##### 









SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-K



|    |                                                                    
|--- | -------------------------------------------------------------------
|[X] | Annual report pursuant to Section 13 or 15(d) of the
    Securities

Exchange Act of 1934


For the fiscal year ended March 31,
2002



|     |                                                                        
|---- | -----------------------------------------------------------------------
|[  ] | Transition report pursuant to Section 13 or 15(d) of the
    Securities

Exchange Act of 1934


For the transition period from

to

Commission file number 0-22520

TERREMARK WORLDWIDE, INC.

(Exact Name of Registrant as Specified in Its
Charter)


|                                                                               |  |                                                   
|------------------------------------------------------------------------------ |  | --------------------------------------------------
|Delaware(State or Other Jurisdiction of
    Incorporation
    or Organization) |  | 52-1981922(I.R.S. 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



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Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past 90 days. Yes [X] No [  ]

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K
(17CFR 229.405) is not contained herein, and will not be
contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]

The aggregate market value of the
registrants voting stock held by non-affiliates of the
registrant on July 8, 2002, based upon the closing market
price of the registrants voting stock on the American
Stock Exchange on July 8, 2002, was approximately
$78,909,552.

The registrant had 204,482,250 shares of
common stock, $0.001 par value, outstanding as of July 8,
2002.



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TABLE OF CONTENTS

|           |           |  |                                                                                           |          |  |    | 
|---------- | --------- |  | ----------------------------------------------------------------------------------------- | -------- |  | -- | 
|           |           |  |                                                                                           | Page No.
|           |           |  |                                                                                           |         
|PART I     |           |  | 2                                                                                         |         
|           | ITEM  1.  |  | BUSINESS                                                                                  |          |  | 2  | 
|           | ITEM  2.  |  | PROPERTIES                                                                                |          |  | 8  | 
|           | ITEM  3.  |  | LEGAL PROCEEDINGS                                                                         |          |  | 8  | 
|           | ITEM  4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS                                   |          |  | 8  | 
|PART II    |           |  | 8                                                                                         |         
|           | ITEM  5.  |  | MARKET FOR REGISTRANTS COMMON EQUITY AND
    RELATED STOCKHOLDER MATTERS                 |          |  | 8  | 
|           | ITEM  6.  |  | SELECTED FINANCIAL DATA                                                                   |          |  | 10 | 
|           | ITEM  7.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS |          |  | 11 | 
|           | ITEM  7A  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK                            |          |  | 27 | 
|           | ITEM  8.  |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                               |          |  | 28 | 
|           | ITEM  9.  |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE  |          |  | 28 | 
|PART III   |           |  | 28                                                                                        |         
|           | ITEM  10. |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                        |          |  | 28 | 
|           | ITEM  11. |  | EXECUTIVE COMPENSATION                                                                    |          |  | 32 | 
|           | ITEM  12. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT                        |          |  | 33 | 
|           | ITEM  13. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                            |          |  | 34 | 
|PART IV    |           |  | 35                                                                                        |         
|           | ITEM  14. |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
    REPORTS ON FORM 8-K                      |          |  | 35 | 
|SIGNATURES |           |  | 38                                                                                        |         

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PART I

ITEM 1. BUSINESS.

This Form 10-K contains forward-looking
statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. Such
statements are indicated by words or phrases such as
anticipate, projects,  management
believes, Terremark believes,
intends, expects, and similar words or
phrases. These forward-looking statements are subject to risks,
uncertainties or assumptions and may be affected by other
factors. Some of these factors are set forth herein.

Overview

We are an internationally recognized
multinational facilitator of Internet connectivity and provider
of Internet infrastructure and managed services. We are the
owner and operator of the NAP of the Americas, the fifth Tier-1
Network Access Point in the world. The NAP of the Americas, the
first TerreNAP(SM) Data Center, and the only
carrier-neutral Tier-1 Network Access Point, or NAP, is located
in Miami, Florida and provides peering, colocation and managed
services to carriers, Internet service providers, and other
Internet companies and enterprises.

The NAP of the Americas provides a neutral
connection point where telecommunications carriers can establish
connections between and among their networks to exchange
Internet traffic either on a settlement-free basis (a process
known as peering) or for a fee (known as
transit), and can purchase capacity from each other.
The NAP of the Americas also provides premium-class space where
carriers, Internet Service Providers, Application Service
Providers, content providers, Internet businesses,
telecommunications providers and enterprises house their
equipment and their network facilities in order to be close to
the traffic exchange connections that take place at the NAP.
This is known as colocation. In addition, the NAP of the
Americas provides a menu of related managed services, such as a
meet-point rooms, power management, and managed router services.
We believe that the NAP of the Americas is becoming a primary
channel of Internet traffic from Central and South America and
the Caribbean to North America and Europe.

We were founded in 1982. On April 28, 2000,
Terremark Holdings, Inc. completed a reverse merger with AmTec,
Inc., a public company. Contemporaneous with the reverse merger
we changed our corporate name to Terremark Worldwide, Inc. and
adopted TWW as our trading symbol on the American
Stock Exchange. Historical information of the surviving company
is that of Terremark Holdings, Inc.

Industry

Network Access Points are locations where two or
more networks meet to interconnect and exchange Internet traffic
(traffic of data, voice, images, video and all forms of digital
telecommunications), much like air carriers meet at airports to
exchange passengers and cargo. Instead of airlines and
transportation companies, however, participation in NAPs comes
from telecommunications carriers, ISPs and large
telecommunications and Internet users in general. Tier-1 NAPs
are large centers that access and distribute Internet traffic
and, following the airport analogy, operate much like large,
international airport passenger and cargo transportation
terminals or hubs.

When this exchange of Internet traffic is done
settlement-free, the process is known as peering
because peers transfer like amounts of Internet
traffic. When the exchange of Internet traffic is done for a
fee, it is known as transit. In either case,
facilitating this exchange of Internet traffic is the primary
service offered by all NAPs, which we will refer to collectively
in this Annual Report as peering.

All five of the existing Tier-1 NAPs are in the
United States. The first four were built in the early
1990s to serve the northern part of the country, from East
Coast to West Coast, and are located in New York, Washington,
Chicago and San Francisco. These NAPs were built with
sponsorship from the National Science Foundation in order to
promote Internet development and used the existing
infrastructures of telecommunication companies, to which
ownership of the NAPs was eventually transferred. These four
Tier-1 NAPs offer only peering services.

2



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We own and operate the fifth Tier-1 NAP, which is
known as the NAP of the Americas, and is located in Miami,
Florida. While the NAP of the Americas also offers peering
services, it is the only one of the five Tier-1 NAPs that
enables customers to colocate equipment next to each
other, and provides customers with other managed services. Using
the airport analogy again, at the NAP of the Americas Internet
traffic is exchanged, redirected to different destinations, and
several managed services are provided, similar to what happens
in air terminals with the provision of fuel, maintenance, spare
parts, food, etc. This activity among the multiple participants
at the NAP of the Americas creates a critical mass of customers
and makes up a real and virtual market in which everyone can buy
from and sell to each other and in which, in a unique manner,
buyers and sellers, as captive customers, share the same
facilities and services.

During the past year, the telecommunications and
Internet infrastructure industry has come under economic and
commercial pressure to restructure and reduce costs. While this
uncertain environment has presented us with certain challenges
that are more fully set forth below, it is important to
highlight some of the positive effects that the current industry
situation has had on the growth of the NAP of the Americas. For
example, as many telecom and Internet companies have been forced
to reduce their overhead, the market of talented employees
available to us has increased. As a result, we have been able to
build a very robust Network Services Team, thereby reducing our
reliance on third party vendors and consultants. These employees
form the outsourcing core of a proprietary knowledge base that
is enhanced by daily interactions with our customers providing
us with insights into our customer issues so that we can present
them with targeted, value added solutions.

Another positive side effect of the industry
downturn is that many telecommunications carriers discontinued
plans to build their own data centers to provide high quality
colocation space for their customers. This retrenchment,
however, did not reduce their need to present their customers
with competitive offerings that include highly conditioned,
carrier-grade colocation facilities. Consequently, the NAP of
the Americas has become an attractive solution for these
telecommunications carriers because we built the facility
specifically to address the needs of the most demanding
telecommunications and enterprise customers. Although our
significant investment in the NAP of the Americas has placed
burdens on our financial resources, we believe that our strategy
will be successful as our customers turn to us as an alternative
to making these expenditures themselves.

Strategy

The NAP of the Americas represents a new and
unique breed of Internet infrastructure business. It is neither
a traditional data center, nor a traditional NAP. It combines
exchange point services (to facilitate peering), carrier-grade
colocation space and managed services. Our strategy is to
leverage our experience as the owner and operator of the NAP of
the Americas to develop and operate TerreNAP(SM) Data
Centers, primarily in Europe and Latin America.
TerreNAP(SM) Data Centers provide exchange point
services (for peering or transit), colocation and managed
services to carriers, Internet Service Providers, other Internet
companies and enterprises. We intend to use our 20 years of
experience in dealing with Latin America, the know-how gained
through our designing, engineering, building and operating the
NAP of the Americas and the expertise of our employees, many of
whom were formerly executives with GTE, Nortel, AT&T,
BellSouth and Telcordia, for example, to roll out additional
TerreNAP(SM) Data Centers in our target markets.

The NAP of the Americas provides the following
value proposition to its customers:



| |   |                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Carrier-neutrality:Tier-1 telecommunications carriers
    are willing to colocate their equipment within our facility
    because they know that we will not give preference to any
    individual or group of customers.                                                                          
|
| |  | Connectivity:The NAPs connectivity allows
    our customers to access the NAP through almost any provider they
    choose, because virtually all significant network providers are
    present at the NAP.                                                                                        
|
| |  | Zero-Mile Access:Because the NAP of the Americas
    provides carrier-grade colocation space directly adjacent to the
    peering point, there is minimal distance between the peering
    point and customers equipment, which reduces points of
    failure and cost and increases efficiency.

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The NAPs Service Level Agreements:The NAP guarantees 100% power
    availability and environmental stability at a level of
    reliability unmatched by other facilities.                                                                                                                                                                                                                                                           
|
| |  | Lower Costs And Increased Efficiency:The combination of these
    attributes helps our customers reduce their total costs of
    providing services to their customers 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.

We expect that TerreNAP Data Centers that we
deploy in Latin America and Europe will reflect these same
characteristics.

In February 2002, we entered into an agreement
with Fundacao de Amparo a Pesquisa do Estado de São Paulo,
the research foundation for the State of Sao Paulo, to operate
and manage Brazils premier NAP created by FAPESP, which we
have renamed the NAP do Brasil. Pursuant to the twenty year
agreement, FAPESP turned over the exchange point to Terremark,
which we will enhance and intend to move to new facilities
modeled after the operational design of the NAP of the Americas
within the next 12 months. FAPESP will receive 6% of the
revenue generated by the enhanced NAP do Brazil for the first
five years of operation, 5% during the following five years, and
1% during the last ten years. The term may be extended for an
additional ten-year period, during which FAPESP would again
receive 1% of revenues.

In June 2002, we entered into an exclusive
agreement with the Comunidad Autonoma de Madrid to develop and
operate carrier-neutral network access points in Spain. As part
of that agreement the parties formed NAP de las
Americas  Madrid S.A. to own and operate
carrier-neutral NAPs in Spain, modeled after the NAP of the
Americas. The shareholders in this new company are the Instituto
Madrileno de Desarrollo  IMADE, the Camara Oficial de
Comercio e Industria de Madrid, Red Electrica
Telecomunicaciones, S.A., Telvent Desarrollos S.A., a subsidiary
of Abengoa S.A., and Centro de Transportes de Coslada, S.A. At
the time the NAP de las Americas  Madrid S.A. was
formed we owned 1% of its equity, which we subsequently
increased to 10%. We also have the option to purchase up to
another 30% of the shares owned by the Comunidad and the Camara
at cost, plus LIBOR. We will provide the technical and
operational know-how for the development of an interim NAP which
should be operational during the summer of 2002. Based on our
expertise in designing, engineering, constructing and operating
Tier-1 carrier-neutral NAPs, we will work with NAP de Las
Americas  Madrid S.A. to select a permanent site,
design the Madrid NAP and operate the business going forward.

When these facilities are operational, we will
have TerreNAP Data Centers at the major crossroads of Internet
traffic. Miami, the home of the NAP of the Americas, is ranked
by Telegeography in its Packet Geography 2002 as the No.1
International Internet Hub City for Latin America and the
Caribbean; Sao Paulo, where Terremarks NAP do Brasil is
located, is ranked No. 2; and Madrid is the 11th of the Top
50 International Internet Hub Cities in the world. The Madrid
NAP will also benefit from Madrids strategic geographic
location by serving as an Internet gateway to the European
Union, North Africa and the Americas.

We continue to explore other locations and have
additionally targeted Mexico as another prospective hub city in
Latin America for expansion.

Our Model

To implement our strategy and meet our current
obligations we will need additional capital as more fully
discussed in Managements Discussion and Analysis of
Financial Condition and Results of Operations 
Liquidity and Capital Resources. In an effort to limit the
additional capital required, our business model for expansion is
best compared to that of a management company model in the
hospitality industry. The model contemplates that a local
in-country partner would own and fund the development and
build-out of the location (the real estate company) where the
TerreNAP Data Center will be located. The facility will ideally
be a ground-up development built to the exacting specifications
required for a top level NAP (as is the case in Miami), but it
may be located in an existing building that is retrofitted to
conform to the those specifications. We intend to control the
operations of the NAP and be the primary tenant in our
partners building under a long-term lease.

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Services

We currently offer the following core services
through the NAP of the Americas:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Exchange Point Service:The NAP provides a service called
    Exchange Point Service, which is designed to facilitate both
    bilateral and multilateral peering, as well as the purchase of
    transit, among customers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | Colocation Services:The NAP of the Americas provides the
    physical environment necessary to keep a customers
    Internet and telecommunications equipment up and running 24
    hours a day, 7 days a week. This facility is custom
    designed to exceed industry standards for electrical and
    environmental systems. In addition, it offers a wide range of
    physical security features, including state-of-the-art biometric
    scanners, man traps, smoke detection, fire suppression systems,
    motion sensors, secured access, video camera surveillance and
    security breach alarms. High levels of reliability are achieved
    through a number of redundant subsystems including power and
    fiber trunks from multiple sources.
|
| | Managed Services:The NAP of the Americas is rapidly
    becoming one of the primary distribution points in the world for
    network-based services. Our managed services are designed to
    support our customers mission-critical needs that focus on
    producing faster network response times. The NAP of the Americas
    currently offers the following managed services:                                                                                                                                                                                                                                                                                                                                                                            



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | TerreNAP(SM) Engineering
    Services The NAP of the
    Americas offers full-service facility and equipment design and
    engineering services, including structural, mechanical,
    electrical and network systems, all provided by our staff of
    industry certified engineers.                                                                                                                                                                                                                                                                                                            
|
| |  | TerreNAP(SM) Installation
    Services The NAPs
    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.                                                                                                                                                                                        
|
| |  | TerreNAP(SM) Managed Router
    Service The NAPs
    Managed Router Service leverages the value of network choice
    among the worlds largest carriers and ISPs located at the
    NAP of the Americas through configuration of Border Gateway
    Protocol (BGP) and the management of necessary hardware. This
    allows customers to optimize their network performance and
    reliability.                                                                                                                                                                                               
|
| |  | TerreNAP(SM) Meet-Point-Rooms
    (MPRs) We own and manage
    the two carrier-neutral, and fully scalable
    Meet-Point-Rooms (MPRs) at the NAP of the Americas.
    We have provisioned each MPR with advanced optical cross-connect
    systems that support leading-edge telecommunications services
    such as optical wavelength service provisioning.                                                                                                                                                                                                                                  
|
| |  | TerreNAP(SM) Power Circuit
    Services The NAP of the
    Americas provides clean, reliable AC and DC power circuit
    services to our customers. The NAPs design guarantees 100%
    availability of power, allowing us to perform routine
    maintenance activities at any component level without planned or
    unplanned outages. Our redundant AC power systems, which
    generate clean, computer-grade electricity, also feed our
    centralized and distributed 48 volt DC systems, giving our
    customers a large choice in power sources at the highest
    reliability levels.
|
| |  | TerreNAP(SM) Reference
    Timing The NAP of the
    Americas offers a fully redundant managed timing reference
    source from our Datum NetSync Plus® SSU-2000 Rubidium
    system for delivering DS1/E1 synchronization and Network Time
    Protocol (NTP). This service allows our customers to save on
    equipment costs, installation times and maintenance of our
    customers network timing reference by using our on-site
    Stratum source.                                                                                                                                      
|
| |  | TerreNAP(SM) Remote Hands
    Assistance TerreNAP Remote
    Hands assists customers that need to remotely access their
    equipment to perform simple trouble-shooting or minor
    maintenance tasks on a 24x7x365 basis that do not require tools
    or equipment. TerreNAP Remote Hands services are available on
    demand or per contract.                                                                                                                                                                                                                                               

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| |   |                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | TerreNAP(SM) Smart Hands
    Assistance TerreNAP(SM) Smart Hands
    enhances the TerreNAP(SM) Remote Hands service with
    more complex remote assistance using industry certified
    engineers for troubleshooting and maintenance.

These services are designed to support the
mission critical needs of network-based systems, supplying
performance monitoring and systems management, and providing
mission-critical IP infrastructure and managed services. We plan
to continue developing other services as customer demand and
technological advances dictate.

Customers

As of June 28, 2002, we have signed customer
contracts that represent approximately $12 million of annualized
recurring revenue with an average term of five years. This
committed annual recurring amount typically includes revenue
from colocation, peering and power services. However, it
excludes revenue from managed services, which we expect will
continue to increase as a percentage of total revenue. No
customer accounted for more than 10% of Data Center revenues for
the year ended March 31, 2002.

Sales

Our sales strategy has a deliberate approach to
obtain new customers. We established the critical mass of
customer connectivity and Tier-1 status for the NAP of the
Americas. We accomplished this by signing contracts with the
Tier-1 telecommunications carriers and ISPs that account for the
majority of the worlds Internet fiber backbone. This
created the critical mass of connectivity that differentiates
the NAP of the Americas from other facilities that offer a
limited choice of carriers. While we successfully completed this
phase during the second quarter of fiscal year 2002, we have
continued to add carrier customers to our portfolio to ensure
the best possible selection of connectivity for our current and
future customers.

With the NAP of the Americas positioned as the
major connectivity point in the Southern United States and Latin
America, in the third quarter of fiscal year 2002, we started
focusing on selling our colocation space. Specifically, we
marketed to the service divisions of the large Tier-1 carriers
to expand their presence in the NAP, working with these groups
to promote the NAP of the Americas to their customer base. In
addition we have targeted Internet Service Providers,
Application Service Providers and content providers as these
companies often require a significant amount of connectivity and
colocation space. We also sell our colocation services to Tier-2
carriers in Latin America and Europe that rely on Tier-1
carriers for access and services. Finally, we have developed
offerings that address the needs of large enterprises that
benefit from colocating their information systems in a secure
facility with access to multiple carriers. We believe that this
approach has been very successful, particularly when viewed in
the context of the current capital restrictions and poor
economic conditions that our target market is experiencing.

During the third quarter of fiscal year 2002, we
also focused on leveraging our engineering and operations
expertise to provide a targeted portfolio of managed services,
particularly network and systems provisioning and operations
services. This program has been successful, and a number of
customers have entered into exclusive service agreements that
call for our staff to provide all needed managed services for
their equipment at the NAP of the Americas, including
engineering, installation and on-going operations. We intend to
continue introducing new services based on customer demand.

To execute our sales strategy, we have a staff of
experienced sales executives divided into a new sales group and
a customer support group. The new sales group is focused on
establishing new customer relationships, and the customer
support group works with our existing customers to better
understand how we can add value to their operations at NAP of
the Americas and ensure customer satisfaction.

We also have an indirect sales channel that
includes resellers and agents, as well as a referral program
that broadens the sales opportunities of our team. Through these
programs, our sales force leverages the unique relationships
with our carrier customers, allowing us unprecedented access to
their customer base and target markets, and providing us with
the opportunity to expand our reach through creative wholesale
relationships. Many of our carrier customers requested that we
establish this program so they could bundle

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their core services with the NAP of the
Americas managed services portfolio to provide a
best-in-class solution for the end customer. In addition, these
programs enable us to distribute carrier-provided services to
other providers, thereby cross-selling our services with theirs.
Our objective is to create a critical mass of TerreNAP services
and those provided by other service providers, including our
customers, which will enhance the value of the NAP of the
Americas to all who have a presence there.


Competition

The market for Internet infrastructure services
is extremely competitive and subject to rapid technological
change. Many companies have announced that they will begin to
provide or plan to expand their service offerings to compete
with our services. We expect to encounter increased competition
in the future due to increased consolidation and the development
of strategic alliances in the industry. In addition, we will
compete with foreign service providers as we expand
internationally and as these service providers increasingly
compete in the United States market. The principal competitive
factors in our market include:



| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | Ability to deliver services when requested by the
    customer;                                               
|
| |  | Internet system engineering and other
    professional services expertise;                                    
|
| |  | Customer service;                                                                                             
|
| |  | Network capability, reliability, quality of
    service and scalability;                                      
|
| |  | Variety of managed services offered;                                                                          
|
| |  | Access to network resources, including circuits,
    equipment and interconnection capacity to other networks;
|
| |  | Broad geographic presence;                                                                                    
|
| |  | Price;                                                                                                        
|
| |  | Ability to maintain and expand distribution
    channels;                                                     
|
| |  | Brand name recognition;                                                                                       
|
| |  | Timing of introductions of new services;                                                                      
|
| |  | Physical and network security;                                                                                
|
| |  | Financial resources; and                                                                                      
|
| |  | Customer base.                                                                                                

Our current and potential competitors include:
providers of data center services; global, regional and local
telecommunications companies and Regional Bell Operating
Companies; and information technology outsourcing firms. Some of
our competitors, particularly the global telecommunications
companies that have begun, or intend to begin, providing data
center services, have substantially greater resources, more
customers, longer operating histories, greater name recognition,
and may have more established relationships in the industry than
we do. As a result, these competitors may be able to develop and
expand their Internet infrastructure services faster, devote
greater resources to the marketing and sale of their products
and adopt more aggressive pricing policies than we can. In
addition, these competitors have entered and will likely
continue to enter into business relationships to provide
additional services that compete with the services we provide.

We believe our market is likely to consolidate in
the near future, which could result in increased price and other
competition. Some of our competitors may be able to provide
customers with additional benefits relating to the
customers Internet system and network management
solutions, including reduced local and long distance
communications costs, which could reduce the overall costs of
their services relative to ours. We may not be able to offset
the effects of any price reductions.

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As we expand our operations in markets outside
the United States, we will also encounter new competitors and
competitive environments. Our foreign competitors may enjoy a
government-sponsored monopoly on telecommunications services
essential to our business, and will generally have a better
understanding of their local industry and longer working
relationships with local infrastructure providers.

We believe that we have certain competitive
advantages. We are one of only five owners/operators of a Tier-1
NAP in the U.S. None of the other Tier-1 NAPs offer
Class A1+ space immediately adjacent to the peering point
as well as managed services. In addition, we are the only
carrier-neutral Tier-1 NAP. Nevertheless, there are few
substantial barriers to entry to the colocation and managed
services market, and we expect to face additional competition
from existing competitors and new market entrants in the future.

Employees

As of June 28, 2002, we had 133 full-time
employees in the United States and 4 full-time employees in
emerging markets.

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

ITEM 2. PROPERTIES.

Our corporate headquarters are located at 2601 S.
Bayshore Drive, Miami, Florida 33133. In fiscal year 2002, we
paid annual rent of approximately $495,000. We also maintain
smaller offices in downtown Miami, Florida and Sao Paulo,
Brazil. The lease terms range from five to twenty years. We also
maintain temporary construction offices. We believe that our
current space is adequate for our expected growth in the next
year.

ITEM 3. LEGAL PROCEEDINGS.

We are, from time to time, involved as defendants
in litigation relating to claims arising out of our operations
in the normal course of business. These claims against us are
generally covered by insurance. We are not currently subject to
any litigation which singularly or in the aggregate could
reasonably be expected to have a material adverse effect on our
financial conditions or results of operations. We also engage as
plaintiffs in a small number of collection lawsuits.



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

No matters were submitted to a vote of our
stockholders during the quarter ended March 31, 2002.

PART II



|         |                                                                           
|-------- | --------------------------------------------------------------------------
|ITEM  5. | MARKET FOR REGISTRANTS COMMON EQUITY AND
    RELATED STOCKHOLDER MATTERS.

Common Stock and Preferred Stock
Information

Our common stock, par value $.001 per share, is
quoted under the symbol TWW on the American Stock
Exchange. Our authorized capital stock consists of 300,000,000
shares of common stock and 10,000,000 shares of preferred stock.
As of July 8, 2002, 204,482,250 shares of common stock were
outstanding, 20 shares of our series G convertible preferred
stock were outstanding and held by one holder of record and 294
shares of our series H convertible preferred stock were
outstanding and held by one holder of record. We believe we have
in excess of 8,800 beneficial owners of our common stock.

8



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##### 



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

|                   |  |        |        |     |  |   |        | 
|------------------ |  | ------ | ------ | --- |  | - | ------ | 
|                   |  |       
|                   |  | Prices
|Fiscal Year 2001   |  |       
|Quarter Ended      |  | High   |        | Low
|                   |  |        |        |    
|June 30, 2000      |  | $      | 4.9375 |     |  | $ | 4.2500 | 
|September 30, 2000 |  |        | 2.9500 |     |  |   | 2.5500 | 
|December 31, 2000  |  |        | 0.9000 |     |  |   | 0.6500 | 
|March 31, 2001     |  |        | 2.5000 |     |  |   | 1.8000 | 

|                   |  |        |        |     |  |   |        | 
|------------------ |  | ------ | ------ | --- |  | - | ------ | 
|                   |  |       
|                   |  | Prices
|Fiscal Year 2002   |  |       
|Quarter Ended      |  | High   |        | Low
|                   |  |        |        |    
|June 30, 2001      |  | $      | 2.3000 |     |  | $ | 1.4000 | 
|September 30, 2001 |  |        | 1.6500 |     |  |   | 0.4500 | 
|December 31, 2001  |  |        | 0.9000 |     |  |   | 0.4700 | 
|March 31, 2002     |  |        | 0.7400 |     |  |   | 0.2200 | 

Dividend Policy

We have never paid cash dividends on our common
stock and do not plan to pay cash dividends in the foreseeable
future. In accordance with a credit facility agreement with a
financial institution we may not pay cash or stock dividends,
without the written consent of the financial institution. See
Managements Discussion and Analysis of Financial
Condition and Results of Operation  Liquidity and Capital
Resources.

Recent Sales of Unregistered
Securities

In May 2002, we sold 10 million shares of our
common stock for $7.5 million to a group that includes two of
our directors, representing a premium to market.

In June 2002, we sold 5 million shares of our
common stock to a Spanish company for $5 million. The number of
shares sold pursuant to this transaction will be adjusted if:
(i) on October 31, 2002 we have failed to materially
meet certain cash flow projections or open an interim NAP in
Madrid; or (ii) any time during the next 12 months we
issue common stock at less than $1.00 per share. At the time of
the transaction we owned 1% of the Spanish companys
equity, which we increased to 10% subsequent to the transaction.

These offers and sales of our common stock were
exempt from the registration requirements of the Securities Act
of 1933, as amended as the common stock was sold to accredited
investors pursuant to Regulation D and to non-United States
persons in offshore transactions pursuant to Regulation S.

9



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##### 



ITEM 6. SELECTED FINANCIAL
DATA.

The selected financial statement data set forth
below has been derived from our financial statements, which have
been audited by our independent certified public accountants.
The information should be read in conjunction with
Managements Discussion and Analysis of Financial
Condition and Results of Operations and our Consolidated
Financial Statements and the Notes thereto included elsewhere in
this report.

|                                                              |  |                                              |         |      |  |      |          |      |  |      |        |   |  |   |        |  |  |   |        | 
|------------------------------------------------------------- |  | -------------------------------------------- | ------- | ---- |  | ---- | -------- | ---- |  | ---- | ------ | - |  | - | ------ |  |  | - | ------ | 
|                                                              |  |                                             
|                                                              |  | Twelve Months Ended March 31,               
|                                                              |  |                                             
|                                                              |  | 2002                                         |         | 2001 |  | 2000 |          | 1999 |  | 1998
|                                                              |  |                                              |         |      |  |      |          |      |  |     
|                                                              |  |                                             
|                                                              |  | (Dollars in Thousands except per Share Data)
|Results of operations:                                        |  |                                              |         |      |  |      |          |      |  |      |        |   |  |   |        |  |  |   |        | 
|Total revenue                                                 |  | $                                            | 15,872  |      |  | $    | 40,147   |      |  | $    | 15,390 |   |  | $ | 44,456 |  |  | $ | 37,632 | 
|Total cost of sales                                           |  |                                              | 18,628  |      |  |      | 23,705   |      |  |      | 9,422  |   |  |   | 31,148 |  |  |   | 22,667 | 
|Other expenses                                                |  |                                              | 54,616  |      |  |      | 37,815   |      |  |      | 12,001 |   |  |   | 12,684 |  |  |   | 13,869 | 
|(Loss) income from continuing operations                      |  |                                              | (57,372 | )    |  |      | (21,373  | )    |  |      | (6,033 | ) |  |   | 624    |  |  |   | 1,096  | 
|Loss  discontinued operations                                |  |                                              |        |      |  |      | (82,627  | )    |  |      |       |   |  |   |       |  |  |   |       | 
|Net (loss) income                                             |  | $                                            | (57,372 | )    |  | $    | (104,000 | )    |  | $    | (6,033 | ) |  | $ | 624    |  |  | $ | 1096   | 
|(Loss) income from continuing operations per
    common share |  | $                                            | (0.29   | )    |  | $    | (0.11    | )    |  | $    | (0.09  | ) |  | $ | 0.01   |  |  | $ | 0.02   | 
|Loss  discontinued operations per
    common share           |  |                                              |        |      |  | $    | (0.44    | )    |  |      |       |   |  |   |       |  |  |   |       | 
|Net (loss) income per common share                            |  | $                                            | (0.29   | )    |  | $    | (0.55    | )    |  | $    | (0.09  | ) |  | $ | 0.01   |  |  | $ | 0.02   | 
|Financial condition:                                          |  |                                              |         |      |  |      |          |      |  |      |        |   |  |   |        |  |  |   |        | 
|Real estate inventory                                         |  |                                              |        |      |  |      |         |      |  | $    | 11,797 |   |  | $ | 12,888 |  |  | $ | 33,311 | 
|Total assets                                                  |  | $                                            | 81,024  |      |  | $    | 78,069   |      |  | $    | 77,998 |   |  | $ | 17,598 |  |  | $ | 42,931 | 
|Long term obligations(1)                                      |  | $                                            | 35,919  |      |  | $    | 16,462   |      |  | $    | 28,632 |   |  | $ | 8,731  |  |  | $ | 32,081 | 
|Stockholders (deficit) equity(2)                             |  | $                                            | (49,276 | )    |  | $    | 11,163   |      |  | $    | 476    |   |  | $ | 6,510  |  |  | $ | 1,709  | 






|    |                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Long term obligations includes convertible debt,
    notes payable, less current portion and capital lease
    obligations, less current portion.
|(2) | Stockholders equity as of March 31, 2000 and
    1999 includes approximately $4,777 in convertible preferred
    stock.                          

The quarterly selected financial statement data
set forth below has been derived from our unaudited financial
statements. The information should be read in conjunction with
those financial statements and our Consolidated Financial
Statements and the Notes thereto included elsewhere in this
report.

|                          |  |                                              |         |                   |  |                    |         |               |  |   |         |   |  |   |        |  
|------------------------- |  | -------------------------------------------- | ------- | ----------------- |  | ------------------ | ------- | ------------- |  | - | ------- | - |  | - | ------ | -
|                          |  |                                             
|                          |  | Three Months Ended                          
|                          |  |                                             
|                          |  | March 31, 2002                               |         | December 31, 2001 |  | September 30, 2001 |         | June 30, 2001
|                          |  |                                              |         |                   |  |                    |         |              
|                          |  |                                             
|                          |  | (Dollars in Thousands except per Share Data)
|Results of operations:    |  |                                              |         |                   |  |                    |         |               |  |   |         |   |  |   |        |  
|Total revenue             |  | $                                            | 4,576   |                   |  | $                  | 1,745   |               |  | $ | 4,397   |   |  | $ | 5,154  |  
|Total cost of sales       |  |                                              | 5,545   |                   |  |                    | 4,322   |               |  |   | 5,082   |   |  |   | 3,679  |  
|Other expenses            |  |                                              | 22,483  |                   |  |                    | 10,028  |               |  |   | 12,651  |   |  |   | 9,454  |  
|Net loss                  |  |                                              | (23,452 | )                 |  |                    | (12,605 | )             |  |   | (13,336 | ) |  |   | (7,979 | )
|Net loss per common share |  | $                                            | (0.12   | )                 |  | $                  | (0.06   | )             |  | $ | (0.07   | ) |  | $ | (0.04  | )

10



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##### 



|                                                    |  |                                              |         |                   |  |                    |         |               |  |   |         |   |  |   |        |  
|--------------------------------------------------- |  | -------------------------------------------- | ------- | ----------------- |  | ------------------ | ------- | ------------- |  | - | ------- | - |  | - | ------ | -
|                                                    |  |                                             
|                                                    |  | Three Months Ended                          
|                                                    |  |                                             
|                                                    |  | March 31, 2001                               |         | December 31, 2000 |  | September 30, 2000 |         | June 30, 2000
|                                                    |  |                                              |         |                   |  |                    |         |              
|                                                    |  |                                             
|                                                    |  | (Dollars in Thousands except per Share Data)
|Results of operations (1):                          |  |                                              |         |                   |  |                    |         |               |  |   |         |   |  |   |        |  
|Total revenue                                       |  | $                                            | 15,857  |                   |  | $                  | 14,469  |               |  | $ | 7,996   |   |  | $ | 1,825  |  
|Total cost of sales                                 |  |                                              | 8,843   |                   |  |                    | 8,344   |               |  |   | 5,850   |   |  |   | 668    |  
|Other expenses                                      |  |                                              | 12,931  |                   |  |                    | 13,578  |               |  |   | 6,947   |   |  |   | 4,359  |  
|Loss from continuing operations                     |  |                                              | (5,917  | )                 |  |                    | (7,453  | )             |  |   | (4,801  | ) |  |   | (3,202 | )
|Loss  discontinued operations                      |  |                                              | (65,833 | )                 |  |                    | (7,564  | )             |  |   | (6,935  | ) |  |   | (2,295 | )
|Net loss                                            |  |                                              | (71,750 | )                 |  |                    | (15,017 | )             |  |   | (11,736 | ) |  |   | (5,497 | )
|Loss from continuing operations per common share    |  | $                                            | (0.04   | )                 |  | $                  | (0.07   | )             |  | $ | (0.06   | ) |  | $ | (0.04  | )
|Loss  discontinued operations per
    common share |  | $                                            | (0.34   | )                 |  | $                  |        |               |  | $ |        |   |  | $ |       |  
|Net loss per common share                           |  | $                                            | (0.38   | )                 |  | $                  | (0.07   | )             |  | $ | (0.06   | ) |  | $ | (0.04  | )






|    |                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Summary financial statement data includes
    discontinued operations as a separate component of net loss as
    compared to amounts previously reported in Form 10-Q.



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

The following discussion of results of operations
and financial condition is based upon and should be read in
conjunction with our Consolidated Financial Statements and Notes
thereto, the Selected Financial Data and other financial data
appearing elsewhere in this report.

Overview

We are an internationally recognized
multinational facilitator of Internet connectivity and provider
of Internet infrastructure and managed services. We are the
owner and operator of the NAP of the Americas, the fifth Tier-1
Network Access Point in the world. The NAP of the Americas, the
first TerreNAP(SM) Data Center, and the only
carrier-neutral Tier-1 Network Access Point, or NAP, is located
in Miami, Florida and provides peering, colocation and managed
services to carriers, Internet service providers, and other
Internet companies and enterprises.

The NAP of the Americas provides a neutral
connection point where telecommunications carriers can establish
bilateral and multilateral connections between and among their
networks, a process known as peering, and purchase capacity from
each other. The NAP of the Americas also provides premium-class
space where carriers, Internet Service Providers, Application
Service Providers, content providers, Internet businesses,
telecommunications providers and enterprises house their
equipment and their network facilities in order to be close to
the peering connections that take place at the NAP. This is
known as colocation. In addition, the NAP of the Americas
provides a menu of related managed services, such as meet-point
rooms. We expect that the NAP of the Americas will be a primary
channel of Internet traffic from Central and South America and
the Caribbean to North America and Europe.

As a result of changes in our business
conditions, including market changes in the telecommunications
industry and the lack of debt and equity financing vehicles to
fund other business expansion during the third quarter of the
year ended March 31, 2001, we began to redefine and focus our
TerreNAP Data Center strategy, and began implementing a plan to
exit all lines of business not directly related to this
strategy. Lines of business discontinued include IP fax
services, unified messaging services, and telephony. As of
March 31, 2002, we have completed our exit of lines of
business not related to our TerreNAP Data Center strategy. This
change in focus has impacted the composition of the financial
revenues for the years ending March 31, 2002 and March 31,
2001.

11



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##### 



We were founded in 1982. On April 28, 2000,
Terremark Holdings, Inc. completed a reverse merger with AmTec,
Inc., a public company. Contemporaneous with the reverse merger
we changed our corporate name to Terremark Worldwide, Inc. and
adopted TWW as our trading symbol on the American
Stock Exchange. Historical information of the surviving company
is that of Terremark Holdings, Inc.

Critical
Accounting Policies and Estimates

Managements Discussion and Analysis of
Financial Condition and Results of Operations discusses
Terremark Worldwide Inc.s consolidated financial
statements, which have been prepared in accordance with
accounting principles generally accepted in the U.S. The
preparation of these financial statements requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. On an on-going basis, management evaluates its
estimates and judgments, including those related to revenues and
collectibility of receivables, income taxes, contingencies and
litigation. Management bases its estimates and judgments on
historical experience and on various other factors that are
believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

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



| |   |                                                                             
| | - | ----------------------------------------------------------------------------
| |  | Revenue recognition and allowance for bad debts;                            
|
| |  | Accounting for income taxes;                                                
|
| |  | Accounting for property and equipment; and                                  
|
| |  | Impairment of long-lived assets and long-lived
    assets to be disposed of.

Revenue Recognition and Allowance for Bad
Debts.Revenue is recognized as
service is provided when there is persuasive evidence of an
arrangement, the fee is fixed or determinable and collection of
the receivable is reasonably assured. We assess collection based
on a number of factors, including past transaction history with
the customer and the credit-worthiness of the customer. We do
not request collateral from our customers. If we determine that
collection is not reasonably assured, we defer the fee and
recognize revenue at the time collection becomes reasonably
assured, which is generally upon receipt of cash. In addition,
an allowance is provided for doubtful accounts for estimated
losses resulting from the inability of our customers to make
required payments for those customers that we had expected to
collect the revenues. If the financial condition of our
customers were to deteriorate or if they become insolvent,
resulting in an impairment of their ability to make payments,
allowances for doubtful accounts may be required, which would
decrease net income in the period the determination was made.
Management specifically analyzes accounts receivable and
analyzes current economic news and trends, historical bad debts,
customer concentrations, customer credit-worthiness and changes
in customer payment terms when evaluating revenue recognition
and the adequacy of our allowances.

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

Revenues from real estate sales are recognized at
the time of delivery to the customer. Revenues from development,
commission and construction fees are recognized when earned.

Revenues from construction contracts are
recognized on the percentage-of-completion method, measured by
the percentage of costs incurred to date to total estimated
costs for each contract. This method is used because management
considers cost incurred to be the best measure of progress on
these contracts. The duration of a construction contract
generally exceeds one year. Billings in excess of costs and
estimated

12



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##### 



earnings on uncompleted contracts are classified
as other liabilities and represent billings in excess of
revenues recognized.


Provisions for estimated losses on uncompleted
contracts are made in the period in which losses are determined.
Changes in job performance, job conditions and estimated
profitability, including those arising from contract penalty
provisions and final contract settlements may result in
revisions to costs and income and are recognized in the period
in which the revisions can be reasonably estimated. Accordingly,
it is possible that our current estimates relating to completion
cost and profitability of our uncompleted contracts will vary
from actual results.

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

We currently have provided for a full valuation
allowance against our net deferred tax assets. We have
considered future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the need for the
valuation allowance and based on the available objective
evidence, management believes it is more likely than not that
the net deferred tax assets will not be fully realizable. Should
we determine that we would be able to realize our deferred tax
assets in the foreseeable future, an adjustment to the deferred
tax assets would increase net income in the period the
determinations were made.

Accounting for Property and Equipment.Property and equipment, net includes
acquired assets and those accounted for under capital leases.
Purchased assets are recorded at cost and capital leased assets
are recorded at the net present value of minimum lease payments.
Property and equipment are depreciated on the straight-line
method over their estimated remaining useful lives, which are
generally five to twenty years for leasehold improvements, three
years for computer software and five years for furniture,
fixtures and equipment.

Should management determine that the actual
useful lives of property and equipment placed into service are
less than originally anticipated, or if any of our property and
equipment was deemed to have incurred an impairment, additional
depreciation or an impairment charge would be required, which
would decrease net income in the period the determination was
made. Conversely, should management determine that the actual
useful lives of our property and equipment placed into service
was greater than originally anticipated, less depreciation may
be required, which would increase net income in the period the
determination was made.

Impairment of Long-lived Assets and Long-lived
Assets to be Disposed of.In
accordance with SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of, we evaluate long-lived assets and identifiable
intangibles for impairment whenever events or changes in
circumstances indicate that the net carrying amount may not be
recoverable. When these events occur, we determine if there is
impairment by comparing the carrying value of the long-lived
asset to the estimated undiscounted future cash flows expected
to result from the use of the asset. If an impairment is
indicated, an impairment charge is provided for the excess of
the carrying amount of the asset over its fair value and would
decrease net income in the period determination was made.

Changes in business conditions in the
telecommunications industry and resulting decline in related
construction projects caused us to perform an impairment
analysis during the year ended March 31, 2002 of our
goodwill acquired in the Post Shell acquisition. Based on this
analysis, we determined that the asset, which is included in our
real estate segment, was impaired by $3,190,000. We believe that
the remaining $2,315,336 in Post Shell goodwill is recoverable
through future related cash flows.

Changes in business conditions in the
telecommunications industry and resulting decline in related
real estate leasing activities caused us to perform an
impairment analysis during the year ended March 31, 2002 of

13



---



##### 



the promote interests in TECOTA which we acquired
in the telecom facilities management operations sale. Based on
this analysis, we determined that the asset, which is included
in our real estate segment, was impaired by $3,800,000. We
believe that the remaining $904,964 in TECOTA promote interests
is recoverable through future related cash flows.


During the three months ended September 30,
2001, we recorded a $6,462,315 impairment charge related to our
colocation facility in Santa Clara, California, based on an
option to purchase the facility granted to one of our vendors.
Subsequent expiration of the option and continued decline in
related colocation industry activities caused us in the quarter
ended March 31, 2002 to change our classification for the
facility to held for sale. As a result, we recorded
an additional $5,521,355 impairment. These charges are included
in our telecom facilities management segment, have fully
impaired the related assets and include approximately $1,530,000
in expected carrying and selling costs.

Results of Operations for the Year Ended
March 31, 2002 as Compared to the Year Ended March 31,
2001

Revenue.Total
revenue decreased $24.3 million, or 60.5%, to $ 15.9 million for
the year ended March 31, 2002 from $40.1 million for the
year ended March 31, 2001, reflecting our exit of the real
estate development business.

Data center revenue increased $3.0 million, or
1,171%, to $3.2 million for the year ended March 31, 2002
from $0.3 million for the year ended March 31, 2001. The
increase was attributable to our peering, colocation and managed
services offered at the NAP, which became operational on July
2001. The data center revenue in the prior year was derived from
our peering and colocation services offered at the interim NAP
which became operational in December 2000. We expect data center
revenues to increase in future periods as customers set up their
operations in the NAP of the Americas. Future data center
revenues will be derived from peering, colocation and managed
services.

Revenue from real estate sales was $2.8 million
for the year ended March 31, 2001, and was attributable to
the sale of twelve condominium units. The net revenue from the
last six condominium units sold during the year ended
March 31, 2002 is recorded as a gain on the sale of real
estate held for sale.

Development, commission and construction fees
decreased approximately $9.3 million during the year ended
March 31, 2002 as compared to the year ended March 31,
2001. This decrease resulted from a decrease in development,
commission and construction fees earned primarily resulting from
a decrease in commissions from telecom facilities management
operations. Since we sold a large portion of our telecom
facilities management operations in February 2001, related
leasing commissions and management fees have decreased.

Contract construction revenue decreased $14.2
million, from $22.4 million for the year ended March 31,
2001 to $8.3 million for the year ended March 31, 2002. The
decrease is attributable to the reduction in the number of
contracts in 2002 as compared to 2001. During the year ended
March 31, 2002, we completed two contracts and as of
March 31, 2002, we had five construction contracts in
process. During the year ended March 31, 2001, we completed
twelve contracts and as of March 31, 2001, we had seven
contracts in process.

Data Center Operations.Data center operations expenses
increased $10.0 million for the year ended March 31, 2002
from $1.2 million for the year ended March 31, 2001. The
increase was attributable to costs associated with the
operations of the NAP of the Americas facility which became
operational in July 2001. The data center operations expense in
the prior year was derived from operations of the interim NAP
facility, which became operational in December 2000. Data center
operations consist mainly of rent, operations personnel,
electricity, chilled water and security services. With the
exception of electricity and chilled water, the majority of
these expenses are fixed in nature. We expect that our costs of
electricity and chilled water costs will increase in the future
as more customers utilize the NAP of the Americas.

Start-up Costs  Data Centers.Start-up costs for the year ended
March 31, 2002 primarily relate to the NAP of the Americas
in Miami, Florida, and were approximately $3.4 million as
compared to $6.5 million for the year ended March 31, 2001.
Start-up costs in the previous year relate to the NAP of the
Americas and the interim NAP facility.

14



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##### 



Contract Construction Expenses.Contract construction expenses
decreased $12.9 million from $20.3 million for the year ended
March 31, 2001 to $7.4 million for the year ended
March 31, 2002. This decrease is a result of the number of
contracts in process, stage of completion and dollar amount of
those projects. We do not currently anticipate any losses on any
of the individual contracts.

General and Administrative Expenses.During fiscal year 2002, our efforts
included establishing internal operations to support our
Internet infrastructure services strategy. General and
administrative expenses decreased by $4.4 million from
approximately $19.9 million for the year ended March 31,
2001 to $15.6 million for the year ended March 31, 2002.
This decrease is attributable to the decrease in our investment
in personnel and corporate infrastructure related to non-core
assets. The significant components of these expenses include
personnel, insurance, office expenses and professional fees. In
addition, during the year ended March 31, 2002, we
implemented several cost-savings initiatives, including staff
reductions and an overall decrease in discretionary spending.

Sales and Marketing Expenses.Sales and marketing expenses increased
$0.9 million, or 30.8%, for the year ended March 31, 2002
as compared to the previous fiscal year. The increase is
principally due to marketing the TerreNAP Data Centers including
NAP of the Americas, partially offset by the decrease in
marketing expenses associated with the sale of real estate.

Depreciation and Amortization Expense.Depreciation and amortization expense
increased from $3.3 million for the year ended March 31,
2001 to $7.3 million for the year ended March 31, 2002. The
increase resulted primarily from the depreciation of the
leasehold improvements and equipment used in the NAP of the
Americas, which was placed in service on July 1, 2001.
Therefore, no similar expenses were recorded for the comparable
period during 2001.

Impairment of Long-lived Assets.During the year ended March 31,
2002, in accordance with SFAS No. 121, we evaluated the
carrying value of our leasehold improvements related to our
colocation facility in Santa Clara and our goodwill related to
Post Shell and our TECOTA promote interests. Our investment in
our Santa Clara facility was impaired due to a decline in the
technology sector and general economic conditions. Accordingly,
we recorded an impairment charge of approximately $12.0 million.
We are currently attempting to sell our leasehold interest and
terminate our obligation under the lease. In addition, changes
in business conditions in the telecommunications industry and
resulting decline in related construction projects caused us to
record an impairment to Post Shells goodwill of
approximately $3.2 million. Furthermore, the decline in real
estate leasing activities caused us to record an impairment of
$3.8 million to the TECOTA promote interests. As a result of our
agreement to sell certain telecom facilities management
operations, during the year ended March 31, 2001, we
recognized a $4.2 million impairment of intangible assets
relating to management contracts sold.

Interest Income.Interest income decreased from $0.5
million for the year ended March 31, 2001 to $0.1 million
for the year ended March 31, 2002 due to a decrease in our
average cash balances invested and a decline in short-term
interest rates.

Interest Expense.Interest expense increased from $1.1
million for the year ended March 31, 2001 to $9.8 million
for the year ended March 31, 2002 due to an increase in our
average debt balance outstanding.

Gain On the Sale of Real Estate Held for Sale.During the year ended March 31,
2002, we sold Fortune House II for $17.2 million and recorded a
gain of $3.9 million. We also sold six condominium units and
recorded a net gain of $0.3 million.

Net Loss From Continuing Operations.Net loss from continuing operations
increased from $21.4 million for the year ended March 31,
2001 to $57.4 million for the year ended March 31, 2002.
This increase was primarily due to non-cash items, which include
impairment of long-lived assets of approximately $19 million,
and depreciation and amortization expense of approximately $7.3
million. Also contributing to the loss were interest expense of
approximately $9.7 million and $14.6 million of expenses
generated from the start-up and operations of the NAP of the
Americas.

15



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##### 



Loss From Discontinued Operations and Loss on
Disposition of Discontinued Operations.In March 2001, we implemented our plan
to dispose of acquired businesses whose operations reflect
Internet faxing, unified messaging and telephony services. These
operations were acquired earlier in the year ended
March 31, 2001 in association with the AmTec, Spectrum
Communication, IXS.Net and Asia Connect acquisitions. Since the
operations represent a class of customer and a major line of
business, the results of these activities and estimated loss on
disposal are accounted for as discontinued operations. The loss
on disposition of discontinued operations of $61.1 million
includes write-off of approximately $54.4 million in goodwill.
For the year ended March 31, 2001, discontinued operations
had $1.8 million of total revenues and a loss of $11.4 million,
net of $10.2 million in goodwill amortization. For the year
ended March 31, 2002 there were no losses from discontinued
operations or loss on disposition of discontinued operations.

Results of Operations for the Year Ended
March 31, 2001 as Compared to the Year Ended March 31,
2000

Revenue.Total
revenue grew $24.8 million, or 160.9%, to $40.1 million for the
year ended March 31, 2001 from $15.4 million for the year
ended March 31, 2000.

Data center revenue was $0.3 million for the year
ended March 31, 2001. No data center revenue was recorded
for the previous comparable period. The increase was
attributable to our peering and colocation services offered at
the interim NAP. We expect data center revenues to increase in
future periods as customers set up their operations in the NAP
of the Americas. Future data center revenues will be derived
from peering, colocation and managed services.

Revenue from real estate sales decreased $8.2
million, or 75.0% from $11.0 million for the year ended
March 31, 2000 to $2.8 million for the year ended
March 31, 2001. Revenue for the year ended March 31,
2000 is attributable to the sale of 45 condominium units. As a
result of fewer units being available for sale, only twelve
units were sold in the year ended March 31, 2001.

Development, commission and construction fees
increased approximately $9.9 million during the year ended
March 31, 2001 as compared to the year ended March 31,
2000. This increase resulted from increases of $4.0 million in
commissions from lease signings, primarily related to telecom
facilities under management, $1.1 million in management fees
earned related to management of telecom, commercial and
residential properties and $4.75 million related to the sale of
certain rights under agreements entered into in conjunction with
a hotel development project. Since we sold a large portion of
our telecom facilities management operations in February 2001,
related leasing commissions and management fees are expected to
decrease in future periods.

Contract construction revenue increased $21.7
million, from $0.7 million for the year ended March 31,
2000 to $22.4 million for the year ended March 31, 2001.
During 2001, we obtained 19 third party contract construction
projects as a result of our acquisition of Post Shell Technology
Contractors, Inc., now known as Terremark Technology Contractors
Inc. As of March 31, 2001, we had seven construction
contracts in process.

Data Center Operations.Data center operation expenses were
$1.2 million for the year ended March 31, 2001. No cost was
recorded for the year ended March 31, 2000. The increase
was attributable to costs associated with the operations of the
interim NAP Facility which became operational in December 2000.
We expect that data center operations costs will increase in the
future as customers set up their operations in the NAP of the
Americas.

Start-Up Costs  Data Centers.Start-up costs of data centers were
$6.5 million for the year ended March 31, 2001. No costs
were recorded for the comparable period during 2000. The
increase was attributable to costs associated with the interim
NAP Facility and the NAP of the Americas.

Cost of Real Estate Sold.Cost of real estate sold decreased by
$6.7 million, or 75.9%, from $8.8 million for the year ended
March 31, 2000 to $2.1 million for the year ended
March 31, 2001. The decrease is primarily attributable to
the decrease in the number of condominium units sold as a result
of fewer units being available for sale.

16



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Contract Construction Expenses.Contract construction expenses
increased $19.8 million from $0.5 million for the year ended
March 31, 2000 to $20.3 million for the year ended
March 31, 2001. This increase is attributable to an
increase in the number of construction contracts in progress as
a result of our acquisition of Post Shell Technology Contractors
during the period and the percentages of completion of those
projects. We do not currently anticipate any losses on any of
the individual contracts.

General and Administrative Expenses.During fiscal 2001, our efforts
included the integration of our acquisitions and establishing
internal operations to support our Internet and telecom
infrastructure services strategy. General and administrative
expenses increased by $12.0 million from approximately $7.9
million for the year ended March 31, 2000 to $19.9 million
for the year ended March 31, 2001. This increase is
attributable to our investment in personnel and corporate
infrastructure and the related additional operating expenses
resulting from the acquisitions of Telecom Routing Exchange
Developers, Post Shell Technology Contractors, IXS.Net and Asia
Connect. Although we are currently attempting to reduce expenses
in activities not related to our core strategy, we expect
general and administrative expenses relating to TerreNAP Data
Center to continue increasing over time as we continue to expand
our operations.

Sales and Marketing Expenses.Sales and marketing expenses decreased
$0.2 million, or 5.6%, for the year ended March 31, 2001.
The decrease is principally due to the decrease of marketing
expenses associated with the sale of real estate offset by the
increase in marketing expenses associated with marketing the new
merged company and TerreNAP Data Centers including NAP of the
Americas. During the year ended March 31, 2000, expenses
were incurred in connection with the promotion of the sale of
two Fortune House condominium projects. During the year ended
March 31, 2001, all sales and marketing efforts were
terminated in the Fortune House projects.

Depreciation and Amortization Expense.Depreciation and amortization expense
increased from $81,000 for the year ended March 31, 2000 to $3.3
million for the year ended March 31, 2001. The increase
resulted primarily from amortization of intangible assets
associated the acquisitions of Telecom Routing Exchange
Developers and Post Shell Technology Contractors.

Impairment of Long-lived Assets.During the year ended March 31,
2000, we recorded a $0.4 million impairment related to real
estate held. As a result of our agreement to sell certain
telecom facilities management operations during the third
quarter of the year ended March 31, 2001, we recognized a
$4.1 million impairment of intangible assets which were
subsequently sold during the following quarter.

Interest Income.Interest income increased from $0.2
million for the year ended March 31, 2000 to $0.5 million
for the year ended March 31, 2001 due to an increase in our
average invested cash balances.

Interest Expense.Interest expense increased from $0.8
million for the year ended March 31, 2000 to $1.1 million
for the year ended March 31, 2001 primarily due to the
issuance of our convertible debentures.

Dividends On Preferred Stock.Dividends on our redeemable preferred
stock were $0.4 million for the year ended March 31, 2000
compared to $35,000 for the year ended March 31, 2001. On
April 28, 2000, the preferred stock was converted to shares
of our common stock.

Net Loss From Continuing Operations.Net loss from continuing operations
increased from $6.0 million for the year ended March 31,
2000 to $21.4 million for the year ended March 31, 2001 as
a result of the factors discussed above. During the year ended
March 31, 2001, our activities were directed towards the
integration of our acquisitions and establishing internal
operations to support Internet and telecom infrastructure
services.

Loss From Discontinued Operations and Loss on
Disposition of Discontinued Operations.In March 2001, we implemented our plan
to dispose of certain acquired businesses whose operations
reflect Internet faxing, unified messaging and telephony
services. These operations were acquired earlier in the year
ended March 31, 2001 in association with the AmTec,
Spectrum Communication, IXS.Net and Asia Connect acquisitions.
Since the operations represent a class of customer and a major
line of business, the results of these activities and estimated
loss on disposal are accounted for as discontinued operations.
The loss on disposition of discontinued operations of $61.1
million includes the write-off of $54.4 million in goodwill. For

17



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the year ended March 31, 2001, discontinued
operations had $1.8 million of total revenues and a loss of
$11.3 million, net of $10.2 million in goodwill amortization.


Liquidity and Capital Resources

Cash used in continuing operations for the year
ended March 31, 2002 was approximately $36.4 million
compared to cash used in operations of $6.3 million for the year
ended March 31, 2001, an increase of $30.1 million. This
increase was primarily the result of our net loss. Cash used in
discontinued operations amounted to $22.2 million for the year
ended March 31, 2001. No cash used in discontinued
operations was recorded for the year ended March 31, 2002.
In the aggregate, cash used in operating activities was $36.4
million and $28.6 million for the years ended March 31,
2002 and 2001, respectively.

Cash used in investing activities for the year
ended March 31, 2002 was $28.7 million compared to cash
provided by investing activities of $28.6 million for the year
ended March 31, 2001. For the year ended March 31,
2002, cash of $45.8 million was used primarily for the purchase
of property and equipment related to the NAP of the Americas and
our colocation facility in Santa Clara, California. For the year
ended March 31, 2001, cash provided by investing activities
was primarily composed of proceeds from the sale of Terremark
Centre for $55.8 million, offset by $24.4 million of cash
primarily used for the purchase of property and equipment
primarily related to the NAP of the Americas and our facility in
Santa Clara, California.

Cash provided by financing activities for the
year ended March 31, 2002 was $59.9 million compared to
cash provided by financing activities of $2.1 million for the
year ended March 31, 2001, an increase of $57.8 million.
The increase in cash provided by financing activities resulted
primarily from $81.8 million of new borrowings and issuance of
convertible debt and $9.3 million of construction payables
relating to the NAP of the Americas and our colocation facility
in Santa Clara, California partially offset by loan payments of
$26.5 million. Cash provided by financing activities for
the year ended March 31, 2001 resulted primarily from
payments on loans of approximately $73.6 million, including
repayment of approximately $55.2 million in debt associated with
Terremark Centre and repayment of approximately $14.6 million
related to a cancelled line of credit, partly offset by $28.1
million provided by the sale of our common stock.

During fiscal year 2003, $93.1 million of our
liabilities, including notes, construction and other trade
payables will come due. We had a net working capital deficit of
approximately $89.0 million and stockholders deficit
of approximately $49.3 million at March 31, 2002 and
incurred a net loss of approximately $57.4 million for the
twelve months then ended. This loss is the result of:



| |   |                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | non-cash items, including impairment charges of
    long-lived assets of approximately $19.0 million, and
    depreciation and amortization expense of approximately $7.3
    million;
|
| |  | interest expense of approximately $9.7 million;                                                                                                                                       
|
| |  | approximately $14.6 million of expenses generated
    from the start-up and operations of the NAP of the Americas; and                                                                
|
| |  | not generating sufficient revenue during the year
    to support the increase in infrastructure.                                                                                      

During the year ended March 31, 2002, we met
our liquidity needs primarily through obtaining additional debt
financing and the issuance of equity interests. Some of our debt
financing was either provided by or guaranteed by a principle
executive officer. We also successfully shut down or disposed of
our remaining non-core operations and implemented a series of
expense reductions. We expect that we will need an infusion of
cash to fund our business operations during the next fiscal
year. Our current liquidity needs are primarily related to
repayment of our construction payables, other payables and debt
and to support operations. We have developed a plan to continue
operating through the year ended March 31, 2003. Actual
funding requirements

18



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are dependent upon our ability to meet
expectations and will be significantly impacted if some or all
of the following assumptions, which underly the expectations are
not met:




| |   |                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------
| |  | signing of additional customer contracts at NAP
    of the Americas;                                                               
|
| |  | restructuring of $23.7 million of construction
    payables into long term payables or equity or a combination
    thereof;        
|
| |  | exercise of our option to sell our common stock
    to a financial institution resulting in $10.2 million in
    additional equity;
|
| |  | no funding under any of our guarantees; and                                                                                        
|
| |  | restructuring of our $48 million credit facility,
    as discussed below.                                                          

We have identified additional potential customers
and are actively marketing to them available services in the NAP
of the Americas. Our plan is predicated on obtaining additional
customer contracts by March 31, 2003, which on an annual
basis will generate revenues of approximately $20 million. We
have also been pursuing and continue to seek sources of
additional debt and equity financing. We are actively engaged in
discussions with certain vendors to restructure the terms of our
construction payable obligations. Our failure to obtain adequate
terms from creditors and additional debt or equity financing and
meet this plan will result in liquidity problems and require us
to curtail, in whole or in part, current operations. There can
be no assurances that our plan will be adequately implemented in
the time frame contemplated, even if such funds are obtained.
Further, any additional equity financing if obtained, will be
dilutive to existing stockholders. As a result of these matters,
substantial doubt exists about our ability to continue as a
going concern.

Our plan to increase liquidity includes
additional equity funding, entering into strategic
relationships, and the potential sale of additional debt
securities sufficient to fund our 2003 business plan. There can
be no assurance that such financing will be available to us. Our
ability to obtain financing may be adversely affected by future
declines in the technology sector and general economic
conditions.

We intend to allocate our financial resources to
activities that are consistent with our strategy of developing
and operating TerreNAP Data Centers, including the NAP of the
Americas. However, the development of the NAP of the Americas
and other TerreNAP Data Centers will require substantial capital
resources. As part of our business strategy, we intend to
continue to evaluate potential acquisitions, joint ventures and
strategic alliances in or with companies that provide services
or operations that complement our existing businesses. These
acquisitions may also require financing, which may not be
available to us on acceptable terms.

Debt and Equity Activity

In June 2002, we entered into an exclusive
agreement with the Comunidad Autonoma de Madrid to develop and
operate carrier-neutral network access points (NAPs) in Spain.
As part of that agreement the parties formed NAP de las
Americas  Madrid S.A. for the purpose of owning and
operating carrier-neutral Tier-1 NAPs in Spain and of which we
own 10%. We contributed approximately $250,000 towards the
capitalization of NAP de las Americas  Madrid S.A. to
obtain the 10% interest. The shareholders in this new company
are the Instituto Madrileno de Desarrollo  IMADE, the
Camara Oficial de Comercio e Industria de Madrid, Red Electrica
Telecomunicaciones, S.A., Telvent Desarrollos S.A., a subsidiary
of Abengoa S.A., and Centro de Transportes de Coslada, S.A. In
June 2002, the NAP de las Americas  Madrid purchased
5 million shares of our common stock at $1.00 per share. We also
have the option to purchase up to another 30% of the NAP de las
Americas  Madrid shares owned by the Comunidad and
the Camara at the initial capitalization value, plus LIBOR.

In May 2002, we received a $1.5 million
short-term loan at 10% interest from our Chief Executive Officer.

In April 2002, we entered into a Put and Warrant
purchase agreement with an international financial institution.
Under the agreement, we have an option to put up to $10.2
million in aggregate value of our shares

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of common stock, at a per share value equivalent
to 86.6% of the closing price of the stock on the day the option
is exercised. The amount of shares that we put to the financial
institution is limited to 9.9% of our then outstanding common
stock. Upon the exercise of the option, we will issue and grant
to the financial institution three call warrants that grant the
financial institution the right to purchase additional shares in
an aggregate amount equal to 20% of the shares sold to the
institution under the option. The strike price for the first
call warrant is equal to the market price of our share price on
the option exercise date. The strike price of the second call
warrant will be at a 15% premium of our share price on the
option exercise date. The strike price of the last call warrant
will be at a 15% discount of our share price on the option
exercise date. All three call warrants have a six month term.
The option expires during October 2002. If the option expires
without exercise, we are required to pay $500,000 in fees.


In April 2002, we received a binding commitment
from two directors and some of our shareholders for the purchase
of $7.5 million of common stock at $0.75 per share. In May 2002,
the transaction was completed by receiving $3.6 million in cash
and the conversion of $3.9 million in short term promissory
notes to equity. In March 2002, we received $950,000 in cash
related to the future stock sale. As of March 31, 2002,
this cash receipt was recorded as common stock subscriptions.

On September 5, 2001, we closed on a $48.0
million credit facility with a bank. The credit facility bears
interest at an annual rate of 9.25%, interest is paid monthly
and the principal balloons in March 2003. To obtain the loan, we
paid a $720,000 commitment fee. We have the option to exercise
two nine-month extension periods, subject to some conditions,
each for a fee of 0.5% of the principal balance outstanding
together with a principal repayment of $2.5 million. During each
extension period, a $250,000 monthly principal repayment
plus interest is due. At closing, the total amount of the credit
facility was disbursed except for approximately $6.6 million
that has been held as an interest reserve available to us
through June 2002. For the first nine months after the closing
of the loan, the reserve has been drawn down on a monthly basis
to make interest payments. Subsequently, we will pay interest
through cash on hand. The proceeds of the credit facility were
primarily used to:



| |   |                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | repay a $10 million short-term loan from
    Manuel D. Medina, our Chief Executive Officer, the proceeds of
    which we had used to fund the build out of the NAP of the
    Americas (he, in turn, used the $10 million to repay a
    personal $10 million short-term loan from the bank);
|
| |  | repay $3.5 million of debt that we owed to
    the bank under a line of credit personally guaranteed by
    Mr. Medina;                                                                                                                                                                      
|
| |  | pay $1.2 million in loan costs related to
    the $48 million credit facility (including the $720,000
    commitment fee); and                                                                                                                                                               
|
| |  | fund the NAP of Americas build out costs.                                                                                                                                                                                                                                                    

The credit facility is secured by all of our
assets and all of our stock in certain of our subsidiaries. The
credit facility allows for up to a $25.0 million junior lien
position on the assets of our NAP of the Americas, Inc.
subsidiary. Mr. Medina has personally guaranteed the
$48 million credit facility.

During July 2002, we reached an agreement in
principle to amend the credit facility. Under the amended terms,
the initial maturity date has been extended to September 2003
and we have the option to exercise two six-month extension
periods each at a cost of 0.5% of the principal balance
outstanding together with a principal repayment of $2.5 million.
The annual interest rate has been reduced to 7.50% and we will
commence making monthly interest payments in July 2002. All
other material provisions of the credit facility will remain
unchanged. This amendment will be binding upon execution of the
documents modifying the terms and conditions of the credit
facility, which we expect to complete in July 2002. The credit
facility is classified as current in our financial statements.

In addition to his personal guarantee of the
credit facility, and in order for us to obtain the facility, the
bank further required that Mr. Medina, prior to the bank
disbursing funds under the credit facility (i) provide a
$5.0 million certificate of deposit to the bank as collateral on
certain personal loans that Mr. Medina has with the bank
and (ii) commit to accelerate the maturity date of those
personal loans to December 31, 2001.

20



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Subsequent to September 2001, Mr. Medina and
the bank changed the maturity date on the personal loans, first
to December 31, 2001 and later to July 1, 2002.
Mr. Medina also agreed to subordinate debt that we owe to
Mr. Medina in the event of our default under the credit
facility. Mr. Medina has repaid part of those personal
loans to the bank through liquidation of the $5.0 million
certificate of deposit in January 2002 leaving an outstanding
principal balance of approximately $5.4 million and he
intends to exercise his right under such personal loan
agreements to extend their maturity date from July 1, 2002
to December 31, 2002.


On September 5, 2001, in consideration of
Mr. Medina agreeing to repay his indebtedness to the bank
earlier than otherwise required, pledging the certificate of
deposit to the bank and personally guaranteeing the
$48 million credit facility and approximately
$21 million of construction payables, we entered into an
amended and restated employment agreement with him. Under the
terms of the amended and restated employment agreement we will
indemnify Mr. Medina from any personal liability related to his
guarantees of any of our debt, use commercially reasonable
efforts to relieve Mr. Medina of all his guarantees of our debt,
provide up to $6.5 million of cash collateral to the bank should
Mr. Medina be unable to repay the personal loans when due
and provide a non interest-bearing $5.0 million loan to
Mr. Medina for as long as his guarantees of our debt exist.
If the promissory note becomes in default, we have the right of
offset against all amounts payable by us to Mr. Medina, the
aggregate of which is approximately $2.2 million as of
March 31, 2002. The note is shown as an adjustment to
equity. Additionally, as long as Mr. Medinas
guarantees of our debt exist, we have agreed to nominate Mr.
Medina to our Board of Directors and not remove Mr. Medina,
unless for good cause, or remove any of our officers without
Mr. Medinas consent. There was no change in the
amount or timing of Mr. Medinas cash or non-cash
compensation in connection with these agreements, nor did
Mr. Medina receive any guarantee fee or other fees in
connection with his guaranteeing our indebtedness. We do not
anticipate funding the $6.5 million of cash collateral.

The $48 million credit facility and the loan to
Mr. Medina have been approved by our Board of Directors.

In July 2002, the terms of Mr. Medinas
$5.0 million non-interest bearing note were amended. As
amended, the note has a maturity date of December 5, 2004
and bears interest subsequent to September 5, 2002 at the
applicable federal rate. Interest is due in bi-annual
installments. On a quarterly basis, we will review the
collectibility of this note. As of July 9, 2002, we owed
Mr. Medina approximately $3.7 million. For so long as
the $5.0 million note from Mr. Medina is outstanding
we have the right to withhold payment to Mr. Medina of
$1,375,000 in our convertible debt held by him.

Our debt financing as of March 31, 2002
primarily includes the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $26.4 million in principal amount of subordinated
    convertible debt issued. Interest accrues at 13%, and is payable
    quarterly beginning March 31, 2001. The debt matures on
    December 31, 2005 and is convertible into shares of our
    common stock at $1.87 weighted average conversion price. We are
    permitted to prepay the debentures, which will entitle holders
    to warrants or a premium over their outstanding principal
    declining from 105% in 2001 at the rate of 1% per year;
|
| |  | $4.3 million in principal amount of subordinated
    convertible debt issued. Interest accrues at 13.125%, and is
    payable quarterly beginning December 31, 2001. The debt
    matures on August 30, 2004 and is convertible into shares
    of our common stock at a $0.66 weighted average conversion price
    We are permitted to prepay the debentures;                                                                                                                                                
|
| |  | $48.0 million loan from a commercial bank
    referred to above (as of March 31, 2002 approximately $43.3
    million is outstanding);                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | $4.2 million under various capital lease
    arrangements, with various terms, secured by equipment;                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | $1.4 million under a loan from a commercial bank
    secured by certain assets and personal guarantees of a director
    and certain of our shareholders. The note payable matured as of
    December 2001. During the year ended March 31, 2002, we
    made principal reductions on this loan of $375,000 and are
    currently working with the lender to extend amounts due;                                                                                                                               
|
| |  | $7.5 million of short term financing borrowed
    from related parties, including certain directors, shareholders
    and members of our executive management team; and                                                                                                                                                                                                                                                                                                                                        

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| |   |                                       
| | - | --------------------------------------
| |  | $1.8 million of other short-term debt.

Subsequent to March 31, 2002, we paid
approximately $951,000 in interest that was due on our
subordinated convertible debt on March 31, 2002. Subsequent
to June 30, 2002, we paid approximately $1,000,000 in
interest that was due on our subordinated convertible debt on
June 30, 2002.

Guarantees and Commitments

In addition to our operating commitments, we have
made certain guarantees. The Technology Center of the Americas,
LLC, (TECOTA) where the NAP of the Americas is
located, obtained $48.0 million of equity and $61.0 million of
construction financing to fund the construction of TECOTA during
November 2000. During September 2001, our guaranty of the
construction financing was reduced from approximately $60.6
million to $9.5 million. As of March 31, 2002, TECOTA had
accounts payable and accrued expenses of $0.8 million and debt
of $33.5 million. We do not expect to fund any amounts under our
guarantee.

We lease space for our operations, office
equipment and furniture under non-cancelable operating leases.
Some equipment is also leased under a capital lease, which are
included in leasehold improvements, furniture and equipment. The
following represents the minimum future operating and capital
lease payments for these commitments, as well as the combined
aggregate maturities for all of our debt as of March 31,
2002:

|           |  |               |           |           |  |            |             |             |  |       |            |  |  |  |            |  |  |  |             | 
|---------- |  | ------------- | --------- | --------- |  | ---------- | ----------- | ----------- |  | ----- | ---------- |  |  |  | ---------- |  |  |  | ----------- | 
|           |  | Capital lease |           | Operating |  | Notes      |             | Convertible |  |      
|           |  | obligations   |           | leases    |  | payable(1) |             | debt        |  | Total
|           |  |               |           |           |  |            |             |             |  |      
|2003       |  |               | 2,354,263 |           |  |            | 4,511,232   |             |  |       | 50,752,209 |  |  |  |           |  |  |  | 57,617,704  | 
|2004       |  |               | 1,436,317 |           |  |            | 4,625,268   |             |  |       | 2,998,000  |  |  |  |           |  |  |  | 9,059,585   | 
|2005       |  |               | 1,072,257 |           |  |            | 4,729,065   |             |  |       | 48,000     |  |  |  | 4,250,000  |  |  |  | 10,099,322  | 
|2006       |  |               |          |           |  |            | 4,420,167   |             |  |       | 48,000     |  |  |  | 26,405,000 |  |  |  | 30,873,167  | 
|2007       |  |               |          |           |  |            | 4,662,561   |             |  |       | 34,091     |  |  |  |           |  |  |  | 4,696,652   | 
|Thereafter |  |               |          |           |  |            | 87,354,638  |             |  |       |           |  |  |  |           |  |  |  | 87,354,638  | 
|           |  |               |           |           |  |            |             |             |  |       |            |  |  |  |            |  |  |  |             | 
|           |  |               | 4,862,837 |           |  |            | 110,302,931 |             |  |       | 53,880,300 |  |  |  | 30,655,000 |  |  |  | 199,701,068 | 
|           |  |               |           |           |  |            |             |             |  |       |            |  |  |  |            |  |  |  |             | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Included in the 2003 notes payable is $43.3
    million credit facility with a bank. Although this facility
    matures during March 2003, we have the option to exercise two
    nine-month extension periods each at a cost of 0.5% of the
    principal balance outstanding and a principal repayment of $2.5
    million. During each extension period, a $250,000 monthly
    principal repayment plus interest is due.

Risk Factors

You should carefully consider the risks described
below and the other information in this annual report. Our
business, financial condition or operating results could be
seriously harmed if any of these risks materialize. The trading
price of our common stock may also decline due to any of these
risks.

The deployment of our TerreNAP(SM)
Data Center strategy will require us to expend substantial
resourcesfor leases, improvements of
facilities, purchase of complementary businesses, assets and
equipment, implementation of multiple telecommunications
connections and hiring of network, administrative, customer
support and sales and marketing personnel. In general, we expect
that it may take us a significant period of time to select the
appropriate location for a new TerreNAP(SM) Data
Center, construct the necessary facilities, install equipment
and telecommunications infrastructure and hire operations and
sales personnel. The failure to generate sufficient cash flows
or to raise sufficient funds may require us to delay or abandon
some or all of our development and expansion plans or otherwise
forego market opportunities, making it difficult for us to
generate additional revenue and to respond to competitive
pressures.

Expenditures commence well before a
TerreNAP(SM) Data Center opens,and it may take an extended period for
us to approach break-even capacity utilization. As a result, we
expect that individual TerreNAP(SM) Data Centers will
experience losses for more than one year from the time they are
opened. If we do not attract customers to new
TerreNAP(SM) Data Centers in a timely manner, or at
all, our business would be materially

22



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adversely affected. Growth in the number of our
TerreNAP(SM) Data Centers is likely to increase the
amount and duration of losses.


To date, we have funded our operations through
private debt and equity offerings.However, because we have not yet
achieved positive cash flow from our operations, we will
continue to require capital support until we are cash flow
positive.

Our consolidated financial statements as of
fiscal year-end March 31, 2002 have been prepared on the
assumption that we will continue as a going concern,which contemplates the realization of
assets and liquidation of liabilities in the normal course of
business. Our independent auditors have issued a report dated
July 12, 2002 stating that our recurring operating losses,
negative cash flows, and liquidity deficit, combined with our
current lack of credit facilities, raise substantial doubt as to
our ability to continue as a going concern. Investors in our
securities should review carefully our financial statements and
the report of our independent accountants thereon. Our ability
to continue as a going concern is dependent on several factors,
including our ability to raise additional debt and capital.
There can be no assurance that any financing will be available
through bank borrowings, debt or equity issuances, vendor lines
of credit, or otherwise, on acceptable terms or at all. If
future financing requirements are satisfied through the issuance
of equity securities, investors may experience significant
dilution both in terms of their percentage interest in the
Company and the net book value per share of common stock. While
we are actively seeking strategic solutions to our funding
issues, there can be no assurance that we will be able to
continue as a going concern.

The nature of our operations changed
subsequent to our April 28, 2000 merger with AmTec, Inc.Our operations continue to evolve as
we develop our Internet infrastructure and managed services
business. We began offering Internet infrastructure and managed
services in 2001. Due to our short operating history, our
business model is still evolving. Consequently, we believe that
period-to-period comparisons of our results of operation may not
be necessarily meaningful and should not be relied upon as
indicators of future performance. We have experienced revenue
growth in the recent period, but this growth may not be
indicative of our future operating results. Many of the factors
that could cause our operating results to fluctuate
significantly in the future are beyond our control. We believe
that we will continue to experience net losses on a quarterly
and annual basis for the foreseeable future. We may also use
significant amounts of cash and/or equity to acquire
complementary businesses, products, services or technologies.

The market for Internet infrastructure
services has only recently begun to develop, is evolving rapidly
and likely will be characterized by an increasing number of
market entrants.There is significant
uncertainty regarding whether this market ultimately will prove
to be viable or, if it becomes viable, that it will grow. Our
future growth, if any, will be dependent on the willingness of
carriers to peer and colocate within our facilities, enterprises
to outsource the system and network management of their
mission-critical Internet operations and our ability to market
our services in a cost-effective manner to a sufficiently large
number of those potential customers. There can be no assurance
that the market for our services will develop, that our services
will be adopted or that businesses, organizations or consumers
will use the Internet for commerce and communication. If this
market fails to develop, or develops more slowly than expected,
or if the our services do not achieve market acceptance, our
business, results of operations and financial condition would be
materially and adversely affected.

We intend to allocate our financial resources
to activities that are consistent with our strategy of
developing and operating TerreNAP(SM) Data Centers,
including the NAP of the Americas.We
have therefore implemented a policy of reducing expenditures in
areas that are not consistent with that objective. However, the
development of the NAP of the Americas and other
TerreNAP(SM) Data Centers will require substantial
capital resources. We are exploring various alternatives,
including the raising of debt and equity both in private and
public markets and obtaining financing from our vendors. In the
event that we are unsuccessful in obtaining sufficient financial
resources to permit us to fully implement our proposed plans, we
will consider various alternatives, including possible joint
ventures and reducing the scale or deferring implementation of
proposed projects. However, there is no assurance that we will
have the funds necessary to discharge our obligations associated
with operating the NAP of the Americas or developing and
operating other TerreNAP(SM) Data Centers.

23



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The expansion of our operations through the
opening of additional TerreNAP(SM) Data Centers in
emerging markets is part of our strategy.To expand successfully, we must be
able to assess markets, locate and secure new
TerreNAP(SM) Data Center sites, install hardware,
software and other equipment in and develop
TerreNAP(SM) Data Center facilities, and attract
carriers, Internet service providers and other customers to the
new locations. To manage this expansion effectively, we must
continue to improve our operational and financial systems and
expand, train and manage our employee base and build a menu of
managed services. We anticipate continuing to make significant
investments in the NAP of the Americas and new
TerreNAP(SM) Data Centers and network infrastructure,
product development, sales and marketing programs and personnel.
Our inability to establish additional TerreNAP(SM)
Data Centers or effectively manage our expansion would have a
material adverse effect upon our business. Furthermore, if we
were to become unable to continue leveraging third-party
products in our services offerings, our product development
costs could increase significantly. Finally, several of our
customers are emerging growth companies that may have negative
cash flows, and there is the possibility that we will not be
able to collect receivables on a timely basis.

We expect to continue to make additional
significant investments in sales and marketing and the
development of new services as part of our expansion strategy.We will incur further expenses from
sales personnel hired to test market our services in markets
where there is no TerreNAP(SM) Data Center. In
addition, we typically experience a lengthy sales cycle for our
services, particularly given the importance to customers of
securing Internet connectivity for mission-critical operations
and the need to educate certain customers regarding
TerreNAP(SM) Data Center, and benefits of colocation
and Internet connectivity services. The rate of growth in our
customer base and the length of the sales cycle for our services
may cause significant adverse results to our business, and our
financial condition would be materially and adversely affected.
Due to the typically lengthy sales cycle for our services, our
expenses may occur prior to customer commitments for our
services. There can be no assurance that the increase in our
sales and marketing efforts will result in increased sales of
our services.

Our success is substantially dependent on the
continued growth of our customer base and the retention of our
customers.Our ability to attract new
customers will depend on a variety of factors, including the
willingness of carriers to peer at our facilities, the
willingness of businesses to outsource their mission-critical
Internet operations, the reliability and cost-effectiveness of
our services and our ability to effectively market such
services. We intend to develop alternative distribution and lead
generation relationships with potential channel partners. Any
failure by us to develop these relationships could materially
and adversely impact our ability to generate increased revenues,
which would have a material adverse effect on our business,
results of operations and financial condition.

We depend on a limited number of third party
suppliers for key components of our infrastructure, and the loss
of one or more suppliers may slow our growth or cause us to lose
customers.For example, the flywheel
electrical generators that we use for power backup at the NAP of
the Americas and the routers used as part of our peering
infrastructure, that, are available only from sole or limited
sources in the quantities and quality demanded by us. We
purchase these components and technology assistance pursuant to
short term agreements with our infrastructure contractors. We do
not carry inventories of components and we have no guaranteed
supply or service arrangements with any of these vendors. Any
failure to obtain required products or services on a timely
basis, at an acceptable cost would impede the growth of our
business, causing our financial condition to be materially and
adversely affected. In addition, any failure of our suppliers to
provide products or components that comply with evolving
Internet standards, would materially and adversely affect our
business, results of operations and financial condition.

We conduct business internationally.Accordingly, our future operating
results could be materially adversely affected by a variety of
factors, some of which are beyond our control, including
currency exchange fluctuation, longer accounts receivable
payment cycles and difficulty in collections, and in managing
operations, taxes, restrictions on repatriation of earnings,
regulatory, political or economic conditions in a specific
country or region, trade protection measures and other
regulatory requirements.

24



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The market for Internet infrastructure
services is extremely competitive and subject to rapid
technological change.Many companies
have announced that they will begin to provide or plan to expand
their service offerings to compete with our services. We expect
to encounter increased competition in the future due to
increased consolidation and the development of strategic
alliances in the industry. In addition, we will compete with
foreign service providers as we expand internationally and as
these service providers increasingly compete in the United
States market. The principal competitive factors in our market
include:



| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | Ability to deliver services when requested by the
    customer;                                               
|
| |  | Internet system engineering and other
    professional services expertise;                                    
|
| |  | Customer service;                                                                                             
|
| |  | Network capability, reliability, quality of
    service and scalability;                                      
|
| |  | Variety of managed services offered;                                                                          
|
| |  | Access to network resources, including circuits,
    equipment and interconnection capacity to other networks;
|
| |  | Broad geographic presence;                                                                                    
|
| |  | Price;                                                                                                        
|
| |  | Ability to maintain and expand distribution
    channels;                                                     
|
| |  | Brand name recognition;                                                                                       
|
| |  | Timing of introductions of new services;                                                                      
|
| |  | Physical and network security;                                                                                
|
| |  | Financial resources; and                                                                                      
|
| |  | Customer base                                                                                                 

Our current and potential competitors include:providers of data center services;
global, regional and local telecommunications companies and
Regional Bell Operating Companies; and information technology
outsourcing firms. Some of our competitors, particularly the
global telecommunications companies that have begun, or intend
to begin, providing data center services, have substantially
greater resources, more customers, longer operating histories,
greater name recognition, and may have more established
relationships in the industry than we do. As a result, these
competitors may be able to develop and expand their Internet
infrastructure services faster, devote greater resources to the
marketing and sale of their products and adopt more aggressive
pricing policies than we can. In addition, these competitors
have entered and will likely continue to enter into business
relationships to provide additional services that compete with
the services we provide.

We believe our market is likely to consolidate
in the near future, which could result in increased price and
other competition.Some of our
competitors may be able to provide customers with additional
benefits relating to the customers Internet system and
network management solutions, including reduced local and long
distance communications costs, which could reduce the overall
costs of their services relative to ours. We may not be able to
offset the effects of any price reductions.

As we expand our operations in markets outside
the United States, we will also encounter new competitors and
competitive environments.Our foreign
competitors may enjoy a government-sponsored monopoly on
telecommunications services essential to our business, and will
generally have a better understanding of their local industry
and longer working relationships with local infrastructure
providers.

We believe that we have certain competitive
advantages but there are few barriers to entry.We are recognized by industry members
as one of five owners/operators of Tier-1 NAP in the US. None of
the other four Tier-1 NAPs offer Class A1+ space
immediately adjacent to the peering point as well as managed
services. In addition, we are the only carrier-neutral NAP.
Nevertheless, there are few substantial barriers to

25



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entry to the colocation and managed services
market, and we expect to face additional competition from
existing competitors and new market entrants in the future.


We are dependent on key personnel.We are highly dependent on the
services of Manuel D. Medina, our Chairman. The loss of
Mr. Medina could materially harm our business. Our
potential growth and expansion and the merger and integration of
separate businesses, are expected to place increased demands on
our management skills and resources. We cannot assure you that
we will be able to retain and attract skilled and experienced
management. The failure to attract and retain personnel could
materially harm our business and impair the price of our stock.

If our shares are delisted from the American
Stock Exchange, we may apply to have our shares quoted on
Nasdaqs Bulletin Board or in the pink sheets
maintained by the National Quotation Bureau, Inc.The Bulletin Board and the pink
sheets are generally considered to be less efficient
markets than the American Stock Exchange on which the shares are
currently traded. In addition, if our shares are no longer
listed on the American Stock Exchange or another national
securities exchange in the United States, our shares may be
subject to the penny stock regulations. If our
shares are delisted from the American Stock Exchange, our
stockholders could find it difficult to sell our stock and the
price of our stock could be adversely affected.

You should not expect to receive dividends on
our common stock.We have not paid
dividends on our common stock to date and have no plans for
paying dividends on the common stock in the foreseeable future.
We have certain obligations to pay dividends in kind, which may
be paid, at our option, in common stock to holders of the
Series G and Series H preferred shares. Except for
those dividends on the shares of issued and outstanding
preferred stock, and cash or in-kind dividends that we may pay
on other preferred stock that may be issued in the future that
require dividends, we intend to retain any earnings to pay for
the expansion of our business. In addition, covenants in our
financing agreements prohibit the payment of dividends.

We could pay additional taxes because our
operations are subject to various foreign taxes.We structure our operations based on
assumptions about various tax laws, U.S. and international tax
treaty developments, international currency exchange and capital
repatriation laws and other relevant laws of a variety of
non-U.S. jurisdictions. Taxing or other authorities might not
reach the same conclusions we reach. We could suffer adverse tax
and other financial consequences if our assumptions about these
matters are incorrect or the relevant laws are changed or
modified.

Distributions and other payments from our
subsidiaries and affiliates may be subject to foreign taxes,
reducing our earnings.Distributions
of earnings and other payments, including interest, we receive
from our subsidiaries and affiliates may be subject to
withholding taxes imposed by the jurisdictions in which these
entities are formed or operating. These taxes would reduce the
amount of after-tax cash we would receive from these entities.

Our customer service could suffer if we are
unable to obtain satisfactory services from local communications
providers, which could adversely affect our ability to compete.We depend on local carriers to provide
various communications services to us and to our customers. We
have from time to time had delays in receiving these
communications services. We may not be able to obtain these
services on the scale and within the time required by us at an
affordable cost, or at all. If adequate services are not
provided, customer service could suffer as could our competitive
position and financial results. Further these service providers
could become competitors in the future.

Recent terrorist activity in the United States
and the military action to counter terrorism could adversely
impact our business.The
September 11, 2001 terrorist attacks in the United States,
the ensuing declaration of war on terrorism and the continued
threat of terrorist activity and other acts of war or hostility
appear to be having an adverse effect on business, financial and
general economic conditions in the U.S. These effects may, in
turn, result in increased costs due to the need to provide
enhanced security, which would have a material adverse effect on
our business and results of operations. These circumstances may
also adversely affect our ability to attract and retain
customers, our ability to raise capital and the operation and
maintenance of our NAP facilities.

26



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Our business could be harmed by prolonged
electrical power outages or shortages, or increased costs of
energy.Our NAP facilities are
susceptible to regional costs of power, electrical power
shortages and planned or unplanned power outages caused by these
shortages. A power shortage may result in an increase of the
cost of energy, which we may not be able to pass on to our
customers. We attempt to limit exposure to system downtime by
using backup generators and power supplies. Power outages, which
last beyond our backup and alternative power arrangements, could
harm our customers and our business.

New Accounting Pronouncements

In June 2001, the Financial Accounting Standards
Board approved Statement of Financial Accounting Standards
No. 141 (FASB 141), Business Combinations, and Statement of
Financial Accounting Standards No. 142 (FASB 142), Goodwill
and Other Intangible Assets. FASB 141 requires that the purchase
method of accounting be used for all business combinations
initiated after June 30, 2001. FASB 142 changes the
accounting for goodwill from an amortization method to an
impairment-only approach. The provisions of FAS 142 are
effective for fiscal years beginning after December 15,
2001. We will adopt FAS 142 at the beginning of the fiscal year
ending March 31, 2003.

In August 2001, the Financial Accounting
Standards Board approved Statement of Financial Accounting
Standards No. 144 (FASB 144), Accounting for the Impairment
or Disposal of Long-Lived Assets. FASB 144 supercedes FASB 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, and the accounting and
reporting provisions of APB Opinion No. 30, Reporting the
Results of Operations  Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions, for the
disposal of a segment of business. FASB 144 retains the
requirements of FASB 121 for recognition and measurement of an
impairment loss on long-lived assets, and establishes a single
accounting model for all long-lived assets to be disposed of by
sale, whether previously held and used or newly acquired. The
provisions of FAS 144 are effective for fiscal years beginning
after December 15, 2001. We will adopt FAS 144 at the
beginning of the fiscal year ending March 31, 2003.

We do not expect the adoption of FASB 141, FASB
142 or FASB 144 to have a material effect on our consolidated
financial statements assuming we are a going concern. Had we
continued amortizing our intangible assets, the annual
amortization expense would have been approximately
$3.3 million for the next four years.



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

We have not entered into any financial
instruments for trading or hedging purposes.

Our carrying values of cash and cash equivalents,
accounts receivable, accounts payable and accrued expenses is a
reasonable approximation of their fair value.

Our exposure to market risk resulting from
changes in interest rates relates primarily to our debt. An
immediate 10% increase or decrease in current interest rates
would furthermore not have a material impact to our debt
obligations due to the fixed nature of our debt obligations. The
fair market value of our long-term fixed interest rate debt is
subject to interest rate risk. Generally, the fair market value
of fixed interest rate debt will increase as interest rates fall
and decrease as interest rates rise. These interest rate changes
may affect the fair market value of the fixed interest rate debt
but does not impact our earnings or cash flows.

To date, all of our recognized revenue has been
denominated in U.S. dollars, generated mostly from customers in
the U.S., and our exposure to foreign currency exchange rate
fluctuations has been minimal. We expect that future revenues
may be derived from customers outside of the U.S. and may be
denominated in foreign currency. As a result, our operating
results or cash flows may be impacted due to currency
fluctuations relative to the U.S. dollar.

Furthermore, to the extent we engage in
international sales that are denominated in U.S. dollars, an
increase in the value of the U.S. dollar relative to foreign
currencies could make our services less competitive in the
international markets. Although we will continue to monitor our
exposure to currency fluctuations, and when appropriate, may use
financial hedging techniques in the future to minimize the
effect of these

27



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fluctuations, we cannot assure you that exchange
rate fluctuations will not adversely affect our financial
results in the future.


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



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

The financial statements required by this
Item 8 are attached to hereto as Exhibit (a)(1).



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

On April 28, 2000, Terremark Holdings, Inc.
merged with and into AmTec, Inc. AmTec was the surviving
corporation in this merger and its name was changed to Terremark
Worldwide, Inc.

Prior to this transaction, Deloitte & Touche
LLP was engaged by AmTec to perform the March 31, 2000
audit of AmTec, Inc. As a result of the transaction with
Terremark Holdings, PricewaterhouseCoopers, LLP was engaged by
us as our principal accountants to audit our financial
statements for the year ended March 31, 2001. The
engagement of PricewaterhouseCoopers was made effective April
28, 2000.

Deloitte & Touche LLP was engaged to audit
AmTecs March 31, 2000 financial statements. During
AmTecs two most recent fiscal years ended March 31,
2000, there were no disagreements between management and
Deloitte & Touche LLP on any matter of accounting principles
or practices, financial statement disclosures, or auditing scope
or procedures, which disagreements, if not resolved to the
satisfaction of Deloitte & Touche LLP, would have caused
Deloitte & Touche LLP to make reference to the subject
matter of the disagreement in connection with its report. In
addition, the financial statements of AmTec for such periods
contained no adverse opinion or disclaimers of opinion, and were
not qualified or modified in any way. Also, during this same
period there were no reportable events as defined or listed in
Item 304 of Regulation S-K.

PART III



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

Our directors, executive officers and key
employees and their ages as of June 26, 2002, are as
follows:

|                          |  |     |    |                    |  |                                                                 
|------------------------- |  | --- | -- | ------------------ |  | ----------------------------------------------------------------
|Name                      |  | Age |    | Principal Position
|                          |  |     |    |                   
|Manuel D. Medina          |  |     | 49 |                    |  | Chairman of the Board, President and Chief
    Executive Officer
|Joseph R. Wright, Jr.     |  |     | 63 |                    |  | Vice Chairman of the Board                                      
|Guillermo Amore           |  |     | 64 |                    |  | Director                                                        
|Timothy Elwes             |  |     | 66 |                    |  | Director                                                        
|Jose Maria Figueres-Olsen |  |     | 47 |                    |  | Director                                                        
|Marvin S. Rosen           |  |     | 60 |                    |  | Director                                                        
|Miguel J. Rosenfeld       |  |     | 52 |                    |  | Director                                                        
|Joel A. Schleicher        |  |     | 49 |                    |  | Director                                                        
|Kenneth I. Starr          |  |     | 53 |                    |  | Director                                                        
|Brian K. Goodkind         |  |     | 44 |                    |  | Executive Vice President and Chief Operating
    Officer        
|José A. Segrera           |  |     | 31 |                    |  | Senior Vice President and Chief Financial Officer               
|José E. González          |  |     | 41 |                    |  | Senior Vice President, General Counsel and
    Secretary        

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|                        |  |     |    |                    |  |                                                                          
|----------------------- |  | --- | -- | ------------------ |  | -------------------------------------------------------------------------
|Name                    |  | Age |    | Principal Position
|                        |  |     |    |                   
|Key Employees           |  |     |    |                    |  |                                                                          
|Monty Bannerman         |  |     | 47 |                    |  | Chief Technology Officer and Senior Vice
    President Corporate Strategy
|Jamie Dos Santos        |  |     | 40 |                    |  | Senior Vice President Global Sales                                       
|Sandra B. Gonzalez-Levy |  |     | 52 |                    |  | Senior Vice President Corporate Communications                           
|Marvin Wheeler          |  |     | 47 |                    |  | Senior Vice President and General Manager NAP of
    the Americas        

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

Joseph R. Wright, Jr.has served as our Vice Chairman of the
Board since April 28, 2000. Mr. Wright is currently
the President & CEO of PanAmSat Corporation. Prior to that,
Mr. Wright served as Chairman of the Board from May 1995 to
April 2000. Mr. Wright also served as Chairman of the Board
of GRC International, Inc. a United States public company that
provides technical information technology support to government
and private entities from 1996 to 2000. He is also Co-Chairman
of Baker & Taylor Holdings, Inc., an international book and
video distribution company, and Vice Chairman of Jefferson
Consulting Group, a Washington D.C. consulting firm. From 1989
to 1994, Mr. Wright served as Executive Vice President,
Vice Chairman and Director of W.R. Grace & Co., an
international chemicals and health care company, President of
Grace Energy Corporation and Chairman of Grace Environmental
Company. From 1982 to 1989, Mr. Wright held the positions
of Director and Deputy Director of the Office of Management and
Budget, The White House, and was a member of President
Reagans cabinet. Before 1982, he served as Deputy
Secretary, United States Department of Commerce, President of
Citicorp Retail Services and Retail Consumer Services, held
posts in the United States Department of Agriculture and the
United States Department of Commerce, and was Vice President and
Partner of Booz Allen & Hamilton, a management consulting
firm. Mr. Wright also serves on the Boards of Directors of
PanAm Sat corporation, Fusion Telecommunications International,
Inc., Cereus Technology Partners, RealMed Corporation and serves
on the AT&T Government Markets Advisory Board. He is a
former member of the Presidents Export Council and a
former member of the Board of Directors of Travelers, Harcourt
Brace Janovich, and Hampton University.

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

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

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Jose Maria Figueres-Olsenhas served as a member of our board of
directors since October 2000. Mr. Figueres-Olsen is the
former President of Costa Rica, serving as the head of state of
his native country from 1994 to 1998, during which he made
sustainable development the cornerstone of his administration
and led his country into the digital economy through the
implementation of several IT programs and the attraction of
foreign investment including Intel. Since leaving office,
President Figueres-Olsen has served as a Director of the Digital
Nations Consortium, launched by the MIT Media Lab to develop a
new generation of technologies and applications that enable
people to design, create, and learn new ways to become more
active participants in developing societies. President
Figueres-Olsen also serves on the Board of Directors of the
World Resources Institute, the World Wildlife Fund, the
Stockholm Environment Institute, and Leadership in Environment
and Development. President Figueres-Olsen holds a degree in
Industrial Engineering from the United States Military Academy
at West Point and a Masters degree in Public Administration
(Mason Fellow) from the John F. Kennedy School of Government at
Harvard University.

Marvin S. Rosenhas
served as a member of our board of directors since April 2000.
Mr. Rosen is a co-founder of Fusion Telecommunications
International and has served as its Vice Chairman since December
1998. From September 1995 through January 1997, Mr. Rosen
served as the Finance Chairman of the Democratic National
Committee. Mr. Rosen currently serves on the Board of
Directors of the Childrens Health Fund (New York City),
since 1994, the Robert F. Kennedy Memorial, since 1995,
Bio-Medical Disposal, Inc., since 1998 and Fusion
Telecommunications International, Inc., since 1997, where he has
also been Vice-Chairman since December 1998. Mr. Rosen
received his Bachelor of Science degree in Commerce from the
University of Virginia, his LL.B. from Dickinson School of Law
and his LL.M. in Corporations from New York University Law
School.

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

Joel A. Schleicherhas served as a member of our board of
directors since April 2000. Mr. Schleicher has been
President and Chief Executive Officer for Exp@nets since June
1998. Exp@nets is a leading nationwide provider of networked
communication solutions to business. His previous communications
industry experience started as the Chief Operating Officer,
President and director of Nextel Communications, Inc. from 1989
to 1995 and subsequently with ProCommunications, Inc. from 1996
to 1997. He has been a member of the board of directors of
NovAtel, Inc., a global GPS provider, since 1997, Fusion
Telecommunications, an international long distance service
provider, since 1998, and TechTronic Industries, a Hong Kong
based manufacturer of consumer appliances, since 1998. Before
Nextel, Mr. Schleicher spent 10 years in the consumer
durables and energy sectors of industry and four years with KPMG
Peat Marwick in various capacities. He is a graduate of the
Carlson School of the University of Minnesota.

Kenneth I. Starrhas
served as a member of our board of directors since April 2000.
Mr. Starr has also served as the Chairman and Chief
Executive Officer of Starr & Company, a New York City-based
accounting and business management firm, since he founded this
firm in 1986.

Brian K. Goodkindhas served as our Executive Vice
President and Chief Operating Officer since April 2000. From
April 1998 until his election to these offices,
Mr. Goodkind served as the Vice-Chairman, Executive Vice
President, and General Counsel to Terremark. In these
capacities, Mr. Goodkind oversaw the operations, risk
management, systems development, and legal matters for
Terremark. Mr. Goodkind has been a member of the Florida
Bar since 1982, and was in private practice for 16 years,
specializing in commercial litigation, employment law,
international transactions and real estate. His experience
includes over 11 years, from 1986 to 1998, as one of two
founding partners of a seventy-attorney full-service law firm,
of which he served as managing partner for over five years. Mr.
Goodkind received his Bachelor of Arts degree from the
University of Alabama and his Juris Doctor from the University
of Florida.

30



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José A. Segrerahas served as Senior Vice President
and Chief Financial Officer since September 2001. Prior to
joining Terremark, Mr. Segrera served as the interim chief
financial officer of FirstCom Corporation, which recently merged
into AT&T Latin America. From 1992 to 1997, Mr. Segrera
was with the assurance practice at KPMG LLP; most recently as a
manager. Mr. Segrera received his Bachelors in Business
Administration and his Masters in Professional Accounting from
the University of Miami.

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

Monty Bannermanhas
served as our Chief Technology Officer and Senior Vice President
Corporate Strategy since December 2000. In June 1997,
Mr. Bannerman founded IXS.NET, a provider of IP telephony
services in China, and DSP.NET, an ISP in the Bay Area. From
December 1984 to June 1996, Mr. Bannerman was Vice
President of Bell Canada International (BCI). Mr. Bannerman
is a graduate of Mohawk College in Hamilton, Ontario where he
earned a degree in Business Administration and Finance.

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

Sandra B. Gonzalez-Levyhas served as our Senior Vice
President Corporate Communications since July 2000. From January
1997 to June 2000, Mrs. Gonzalez-Levy was President and
Chief Executive Officer of the Miami-Dade Community College
Foundation, Inc. Mrs. Gonzalez-Levy was Group Senior Vice
President and Public Relations Director with Barnett Bank, N.A.
From 1980 to December 1996, she was with the Greater Miami
Chamber of Commerce most recent as Senior Vice President, in
charge of the International Economic Development and Hispanic
Business Departments. Mrs. Gonzalez-Levy holds a Masters
degree of Business Administration from Barry University.

Marvin Wheelerhas
served as our Senior Vice President of Operations and General
Manager of the NAP of the Americas since March 2001. From June
1978 to March 2000, Mr. Wheeler worked at BellSouth
managing Data Center and WAN/LAN Operations in addition to
directing some of the 24/7 operations centers in the Southeast
United States. Mr. Wheeler graduated from the University of
Florida, where he earned a degree in Business Administration
with a concentration in marketing.

Employment Agreements

We have entered into employment agreements with
Manuel D. Medina, Brian K. Goodkind, José A. Segrera and
José E. González.

31



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

The following tables set forth certain
information concerning compensation for the fiscal years ended
March 31, 2002, 2001 and 2000 of our executive officers,
including the Chief Executive Officer and four executive
officers whose total annual salary and bonus exceeded $100,000,
for the fiscal year ended March 31, 2002.

LONG TERM COMPENSATION AWARDS

|                                  |  |      |      |           |  |              |         |           |  |         |        |     |  |  |        |  |  |  |         | 
|--------------------------------- |  | ---- | ---- | --------- |  | ------------ | ------- | --------- |  | ------- | ------ | --- |  |  | ------ |  |  |  | ------- | 
|                                  |  |      |      |           |  |              |         |           |  | Options
|                                  |  |      |      |           |  | Other Annual |         | Stock     |  | SARs   
|Name and Principal Position       |  | Year |      | Salary($) |  | Compensation |         | Awards($) |  | (#)    
|                                  |  |      |      |           |  |              |         |           |  |        
|Manuel D. Medina                  |  |      | 2002 |           |  | $            | 350,000 |           |  |         |        |     |  |  |        |  |  |  | 100,000 | 
|President & Chairman of the Board |  |      | 2001 |           |  | $            | 350,000 |           |  |         |        |     |  |  |        |  |  |  |         | 
|                                  |  |      | 2000 |           |  | $            | 350,000 |           |  |         |        |     |  |  |        |  |  |  |         | 
|                                 
|Joseph R. Wright, Jr.             |  |      | 2002 |           |  | $            | 100,000 | (1)       |  |         |        |     |  |  |        |  |  |  |         | 
|Vice Chairman                     |  |      | 2001 |           |  | $            | 250,000 |           |  |         |        |     |  |  |        |  |  |  |         | 
|                                  |  |      | 2000 |           |  | $            | 285,000 |           |  |         | 35,000 | (2) |  |  | 87,500 |  |  |  | 200,000 | 
|                                 
|Brian K. Goodkind                 |  |      | 2002 |           |  | $            | 250,000 |           |  |         |        |     |  |  |        |  |  |  | 150,000 | 
|Executive Vice President &        |  |      | 2001 |           |  | $            | 250,000 |           |  |         |        |     |  |  |        |  |  |  | 150,000 | 
|Chief Operating Officer           |  |      | 2000 |           |  | $            | 250,000 |           |  |         |        |     |  |  |        |  |  |  |         | 
|                                 
|José A. Segrera                   |  |      | 2002 |           |  | $            | 170,000 |           |  |         |        |     |  |  |        |  |  |  | 200,000 | 
|Senior Vice President &           |  |      | 2001 |           |  | $            | 150,000 |           |  |         |        |     |  |  |        |  |  |  | 150,000 | 
|Chief Financial Officer           |  |      | 2000 |           |  |              |        |           |  |         |        |     |  |  |        |  |  |  |         | 
|                                 
|José E. González                  |  |      | 2002 |           |  | $            | 175,000 |           |  |         |        |     |  |  |        |  |  |  | 200,000 | 
|Senior Vice President,            |  |      | 2001 |           |  | $            | 175,000 |           |  |         |        |     |  |  |        |  |  |  | 150,000 | 
|General Counsel & Secretary       |  |      | 2000 |           |  |              |        |           |  |         |        |     |  |  |        |  |  |  |         | 






|    |                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Pursuant to a one-year consulting agreement with
    the Company, whereby Mr. Wright receives $8,333 per month.                                                                               
|(2) | During fiscal year 2000, we paid approximately
    $30,000 per year on behalf of Mr. Wright for certain
    personal tax and accounting services rendered by third parties
    for Mr. Wright.

32



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

Owners

The following table sets forth information
regarding the beneficial ownership of shares of our common
stock, as of June 28, 2002, by (i) each of our
directors, (ii) each of our executive officers,
(iii) by all of our directors and executive officers as a
group and (iv) by each person that beneficially owns five
percent or more of shares of common stock. Each person named in
the table has sole voting and investment power with respect to
all shares of common stock shown as beneficially owned, expect
as otherwise set forth in the notes to the table. Unless
otherwise provided, the address of each holder is c/o Terremark
Worldwide, Inc., 2601 South Bayshore Drive, Miami, Florida 33133.

|                                                                 |                                                                                                           |                      |            |               |  |  |      |   | 
|---------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------- | -------------------- | ---------- | ------------- |  |  | ---- | - | 
|                                                                 |                                                                                                           |                      |            | Percentage of
|                                                                 |                                                                                                           |                      |            | Outstanding  
|                                                                 |                                                                                                           | Amount of Beneficial |            | Common Shares
|Name and Address of Beneficial Owner                             |                                                                                                           | Ownership(1)         |            | Owned        
|                                                                 |                                                                                                           |                      |            |              
|Directors and Executive Officers                                 |                                                                                                           |                      |            |               |  |  |      |  
|Manuel D. Medina                                                 |                                                                                                           |                      | 33,302,190 | (2)           |  |  | 16.2 | %
|Joseph R. Wright, Jr.                                            |                                                                                                           |                      | 4,257,017  | (3)           |  |  | 2.0  | %
|Guillermo Amore                                                  |                                                                                                           |                      | 3,669,928  | (4)           |  |  | 1.8  | %
|Marvin S. Rosen                                                  |                                                                                                           |                      | 1,286,151  | (5)           |  |  | *    |  
|Miguel J. Rosenfeld                                              |                                                                                                           |                      | 383,463    | (6)           |  |  | *    |  
|Kenneth J. Starr                                                 |                                                                                                           |                      | 272,000    | (7)           |  |  | *    |  
|Brian K. Goodkind                                                |                                                                                                           |                      | 262,843    | (8)           |  |  | *    |  
|Jose Maria Figueres-Olsen                                        |                                                                                                           |                      | 234,000    | (9)           |  |  | *    |  
|Joel A. Schleicher                                               |                                                                                                           |                      | 160,668    | (10)          |  |  | *    |  
|Timothy Elwes                                                    |                                                                                                           |                      | 134,000    | (11)          |  |  | *    |  
|José E. González                                                 |                                                                                                           |                      | 54,501     | (12)          |  |  | *    |  
|José A. Segrera                                                  |                                                                                                           |                      | 50,001     | (12)          |  |  | *    |  
|All directors and executive officers as a group
    (12 persons) |                                                                                                           |                      | 44,066,762 |               |  |  | 20.8 | %
|5% Stockholders                                                  |                                                                                                           |                      |            |               |  |  |      |  
|Vistagreen Holdings (Bahamas Limited)                            |                                                                                                           |                      | 29,909,128 | (13)          |  |  | 14.6 | %
|                                                                 | Charlotte House
    Charlotte Street, PO Box N-65
    Nassau Bahamas                                      |                      |            |               |  |  |      |   | 
|Paradise Stream Delaware LLC                                     |                                                                                                           |                      | 25,000,000 | (13)          |  |  | 12.2 | %
|                                                                 | c/o Corporate Service Company
    2711 Centerville Road
    Suite 400
    Wilmington, Delaware 19808-1645 |                      |            |               |  |  |      |   | 






| |   |                         
| | - | ------------------------
| | * | Represents less than 1%.

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | A person is deemed to be the beneficial owner of
    securities that can be acquired by such person within
    60 days from June 28, 2002 upon the exercise of
    convertible debentures, options or warrants. Each beneficial
    owners percentage ownership is determined by assuming that
    convertible debentures, options and warrants that are held by
    that person, but not those held by any other person, and that
    are exercisable within 60 days from June 28, 2002 have
    been exercised.
| | (2) | Includes shares to which Mr. Medina has sole
    voting and investment power or shares voting and investment
    power with his spouse. Also includes 895,277 shares of common
    stock underlying convertible debentures and 134,000 shares of
    common stock underlying options.                                                                                                                                                                                                                             
| | (3) | Does not include 50,000 shares held in trust for
    the benefit of Mr. Wrights grandchildren, with respect to
    which Mr. Wright disclaims any beneficial ownership.
    Includes 3,334,000 shares of common stock underlying options and
    323,373 shares of common stock underlying warrants.                                                                                                                                                                                                             

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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (4) | Includes 1,154,201 shares of common stock
    underlying convertible debentures which are held by a trust with
    respect to which Mr. Amore is a general partner and with
    respect to which holder disclaims any beneficial ownership
    except as to the extent of his pecuniary interest therein.
    Includes 4,000 shares owned by Mr. Amores brother,
    over which Mr. Amore has investment control and 134,000
    shares of common stock underlying options. Includes 610,909
    shares of common stock held by the same trust, with respect to
    which Mr. Amore disclaims beneficial ownership except to
    the extent of his pecuniary interest therein. Does not include
    477,074 shares held in a trust for the benefit of Mr.
    Amores grandchildren, with respect to which holder
    disclaims any beneficial ownership therein.
| | (5) | Includes 205,810 shares of common stock
    underlying convertible debentures and 169,001 shares of common
    stock underlying options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (6) | Includes 145,000 shares held indirectly by
    Mr. Rosenfeld and 134,000 shares of common stock underlying
    options. Does not include 49,189 shares held by
    Mr. Rosenfelds children and mother, with respect to
    which holder disclaims any beneficial ownership.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (7) | Includes 30,000 shares owned by
    Mr. Starrs wife and 8,000 shares owned by
    Mr. Starrs children. Also includes 100,000 shares of
    common stock underlying warrants and 134,000 shares of common
    stock underlying options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (8) | Includes 80,843 shares of common stock underlying
    convertible debentures and 150,000 shares of common stock
    underlying options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (9) | Includes shares to which Mr. Figueres-Olsen
    has sole voting and investment power or shares voting and
    investment power with his spouse and 134,000 shares of common
    stock underlying options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

|     |                                                                                                                                                                                                                                         
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Includes 160,668 shares of common stock
    underlying options.                                                                                                                                                                         
|(11) | Includes 134,000 shares of common stock
    underlying options.                                                                                                                                                                         
|(12) | Includes 50,001 shares of common stock
    underlying options.                                                                                                                                                                          
|(13) | The information set forth herein is based upon
    the most recent Schedule 13D (and any amendments thereto)
    filed with the SEC and, accordingly, may not reflect the
    owners respective holdings as of the date of this report.

Equity Compensation Plan Information

This table summarizes share and exercise price
information about our equity compensation plans as of
March 31, 2002.

|                                                               |  |                      |            |                      |  |                       |        |  |  |  |           | 
|-------------------------------------------------------------- |  | -------------------- | ---------- | -------------------- |  | --------------------- | ------ |  |  |  | --------- | 
|                                                               |  |                      |            | Weighted average     |  | Number of securities 
|                                                               |  |                      |            | exercise price of    |  | available for future 
|                                                               |  | Number of securities |            | outstanding options, |  | issuance under equity
|Plan Category                                                  |  | to be issued         |            | warrants and rights  |  | compensation plans   
|                                                               |  |                      |            |                      |  |                      
|Equity compensation plans approved by security
    holders     |  |                      | 12,554,901 |                      |  | $                     | 1.9844 |  |  |  | 6,445,099 | 
|Equity compensation plans not approved by
    security holders |  |                      | 900,000    |                      |  | $                     | 0.6700 |  |  |  | N/A       | 



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

In May 2002, we received a $1.5 million
short-term loan at a 10% interest rate from Manuel D. Medina,
our Chief Executive Officer.

In April 2002, we received a binding commitment
from a group that includes two of our directors 
Guillermo Amore and Miguel Rosenfeld for the purchase of 10
million shares of common stock at $.75 per share. In May 2002,
the transaction was completed by receiving $3.6 million in cash
and the conversion of $3.9 million in short term promissory
notes to equity.

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

34



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##### 



and (ii) commit to accelerate the maturity
date of those personal loans to December 31, 2001.
Subsequent to September 2001, Mr. Medina and the bank
changed the maturity date on the personal loans, first to
December 31, 2001 and later to July 1, 2002.
Mr. Medina also agreed to subordinate debt that we owed to
Mr. Medina in the event of our default under the credit
facility. Mr. Medina has repaid part of those personal
loans to the bank through liquidation of the $5.0 million
certificate of deposit in January 2002 leaving an outstanding
principal balance of approximately $5.4 million and he
intends to exercise his right under such personal loan
agreements to extend their maturity date from July 1, 2002
to December 31, 2002.


On September 5, 2001, in consideration of
Mr. Medina agreeing to repay his indebtedness to the bank
earlier than otherwise required, pledging the certificate of
deposit to the bank and personally guaranteeing the
$48 million credit facility and approximately
$21 million of construction payables, we entered into an
amended and restated employment agreement with him. Under the
terms of the amended and restated employment agreement we will
indemnify Mr. Medina from any personal liability related to his
guarantees of any of our debt, use commercially reasonable
efforts to relieve Mr. Medina of all his guarantees of our debt,
provide up to $6.5 million of cash collateral to the bank should
Mr. Medina be unable to repay the personal loans when due
and provide a non interest-bearing $5.0 million loan to
Mr. Medina for as long as his guarantees of our debt exist.
If the promissory note becomes in default, we have the right of
offset against all amounts payable by us to Mr. Medina,
which is approximately $2.2 million as of March 31,
2002. The note is shown as an adjustment to equity.
Additionally, as long as Mr. Medinas guarantees of
our debt exist, we have agreed to nominate Mr. Medina to our
Board of Directors and not remove Mr. Medina, unless for
good cause, or remove any of our officers without
Mr. Medinas consent. There was no change in the
amount or timing of Mr. Medinas cash or non-cash
compensation in connection with these agreements, nor did
Mr. Medina receive any guarantee fee or other fees in
connection with his guaranteeing our indebtedness. We do not
anticipate funding the $6.5 million of cash collateral.

The $48 million credit facility and the
promissory note from Mr. Medina have been approved by our
Board of Directors.

In July 2002, the terms of non-interest bearing
note were amended. As amended, the note has a maturity date of
December 5, 2004 and bears interest subsequent to
September 5, 2002 at the applicable federal rate. Interest
is due in bi-annual installments. On a quarterly basis, we will
review the collectibility of this note. As of July 9, 2002,
we owed Mr. Medina approximately $3.7 million. We have
the right to withhold payment to Mr. Medina of $1,375,000
in amounts due.

PART IV



|          |                                                                      
|--------- | ---------------------------------------------------------------------
|ITEM  14. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
    REPORTS ON FORM 8-K.

(a) 1 and 2. The financial statements listed
in the accompanying Table of Contents to Consolidated Financial
Statements and Financial Statement Schedule on page F-1 herein
are filed as part of this report.

3. The exhibits
listed in the Exhibit Index are filed with or incorporated
by reference as part of this report.

(b) No reports were filed on Form 8-K
during the fourth quarter of the fiscal year ended
March 31, 2001.

35



---



##### 



(c) The following exhibits, which are
furnished with this Annual Report or incorporated herein by
reference, are filed as part of this Annual Report.

|        |       |                     |  |                                                                                                                                                                                                                                            
|------- | ----- | ------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                    
|Number  |       | Exhibit Description
|        |       |                    
|        | 2.1   |                     |  | Agreement for Sale of Assets by and between ITV
    Communications, Inc. and Netmatics, Inc., dated January 11,
    1996, and Promissory Note and Security Agreement dated
    January 16, 1996(1)                                         
|        | 2.2   |                     |  | Agreement of Merger between AVIC Group
    International, Inc., a Colorado corporation, with and into AVIC
    Group International, Inc., a Delaware corporation dated
    July 10, 1996(2)                                                
|        | 2.3   |                     |  | Agreement and Plan of Merger by and between
    Terremark Holdings, Inc. and AmTec, Inc., dated as of
    November 24, 1999, as amended by that certain Amendment to
    Agreement and Plan of Merger, dated as of February 11,
    2000(3)
|        | 2.4   |                     |  | Letter agreement dated January 12, 2001
    among MP Telecom, LLC, Terremark Worldwide, Inc., Clifford J.
    Preminger, Thomas M. Mulroy and Manuel Medina(4)                                                                             
|        | 3.1   |                     |  | Certificate of Merger of Terremark Holdings, Inc.
    with and into AmTec, Inc.(5)                                                                                                                                                         
|        | 3.2   |                     |  | Restated Certificate of Incorporation of the
    Company(5)                                                                                                                                                                                
|        | 3.3   |                     |  | Restated Bylaws of the Company (5)                                                                                                                                                                                                         
|        | 3.4   |                     |  | Certificate of Designations of Preferences of
    Series G Convertible Preferred Stock of the Company(5)                                                                                                                                   
|        | 3.5   |                     |  | Certificate of Designations of Preferences of
    Series H Convertible Preferred Stock of the Company(6)                                                                                                                                   
|        | 4.2   |                     |  | Specimen Stock Certificate(1)                                                                                                                                                                                                              
|        | 4.3   |                     |  | Form of 13% Subordinated Convertible Debenture,
    due December 31, 2005(7)                                                                                                                                                               
|        | 4.4   |                     |  | Form of Warrant for the Purchase of Shares of
    Common Stock(8)                                                                                                                                                                          
|        | 4.5   |                     |  | Form of 13.125% Subordinated Convertible
    Debenture, due August 30, 2004*                                                                                                                                                               
|        | 10.1  |                     |  | 1995 Stock Option Plan(9)                                                                                                                                                                                                                  
|        | 10.2  |                     |  | 1996 Stock Option Plan(9)                                                                                                                                                                                                                  
|        | 10.3  |                     |  | Real Property Lease between Lexreal Associates
    and the Company dated May 8, 1995(9)                                                                                                                                                    
|        | 10.4  |                     |  | Form of Indemnification Agreement for directors
    and officers of the Company(2)                                                                                                                                                         
|        | 10.5  |                     |  | Employment Agreement with Joseph R. Wright(10)                                                                                                                                                                                             
|        | 10.6  |                     |  | Employment Agreement with Manuel Medina(11)                                                                                                                                                                                                
|        | 10.7  |                     |  | Amendment to Employment Agreement with Manuel
    Medina(12)                                                                                                                                                                               
|        | 10.8  |                     |  | Employment Agreement with Brian Goodkind(13)                                                                                                                                                                                               
|        | 10.9  |                     |  | Amended and Restated Credit Agreement between the
    Company and Ocean Bank, dated September 5, 2001(14)                                                                                                                                  
|        | 10.10 |                     |  | $5 million Promissory Note from Manuel D. Medina
    to the Company dated September 5, 2001*                                                                                                                                               
|        | 10.11 |                     |  | Share Purchase Agreement between the Company and
    NAP de Las Americas  Madrid, S. A. dated
    July 13, 2002*                                                                                                                          
|        | 10.12 |                     |  | Form of Promissory by Company to Officers or
    Directors*                                                                                                                                                                                
|        | 10.13 |                     |  | Employment Agreement with José A. Segrera*                                                                                                                                                                                                 
|        | 10.14 |                     |  | Employment Agreement with José E.
    González*                                                                                                                                                                                            
|        | 21    |                     |  | Subsidiaries of the Company*                                                                                                                                                                                                               






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

| |     |                                                                                                  
| | --- | -------------------------------------------------------------------------------------------------
| | (1) | Previously filed as part of the Companys
    Current Report on Form 8-K dated March 6, 1997.    
| | (2) | Previously filed as part of the Companys
    Definitive Proxy Statement filed on April 18, 1996.
| | (3) | Previously filed as part of the Companys
    Definitive Proxy Statement filed on March 24, 2000.
| | (4) | Previously filed as part of the Companys
    Current Report on Form 8-K dated February 28, 2001.

36



---



##### 



| |     |                                                                                                                                                     
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | (5) | Previously filed as an exhibit to the
    Companys Registration Statement on Form S-3 filed
    May 15, 2000.                                      
| | (6) | Previously filed as exhibit 3.5 to the
    Companys Annual Report on Form 10-K filed on
    July 16, 2001.                                         
| | (7) | Previously filed as exhibit 4.1 to the
    Companys Quarterly Report on Form 10-Q filed on
    February 14, 2001.                                  
| | (8) | Previously filed as exhibit 4.2 to the
    Companys Quarterly Report on Form 10-Q filed on
    February 14, 2001.                                  
| | (9) | 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) | Previously filed as exhibit 10.6 to the
    Companys Annual Report on Form 10-KSB filed
    June 29, 2000.        
|(11) | Previously filed as exhibit 10.6 to the
    Companys Annual Report on Form 10-K filed on
    July 16, 2001.       
|(12) | Previously filed as exhibit 10.1 to the
    Companys Quarterly report on Form 10-Q filed on
    November 14, 2001.
|(13) | Previously filed as exhibit 10.2 to the
    Companys Quarterly Report on Form 10-Q filed on
    November 14, 2000.
|(14) | Previously filed as exhibit 10.2 to the
    Companys Quarterly report on Form 10-Q filed on
    November 14, 2001.

37



---



##### 



SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 15th day of July
2002.



| |                          
| | -------------------------
| | TERREMARK WORLDWIDE, INC.



| |     |                     
| | --- | --------------------
| | By: | /s/ MANUEL D. MEDINA

| |                                                                                     
| | ------------------------------------------------------------------------------------
| |                                                                                     
| | Manuel D. Medina, Chairman of the Board, 
     President and Chief Executive Officer



| |     |                    
| | --- | -------------------
| | By: | /s/ JOSÉ A. SEGRERA

| |                        
| | -----------------------
| |                        
| | Chief Financial Officer

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the dates indicated:

|                                                       |  |                                                                                                |  |              
|------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------- |  | -------------
|Signature                                              |  | Title                                                                                          |  | Date         
|                                                       |  |                                                                                                |  |              
|/s/ MANUEL D. MEDINAManuel D. Medina                   |  | Chairman of the Board, President and Chief
    Executive Officer (principal executive officer) |  | July 15, 2002
|/s/ GUILLERMO AMOREGuillermo Amore                     |  | Director                                                                                       |  | July 15, 2002
|/s/ TIMOTHY ELWESTimothy Elwes                         |  | Director                                                                                       |  | July 15, 2002
|/s/ JOSÉ MARIA FIGUERES-OLSENJosé Maria Figueres-Olsen |  | Director                                                                                       |  | July 15, 2002
|/s/ MARVIN S. ROSENMarvin S. Rosen                     |  | Director                                                                                       |  | July 15, 2002
|/s/ MIGUEL J. ROSENFELDMiguel J. Rosenfeld             |  | Director                                                                                       |  | July 15, 2002
|/s/ JOEL A. SCHLEICHERJoel A. Schleicher               |  | Director                                                                                       |  | July 15, 2002
|/s/ KENNETH I. STARRKenneth I. Starr                   |  | Director                                                                                       |  | July 15, 2002
|/s/ JOSEPH R. WRIGHT, JR.Joseph R. Wright, Jr.         |  | Director                                                                                       |  | July 15, 2002
|/s/ JOSÉ A. SEGRERAJosé A. Segrerá                     |  | Chief Financial Officer                                                                        |  | July 15, 2002

38



---



##### 



REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS

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

In our opinion, the accompanying consolidated
balance sheets and the related consolidated statements of
operations, of changes in stockholders (deficit) equity
and of cash flows present fairly, in all material respects, the
financial position of Terremark Worldwide, Inc. and its
subsidiaries at March 31, 2002 and 2001, and the results of
their operations and their cash flows for each of the three
years in the period ended March 31, 2002 in conformity with
accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of
the Companys management; our responsibility is to express
an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.

The accompanying financial statements have been
prepared assuming the Company will continue as a going concern.
As discussed in Note 2 to the financial statements, the
Company has suffered recurring losses from operations and has a
net liquidity deficit that raise substantial doubt about its
ability to continue as a going concern. Managements plans
in regard to these matters are also described in Note 2.
The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

PRICEWATERHOUSECOOPERS LLP

Fort Lauderdale, Florida

July 12, 2002


F-1



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

|                                                                                                                                                                              |                                                          |           |              |             |   |   |              |            | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | --------- | ------------ | ----------- | - | - | ------------ | ---------- | 
|                                                                                                                                                                              |                                                          |          
|                                                                                                                                                                              |                                                          | March 31,
|                                                                                                                                                                              |                                                          |          
|                                                                                                                                                                              |                                                          | 2002      |              | 2001       
|                                                                                                                                                                              |                                                          |           |              |            
|ASSETS                                                                                                                                                                        |                                                          |           |              |             |   |   |              |           
|Current assets:                                                                                                                                                               |                                                          |           |              |             |   |   |              |           
|Cash and cash equivalents                                                                                                                                                     |                                                          | $         | 283,078      |             |   | $ | 5,574,687    |           
|Restricted cash                                                                                                                                                               |                                                          |           | 757,573      |             |   |   | 32,039       |           
|Accounts receivable, net of allowance for
    doubtful accounts of $234,767 and $0, respectively                                                                              |                                                          |           | 1,621,978    |             |   |   | 2,871,119    |           
|Contracts receivable                                                                                                                                                          |                                                          |           | 1,362,836    |             |   |   | 4,637,916    |           
|Real estate held for sale                                                                                                                                                     |                                                          |           |             |             |   |   | 12,860,657   |           
|                                                                                                                                                                              |                                                          |           |              |             |   |   |              |           
|                                                                                                                                                                              | Total current assets                                     |           |              | 4,025,465   |   |   |              | 25,976,418 | 
|Investments in TECOTA, at cost                                                                                                                                                |                                                          |           | 489,855      |             |   |   | 489,855      |           
|Property and equipment, net                                                                                                                                                   |                                                          |           | 61,088,987   |             |   |   | 25,065,989   |           
|Other assets                                                                                                                                                                  |                                                          |           | 2,199,454    |             |   |   | 2,823,579    |           
|Identifiable intangible assets and goodwill, net
    of accumulated amortization of $4,773,029 and $1,270,462,
    respectively                                               |                                                          |           | 13,220,170   |             |   |   | 23,712,737   |           
|                                                                                                                                                                              |                                                          |           |              |             |   |   |              |           
|                                                                                                                                                                              | TOTAL ASSETS                                             |           | $            | 81,023,931  |   |   | $            | 78,068,578 | 
|                                                                                                                                                                              |                                                          |           |              |             |   |   |              |           
|                                                                                                                                                                             
|LIABILITIES AND STOCKHOLDERS (DEFICIT)
    EQUITY                                                                                                                            |                                                          |           |              |             |   |   |              |           
|Current liabilities:                                                                                                                                                          |                                                          |           |              |             |   |   |              |           
|Current portion notes payable (includes
    $4,250,000 and $-0- due to related parties)                                                                                       |                                                          | $         | 50,752,209   |             |   | $ | 13,317,662   |           
|Construction payables  property and
    equipment                                                                                                                            |                                                          |           | 26,250,729   |             |   |   | 16,960,452   |           
|Trade payables and other liabilities                                                                                                                                          |                                                          |           | 10,240,698   |             |   |   | 16,016,521   |           
|Current portion of capital lease obligations                                                                                                                                  |                                                          |           | 2,079,294    |             |   |   | 840,106      |           
|Interest payable                                                                                                                                                              |                                                          |           | 2,347,742    |             |   |   | 323,153      |           
|Net liabilities of discontinued operations                                                                                                                                    |                                                          |           | 1,394,010    |             |   |   | 2,700,847    |           
|                                                                                                                                                                              |                                                          |           |              |             |   |   |              |           
|                                                                                                                                                                              | Total current liabilities                                |           |              | 93,064,682  |   |   |              | 50,158,741 | 
|Convertible debt (includes $4,450,000 and
    $3,875,000 due to related parties)                                                                                              |                                                          |           | 30,655,000   |             |   |   | 15,855,382   |           
|Notes payable, less current portion (includes
    $2,950,000 and $-0- due to related parties)                                                                                 |                                                          |           | 3,128,091    |             |   |   | 363,181      |           
|Capital lease, less current portion                                                                                                                                           |                                                          |           | 2,136,076    |             |   |   | 243,738      |           
|Deferred revenue                                                                                                                                                              |                                                          |           | 815,826      |             |   |   | 284,693      |           
|                                                                                                                                                                              |                                                          |           |              |             |   |   |              |           
|                                                                                                                                                                              | TOTAL LIABILITIES                                        |           |              | 129,799,675 |   |   |              | 66,905,735 | 
|                                                                                                                                                                              |                                                          |           |              |             |   |   |              |           
|Series H redeemable convertible preferred
    stock: $.001 par value, 294 and -0-shares authorized, issued and
    outstanding, respectively                                  |                                                          |           | 500,000      |             |   |   |             |           
|                                                                                                                                                                              |                                                          |           |              |             |   |   |              |           
|Series G convertible preferred stock: $.001
    par value, 20 and -0-shares authorized, issued and outstanding,
    respectively                                              |                                                          |           | 1            |             |   |   | 1            |           
|Common stock: $.001 par value, 300,000,000 shares
    authorized; 200,882,250 and 200,507,179 shares issued, of which
    1,400,000 shares are held in treasury, respectively |                                                          |           | 200,882      |             |   |   | 200,507      |           
|Paid in capital                                                                                                                                                               |                                                          |           | 125,652,119  |             |   |   | 125,339,544  |           
|Retained deficit                                                                                                                                                              |                                                          |           | (173,096,835 | )           |   |   | (115,724,620 | )         
|Common stock subscriptions                                                                                                                                                    |                                                          |           | 950,000      |             |   |   |             |           
|Common stock warrants                                                                                                                                                         |                                                          |           | 2,879,413    |             |   |   | 2,059,398    |           
|Common stock options                                                                                                                                                          |                                                          |           | 1,566,801    |             |   |   | 1,716,138    |           
|Less cost of shares of common stock in treasury                                                                                                                               |                                                          |           | (2,428,125   | )           |   |   | (2,428,125   | )         
|Note receivable  related party (Note
    10)                                                                                                                                 |                                                          |           | (5,000,000   | )           |   |   |             |           
|Commitments and contingencies (Note 15)                                                                                                                                       |                                                          |           |              |             |   |   |              |           
|                                                                                                                                                                              |                                                          |           |              |             |   |   |              |           
|                                                                                                                                                                              | TOTAL STOCKHOLDERS (DEFICIT) EQUITY                     |           |              | (49,275,744 | ) |   |              | 11,162,843 | 
|                                                                                                                                                                              |                                                          |           |              |             |   |   |              |           
|                                                                                                                                                                              | TOTAL LIABILITIES AND STOCKHOLDERS
    (DEFICIT) EQUITY |           | $            | 81,023,931  |   |   | $            | 78,068,578 | 
|                                                                                                                                                                              |                                                          |           |              |             |   |   |              |           

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

F-2



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                                        |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |            |            |  
|------------------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------- | ----------- | ----------- | ---------- | ---- | ------------ | ----------- | ---------- | - | ---------- | ---------- | ---------- | -
|                                                        |                                                                                 |                                      
|                                                        |                                                                                 | For the Twelve Months Ended March 31,
|                                                        |                                                                                 |                                      
|                                                        |                                                                                 | 2002                                  |             | 2001        |            | 2000
|                                                        |                                                                                 |                                       |             |             |            |     
|Revenues                                                |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |           
|                                                        | Data center                                                                     |                                       | $           | 3,215,897   |            |      | $            | 252,906     |            |   | $          |           |           
|                                                        | Real estate sales                                                               |                                       |             |            |            |      |              | 2,752,748   |            |   |            | 11,008,332 |           
|                                                        | Development, commission and construction fees                                   |                                       |             | 3,218,330   |            |      |              | 12,484,272  |            |   |            | 2,563,647  |           
|                                                        | Management fees                                                                 |                                       |             | 1,183,570   |            |      |              | 2,212,326   |            |   |            | 1,069,176  |           
|                                                        | Construction contracts                                                          |                                       |             | 8,254,687   |            |      |              | 22,445,156  |            |   |            | 749,262    |           
|                                                        |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |           
|                                                        |                                                                                 | Operating revenues                    |             |             | 15,872,484 |      |              |             | 40,147,408 |   |            |            | 15,390,417 |  
|                                                        |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |           
|Expenses                                                |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |           
|                                                        | Data center operations                                                          |                                       |             | 11,230,513  |            |      |              | 1,223,112   |            |   |            |           |           
|                                                        | Start up costs  data centers                                                   |                                       |             | 3,383,127   |            |      |              | 6,507,517   |            |   |            |           |           
|                                                        | Cost of real estate sold                                                        |                                       |             |            |            |      |              | 2,134,572   |            |   |            | 8,867,641  |           
|                                                        | Construction contract expenses                                                  |                                       |             | 7,397,524   |            |      |              | 20,347,165  |            |   |            | 554,610    |           
|                                                        | General and administrative                                                      |                                       |             | 15,561,042  |            |      |              | 19,929,438  |            |   |            | 7,917,793  |           
|                                                        | Sales and marketing                                                             |                                       |             | 3,621,176   |            |      |              | 2,768,890   |            |   |            | 2,933,125  |           
|                                                        | Depreciation and amortization                                                   |                                       |             | 7,257,151   |            |      |              | 3,257,292   |            |   |            | 81,264     |           
|                                                        | Impairment of long-lived assets                                                 |                                       |             | 18,973,670  |            |      |              | 4,155,178   |            |   |            | 443,627    |           
|                                                        |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |           
|                                                        |                                                                                 | Operating expenses                    |             |             | 67,424,203 |      |              |             | 60,323,164 |   |            |            | 20,798,060 |  
|                                                        |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |           
|                                                        | Loss from operations                                                            |                                       |             | (51,551,719 | )          |      |              | (20,175,756 | )          |   |            | (5,407,643 | )         
|                                                        |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |           
|Other income (expense)                                  |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |           
|                                                        | Interest income                                                                 |                                       |             | 97,237      |            |      |              | 505,743     |            |   |            | 222,062    |           
|                                                        | Interest expense                                                                |                                       |             | (9,750,473  | )          |      |              | (1,097,683  | )          |   |            | (804,785   | )         
|                                                        | Other (expense) income                                                          |                                       |             | (326,247    | )          |      |              | (570,749    | )          |   |            | 374,803    |           
|                                                        | Dividend on preferred stock                                                     |                                       |             | (26,741     | )          |      |              | (34,806     | )          |   |            | (417,669   | )         
|                                                        | Gain on sale of real estate held for sale                                       |                                       |             | 4,185,728   |            |      |              |            |            |   |            |           |           
|                                                        |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |           
|                                                        |                                                                                 | Total other expense                   |             |             | (5,820,496 | )    |              |             | (1,197,495 | ) |            |            | (625,589   | )
|                                                        |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |           
|                                                        | Loss from continuing operations before income
    taxes                         |                                       |             | (57,372,215 | )          |      |              | (21,373,251 | )          |   |            | (6,033,232 | )         
|Income taxes                                            |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |           
|                                                        | Current tax expense                                                             |                                       |             |            |            |      |              |            |            |   |            |           |           
|                                                        | Deferred tax                                                                    |                                       |             |            |            |      |              |            |            |   |            |           |           
|                                                        |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |           
|                                                        |                                                                                 | Total income tax expense              |             |             |           |      |              |             |           |   |            |            |           |  
|                                                        |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |           
|Loss from continuing operations                         |                                                                                 |                                       | (57,372,215 | )           |            |      | (21,373,251  | )           |            |   | (6,033,232 | )         
|                                                        |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |           
|                                                        | Loss from discontinued operations, net of income
    taxes of $-0-              |                                       |             |            |            |      |              | (21,499,587 | )          |   |            |           |           
|                                                        | Loss on disposition of discontinued operations,
    net of income taxes of $-0- |                                       |             |            |            |      |              | (61,126,824 | )          |   |            |           |           
|                                                        |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |           
|Net loss                                                |                                                                                 | $                                     | (57,372,215 | )           |            | $    | (103,999,662 | )           |            | $ | (6,033,232 | )         
|                                                        |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |           
|Basic and diluted (loss) earnings per common
    share: |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |           
|                                                        | Continuing operations                                                           |                                       | $           | (.29        | )          |      | $            | (.11        | )          |   | $          | (.09       | )         
|                                                        | Discontinued operations                                                         |                                       |             |            |            |      |              | (.44        | )          |   |            |           |           
|                                                        |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |           
|                                                        | Net loss                                                                        |                                       | $           | (.29        | )          |      | $            | (.55        | )          |   | $          | (.09       | )         
|                                                        |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |           
|                                                        | Weighted average common shares outstanding                                      |                                       |             | 199,243,146 |            |      |              | 188,550,498 |            |   |            | 70,685,845 |           
|                                                        |                                                                                 |                                       |             |             |            |      |              |             |            |   |            |           

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

F-3



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS (DEFICIT) EQUITY

|                                         |                               |                      |           |                 |   |            |             |            |  |               |         |          |  |         |             |            |  |                  |         |          |  |   |           |           |  |   |           |   |  |   |            |   |  |   |            |   |  |   |              |   | 
|---------------------------------------- | ----------------------------- | -------------------- | --------- | --------------- | - | ---------- | ----------- | ---------- |  | ------------- | ------- | -------- |  | ------- | ----------- | ---------- |  | ---------------- | ------- | -------- |  | - | --------- | --------- |  | - | --------- | - |  | - | ---------- | - |  | - | ---------- | - |  | - | ------------ | - | 
|                                         |                               |                     
|                                         |                               | Stockholders Equity
|                                         |                               |                     
|                                         |                               |                      |           |                 |   |           
|                                         |                               |                      |           | Common Stock    |   |           
|                                         |                               |                      |           | Par Value $.001 |   |           
|                                         |                               |                      |           |                 |   | Additional |             |            |  | Common        |         | Common   |  |        
|                                         |                               | Preferred            |           | Issued          |   |            |             | Paid-In    |  | Stock         |         | Stock    |  | Stock   |             | Treasury   |  | Note Receivable- |         | Retained
|                                         |                               | Stock                |           | Shares          |   | Amount     |             | Capital    |  | Subscriptions |         | Warrants |  | Options |             | Stock      |  | Related Party    |         | Deficit 
|                                         |                               |                      |           |                 |   |            |             |            |  |               |         |          |  |         |             |            |  |                  |         |         
|Balance at March 31, 1999                |                               | $                    | 4,176,693 |                 |   |            | 70,685,845  |            |  | $             | 70,686  |          |  | $       | 7,954,010   |            |  | $                |        |          |  | $ |          |           |  | $ |          |   |  | $ |           |   |  | $ |           |   |  | $ | (5,691,726   | )
|Net loss                                 |                               |                      |           |                 |   |            |             |            |  |               |         |          |  |         |             |            |  |                  |         |          |  |   |           |           |  |   |           |   |  |   |            |   |  |   |            |   |  |   | (6,033,232   | )
|                                         |                               |                      |           |                 |   |            |             |            |  |               |         |          |  |         |             |            |  |                  |         |          |  |   |           |           |  |   |           |   |  |   |            |   |  |   |            |   |  |   |              |  
|Balance at March 31, 2000                |                               |                      | 4,176,693 |                 |   |            | 70,685,845  |            |  |               | 70,686  |          |  |         | 7,954,010   |            |  |                  |        |          |  |   |          |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   | (11,724,958  | )
|Effect of AmTec merger:                  |                               |                      |           |                 |   |            |             |            |  |               |         |          |  |         |             |            |  |                  |         |          |  |   |           |           |  |   |           |   |  |   |            |   |  |   |            |   |  |   |              |  
|                                         | Conversion of preferred stock |                      |           | (4,176,693      | ) |            |             | 7,853,985  |  |               |         | 7,854    |  |         |             | 4,168,839  |  |                  |         |         |  |   |           |          |  |   |           |  |  |   |            |  |  |   |            |  |  |   |              |  | 
|                                         | Assumption of AmTec equity    |                      |           | 1               |   |            |             | 38,289,500 |  |               |         | 38,289   |  |         |             | 46,923,782 |  |                  |         |         |  |   |           | 1,687,038 |  |   |           |  |  |   |            |  |  |   |            |  |  |   |              |  | 
|Sale of common stock                     |                               |                      |          |                 |   |            | 68,722,349  |            |  |               | 68,722  |          |  |         | 28,054,203  |            |  |                  |        |          |  |   |          |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Common stock issued in acquisitions      |                               |                      |          |                 |   |            | 14,412,500  |            |  |               | 14,413  |          |  |         | 37,531,045  |            |  |                  |        |          |  |   |          |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Exercise of warrants                     |                               |                      |          |                 |   |            | 54,000      |            |  |               | 54      |          |  |         | 190,161     |            |  |                  |        |          |  |   | (21,640   | )         |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Exercise of stock options                |                               |                      |          |                 |   |            | 489,000     |            |  |               | 489     |          |  |         | 517,504     |            |  |                  |        |          |  |   |          |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Warrants issued                          |                               |                      |          |                 |   |            |            |            |  |               |        |          |  |         |            |            |  |                  |        |          |  |   | 394,000   |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Stock options issued                     |                               |                      |          |                 |   |            |            |            |  |               |        |          |  |         |            |            |  |                  |        |          |  |   |          |           |  |   | 1,716,138 |   |  |   |           |   |  |   |           |   |  |   |             |  
|Treasury stock acquisitions              |                               |                      |          |                 |   |            |            |            |  |               |        |          |  |         |            |            |  |                  |        |          |  |   |          |           |  |   |          |   |  |   | (2,428,125 | ) |  |   |           |   |  |   |             |  
|Net loss                                 |                               |                      |          |                 |   |            |            |            |  |               |        |          |  |         |            |            |  |                  |        |          |  |   |          |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   | (103,999,662 | )
|                                         |                               |                      |           |                 |   |            |             |            |  |               |         |          |  |         |             |            |  |                  |         |          |  |   |           |           |  |   |           |   |  |   |            |   |  |   |            |   |  |   |              |  
|Balance at March 31, 2001                |                               |                      | 1         |                 |   |            | 200,507,179 |            |  |               | 200,507 |          |  |         | 125,339,544 |            |  |                  |        |          |  |   | 2,059,398 |           |  |   | 1,716,138 |   |  |   | (2,428,125 | ) |  |   |           |   |  |   | (115,724,620 | )
|Exercise of stock options                |                               |                      |          |                 |   |            | 115,000     |            |  |               | 115     |          |  |         | 40,135      |            |  |                  |        |          |  |   |          |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Forfeiture of stock options              |                               |                      |          |                 |   |            |            |            |  |               |        |          |  |         |            |            |  |                  |        |          |  |   |          |           |  |   | (169,337  | ) |  |   |           |   |  |   |           |   |  |   |             |  
|Warrants issued                          |                               |                      |          |                 |   |            |            |            |  |               |        |          |  |         |            |            |  |                  |        |          |  |   | 849,015   |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Exercise of warrants                     |                               |                      |          |                 |   |            | 100,000     |            |  |               | 100     |          |  |         | 29,900      |            |  |                  |        |          |  |   |          |           |  |   | (29,000   | ) |  |   |           |   |  |   |           |   |  |   |             |  
|Stock options issued                     |                               |                      |          |                 |   |            |            |            |  |               |        |          |  |         |            |            |  |                  |        |          |  |   |          |           |  |   | 20,000    |   |  |   |           |   |  |   |           |   |  |   |             |  
|Conversion of debt                       |                               |                      |          |                 |   |            | 160,071     |            |  |               | 160     |          |  |         | 242,540     |            |  |                  |        |          |  |   |          |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Common stock subscriptions               |                               |                      |          |                 |   |            |            |            |  |               |        |          |  |         |            |            |  |                  | 950,000 |          |  |   |          |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Funding of note receivable-related party |                               |                      |          |                 |   |            |            |            |  |               |        |          |  |         |            |            |  |                  |        |          |  |   |          |           |  |   |          |   |  |   |           |   |  |   | (5,000,000 | ) |  |   |             |  
|Net loss                                 |                               |                      |          |                 |   |            |            |            |  |               |        |          |  |         |            |            |  |                  |        |          |  |   |          |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   | (57,372,215  | )
|                                         |                               |                      |           |                 |   |            |             |            |  |               |         |          |  |         |             |            |  |                  |         |          |  |   |           |           |  |   |           |   |  |   |            |   |  |   |            |   |  |   |              |  
|Balance at March 31, 2002                |                               | $                    | 1         |                 |   |            | 200,882,250 |            |  | $             | 200,882 |          |  | $       | 125,652,119 |            |  | $                | 950,000 |          |  | $ | 2,879,413 |           |  | $ | 1,566,801 |   |  | $ | (2,428,125 | ) |  | $ | (5,000,000 | ) |  | $ | (173,096,835 | )
|                                         |                               |                      |           |                 |   |            |             |            |  |               |         |          |  |         |             |            |  |                  |         |          |  |   |           |           |  |   |           |   |  |   |            |   |  |   |            |   |  |   |              |  

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

F-4



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                               |                                                                                |                                                 |                                            |                                                         |            |            |             |              |            |            |             |            |         |            |            |  
|---------------------------------------------- | ------------------------------------------------------------------------------ | ----------------------------------------------- | ------------------------------------------ | ------------------------------------------------------- | ---------- | ---------- | ----------- | ------------ | ---------- | ---------- | ----------- | ---------- | ------- | ---------- | ---------- | -
|                                               |                                                                                |                                                
|                                               |                                                                                | For the Twelve Months Ended                    
|                                               |                                                                                | March 31,                                      
|                                               |                                                                                |                                                
|                                               |                                                                                | 2002                                            |                                            | 2001                                                    |            | 2000      
|                                               |                                                                                |                                                 |                                            |                                                         |            |           
|Cash flows from operating activities:          |                                                                                |                                                 |                                            |                                                         |            |            |             |              |            |            |             |           
|                                               | Net loss                                                                       |                                                 | $                                          | (57,372,215                                             | )          |            | $           | (103,999,662 | )          |            | $           | (6,033,232 | )      
|                                               | Adjustments to reconcile net loss to net cash
    used in operating activities |                                                 |                                            |                                                         |            |            |             |              |            |            |             |            |        
|                                               |                                                                                | Discontinued operations                         |                                            |                                                         |           |            |             |              | 82,626,411 |            |             |            |        |           
|                                               |                                                                                | Depreciation and amortization of capital leases |                                            |                                                         | 3,754,584  |            |             |              | 408,274    |            |             |            | 81,264  |           
|                                               |                                                                                | Amortization of intangible assets and goodwill  |                                            |                                                         | 3,502,567  |            |             |              | 2,849,018  |            |             |            |        |           
|                                               |                                                                                | Amortization of loan costs to interest expense  |                                            |                                                         | 1,097,922  |            |             |              | 132,481    |            |             |            | 137,749 |           
|                                               |                                                                                | Bad debt                                        |                                            |                                                         | 234,767    |            |             |              |           |            |             |            |        |           
|                                               |                                                                                | Gain on sales of real estate held for sale      |                                            |                                                         | (4,185,728 | )          |             |              |           |            |             |            |        |           
|                                               |                                                                                | Loss on sale of property and equipment          |                                            |                                                         | 373,369    |            |             |              |           |            |             |            |        |           
|                                               |                                                                                | Other, net                                      |                                            |                                                         | (44,167    | )          |             |              | 164,167    |            |             |            |        |           
|                                               |                                                                                | Impairment of long-lived assets                 |                                            |                                                         | 18,973,670 |            |             |              | 4,155,178  |            |             |            | 443,627 |           
|                                               |                                                                                | (Increase) decrease in:                         |                                            |                                                         |            |            |             |              |            |            |             |            |         |           
|                                               |                                                                                |                                                 | Real estate inventories                    |                                                         |            |           |             |              |            | (1,063,351 | )           |            |         | 929,786    |           
|                                               |                                                                                |                                                 | Restricted cash                            |                                                         |            | (725,534   | )           |              |            | 504,737    |             |            |         | (212,335   | )         
|                                               |                                                                                |                                                 | Accounts receivable                        |                                                         |            | 1,014,374  |             |              |            | (3,982,744 | )           |            |         | 164,172    |           
|                                               |                                                                                |                                                 | Contracts receivable                       |                                                         |            | 3,275,080  |             |              |            | (2,312,896 | )           |            |         |           |           
|                                               |                                                                                |                                                 | Notes receivable                           |                                                         |            |           |             |              |            | 1,809,254  |             |            |         | (2,418,363 | )         
|                                               |                                                                                |                                                 | Other assets                               |                                                         |            | (285,764   | )           |              |            | (315,198   | )           |            |         | (263,702   | )         
|                                               |                                                                                | Increase (decrease) in:                         |                                            |                                                         |            |            |             |              |            |            |             |            |         |           
|                                               |                                                                                |                                                 | Trade payable and other liabilities        |                                                         |            | (7,305,823 | )           |              |            | 9,463,524  |             |            |         | 79,562     |           
|                                               |                                                                                |                                                 | Interest payable                           |                                                         |            | 2,024,589  |             |              |            | 250,239    |             |            |         | (351,312   | )         
|                                               |                                                                                |                                                 | Deferred revenue                           |                                                         |            | 531,133    |             |              |            | 284,693    |             |            |         | 22,721     |           
|                                               |                                                                                |                                                 | Net liabilities of discontinued operations |                                                         |            | (1,306,837 | )           |              |            | 2,700,847  |             |            |         |           |           
|                                               |                                                                                |                                                 |                                            |                                                         |            |            |             |              |            |            |             |           
|                                               |                                                                                |                                                 |                                            | Net cash used in continuing operations                  |            |            | (36,444,013 | )            |            |            | (6,325,028  | )          |         |            | (7,420,063 | )
|                                               |                                                                                |                                                 |                                            | Net cash used in discontinued operations                |            |            |            |              |            |            | (22,236,555 | )          |         |            |           |  
|                                               |                                                                                |                                                 |                                            |                                                         |            |            |             |              |            |            |             |           
|                                               |                                                                                |                                                 |                                            | Net cash used in operating activities                   |            |            | (36,444,013 | )            |            |            | (28,561,583 | )          |         |            | (7,420,063 | )
|                                               |                                                                                |                                                 |                                            |                                                         |            |            |             |              |            |            |             |           
|Cash flows from investing activities:          |                                                                                |                                                 |                                            |                                                         |            |            |             |              |            |            |             |           
|                                               | Purchase and development of property and equipment                             |                                                 |                                            | (45,785,047                                             | )          |            |             | (24,412,720  | )          |            |             | (745,409   | )      
|                                               | Cash paid in disposals                                                         |                                                 |                                            |                                                        |            |            |             | (900,000     | )          |            |             |           |        
|                                               | Investment in unconsolidated entities, net                                     |                                                 |                                            |                                                        |            |            |             | (4,202,004   | )          |            |             |           |        
|                                               | Proceeds from sale of real estate held for sale                                |                                                 |                                            | 17,046,385                                              |            |            |             | 55,781,259   |            |            |             |           |        
|                                               | Proceeds from sale of property and equipment                                   |                                                 |                                            | 30,000                                                  |            |            |             |             |            |            |             |           |        
|                                               | Cash acquired in acquisitions                                                  |                                                 |                                            |                                                        |            |            |             | 2,368,273    |            |            |             | 10,250     |        
|                                               |                                                                                |                                                 |                                            |                                                         |            |            |             |              |            |            |             |           
|                                               |                                                                                |                                                 |                                            | Net cash (used in) provided by investing
    activities |            |            | (28,708,662 | )            |            |            | 28,634,808  |            |         |            | (735,159   | )
|                                               |                                                                                |                                                 |                                            |                                                         |            |            |             |              |            |            |             |           
|Cash flows from financing activities:          |                                                                                |                                                 |                                            |                                                         |            |            |             |              |            |            |             |           
|                                               | Construction payables  property and
    equipment                             |                                                 |                                            | 9,290,277                                               |            |            |             | 16,960,452   |            |            |             |           |        
|                                               | New borrowings                                                                 |                                                 |                                            | 66,750,175                                              |            |            |             | 17,947,892   |            |            |             | 17,861,701 |        
|                                               | Note receivable  related party                                                |                                                 |                                            | (5,000,000                                              | )          |            |             |             |            |            |             |           |        
|                                               | Payments on loans                                                              |                                                 |                                            | (26,550,718                                             | )          |            |             | (73,563,352  | )          |            |             | (9,122,535 | )      
|                                               | Convertible debt                                                               |                                                 |                                            | 15,042,318                                              |            |            |             | 11,955,000   |            |            |             |           |        
|                                               | Capital lease obligations                                                      |                                                 |                                            | (1,162,236                                              | )          |            |             |             |            |            |             |           |        
|                                               | Exercise of stock options                                                      |                                                 |                                            | 40,250                                                  |            |            |             | 517,993      |            |            |             |           |        
|                                               | Sale of common stock                                                           |                                                 |                                            |                                                        |            |            |             | 28,122,925   |            |            |             |           |        
|                                               | Exercise of warrants                                                           |                                                 |                                            | 1,000                                                   |            |            |             | 168,575      |            |            |             |           |        
|                                               | Cash received for common stock subscriptions                                   |                                                 |                                            | 950,000                                                 |            |            |             |             |            |            |             |           |        
|                                               | Sale of preferred stock                                                        |                                                 |                                            | 500,000                                                 |            |            |             |             |            |            |             |           |        
|                                               |                                                                                |                                                 |                                            |                                                         |            |            |             |              |            |            |             |           
|                                               |                                                                                |                                                 |                                            | Net cash provided by financing activities               |            |            | 59,861,066  |              |            |            | 2,109,485   |            |         |            | 8,739,166  |  
|                                               |                                                                                |                                                 |                                            |                                                         |            |            |             |              |            |            |             |           
|                                               |                                                                                |                                                 |                                            | Net (decrease) increase in cash                         |            |            | (5,291,609  | )            |            |            | 2,182,710   |            |         |            | 583,944    |  
|Cash and cash equivalents at beginning of year |                                                                                |                                                 | 5,574,687                                  |                                                         |            |            | 3,391,977   |              |            |            | 2,808,033   |           
|                                               |                                                                                |                                                 |                                            |                                                         |            |            |             |              |            |            |             |           
|Cash and cash equivalents at end of year       |                                                                                | $                                               | 283,078                                    |                                                         |            | $          | 5,574,687   |              |            | $          | 3,391,977   |           
|                                               |                                                                                |                                                 |                                            |                                                         |            |            |             |              |            |            |             |           

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

F-5



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)

SUPPLEMENTAL DISCLOSURE:

|                                                             |  |                             |           |      |  |      |           |  |  |  |         | 
|------------------------------------------------------------ |  | --------------------------- | --------- | ---- |  | ---- | --------- |  |  |  | ------- | 
|                                                             |  |                            
|                                                             |  | For the Twelve Months Ended
|                                                             |  | March 31,                  
|                                                             |  |                            
|                                                             |  | 2002                        |           | 2001 |  | 2000
|                                                             |  |                             |           |      |  |     
|Interest paid (net of amount capitalized)                    |  | $                           | 5,318,320 |      |  | $    | 178,718   |  |  |  | 366,707 | 
|Taxes paid                                                   |  |                             |          |      |  |      |          |  |  |  |        | 
|Non-cash portion of assets acquired under capital
    leases |  |                             | 4,293,762 |      |  |      | 1,578,882 |  |  |  | 216,412 | 

During the year ended March 31, 2002, the
Company issued $849,015, net in warrants to third parties in
lieu of cash payment primarily for assets and interest.

During the year ended March 31, 2002,
$29,000 in warrants was exercised and reclassified to equity.

During the year ended March 31, 2002,
$242,700 in convertible debt was converted and reclassified to
equity.

During the year ended March 31, 2001, the
Company reclassified approximately $12,860,657 in real estate
inventories to real estate held for sale.

During the year ended March 31, 2001, the
Company converted approximately $3,900,382 from notes and
accounts payable to convertible debt.

During the year ended March 31, 2001, the
Company issued $394,000 in warrants to a third party in lieu of
cash compensation for a one year consulting agreement.

See Notes 4 and 5 in the accompanying notes for
additional discussion of non-cash acquisitions and dispositions.

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

F-6



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

MARCH 31, 2002


1. BUSINESS AND ORGANIZATION

Terremark Worldwide, Inc. (together with its
subsidiaries the Company) is a multinational
corporation that provides Internet infrastructure and managed
services. It is the owner and operator of the NAP of the
Americas, the fifth Tier-1 Network Access Point
(NAP) in the world. The NAP of the Americas in
Miami, Florida, was fully placed in service on July 1,
2001. The Companys strategy is to leverage its experience
as the owner and operator of the NAP of the Americas by
developing and operating TerreNAPSM Data Centers in
Latin America and Europe. TerreNAPSM Data Centers
provide peering, colocation and managed services to carriers,
Internet service providers, other Internet companies and
enterprises.

On April 28, 2000, the predecessor to the
Company, Terremark Holdings, Inc. (THI), which was
founded in 1982, completed a reverse merger with AmTec Inc.
(AmTec). AmTecs operations consisted of equity
investments and other alliances that provided long distance
international telecommunications services, including telephony
and data in Asia, and Internet Protocol (IP) fax
services in Hong Kong, Guangdong Province of the Peoples
Republic of China and Taiwan. Historical information of the
surviving company is that of THI.

In addition to the AmTec merger, the Company made
five additional acquisitions (Note 4) during the first two
quarters of the year ended March 31, 2001. These
acquisitions expanded the Companys operations to include
providing: 1) IP fax services and unified messaging
services in Asia, 2) telephony services in South America,
3) development expertise for telecommunications facilities,
and 4) telecommunications facilities construction services.

Changes in business conditions, including market
changes in the telecommunications industry and the availability
of debt and equity financing vehicles to fund other business
expansion, caused the Company during the third quarter of the
year ended March 31, 2001 to redefine and focus on its
TerreNAP Data Center strategy, and begin implementing a plan to
exit all lines of business not directly related to that
strategy. Lines of business discontinued include IP fax
services, unified messaging services, and telephony (Note 5). As
of March 31, 2002, the Company has completed its exit of
lines of business not related to its TerreNAP Data Center
strategy.

2. LIQUIDITY AND CAPITAL
RESOURCES

The accompanying financial statements have been
prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities and
commitments in the normal course of business. During fiscal year
2003, $93.1 million of the Companys liabilities, including
notes, construction and other trade payables will come due. The
Company had a net working capital deficit of approximately
$89.0 million and stockholders deficit of
approximately $49.3 million at March 31, 2002 and incurred
a net loss of approximately $57.4 million for the twelve months
then ended. This loss is the result of:



| |   |                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | non-cash items, including impairment charges of
    long-lived assets of approximately $19.0 million and
    depreciation and amortization expense of approximately $7.3
    million;
|
| |  | interest expense of approximately $9.7 million;                                                                                                                                      
|
| |  | approximately $14.6 million of expenses generated
    from the start-up and operations of the NAP of the Americas; and                                                               
|
| |  | not generating sufficient revenue during the year
    to support the increase in infrastructure.                                                                                     

During the year ended March 31, 2002, the
Company met its liquidity needs through obtaining additional
debt financing and the issuance of equity interests and entering
into arrangements with a principal executive officer to provide
some guarantees and financing as discussed in Note 10. The
Company also shut down or

F-7



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

disposed of remaining non-core operations and
implemented a series of expense reductions. Management expects
the Company will need an infusion of cash to fund business
operations during the year ended March 31, 2003. The
Companys liquidity needs are primarily related to
repayment of construction payables and debt and to support
operations. The Company has developed a plan to continue
operating through the year ended March 31, 2003. Actual
funding requirements are dependent upon managements
ability to meet its expectations and will be significantly
impacted if some or all of the following assumptions, which
underly the expectations are not met:



| |   |                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | signing of additional customer contracts at NAP
    of the Americas;                                                                                   
|
| |  | restructuring of $23.7 million of construction
    payables into long term payables or equity or a combination
    thereof;                            
|
| |  | exercise of the Companys option to sell its
    common stock to a financial institution resulting in $10.2
    million in additional equity (Note 18);
|
| |  | no funding under any of the Companys
    guarantees; and                                                                                              
|
| |  | restructuring of the Companys $48 million
    credit facility (see Note 18).                                                                          

The Company has identified additional potential
customers and is actively marketing to them available services
in the NAP of the Americas. The Companys plan is
predicated on obtaining additional customer contracts through
March 31, 2003, which on an annual basis will generate
revenues of approximately $20 million. The Company has also been
pursuing and continues to seek sources of additional debt and
equity financing. The Company is actively engaged in discussions
with certain vendors to restructure the terms of the
Companys construction payable obligations. The
Companys failure to obtain adequate terms from creditors
and additional debt or equity financing and meet its plan will
result in liquidity problems and require the Company to curtail
in whole or in part current operations. There can be no
assurances that the Companys plan will be adequately
implemented in the time frame contemplated, even if such funds
are obtained. Further, any additional equity financing if
obtained will be dilutive to existing stockholders. As a result
of these matters, substantial doubt exists about the
Companys ability to continue as a going concern. The
consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

Our plan to increase liquidity includes
additional equity funding, entering into strategic
relationships, and the potential sale of additional debt
securities sufficient to fund our 2003 business plan. There can
be no assurance that such financing will be available to us. Our
ability to obtain financing may be adversely affected by future
declines in the technology sector and general economic
conditions.

We intend to allocate our financial resources to
activities that are consistent with our strategy of developing
and operating TerreNAP Data Centers, including the NAP of the
Americas. However, the development of the NAP of the Americas
and other TerreNAP Data Centers will require substantial capital
resources. As part of our business strategy, we intend to
continue to evaluate potential acquisitions, joint ventures and
strategic alliances in or with companies that provide services
or operations that complement our existing businesses. These
acquisitions may also require financing, which may not be
available to us on acceptable terms.

The nature of the Companys operations
changed subsequent to the April 28, 2000 merger with AmTec,
Inc. Its operations continue to evolve as it develops its
Internet infrastructure and managed services business.

The deployment of the Companys TerreNAP
Data Center strategy will require the Company to expend
substantial resources for leases, assets, equipment and hiring
of network, administrative, customer support and sales and
marketing personnel. These expenditures commence well before a
TerreNAP Data Center opens, and it may take an extended period
for the Company to approach break-even. To date, the Company has
funded its operations through private debt and equity offerings.
However, because the Company has not yet

F-8



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

achieved positive cash flow from operations, the
Company will continue to require capital support until it is
cash flow positive. The Company intends to continue to allocate
its financial resources to activities that are consistent with
its expansion strategy, such as making additional significant
investments in sales and marketing and the development of new
services. The Companys business could be adversely
affected if it were unable to obtain necessary licenses and
approvals in order to expand its services and enter new markets.

The market for Internet infrastructure services
has only recently begun to develop, is evolving rapidly and
likely will be characterized by an increasing number of market
entrants. The market for Internet infrastructure services is
extremely competitive and subject to rapid technological change.
Management believes that the Company has some competitive
advantages. However, the market for Internet infrastructure
services is characterized by few barriers to entry. Current and
potential competitors include: providers of data center
services; global, regional and local telecommunications
companies and regional Bell operating companies; and information
technology outsourcing firms. As the Company continues to expand
operations in markets outside the United States, it will also
encounter new competitors and competitive environments. The
Company believes that the market for Internet infrastructure
services is likely to consolidate in the near future, which
could result in increased price and other competition.

The Companys strategy includes the
expansion of operations through the opening of additional
TerreNAP Data Centers. Some of the Companys customers are
emerging growth companies that may have negative cash flows and
the Company may not be able to collect receivables on a timely
basis. If the Company were unable to effectively manage its
expansion it would have a material adverse effect on its
business. The Companys success is substantially dependent
on the continued growth of its customer base and the retention
of current customers. The Companys customer service could
suffer if it is unable to obtain satisfactory services from
local communications providers. The loss of one or more of the
Companys suppliers may slow its growth or cause it to lose
customers. The Companys business could be harmed by
prolonged electrical power outages, shortages or increased costs
of energy. The Companys success is also dependent on its
Chairman, Manuel D. Medina.

The Company conducts business internationally and
its operations could be subject to various foreign taxes.
Distributions and other payments from the Companys
subsidiaries and affiliates may also be subject to foreign
taxes, reducing its earnings. The Company does not have any
plans to pay dividends on its common stock and covenants in its
financing agreements prohibit the payment of dividends. If the
Companys stock were to be delisted from the American Stock
Exchange, its stockholders could find it difficult to sell the
Companys stock and the price of the Companys stock
could be adversely affected.

3. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

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

The Companys consolidated financial
statements include the accounts of the Companys wholly
owned subsidiaries. All significant inter-company balances and
transactions are eliminated in consolidation.

Certain businesses acquired during the year ended
March 31, 2001 whose operations reflect IP fax, unified
messaging and telephony services were approved for disposition
during March 2001. Since the operations represent a class of
customer and a major line of business as contemplated in
Accounting Principles Board Opinion 30 Reporting the
Results of Operations  Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions
(APB 30), their operations were accounted for as
discontinued operations in the year ended March 31, 2001.
Included in discontinued operations are AmTecs,
Spectrums, Asia Connects and IXS.NETs
businesses. In addition, disposal of certain activities not
representing an operating segment as contemplated under APB 30
are accounted for in current operations.

F-9



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Use of estimates

The Company prepares its financial statements in
conformity with accepted accounting principles generally
accepted in the United States of America. These principles
require management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial
statements and reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those
estimates. Significant estimates include revenue and costs
related to construction contracts, impairment of long-lived
assets, contingent liabilities and loss on disposition of
discontinued operations.

Reclassifications

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

New accounting standards

In June 2001, the Financial Accounting Standards
Board approved Statement of Financial Accounting Standards
No. 141 (FASB 141), Business Combinations, and Statement of
Financial Accounting Standards No. 142 (FASB 142), Goodwill
and Other Intangible Assets. FASB 141 requires that the purchase
method of accounting be used for all business combinations
initiated after June 30, 2001. FASB 142 changes the
accounting for goodwill from an amortization method to an
impairment-only approach. The provisions of FAS 142 are
effective for fiscal years beginning after December 15,
2001. The Company will adopt FAS 142 at the beginning of its
fiscal year ending March 31, 2003.

In August 2001, the Financial Accounting
Standards Board approved Statement of Financial Accounting
Standards No. 144 (FASB 144), Accounting for the Impairment
or Disposal of Long-Lived Assets. FASB 144 supercedes FASB 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, and the accounting and
reporting provisions of APB Opinion No. 30, Reporting the
Results of Operations  Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions, for the
disposal of a segment of business. FASB 144 retains the
requirements of FASB 121 for recognition and measurement of an
impairment loss on long-lived assets, and establishes a single
accounting model for all long-lived assets to be disposed of by
sale, whether previously held and used or newly acquired. The
provisions of FAS 144 are effective for fiscal years beginning
after December 15, 2001. The Company will adopt FAS 144 at
the beginning of its fiscal year ending March 31, 2003.

The Company does not expect the adoption of FASB
141, FASB 142 or FASB 144 to have a material effect on its
consolidated financial statements assuming it continues as a
going concern. Had the Company continued amortizing its
intangible assets, the annual amortization expense would have
been approximately $3.3 million through the year ended
March 31, 2006.

Loss per share

The Company has adopted Statement of Financial
Accounting Standards No. 128, Earnings Per Share.
Basic earnings (loss) per share (EPS) equals net
income (loss) divided by the number of weighted average common
shares. Diluted EPS includes potentially dilutive securities
such as stock options and convertible securities. The effect of
shares issuable upon exercise of convertible preferred stock,
warrants and stock options is anti-dilutive, therefore diluted
(loss) earnings per share is not presented in a comparative
format.

F-10



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Revenue and profit recognition

Revenue is recognized as service is provided when
there is persuasive evidence of an arrangement, the fee is fixed
or determinable and collection of the receivable is reasonably
assured. The Company assesses collection based on a number of
factors, including past transaction history with the customer
and the credit-worthiness of the customer. The Company does not
request collateral from customers. If the Company determines
that collection is not reasonably assured, the Company defers
the fee and recognizes revenue at the time collection becomes
reasonably assured, which is generally upon receipt of cash.
Management specifically analyzes accounts receivable and
analyzes current economic news and trends, historical bad debts,
customer concentrations, customer credit-worthiness and changes
in customer payment terms when evaluating revenue recognition
and the adequacy of the Companys reserves.

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

Revenues from real estate sales are recognized at
the time of delivery to the customer. Revenues from development,
commission and construction fees are recognized when earned.

Revenues from construction contracts are
recognized on the percentage-of-completion method, measured by
the percentage of costs incurred to date to total estimated
costs for each contract. This method is used because management
considers cost incurred to be the best measure of progress on
these contracts. The duration of a construction contract
generally exceeds one year. Billings in excess of costs and
estimated earnings on uncompleted contracts are classified as
other liabilities and represent billings in excess of revenues
recognized.

Construction contract expenses costs include all
direct material and labor costs and indirect costs related to
contract performance such as indirect labor, supplies, tools,
repairs, bad debt and depreciation.

Provisions for estimated losses on uncompleted
contracts are made in the period in which losses are determined.
Changes in job performance, job conditions and estimated
profitability, including those arising from contract penalty
provisions and final contract settlements may result in
revisions to costs and income and are recognized in the period
in which the revisions can be reasonably estimated. Accordingly,
it is possible that the Companys current estimates
relating to completion cost and profitability of its uncompleted
contracts will vary from actual results.

Cash, cash equivalents and restricted
cash

The Company considers all amounts held in highly
liquid instruments with an original purchased maturity of three
months or less to be cash equivalents. Cash and cash equivalents
include cash balances maintained in the operating and
interest-bearing money market accounts at the Companys
banks. Restricted cash at March 31, 2002 represents cash
deposits with a financial institution collateralizing a $750,000
letter of credit issued to the lessor of the Companys
colocation facility in Santa Clara, California (Note 8).
Restricted cash at March 31, 2001 represents customer
purchase deposits.

Accounts Receivable

The Companys management regularly evaluates
factors affecting collectibility of receivable balances. The
Company estimates an allowance for doubtful accounts based upon
the actual payment history of each individual customer.
Consequently, an adverse change in the financial condition of a
particular customer could affect the Companys estimate of
its bad debt.

F-11



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Property and equipment, net

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

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

Identifiable intangible assets and
goodwill

Identifiable intangible assets consist primarily
of certain rights, customer relationships and contracts. The
identifiable intangible assets are amortized on the
straight-line method over periods ranging from one to five
years. Goodwill represents the excess of the purchase price over
the fair value of identifiable net assets acquired in
conjunction with business acquisitions and is amortized on the
straight-line basis over a five year period. At March 31,
2002, identifiable intangible assets and goodwill consists of
TECOTA promote interest of $904,964, NAP of the Americas
intangible of $9,999,871 and Post Shell goodwill of $2,315,336.

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

In accordance with SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Live Assets to Be Disposed Of,the Company evaluates
long-lived assets and identifiable intangibles for impairment
whenever events or changes in circumstances indicate that the
net carrying amount may not be recoverable. When such events
occur, the Company determines if there is impairment by
comparing the carrying value of the long-lived asset to the
estimated undiscounted future cash flows expected to result from
use of the asset. If an impairment is indicated, an impairment
charge is provided for the excess of the carrying amount of the
asset over its fair value. Accordingly, during the year ended
March 31, 2002 and 2001, the Company recorded approximately
$19.0 million and $4.2 million, respectively, in impairment
charges (Notes 4, 5 and 8).

Trade payables and other liabilities

Trade payables and other liabilities include
liabilities incurred during the normal course of business.

4. ACQUISITIONS

AmTec, Inc.

On April 28, 2000, the predecessor to the
Company, Terremark Holdings, Inc. (THI) merged with and
into AmTec, Inc., a publicly traded international
telecommunications and services company. As a result of the
merger, each share of THI common stock was converted into
approximately 63 shares of the Companys common stock. The
stockholders equity in the historical financial statements
reflects this conversion as if it had occurred at the beginning
of each period.

The AmTec merger was accounted for using the
purchase method of accounting, with THI treated as the acquirer
for accounting purposes. As a result, the assets and liabilities
of THI are recorded at historical values and the assets and
liabilities of AmTec was recorded at their estimated fair values
at the date of the merger. The purchase price was based on
market capitalization of AmTec using $0.99 per AmTec common
share, the average closing price of AmTec shares, for a period
immediately before and after announcement on November 9,
1999 of the proposed merger, plus merger related costs.

F-12



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following unaudited condensed results of
operations for the twelve months ended March 31, 2001 was
prepared assuming the merger occurred on April 1, 2000, and
assumes AmTecs operations are a part of continuing
operations.

|                                     |  |   |              |  
|------------------------------------ |  | - | ------------ | -
|Revenue                              |  | $ | 40,147       |  
|Net loss                             |  | $ | (106,030,000 | )
|Basic and diluted net loss per share |  | $ | (0.47        | )

The amounts for the twelve months ended
March 31, 2001 include AmTecs actual results for the
period April 1, 2000 to April 28, 2000. In preparing
the pro forma information, various assumptions were made. This
information is not necessarily indicative of what would have
occurred had these transactions occurred on April 1, 2000
nor is it indicative of the results of future combined
operations.

Other acquisitions

During the year ended March 31, 2001, the
Company acquired five businesses. The Company accounted for each
acquisition as a purchase. When consideration included common
stock, its value was determined using the average closing price
of the Companys stock for a period immediately before and
after each acquisitions announcement. The effect of each
acquisition individually and in the aggregate on the
Companys consolidated financial statements was not
material. The acquisitions are as follows:

Telecom Routing Exchange Developers,
Inc.

On May 31, 2000, the Company acquired
Telecom Routing Exchange Developers, Inc. (T-Rex), a
corporation holding rights to develop and manage facilities
catering to the telecommunications industry, in exchange for
eight million shares of common stock. Since the Company was a
non-public entity at the time the AmTec merger was announced and
the terms were conditional on the consummation of the AmTec
merger, the purchase price was based on the closing price of the
Companys common stock of $1.94 per common share on the
acquisition date.

Post Shell Technology Contractors,
Inc.

On June 23, 2000, the Company acquired all
of the outstanding stock of Post Shell Technology Contractors,
Inc. (Post Shell), a provider of construction
services, in exchange for three million shares of common stock.
The acquisition was accounted for using the purchase method of
accounting. The purchase price was based on the market
capitalization of the Company using an average closing price of
$2.81 per common share for a period immediately before and after
the announcement of the acquisition on June 26, 2000.

Changes in business conditions in the
telecommunications industry and resulting decline in related
construction projects caused the Company to perform an
impairment analysis during the year ended March 31, 2002 of
its goodwill acquired in the Post Shell acquisition. Based on
this analysis, the Company determined that the asset, which is
included in its real estate segment, was impaired by
approximately $3.2 million. The Company believes that the
remaining amount of approximately $2.3 million in Post Shell
goodwill is recoverable through future related cash flows.

Spectrum Telecommunications

On August 9, 2000, the Company acquired an
80% ownership interest in Spectrum Telecommunications, Inc.
(Spectrum) through issuing three million shares of
common stock. Spectrum provides telecommunication services in
Latin America. On February 16, 2001, the Company acquired
for $100 the remaining 20% ownership interest.

F-13



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

IXS.Net

On August 14, 2000, the Company acquired
100% of IXS.Net (IXS), a private IP fax services
provider in Asia, by issuing 412,500 shares of common stock and
transferring a 7.55% ownership interest in the Companys
subsidiary, Asia Connect L.L.C.

Asia Connect L.L.C.

On September 1, 2000, the Company completed
its acquisition of a controlling interest in Asia Connect L.L.C.
(Asia Connect). Asia Connect is developing unified messaging
services in Asia. The Company had a 92.45% interest in Asia
Connect.

Acquisitions during the twelve months ended
March 31, 2001 are summarized as follows:

|                                 |                                     |                           |            |            |            |            |            |            |            |         |            |              |            |   |            |            |            |   |           |            |           |   |         |            |         | 
|-------------------------------- | ----------------------------------- | ------------------------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ------- | ---------- | ------------ | ---------- | - | ---------- | ---------- | ---------- | - | --------- | ---------- | --------- | - | ------- | ---------- | ------- | 
|                                 |                                     | AmTec                     |            | T-Rex      |            | Post Shell |            | Spectrum   |            | IXS.NET |            | Asia Connect
|                                 |                                     |                           |            |            |            |            |            |            |            |         |            |             
|Assets:                          |                                     |                           |            |            |            |            |            |            |            |         |            |              |            |   |            |            |            |   |           |            |           |   |         |           
|                                 | Cash and cash equivalents           |                           | $          | 1,508,803  |            |            | $          | 248,210    |            |         | $          | 307,260      |            |   | $          | 247,130    |            |   | $         | 26,945     |           |   | $       | 29,925     |        
|                                 | Restricted cash                     |                           |            |           |            |            |            | 30,000     |            |         |            |             |            |   |            |           |            |   |           |           |           |   |         |           |        
|                                 | Accounts receivable                 |                           |            |           |            |            |            | 238,322    |            |         |            | 2,325,020    |            |   |            | 531,712    |            |   |           | 184,902    |           |   |         |           |        
|                                 | Investments and option agreements   |                           |            | 12,228,209 |            |            |            | 172,970    |            |         |            |             |            |   |            |           |            |   |           |           |           |   |         |           |        
|                                 | Reclassification of option          |                           |            |           |            |            |            |           |            |         |            |             |            |   |            |           |            |   |           | (2,400,000 | )         |   |         | (6,500,000 | )      
|                                 | Notes receivable                    |                           |            | 344,438    |            |            |            |           |            |         |            |             |            |   |            |           |            |   |           |           |           |   |         |           |        
|                                 | Furniture and equipment             |                           |            | 48,355     |            |            |            | 46,038     |            |         |            | 55,556       |            |   |            | 5,352,923  |            |   |           | 161,694    |           |   |         | 55,866     |        
|                                 | Other assets                        |                           |            | 279,143    |            |            |            | 61,275     |            |         |            | 17,785       |            |   |            | 900,939    |            |   |           | 95,710     |           |   |         | 293,030    |        
|                                 | Identifiable intangible assets      |                           |            |           |            |            |            | 15,785,558 |            |         |            | 1,283,000    |            |   |            |           |            |   |           |           |           |   |         |           |        
|                                 | Goodwill                            |                           |            | 35,519,223 |            |            |            |           |            |         |            | 7,126,748    |            |   |            | 18,252,975 |            |   |           | 4,543,194  |           |   |         | 6,770,179  |        
|                                 |                                     |                           |            |            |            |            |            |            |            |         |            |              |            |   |            |            |            |   |           |            |           |   |         |           
|                                 |                                     | Total assets acquired     |            | $          | 49,928,171 |            |            | $          | 16,582,373 |         |            | $            | 11,115,369 |   |            | $          | 25,285,679 |   |           | $          | 2,612,445 |   |         | $          | 649,000 | 
|                                 |                                     |                           |            |            |            |            |            |            |            |         |            |              |            |   |            |            |            |   |           |            |           |   |         |           
|Liabilities                      |                                     |                           |            |            |            |            |            |            |            |         |            |              |            |   |            |            |            |   |           |            |           |   |         |           
|                                 | Notes payable                       |                           | $          |           |            |            | $          |           |            |         | $          | 4,924        |            |   | $          | 10,531,229 |            |   | $         | 29,896     |           |   | $       | 150,000    |        
|                                 | Trade payable and other liabilities |                           |            | 479,060    |            |            |            | 1,082,373  |            |         |            | 2,680,445    |            |   |            | 1,693,463  |            |   |           | 320,904    |           |   |         |           |        
|                                 |                                     |                           |            |            |            |            |            |            |            |         |            |              |            |   |            |            |            |   |           |            |           |   |         |           
|                                 |                                     | Total liabilities assumed |            |            | 479,060    |            |            |            | 1,082,373  |         |            |              | 2,685,369  |   |            |            | 12,224,692 |   |           |            | 350,800   |   |         |            | 150,000 | 
|                                 | Minority interest                   |                           |            |           |            |            |            |           |            |         |            |             |            |   |            | 475,306    |            |   |           |           |           |   |         |           |        
|Equity assumed                   |                                     |                           | 48,649,111 |            |            |            |           |            |            |         |           |              |            |   |           |            |            |   |          |            |           |   |        |           
|Issuance of common stock         |                                     |                           |           |            |            |            | 15,500,000 |            |            |         | 8,430,000  |              |            |   | 12,039,000 |            |            |   | 1,576,457 |            |           |   |        |           
|Estimated merger costs and other |                                     |                           | 800,000    |            |            |            |           |            |            |         |           |              |            |   | 546,681    |            |            |   | 685,188   |            |           |   | 499,000 |           
|                                 |                                     |                           |            |            |            |            |            |            |            |         |            |              |            |   |            |            |            |   |           |            |           |   |         |           
|                                 |                                     | $                         | 49,928,171 |            |            | $          | 16,582,373 |            |            | $       | 11,115,369 |              |            | $ | 25,285,679 |            |            | $ | 2,612,445 |            |           | $ | 649,000 |           
|                                 |                                     |                           |            |            |            |            |            |            |            |         |            |              |            |   |            |            |            |   |           |            |           |   |         |           

5. DISPOSITIONS

Sale of telecom facilities management
operations

On February 23, 2001, the Company sold
certain of its telecom facilities management operations to MP
Telecom, LLC (MP), an entity owned by certain
officers and a director of the Company.

Assets sold include all of the Companys
equity ownership interests (including any rights to
promote interests) in the T-Rex branded
Telecom Hotel together with assets owned by Telecom
Routing Exchange Developers, Inc., a wholly owned subsidiary of
the Company. As part of the transaction, the Company retained
its management rights for The Technology Center of the Americas
(TECOTA), in which the NAP of the Americas is
located. The purchaser conveyed to the Company its rights to the
promote and equity interests in TECOTA. As a result of these
transactions, at March 31, 2001, the Company owns 100% of
the promote interest and .84% of the equity interests in TECOTA.

As part of the transaction, MP conveyed to the
Company 1,400,000 shares of the Companys common stock,
representing a portion of 8,000,000 shares issued to MP and its
affiliates in conjunction with the T-Rex acquisition. MP also
conveyed its minority interest in the Companys co-location
business. The Company paid

F-14



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

$900,000 to the purchaser in connection with the
transaction. The principals of MP and certain Company officers
agreed to limit the aggregate number of Company shares sold by
them during any trading day until December 25, 2001.

During the quarter ended December 31, 2000,
the Company recognized an impairment of intangible assets of
$4,155,178 in contemplation of the transaction with MP, which
closed during the quarter ended March 31, 2001.

Changes in business conditions in the
telecommunications industry and resulting decline in related
real estate leasing activities caused the Company to perform an
impairment analysis during the year ended March 31, 2002 of
its promote interests in TECOTA acquired in the telecom
facilities management operations sale. Based on this analysis,
the Company determined that the asset, which is included in its
real estate segment, was impaired by $3.8 million. The Company
believes that the remaining $905,000 in TECOTA promote interests
is recoverable through future related cash flows.

Discontinued operations

In March 2001, the Company implemented its plan
to dispose of certain acquired businesses whose operations
reflect IP fax, unified messaging and telephony services. Since
the operations represent a class of customer and a major line of
business as contemplated in Accounting Principles Board
Opinion 30, the results of these activities and estimated
loss on disposal are accounted for as discontinued operations.

As of March 31, 2001, $2,245,896 in assets,
exclusive of goodwill, had been disposed. Remaining assets to be
disposed amounted to $6,390,009. Subsequent to March 31,
2001, these assets were sold for proceeds aggregating $500,000
in cash and assumption of approximately $1,740,838 in
liabilities. The loss on disposition of discontinued operations
includes the write-off of $54,381,681 in goodwill. For the year
ended March 31, 2001, discontinued operations had
$1,760,640 of total revenues and a loss of $11,346,447, net of
$10,153,140 in goodwill amortization. The net liabilities for
discontinued operations at March 31, 2002 and 2001
primarily represent trade payables, which remain an obligation
of the Company. In addition, the Company at March 31, 2002
and 2001 guaranteed approximately $550,000 in debt related to
discontinued operations.

Other

In February 2001, the Company sold for $4,750,000
certain rights, including the entitlement to a contingent
payment and related preferred return, under agreements entered
into in conjunction with a hotel development project in Miami,
Florida. For the year ended March 31, 2001, these proceeds
are included in development, commission and construction fees.

6. CONTRACTS RECEIVABLE

Contracts receivable consist of the following:

|                      |  |           |           |      |  |   |           | 
|--------------------- |  | --------- | --------- | ---- |  | - | --------- | 
|                      |  |          
|                      |  | March 31,
|                      |  |          
|                      |  | 2002      |           | 2001
|                      |  |           |           |     
|Completed contracts   |  | $         | 96,035    |      |  | $ | 939,312   | 
|Contracts in progress |  |           | 1,214,167 |      |  |   | 2,543,489 | 
|Retainage             |  |           | 52,634    |      |  |   | 1,155,115 | 
|                      |  |           |           |      |  |   |           | 
|                      |  | $         | 1,362,836 |      |  | $ | 4,637,916 | 
|                      |  |           |           |      |  |   |           | 

F-15



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

7. REAL ESTATE HELD FOR SALE

Real estate held for sale is summarized as
follows:

|                                            |  |           |   |      |  |   |            | 
|------------------------------------------- |  | --------- | - | ---- |  | - | ---------- | 
|                                            |  |          
|                                            |  | March 31,
|                                            |  |          
|                                            |  | 2002      |   | 2001
|                                            |  |           |   |     
|Fortune House II land and improvements      |  | $         |  |      |  | $ | 11,668,090 | 
|Fortune House I completed condominium units |  |           |  |      |  |   | 1,192,567  | 
|                                            |  |           |   |      |  |   |            | 
|                                            |  | $         |  |      |  | $ | 12,860,657 | 
|                                            |  |           |   |      |  |   |            | 

On July 2001, the Company sold for $17.2 million
Fortune House II, a proposed condominium/hotel project in Ft.
Lauderdale, Florida. In connection with the sale, the Company
repaid approximately $12.1 million in related notes payable and
recorded a gain of approximately $3.9 million.

On December 22, 1999, the Company acquired
for approximately $56.0 million all partnership interests of
Terremark Centre, Ltd. (TCL). TCL is a single
purpose entity and fee simple owner of a 294,000 square foot 21
story Class A office building and 16 townhouses, located in
Coconut Grove, Florida. The acquisition was financed through
assumption of a first mortgage of approximately $28.3 million
and issuance of approximately $27.1 million in purchase money
notes to the sellers. In April 2000, the Company sold its
interests for approximately $58.8 million. No gain or loss was
recognized on this sale. The cash proceeds were used to repay
approximately $55.8 million in related debt.

8. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consist of the
following:

|                                |  |           |            |      |  |   |            |  
|------------------------------- |  | --------- | ---------- | ---- |  | - | ---------- | -
|                                |  |          
|                                |  | March 31,
|                                |  |          
|                                |  | 2002      |            | 2001
|                                |  |           |            |     
|Leasehold improvements          |  | $         | 51,173,835 |      |  | $ | 1,217,608  |  
|Furniture and equipment         |  |           | 13,249,020 |      |  |   | 3,433,806  |  
|                                |  |           |            |      |  |   |            |  
|                                |  |           | 64,422,855 |      |  |   | 4,651,414  |  
|Less accumulated depreciation   |  |           | (3,888,412 | )    |  |   | (542,217   | )
|                                |  |           |            |      |  |   |            |  
|                                |  |           | 60,534,443 |      |  |   | 4,109,197  |  
|Construction in process         |  |           |           |      |  |   | 20,956,792 |  
|Equipment held for installation |  |           | 554,544    |      |  |   |           |  
|                                |  |           |            |      |  |   |            |  
|                                |  | $         | 61,088,987 |      |  | $ | 25,065,989 |  
|                                |  |           |            |      |  |   |            |  

Property and equipment, net includes
approximately $60.0 million in assets related to the NAP of the
Americas at March 31, 2002.

During the three months ended September 30,
2001, the Company reached final agreement with a vendor
regarding amounts due. As a result, the Company recorded
approximately $1.0 million and $267,880 of reductions in data
center operations expense and property and equipment,
respectively.

During the three months ended September 30,
2001, the Company recorded a $6,642,315 impairment charge to its
colocation facility in Santa Clara, California, based on an
option to purchase the facility granted to one of its vendors.
Subsequent expiration of the option and continued decline in
related colocation industry activities caused the Company in the
quarter ended March 31, 2002 to change its strategy for the
facility to held for sale. As a result, the Company recorded an
additional $5,521,355 impairment charge. These charges are
included in the telecom facilities management segment, have
fully impaired the related assets and include approximately
$1,530,000 in expected carrying and lease termination costs.

F-16



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Construction in process at March 31, 2001
primarily includes costs related to the NAP of the Americas and
the colocation facility in Santa Clara, California.

9. OTHER ASSETS

Other assets consist of the following:

|                                                                                         |  |           |           |      |  |   |           | 
|---------------------------------------------------------------------------------------- |  | --------- | --------- | ---- |  | - | --------- | 
|                                                                                         |  |          
|                                                                                         |  | March 31,
|                                                                                         |  |          
|                                                                                         |  | 2002      |           | 2001
|                                                                                         |  |           |           |     
|Prepaid expenses and other                                                               |  | $         | 1,278,433 |      |  | $ | 2,692,794 | 
|Loan costs, net of accumulated amortization of
    $618,163 and $1,228,076, respectively |  |           | 921,021   |      |  |   | 130,785   | 
|                                                                                         |  |           |           |      |  |   |           | 
|                                                                                         |  | $         | 2,199,454 |      |  | $ | 2,823,579 | 
|                                                                                         |  |           |           |      |  |   |           | 

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

10. NOTES PAYABLE

Notes payable consist of the following:

|                                                                                                                                                                                                                                                                                                                                                                                             |  |           |            |      |  |   |           | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | ---------- | ---- |  | - | --------- | 
|                                                                                                                                                                                                                                                                                                                                                                                             |  |          
|                                                                                                                                                                                                                                                                                                                                                                                             |  | March 31,
|                                                                                                                                                                                                                                                                                                                                                                                             |  |          
|                                                                                                                                                                                                                                                                                                                                                                                             |  | 2002      |            | 2001
|                                                                                                                                                                                                                                                                                                                                                                                             |  |           |            |     
|Note payable to a financial institution,
    collateralized primarily by substantially all assets of the NAP
    of the Americas and a personal guaranty of the Chief Executive
    Officer. Interest accrues at 9.25%, payable monthly, with
    principal balance due March 2003. Maturity date may be extended
    for two nine-month periods subject to certain conditions (Note
    18) |  | $         | 43,293,333 |      |  | $ |          | 
|Unsecured note payable to certain directors and a
    shareholder of the Company. Interest accrues at 8.25%, with
    principal installments of $150,000 and interest due quarterly
    commencing March 31, 2002 and maturing on June 23,
    2003.                                                                                                                                         |  |           | 3,500,000  |      |  |   |          | 
|Unsecured note payable to a corporation
    controlled by a shareholder, interest accrues at 15%. Principal
    and interest due in January 2003.                                                                                                                                                                                                                                            |  |           | 1,600,000  |      |  |   |          | 
|Note payable to a financial institution,
    collateralized by certain assets and personal guarantees of a
    director and certain shareholders of the Company. Interest
    accrues at 1% over prime, with principal and interest payments
    due monthly                                                                                                                                 |  |           | 1,375,000  |      |  |   | 1,750,000 | 
|Unsecured notes payable to certain executives and
    directors of the Company and third party corporations, interest
    accrues at 13%. Principal and interest due September 30,
    2002 ($1,850,000 due to related parties).                                                                                                                                                             |  |           | 2,100,000  |      |  |   |          | 
|Unsecured note payable to individual, interest
    accrues at 15%. Principal and interest due September 2002.                                                                                                                                                                                                                                                                                |  |           | 1,000,000  |      |  |   |          | 

F-17



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                                                                                                                                                                                                                                                                                                                                                  |  |           |            |      |  |   |            | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | ---------- | ---- |  | - | ---------- | 
|                                                                                                                                                                                                                                                                                                                                                                                  |  |          
|                                                                                                                                                                                                                                                                                                                                                                                  |  | March 31,
|                                                                                                                                                                                                                                                                                                                                                                                  |  |          
|                                                                                                                                                                                                                                                                                                                                                                                  |  | 2002      |            | 2001
|                                                                                                                                                                                                                                                                                                                                                                                  |  |           |            |     
|Unsecured note payable to the Chief Executive
    Officer. Interest accrues at 7.5%, payable monthly, with
    principal installments of $50,000 due on a quarterly basis
    commencing on June 26, 2002, and maturing on June 26,
    2003.                                                                                                                                     |  |           | 250,000    |      |  |   |           | 
|Unsecured note payable to a corporation in
    seventy-five monthly installments of principal and interest
    beginning January 1, 1999. Interest accrues at 9.5%                                                                                                                                                                                                                |  |           | 226,092    |      |  |   | 249,326    | 
|Unsecured notes payable to individuals, interest
    accrues at 8%, with interest due monthly. Matured and currently
    due                                                                                                                                                                                                                                                      |  |           | 138,442    |      |  |   | 147,139    | 
|Unsecured note payable to a corporation in
    4 monthly installments of principal and interest beginning
    February 15, 2002. Interest accrues at 13%                                                                                                                                                                                                                          |  |           | 285,190    |      |  |   |           | 
|Unsecured note payable to a corporation in
    7 monthly installments of principal and interest beginning
    February 25, 2002. Interest accrues at 15%                                                                                                                                                                                                                          |  |           | 72,243     |      |  |   |           | 
|Unsecured note payable to a corporation in
    6 monthly installments of principal and interest beginning
    February 15, 2002. Interest accrues at 10%                                                                                                                                                                                                                          |  |           | 40,000     |      |  |   |           | 
|Note payable to an individual, collateralized by
    a first mortgage on land, interest accrues at 12% and is payable
    monthly. Principal due November 10, 2001.                                                                                                                                                                                                               |  |           |           |      |  |   | 7,500,000  | 
|$5 million line of credit facility with a
    financial institution, collateralized by certain assets of the
    Company. Interest accrues at 1% over prime, payable monthly,
    with principal balance due upon demand                                                                                                                                                          |  |           |           |      |  |   | 3,500,000  | 
|Note payable to a commercial lender,
    collateralized by a first mortgage on real estate. Principal
    payable in installments as condominium units are sold. Interest
    accrues at prime, payable through an interest reserve. Principal
    and unpaid interest due November 2001, with an option for a six
    month extension. Guaranteed by the Chief Executive Officer |  |           |           |      |  |   | 534,378    | 
|                                                                                                                                                                                                                                                                                                                                                                                  |  |           |            |      |  |   |            | 
|                                                                                                                                                                                                                                                                                                                                                                                  |  |           | 53,880,300 |      |  |   | 13,680,843 | 
|Less current portion of notes payable                                                                                                                                                                                                                                                                                                                                             |  |           | 50,752,209 |      |  |   | 13,317,662 | 
|                                                                                                                                                                                                                                                                                                                                                                                  |  |           |            |      |  |   |            | 
|Notes payable, less current portion                                                                                                                                                                                                                                                                                                                                               |  | $         | 3,128,091  |      |  | $ | 363,181    | 
|                                                                                                                                                                                                                                                                                                                                                                                  |  |           |            |      |  |   |            | 

On September 5, 2001, the Company closed on
a $48 million loan. The credit facility bears interest at an
annual rate of 9.25%, interest is paid monthly and the principal
balloons in 12 months. To obtain the loan, the Company paid
a $720,000 commitment fee to the lender. The Company has the
option to exercise two nine-month extension periods, subject to
certain conditions, each at a cost of 0.5% of the principal
balance outstanding together with a principal repayment of $2.5
million. During each period under extension, a
$250,000 monthly principal repayment plus interest is due.
At closing, the total amount of the loan was disbursed except
for approximately $6.6 million that was held as an interest
reserve available to the Company through June 2002. Through June
2002, the interest reserve is disbursed monthly to make interest
payments.

F-18



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Subsequently, the Company will pay interest
through cash on hand. The proceeds of the credit facility were
used to:



| |   |                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | repay a $10 million short-term loan from
    Manuel D. Medina, the Companys Chief Executive
    Officer, the proceeds of which the Company had used to fund the
    buildout of the NAP of the Americas (he, in turn, used the
    $10 million to repay a personal $10 million short-term
    loan from the bank);
|
| |  | repay $3.5 million of debt that the Company
    owed to the bank under a line of credit personally guaranteed by
    Mr. Medina;                                                                                                                                                                                   
|
| |  | pay $1.2 million in loan costs related to
    the $48 million credit facility (including the $720,000
    commitment fee); and                                                                                                                                                                                     
|
| |  | fund the NAP of Americas build out costs.                                                                                                                                                                                                                                                                          

The credit facility is secured by all of the
Companys assets and allows for up to a $25.0 million
junior lien position on the assets of our NAP of the Americas,
Inc. subsidiary. Mr. Medina has personally guaranteed the
$48 million credit facility.

During July 2002, the Company reached an
agreement in principle to amend its existing $48 million credit
facility. Under the amended terms, the initial maturity date has
been extended to September 2003 and the Company has the option
to exercise two six-month extension periods each at a cost of
0.5% of the principal balance outstanding together with a
principal repayment of $2.5 million. The annual interest rate
has been reduced to 7.50% and the Company will commence making
monthly interest payments in July 2002. All other material
provisions of the credit facility will remain unchanged. This
amendment will be binding upon execution of the documents
modifying the terms and conditions of this credit facility,
which the Company expects to complete in July 2002. The credit
facility is classified as current.

In addition to Mr. Medinas personal
guarantee of the credit facility, and in order to obtain the
facility, the bank further required Mr. Medina, prior to
the bank disbursing funds under the credit facility, to
(i) provide $5.0 million certificate of deposit to the bank
as collateral on certain personal loans that Mr. Medina has
with the bank and (ii) commit to accelerate the maturity
date of those personal loans to December 31, 2001.
Subsequent to September 2001, Mr. Medina and the bank
changed the maturity date on the personal loans, first to
December 31, 2001 and later to July 1, 2002. In the
event of the Companys default under the credit facility
Mr. Medina also agreed to subordinate debt that the Company
owed to Mr. Medina. Mr. Medina has repaid part of
those personal loans to the bank through liquidation of the
5.0 million certificate of deposit in January 2002 leaving
an outstanding principal balance of approximately
$5.4 million and he intends to exercise his right under
such personal loan agreements to extend their maturity date from
July 1, 2002 to December 31, 2002.

On September 5, 2001 and in consideration of
Mr. Medinas agreeing to repay his indebtedness to the
bank earlier than otherwise required, pledging the certificate
of deposit to the bank and personally guaranteeing the
$48 million credit facility and approximately
$21 million of construction payables, the Company entered
into an amended and restated employment agreement with him.
Under the terms of the amended and restated employment
agreement, the Company will indemnify Mr. Medina from any
personal liability related to his guarantees of the
Companys debt, use commercially reasonable efforts to
relieve Mr. Medina of all his guarantees of the
Companys debt, provide up to $6.5 million of cash
collateral to the bank should Mr. Medina be unable to repay
the personal loans when due and provide a non interest-bearing
$5.0 million loan to Mr. Medina for as long as his guarantees of
the Companys debt exist. If the loan to Mr. Medina
becomes in default, the Company has a right of offset against
all amounts payable by the Company to Mr. Medina, the
aggregate of which is approximately $2.2 million as of
March 31, 2002. The note receivable from Mr. Medina is
shown as an adjustment to equity. The $48 million credit
facility and the note receivable from Mr. Medina have been
approved by the Board of Directors.

F-19



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

A note issued by a subsidiary of the Company, and
guaranteed by the Company is in default since it matured in
December 2001. During the year ended March 31, 2002, the
Company made principal payments on the loan reducing its balance
to $1,375,000 at March 31, 2002. Although the lender has
the right to call on the guarantee it has not done so and the
Company and the lender are negotiating to extend the terms of
repayment.

During the year ended March 31, 2002, the
Companys $5 million line of credit with a financial
institution was repaid and cancelled. The line of credit allowed
for the issuance of letters of credit. At March 31, 2001,
the Company had two stand-by letters of credit totaling $1.5
million related to deposits for leased space. Therefore, the
line of credit was fully utilized.

Interest expense of approximately $9.8 million,
$1.1 million and $804,785, net of amounts capitalized to
leasehold improvements and real estate inventories totaling
$891,644, $605,332 and $41,038 was recognized in fiscal years
2002, 2001 and 2000, respectively.

The future maturities through March 31 for
each of the following five years and thereafter of the
Companys borrowings as of March 31, 2002 are as
follows:

|           |       |   |            |            | 
|---------- | ----- | - | ---------- | ---------- | 
|2003       |       | $ | 50,752,209 |           
|2004       |       |   | 2,998,000  |           
|2005       |       |   | 48,000     |           
|2006       |       |   | 48,000     |           
|2007       |       |   | 34,091     |           
|Thereafter |       |   |           |           
|           |       |   |            |           
|           | Total |   | $          | 53,880,300 | 
|           |       |   |            |           

11. CONSTRUCTION PAYABLES 
PROPERTY AND EQUIPMENT

Construction payables include approximately $23
million of amounts due to two vendors under promissory notes
maturing from October 2002 through December 2002 bearing
interest at annual rates ranging from 8.5 to 10 percent.
Approximately $21 million of the amounts due under the
promissory notes are guaranteed by Mr. Medina. These
amounts relate to construction of the NAP of the Americas and
its colocation facility in Santa Clara, California. The Company
has the option with a certain vendor to make a payment of $8.0
million and convert the remaining payable of approximately $9.0
million into the Companys common stock. The option expires
in October 2002. The conversion of the payable would be at the
then current market value of the Companys common stock.

12. CONVERTIBLE DEBT

The Company issued approximately $10.5 million of
13% subordinated convertible debt during the year ended
March 31, 2002 and approximately $15.9 million during the
year ended March 31, 2001. The Company issued approximately
$4.3 million of 13.125% subordinated convertible debt during the
year ended March 31, 2002. The 13% debt matures on
December 31, 2005 and the 13.125% debt matures on
August 30, 2004. The debt is convertible into the
Companys stock at a weighted average conversion price of
$1.87 and $0.66 for the convertible debt issued at 13% and
13.125%, respectively. Prepayment by the Company is permitted
under

F-20



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

both debt instruments, but will entitle holders
of the 13% subordinated debenture to warrants or a premium over
their outstanding principal and interest based upon the
following schedule:

|     |  |                  |     |  
|---- |  | ---------------- | --- | -
|Year |  | Redemption Price
|     |  |                 
|2002 |  |                  | 104 | %
|2003 |  |                  | 103 | %
|2004 |  |                  | 102 | %
|2005 |  |                  | 100 | %

Subsequent to March 31, 2002, the Company
paid approximately $951,000 in interest that was due on
March 31, 2002. Subsequent to June 30, 2002, the
Company paid approximately $1,000,000 in interest that was due
on June 30, 2002.

13. CHANGES TO STOCKHOLDERS
EQUITY

In addition to acquisitions effectuated through
common stock transactions, the Company entered into the
following equity transactions:

Common stock

On March 7, 2002, 100,000 warrants issued on
March 1, 2002 at $0.01 per share were converted to 100,000
shares of common stock.

On February 19, 2002, $242,700 of
convertible debt was converted to 160,071 shares of common stock
at $1.52 per share.

In conjunction with the AmTec merger on
April 28, 2000, the Company sold 68,722,349 shares of
common stock to a third party for approximately $28.1 million.

Convertible preferred stock

At March 31, 2000, the Company had 4,176,693
shares of convertible preferred stock outstanding. The $1 par
value preferred stock had a 10% cumulative preferred dividend,
payable annually commencing March 31, 2000. During April
2000, the preferred stock was acquired by certain members of the
Companys management. Upon consummation of the AmTec
merger, the preferred shares were converted into 7,853,985
shares of the Companys common stock.

Series H redeemable convertible preferred
stock

In May 2001, the Company issued 294 shares of
Series H redeemable convertible preferred stock for
$500,000. The preferred stock allows for a preferential annual
dividend of $102 per share and is initially convertible into
294,000 shares of common stock. The preferred stock is
redeemable at $1,700 per share plus any unpaid dividends at the
request of the holder on the earlier of June 1, 2005 or
termination of a service agreement between the Company and the
holder.

Series G convertible preferred
stock

The Company assumed AmTecs 20 outstanding
shares of Series G convertible preferred stock
(Series G Preferred) in the AmTec merger, which
do not bear dividends. Conversion of the Series G Preferred
into common stock is based on the issue price plus an 8% per
annum non-compounding premium, divided by the lesser of: (a)
$1.50 per Series G Preferred share or (b) the closing
price of the Companys common stock, as reported on the
American Stock Exchange, on the business day immediately
preceding the conversion. The Series G Preferred also has a
stated liquidation preference value of $100,000 per share plus

F-21



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

8% in-kind dividends since March 1999, the date
of issuance. The holders have no voting rights except with
respect to matters that affect rights related to the
Series G Preferred.

Stock warrants

The Company uses the Black-Scholes model to
estimate the fair value of warrants at the date of grant.

During the year ended March 31, 2002, the
Company issued warrants to purchase 750,000 shares of common
stock and warrants to purchase 68,000 shares of common stock at
exercise prices of $0.77 and $1.72, respectively, to a third
party for services performed. On March 20, 2002, these
warrants were reissued at $0.01 per share with a $364,828
estimated value. These warrants expire June 2007.

On June 26, 2001, the Company issued
warrants with a $26,575 estimated value, to purchase 25,000
shares of common stock to a third party for services performed.
The warrants are exercisable at $2.00 per share and expire June
2003.

On June 12, 2001, the Company issued
warrants with a $46,150 estimated value, to purchase 50,000
shares of common stock to a third party for services performed.
The warrants are exercisable at $1.72 per share and expire June
2002.

On June 12, 2001, the Company issued
warrants with a $22,490 estimated value, to purchase 13,000
shares of common stock to a third party for services performed.
The warrants are exercisable at $1.72 per share and expire June
2011.

On June 12, 2001, the Company issued
warrants to purchase 19,000 shares of common stock at an
exercise price of $1.72, to a third party for services
performed. On January 31, 2002, the Company reissued these
warrants at $0.48 per share with a $7,942 estimated value. These
warrants expire January 31, 2012.

On March 22, 2001, the Company issued
warrants with a $352,200 estimated value, to purchase 300,000
shares of common stock to a third party for services performed.
The warrants are exercisable at $2.00 per share and expire March
2006.

In conjunction with the AmTec merger, the Company
assumed 3,036,981 warrants to acquire common stock at prices
ranging from $1.25 to $3.31 per share. The Company assigned a
value of $1,687,038 to the warrants, which expire in June 2001
through March 2004.

In November 2000, the Company issued 250,000
warrants to acquire common stock at $2.76 per share in payment
for services provided. The Company assigned a value of $394,000
to the warrants, which expire in 2008.

Stock options

In conjunction with the AmTec merger, the Company
adopted its two stock option plans, which were the 1995 and 1996
stock option plans, and assumed all outstanding stock options.
On June 23, 2000, the Board of Directors of the Company
adopted the 2000 stock option plan. Prior to the AmTec merger,
the Company did not have a plan. Incentive and nonqualified
options and stock appreciation rights may be granted to
employees, officers, directors, and consultants of the Company.
There are 12,500,000 shares of common stock reserved for
issuance under the 1995 and 1996 plans and 5,000,000 under the
2000 plan. The exercise price of the options are determined by
the Board of Directors, but in the case of an incentive stock
option, the exercise price may not be less than 100% of the fair
market value at the time of grant. Options vest over periods not
to exceed ten years.

On October 19, 2001, the Company issued
options to purchase 100,000 shares of common stock to each
member of the Companys Board of Directors, for a total of
900,000 options. The exercise price of the options is $0.67 per
share. The options are immediately exercisable.

F-22



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

A summary of the status of all of the
Companys stock options issued as of March 31, 2002
and 2001, and changes during the years is presented below:

|                                                                      |                |        |            |           |  |   |      |      | 
|--------------------------------------------------------------------- | -------------- | ------ | ---------- | --------- |  | - | ---- | ---- | 
|                                                                      |                |        |            | Weighted 
|                                                                      |                |        |            | Average  
|                                                                      |                |        |            | Exercise 
|                                                                      |                | Number |            | Price    
|                                                                      |                |        |            |          
|Outstanding at March 31, 2000                                         |                |        |           |           |  |   |     |     
|Assumed in merger                                                     |                |        | 5,077,000  |           |  |   | 1.24 |     
|Granted                                                               |                |        | 6,468,326  |           |  |   | 1.48 |     
|Expired/Terminated                                                    |                |        | (157,500   | )         |  |   | 3.19 |     
|Exercised                                                             |                |        | (489,000   | )         |  |   | 1.06 |     
|                                                                      |                |        |            |           |  |   |      |     
|Outstanding at March 31, 2001                                         |                |        | 10,898,826 |           |  | $ | 2.31 |     
|                                                                      |                |        |            |           |  |   |      |     
|Granted                                                               |                |        | 4,072,125  |           |  |   | .91  |     
|Expired/Terminated                                                    |                |        | (2,106,500 | )         |  |   | 2.75 |     
|Exercised                                                             |                |        | (115,000   | )         |  |   | .35  |     
|                                                                      |                |        |            |           |  |   |      |     
|Outstanding at March 31, 2002                                         |                |        | 12,749,451 |           |  | $ | 1.92 |     
|                                                                      |                |        |            |           |  |   |      |     
|Options exercisable at:                                               |                |        |            |           |  |   |      |     
|                                                                      | March 31, 2002 |        |            | 7,382,793 |  |   | $    | 1.74 | 
|                                                                      |                |        |            |           |  |   |      |     
|                                                                      | March 31, 2001 |        |            | 4,588,000 |  |   | $    | 1.26 | 
|                                                                      |                |        |            |           |  |   |      |     
|Weighted average fair value of options granted
    during year ended: |                |        |            |           |  |   |      |     
|                                                                      | March 31, 2002 |        | $          | .81       |  |   |      |      | 
|                                                                      |                |        |            |           |  |   |      |     
|                                                                      | March 31, 2001 |        | $          | 2.63      |  |   |      |      | 
|                                                                      |                |        |            |           |  |   |      |     

The Company has followed the guidelines under
SFAS No. 123 to determine the fair value of options at the
date of grant. The fair value of the options at the date of
grant was determined using an adjusted Black-Scholes option
pricing model, which is generally accepted as appropriate
primarily for short-term, exchange-traded options. For the
purpose of valuing the Companys options granted during the
year ended March 31, 2002 and 2001, the following
assumptions were used:

|                   |  |                |               |                |  |  |               | 
|------------------ |  | -------------- | ------------- | -------------- |  |  | ------------- | 
|                   |  | Year ended     |               | Year ended    
|                   |  | March 31, 2002 |               | March 31, 2001
|                   |  |                |               |               
|Risk-free rate     |  |                | 3.91% - 6.41% |                |  |  | 4.64% - 6.41% | 
|Volatility         |  |                | 80% - 139%    |                |  |  | 80% - 139%    | 
|Expected life      |  |                | 5 years       |                |  |  | 5 years       | 
|Expected dividends |  |                | 0%            |                |  |  | 0%            | 

F-23



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following tables summarize information about
options outstanding at March 31, 2002 and 2001:

|               |            |                |  |              |            |          |  |             |     |  |  |   |      |  |  |  |           | 
|-------------- | ---------- | -------------- |  | ------------ | ---------- | -------- |  | ----------- | --- |  |  | - | ---- |  |  |  | --------- | 
|               |            |                |  | Average      |            |          |  |            
|Range of       |            |                |  | Remaining    |            | Average  |  | Number     
|Exercise       |            |                |  | Contractual  |            | Exercise |  | Exercisable
|Prices         |            | Outstanding at |  | Life (Years) |            | Price    |  | Options at 
|               |            |                |  |              |            |          |  |            
|March 31, 2002 |            |                |  |              |            |          |  |             |     |  |  |  
|               | $0.29-0.50 |                |  |              | 2,176,000  |          |  |             | 3.2 |  |  | $ | 0.35 |  |  |  | 2,150,000 | 
|               | $0.51-1.00 |                |  |              | 2,769,900  |          |  |             | 9.3 |  |  |   | 0.70 |  |  |  | 1,118,500 | 
|               | $1.01-1.50 |                |  |              | 1,359,500  |          |  |             | 7.1 |  |  |   | 1.41 |  |  |  | 852,833   | 
|               | $1.51-2.00 |                |  |              | 324,874    |          |  |             | 8.9 |  |  |   | 1.73 |  |  |  | 100,976   | 
|               | $2.01-3.00 |                |  |              | 1,515,225  |          |  |             | 5.9 |  |  |   | 2.84 |  |  |  | 1,130,833 | 
|               | $3.01-5.00 |                |  |              | 4,603,952  |          |  |             | 8.3 |  |  |   | 3.26 |  |  |  | 2,029,651 | 
|               |            |                |  |              |            |          |  |             |     |  |  |   |      |  |  |  |           | 
|               |            |                |  |              | 12,749,451 |          |  |             |     |  |  |   |      |  |  |  | 7,382,793 | 
|               |            |                |  |              |            |          |  |             |     |  |  |   |      |  |  |  |           | 
|March 31, 2001 |            |                |  |              |            |          |  |             |     |  |  |  
|               | $0.35-0.50 |                |  |              | 2,390,000  |          |  |             | 4.1 |  |  | $ | 0.35 |  |  |  | 2,390,000 | 
|               | $0.51-1.00 |                |  |              | 223,500    |          |  |             | 7.7 |  |  |   | 0.87 |  |  |  | 217,500   | 
|               | $1.01-1.50 |                |  |              | 1,235,500  |          |  |             | 7.5 |  |  |   | 1.37 |  |  |  | 704,500   | 
|               | $1.51-2.00 |                |  |              | 808,374    |          |  |             | 9.7 |  |  |   | 1.82 |  |  |  | 17,500    | 
|               | $2.01-3.00 |                |  |              | 1,167,000  |          |  |             | 5.2 |  |  |   | 2.90 |  |  |  | 1,146,000 | 
|               | $3.01-5.00 |                |  |              | 5,074,452  |          |  |             | 9.2 |  |  |   | 3.94 |  |  |  | 112,500   | 
|               |            |                |  |              |            |          |  |             |     |  |  |   |      |  |  |  |           | 
|               |            |                |  |              | 10,898,826 |          |  |             |     |  |  |   |      |  |  |  | 4,588,000 | 
|               |            |                |  |              |            |          |  |             |     |  |  |   |      |  |  |  |           | 

The Company applies Accounting Principles Board
Opinion No. 25 and related Interpretations in accounting
for its employee options. Accordingly, no compensation cost has
been recognized with respect to such awards. Had compensation
cost for the Companys stock option plans been determined
consistent with Statement of Financial Accounting Standards
No. 123 Accounting for Stock-Based
Compensation, the Companys net earnings and earnings
per share for the years ended March 31, 2002 and 2001,
would have approximated the pro forma amounts indicated below:

|                                                       |  |                |             |                |  |   |              |  
|------------------------------------------------------ |  | -------------- | ----------- | -------------- |  | - | ------------ | -
|                                                       |  | Year ended     |             | Year ended    
|                                                       |  | March 31, 2002 |             | March 31, 2001
|                                                       |  |                |             |               
|Net loss applicable to common shares 
    as reported |  | $              | (57,372,215 | )              |  | $ | (103,999,662 | )
|                                                       |  |                |             |                |  |   |              |  
|Net loss applicable to common shares 
    proforma    |  | $              | (62,138,405 | )              |  |   | (106,477,216 | )
|                                                       |  |                |             |                |  |   |              |  
|Loss per common share  as reported                    |  | $              | (.29        | )              |  |   | (.55         | )
|                                                       |  |                |             |                |  |   |              |  
|Loss per common share  proforma                       |  | $              | (.31        | )              |  |   | (.56         | )
|                                                       |  |                |             |                |  |   |              |  

F-24



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

14. INCOME TAXES

The deferred tax provision consists of income
taxes relating to differences between the tax bases of assets
and liabilities and their financial reporting amounts.

|                        |                                                                            |                              |             |            |            |   |             |            |            |  
|----------------------- | -------------------------------------------------------------------------- | ---------------------------- | ----------- | ---------- | ---------- | - | ----------- | ---------- | ---------- | -
|                        |                                                                            |                             
|                        |                                                                            | March 31,                   
|                        |                                                                            |                             
|                        |                                                                            | 2002                         |             | 2001      
|                        |                                                                            |                              |             |           
|Deferred tax assets:    |                                                                            |                              |             |            |            |   |             |           
|                        | Charitable contributions                                                   |                              | $           | 230,293    |            |   | $           | 231,393    |           
|                        | Deferred revenue (percentage of completion vs
    completed contract)      |                              |             |           |            |   |             | 322,191    |           
|                        | Capitalized start-up costs                                                 |                              |             | 3,807,488  |            |   |             | 3,073,793  |           
|                        | Allowances and other                                                       |                              |             | 5,574,458  |            |   |             | 166,938    |           
|                        | Net operating loss carryforwards                                           |                              |             | 18,432,832 |            |   |             | 6,619,344  |           
|                        | Net operating loss carryforwards retained from
    discontinued operations |                              |             | 17,280,709 |            |   |             | 17,280,709 |           
|                        | Tax credits                                                                |                              |             | 245,780    |            |   |             | 245,780    |           
|                        |                                                                            |                              |             |            |            |   |             |           
|                        |                                                                            | Total deferred tax assets    |             |            | 45,571,560 |   |             |            | 27,940,148 |  
|                        |                                                                            |                              |             |            |            |   |             |           
|Valuation allowance     |                                                                            |                              | (45,506,913 | )          |            |   | (27,687,376 | )         
|                        |                                                                            |                              |             |            |            |   |             |           
|Deferred tax liability: |                                                                            |                              |             |            |            |   |             |           
|                        | Excess of book basis over tax basis on real
    estate investment          |                              |             |           |            |   |             | (252,166   | )         
|                        | Other                                                                      |                              |             | (64,647    | )          |   |             | (606       | )         
|                        |                                                                            |                              |             |            |            |   |             |           
|                        |                                                                            | Total deferred tax liability |             |            | (64,647    | ) |             |            | (252,772   | )
|                        |                                                                            |                              |             |            |            |   |             |           
|Net deferred tax asset  |                                                                            | $                            |            |            |            | $ |            |           
|                        |                                                                            |                              |             |            |            |   |             |           

The Company provides a valuation allowance
against deferred tax assets if, based on the weight of available
evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. The Company has
established a valuation allowance against deferred tax assets of
$45,506,913 and $27,687,376 as of March 31, 2002 and 2001,
respectively, since the Company has a history of operating
losses and in the near term does not expect taxable income.
Accordingly, the deferred tax asset will likely not be realized.
The Companys federal and state net operating loss
carryforwards begin to expire in 2011. Utilization of the net
operating losses generated prior to the AmTec merger may be
limited by the Internal Revenue Code.

The reconciliation between the statutory income
tax rate and the effective income tax rate on pre-tax
(loss) income is as follows:

|                                                          |  |                    |       |      |  |      |       |    |  |  |       |   
|--------------------------------------------------------- |  | ------------------ | ----- | ---- |  | ---- | ----- | -- |  |  | ----- | --
|                                                          |  |                   
|                                                          |  | For the year ended
|                                                          |  | March 31,         
|                                                          |  |                   
|                                                          |  | 2002               |       | 2001 |  | 2000
|                                                          |  |                    |       |      |  |     
|Statutory rate                                            |  |                    | (34.0 | )%   |  |      | (34.0 | )% |  |  | (34.0 | )%
|State income taxes, net of federal income tax
    benefit |  |                    | (3.3  | )%   |  |      | (3.4  | )% |  |  | (3.3  | )%
|Other permanent differences                               |  |                    | 6.2   | %    |  |      | 4.7   | %  |  |  | 2.7   | % 
|Increase in valuation allowance                           |  |                    | 31.1  | %    |  |      | 32.7  | %  |  |  | 36.4  | % 
|                                                          |  |                    |       |      |  |      |       |    |  |  |       |   
|Effective tax rate                                        |  |                    | 0     | %    |  |      | 0     | %  |  |  | 1.8   | % 
|                                                          |  |                    |       |      |  |      |       |    |  |  |       |   

15. COMMITMENTS AND
CONTINGENCIES

Leasing activities

The Company leases space for its operations,
office equipment and furniture under operating leases. Certain
equipment is also leased under capital leases, which are
included in leasehold improvements, furniture and equipment.

F-25



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

As of March 31, 2002, the Company has
entered into capital lease agreements with third parties for
equipment related primarily to the NAP of the Americas.
Generally, the lease terms are for 48 months, and the
aggregate gross related assets total approximately $6.1 million.

Operating lease expense amounted to approximately
$7.0 million, $1.3 million and $72,833 for the years ended
March 31, 2002, 2001 and 2000, respectively.

At March 31, 2002, future minimum lease
payments for each of the following five years and thereafter
under non-cancellable operating and capital leases having a
remaining term in excess of one year are as follows:

|           |                              |                                             |           |           |           |   |            |             |  | 
|---------- | ---------------------------- | ------------------------------------------- | --------- | --------- | --------- | - | ---------- | ----------- |  | 
|           |                              | Capital                                     |           | Operating
|           |                              | Leases                                      |           | Leases   
|           |                              |                                             |           |          
|2003       |                              | $                                           | 2,354,263 |           |           | $ | 4,511,232  |            
|2004       |                              |                                             | 1,436,317 |           |           |   | 4,625,268  |            
|2005       |                              |                                             | 1,072,257 |           |           |   | 4,729,065  |            
|2006       |                              |                                             |          |           |           |   | 4,420,167  |            
|2007       |                              |                                             |          |           |           |   | 4,662,561  |            
|Thereafter |                              |                                             |          |           |           |   | 87,354,638 |            
|           |                              |                                             |           |           |           |   |            |            
|           | Total minimum lease payments |                                             |           | 4,862,837 |           |   | $          | 110,302,931 | 
|           |                              |                                             |           |           |           |   |            |            
|           | Amount representing interest |                                             |           | 647,467   |           |   |            |             | 
|           |                              |                                             |           |           |           |   |            |            
|           |                              | Present value of net minimum lease payments |           | $         | 4,215,370 |   |            |             |  | 
|           |                              |                                             |           |           |           |   |            |            

As of June 28, 2002, the Company has signed
customer contracts that represent over $12 million of annualized
committed revenue with an average term of 5 years. No
customer accounted for more than 10% of Data Center revenues for
the year ended March 31, 2002.

Litigation

From time to time, the Company is involved in
various litigation relating to claims arising out of the normal
course of business. These claims are generally covered by
insurance. The Company is not currently subject to any
litigation which singularly or in the aggregate could reasonably
be expected to have a material adverse effect on the
Companys financial position or results of operations.

Other

Technology Center of the Americas LLC
(TECOTA), an entity that the Company has a .84%
member interest owns the building which leases the space for the
NAP of the Americas under a 20 year lease. The Company has
entered into an agreement to provide construction and management
services to TECOTA for fees. For the year ended March 31,
2002 and 2001 the Company earned approximately $408,000 and
approximately $1.4 million in related fees respectively. In
addition, the Company has guaranteed $9.5 million of TECOTA debt.

In October 2000, the Company signed a 20-year
lease for the colocation facility in Santa Clara, California.

16. RELATED PARTY TRANSACTIONS

Due to the nature of the following relationships,
the terms of the respective agreements might not be the same as
those that would result from transactions among wholly unrelated
parties. All significant related party transactions require
approval by the Companys Board of Directors.

The Company provides management and construction
services to partnerships where certain officers own an interest.
Management and construction fees earned totaled $0, $102,348 and
$119,416 for the years ended March 31, 2002, 2001 and 2000,
respectively.

F-26



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Included in the March 31, 2002 balance sheet
are amounts from related parties and include $5.0 million Note
Receivable (Note 10 and Note 18), $7.2 million in Notes Payable
(Note 10) and approximately $4.5 million in Convertible Debt
(Note 12).

In May 2002, the Company received a binding
commitment from certain directors and shareholders of the
Company for the purchase of $7.5 million of common stock at $.75
per share. In May 2002, the transaction was completed by
receiving $3.6 million in cash and the conversion of $3.9
million in short term promissory notes to equity. In March 2002,
the Company received $950,000 in cash related to the future
stock sale. As of March 31, 2002, this cash receipt was
recorded as common stock subscriptions.

In May 2002, the Company received a $1.5 million
short-term loan at a 10% interest rate from Mr. Medina.

In February 2001, the Company sold certain of its
operations to related parties (Note 5).

In April 2000, certain members of the
Companys management acquired convertible preferred stock
which was subsequently converted to common stock (Note 13).

The Company owns a .84% member interest in TECOTA
and provides construction and management services for fees. In
addition, the Company has guaranteed $9.5 million of
TECOTAs debt (Note 13).

Mr. Medina had guaranteed the Companys
$48 million credit facility (Note 10) and
approximately $21 million in construction payables
(Note 11).

17. INFORMATION ABOUT THE COMPANYS
OPERATING SEGMENTS

As of March 31, 2002, the Company had two
reportable business segments, data center operations and real
estate services. The data center operations segment provides
Tier 1 NAP, Internet infrastructure and managed services in a
data center environment. The real estate services segment
constructs, develops and manages real estate projects. The
Companys reportable segments are strategic business
operations that offer different products and services.

During the year ended March 31, 2001, the
Company had an additional segment, telecom facilities
management, which developed, managed and leased facilities
catering primarily to the telecommunications industry. In
conjunction with the Companys change in its strategy
related to its colocation facility in Santa Clara, California,
the Company no longer considers the remaining operations to be
separate from its other two segments. Therefore, amounts
unrelated to the colocation facility have been reclassified in
the current and prior year presentations to their respective
March 31, 2002 segments.

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

F-27



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##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

performance based on the segments net
operating results. The following presents information about
reportable segments.

|                             |  |             |             |            |  |             |             |              |  |       |            |   |  |   |             |   |  |   |              |  
|---------------------------- |  | ----------- | ----------- | ---------- |  | ----------- | ----------- | ------------ |  | ----- | ---------- | - |  | - | ----------- | - |  | - | ------------ | -
|                             |  |             |             |            |  |             |             | Discontinued |  |      
|                             |  |             |             | Telecom    |  |             |             | Operations - |  |      
|                             |  | Data Center |             | Facilities |  | Real Estate |             | Telecom      |  |      
|For the Year Ended March 31, |  | Operations  |             | Management |  | Services    |             | Services     |  | Total
|                             |  |             |             |            |  |             |             |              |  |      
|2002                         |  |             |             |            |  |             |             |              |  |       |            |   |  |   |             |   |  |   |              |  
|                             |  |             |             |            |  |             |             |              |  |       |            |   |  |   |             |   |  |   |              |  
|Revenue                      |  | $           | 3,215,897   |            |  | $           |            |              |  | $     | 12,656,587 |   |  | $ |            |   |  | $ | 15,872,484   |  
|Loss from operations         |  |             | (26,249,509 | )          |  |             | (16,340,634 | )            |  |       | (8,961,576 | ) |  |   |            |   |  |   | (51,551,719  | )
|Net loss                     |  |             | (34,971,359 | )          |  |             | (16,682,059 | )            |  |       | (5,718,797 | ) |  |   |            |   |  |   | (57,372,215  | )
|2001                         |  |             |             |            |  |             |             |              |  |       |            |   |  |   |             |   |  |   |              |  
|                             |  |             |             |            |  |             |             |              |  |       |            |   |  |   |             |   |  |   |              |  
|Revenue                      |  | $           | 252,906     |            |  | $           | 2,863,443   |              |  | $     | 37,031,059 |   |  | $ |            |   |  | $ | 40,147,408   |  
|Loss from operations         |  |             | (9,158,888  | )          |  |             | (7,758,575  | )            |  |       | (3,258,293 | ) |  |   |            |   |  |   | (20,175,756  | )
|Net loss                     |  |             | (9,219,416  | )          |  |             | (8,383,329  | )            |  |       | (3,770,506 | ) |  |   | (82,626,411 | ) |  |   | (103,999,662 | )
|2000                         |  |             |             |            |  |             |             |              |  |       |            |   |  |   |             |   |  |   |              |  
|                             |  |             |             |            |  |             |             |              |  |       |            |   |  |   |             |   |  |   |              |  
|Revenue                      |  |             |            |            |  |             |            |              |  | $     | 15,390,417 |   |  | $ |            |   |  | $ | 15,390,417   |  
|Loss from operations         |  |             |            |            |  |             |            |              |  |       | (5,407,643 | ) |  |   |            |   |  |   | (5,407,643   | )
|Net loss                     |  |             |            |            |  |             |            |              |  |       | (6,033,232 | ) |  |   |            |   |  |   | (6,033,232   | )
|Assets, as of March 31,      |  |             |             |            |  |             |             |              |  |       |            |   |  |   |             |   |  |   |              |  
|                             |  |             |             |            |  |             |             |              |  |       |            |   |  |   |             |   |  |   |              |  
|2002                         |  | $           | 69,644,606  |            |  | $           |            |              |  | $     | 11,379,325 |   |  | $ |            |   |  | $ | 81,023,931   |  
|2001                         |  |             | 31,074,738  |            |  |             | 8,440,859   |              |  |       | 38,552,981 |   |  |   |            |   |  |   | 78,068,578   |  

18. SUBSEQUENT EVENTS

During July 2002, the Company reached an
agreement in principle to amend its existing $48 million credit
facility. Under the amended terms, the initial maturity date has
been extended to September 2003 and the Company has the option
to exercise two six-month extension periods each at a cost of
0.5% of the principal balance outstanding together with a
principal repayment of $2.5 million. The annual interest rate
has been reduced to 7.50% and the Company will commence making
monthly interest payments in July 2002. All other material
provisions of the credit facility will remain unchanged. This
amendment will be binding upon execution of the documents
modifying the terms and conditions of this credit facility,
which the Company expects to complete in July 2002. The
$48 million is classified as current in the accompanying
financial statements.

In July 2002, the Company and Mr. Medina
agreed to modify the terms of the $5.0 million non-interest
bearing note. As amended, the note has a maturity date of
December 5, 2004 and bears interest subsequent to
September 5, 2002 at the applicable federal rate. Interest
is due in bi-annual installments. On a quarterly basis, the
Company will review the collectibility of this note. As of
July 9, 2002, the Company owed Mr. Medina
approximately $3.7 million. The Company has the right to
withhold payment to Mr. Medina of $1,375,000 in amounts due.

In June 2002, the Company entered into an
exclusive agreement with the Comunidad Autonoma de Madrid to
develop and operate carrier-neutral network access points (NAPs)
in Spain. As part of that agreement, the parties formed NAP de
las Americas  Madrid S.A. for the purpose of owning
and operating carrier-neutral Tier-1 NAPs in Spain and of which
the Company owns 10%. The Company contributed approximately
$250,000 towards the capitalization of NAP de las
Americas  Madrid S.A. to obtain the 10% interest. The
shareholders in this new company are the Instituto Madrileno de
Desarrollo  IMADE, the Camara Oficial de Comercio e
Industria de Madrid, Red Electrica Telecomunicaciones, S.A.,
Telvent Desarrollos S.A., a subsidiary of Abengoa S.A., and
Centro de Transportes de Coslada, S.A. In June 2002, the NAP de
las Americas  Madrid purchased 5 million shares of
the Companys common stock at $1.00 per share. The Company
also has the option to purchase up to another 30% of the NAP de
las Americas  Madrid shares owned by the Comunidad
and the Camara at initial capitalization, plus LIBOR. The number
of shares sold will be adjusted if the Company during the next
12 months issues common stock at less than $1.00 per
share.

F-28



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##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In May 2002, the Company received a
$1.5 million short term loan at 10% interest from
Mr. Medina.

In April 2002, the Company entered into a Put and
Warrant purchase agreement with an international financial
institution. Under the agreement, the Company has an option to
sell up to $10.2 million in aggregate value of its shares of
common stock, at a per share price equivalent to 86.6% of the
closing price of the Companys common stock on the day the
option is exercised. The amount of shares that the Company puts
to the financial institution is limited to 9.9% of the then
outstanding common stock. Upon the exercise of the option, the
Company will issue and grant to the financial institution three
call warrants that grant the financial institution the right to
purchase additional shares in an aggregate amount equal to 20%
of the shares sold to the institution under the option. The
strike price for the first call warrant is equal to the market
price of the Companys share price on the option exercise
date. The strike price of the second call warrant will be at a
15% premium of the Companys share price on the option
exercise date. The strike price of the last call warrant will be
at a 15% discount of our share price on the option exercise
date. All three call warrants have a six month term. The option
expires during October 2002. If the option expires without
exercise, the Company is required to pay $500,000 in fees.

* * * * *

F-29