10,000 |       
|                            | Chief Operations Officer      |                     |      | 2005 |              |  |         | 200,000     |  |  |         |        |  |                   |   | 50,000 |  |  |        | 10,000 | 
|                            |                               |                     |      | 2004 |              |  |         | 195,000     |  |  |         |        |  |                   |   |       |  |  |        | 20,000 | 
|John Neville                |                               |                     | 2006 |      |              |  | 200,000 |             |  |  | 60,000  |         |  |                   |  |        |  |  | 25,000 |       
|                            | Senior Vice President  Sales |                     |      | 2005 |              |  |         |            |  |  |         |        |  |                   |   |       |  |  |        |       | 
|                            |                               |                     |      | 2004 |              |  |         |            |  |  |         |        |  |                   |   |       |  |  |        |       | 

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Option/ SAR Grants in Last Fiscal Year




|                    |  |                 |                  |  |           |  |                 |          |  |                  |            |  |                |        |         |  |         |  |        |  |  |  |         | 
|------------------- |  | --------------- | ---------------- |  | --------- |  | --------------- | -------- |  | ---------------- | ---------- |  | -------------- | ------ | ------- |  | ------- |  | ------ |  |  |  | ------- | 
|Individual Grants   |  |                 | Potential        | 
|                    |  |                 | Realizable Value | 
|                    |  | % of Total      |                  |  |           |  | At Assumed      |         
|                    |  | Options         |                  |  |           |  | Annual Rates Of |         
|                    |  | Number of       |                  |  | Granted   |  |                 |          |  | Stock Price      |           
|                    |  | Securities      |                  |  | to        |  |                 |          |  | Appreciation For |           
|                    |  | Underlying      |                  |  | Employees |  |                 | Exercise |  |                  |            |  | Option Term(1) |       
|                    |  | Options Granted |                  |  | in Fiscal |  |                 | Price    |  |                  | Expiration |  |                |        |        
|Name                |  | (#)             |                  |  | Year      |  |                 | ($/Sh)   |  |                  | Date       |  |                | 5% ($) |         |  | 10% ($) | 
|                    |  |                 |                  |  |           |  |                 |          |  |                  |            |  |                |        |         |  |         | 
|Manuel D. Medina    |  |                 |                 |  |           |  |                |          |  |                  |           |  |                |        |        |  |         |  |       |  |  |  |        | 
|Jose A. Segrera(2)  |  |                 | 10,000           |  |           |  | 2.9             | %        |  | $                | 6.74       |  |                |        | 7/14/15 |  |         |  | 42,387 |  |  |  | 107,418 | 
|John Neville(2)     |  |                 | 25,000           |  |           |  | 7.3             | %        |  | $                | 6.20       |  |                |        | 4/18/15 |  |         |  | 97,479 |  |  |  | 247,030 | 
|Jamie Dos Santos(2) |  |                 | 10,000           |  |           |  | 2.9             | %        |  | $                | 6.74       |  |                |        | 7/14/15 |  |         |  | 42,387 |  |  |  | 107,418 | 
|Marvin Wheeler(2)   |  |                 | 10,000           |  |           |  | 2.9             | %        |  | $                | 6.74       |  |                |        | 7/14/15 |  |         |  | 42,387 |  |  |  | 107,418 | 






|    |                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.
|   
|(2) | On March 23, 2006, our compensation committee approved the
    vesting, effective as of March 31, 2006, of all unvested
    stock options previously granted under our stock option and
    executive incentive plans.        

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




|                 |  |             |   |  |          |                        |                            |             |                         |                    |               |  |  |             |   |  |               |   |         |  |  |  |   | 
|---------------- |  | ----------- | - |  | -------- | ---------------------- | -------------------------- | ----------- | ----------------------- | ------------------ | ------------- |  |  | ----------- | - |  | ------------- | - | ------- |  |  |  | - | 
|                 |  |             |   |  |          | Number of Securities   |                            |             | Value of Unexercised    |                   
|                 |  |             |   |  |          | Underlying Unexercised |                            |             | In-the-Money Options at |                   
|                 |  | Shares      |   |  |          |                        | Options at Fiscal Year End |             |                         | Fiscal Year End(1) |              
|                 |  | Acquired on |   |  | Value    |                        |                            |             |                         |                    |               | 
|Name             |  | Exercise    |   |  | Realized |                        |                            | Exercisable |                         |                    | Unexercisable |  |  | Exercisable |   |  | Unexercisable |  
|                 |  |             |   |  |          |                        |                            |             |                         |                    |               |  |  |             |   |  |               |  
|Manuel D. Medina |  |             |  |  |          |                        |                           |             |                         |                    | 41,500        |  |  |             |  |  |               | $ | 68,750  |  |  |  |  | 
|Jose A. Segrera  |  |             |  |  |          |                        |                           |             |                         |                    | 75,000        |  |  |             |  |  |               | $ | 159,600 |  |  |  |  | 
|John Neville     |  |             |  |  |          |                        |                           |             |                         |                    | 25,000        |  |  |             |  |  |               | $ | 57,500  |  |  |  |  | 
|Jamie Dos Santos |  |             |  |  |          |                        |                           |             |                         |                    | 102,500       |  |  |             |  |  |               | $ | 271,100 |  |  |  |  | 
|Marvin Wheeler   |  |             |  |  |          |                        |                           |             |                         |                    | 65,500        |  |  |             |  |  |               | $ | 193,950 |  |  |  |  | 






|    |                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Based on a per share price of $8.50, the closing price of the
    common stock as reported on the American Stock Exchange on
    March 31, 2006, minus the exercise price of the option,
    multiplied by the number of shares underlying the option.



| |                          
| | -------------------------
| | Compensation of Directors



44



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18-month 18-month out-of




| |                      
| | ---------------------
| | Employment Agreements











45



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| |                                                                
| | ---------------------------------------------------------------
| | Compensation Committee Interlocks and Insider
    Participation





| |                                          
| | -----------------------------------------
| | Indemnification of Officers and Directors







| |                                           
| | ------------------------------------------
| | Directors and Officers Liability Insurance



46



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| |                            
| | ---------------------------
| | Employee Stock Option Plans









Shares Available for Awards; Annual Per-Person
Limitations.






Eligibility.


47



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|                          |  |             |        |  |               |   |             | 
|------------------------- |  | ----------- | ------ |  | ------------- | - | ----------- | 
|                          |  | Accelerated |        |  | Range of      |  
|Directors                 |  | Shares      |        |  | Strike Prices |  
|                          |  |             |        |  |               |  
|Fernando Fernandez-Tapias |  |             | 9,000  |  |               | $ | 6.30        | 
|Rodolfo A. Ruiz           |  |             | 8,400  |  |               | $ | 6.30  7.10 | 
|Antonio S. Fernandez      |  |             | 4,000  |  |               | $ | 6.30        | 
|Marvin S. Rosen           |  |             | 4,000  |  |               | $ | 6.30        | 
|Joseph R. Wright, Jr.     |  |             | 3,000  |  |               | $ | 6.30        | 
|Arthur J. Money           |  |             | 5,400  |  |               | $ | 6.00  6.30 | 
|Guillermo Amore           |  |             | 1,000  |  |               | $ | 6.30        | 
|Miguel J. Rosenfeld       |  |             | 1,000  |  |               | $ | 6.30        | 
|Timothy Elwes             |  |             | 1,000  |  |               | $ | 6.30        | 
|                          |  |             |        |  |               |  
|                          |  |             | 36,800 |  |               |   |             | 
|                          |  |             |        |  |               |  

|                    |  |             |        |  |               |   |             | 
|------------------- |  | ----------- | ------ |  | ------------- | - | ----------- | 
|                    |  | Accelerated |        |  | Range of      |  
|Section 16 Officers |  | Shares      |        |  | Strike Prices |  
|                    |  |             |        |  |               |  
|John S. Neville     |  |             | 25,000 |  |               | $ | 6.20        | 
|Jamie Dos Santos    |  |             | 13,333 |  |               | $ | 3.30  6.50 | 
|Marvin Wheeler      |  |             | 13,333 |  |               | $ | 3.30  6.50 | 
|Jose A. Segrera     |  |             | 10,000 |  |               | $ | 3.30  6.50 | 
|Manuel D. Medina    |  |             | 4,910  |  |               | $ | 6.00  6.30 | 
|                    |  |             |        |  |               |  
|                    |  |             | 66,576 |  |               |   |             | 
|                    |  |             |        |  |               |  





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| |                
| | ---------------
| | Audit Committee





| |               
| | --------------
| | Code of Ethics

www.terremark.com







|         |                                                                                                    
|-------- | ---------------------------------------------------------------------------------------------------
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    MANAGEMENT AND RELATED STOCKHOLDER MATTERS.





| |   |                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | each of our directors;                                                                                                                                                         
|
| |  | each of our executive officers;                                                                                                                                                
|
| |  | 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 H convertible preferred
    stock or series I convertible preferred stock.





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|                                                                         |  |                         |           |      |                      |  |      |  
|------------------------------------------------------------------------ |  | ----------------------- | --------- | ---- | -------------------- |  | ---- | -
|                                                                         |  | Amount and Nature of    |           |      |                     
|Name and Address of Beneficial Owner                                     |  | Beneficial Ownership(1) |           |      | Percent of Class (%) | 
|                                                                         |  |                         |           |      |                      | 
|Common Stock:                                                            |  |                         |           |      |                      |  |      |  
|Manuel D. Medina                                                         |  |                         | 3,850,539 | (2)  |                      |  | 7.6  | %
|Joseph R. Wright, Jr.                                                    |  |                         | 542,309   | (3)  |                      |  | 1.1  | %
|Guillermo Amore                                                          |  |                         | 451,041   | (4)  |                      |  | *    |  
|Miguel J. Rosenfeld                                                      |  |                         | 304,876   | (5)  |                      |  | *    |  
|Timothy Elwes                                                            |  |                         | 279,000   | (6)  |                      |  | *    |  
|Marvin S. Rosen                                                          |  |                         | 136,134   | (7)  |                      |  | *    |  
|Jaime Dos Santos                                                         |  |                         | 102,500   | (8)  |                      |  | *    |  
|Antonio S. Fernandez                                                     |  |                         | 90,158    | (9)  |                      |  | *    |  
|Jose A. Segrera                                                          |  |                         | 76,000    | (8)  |                      |  | *    |  
|Marvin Wheeler                                                           |  |                         | 65,500    | (8)  |                      |  | *    |  
|John Neville                                                             |  |                         | 41,500    | (8)  |                      |  | *    |  
|Fernando Fernandez-Tapias                                                |  |                         | 31,500    | (8)  |                      |  | *    |  
|Arthur L. Money                                                          |  |                         | 31,500    | (8)  |                      |  | *    |  
|Rodolfo A. Ruiz                                                          |  |                         | 31,500    | (8)  |                      |  | *    |  
|Ocean Bank                                                               |  |                         | 2,000,000 | (10) |                      |  | 4.0  | %
|Sun Equity Assets Limited                                                |  |                         | 5,902,234 | (11) |                      |  | 11.7 | %
|All directors and executive officers as a group (14 persons)             |  |                         | 6,034,057 |      |                      |  | 11.9 | %
|Series H Preferred Stock:                                                |  |                         |           |      |                      |  |      |  
|One Vision Worldwide, LLC                                                |  |                         | 294       | (12) |                      |  | *    |  
|Series I Preferred Stock:                                                |  |                         |           |      |                      |  |      |  
|Louisa Stude Sarofim 2006 Terremark Grantor Retained Annuity
    Trust I |  |                         | 80        | (13) |                      |  | *    |  
|Guazapa Properties, Inc.                                                 |  |                         | 48        | (14) |                      |  | *    |  
|CRG, LLC                                                                 |  |                         | 100       | (15) |                      |  | *    |  
|Palmetto, S.A.                                                           |  |                         | 20        | (16) |                      |  | *    |  
|Promociones Bursatiles, S.A.                                             |  |                         | 28        | (17) |                      |  | *    |  






| |   |                           
| | - | --------------------------
| | * | Represents less than 1.0%.



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | For purposes of this table, beneficial ownership is computed
    pursuant to Rule 1
    3d-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 (i) vote, (ii) direct the voting
    of such security or (iii) 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 41,500 shares of our common stock underlying
    options. As reported in Mr. Medinas Schedule 1
    3D, and any amendments thereto, filed with the Securities and
    Exchange Commission on October 4, 2002, these include
    702,168 shares as to which Mr. Medina has sole voting
    power but does not have dispositive power. Includes
    225,523 shares of our common stock which are held of record
    by Communication Investors Group, an entity in which
    Mr. Medina is a partner and holds a 50% interest. See
    Shareholders Agreement below.                                                                                                                       

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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (3) | Includes 160,500 shares of our common stock underlying
    options. Does not include 10,000 shares held in trust for
    the benefit of Mr. Wrights grandchildren with respect
    to which Mr. Wright disclaims beneficial ownership.                                                                                                                                                                                                                                                                                           
|
| | (4) | Includes 41,500 shares underlying options,
    17,500 shares owned by Mr. Amores sibling, over
    which Mr. Amore has investment control. Also includes
    (i) 104,393 shares, (ii) 26,667 shares which
    may be acquired upon the conversion of shares of series I
    preferred stock and (iii) 5,600 shares underlying
    warrants, all of 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 41,500 shares of our common stock underlying
    options and 123,412 shares held indirectly by
    Mr. Rosenfeld. Does not include 33,877 shares held by
    Mr. Rosenfelds children, with respect to which
    Mr. Rosenfeld disclaims beneficial ownership.                                                                                                                                                                                                                                                           
|
| | (6) | Includes 41,500 shares of our common stock underlying
    options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | (7) | Includes 45,000 shares of our common stock underlying
    options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | (8) | Represents shares of our common stock underlying options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (9) | Includes 31,500 shares of our common stock underlying
    options, 6,667 shares which may be acquired upon the
    conversion of Series I preferred stock and
    1,400 shares underlying warrants.                                                                                                                                                                                                                                                                                                                               



|     |                                                                                                                                                                                                                                                                                        
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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) | Represents 294 shares of series H convertible
    preferred stock which are convertible into, and have voting
    rights equivalent to, 29,400 shares of our common stock.                                                                                                             
|    
|(13) | Represents 80 shares of series I convertible preferred
    stock which are convertible into, and have voting rights
    equivalent to, 266,667 shares of our common stock.                                                                                                             
|    
|(14) | Represents 48 shares of series I convertible preferred
    stock which are convertible into, and have voting rights
    equivalent to, 160,000 shares of our common stock. Heinrich
    Adolf Hans Herweg is the natural person with voting and
    investment control over the shares.
|    
|(15) | Represents 100 shares of series I convertible
    preferred stock which are convertible into, and have voting
    rights equivalent to, 333,333 shares of our common stock.
    Christian Altaba is the natural person with voting and
    investment control over the shares.         
|    
|(16) | Represents 20 shares of series I convertible preferred
    stock which are convertible into, and have voting rights
    equivalent to, 66,667 shares of our common stock. Antonio
    De Roguery is the natural person with voting and investment
    control over the shares.         
|    
|(17) | Represents 28 shares of series I convertible preferred
    stock which are convertible into, and have voting rights
    equivalent to, 93,333 shares of our common stock. Roberto
    Solis Monsato is the natural person with voting and investment
    control over the shares.      

Shareholders Agreement


predecessor-in predecessor-in


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Equity Compensation Plan Information




|                                                           |  |                      |           |  |                      |   |       |                       |  |  |           | 
|---------------------------------------------------------- |  | -------------------- | --------- |  | -------------------- | - | ----- | --------------------- |  |  | --------- | 
|                                                           |  | Number of Securities |           |  |                      |   |      
|                                                           |  | to be Issued Upon    |           |  | Weighted Average     |   |       | Number of securities  | 
|                                                           |  | Exercise of          |           |  | Exercise Price of    |   |       | Available for Future  | 
|                                                           |  | Outstanding Options, |           |  | Outstanding Options, |   |       | Issuance Under Equity | 
|Plan Category                                              |  | Warrants and Rights  |           |  | Warrants and Rights  |   |       | Compensation Plans    | 
|                                                           |  |                      |           |  |                      |   |       |                       | 
|Equity compensation plans approved by security holders     |  |                      | 2,279,700 |  |                      | $ | 11.27 |                       |  |  | 1,483,258 | 
|Equity compensation plans not approved by security holders |  |                      |          |  |                      | $ |      |                       |  |  |          | 






|         |                                                
|-------- | -----------------------------------------------
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.













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|         |                                        
|-------- | ---------------------------------------
|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES.

PricewaterhouseCoopers LLP


10-Q




S-K),




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In accordance with Section 404 of the Sarbanes-Oxley Act of
    2002, we completed our assessment of the effectiveness of its
    internal control over financial reporting and concluded that our
    internal control over financial reporting was not effective as
    of March 31, 2005 due to material weaknesses in our
    internal control related to (i) the restriction of access
    to key financial applications and data and controls over the
    custody and processing of disbursements and of customer payments
    received by mail, and (ii) the billing function to ensure
    that invoices capture all services delivered to customers and
    that such services are invoiced and revenue is recorded
    accurately and timely, based on criteria established in
    Internal Control  Integrated Frameworkissued
    by the Committee of Sponsoring Organizations of the Treadway
    Commission (COSO). More details on these two material weaknesses
    in internal control over financial reporting and
    managements plans to remediate these weaknesses are
    discussed in Item 9A of our annual report on
    Form 10-K
    (Amendment No. 2), which was filed with the
    U.S. Securities and Exchange Commission on August 17,
    2005, and in Item 4 of our quarterly report on
    Form 10-Q for the
    quarter ended September 30, 2005. In connection with the
    previously described restatement of our consolidated financial
    statements, we determined we would restate our report on
    internal controls over financial reporting as of March 31,
    2005 to include this additional material weakness.
|
| |  | On November 9, 2005, the Company filed a Current Report on
    Form 8-K,
    indicating it would restate its Annual Report on
    Form 10-K for the
    year ended March 31, 2005 and its Quarterly Report on
    Form 10-Q for the
    quarterly period ended December 31, 2004. In connection
    with this restatement, management determined that the following
    material weakness also existed as of September 30, 2005:
    The Company did not maintain effective controls over the
    accounting for and calculation of earnings per share. More
    details on this restatement and the additional material weakness
    in internal control over financial reporting can be found in
    Item 4.02(a) of the Companys Current Report on
    Form 8-K, which
    was filed with the U.S. Securities and Exchange Commission
    on November 9, 2005, and in Item 4 of the
    Companys
    Form 10-Q for the
    quarter ended September 30, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | As further discussed in Item 4 of our quarterly report on
    Form 10-Q for the
    quarter ended December 31, 2004, the failure of certain of
    our internal controls to identify certain adjustments that                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

53



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| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | were required to be recorded within our quarterly report on
    Form 10-Q for the
    quarter ended June 30, 2004 and the fact that certain
    further adjustments to our calculations of the value of embedded
    derivatives, which necessitated the filing of an amendment to
    our quarterly report on
    Form 10-Q for the
    quarter ended June 30, 2004, led our management to conclude
    that a material weakness existed in our internal
    controls with respect to these matters as of June 30, 2004.





Audit Fees


10-Q


Audit Related Fees




Tax Fees




All Other Fees




KPMG LLP




S-K), S-K).




54



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Audit Fees


10-Q


Tax Fees




All Other Fees




Audit Committee Approval




55



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##### Table of Contents






PART IV







|         |                                   
|-------- | ----------------------------------
|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENTS.





| |                        
| | -----------------------
| | 1. Financial Statements



| |   |                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------
| |  | Report of Independent Registered Certified Public Accounting
    Firm on the Financial Statements  KPMG LLP.                      
|
| |  | Report of Independent Registered Certified Public Accounting
    Firm on Internal Control Over Financial Reporting 
    KPMG LLP. 
|
| |  | Report of Independent Registered Certified Public Accounting
    Firm on the Financial Statements 
    PricewaterhouseCoopers LLP.
|
| |  | Consolidated Balance Sheets as of March 31, 2006 and 2005.                                                                         
|
| |  | Consolidated Statements of Operations for the Years Ended
    March 31, 2006, 2005 and 2004.                                       
|
| |  | Consolidated Statement of Changes in Stockholders Equity
    (Deficit) for the Three Year Period Ended March 31, 2006.            
|
| |  | Consolidated Statements of Cash Flows for the Years Ended
    March 31, 2006, 2005 and 2004.                                       
|
| |  | Notes to Consolidated Financial Statements.                                                                                        



| |                                 
| | --------------------------------
| | 2. Financial Statement Schedules





| |            
| | -----------
| | 3. Exhibits

|        |   |                     |  |                                                                                                                                                                                                                              
|------- | - | ------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |                    
|Number  |   | Exhibit Description
|        |   |                    
|        | 1 | .1                  |  | Form of Underwriting Agreement related to the Companys
    offering of common stock on March 14, 2005 (previously
    filed as an exhibit to the Companys registration statement
    filed on February 3, 2005).           
|       
|        | 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 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 | .6                  |  | 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).
|       
|        | 3 | .8                  |  | Certificate of Amendment to Certificate of Incorporation of the
    Company (previously filed as an exhibit to the Companys
    current report on Form 8-K filed on May 18, 2005).                                          
|       
|        | 4 | .1                  |  | Specimen Stock Certificate (previously filed as exhibit to the
    Companys current report on Form 8-K filed on May 18,
    2005).                                                                                          

56



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|        |    |                     |  |                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | ------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|Number  |    | Exhibit Description
|        |    |                    
|       
|        | 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)                                                                                                                                           
|       
|        | 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)+                                                                                                                                                                 
|       
|        | 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 | .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 | .13                 |  | Non-qualified Stock Option Agreement with Brian K. Goodkind to
    purchase 127,821 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 140,680 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                 |  | Amended and restated 2000 Stock Option Plan (previously filed as
    an exhibit to the Companys Registration Statement on Form
    S-8 filed on August 19, 2004)+                                                                                                                                                                                
|       
|        | 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 Sao 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)                                                                                      
|       
|        | 10 | .20                 |  | Employment Agreement with Jose 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 | .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 | .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)                                                                                                                        

57



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##### Table of Contents



|        |    |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | -- | ------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|Number  |    | Exhibit Description
|        |    |                    
|       
|        | 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 (previously
    filed as an exhibit to the Companys Registration Statement
    on Form S-1 filed on February 3, 2005).                                                                                       
|       
|        | 10 | .34                 |  | Employment Agreement with John Neville dated April 18, 2005
    (previously filed as an exhibit to the Companys Annual
    Report on Form 10-K filed June 29, 2005).+#                                                                                                                                                                                                                             
|       
|        | 10 | .35                 |  | Dedigate Stock Purchase Agreement (previously filed as an
    exhibit to the Companys Quarter Report on Form 10-Q filed
    August 9, 2005).                                                                                                                                                                                                                                                       
|       
|        | 10 | .36                 |  | Dedigate Registration Rights Agreement (previously filed as an
    exhibit to the Companys Quarter Report on Form 10-Q filed
    August 9, 2005).                                                                                                                                                                                                                                                  
|       
|        | 10 | .37                 |  | 2005 Executive Incentive Compensation Plan (previously filed as
    an exhibit to the Companys Definitive Proxy Statement
    relating to the Companys 2005 Annual Meeting of
    Stockholders).+                                                                                                                                                                                                 
|       
|        | 10 | .38                 |  | Amended and Restated Employment Letter Agreement between
    Terremark Worldwide, Inc. and Arthur J. Money*+#                                                                                                                                                                                                                                                                                       
|       
|        | 21 | .1                  |  | Subsidiaries of the Company*                                                                                                                                                                                                                                                                                                                                                                        
|       
|        | 23 | .1                  |  | Consent of PricewaterhouseCoopers LLP*                                                                                                                                                                                                                                                                                                                                                              
|       
|        | 23 | .2                  |  | Consent of KPMG LLP*                                                                                                                                                                                                                                                                                                                                                                                
|       
|        | 31 | .1                  |  | Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a) and 15d-14(a)*                                                                                                                                                                                                                                                                                                              
|       
|        | 31 | .2                  |  | Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a) and 15d-14(a)*                                                                                                                                                                                                                                                                                                              
|       
|        | 32 | .1                  |  | Certification of Chief Executive Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002*                                                                                                                                                                                                                                          
|       
|        | 32 | .2                  |  | Certification of Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002*                                                                                                                                                                                                                                          






|  |                                 
|- | --------------------------------
|* | Filed herewith                  
| 
|+ | Compensation Plan or Arrangement
| 
|# | Management Contract             

58



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##### Table of Contents






SIGNATURES






| |                          
| | -------------------------
| | 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                                     
| | Executive Vice President and Chief Financial Officer
| | (Principal Financial and Accounting Officer)        





|                                                           |  |                                                                                                           |  |               |  | 
|---------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------- |  | ------------- |  | 
|Signature                                                  |  | Title                                                                                                     |  | Date         
|                                                           |  |                                                                                                           |  |              
|                                                          
|/s/ MANUEL D. MEDINAManuel
    D. Medina                   |  | Chairman of the Board, President
    and Chief Executive Officer
    (Principal Executive Officer)        |  | June 14, 2006
|                                                          
|/s/ GUILLERMO AMOREGuillermo
    Amore                     |  | Director                                                                                                  |  | June 14, 2006
|                                                          
|/s/ TIMOTHY ELWESTimothy
    Elwes                         |  | Director                                                                                                  |  | June 14, 2006
|                                                          
|/s/ ANTONIO S. FERNANDEZAntonio
    S. Fernandez           |  | Director                                                                                                  |  | June 14, 2006
|                                                          
|/s/ FERNANDO FERNANDEZ-TAPIASFernando
    Fernandez-Tapias |  | Director                                                                                                  |  | June 14, 2006
|                                                          
|/s/ HON. ARTHUR L. MONEYHon.
    Arthur L. Money           |  | Director                                                                                                  |  | June 14, 2006
|                                                          
|/s/ MARVIN S. ROSENMarvin
    S. Rosen                     |  | Director                                                                                                  |  | June 14, 2006
|                                                          
|/s/ MIGUEL J. ROSENFELDMiguel
    J. Rosenfeld             |  | Director                                                                                                  |  | June 14, 2006
|                                                          
|/s/ RODOLFO A. RUIZRodolfo
    A. Ruiz                     |  | Director                                                                                                  |  | June 14, 2006
|                                                          
|/s/ JOSEPH R. WRIGHT, JR.Joseph
    R. Wright, Jr.         |  | Director                                                                                                  |  | June 14, 2006
|                                                          
|/s/ JOSE A. SEGRERAJose
    A. Segrera                     |  | Executive Vice President
    and Chief Financial Officer
    (Principal Financial and Accounting Officer) |  | June 14, 2006

59



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##### Table of Contents



EXHIBIT SCHEDULE


|        |    |             |  |                                                                                                                                                            
|------- | -- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .38         |  | Amended and Restated Employment Letter Agreement between
    Terremark Worldwide, Inc. and Arthur J. Money                                                 
|       
|        | 21 | .1          |  | Subsidiaries of the Company*                                                                                                                               
|       
|        | 23 | .1          |  | Consent of PricewaterhouseCoopers LLP*                                                                                                                     
|       
|        | 23 | .2          |  | Consent of KPMG LLP*                                                                                                                                       
|       
|        | 31 | .1          |  | Certification of Chief Executive Officer, pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002*                                                   
|       
|        | 31 | .2          |  | Certification of Chief Financial Officer, pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002*                                                   
|       
|        | 32 | .1          |  | Certification of Chief Executive Officer, pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002*
|       
|        | 32 | .2          |  | Certification of Chief Financial Officer, pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002*






|  |                
|- | ---------------
|* | Filed herewith.

60



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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


























F-1



---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




















F-2



---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING
FIRM






PricewaterhouseCoopers
LLP












F-3



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


|                                                                                                                                                                            |                                            |           |              |             |      |   |              |             | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | --------- | ------------ | ----------- | ---- | - | ------------ | ----------- | 
|                                                                                                                                                                            |                                            | March 31, |             
|                                                                                                                                                                            |                                            |           |             
|                                                                                                                                                                            |                                            | 2006      |              |             | 2005 |  
|                                                                                                                                                                            |                                            |           |              |             |      |  
|ASSETS                                                                                                                                                                     
|Current assets:                                                                                                                                                             |                                            |           |              |             |      |   |              |            
|Cash and cash equivalents                                                                                                                                                   |                                            | $         | 20,401,934   |             |      | $ | 44,001,144   |            
|Restricted cash                                                                                                                                                             |                                            |           | 474,073      |             |      |   | 2,185,321    |            
|Accounts receivable, net of allowance for doubtful accounts of
    $200,000 each year                                                                                       |                                            |           | 10,951,827   |             |      |   | 4,388,889    |            
|Current portion of capital lease receivable                                                                                                                                 |                                            |           | 2,507,029    |             |      |   | 2,280,000    |            
|Prepaid and other current assets                                                                                                                                            |                                            |           | 1,840,075    |             |      |   | 942,575      |            
|                                                                                                                                                                            |                                            |           |              |             |      |  
|                                                                                                                                                                            | Total current assets                       |           |              | 36,174,938  |      |   |              | 53,797,929  | 
|Restricted cash                                                                                                                                                             |                                            |           | 3,814,842    |             |      |   | 5,641,531    |            
|Property and equipment, net of accumulated depreciation and
    amortization of $26,331,368 and $18,110,516                                                                 |                                            |           | 129,893,318  |             |      |   | 123,406,321  |            
|Debt issuance costs, net of accumulated amortization of
    $2,810,403 and $1,007,734                                                                                       |                                            |           | 6,963,232    |             |      |   | 8,797,296    |            
|Other assets                                                                                                                                                                |                                            |           | 3,414,483    |             |      |   | 1,182,716    |            
|Capital lease receivable, net of current portion                                                                                                                            |                                            |           | 4,004,449    |             |      |   | 6,080,001    |            
|Intangibles, net of accumulated amortization of $520,000                                                                                                                    |                                            |           | 3,680,000    |             |      |   |             |            
|Goodwill                                                                                                                                                                    |                                            |           | 16,771,189   |             |      |   | 9,999,870    |            
|                                                                                                                                                                            |                                            |           |              |             |      |  
|                                                                                                                                                                            | Total assets                               |           | $            | 204,716,451 |      |   | $            | 208,905,664 | 
|                                                                                                                                                                            |                                            |           |              |             |      |  
|                                                                                                                                                                           
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                       
|Current liabilities:                                                                                                                                                        |                                            |           |              |             |      |   |              |            
|Current portion of debt and capital lease obligations                                                                                                                       |                                            | $         | 1,890,108    |             |      | $ | 6,219,974    |            
|Accounts payable and accrued expenses                                                                                                                                       |                                            |           | 19,122,700   |             |      |   | 10,067,016   |            
|Interest payable                                                                                                                                                            |                                            |           | 3,833,288    |             |      |   | 2,680,882    |            
|Series H redeemable convertible preferred stock:
    $.001 par value, 294 shares issued and outstanding, at
    liquidation value                                           |                                            |           | 646,693      |             |      |   |             |            
|                                                                                                                                                                            |                                            |           |              |             |      |  
|                                                                                                                                                                            | Total current liabilities                  |           |              | 25,492,789  |      |   |              | 18,967,872  | 
|Mortgage payable, less current portion                                                                                                                                      |                                            |           | 45,795,552   |             |      |   | 46,034,024   |            
|Convertible debt                                                                                                                                                            |                                            |           | 59,102,452   |             |      |   | 53,972,558   |            
|Derivatives embedded with convertible debt, at estimated fair
    value                                                                                                     |                                            |           | 24,960,750   |             |      |   | 20,199,750   |            
|Notes payable, less current portion                                                                                                                                         |                                            |           | 25,614,140   |             |      |   | 23,664,142   |            
|Deferred rent and other liabilities                                                                                                                                         |                                            |           | 3,267,481    |             |      |   | 2,817,435    |            
|Capital lease obligations, less current portion                                                                                                                             |                                            |           | 852,311      |             |      |   | 434,441      |            
|Deferred revenue                                                                                                                                                            |                                            |           | 5,794,659    |             |      |   | 1,994,598    |            
|Series H redeemable convertible preferred stock: $.001 par
    value, 294 shares issued and outstanding, at liquidation
    value                                           |                                            |           |             |             |      |   | 616,705      |            
|                                                                                                                                                                            |                                            |           |              |             |      |  
|                                                                                                                                                                            | Total liabilities                          |           |              | 190,880,134 |      |   |              | 168,701,525 | 
|                                                                                                                                                                            |                                            |           |              |             |      |  
|Minority interest                                                                                                                                                           |                                            |           |             |             |      |   | 28,090       |            
|                                                                                                                                                                            |                                            |           |              |             |      |  
|Commitments and contingencies                                                                                                                                               |                                            |           |             |             |      |   |             |            
|                                                                                                                                                                            |                                            |           |              |             |      |  
|Stockholders equity:                                                                                                                                                       |                                            |           |              |             |      |   |              |            
|Series I convertible preferred stock: $.001 par value,
    339 and 383 shares issued and outstanding (liquidation
    value of approximately $8.6 million and $9.8 million) |                                            |           | 1            |             |      |   | 1            |            
|Common stock: $.001 par value, 100,000,000 shares
    authorized; 44,490,352 and 42,587,321 shares issued                                                                   |                                            |           | 44,490       |             |      |   | 42,587       |            
|Common stock warrants                                                                                                                                                       |                                            |           | 13,251,660   |             |      |   | 13,599,704   |            
|Common stock options                                                                                                                                                        |                                            |           | 582,004      |             |      |   | 1,538,260    |            
|Additional paid-in capital                                                                                                                                                  |                                            |           | 291,607,528  |             |      |   | 279,063,085  |            
|Accumulated deficit                                                                                                                                                         |                                            |           | (283,823,243 | )           |      |   | (246,674,069 | )          
|Accumulated other comprehensive loss                                                                                                                                        |                                            |           | (317,756     | )           |      |   | (172,882     | )          
|Treasury stock: 865,202 shares                                                                                                                                              |                                            |           | (7,220,637   | )           |      |   | (7,220,637   | )          
|Note receivable                                                                                                                                                             |                                            |           | (287,730     | )           |      |   |             |            
|                                                                                                                                                                            |                                            |           |              |             |      |  
|                                                                                                                                                                            | Total stockholders equity                 |           |              | 13,836,317  |      |   |              | 40,176,049  | 
|                                                                                                                                                                            |                                            |           |              |             |      |  
|                                                                                                                                                                            | Total liabilities and stockholders equity |           | $            | 204,716,451 |      |   | $            | 208,905,664 | 
|                                                                                                                                                                            |                                            |           |              |             |      |  



F-4



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                     |                                                                          |                               |                          |             |             |             |             |             |            |             |             |             |            |             |  
|---------------------------------------------------- | ------------------------------------------------------------------------ | ----------------------------- | ------------------------ | ----------- | ----------- | ----------- | ----------- | ----------- | ---------- | ----------- | ----------- | ----------- | ---------- | ----------- | -
|                                                     |                                                                          | For the Year Ended March 31,  |                         
|                                                     |                                                                          |                               |                         
|                                                     |                                                                          | 2006                          |                          |             | 2005        |             |             | 2004        |           
|                                                     |                                                                          |                               |                          |             |             |             |             |             |           
|Revenues                                             |                                                                          |                               |                          |             |             |             |             |             |            |             |             |            
|                                                     | Data center  services                                                   |                               | $                        | 62,529,282  |             |             | $           | 34,985,343  |            |             | $           | 17,034,377  |           
|                                                     | Data center  technology infrastructure build-out                        |                               |                          |            |             |             |             | 11,832,745  |            |             |             |            |           
|                                                     | Construction contracts and fees                                          |                               |                          |            |             |             |             | 1,329,526   |            |             |             | 1,179,362   |           
|                                                     |                                                                          |                               |                          |             |             |             |             |             |           
|                                                     |                                                                          | Operating revenues            |                          |             | 62,529,282  |             |             |             | 48,147,614 |             |             |             | 18,213,739 |            
|                                                     |                                                                          |                               |                          |             |             |             |             |             |           
|Expenses                                             |                                                                          |                               |                          |             |             |             |             |             |            |             |             |            
|                                                     | Data center operations  services, excluding
    depreciation            |                               |                          | 38,823,880  |             |             |             | 26,377,861  |            |             |             | 16,413,021  |           
|                                                     | Data center operations  technology infrastructure
    build-out         |                               |                          |            |             |             |             | 9,711,022   |            |             |             |            |           
|                                                     | Construction contract expenses, excluding depreciation                   |                               |                          |            |             |             |             | 809,372     |            |             |             | 918,022     |           
|                                                     | General and administrative                                               |                               |                          | 15,624,516  |             |             |             | 13,243,073  |            |             |             | 13,336,400  |           
|                                                     | Sales and marketing                                                      |                               |                          | 8,548,049   |             |             |             | 5,402,886   |            |             |             | 3,424,411   |           
|                                                     | Depreciation and amortization                                            |                               |                          | 8,678,168   |             |             |             | 5,697,071   |            |             |             | 4,698,292   |           
|                                                     | Impairment of long-lived assets and goodwill                             |                               |                          |            |             |             |             | 813,073     |            |             |             |            |           
|                                                     |                                                                          |                               |                          |             |             |             |             |             |           
|                                                     |                                                                          | Operating expenses            |                          |             | 71,674,613  |             |             |             | 62,054,358 |             |             |             | 38,790,146 |            
|                                                     |                                                                          |                               |                          |             |             |             |             |             |           
|                                                     |                                                                          |                               | Loss from operations     |             |             | (9,145,331  | )           |             |            | (13,906,744 | )           |             |            | (20,576,407 | )
|                                                     |                                                                          |                               |                          |             |             |             |             |             |           
|Other (expenses) income                              |                                                                          |                               |                          |             |             |             |             |             |            |             |             |            
|                                                     | Change in fair value of derivatives embedded within convertible
    debt |                               |                          | (4,761,000  | )           |             |             | 15,283,500  |            |             |             |            |           
|                                                     | Gain on debt restructuring and extinguishment, net                       |                               |                          |            |             |             |             | 3,420,956   |            |             |             | 8,475,000   |           
|                                                     | Interest expense                                                         |                               |                          | (25,048,519 | )           |             |             | (15,493,610 | )          |             |             | (14,624,922 | )         
|                                                     | Interest income                                                          |                               |                          | 1,742,609   |             |             |             | 666,286     |            |             |             | 131,548     |           
|                                                     | Gain on sale of asset                                                    |                               |                          | 499,388     |             |             |             |            |            |             |             |            |           
|                                                     | Other, net                                                               |                               |                          | (436,321    | )           |             |             | 170,260     |            |             |             | 4,104,204   |           
|                                                     |                                                                          |                               |                          |             |             |             |             |             |           
|                                                     |                                                                          | Total other (expenses) income |                          |             | (28,003,843 | )           |             |             | 4,047,392  |             |             |             | (1,914,170 | )          
|                                                     |                                                                          |                               |                          |             |             |             |             |             |           
|                                                     |                                                                          |                               | Loss before income taxes |             |             | (37,149,174 | )           |             |            | (9,859,352  | )           |             |            | (22,490,577 | )
|                                                     | Income taxes                                                             |                               |                          |            |             |             |             |            |            |             |             |            |           
|                                                     |                                                                          |                               |                          |             |             |             |             |             |           
|                                                     |                                                                          |                               | Net loss                 |             |             | (37,149,174 | )           |             |            | (9,859,352  | )           |             |            | (22,490,577 | )
|Preferred dividend                                   |                                                                          |                               | (726,889                 | )           |             |             | (915,250    | )           |            |             | (1,158,244  | )          
|                                                     |                                                                          |                               |                          |             |             |             |             |             |           
|Net loss attributable to common stockholders         |                                                                          | $                             | (37,876,063              | )           |             | $           | (10,774,602 | )           |            | $           | (23,648,821 | )          
|                                                     |                                                                          |                               |                          |             |             |             |             |             |           
|Net loss per common share:                           |                                                                          |                               |                          |             |             |             |             |             |            |             |             |            
|                                                     | Basic                                                                    |                               | $                        | (0.88       | )           |             | $           | (0.31       | )          |             | $           | (0.78       | )         
|                                                     |                                                                          |                               |                          |             |             |             |             |             |           
|                                                     | Diluted                                                                  |                               | $                        | (0.88       | )           |             | $           | (0.40       | )          |             | $           | (0.78       | )         
|                                                     |                                                                          |                               |                          |             |             |             |             |             |           
|Weighted average common shares outstanding  basic   |                                                                          |                               | 42,973,114               |             |             |             | 35,147,503  |             |            |             | 30,502,819  |            
|                                                     |                                                                          |                               |                          |             |             |             |             |             |           
|Weighted average common shares outstanding  diluted |                                                                          |                               | 42,973,114               |             |             |             | 40,610,003  |             |            |             | 30,502,819  |            
|                                                     |                                                                          |                               |                          |             |             |             |             |             |           



F-5



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS
EQUITY


|                                                                        |                                         |           |    |   |           |                  |   |               |  |  |              |   |  |         |            |   |               |   |            |             |  |   |               |   |  |          |             |   |       |   |              |             |   |   |       |          |   |   |            |   |  |   |            |   |  |  |             |             |  
|----------------------------------------------------------------------- | --------------------------------------- | --------- | -- | - | --------- | ---------------- | - | ------------- |  |  | ------------ | - |  | ------- | ---------- | - | ------------- | - | ---------- | ----------- |  | - | ------------- | - |  | -------- | ----------- | - | ----- | - | ------------ | ----------- | - | - | ----- | -------- | - | - | ---------- | - |  | - | ---------- | - |  |  | ----------- | ----------- | -
|                                                                        |                                         |           |    |   |           | Common Stock Par |   |               |  |  |              |   |  |         |            |   | Accumulated   |   |            |             |  |   |               |  
|                                                                        |                                         | Preferred |    |   | Preferred |                  |   | Value $.001   |  |  |              |   |  |         | Additional |   |               |   |            | Other       |  |   |               |   |  |          |            
|                                                                        |                                         | Stock     |    |   | Stock     |                  |   |               |  |  | Common Stock |   |  | Common  |            |   | Paid-In       |   |            | Accumulated |  |   | Comprehensive |   |  | Treasury |             |   | Notes |   |              |            
|                                                                        |                                         | Series G  |    |   | Series I  |                  |   | Issued Shares |  |  | Amount       |   |  | Warrant |            |   | Stock Options |   |            | Capital     |  |   | Deficit       |   |  | Loss     |             |   | Stock |   |              | Receivable  |   |   | Total |         
|                                                                        |                                         |           |    |   |           |                  |   |               |  |  |              |   |  |         |            |   |               |   |            |             |  |   |               |   |  |          |             |   |       |   |              |             |   |   |       |         
|Balance at March 31, 2003                                               |                                         | $         | 1  |   |           | $                |  |               |  |  | 25,627,686   |   |  | $       | 25,628     |   |               | $ | 1,857,581  |             |  | $ | 1,545,375     |   |  | $        | 169,434,857 |   |       | $ | (214,324,140 | )           |   | $ |      |          |   | $ |           |   |  | $ | (5,000,000 | ) |  |  | (46,460,698 | )          
|Conversion of debt                                                      |                                         |           |   |   |           |                  |  |               |  |  | 5,121,183    |   |  |         | 5,121      |   |               |   |           |             |  |   |              |   |  |          | 24,303,755  |   |       |   |             |             |   |   |      |          |   |   |           |   |  |   |           |   |  |  | 24,308,876  |            
|Exercise of stock options                                               |                                         |           |   |   |           |                  |  |               |  |  | 7,727        |   |  |         | 8          |   |               |   |           |             |  |   |              |   |  |          | 38,397      |   |       |   |             |             |   |   |      |          |   |   |           |   |  |   |           |   |  |  | 38,405      |            
|Warrants issued                                                         |                                         |           |   |   |           |                  |  |               |  |  |             |   |  |         |           |   |               |   | 644,597    |             |  |   |              |   |  |          | (309,998    | ) |       |   |             |             |   |   |      |          |   |   |           |   |  |   |           |   |  |  | 334,599     |            
|Exercise of warrants                                                    |                                         |           |   |   |           |                  |  |               |  |  | 950          |   |  |         | 1          |   |               |   | (3,971     | )           |  |   |              |   |  |          | 8,529       |   |       |   |             |             |   |   |      |          |   |   |           |   |  |   |           |   |  |  | 4,559       |            
|Warrants expired                                                        |                                         |           |   |   |           |                  |  |               |  |  |             |   |  |         |           |   |               |   | (528,449   | )           |  |   |              |   |  |          | 528,449     |   |       |   |             |             |   |   |      |          |   |   |           |   |  |   |           |   |  |  |            |            
|Beneficial conversion feature on issuance of convertible
    debentures |                                         |           |   |   |           |                  |  |               |  |  |             |   |  |         |           |   |               |   |           |             |  |   |              |   |  |          | 9,500,000   |   |       |   |             |             |   |   |      |          |   |   |           |   |  |   |           |   |  |  | 9,500,000   |            
|Stock options issued                                                    |                                         |           |   |   |           |                  |  |               |  |  |             |   |  |         |           |   |               |   | 1,672,248  |             |  |   |              |   |  |          | 2,185,463   |   |       |   |             |             |   |   |      |          |   |   |           |   |  |   |           |   |  |  | 3,857,711   |            
|Series I Preferred stock issued                                         |                                         |           |   |   |           |                  |  |               |  |  |             |   |  |         |           |   |               |   |           |             |  |   |              |   |  |          | 8,187,518   |   |       |   |             |             |   |   |      |          |   |   |           |   |  |   |           |   |  |  | 8,187,518   |            
|Common stock issued                                                     |                                         |           |   |   |           |                  | 1 |               |  |  | 365,202      |   |  |         | 365        |   |               |   |           |             |  |   |              |   |  |          | (365        | ) |       |   |             |             |   |   |      |          |   |   |           |   |  |   |           |   |  |  | 1           |            
|Other comprehensive loss:                                               |                                         |           |    |   |           |                  |   |               |  |  |              |   |  |         |            |   |               |   |            |             |  |   |               |   |  |          |             |   |       |   |              |             |   |   |       |          |   |   |            |   |  |   |            |   |  |  |             |            
|                                                                        | Net loss                                |           |    |  |           |                  |   |              |  |  |              |  |  |         |            |  |               |   |            |            |  |   |               |  |  |          |             |  |       |   |              | (22,490,577 | ) |   |       |         |   |   |            |  |  |   |            |  |  |  |             | (22,490,577 | )
|                                                                        |                                         |           |    |   |           |                  |   |               |  |  |              |   |  |         |            |   |               |   |            |             |  |   |               |   |  |          |             |   |       |   |              |             |   |   |       |         
|                                                                        | Total comprehensive loss                |           |    |  |           |                  |   |              |  |  |              |  |  |         |            |  |               |   |            |            |  |   |               |  |  |          |             |  |       |   |              | (22,490,577 | ) |   |       |         |   |   |            |  |  |   |            |  |  |  |             | (22,490,577 | )
|                                                                        |                                         |           |    |   |           |                  |   |               |  |  |              |   |  |         |            |   |               |   |            |             |  |   |               |   |  |          |             |   |       |   |              |             |   |   |       |         
|Balance at March 31, 2004                                               |                                         |           | 1  |   |           |                  | 1 |               |  |  | 31,122,748   |   |  |         | 31,123     |   |               |   | 3,642,006  |             |  |   | 1,545,375     |   |  |          | 213,876,605 |   |       |   | (236,814,717 | )           |   |   |      |          |   |   |           |   |  |   | (5,000,000 | ) |  |  | (22,719,606 | )          
|Sale of Common stock                                                    |                                         |           |   |   |           |                  |  |               |  |  | 6,301,778    |   |  |         | 6,302      |   |               |   |           |             |  |   |              |   |  |          | 42,587,192  |   |       |   |             |             |   |   |      |          |   |   |           |   |  |   |           |   |  |  | 42,593,494  |            
|Conversion of debt                                                      |                                         |           |   |   |           |                  |  |               |  |  | 5,524,927    |   |  |         | 5,525      |   |               |   |           |             |  |   |              |   |  |          | 28,030,500  |   |       |   |             |             |   |   |      |          |   |   |           |   |  |   |           |   |  |  | 28,036,025  |            
|Conversion of preferred stock                                           |                                         |           | (1 | ) |           |                  |  |               |  |  | 281,089      |   |  |         | 281        |   |               |   |           |             |  |   |              |   |  |          | 1,448       |   |       |   |             |             |   |   |      |          |   |   |           |   |  |   |           |   |  |  | 1,728       |            
|Exercise of stock options                                               |                                         |           |   |   |           |                  |  |               |  |  | 33,667       |   |  |         | 33         |   |               |   |           |             |  |   |              |   |  |          | 122,720     |   |       |   |             |             |   |   |      |          |   |   |           |   |  |   |           |   |  |  | 122,753     |            
|Warrants issued                                                         |                                         |           |   |   |           |                  |  |               |  |  |             |   |  |         |           |   |               |   | 10,365,483 |             |  |   |              |   |  |          |            |   |       |   |             |             |   |   |      |          |   |   |           |   |  |   |           |   |  |  | 10,365,483  |            
|Exercise of warrants                                                    |                                         |           |   |   |           |                  |  |               |  |  | 35,162       |   |  |         | 35         |   |               |   | (261,640   | )           |  |   |              |   |  |          | 263,603     |   |       |   |             |             |   |   |      |          |   |   |           |   |  |   |           |   |  |  | 1,998       |            
|Warrants expired                                                        |                                         |           |   |   |           |                  |  |               |  |  |             |   |  |         |           |   |               |   | (146,145   | )           |  |   |              |   |  |          | 146,145     |   |       |   |             |             |   |   |      |          |   |   |           |   |  |   |           |   |  |  |            |            
|Preferred stock issuance costs                                          |                                         |           |   |   |           |                  |  |               |  |  |             |   |  |         |           |   |               |   |           |             |  |   |              |   |  |          | (587,858    | ) |       |   |             |             |   |   |      |          |   |   |           |   |  |   |           |   |  |  | (587,858    | )          
|Dividends on preferred stock                                            |                                         |           |   |   |           |                  |  |               |  |  |             |   |  |         |           |   |               |   |           |             |  |   |              |   |  |          | (795,249    | ) |       |   |             |             |   |   |      |          |   |   |           |   |  |   |           |   |  |  | (795,249    | )          
|Issuance of common stock in lieu of cash-preferred stock dividend       |                                         |           |   |   |           |                  |  |               |  |  | 61,685       |   |  |         | 62         |   |               |   |           |             |  |   |              |   |  |          | 361,997     |   |       |   |             |             |   |   |      |          |   |   |           |   |  |   |           |   |  |  | 362,059     |            
|Stock tendered in payment of loan and retired                           |                                         |           |   |   |           |                  |  |               |  |  | (773,735     | ) |  |         | (774       | ) |               |   |           |             |  |   |              |   |  |          | (4,951,133  | ) |       |   |             |             |   |   |      |          |   |   |           |   |  |   | 5,000,000  |   |  |  | 48,093      |            
|Net assets acquired from NAP Madrid                                     |                                         |           |   |   |           |                  |  |               |  |  |             |   |  |         |           |   |               |   |           |             |  |   |              |   |  |          |            |   |       |   |             |             |   |   |      |          |   |   | (7,220,637 | ) |  |   |           |   |  |  | (7,220,637  | )          
|Forfeiture of stock options                                             |                                         |           |   |   |           |                  |  |               |  |  |             |   |  |         |           |   |               |   |           |             |  |   | (7,115        | ) |  |          | 7,115       |   |       |   |             |             |   |   |      |          |   |   |           |   |  |   |           |   |  |  |            |            
|Other comprehensive loss:                                               |                                         |           |    |   |           |                  |   |               |  |  |              |   |  |         |            |   |               |   |            |             |  |   |               |   |  |          |             |   |       |   |              |             |   |   |       |          |   |   |            |   |  |   |            |   |  |  |             |            
|                                                                        | Foreign currency translation adjustment |           |    |  |           |                  |   |              |  |  |              |  |  |         |            |  |               |   |            |            |  |   |               |  |  |          |             |  |       |   |              |            |   |   |       | (172,882 | ) |   |            |  |  |   |            |  |  |  |             | (172,882    | )
|                                                                        | Net loss                                |           |    |  |           |                  |   |              |  |  |              |  |  |         |            |  |               |   |            |            |  |   |               |  |  |          |             |  |       |   |              | (9,859,352  | ) |   |       |         |   |   |            |  |  |   |            |  |  |  |             | (9,859,352  | )
|                                                                        |                                         |           |    |   |           |                  |   |               |  |  |              |   |  |         |            |   |               |   |            |             |  |   |               |   |  |          |             |   |       |   |              |             |   |   |       |         
|                                                                        | Total comprehensive loss                |           |    |  |           |                  |   |              |  |  |              |  |  |         |            |  |               |   |            |            |  |   |               |  |  |          |             |  |       |   |              | (9,859,352  | ) |   |       | (172,882 | ) |   |            |  |  |   |            |  |  |  |             | (10,032,234 | )
|                                                                        |                                         |           |    |   |           |                  |   |               |  |  |              |   |  |         |            |   |               |   |            |             |  |   |               |   |  |          |             |   |       |   |              |             |   |   |       |         

F-6



---



##### Table of Contents



|                                                                  |                                         |           |   |           |  |                  |               |   |  |              |            |   |         |            |        |               |             |   |             |   |  |               |           |   |          |   |             |       |  |   |              |             |   |       |          |          |   |   |            |   |  |   |          |   |  |  |            |             |  
|----------------------------------------------------------------- | --------------------------------------- | --------- | - | --------- |  | ---------------- | ------------- | - |  | ------------ | ---------- | - | ------- | ---------- | ------ | ------------- | ----------- | - | ----------- | - |  | ------------- | --------- | - | -------- | - | ----------- | ----- |  | - | ------------ | ----------- | - | ----- | -------- | -------- | - | - | ---------- | - |  | - | -------- | - |  |  | ---------- | ----------- | -
|                                                                  |                                         |           |   |           |  | Common Stock Par |               |   |  |              |            |   |         |            |        |               | Accumulated |   |             |   |  |               |           |  
|                                                                  |                                         | Preferred |   | Preferred |  |                  | Value $.001   |   |  |              |            |   |         | Additional |        |               |             |   | Other       |   |  |               |           |   |          |  
|                                                                  |                                         | Stock     |   | Stock     |  |                  |               |   |  | Common Stock |            |   | Common  |            |        | Paid-In       |             |   | Accumulated |   |  | Comprehensive |           |   | Treasury |   |             | Notes |  |   |             
|                                                                  |                                         | Series G  |   | Series I  |  |                  | Issued Shares |   |  | Amount       |            |   | Warrant |            |        | Stock Options |             |   | Capital     |   |  | Deficit       |           |   | Loss     |   |             | Stock |  |   | Receivable   |             |   | Total |         
|                                                                  |                                         |           |   |           |  |                  |               |   |  |              |            |   |         |            |        |               |             |   |             |   |  |               |           |   |          |   |             |       |  |   |              |             |   |       |         
|Balance at March 31, 2005                                         |                                         |           |  |           |  |                  | 1             |   |  |              | 42,587,321 |   |         |            | 42,587 |               |             |   | 13,599,704  |   |  |               | 1,538,260 |   |          |   | 279,063,085 |       |  |   | (246,674,069 | )           |   |       | (172,882 | )        |   |   | (7,220,637 | ) |  |   |         |   |  |  | 40,176,049 |            
|Conversion of preferred stock                                     |                                         |           |  |           |  |                  |              |   |  |              | 146,655    |   |         |            | 147    |               |             |   |            |   |  |               |          |   |          |   | (147        | )     |  |   |             |             |   |       |         |          |   |   |           |   |  |   |         |   |  |  |           |            
|Exercise of stock options                                         |                                         |           |  |           |  |                  |              |   |  |              | 113,456    |   |         |            | 113    |               |             |   |            |   |  |               |          |   |          |   | 185,869     |       |  |   |             |             |   |       |         |          |   |   |           |   |  |   |         |   |  |  | 185,982    |            
|Warrants issued for services                                      |                                         |           |  |           |  |                  |              |   |  |              |           |   |         |            |       |               |             |   | 45,226      |   |  |               |          |   |          |   |            |       |  |   |             |             |   |       |         |          |   |   |           |   |  |   |         |   |  |  | 45,226     |            
|Accrued dividends on preferred stock                              |                                         |           |  |           |  |                  |              |   |  |              |           |   |         |            |       |               |             |   |            |   |  |               |          |   |          |   | (726,889    | )     |  |   |             |             |   |       |         |          |   |   |           |   |  |   |         |   |  |  | (726,889   | )          
|Exercise of warrants                                              |                                         |           |  |           |  |                  |              |   |  |              | 15,000     |   |         |            | 15     |               |             |   | (41,070     | ) |  |               |          |   |          |   | 94,555      |       |  |   |             |             |   |       |         |          |   |   |           |   |  |   |         |   |  |  | 53,500     |            
|Forfeiture of stock options                                       |                                         |           |  |           |  |                  |              |   |  |              |           |   |         |            |       |               |             |   |            |   |  |               | (956,256  | ) |          |   | 956,256     |       |  |   |             |             |   |       |         |          |   |   |           |   |  |   |         |   |  |  |           |            
|Warrants expired                                                  |                                         |           |  |           |  |                  |              |   |  |              |           |   |         |            |       |               |             |   | (352,200    | ) |  |               |          |   |          |   | 352,200     |       |  |   |             |             |   |       |         |          |   |   |           |   |  |   |         |   |  |  |           |            
|Stock-based compensation                                          |                                         |           |  |           |  |                  |              |   |  |              |           |   |         |            |       |               |             |   |            |   |  |               |          |   |          |   | 755,644     |       |  |   |             |             |   |       |         |          |   |   |           |   |  |   |         |   |  |  | 755,644    |            
|Issuance of common stock in lieu of cash-preferred stock dividend |                                         |           |  |           |  |                  |              |   |  |              | 27,920     |   |         |            | 28     |               |             |   |            |   |  |               |          |   |          |   | 173,355     |       |  |   |             |             |   |       |         |          |   |   |           |   |  |   |         |   |  |  | 173,383    |            
|Common stock issued in acquisition                                |                                         |           |  |           |  |                  |              |   |  |              | 1,600,000  |   |         |            | 1,600  |               |             |   |            |   |  |               |          |   |          |   | 10,753,600  |       |  |   |             |             |   |       |         |          |   |   |           |   |  |   |         |   |  |  | 10,755,200 |            
|Loans issued to employees, net of repayments                      |                                         |           |  |           |  |                  |              |   |  |              |           |   |         |            |       |               |             |   |            |   |  |               |          |   |          |   |            |       |  |   |             |             |   |       |         |          |   |   |           |   |  |   | (287,730 | ) |  |  | (287,730   | )          
|Other comprehensive loss:                                         |                                         |           |   |           |  |                  |               |   |  |              |            |   |         |            |        |               |             |   |             |   |  |               |           |   |          |   |             |       |  |   |              |             |   |       |          |          |   |   |            |   |  |   |          |   |  |  |           |            
|                                                                  | Foreign currency translation adjustment |           |   |          |  |                  |               |  |  |              |            |  |         |            |        |              |             |   |             |  |  |               |           |  |          |   |             |      |  |   |              |            |   |       |          | (144,874 | ) |   |            |  |  |   |          |  |  |  |            | (144,874    | )
|                                                                  | Net loss                                |           |   |          |  |                  |               |  |  |              |            |  |         |            |        |              |             |   |             |  |  |               |           |  |          |   |             |      |  |   |              | (37,149,174 | ) |       |          |         |   |   |            |  |  |   |          |  |  |  |            | (37,149,174 | )
|                                                                  |                                         |           |   |           |  |                  |               |   |  |              |            |   |         |            |        |               |             |   |             |   |  |               |           |   |          |   |             |       |  |   |              |             |   |       |          |         
|                                                                  | Total comprehensive loss                |           |   |          |  |                  |               |  |  |              |            |  |         |            |        |              |             |   |             |  |  |               |           |  |          |   |             |      |  |   |              | (37,149,174 | ) |       |          | (144,874 | ) |   |            |  |  |   |          |  |  |  |            | (37,294,048 | )
|                                                                  |                                         |           |   |           |  |                  |               |   |  |              |            |   |         |            |        |               |             |   |             |   |  |               |           |   |          |   |             |       |  |   |              |             |   |       |          |         
|Balance at March 31, 2006                                         |                                         | $         |  |           |  | $                | 1             |   |  |              | 44,490,352 |   |         | $          | 44,490 |               |             | $ | 13,251,660  |   |  | $             | 582,004   |   |          | $ | 291,607,528 |       |  | $ | (283,823,243 | )           |   | $     | (317,756 | )        |   | $ | (7,220,637 | ) |  | $ | (287,730 | ) |  |  | 13,836,317 |            
|                                                                  |                                         |           |   |           |  |                  |               |   |  |              |            |   |         |            |        |               |             |   |             |   |  |               |           |   |          |   |             |       |  |   |              |             |   |       |          |         



F-7



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                      |                                                                                |                                                                                         |                                                             |                                                     |           |            |             |             |             |            |             |             |            |            |             |  
|----------------------------------------------------- | ------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------- | ----------------------------------------------------------- | --------------------------------------------------- | --------- | ---------- | ----------- | ----------- | ----------- | ---------- | ----------- | ----------- | ---------- | ---------- | ----------- | -
|                                                      |                                                                                | For the Year Ended March 31,                                                            |                                                            
|                                                      |                                                                                |                                                                                         |                                                            
|                                                      |                                                                                | 2006                                                                                    |                                                             |                                                     | 2005      |            |             | 2004        |            
|                                                      |                                                                                |                                                                                         |                                                             |                                                     |           |            |             |             |            
|Cash flows from operating activities:                 |                                                                                |                                                                                         |                                                             |                                                     |           |            |             |             |             |            |             |            
|                                                      | Net loss                                                                       |                                                                                         | $                                                           | (37,149,174                                         | )         |            | $           | (9,859,352  | )           |            | $           | (22,490,577 | )         
|                                                      | Adjustments to reconcile net loss to net cash used in operating
    activities |                                                                                         |                                                             |                                                     |           |            |             |             |             |            |             |             |           
|                                                      |                                                                                | Depreciation and amortization of long-lived assets                                      |                                                             |                                                     | 8,678,168 |            |             |             | 5,697,071   |            |             |             | 4,698,292  |           
|                                                      |                                                                                | Change in estimated fair value of embedded derivatives                                  |                                                             |                                                     | 4,761,000 |            |             |             | (15,283,500 | )          |             |             |           |           
|                                                      |                                                                                | Accretion on convertible debt and mortgage payable                                      |                                                             |                                                     | 6,769,030 |            |             |             | 3,303,168   |            |             |             |           |           
|                                                      |                                                                                | Amortization of beneficial conversion feature on issuance of
    convertible debentures |                                                             |                                                     |          |            |             |             | 904,761     |            |             |             | 8,595,239  |           
|                                                      |                                                                                | Amortization of debt issue costs                                                        |                                                             |                                                     | 1,814,480 |            |             |             | 1,402,010   |            |             |             | 130,483    |           
|                                                      |                                                                                | Provision for bad debt                                                                  |                                                             |                                                     | 249,425   |            |             |             | 317,603     |            |             |             | 167,135    |           
|                                                      |                                                                                | Interest payment in kind on notes payable                                               |                                                             |                                                     | 823,039   |            |             |             |            |            |             |             |           |           
|                                                      |                                                                                | Impairment of long-lived assets                                                         |                                                             |                                                     |          |            |             |             | 813,073     |            |             |             |           |           
|                                                      |                                                                                | Stock-based compensation                                                                |                                                             |                                                     | 975,644   |            |             |             |            |            |             |             | 2,185,463  |           
|                                                      |                                                                                | Gain on debt restructuring and extinguishment                                           |                                                             |                                                     |          |            |             |             | (3,626,956  | )          |             |             | (8,475,000 | )         
|                                                      |                                                                                | Loss on disposal of property and equipment                                              |                                                             |                                                     | 174,747   |            |             |             |            |            |             |             |           |           
|                                                      |                                                                                | Gain on sale of asset                                                                   |                                                             |                                                     | (499,388  | )          |             |             |            |            |             |             |           |           
|                                                      |                                                                                | Other, net                                                                              |                                                             |                                                     | (317,549  | )          |             |             | (44,425     | )          |             |             | 74,034     |           
|                                                      |                                                                                | Warrants issued for services                                                            |                                                             |                                                     | 45,226    |            |             |             | 202,550     |            |             |             |           |           
|                                                      |                                                                                | (Increase) decrease in:                                                                 |                                                             |                                                     |           |            |             |             |             |            |             |             |            |           
|                                                      |                                                                                |                                                                                         | Accounts receivable                                         |                                                     |           | (5,835,215 | )           |             |             | (1,129,348 | )           |             |            | (3,220,339 | )          
|                                                      |                                                                                |                                                                                         | Capital lease receivable, net of unearned interest          |                                                     |           | 1,365,713  |             |             |             | (6,736,537 | )           |             |            |           |            
|                                                      |                                                                                |                                                                                         | Restricted cash                                             |                                                     |           | 1,754,981  |             |             |             | (1,355,975 | )           |             |            |           |            
|                                                      |                                                                                |                                                                                         | Prepaid and other assets                                    |                                                     |           | (2,879,615 | )           |             |             | (984,947   | )           |             |            | 279,530    |            
|                                                      |                                                                                | Increase (decrease) in:                                                                 |                                                             |                                                     |           |            |             |             |             |            |             |             |            |           
|                                                      |                                                                                |                                                                                         | Accounts payable and accrued expenses                       |                                                     |           | 1,624,057  |             |             |             | (1,857,528 | )           |             |            | (1,166,016 | )          
|                                                      |                                                                                |                                                                                         | Interest payable                                            |                                                     |           | 1,152,406  |             |             |             | 1,001,428  |             |             |            | (1,526,664 | )          
|                                                      |                                                                                |                                                                                         | Deferred revenue                                            |                                                     |           | 3,800,060  |             |             |             | (691,798   | )           |             |            | 1,715,246  |            
|                                                      |                                                                                |                                                                                         | Net operating assets/liabilities of discontinued operations |                                                     |           |           |             |             |             |           |             |             |            | (1,170,980 | )          
|                                                      |                                                                                |                                                                                         | Construction payables                                       |                                                     |           |           |             |             |             | (820,146   | )           |             |            |           |            
|                                                      |                                                                                |                                                                                         | Deferred rent and other liabiltiies                         |                                                     |           | 770,295    |             |             |             | 4,387,360  |             |             |            | 4,327,831  |            
|                                                      |                                                                                |                                                                                         |                                                             |                                                     |           |            |             |             |            
|                                                      |                                                                                |                                                                                         |                                                             | Net cash used in operating activities               |           |            | (11,922,670 | )           |             |            | (24,361,488 | )           |            |            | (15,876,323 | )
|                                                      |                                                                                |                                                                                         |                                                             |                                                     |           |            |             |             |            
|Cash flows from investing activities:                 |                                                                                |                                                                                         |                                                             |                                                     |           |            |             |             |             |            |             |            
|                                                      | Restricted cash                                                                |                                                                                         |                                                             | 1,782,956                                           |           |            |             | (4,000,000  | )           |            |             | (20,571     | )         
|                                                      | Purchase of property and equipment                                             |                                                                                         |                                                             | (8,483,784                                          | )         |            |             | (10,508,261 | )           |            |             | (4,054,741  | )         
|                                                      | Acquisition of a majority interest in NAP Madrid                               |                                                                                         |                                                             |                                                    |           |            |             | (2,537,627  | )           |            |             |            |           
|                                                      | Acquisition of TECOTA, net of cash acquired                                    |                                                                                         |                                                             |                                                    |           |            |             | (73,936,374 | )           |            |             |            |           
|                                                      | Proceeds from sale of assets                                                   |                                                                                         |                                                             | 762,046                                             |           |            |             |            |             |            |             |            |           
|                                                      | Acquisition of interest rate cap agreement                                     |                                                                                         |                                                             |                                                    |           |            |             | (100,000    | )           |            |             |            |           
|                                                      | Acquisition of Dedigate, net of cash acquired                                  |                                                                                         |                                                             | 203,308                                             |           |            |             |            |             |            |             |            |           
|                                                      | Issuance of notes receivable                                                   |                                                                                         |                                                             | (344,530                                            | )         |            |             |            |             |            |             |            |           
|                                                      | Repayments of notes receivable                                                 |                                                                                         |                                                             | 56,800                                              |           |            |             | 50,000      |             |            |             |            |           
|                                                      |                                                                                |                                                                                         |                                                             |                                                     |           |            |             |             |            
|                                                      |                                                                                |                                                                                         |                                                             | Net cash used in investing activities               |           |            | (6,023,204  | )           |             |            | (91,032,262 | )           |            |            | (4,075,312  | )
|                                                      |                                                                                |                                                                                         |                                                             |                                                     |           |            |             |             |            
|Cash flows from financing activities:                 |                                                                                |                                                                                         |                                                             |                                                     |           |            |             |             |             |            |             |            
|Increase in restricted cash                           |                                                                                |                                                                                         |                                                            |                                                     |           |            | (1,681,401  | )           |             |            |            |            
|Proceeds from mortgage loan and warrants              |                                                                                |                                                                                         |                                                            |                                                     |           |            | 49,000,000  |             |             |            | 750,000     |            
|Issuance of senior secured notes and warrants         |                                                                                |                                                                                         |                                                            |                                                     |           |            | 30,000,000  |             |             |            |            |            
|Decrease in construction payables                     |                                                                                |                                                                                         |                                                            |                                                     |           |            |            |             |             |            | 1,215,505   |            
|Payment on loans                                      |                                                                                |                                                                                         | (4,938,566                                                  | )                                                   |           |            | (36,667,782 | )           |             |            | (2,996,517  | )          
|Issuance of convertible debt                          |                                                                                |                                                                                         |                                                            |                                                     |           |            | 86,257,312  |             |             |            | 19,550,000  |            
|Payments on convertible debt                          |                                                                                |                                                                                         |                                                            |                                                     |           |            | (10,131,800 | )           |             |            | (1,605,000  | )          
|Debt issuance costs                                   |                                                                                |                                                                                         | (4,111                                                      | )                                                   |           |            | (6,007,370  | )           |             |            |            |            
|Proceeds from issuance of common stock                |                                                                                |                                                                                         |                                                            |                                                     |           |            | 42,593,594  |             |             |            |            |            
|Proceeds from sale of preferred stock                 |                                                                                |                                                                                         |                                                            |                                                     |           |            | 2,131,800   |             |             |            | 7,309,765   |            
|Preferred stock issuance costs                        |                                                                                |                                                                                         |                                                            |                                                     |           |            | (587,860    | )           |             |            |            |            
|Payments of preferred stock dividends                 |                                                                                |                                                                                         | (383,834                                                    | )                                                   |           |            | (433,253    | )           |             |            |            |            
|Other borrowings                                      |                                                                                |                                                                                         |                                                            |                                                     |           |            | 850,262     |             |             |            |            |            
|Payments under capital lease obligations              |                                                                                |                                                                                         | (566,307                                                    | )                                                   |           |            | (433,712    | )           |             |            | (1,334,325  | )          
|Proceeds from exercise of stock options and warrants  |                                                                                |                                                                                         | 239,482                                                     |                                                     |           |            | 124,760     |             |             |            | 32,631      |            
|Proceeds from exercise of preferred stock conversions |                                                                                |                                                                                         |                                                            |                                                     |           |            | 1,730       |             |             |            |            |            
|                                                      |                                                                                |                                                                                         |                                                             |                                                     |           |            |             |             |            
|                                                      |                                                                                |                                                                                         |                                                             | Net cash (used in) provided by financing activities |           |            | (5,653,336  | )           |             |            | 155,016,280 |             |            |            | 22,922,059  |  
|                                                      |                                                                                |                                                                                         |                                                             |                                                     |           |            |             |             |            
|                                                      |                                                                                |                                                                                         |                                                             | Net increase(decrease) in cash                      |           |            | (23,599,210 | )           |             |            | 39,622,530  |             |            |            | 2,970,424   |  
|                                                      | Cash and cash equivalents at beginning of period                               |                                                                                         |                                                             | 44,001,144                                          |           |            |             | 4,378,614   |             |            |             | 1,408,190   |           
|                                                      |                                                                                |                                                                                         |                                                             |                                                     |           |            |             |             |            
|                                                      | Cash and cash equivalents at end of period                                     |                                                                                         | $                                                           | 20,401,934                                          |           |            | $           | 44,001,144  |             |            | $           | 4,378,614   |           
|                                                      |                                                                                |                                                                                         |                                                             |                                                     |           |            |             |             |            



F-8



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                          
|-- | -------------------------
|1. | Business and Organization





|   |                                           
|-- | ------------------------------------------
|2. | Summary of Significant Accounting Policies







| |                 
| | ----------------
| | Use of estimates





| |                                                                        
| | -----------------------------------------------------------------------
| | Revenue recognition, profit recognition and allowance for
    bad debts



00-21,


F-9



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










| |            
| | -----------
| | Derivatives











| |                           
| | --------------------------
| | Significant concentrations





| |                         
| | ------------------------
| | Stock-based compensation



F-10



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                                                               |  |                              |             |   |      |   |             |      |  |   |             |  
|------------------------------------------------------------------------------ |  | ---------------------------- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                                               |  | For the Year Ended March 31, |            
|                                                                               |  |                              |            
|                                                                               |  | 2006                         |             |   | 2005 |   |             | 2004 | 
|                                                                               |  |                              |             |   |      |   |             |      | 
|Net loss attributable to common shareholders as reported                       |  | $                            | (37,876,063 | ) |      | $ | (10,774,602 | )    |  | $ | (23,648,821 | )
|Employee related stock-based compensation expense included in
    net loss     |  |                              | 975,644     |   |      |   |            |      |  |   | 2,185,463   |  
|Stock-based compensation expense if the fair value method had
    been adopted |  |                              | (3,691,670  | ) |      |   | (2,112,914  | )    |  |   | (3,288,790  | )
|                                                                               |  |                              |             |   |      |   |             |      | 
|Pro forma net loss attributable to common shareholders                         |  |                              | (40,592,089 | ) |      |   | (12,887,516 | )    |  |   | (24,752,148 | )
|                                                                               |  |                              |             |   |      |   |             |      | 
|Basic loss per common share  as reported                                      |  | $                            | (0.88       | ) |      | $ | (0.31       | )    |  | $ | (0.78       | )
|                                                                               |  |                              |             |   |      |   |             |      | 
|Basic loss per common share  pro forma                                        |  | $                            | (0.94       | ) |      | $ | (0.37       | )    |  |   | (0.81       | )
|                                                                               |  |                              |             |   |      |   |             |      | 
|Diluted loss per common share  as reported                                    |  | $                            | (0.88       | ) |      | $ | (0.40       | )    |  | $ | (0.78       | )
|                                                                               |  |                              |             |   |      |   |             |      | 
|Diluted loss per common share  pro forma                                      |  | $                            | (0.94       | ) |      | $ | (0.45       | )    |  | $ | (0.81       | )
|                                                                               |  |                              |             |   |      |   |             |      | 



|                   |  |      |              |   |      |  |              |      |  |  |              |  
|------------------ |  | ---- | ------------ | - | ---- |  | ------------ | ---- |  |  | ------------ | -
|                   |  | 2006 |              |   | 2005 |  |              | 2004 | 
|                   |  |      |              |   |      |  |              |      | 
|Risk Free Rate     |  |      | 3.63% - 4.83 | % |      |  | 2.87% - 4.33 | %    |  |  | 2.14% - 3.50 | %
|Volatility         |  |      | 112% - 121   | % |      |  | 126% - 137   | %    |  |  | 150          | %
|Expected Life      |  |      | 5 years      |   |      |  | 5 years      |      |  |  | 5 years      |  
|Expected Dividends |  |      | 0            | % |      |  | 0            | %    |  |  | 0            | %





F-11



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |               
| | --------------
| | Stock warrants





| |               
| | --------------
| | Loss per share







|                                                                              |  |           |             |   |      |   |             |      |  |   |             |  
|----------------------------------------------------------------------------- |  | --------- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                                              |  | March 31, |            
|                                                                              |  |           |            
|                                                                              |  | 2006      |             |   | 2005 |   |             | 2004 | 
|                                                                              |  |           |             |   |      |   |             |      | 
|Net loss                                                                      |  | $         | (37,149,174 | ) |      | $ | (9,859,352  | )    |  | $ | (22,490,577 | )
|Adjustments:                                                                  |  |           |             |   |      |   |             |      |  |   |             |  
|Preferred dividend                                                            |  |           | (726,889    | ) |      |   | (915,250    | )    |  |   | (1,158,244  | )
|Interest expense, including amortization of discount and debt
    issue costs |  |           |            |   |      |   | 9,739,395   |      |  |   |            |  
|Change in fair value of derivatives embedded within convertible
    debt      |  |           |            |   |      |   | (15,283,500 | )    |  |   |            |  
|                                                                              |  |           |             |   |      |   |             |      | 
|                                                                              |  | $         | (37,876,063 | ) |      | $ | (16,318,707 | )    |  | $ | (23,648,821 | )
|                                                                              |  |           |             |   |      |   |             |      | 

F-12



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                     |  |           |            |  |      |  |            |      |  |  |            | 
|---------------------------------------------------- |  | --------- | ---------- |  | ---- |  | ---------- | ---- |  |  | ---------- | 
|                                                     |  | March 31, |           
|                                                     |  |           |           
|                                                     |  | 2006      |            |  | 2005 |  |            | 2004 | 
|                                                     |  |           |            |  |      |  |            |      | 
|Basic:                                               |  |           |            |  |      |  |            |      |  |  |            | 
|Weighted average common shares outstanding  basic   |  |           | 42,973,114 |  |      |  | 35,147,503 |      |  |  | 30,502,819 | 
|                                                     |  |           |            |  |      |  |            |      | 
|Diluted:                                             |  |           |            |  |      |  |            |      |  |  |            | 
|Weighted average common shares outstanding  basic   |  |           | 42,973,114 |  |      |  | 35,147,503 |      |  |  | 30,502,819 | 
|Weighted average Senior Convertible Notes            |  |           |           |  |      |  | 5,462,500  |      |  |  |           | 
|                                                     |  |           |            |  |      |  |            |      | 
|Weighted average common shares outstanding  diluted |  |           | 42,973,114 |  |      |  | 40,610,003 |      |  |  | 30,502,819 | 
|                                                     |  |           |            |  |      |  |            |      | 



|                                     |  |           |           |  |      |  |           |      |  |  |           | 
|------------------------------------ |  | --------- | --------- |  | ---- |  | --------- | ---- |  |  | --------- | 
|                                     |  | March 31, |          
|                                     |  |           |          
|                                     |  | 2006      |           |  | 2005 |  |           | 2004 | 
|                                     |  |           |           |  |      |  |           |      | 
|9% Senior convertible notes          |  |           | 6,900,000 |  |      |  |          |      |  |  |          | 
|Series I convertible preferred stock |  |           | 1,130,000 |  |      |  | 1,276,667 |      |  |  | 1,333,333 | 
|Series H redeemable preferred stock  |  |           | 29,400    |  |      |  | 29,400    |      |  |  | 29,400    | 
|10% convertible debentures           |  |           |          |  |      |  |          |      |  |  | 5,000,000 | 
|13% convertible debentures           |  |           |          |  |      |  |          |      |  |  | 481,308   | 
|13.125% convertible debentures       |  |           |          |  |      |  |          |      |  |  | 416,667   | 
|Common stock warrants                |  |           | 2,679,636 |  |      |  | 2,712,436 |      |  |  | 673,140   | 
|Common stock options                 |  |           | 2,257,700 |  |      |  | 1,744,419 |      |  |  | 1,444,245 | 
|Restricted stock                     |  |           | 15,000    |  |      |  |          |      |  |  |          | 



| |                  
| | -----------------
| | Reclassifications





| |                  
| | -----------------
| | Minority interest





| |                         
| | ------------------------
| | Other comprehensive loss





F-13



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                          
| | -------------------------
| | Cash and cash equivalents





| |                
| | ---------------
| | Restricted cash





| |                       
| | ----------------------
| | Property and equipment



|                                 |  |  |              | 
|-------------------------------- |  |  | ------------ | 
|Building                         |  |  | 39 years     | 
|Improvements                     |  |  | 5 - 20 years | 
|Computer software                |  |  | 3 years      | 
|Furniture, fixture and equipment |  |  | 5 - 20 years | 





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





F-14



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                         |               |           |            |           |      |   |           |   | 
|------------------------ | ------------- | --------- | ---------- | --------- | ---- | - | --------- | - | 
|                         |               | March 31, |           
|                         |               |           |           
|                         |               | 2006      |            |           | 2005 |  
|                         |               |           |            |           |      |  
|Goodwill                 |               | $         | 16,771,189 |           |      | $ | 9,999,870 |  
|Intangibles:             |               |           |            |           |      |   |           |  
|                         | Customer base |           |            | 1,800,000 |      |   |           |  | 
|                         | Technology    |           |            | 2,400,000 |      |   |           |  | 
|                         |               |           |            |           |      |  
|                         |               |           | 4,200,000  |           |      |   |          |  
|Accumulated amortization |               |           | 520,000    |           |      |   |          |  
|                         |               |           |            |           |      |  
|                         |               | $         | 3,680,000  |           |      | $ |          |  
|                         |               |           |            |           |      |  



|           |  |               |           |  |            |   |           | 
|---------- |  | ------------- | --------- |  | ---------- | - | --------- | 
|           |  | Customer Base |           |  | Technology |  
|           |  |               |           |  |            |  
|2007       |  | $             | 180,000   |  |            | $ | 600,000   | 
|2008       |  |               | 180,000   |  |            |   | 600,000   | 
|2009       |  |               | 180,000   |  |            |   | 600,000   | 
|2010       |  |               | 180,000   |  |            |   | 200,000   | 
|2011       |  |               | 180,000   |  |            |   |          | 
|Thereafter |  |               | 780,000   |  |            |   |          | 
|           |  |               |           |  |            |  
|           |  | $             | 1,680,000 |  |            | $ | 2,000,000 | 
|           |  |               |           |  |            |  



| |             
| | ------------
| | Rent expense



F-15



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                    
| | -----------------------------------
| | Fair value of financial instruments





|                                            |  |                |            |  |                |   |            |            |  |   |            |  |  |   |            | 
|------------------------------------------- |  | -------------- | ---------- |  | -------------- | - | ---------- | ---------- |  | - | ---------- |  |  | - | ---------- | 
|                                            |  | March 31, 2006 |            |  | March 31, 2005 |  
|                                            |  |                |            |  |                |  
|                                            |  | Book Value     |            |  | Fair Value     |   |            | Book Value |  |   | Fair Value | 
|                                            |  |                |            |  |                |   |            |            |  |   |            | 
|Mortgage payable, including current portion |  | $              | 46,540,181 |  |                | $ | 40,021,636 |            |  | $ | 46,726,594 |  |  | $ | 48,822,510 | 
|Notes payable, including current portion    |  |                | 25,609,890 |  |                |   | 22,756,178 |            |  |   | 28,154,087 |  |  |   | 25,572,448 | 
|Convertible debt                            |  |                | 59,102,452 |  |                |   | 73,059,204 |            |  |   | 53,972,558 |  |  |   | 75,350,377 | 





| |             
| | ------------
| | Income taxes





| |                              
| | -----------------------------
| | Beneficial conversion feature



F-16



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                            
| | ---------------------------
| | Recent accounting standards







F-17



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




05-6, 05-6). 05-6 05-6 05-6 05-6


05-7, 05-7). 05-7 05-7 05-7






F-18



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|   |             
|-- | ------------
|3. | Acquisitions



|                                      |  |   |            |  
|------------------------------------- |  | - | ---------- | -
|Cash and cash equivalents             |  | $ | 1,587,384  |  
|Accounts receivable                   |  |   | 977,150    |  
|Other current assets                  |  |   | 130,931    |  
|Property and equipment                |  |   | 831,170    |  
|Intangible assets, including goodwill |  |   | 10,971,319 |  
|Other assets                          |  |   | 39,907     |  
|Accounts payable and accrued expenses |  |   | (1,285,553 | )
|Other liabilities                     |  |   | (1,113,345 | )
|                                      |  |   |           
|Net assets acquired                   |  | $ | 12,138,963 |  
|                                      |  |   |           

F-19



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                 |  |                |           |  |              |  |          |              |  |   |         | 
|-------------------------------- |  | -------------- | --------- |  | ------------ |  | -------- | ------------ |  | - | ------- | 
|                                 |  | Gross Carrying |           |  | Amortization |  |          | Accumulated  | 
|                                 |  | Amount         |           |  | Period       |  |          | Amortization | 
|                                 |  |                |           |  |              |  |          |              | 
|Intangibles no longer amortized: |  |                |           |  |              |  |          |              |  |   |         | 
|Goodwill                         |  | $              | 6,771,319 |  |              |  |         |              |  | $ |        | 
|Amortizable intangibles:         |  |                |           |  |              |  |          |              |  |   |         | 
|Customer base                    |  |                | 1,800,000 |  |              |  | 10 years |              |  |   | 120,000 | 
|Technology acquired              |  |                | 2,400,000 |  |              |  | 4 years  |              |  |   | 400,000 | 



|                           |  |           |             |   |      |   |            |  
|-------------------------- |  | --------- | ----------- | - | ---- | - | ---------- | -
|                           |  | March 31, |            
|                           |  |           |            
|                           |  | 2006      |             |   | 2005 |  
|                           |  |           |             |   |      |  
|Revenues                   |  | $         | 65,143,150  |   |      | $ | 54,111,614 |  
|                           |  |           |             |   |      |  
|Net loss                   |  | $         | (36,995,700 | ) |      | $ | (9,576,352 | )
|                           |  |           |             |   |      |  
|Net loss per common share: |  |           |             |   |      |   |            |  
|Basic                      |  | $         | (0.85       | ) |      | $ | (0.29      | )
|                           |  |           |             |   |      |  
|Diluted                    |  | $         | (0.85       | ) |      | $ | (0.38      | )
|                           |  |           |             |   |      |  



|   |                             
|-- | ----------------------------
|4. | Restricted cash consists of:

|                                              |  |           |           |   |      |   |            |  
|--------------------------------------------- |  | --------- | --------- | - | ---- | - | ---------- | -
|                                              |  | March 31, |          
|                                              |  |           |          
|                                              |  | 2006      |           |   | 2005 |  
|                                              |  |           |           |   |      |  
|Capital improvements reserve                  |  | $         | 2,217,044 |   |      | $ | 4,000,000  |  
|Security deposits under bank loan agreement   |  |           |          |   |      |   | 1,681,400  |  
|Security deposits under operating leases      |  |           | 1,597,798 |   |      |   | 1,641,531  |  
|Escrow deposits under mortgage loan agreement |  |           | 474,073   |   |      |   | 503,921    |  
|                                              |  |           |           |   |      |  
|                                              |  |           | 4,288,915 |   |      |   | 7,826,852  |  
|                                              |  |           |           |   |      |  
|Less: current portion                         |  |           | (474,073  | ) |      |   | (2,185,321 | )
|                                              |  |           |           |   |      |  
|                                              |  | $         | 3,814,842 |   |      | $ | 5,641,531  |  
|                                              |  |           |           |   |      |  

F-20



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                       
|-- | ----------------------
|5. | Property and Equipment

|                                                                                                      |  |           |             |   |      |   |             |  
|----------------------------------------------------------------------------------------------------- |  | --------- | ----------- | - | ---- | - | ----------- | -
|                                                                                                      |  | March 31, |            
|                                                                                                      |  |           |            
|                                                                                                      |  | 2006      |             |   | 2005 |  
|                                                                                                      |  |           |             |   |      |  
|Land                                                                                                  |  | $         | 10,139,683  |   |      | $ | 10,393,877  |  
|Building and improvements                                                                             |  |           | 99,634,006  |   |      |   | 96,643,573  |  
|Furniture, equipment and software, including $1,912,926 and
    $958,230 in capital leases            |  |           | 46,450,997  |   |      |   | 34,479,387  |  
|                                                                                                      |  |           |             |   |      |  
|                                                                                                      |  |           | 156,224,686 |   |      |   | 141,516,837 |  
|Less accumulated depreciation and amortization, including
    $377,032 and $192,959 in capital leases |  |           | (26,331,368 | ) |      |   | (18,110,516 | )
|                                                                                                      |  |           |             |   |      |  
|                                                                                                      |  | $         | 129,893,318 |   |      | $ | 123,406,321 |  
|                                                                                                      |  |           |             |   |      |  



|   |                 
|-- | ----------------
|6. | Mortgage Payable







|   |                 
|-- | ----------------
|7. | Convertible Debt



|                                                                                                                                                                                                                                                                                 |  |           |            |  |      |   |            | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | ---------- |  | ---- | - | ---------- | 
|                                                                                                                                                                                                                                                                                 |  | March 31, |           
|                                                                                                                                                                                                                                                                                 |  |           |           
|                                                                                                                                                                                                                                                                                 |  | 2006      |            |  | 2005 |  
|                                                                                                                                                                                                                                                                                 |  |           |            |  |      |  
|Senior Convertible Notes, face value of $86.25 million, due
    June 15, 2009, and convertible into shares of the
    Companys common stock at $12.50 per share. Interest
    at 9% is payable semi-annually, on December 15 and June 15
    (Effective interest rate of 23.4%) |  | $         | 59,102,452 |  |      | $ | 53,972,558 | 
|Less: Current portion of convertible debt                                                                                                                                                                                                                                        |  |           |           |  |      |   |           | 
|                                                                                                                                                                                                                                                                                 |  |           |            |  |      |  
|Convertible debentures                                                                                                                                                                                                                                                           |  | $         | 59,102,452 |  |      | $ | 53,972,558 | 
|                                                                                                                                                                                                                                                                                 |  |           |            |  |      |  

F-21



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)














|   |            
|-- | -----------
|8. | Derivatives



F-22



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|   |              
|-- | -------------
|9. | Notes Payable









| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | incur more debt;                                                              
|
| |  | pay dividends, redeem or repurchase its 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.                                                                



F-23



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                     
|--- | --------------------
|10. | Stockholders Equity



| |                
| | ---------------
| | Preferred stock



| |                                                
| | -----------------------------------------------
| | Series H redeemable convertible preferred stock







| |                                     
| | ------------------------------------
| | Series I convertible preferred stock





| |             
| | ------------
| | Common stock



| |                         
| | ------------------------
| | Issuance of Common Stock







F-24



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                             
| | ----------------------------
| | Conversion of debt to equity

















| |                                              
| | ---------------------------------------------
| | Conversion of preferred stock to common stock









| |                                
| | -------------------------------
| | Grant of employee stock options







| |                          
| | -------------------------
| | Exercise of stock options





F-25



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                     
| | --------------------
| | Exercise of warrants















| |                                  
| | ---------------------------------
| | Stock tendered in payment of loan





| |                          
| | -------------------------
| | Loans issued to employees





| |                         
| | ------------------------
| | Preferred stock dividend







F-26



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |               
| | --------------
| | Stock Warrants



|              |  |                  |           |  |          |  |           |                 |  |               |          |   |           |   |            | 
|------------- |  | ---------------- | --------- |  | -------- |  | --------- | --------------- |  | ------------- | -------- | - | --------- | - | ---------- | 
|              |  |                  |           |  |          |  |           | Estimated       | 
|              |  | No. of shares    |           |  | Exercise |  |           |                 |  | Fair Value at |         
|Issuance Date |  | able to purchase |           |  | Price    |  |           | Expiration Date |  |               | Issuance |  
|              |  |                  |           |  |          |  |           |                 |  |               |          |  
|April 2005    |  |                  | 7,200     |  |          |  | 6.90      |                 |  | April 2011    |          | $ | 25,056    |  
|March 2005    |  |                  | 10,000    |  |          |  | 7.20      |                 |  | March 2007    |          |   | 29,900    |  
|December 2004 |  |                  | 2,000,000 |  |          |  | 6.80-8.80 |                 |  | March 2009    |          |   | 8,782,933 |  
|June 2004     |  |                  | 181,579   |  |          |  | 9.50      |                 |  | June 2007     |          |   | 1,380,000 |  
|April 2004    |  |                  | 5,000     |  |          |  | 7.00      |                 |  | April 2009    |          |   | 32,450    |  
|March 2004    |  |                  | 285,397   |  |          |  | 9.00      |                 |  | March 2009    |          |   | 1,672,248 |  
|February 2004 |  |                  | 1,210     |  |          |  | 9.00      |                 |  | February 2009 |          |   | 8,652     |  
|January 2004  |  |                  | 5,000     |  |          |  | 7.10      |                 |  | January 2009  |          |   | 33,750    |  
|October 2003  |  |                  | 5,000     |  |          |  | 7.30      |                 |  | October 2008  |          |   | 33,700    |  
|July 2003     |  |                  | 10,000    |  |          |  | 6.20      |                 |  | July 2008     |          |   | 114,400   |  
|June 2003     |  |                  | 30,000    |  |          |  | 5.00      |                 |  | June 2006     |          |   | 220,200   |  
|June 2003     |  |                  | 25,000    |  |          |  | 7.50      |                 |  | June 2006     |          |   | 177,750   |  
|March 2003    |  |                  | 30,000    |  |          |  | 7.50      |                 |  | March 2007    |          |   | 110,400   |  
|December 2002 |  |                  | 30,000    |  |          |  | 7.50      |                 |  | March 2007    |          |   | 110,400   |  
|April 2002    |  |                  | 27,000    |  |          |  | 4.00      |                 |  | March 2007    |          |   | 99,360    |  
|June 2001     |  |                  | 1,300     |  |          |  | 17.20     |                 |  | June 2011     |          |   | 22,490    |  
|January 2002  |  |                  | 950       |  |          |  | 4.80      |                 |  | June 2011     |          |   | 3,971     |  
|November 2000 |  |                  | 25,000    |  |          |  | 27.60     |                 |  | November 2008 |          |   | 394,000   |  
|              |  |                  |           |  |          |  |           |                 |  |               |          |  
|              |  |                  | 2,679,636 |  |          |  |           |                 |  |               |          |   |           | $ | 13,251,660 | 
|              |  |                  |           |  |          |  |           |                 |  |               |          |  







| |              
| | -------------
| | Stock Options



F-27



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                                                  |                     |        |           |          |                |   |       |       | 
|----------------------------------------------------------------- | ------------------- | ------ | --------- | -------- | -------------- | - | ----- | ----- | 
|                                                                  |                     |        |           | Weighted |               
|                                                                  |                     |        |           | Average  |               
|                                                                  |                     | Number |           |          | Exercise Price |  
|                                                                  |                     |        |           |          |                |  
|Outstanding at March 31, 2003                                     |                     |        | 1,373,162 |          |                | $ | 16.40 |      
|Granted                                                           |                     |        | 551,578   |          |                |   | 5.55  |      
|Expired/Terminated                                                |                     |        | (73,743   | )        |                |   | 11.22 |      
|Exercised                                                         |                     |        | (7,060    | )        |                |   | 4.94  |      
|                                                                  |                     |        |           |          |                |  
|Outstanding at March 31, 2004                                     |                     |        | 1,843,937 |          |                | $ | 13.41 |      
|Granted                                                           |                     |        | 527,620   |          |                |   | 6.20  |      
|Expired/ Terminated                                               |                     |        | (39,236   | )        |                |   | 3.67  |      
|Exercised                                                         |                     |        | (33,666   | )        |                |   | 8.20  |      
|                                                                  |                     |        |           |          |                |  
|Outstanding at March 31, 2005                                     |                     |        | 2,298,655 |          |                | $ | 11.99 |      
|Granted                                                           |                     |        | 344,661   |          |                |   | 5.74  |      
|                                                                  | Expired/ Terminated |        |           | (179,362 | )              |   |       | 18.74 | 
|                                                                  | Exercised           |        |           | (206,254 | )              |   |       | 3.54  | 
|                                                                  |                     |        |           |          |                |  
|Outstanding at March 31, 2006                                     |                     |        | 2,257,700 |          |                | $ | 11.27 |      
|                                                                  |                     |        |           |          |                |  
|Options exercisable at:                                           |                     |        |           |          |                |   |       |      
|March 31, 2006                                                    |                     |        | 2,257,700 |          |                | $ | 11.27 |      
|                                                                  |                     |        |           |          |                |  
|March 31, 2005                                                    |                     |        | 1,758,755 |          |                | $ | 13.90 |      
|                                                                  |                     |        |           |          |                |  
|Weighted average fair value of options granted during year ended: |                     |        |           |          |                |   |       |      
|March 31, 2006                                                    |                     | $      | 4.87      |          |                |   |       |      
|                                                                  |                     |        |           |          |                |  
|March 31, 2005                                                    |                     | $      | 5.39      |          |                |   |       |      
|                                                                  |                     |        |           |          |                |  
|March 31, 2004                                                    |                     | $      | 5.10      |          |                |   |       |      
|                                                                  |                     |        |           |          |                |  



|                                        |  |                |           |                   |         |  |         |                |        |             |            |  |  |  |           | 
|--------------------------------------- |  | -------------- | --------- | ----------------- | ------- |  | ------- | -------------- | ------ | ----------- | ---------- |  |  |  | --------- | 
|                                        |  |                |           | Average Remaining |         |  |         |                | Number |            
|                                        |  |                |           | Contractual Life  |         |  | Average |                |        | Exercisable |           
|Range of Exercise Prices March 31, 2006 |  | Outstanding at |           |                   | (Years) |  |         | Exercise Price |        |             | Options at | 
|                                        |  |                |           |                   |         |  |         |                |        |             |            | 
|$ 2.50- 5.00                            |  |                | 336,765   |                   |         |  | 8.36    |                |        | $           | 3.91       |  |  |  | 336,765   | 
|$ 5.01-10.00                            |  |                | 1,372,176 |                   |         |  | 7.94    |                |        | $           | 6.84       |  |  |  | 1,372,176 | 
|$10.01-11.50                            |  |                | 15,150    |                   |         |  | 3.39    |                |        | $           | 10.72      |  |  |  | 15,150    | 
|$11.51-20.00                            |  |                | 105,677   |                   |         |  | 4.01    |                |        | $           | 16.00      |  |  |  | 105,677   | 
|$20.01-30.00                            |  |                | 114,570   |                   |         |  | 3.74    |                |        | $           | 25.15      |  |  |  | 114,570   | 
|$30.01-50.00                            |  |                | 313,362   |                   |         |  | 4.28    |                |        | $           | 35.22      |  |  |  | 313,362   | 
|                                        |  |                |           |                   |         |  |         |                |        |             |            | 
|                                        |  |                | 2,257,700 |                   |         |  |         |                |        |             |            |  |  |  | 2,257,700 | 
|                                        |  |                |           |                   |         |  |         |                |        |             |            | 

F-28



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                              
|--- | -----------------------------
|11. | Commitments and Contingencies



| |                   
| | ------------------
| | Leasing activities













|           |                              |                            |         |           |           |   |            |            |  |   |           |           |           |   |            |            |  | 
|---------- | ---------------------------- | -------------------------- | ------- | --------- | --------- | - | ---------- | ---------- |  | - | --------- | --------- | --------- | - | ---------- | ---------- |  | 
|           |                              | As Lessee                  |         |           | As Lessor |  
|           |                              |                            |         |           |           |  
|           |                              | Capital                    |         |           | Operating |   |            | Capital    |  |   | Operating |          
|           |                              | Leases                     |         |           | Leases    |   |            | Leases     |  |   | Leases    |          
|           |                              |                            |         |           |           |   |            |            |  |   |           |          
|2007       |                              | $                          | 690,453 |           |           | $ | 5,009,933  |            |  | $ | 2,507,029 |           |           | $ | 3,393,511  |           
|2008       |                              |                            | 511,169 |           |           |   | 4,879,272  |            |  |   | 2,428,701 |           |           |   | 3,066,516  |           
|2009       |                              |                            | 223,537 |           |           |   | 3,745,270  |            |  |   | 1,575,748 |           |           |   | 2,581,712  |           
|2010       |                              |                            | 119,110 |           |           |   | 3,726,497  |            |  |   |          |           |           |   | 2,659,163  |           
|2011       |                              |                            | 117,340 |           |           |   | 3,800,232  |            |  |   |          |           |           |   | 2,738,938  |           
|Thereafter |                              |                            | 16,310  |           |           |   | 33,309,488 |            |  |   |          |           |           |   | 14,427,616 |           
|           |                              |                            |         |           |           |   |            |            |  |   |           |          
|           | Total minimum lease payments |                            | $       | 1,677,919 |           |   | $          | 54,470,692 |  |   | $         | 6,511,478 |           |   | $          | 28,867,456 | 
|           |                              |                            |         |           |           |   |            |            |  |   |           |          
|           | Amount representing interest |                            |         | 252,682   |           |   |            |            |  |   |           | 935,956   |           |   |            |            | 
|           |                              |                            |         |           |           |   |            |            |  |   |           |          
|           |                              | Net minimum lease payments |         | $         | 1,425,237 |   |            |            |  |   |           | $         | 5,575,522 |   |            |            |  | 
|           |                              |                            |         |           |           |   |            |            |  |   |           |          



| |           
| | ----------
| | Litigation



F-29



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                           
|--- | --------------------------
|12. | Related Party Transactions





|                                                                          |  |                              |           |  |      |   |           |      |  |   |           | 
|------------------------------------------------------------------------- |  | ---------------------------- | --------- |  | ---- | - | --------- | ---- |  | - | --------- | 
|                                                                          |  | For the Year Ended March 31, |          
|                                                                          |  |                              |          
|                                                                          |  | 2006                         |           |  | 2005 |   |           | 2004 | 
|                                                                          |  |                              |           |  |      |   |           |      | 
|Rent paid to TECOTA                                                       |  | $                            |          |  |      | $ | 5,818,784 |      |  | $ | 5,308,272 | 
|Services purchased from Fusion Telecommunications International,
    Inc. |  |                              | 1,270,504 |  |      |   | 957,483   |      |  |   | 501,080   | 
|Property management fees charged to TECOTA                                |  |                              |          |  |      |   | 144,826   |      |  |   | 198,000   | 
|Interest income on notes receivable  related party                       |  |                              |          |  |      |   | 50,278    |      |  |   | 76,284    | 
|Interest income from shareholder                                          |  |                              | 29,728    |  |      |   | 28,944    |      |  |   | 32,489    | 
|Interest paid to shareholder                                              |  |                              |          |  |      |   | 670,649   |      |  |   | 2,065,695 | 
|Consulting fees to certain directors                                      |  |                              | 442,500   |  |      |   | 410,000   |      |  |   | 410,000   | 
|                                                                         
|Other assets                                                              |  | $                            | 452,444   |  |      | $ | 477,846   |      |  |   |           | 
|Note receivable  related party                                           |  |                              | 287,730   |  |      |   |          |      |  |   |           | 





|    |                     
|--- | --------------------
|13. | Data Center Revenues



|                                    |  |                              |            |  |      |   |            | 
|----------------------------------- |  | ---------------------------- | ---------- |  | ---- | - | ---------- | 
|                                    |  | For the Year Ended March 31, |           
|                                    |  |                              |           
|                                    |  | 2006                         |            |  | 2005 |  
|                                    |  |                              |            |  |      |  
|Colocation                          |  | $                            | 28,126,193 |  |      | $ | 21,402,860 | 
|Managed and professional services   |  |                              | 28,088,192 |  |      |   | 9,017,282  | 
|Exchange point services             |  |                              | 6,308,708  |  |      |   | 4,564,283  | 
|Other                               |  |                              | 6,189      |  |      |   | 918        | 
|                                    |  |                              |            |  |      |  
|                                    |  | $                            | 62,529,282 |  |      | $ | 34,985,343 | 
|Technology infrastructure buildouts |  |                              |           |  |      |   | 11,832,745 | 
|                                    |  |                              |            |  |      |  
|Total data center revenues          |  | $                            | 62,529,282 |  |      | $ | 46,818,088 | 
|                                    |  |                              |            |  |      |  

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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                        
|--- | -----------------------
|14. | Other Income (Expenses)





|    |             
|--- | ------------
|15. | Income Taxes





|              |  |                              |             |   |      |   |            |      |  |   |             |  
|------------- |  | ---------------------------- | ----------- | - | ---- | - | ---------- | ---- |  | - | ----------- | -
|              |  | For the year ended March 31, |            
|              |  |                              |            
|              |  | 2006                         |             |   | 2005 |   |            | 2004 | 
|              |  |                              |             |   |      |   |            |      | 
|United States |  | $                            | (34,201,581 | ) |      | $ | (8,367,640 | )    |  | $ | (21,666,210 | )
|International |  |                              | (2,947,593  | ) |      |   | (1,491,712 | )    |  |   | (824,367    | )
|              |  |                              |             |   |      |   |            |      | 
|              |  | $                            | (37,149,174 | ) |      | $ | (9,859,352 | )    |  | $ | (22,490,577 | )
|              |  |                              |             |   |      |   |            |      | 



|                                                                           |  |           |             |   |      |   |             |  
|-------------------------------------------------------------------------- |  | --------- | ----------- | - | ---- | - | ----------- | -
|                                                                           |  | March 31, |            
|                                                                           |  |           |            
|                                                                           |  | 2006      |             |   | 2005 |  
|                                                                           |  |           |             |   |      |  
|Deferred tax assets:                                                       |  |           |             |   |      |   |             |  
|Net operating loss carryforwards                                           |  | $         | 61,229,430  |   |      | $ | 47,796,808  |  
|Net operating loss carryforwards retained from discontinued
    operations |  |           | 17,280,709  |   |      |   | 17,280,709  |  
|Capitalized start-up costs                                                 |  |           | 310,195     |   |      |   | 1,163,296   |  
|Embedded derivatives                                                       |  |           | 9,485,085   |   |      |   | 7,675,905   |  
|Allowances and other                                                       |  |           | 7,386,909   |   |      |   | 8,512,891   |  
|                                                                           |  |           |             |   |      |  
|Total deferred tax assets                                                  |  |           | 95,692,328  |   |      |   | 82,429,609  |  
|                                                                           |  |           |             |   |      |  
|Valuation allowance                                                        |  |           | (75,896,123 | ) |      |   | (67,165,342 | )
|                                                                           |  |           |             |   |      |  
|Deferred tax liability:                                                    |  |           |             |   |      |   |             |  
|Intangibles                                                                |  |           | (1,251,200  | ) |      |   |            |  
|Convertible debt                                                           |  |           | (10,318,847 | ) |      |   | (12,268,207 | )
|Depreciation                                                               |  |           | (8,305,610  | ) |      |   | (2,996,060  | )
|Other                                                                      |  |           | (47,561     | ) |      |   |            |  
|                                                                           |  |           |             |   |      |  
|Total deferred tax liability                                               |  |           | (19,923,218 | ) |      |   | (15,264,267 | )
|                                                                           |  |           |             |   |      |  
|Net deferred tax asset (liability)                                         |  | $         | (127,013    | ) |      | $ |            |  
|                                                                           |  |           |             |   |      |  



F-31



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












|                                                      |  |                              |       |    |      |  |       |      |  |  |       |   
|----------------------------------------------------- |  | ---------------------------- | ----- | -- | ---- |  | ----- | ---- |  |  | ----- | --
|                                                      |  | For the Year Ended March 31, |      
|                                                      |  |                              |      
|                                                      |  | 2006                         |       |    | 2005 |  |       | 2004 | 
|                                                      |  |                              |       |    |      |  |       |      | 
|Rate reconciliation Statutory rate                    |  |                              | (34.0 | )% |      |  | (34.0 | )%   |  |  | (34.0 | )%
|State income taxes, net of federal income tax benefit |  |                              | (4.0  | )  |      |  | (3.5  | )    |  |  | (3.2  | ) 
|Permanent differences                                 |  |                              | 0.3   |    |      |  | 3.7   |      |  |  | 14.0  |   
|Increase in valuation allowance                       |  |                              | 37.7  |    |      |  | 33.8  |      |  |  | 23.2  |   
|                                                      |  |                              |       |    |      |  |       |      | 
|Effective tax rate                                    |  |                              |      | %  |      |  |      | %    |  |  |      | % 
|                                                      |  |                              |       |    |      |  |       |      | 



|    |                                                   
|--- | --------------------------------------------------
|16. | Information About the Companys Operating Segments





F-32



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                             |  |             |             |   |             |   |           |       |  |   |             |  
|---------------------------- |  | ----------- | ----------- | - | ----------- | - | --------- | ----- |  | - | ----------- | -
|                             |  | Data center |             |   | Real estate |   |           |      
|For the year ended March 31, |  | operations  |             |   | services    |   |           | Total | 
|                             |  |             |             |   |             |   |           |       | 
|2006                         |  |             |             |   |             |   |           |       |  |   |             |  
|                             |  |             |             |   |             |   |           |       | 
|Revenue                      |  | $           | 62,529,282  |   |             | $ |          |       |  | $ | 62,529,282  |  
|Loss from operations         |  |             | (9,145,331  | ) |             |   |          |       |  |   | (9,145,331  | )
|Net loss                     |  |             | (37,149,174 | ) |             |   |          |       |  |   | (37,149,174 | )
|                            
|2005                         |  |             |             |   |             |   |           |       |  |   |             |  
|                             |  |             |             |   |             |   |           |       | 
|Revenue                      |  | $           | 46,818,088  |   |             | $ | 1,329,526 |       |  | $ | 48,147,614  |  
|Loss from operations         |  |             | (13,506,734 | ) |             |   | (400,010  | )     |  |   | (13,906,744 | )
|Net loss                     |  |             | (9,490,543  | ) |             |   | (368,809  | )     |  |   | (9,859,352  | )
|                            
|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 | )
|                            
|Assets, as of                |  |             |             |   |             |   |           |       |  |   |             |  
|                             |  |             |             |   |             |   |           |       | 
|March 31, 2006               |  | $           | 204,716,451 |   |             | $ |          |       |  | $ | 204,716,451 |  
|March 31, 2005               |  | $           | 208,905,664 |   |             | $ |          |       |  | $ | 208,905,664 |  



|                                    |                          |                              |             |             |      |   |             |            |   |   |             |             |  
|----------------------------------- | ------------------------ | ---------------------------- | ----------- | ----------- | ---- | - | ----------- | ---------- | - | - | ----------- | ----------- | -
|                                    |                          | For the Year Ended March 31, |            
|                                    |                          |                              |            
|                                    |                          | 2006                         |             |             | 2005 |   |             | 2004       |  
|                                    |                          |                              |             |             |      |   |             |            |  
|Total segment loss from operations  |                          | $                            | (9,145,331  | )           |      | $ | (13,906,744 | )          |   | $ | (20,576,407 | )          
|Change in fair value of derivatives |                          |                              | (4,761,000  | )           |      |   | 15,283,500  |            |   |   |            |            
|Debt restructuring                  |                          |                              |            |             |      |   | 3,420,956   |            |   |   | 8,475,000   |            
|Interest income                     |                          |                              | 1,742,610   |             |      |   | 666,286     |            |   |   | 131,548     |            
|Interest expense                    |                          |                              | (25,048,519 | )           |      |   | (15,493,610 | )          |   |   | (14,624,922 | )          
|Gain on real estate held for sale   |                          |                              | 499,388     |             |      |   |            |            |   |   |            |            
|Other income (expense)              |                          |                              | (436,321    | )           |      |   | 170,260     |            |   |   | 4,104,204   |            
|                                    |                          |                              |             |             |      |   |             |            |  
|                                    | Loss before income taxes |                              | $           | (37,149,174 | )    |   | $           | (9,859,352 | ) |   | $           | (22,490,577 | )
|                                    |                          |                              |             |             |      |   |             |            |  

F-33



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                      |               |           |        |        |      |   |         |         |   |   |         |         |  
|--------------------- | ------------- | --------- | ------ | ------ | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                      |               | March 31, |       
|                      |               |           |       
|                      |               | 2006      |        |        | 2005 |   |         | 2004    |  
|                      |               |           |        |        |      |   |         |         |  
|Total revenues:       |               |           |        |        |      |   |         |         |   |   |         |        
|                      | United States |           | $      | 54,837 |      |   | $       | 47,589  |   |   | $       | 18,054  |  
|                      | International |           |        | 7,692  |      |   |         | 559     |   |   |         | 160     |  
|                      |               |           |        |        |      |   |         |         |  
|                      |               | $         | 62,529 |        |      | $ | 48,148  |         |   | $ | 18,214  |        
|                      |               |           |        |        |      |   |         |         |  
|Cost of sales:        |               |           |        |        |      |   |         |         |   |   |         |        
|                      | United States |           | $      | 32,893 |      |   | $       | 35,970  |   |   | $       | 17,195  |  
|                      | International |           |        | 5,931  |      |   |         | 928     |   |   |         | 136     |  
|                      |               |           |        |        |      |   |         |         |  
|                      |               | $         | 38,824 |        |      | $ | 36,898  |         |   | $ | 17,331  |        
|                      |               |           |        |        |      |   |         |         |  
|Loss from operations: |               |           |        |        |      |   |         |         |   |   |         |        
|                      | United States |           | $      | (6,353 | )    |   | $       | (12,323 | ) |   | $       | (19,754 | )
|                      | International |           |        | (2,792 | )    |   |         | (1,584  | ) |   |         | (822    | )
|                      |               |           |        |        |      |   |         |         |  
|                      |               | $         | (9,145 | )      |      | $ | (13,907 | )       |   | $ | (20,576 | )      
|                      |               |           |        |        |      |   |         |         |  



|              |  |           |         |  |      |   |         | 
|------------- |  | --------- | ------- |  | ---- | - | ------- | 
|              |  | March 31, |        
|              |  |           |        
|              |  | 2006      |         |  | 2005 |  
|              |  |           |         |  |      |  
|United States |  | $         | 145,978 |  |      | $ | 130,102 | 
|International |  |           | 4,366   |  |      |   | 3,304   | 
|              |  |           |         |  |      |  
|              |  | $         | 150,344 |  |      | $ | 133,406 | 
|              |  |           |         |  |      |  

F-34



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                   
|--- | ----------------------------------
|17. | Supplemental Cash Flow Information

|                                                        |                                                                                             |                              |   |            |      |  |   |            |  |  |   |            |  
|------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ---------------------------- | - | ---------- | ---- |  | - | ---------- |  |  | - | ---------- | -
|                                                        |                                                                                             | For the Year Ended March 31, |  
|                                                        |                                                                                             |                              |  
|                                                        |                                                                                             | 2006                         |   |            | 2005 |  |   | 2004       | 
|                                                        |                                                                                             |                              |   |            |      |  |   |            | 
|Supplemental disclosures of cash flow information:      |                                                                                             |                              |   |            |      |  |   |            |  |  |   |           
|                                                        | Cash paid for interest                                                                      |                              | $ | 14,489,566 |      |  | $ | 6,399,840  |  |  | $ | 7,349,467  |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            | 
|Non-cash operating, investing and financing activities: |                                                                                             |                              |   |            |      |  |   |            |  |  |   |           
|                                                        | Warrants issued                                                                             |                              |   | 45,226     |      |  |   | 1,380,000  |  |  |   | 644,597    |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            | 
|                                                        | 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                                                        |                              |   | 889,012    |      |  |   |           |  |  |   | 196,211    |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            | 
|                                                        | Warrants exercised and converted to equity                                                  |                              |   |           |      |  |   | 261,640    |  |  |   | 3,971      |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            | 
|                                                        | Conversion of accounts payable to equity                                                    |                              |   |           |      |  |   |           |  |  |   | 229,588    |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            | 
|                                                        | Conversion of debt and related accrued interest to equity                                   |                              |   |           |      |  |   | 262,500    |  |  |   | 9,420,004  |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            | 
|                                                        | Conversion of construction payables and accrued interest to
    equity                      |                              |   |           |      |  |   |           |  |  |   | 14,400,977 |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            | 
|                                                        | Conversion of convertible debt and related accrued interest to
    equity                   |                              |   |           |      |  |   | 27,773,524 |  |  |   | 258,306    |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            | 
|                                                        | Settlement of note receivable through extinguishment of
    convertible debt                |                              |   |           |      |  |   | 418,200    |  |  |   |           |  
|                                                        | Net assets acquired in exchange for common stock                                            |                              |   | 10,755,200 |      |  |   |           |  |  |   |           |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            | 
|                                                        | Cancellation and expiration of stock options and warrants                                   |                              |   | 1,308,456  |      |  |   | 146,145    |  |  |   | 26,575     |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            | 
|                                                        | Settlement of notes receivable  related party by
    tendering Terremark Stock             |                              |   |           |      |  |   | 4,951,904  |  |  |   |           |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            | 
|                                                        | Non-cash preferred dividend                                                                 |                              |   | 173,355    |      |  |   | 481,947    |  |  |   | (1,158,244 | )
|                                                        |                                                                                             |                              |   |            |      |  |   |            | 
|                                                        | Conversion of preferred stock to equity                                                     |                              |   | 804,000    |      |  |   | 1,925,000  |  |  |   |           |  



|    |                 
|--- | ----------------
|18. | Subsequent Event



F-35