##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


|  |  |                                                                                             
|- |  | --------------------------------------------------------------------------------------------
|þ |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
| 
|  |  | For the fiscal year ended March 31, 2005                                                    
| 
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-22520





Terremark Worldwide, Inc.


(Exact Name of Registrant as Specified in Its Charter)


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

2601 S. Bayshore Drive, Miami, Florida 33133


(Address of Principal Executive Offices, Including Zip
Code)


Registrants telephone number, including area code:


(305) 856-3200


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


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

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


NONE





þ o





o





þ o





The aggregate market value of the registrants common
stock held by non-affiliates of the registrant on,
September 30, 2004, was approximately $155,145,610, based
on the closing market price of the registrants common
stock ($0.64 as reported by the American Stock Exchange on such
date).





The number of shares outstanding of the registrants
common stock, par value $0.001 per share, as of
June 29, 2005 was 42,725,138. This number reflects a
one-for-ten reverse stock split the registrant implemented,
effective as of May 16, 2005.










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TABLE OF CONTENTS


|                                                 |          |  |                                                                                                                      |      |  |    | 
|------------------------------------------------ | -------- |  | -------------------------------------------------------------------------------------------------------------------- | ---- |  | -- | 
|                                                 |          |  |                                                                                                                      | Page | 
|                                                 |          |  |                                                                                                                      |      | 
|Part I                                           |          |  | 3                                                                                                                    |     
|                                                 | Item 1.  |  | Business                                                                                                             |      |  | 3  | 
|                                                 | Item 2.  |  | Properties                                                                                                           |      |  | 11 | 
|                                                 | Item 3.  |  | Legal Proceedings                                                                                                    |      |  | 12 | 
|                                                 | Item 4.  |  | Submission of Matters to a Vote of Security
    Holders                                                              |      |  | 12 | 
|Part II                                          |          |  | 12                                                                                                                   |     
|                                                 | Item 5.  |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |      |  | 12 | 
|                                                 | Item 6.  |  | Selected Consolidated Financial Data                                                                                 |      |  | 14 | 
|                                                 | Item 7.  |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |      |  | 16 | 
|                                                 | Item 7A. |  | Quantitative and Qualitative Disclosures
    about Market Risk                                                       |      |  | 36 | 
|                                                 | Item 8.  |  | Financial Statements And Supplementary
    Data                                                                      |      |  | 38 | 
|                                                 | Item 9.  |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |      |  | 38 | 
|                                                 | Item 9A. |  | Controls and Procedures                                                                                              |      |  | 38 | 
|                                                 | Item 9B. |  | Other Information                                                                                                    |      |  | 41 | 
|Part III                                         |          |  | 42                                                                                                                   |     
|                                                 | Item 10. |  | Directors and Executive Officers of the
    Registrant                                                               |      |  | 42 | 
|                                                 | Item 11. |  | Executive Compensation                                                                                               |      |  | 45 | 
|                                                 | Item 12. |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |      |  | 49 | 
|                                                 | Item 13. |  | Certain Relationships and Related
    Transactions                                                                   |      |  | 52 | 
|                                                 | Item 14. |  | Principal Accountant Fees and Services                                                                               |      |  | 54 | 
|Part IV                                          |          |  | 55                                                                                                                   |     
|                                                 | Item 15. |  | Exhibits and Financial Statement
    Schedules                                                                       |      |  | 55 | 
|Signatures                                       |          |  | 58                                                                                                                   |     
|Employment Agreement with John Neville          
|Subsidiaries of the Company                     
|Consent of PricewaterhouseCoopers LLP           
|Section 302 Chief Executive Officer Certfication
|Section 302 Chief Financial Officer Certfication
|Section 906 Chief Executive Officer Certfication
|Section 906 Chief Financial Officer Certfication



2



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PART I







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

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


Recent Events


All share amounts and prices, and per share information in
this annual report on Form 10-K have been adjusted to
reflect the reverse stock split.






3



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Our Business








| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | space to house equipment and network facilities in immediate
    proximity to Internet and communications networks;           
|
| |  | the platform to exchange telecommunications and Internet traffic
    and access to network-based services; and                
|
| |  | related professional and managed services such as our network
    operations center, outsourced storage and remote monitoring.







4



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Industry








Value Proposition






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | State-of-the-art facilities. Our facilities are
    constructed in order to meet high standards of security and
    provide 24x7 monitoring, on-site technical support and service
    level agreements that guarantee 100% uptime for power and
    cooling capabilities. Additionally, our Miami facility is
    designed to withstand a category 5 hurricane and houses
    equipment only above the second floor in order to prevent flood
    damage.
|
| |  | Carrier-neutrality. Carriers and other customers are
    willing to locate their equipment within our facility and use
    our professional managed services because we neither
    discriminate against nor give preference to any individual or
    group of customers.                                                                                                                                                                                 
|
| |  | Connectivity. Our customers can access any of the more
    than 90 network providers present at our facilities.                                                                                                                                                                                                                                                                                                                                           
|
| |  | Zero-Mile Access. Because our facilities
    provide carrier-grade colocation space directly adjacent to the
    point at which the traffic is exchanged, there is effectively
    zero distance between the peering point and
    customers equipment, which reduces costs and points of
    failure and increases efficiency.                                                                                                                      
|
| |  | Outsourcing of Services. Because of our staffs
    expertise, our customers find it more cost effective to contract
    us to design, deploy, operate, monitor and manage their
    equipment and networks at our facilities than to hire dedicated
    staff to perform those functions.                                                                                                                                                                
|
| |  | Lower Costs, Increased Efficiency and Quality of Service.
    The combination of these attributes helps our customers reduce
    their total costs by eliminating local loop charges to connect
    their facility to the                                                                                                                                                                                                                                 

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| |  |                                                                                                                                                                                    
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | peering point, backhaul charges to and from connecting points,
    and the cost of redundancy to mitigate risks associated with
    increased points of failure along these routes.

Our Strategy




Deepen our relationships with existing customers.


Penetrate new sectors.


Establish insertion points for network-based services. tm tm


Maintain and establish a presence in strategic locations.


Customers




6



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






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



|   |                                   
|-- | ----------------------------------
|** | A business unit of Telecom Italia.



|    |                                     
|--- | ------------------------------------
|*** | A business unit of Deutsche Telecom.



Products and Services






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





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





| |   |                          
| | - | -------------------------
| |  | Ethernet Exchange Service



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

7



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| |   |                         
| | - | ------------------------
| |  | Optical Exchange Service



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



| |   |                              
| | - | -----------------------------
| |  | Muxing and De-muxing Services



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



| |   |                               
| | - | ------------------------------
| |  | International Gateway Services



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

Managed and Professional Services






| |   |                                      
| | - | -------------------------------------
| |  | Network Operations Center Outsourcing



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



| |   |                       
| | - | ----------------------
| |  | Managed Router Service



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



| |   |                        
| | - | -----------------------
| |  | Managed Storage Service



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



| |   |                                  
| | - | ---------------------------------
| |  | Managed Optical Extension Service



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



| |   |                                     
| | - | ------------------------------------
| |  | Advanced Network Monitoring Services



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

8



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| |   |                                 
| | - | --------------------------------
| |  | Professional Outsourced Services



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



| |   |                      
| | - | ---------------------
| |  | Installation Services



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



| |   |                                     
| | - | ------------------------------------
| |  | Remote Hands and Smart Hands Service



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

Sales and Marketing




Government and Federal Information Technology Service
Providers.


Commercial.




Marketing.


9



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Competition








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


U.S. IXs such as MAE West and carrier operated IXs.


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


Neutral colocation and Internet exchange services companies
such as Equinix.


Employees






10



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Where You Can Find Additional Information


http://www.terremark.com







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



















11



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








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






PART II







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

Common Stock and Preferred Stock Information








| |   |                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 100,000,000 shares of common stock, par value
    $0.001 per share; and                                                                                                                                                                                                                                                    
|
| |  | 10,000,000 shares of preferred stock, par value
    $0.001 per share, which are issuable in series on terms to
    be determined by our board of directors, of which
    5,882 shares are designated as series H convertible
    preferred stock and 600 shares are designated as
    series I convertible preferred stock.





| |   |                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 42,745,283 shares of our common stock were outstanding;                                                                                                                                                                           
|
| |  | 294 shares of our series H convertible preferred stock
    were outstanding and held by one holder of record. Each share of
    series H convertible preferred stock may be converted into
    100 shares of our common stock; and
|
| |  | 384 shares of our series I convertible preferred stock
    were outstanding. Each share of series I convertible
    preferred stock may be converted into 3,333 shares of our
    common stock.                                   





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

12



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|                               |  |        |       |  |     |   |      | 
|------------------------------ |  | ------ | ----- |  | --- | - | ---- | 
|                               |  | Prices |      
|                               |  |        |      
|Fiscal Year 2004 Quarter Ended |  | High   |       |  | Low |  
|                               |  |        |       |  |     |  
|June 30, 2003                  |  | $      | 12.10 |  |     | $ | 3.30 | 
|September 30, 2003             |  |        | 10.00 |  |     |   | 5.30 | 
|December 31, 2003              |  |        | 7.80  |  |     |   | 5.20 | 
|March 31, 2004                 |  |        | 9.40  |  |     |   | 6.00 | 

Dividend Policy




Recent Sales of Unregistered Securities












13



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



14



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|                                                      |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |         |        |  |   |          |        | 
|----------------------------------------------------- | -------------- | -------------------------------------------- | ------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ |  | ---- | ------- | ------ |  | - | -------- | ------ | 
|                                                      |                | Twelve Months Ended March 31,                |        
|                                                      |                |                                              |        
|                                                      |                | 2005                                         |         |        | 2004 |   |         | 2003   |  |   | 2002    |        |  | 2001 |        
|                                                      |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |        
|                                                      |                | (Dollars in thousands except per share data) |        
|Results of Operations:                                |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |         |        |  |   |          |       
|Data center(1)                                        |                | $                                            | 46,818  |        |      | $ | 17,034  |        |  | $ | 11,033  |        |  | $    | 3,216   |        |  | $ | 253      |       
|Real estate services                                  |                |                                              | 1,330   |        |      |   | 1,179   |        |  |   | 3,661   |        |  |      | 12,656  |        |  |   | 39,894   |       
|                                                      |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |        
|                                                      | Total revenue  |                                              |         | 48,148 |      |   |         | 18,213 |  |   |         | 14,694 |  |      |         | 15,872 |  |   |          | 40,147 | 
|                                                      |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |        
|Data center operations expenses                       |                |                                              | 36,310  |        |      |   | 16,413  |        |  |   | 11,235  |        |  |      | 11,231  |        |  |   | 1,223    |       
|Construction contract expenses                        |                |                                              | 809     |        |      |   | 918     |        |  |   | 2,968   |        |  |      | 7,398   |        |  |   | 20,347   |       
|Other expenses                                        |                |                                              | 20,888  |        |      |   | 23,373  |        |  |   | 41,718  |        |  |      | 54,615  |        |  |   | 39,950   |       
|                                                      |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |        
|                                                      | Total expenses |                                              |         | 58,007 |      |   |         | 40,704 |  |   |         | 55,921 |  |      |         | 73,244 |  |   |          | 61,520 | 
|                                                      |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |        
|Net loss                                              |                |                                              | (9,859  | )      |      |   | (22,491 | )      |  |   | (41,227 | )      |  |      | (57,372 | )      |  |   | (21,373  | )     
|Loss from discontinued operations                     |                |                                              |        |        |      |   |        |        |  |   |        |        |  |      |        |        |  |   | (82,627  | )     
|Non-cash preferred dividend                           |                |                                              | (915    | )      |      |   | (1,158  | )      |  |   | (160    | )      |  |      | (160    | )      |  |   | (160     | )     
|                                                      |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |        
|Net loss attributable to common shareholders          |                | $                                            | (10,774 | )      |      | $ | (23,649 | )      |  | $ | (41,387 | )      |  | $    | (57,532 | )      |  | $ | (104,160 | )     
|                                                      |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |        
|Loss from continuing operations per common share(2)   |                | $                                            | (0.31   | )      |      | $ | (0.78   | )      |  | $ | (1.76   | )      |  | $    | (2.90   | )      |  | $ | (1.10    | )     
|Loss from discontinued operations per common share(2) |                |                                              |        |        |      |   |        |        |  |   |        |        |  |      |        |        |  |   | (4.40    | )     
|                                                      |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |        
|Net loss per common share(2)                          |                | $                                            | (0.31   | )      |      | $ | (0.78   | )      |  | $ | (1.76   | )      |  | $    | (2.90   | )      |  | $ | (5.50    | )     
|                                                      |                |                                              |         |        |      |   |         |        |  |   |         |        |  |      |        

|                                  |  |                               |         |  |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        | 
|--------------------------------- |  | ----------------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------ | 
|                                  |  | Twelve Months Ended March 31, |        
|                                  |  |                               |        
|                                  |  | 2005                          |         |  | 2004 |   |         | 2003 |  |   | 2002    |   |  | 2001 |        
|                                  |  |                               |         |  |      |   |         |      |  |   |         |   |  |      |        
|                                  |  | (Dollars in thousands)        |        
|Financial condition:(3)           |  |                               |         |  |      |   |         |      |  |   |         |   |  |      |         |   |  |   |        | 
|Property and equipment, net       |  | $                             | 123,406 |  |      | $ | 53,898  |      |  | $ | 54,483  |   |  | $    | 61,089  |   |  | $ | 25,066 | 
|Total assets                      |  |                               | 208,906 |  |      |   | 77,433  |      |  |   | 69,602  |   |  |      | 81,024  |   |  |   | 78,069 | 
|Long term obligations(4)(5)       |  |                               | 149,734 |  |      |   | 78,525  |      |  |   | 74,524  |   |  |      | 38,210  |   |  |   | 16,462 | 
|Stockholders equity (deficit)(6) |  |                               | 40,176  |  |      |   | (22,720 | )    |  |   | (46,461 | ) |  |      | (49,276 | ) |  |   | 11,163 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Amount includes contract termination fees for the years ended
    March 31, 2004 and 2003 of $422 and $1,095, respectively.                                                                                                                                                                                                                                                                                      
|   
|(2) | Earnings per share have been adjusted to reflect the one-for-ten
    reverse stock split effective May 16, 2005.                                                                                                                                                                                                                                                                                                 
|   
|(3) | See Managements discussion and Analysis of Financial
    Condition and Results of Operations  Liquidity and
    Capital Resources.                                                                                                                                                                                                                                                                           
|   
|(4) | Long term obligations include mortgage payable less current
    portion, convertible debt less current portion, estimated fair
    value of derivatives embedded within convertible debt, deferred
    rent, deferred revenue, unearned interest under capital lease
    obligations, capital lease obligations less current portion,
    notes payable less current portion, and redeemable preferred
    stock.
|   
|(5) | Long term obligations as of March 31, 2005, 2004, 2004 and
    2002 include $500 thousand in redeemable convertible
    preferred stock plus accrued dividends.                                                                                                                                                                                                                                                  
|   
|(6) | Stockholders equity as of March 31, 2000 includes
    approximately $4,777 in convertible preferred stock.                                                                                                                                                                                                                                                                                                      

15



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|                                                      |  |                                              |        |         |             |   |        |              |  |   |            |   |  |   |       |  
|----------------------------------------------------- |  | -------------------------------------------- | ------ | ------- | ----------- | - | ------ | ------------ |  | - | ---------- | - |  | - | ----- | -
|                                                      |  | Three Months Ended                           |       
|                                                      |  |                                              |       
|                                                      |  |                                              |        | June 30 |            
|                                                      |  | March 31                                     |        |         | December 31 |   |        | September 30 |  |   | 2004       |  
|                                                      |  | 2005                                         |        |         | 2004        |   |        | 2004         |  |   | (Restated) |  
|                                                      |  |                                              |        |         |             |   |        |              |  |   |            |  
|                                                      |  | (Dollars in thousands except per share data) |       
|Data center                                           |  | $                                            | 13,472 |         |             | $ | 18,320 |              |  | $ | 7,915      |   |  | $ | 7,111 |  
|Real estate services                                  |  |                                              |       |         |             |   | 242    |              |  |   | 303        |   |  |   | 784   |  
|                                                      |  |                                              |        |         |             |   |        |              |  |   |            |  
|Total revenue                                         |  |                                              | 13,472 |         |             |   | 18,562 |              |  |   | 8,218      |   |  |   | 7,895 |  
|                                                      |  |                                              |        |         |             |   |        |              |  |   |            |  
|Data center operations expenses                       |  |                                              | 8,506  |         |             |   | 15,382 |              |  |   | 6,465      |   |  |   | 5,737 |  
|Construction contract expenses                        |  |                                              | (319   | )       |             |   | 180    |              |  |   | 243        |   |  |   | 705   |  
|Other expenses                                        |  |                                              | 12,094 |         |             |   | 8,288  |              |  |   | (1,304     | ) |  |   | 2,030 |  
|                                                      |  |                                              |        |         |             |   |        |              |  |   |            |  
|Total expenses                                        |  |                                              | 20,281 |         |             |   | 23,850 |              |  |   | 5,404      |   |  |   | 8,472 |  
|                                                      |  |                                              |        |         |             |   |        |              |  |   |            |  
|Loss from continued operations                        |  |                                              | (6,809 | )       |             |   | (5,288 | )            |  |   | 2,814      |   |  |   | (577  | )
|Non-cash preferred dividend                           |  |                                              | (193   | )       |             |   | (235   | )            |  |   | (245       | ) |  |   | (242  | )
|                                                      |  |                                              |        |         |             |   |        |              |  |   |            |  
|Net income (loss) attributable to common shareholders |  | $                                            | (7,002 | )       |             | $ | (5,523 | )            |  | $ | 2,569      |   |  | $ | (819  | )
|                                                      |  |                                              |        |         |             |   |        |              |  |   |            |  
|Net income (loss) per common share                    |  | $                                            | (0.19  | )       |             | $ | (0.16  | )            |  | $ | 0.07       |   |  | $ | (0.02 | )
|                                                      |  |                                              |        |         |             |   |        |              |  |   |            |  

|                                                      |  |                                              |        |   |             |   |        |              |  |   |         |   |  |   |        |  
|----------------------------------------------------- |  | -------------------------------------------- | ------ | - | ----------- | - | ------ | ------------ |  | - | ------- | - |  | - | ------ | -
|                                                      |  | March 31                                     |        |   | December 31 |   |        | September 30 |  |   | June 30 |  
|                                                      |  | 2004                                         |        |   | 2003        |   |        | 2003         |  |   | 2003    |  
|                                                      |  |                                              |        |   |             |   |        |              |  |   |         |  
|                                                      |  | (Dollars in thousands except per share data) |       
|Revenue                                               |  | $                                            | 5,858  |   |             | $ | 4,865  |              |  | $ | 4,049   |   |  | $ | 3,441  |  
|                                                      |  |                                              |        |   |             |   |        |              |  |   |         |  
|Data center operations expenses                       |  |                                              | 5,243  |   |             |   | 4,664  |              |  |   | 3,950   |   |  |   | 2,556  |  
|Construction contract expenses                        |  |                                              | 581    |   |             |   | 229    |              |  |   | 62      |   |  |   | 46     |  
|Other expenses                                        |  |                                              | 5,496  |   |             |   | 9,124  |              |  |   | 10,844  |   |  |   | (2,091 | )
|                                                      |  |                                              |        |   |             |   |        |              |  |   |         |  
|Total expenses                                        |  |                                              | 11,320 |   |             |   | 14,017 |              |  |   | 14,856  |   |  |   | 511    |  
|                                                      |  |                                              |        |   |             |   |        |              |  |   |         |  
|Loss from continued operations                        |  |                                              | (5,462 | ) |             |   | (9,152 | )            |  |   | (10,807 | ) |  |   | 2,930  |  
|Non-cash preferred dividend                           |  |                                              | (1,038 | ) |             |   | (40    | )            |  |   | (40     | ) |  |   | (40    | )
|                                                      |  |                                              |        |   |             |   |        |              |  |   |         |  
|Net income (loss) attributable to common shareholders |  | $                                            | (6,500 | ) |             | $ | (9,192 | )            |  | $ | (10,847 | ) |  | $ | 2,890  |  
|                                                      |  |                                              |        |   |             |   |        |              |  |   |         |  
|Net income (loss) per common share                    |  | $                                            | (0.21  | ) |             | $ | (0.30  | )            |  | $ | (0.35   | ) |  | $ | 0.10   |  
|                                                      |  |                                              |        |   |             |   |        |              |  |   |         |  






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

This report contains forward-looking statements
within the meaning of the Private Securities Litigation Reform
Act of 1995 based on our current expectations, assumptions, and
estimates about us and our industry. These forward-looking
statements involve risks and uncertainties. Words such as
believe, anticipate,
estimate, expect, intend,
plan, will, may, and other
similar expressions identify forward-looking statements. In
addition, any statements that refer to expectations, projections
or other characterizations of future events or circumstances are
forward-looking statements. All statements other than statements
of


16



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historical facts, including, among others, statements
regarding our future financial position, business strategy,
projected levels of growth, projected costs and projected
financing needs, are forward-looking statements. Our actual
results could differ materially from those anticipated in such
forward-looking statements as a result of several important
factors including, without limitation, a history of losses,
competitive factors, uncertainties inherent in government
contracting, concentration of business with a small number of
clients, the ability to service debt, substantial leverage,
material weaknesses in our internal controls and our disclosure
controls, energy costs, the interest rate environment, one-time
events and other factors more fully described in Risk
Factors and elsewhere in this report. The forward-looking
statements made in this report relate only to events as of the
date on which the statements are made. Because forward-looking
statements are inherently subject to risks and uncertainties,
some of which cannot be predicted or quantified, you should not
rely upon forward-looking statements as predictions of future
events. Except as required by applicable law, including the
securities laws of the United States, and the rules and
regulations of the Securities and Exchange Commission, we do not
plan and assume no obligation to publicly update or revise any
forward-looking statements contained herein after the date of
this report, whether as a result of any new information, future
events or otherwise.


Critical Accounting Policies and Estimates








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



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





17



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



18



---



##### Table of Contents











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









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



19



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







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





Results of Operations




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

Revenue.


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

20



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







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











21



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Construction Contract and Fee Revenue.


Data Center Operations Expenses.










Construction Contract Expenses.


Sales and Marketing Expenses.


General and Administrative Expenses.


22



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Depreciation and Amortization Expense.


Impairment of Long-lived Assets.


Change in Fair Value of Derivatives Embedded within
Convertible Debt.


Gain on Debt Restructuring and Conversion.


Interest Expense.


Net Loss.




23



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

Revenue.


|        |                                       |               |     |    |      |  |     |    |  
|------- | ------------------------------------- | ------------- | --- | -- | ---- |  | --- | -- | -
|        |                                       | For the       |    
|        |                                       | Twelve Months |    
|        |                                       | Ended         |    
|        |                                       | March 31,     |    
|        |                                       |               |    
|        |                                       | 2004          |     |    | 2003 | 
|        |                                       |               |     |    |      | 
|Revenue |                                       |               |     |    |      |  |     |   
|        | U.S.                                  |               |     | 99 | %    |  |     | 98 | %
|        | Outside US                            |               |     | 1  | %    |  |     | 2  | %
|        |                                       |               |     |    |      | 
|        |                                       |               | 100 | %  |      |  | 100 | % 
|        |                                       |               |     |    |      | 
|        | Data center                           |               |     | 94 | %    |  |     | 75 | %
|        | Construction contract and fee revenue |               |     | 6  | %    |  |     | 25 | %
|        |                                       |               |     |    |      | 
|        |                                       |               | 100 | %  |      |  | 100 | % 
|        |                                       |               |     |    |      | 



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





| |   |                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | colocation services, such as leasing of space and provisioning
    of power;                                                                                                                                                        
|
| |  | exchange point services, such as peering and cross
    connects; and                                                                                                                                                                
|
| |  | managed and professional services, such as network management,
    network monitoring, procurement and installation of equipment
    and procurement of connectivity, managed router services,
    technical support and consulting.





24



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Data Center Operations Expenses.


Contract Construction Expenses.


General and Administrative Expense.


Sales and Marketing Expenses.


25



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Depreciation and Amortization Expense.


Impairment of Long-Lived Assets.


|                                    |  |   |           | 
|----------------------------------- |  | - | --------- | 
|Facility in Santa Clara, California |  | $ | 350,000   | 
|Post Shell goodwill                 |  |   | 2,315,336 | 
|TECOTA promote interest             |  |   | 904,964   | 
|Equipment                           |  |   | 450,000   | 
|                                    |  |   |          
|                                    |  | $ | 4,020,300 | 
|                                    |  |   |          



Debt Restructuring.


Interest Expense.


Other income (expenses).


Net Loss.


Liquidity and Capital Resources




| |                                  
| | ---------------------------------
| | Liquidity and Recent Developments



26



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| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | incur more debt;                                                              
|
| |  | pay dividends, redeem or repurchase our stock or make other
    distributions;
|
| |  | make acquisitions or investments;                                             
|
| |  | enter into transactions with affiliates;                                      
|
| |  | merge or consolidate with others;                                             
|
| |  | dispose of assets or use asset sale proceeds;                                 

27



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| |   |                                
| | - | -------------------------------
| |  | create liens on our assets; and
|
| |  | extend credit.                 















28



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Sources and Uses of Cash








Guarantees and Commitments






| |   |                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | TECOTA files for bankruptcy or a petition in bankruptcy is filed
    against TECOTA with TECOTAs or Terremarks consent;                                                     
|
| |  | Terremark pays a cash dividend or makes any other cash
    distribution on its capital stock (except with respect to its
    outstanding preferred stock);                    
|
| |  | Terremark makes any repayments of its outstanding debt other
    than the scheduled payments provided in the terms of the debt;                                               
|
| |  | Terremark pledges the collateral it has pledged to the lenders
    or pledges any of its existing cash balances as of
    December 31, 2004 as collateral for another loan; or
|
| |  | Terremark repurchases any of its common stock.                                                                                                                                





| |   |                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------
| |  | any fraud, misappropriation or misapplication of funds;                                                
|
| |  | any transfers of the collateral held by the lenders in violation
    of the Citigroup credit agreement;
|
| |  | failure to maintain TECOTA as a single purpose
    entity;                                           
|
| |  | TECOTA obtaining additional financing in violation of the terms
    of the Citigroup credit agreement; 
|
| |  | intentional physical waste of TECOTAs assets that have
    been pledged to the lenders;               

29



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| |   |                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | breach of any representation, warranty or covenant provided by
    or applicable to TECOTA and Terremark which relates to
    environmental liability;                                                                         
|
| |  | improper application and use of security deposits received by
    TECOTA from tenants;                                                                                                                                         
|
| |  | forfeiture of the collateral pledged to the lenders as a result
    of criminal activity by TECOTA;                                                                                                                            
|
| |  | attachment of liens on the collateral in violation of the terms
    of the Citigroup credit agreement;                                                                                                                         
|
| |  | TECOTAs contesting or interfering with any foreclosure
    action or other action commenced by lenders to protect their
    rights under the credit facility (except to the extent TECOTA is
    successful in these efforts);
|
| |  | any costs incurred by the lenders to enforce their rights under
    the credit facility; or                                                                                                                                    
|
| |  | failure to pay assessments made against or to adequately insure
    the assets pledged to the lenders.                                                                                                                         





|           |  |               |           |  |                  |   |            |                  |  |   |                  |  |  |               |            |  |       |   |            |  |  |   |             | 
|---------- |  | ------------- | --------- |  | ---------------- | - | ---------- | ---------------- |  | - | ---------------- |  |  | ------------- | ---------- |  | ----- | - | ---------- |  |  | - | ----------- | 
|           |  | Capital Lease |           |  |                  |   |            |                  |  |   |                  |  | 
|           |  | Obligations   |           |  | Operating Leases |   |            | Convertible Debt |  |   | Mortgage Payable |  |  | Notes Payable |            |  | Total |  
|           |  |               |           |  |                  |   |            |                  |  |   |                  |  |  |               |            |  |       |  
|2006       |  | $             | 1,117,962 |  |                  | $ | 3,198,752  |                  |  | $ | 7,763,158        |  |  | $             | 4,219,846  |  |       | $ | 8,523,321  |  |  | $ | 24,823,039  | 
|2007       |  |               | 300,807   |  |                  |   | 3,167,573  |                  |  |   | 7,763,158        |  |  |               | 4,219,846  |  |       |   | 4,050,000  |  |  |   | 19,501,384  | 
|2008       |  |               | 181,541   |  |                  |   | 3,129,655  |                  |  |   | 7,763,158        |  |  |               | 4,219,846  |  |       |   | 4,050,000  |  |  |   | 19,344,200  | 
|2009       |  |               |          |  |                  |   | 3,087,242  |                  |  |   | 7,763,158        |  |  |               | 46,414,809 |  |       |   | 34,050,000 |  |  |   | 94,315,209  | 
|2010       |  |               |          |  |                  |   | 3,172,557  |                  |  |   | 90,131,579       |  |  |               |           |  |       |   |           |  |  |   | 93,304,136  | 
|Thereafter |  |               |          |  |                  |   | 31,172,525 |                  |  |   |                 |  |  |               |           |  |       |   |           |  |  |   | 31,172,525  | 
|           |  |               |           |  |                  |   |            |                  |  |   |                  |  |  |               |            |  |       |  
|           |  | $             | 1,600,310 |  |                  | $ | 46,928,304 |                  |  | $ | 121,184,211      |  |  | $             | 62,074,347 |  |       | $ | 50,673,321 |  |  | $ | 282,460,493 | 
|           |  |               |           |  |                  |   |            |                  |  |   |                  |  |  |               |            |  |       |  



New Accounting Pronouncements






30



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Risk Factors




31



---



##### Table of Contents





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





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









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



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





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







| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | general economic and capital markets conditions, and in
    particular the non-investment grade debt market;
|
| |  | conditions in the Internet infrastructure market;                                                           
|
| |  | credit availability from banks or other lenders;                                                            
|
| |  | investor confidence in the telecommunications industry generally
    and our company specifically; and      
|
| |  | the success of our facilities.                                                                              





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





| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | incur more debt;                                                              
|
| |  | pay dividends, redeem or repurchase our stock or make other
    distributions;
|
| |  | make acquisitions or investments;                                             

33



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| |   |                                              
| | - | ---------------------------------------------
| |  | enter into transactions with affiliates;     
|
| |  | merge or consolidate with others;            
|
| |  | dispose of assets or use asset sale proceeds;
|
| |  | create liens on our assets; and              
|
| |  | extend credit.                               





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





| |   |                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | limit our ability to obtain additional financing to fund our
    growth strategy, working capital, capital expenditures, debt
    service requirements or other purposes;                                           
|
| |  | limit our ability to use operating cash flow in other areas of
    our business because we must dedicate a substantial portion of
    these funds to make principal payments and fund debt service
    requirements;
|
| |  | cause us to be unable to satisfy our obligations under our
    existing or new debt agreements;                                                                                                                     
|
| |  | make us more vulnerable to adverse general economic and industry
    conditions;                                                                                                                                    
|
| |  | limit our ability to compete with others who are not as highly
    leveraged as we are; and                                                                                                                         
|
| |  | limit our flexibility in planning for, or reacting to, changes
    in our business, industry and market conditions.                                                                                                 





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Although we have not completed our assessment of the
    design and operating effectiveness of our internal control over
    financial reporting, we have identified material weaknesses in
    our internal control over financial reporting that may prevent
    us from being able to accurately report our financial results or
    prevent fraud, which could harm our business and operating
    results, the trading price of our stock and our access to
    capital.



34



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| |                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If our financial condition deteriorates, we may be
    delisted by the American Stock Exchange and our stockholders
    could find it difficult to sell our common stock.





| |   |                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our financial condition and operating results appear to be
    unsatisfactory;                                                                                                                                                                                                            
|
| |  | it appears that the extent of public distribution or the
    aggregate market value of the securities has become so reduced
    as to make further dealings on the AMEX inadvisable; or                                                                                                   
|
| |  | we have sustained losses which are so substantial in relation to
    our overall operations or our existing financial condition has
    become so impaired that it appears questionable whether we will
    be able to continue operations and/or meet our obligations as
    they mature.





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



35



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





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





| |   |                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the ability to identify and consummate complementary acquisition
    candidates;                                                                                                                        
|
| |  | the possibility that we may not be able to successfully
    integrate the operations, personnel, technologies, products and
    services of the acquired companies in a timely and efficient
    manner;
|
| |  | diversion of managements attention from normal daily
    operations to negotiate acquisitions and integrate acquired
    businesses;                                                                   
|
| |  | insufficient revenues to offset significant unforeseen costs and
    increased expenses associated with the acquisitions;                                                                               
|
| |  | challenges in completing products associated with in-process
    research and development being conducted by the acquired
    businesses;                                                               
|
| |  | risks associated with our entrance into markets in which we have
    little or no prior experience and where competitors have a
    stronger market presence;                                           
|
| |  | deferral of purchasing decisions by current and potential
    customers as they evaluate the likelihood of success of our
    acquisitions;                                                             
|
| |  | issuance by us of equity securities that would dilute ownership
    of our existing stockholders;                                                                                                       
|
| |  | incurrence and/or assumption of significant debt, contingent
    liabilities and amortization expenses; and                                                                                             
|
| |  | loss of key employees of the acquired companies.                                                                                                                                                        








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



36



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|                                |  |                         |            | 
|------------------------------- |  | ----------------------- | ---------- | 
|                                |  | Estimated Fair Value of |           
|Price Per Share of Common Stock |  | Embedded Derivatives    |           
|                                |  |                         |           
|$4.40                           |  | $                       | 11,835,225 | 
|$6.50                           |  | $                       | 20,199,750 | 
|$8.40                           |  | $                       | 27,605,520 | 
|$10.40                          |  | $                       | 35,305,661 | 
|$12.40                          |  | $                       | 42,362,895 | 





| |   |                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------
| |  | 5.0% per annum, through August 10, 2005;                                                                        
|
| |  | 5.75% per annum, starting August 11, 2005;                                                                      
|
| |  | 6.5% per annum, starting February 11, 2006;                                                                     
|
| |  | 7.25% per annum, starting August 11, 2006; and                                                                  
|
| |  | 7.72% per annum, starting February 11, 2007 until the
    termination date of the rate cap protection agreement.









37



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








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





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

Evaluation of Disclosure Controls and Procedures








38



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Status of Managements Assessment of Internal Control
Over Financial Reporting




Internal Control  Integrated
Framework


Internal Control  Integrated
Framework






| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. We did not maintain effective controls to restrict
    access to key financial applications and data. Specifically, we
    did not adequately segregate the duties of certain individuals
    in the information technology and accounting departments having
    access to key financial applications and data broader than that
    required by their roles and responsibilities, including an
    employee with check signing authority and another with
    responsibility over the custody and processing of customer
    payments received by mail. In addition, we did not have controls
    to monitor access to financial applications and data. This
    control deficiency did not result in an adjustment to the
    consolidated financial statements. However, this control
    deficiency could result in a misstatement in financial statement
    accounts or disclosures that would result in a material
    misstatement to annual or interim consolidated financial
    statements that would not be prevented or detected. Accordingly,
    management has determined that this control deficiency
    represents a material weakness.
|
| | 2. We did not maintain effective controls over the billing
    function to ensure that invoices capture all services delivered
    to customers and that such services are invoiced and revenue is
    recorded accurately and timely. Specifically, we did not have
    effective controls to reconcile, review and monitor revenues
    recorded to amounts invoiced to customers, to data in customer
    contracts or to customer service delivery data. This control
    deficiency resulted in immaterial audit adjustments to the
    interim and annual consolidated financial statements. In
    addition, this control deficiency could result in a misstatement
    to revenues or receivables that would result in a material
    misstatement to the annual or interim consolidated financial
    statements that would not be prevented or detected. Accordingly,
    management has determined that this control deficiency
    represents a material weakness.                                                                                                                                                                                





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Changes in Internal Control Over Financial Reporting and
Managements Remediation Initiatives












| |   |                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Establishment of a Disclosure Committee to review periodic
    reports to the SEC before filing.                                                    
|
| |  | Implementation of specific additional procedures for the
    issuance and recording of securities.                                                  
|
| |  | Retention of a third party expert to assist management in the
    identification and valuation of derivatives.                                      
|
| |  | Hiring of a dedicated individual with technical capabilities in
    preparing periodic filings and researching accounting and
    reporting matters.







| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Internal security deficiencies, which included allowing
    individuals in the information technology and accounting
    departments access to key financial information systems and data
    broader than that required by their roles and responsibilities,
    including an employee with check signing authority. Our
    information technology department is in the process of testing
    recent enhancements to our internal security through more
    restrictive user access and will also implement stronger system
    password controls.
|
| |  | Deficiencies over custody and processing of customer payments
    received by mail include having an employee with the ability to
    receive customer payments, reconcile our bank account and adjust
    customer balances. We are in the process of setting up a lockbox
    with our bank and directing our customers to mail payments
    directly to the lockbox.                                                                                                                                                                              
|
| |  | Deficiencies over completeness and accuracy of revenues include
    not reconciling invoices to data in customer contracts or to
    customer service delivery data and not having an independent
    review of                                                                                                                                                                                                                                                                                                                                      

40



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##### Table of Contents



| |  |                                                                                                                                                                                                                                                                                                                                                                                    
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | invoices, or of the recording of revenues related to such
    invoices. We have retained an information technology consultant
    to assist us with the integration and/or reconciliation of
    invoices to customer service delivery data. We are also in the
    process of establishing the policies and procedures for an
    independent review of our invoices to customers.








ITEM 9B.     OTHER
INFORMATION.




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##### Table of Contents






PART III







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



|                          |  |     |    |  |                    |                                                             
|------------------------- |  | --- | -- |  | ------------------ | ------------------------------------------------------------
|Name                      |  | Age |    |  | Principal Position
|                          |  |     |    |  |                   
|Manuel D. Medina          |  |     | 52 |  |                    | Chairman of the Board, President and Chief Executive Officer
|Joseph R. Wright, Jr.     |  |     | 66 |  |                    | Vice Chairman of the Board                                  
|Guillermo Amore           |  |     | 66 |  |                    | Director                                                    
|Timothy Elwes             |  |     | 69 |  |                    | Director                                                    
|Antonio S. Fernandez      |  |     | 65 |  |                    | Director                                                    
|Fernando Fernandez-Tapias |  |     | 66 |  |                    | Director                                                    
|Arthur L. Money           |  |     | 65 |  |                    | Director                                                    
|Marvin S. Rosen           |  |     | 63 |  |                    | Director                                                    
|Miguel J. Rosenfeld       |  |     | 55 |  |                    | Director                                                    
|Rodolfo A. Ruiz           |  |     | 56 |  |                    | Director                                                    
|Jamie Dos Santos          |  |     | 43 |  |                    | Chief Marketing Officer                                     
|Jose E. Gonzalez          |  |     | 44 |  |                    | Senior Vice President-Business Affairs                      
|Jose A. Segrera           |  |     | 34 |  |                    | Chief Financial Officer                                     
|Marvin Wheeler            |  |     | 50 |  |                    | Chief Operations Officer                                    

Manuel D. Medina


Joseph R. Wright, Jr.


Guillermo Amore


42



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Timothy Elwes


Antonio S. Fernandez


Fernando Fernández-Tapias


Arthur L. Money


Marvin S. Rosen


Miguel J. Rosenfeld


43



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##### Table of Contents





Rodolfo A. Ruiz


Jamie Dos Santos


Jose E. Gonzalez


Jose A. Segrera


Marvin Wheeler


Section 16(a) Beneficial Ownership Reporting
Compliance




44



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##### Table of Contents







| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | Joseph R. Wright, Jr. filed a late Form 4 reporting
    one late transaction;                         
|
| |  | Antonio S. Fernandez filed four late Forms 4 reporting an
    aggregate of four late transactions; and
|
| |  | Manuel D. Medina filed a late Form 4 reporting two late
    transactions;                             






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

Summary Compensation Table




|                            |                                        |                     |      |      |                     |  |         |             |  |  |                   |         |  |  |        |        | 
|--------------------------- | -------------------------------------- | ------------------- | ---- | ---- | ------------------- |  | ------- | ----------- |  |  | ----------------- | ------- |  |  | ------ | ------ | 
|                            |                                        | Annual Compensation |      |      | Long Term           | 
|                            |                                        |                     |      |      | Compensation Awards | 
|                            |                                        | Fiscal              |      |      | Salary              |  |         | Commissions |  |  |                   |        
|Name and Principal Position |                                        | Year                |      |      | ($)                 |  |         | ($)         |  |  | Options/ SARS (#) |        
|                            |                                        |                     |      |      |                     |  |         |             |  |  |                   |        
|Manuel D. Medina            |                                        |                     | 2005 |      |                     |  | 350,000 |             |  |  |                  |         |  |  | 20,500 |       
|                            | Chairman of the Board, President and   |                     |      | 2004 |                     |  |         | 350,000     |  |  |                   |        |  |  |        |       | 
|                            | Chief Executive Officer                |                     |      | 2003 |                     |  |         | 350,000     |  |  |                   |        |  |  |        |       | 
|Jamie Dos Santos            |                                        |                     | 2005 |      |                     |  | 250,000 |             |  |  | 239,000           |         |  |  | 10,000 |       
|                            | Chief Marketing Officer                |                     |      | 2004 |                     |  |         | 250,000     |  |  |                   | 104,000 |  |  |        | 20,000 | 
|                            |                                        |                     | 2003 |      |                     |  | 250,000 |             |  |  | 23,000            |         |  |  | 27,500 |       
|Jose A. Segrera             |                                        |                     | 2005 |      |                     |  | 200,000 |             |  |  |                  |         |  |  | 10,000 |       
|                            | Chief Financial Officer                |                     |      | 2004 |                     |  |         | 195,000     |  |  |                   |        |  |  |        | 10,000 | 
|                            |                                        |                     | 2003 |      |                     |  | 170,000 |             |  |  |                  |         |  |  | 10,000 |       
|Marvin Wheeler              |                                        |                     | 2005 |      |                     |  | 200,000 |             |  |  |                  |         |  |  | 10,000 |       
|                            | Chief Operations Officer               |                     |      | 2004 |                     |  |         | 195,000     |  |  |                   |        |  |  |        | 20,000 | 
|                            |                                        |                     |      | 2003 |                     |  |         | 175,000     |  |  |                   |        |  |  |        | 10,000 | 
|Jose E. Gonzalez            |                                        |                     | 2005 |      |                     |  | 185,000 |             |  |  |                  |         |  |  | 7,500  |       
|                            | Senior Vice President-Business Affairs |                     |      | 2004 |                     |  |         | 185,000     |  |  |                   |        |  |  |        | 5,000  | 
|                            |                                        |                     |      | 2003 |                     |  |         | 185,000     |  |  |                   |        |  |  |        | 7,500  | 

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Option/ SAR Grants in Last Fiscal Year




|                  |  |                 |                  |  |           |  |                 |          |  |                  |                 |  |                 |        |                        |  |         |  |         |  |  |  |         | 
|----------------- |  | --------------- | ---------------- |  | --------- |  | --------------- | -------- |  | ---------------- | --------------- |  | --------------- | ------ | ---------------------- |  | ------- |  | ------- |  |  |  | ------- | 
|Individual Grants |  |                 | Potential        | 
|                  |  |                 | Realizable Value | 
|                  |  | % of Total      |                  |  |           |  | At Assumed      |         
|                  |  | Options         |                  |  |           |  | Annual Rates Of |         
|                  |  | Number of       |                  |  | Granted   |  |                 |          |  | Stock Price      |                
|                  |  | Securities      |                  |  | to        |  |                 |          |  | Appreciation For |                
|                  |  | Underlying      |                  |  | Employees |  |                 | Exercise |  |                  |                 |  | Option Term (1) |       
|                  |  | Options Granted |                  |  | in Fiscal |  |                 | Price    |  |                  |                 |  |                 |       
|Name              |  | (#)             |                  |  | Year      |  |                 | ($/Sh)   |  |                  | Expiration Date |  |                 | 5% ($) |                        |  | 10% ($) | 
|                  |  |                 |                  |  |           |  |                 |          |  |                  |                 |  |                 |        |                        |  |         | 
|Manuel D. Medina  |  |                 | 20,500           |  |           |  | 3.9             | %        |  |                  | $6.00-$6.30     |  |                 |        | Oct 2013 to March 2015 |  |         |  | 217,000 |  |  |  | 346,000 | 
|Jose A. Segrera   |  |                 | 10,000           |  |           |  | 1.9             | %        |  |                  | $6.50           |  |                 |        | July 2014              |  |         |  | 106,000 |  |  |  | 169,000 | 
|Jose E. Gonzalez  |  |                 | 7,500            |  |           |  |                 |          |  |                  | $6.50           |  |                 |        | July 2014              |  |         |  | 79,000  |  |  |  | 126,000 | 
|Jamie Dos Santos  |  |                 | 10,000           |  |           |  | 1.9             | %        |  |                  | $6.50           |  |                 |        | July 2014              |  |         |  | 106,000 |  |  |  | 169,000 | 
|Marvin Wheeler    |  |                 | 10,000           |  |           |  | 1.9             | %        |  |                  | $6.50           |  |                 |        | July 2014              |  |         |  | 106,000 |  |  |  | 169,000 | 






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

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




|                 |  |             |   |  |          |                        |                             |             |                         |                    |               |  |  |             |        |  |               |   |        |  |  |  |   | 
|---------------- |  | ----------- | - |  | -------- | ---------------------- | --------------------------- | ----------- | ----------------------- | ------------------ | ------------- |  |  | ----------- | ------ |  | ------------- | - | ------ |  |  |  | - | 
|                 |  |             |   |  |          | Number of Securities   |                             |             | Value of Unexercised In |                   
|                 |  |             |   |  |          | Underlying Unexercised |                             |             | the Money Options at    |                   
|                 |  | Shares      |   |  |          |                        | ?Options at Fiscal Year End |             |                         | Fiscal Year End(1) |              
|                 |  | Acquired on |   |  | Value    |                        |                             |             |                         |                    |               | 
|Name             |  | Exercised   |   |  | Realized |                        |                             | Exercisable |                         |                    | Unexercisable |  |  | Exercisable |        |  | Unexercisable |  
|                 |  |             |   |  |          |                        |                             |             |                         |                    |               |  |  |             |        |  |               |  
|Manuel D. Medina |  |             |  |  |          |                        |                            |             |                         |                    | 34,500        |  |  |             | 7,000  |  |               |   |       |  |  |  |  | 
|Jose A. Segrera  |  |             |  |  |          |                        |                            |             |                         |                    | 45,000        |  |  |             | 20,000 |  |               | $ | 36,950 |  |  |  |  | 
|Jose E. Gonzalez |  |             |  |  |          |                        |                            |             |                         |                    | 41,667        |  |  |             | 13,333 |  |               | $ | 30,650 |  |  |  |  | 
|Jamie Dos Santos |  |             |  |  |          |                        |                            |             |                         |                    | 78,234        |  |  |             | 14,266 |  |               | $ | 13,150 |  |  |  |  | 
|Marvin Wheeler   |  |             |  |  |          |                        |                            |             |                         |                    | 41,250        |  |  |             | 14,250 |  |               | $ | 5,765  |  |  |  |  | 






|    |                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Based on a per share price of $6.50, the closing price of the
    common stock as reported on the American Stock Exchange on
    March 31, 2005, minus the exercise price of the option,
    multiplied by the number of shares underlying the option.



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



46



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











47



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





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







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





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





48



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





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

www.terremark.com







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





| |   |                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | each of our directors;                                                                                                                                                         
|
| |  | each of our executive officers;                                                                                                                                                
|
| |  | all of our directors and executive officers as a group; and                                                                                                                    
|
| |  | each person known by us to beneficially own more than 5% of our
    outstanding common stock, series H convertible preferred
    stock or series I convertible preferred stock.





49



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|                                                                       |  |                         |           |      |                      |  |       |  
|---------------------------------------------------------------------- |  | ----------------------- | --------- | ---- | -------------------- |  | ----- | -
|                                                                       |  | Amount and Nature of    |           |      |                     
|Name and Address of Beneficial Owner                                   |  | Beneficial Ownership(1) |           |      | Percent of Class (%) | 
|                                                                       |  |                         |           |      |                      | 
|Common Stock:                                                          |  |                         |           |      |                      |  |       |  
|Manuel D. Medina                                                       |  |                         | 3,634,140 | (2)  |                      |  | 8.7   | %
|Joseph R. Wright, Jr.                                                  |  |                         | 523,309   | (3)  |                      |  | 1.2   | %
|Guillermo Amore                                                        |  |                         | 399,392   | (4)  |                      |  | *     |  
|Marvin S. Rosen                                                        |  |                         | 130,134   | (5)  |                      |  | *     |  
|Miguel J. Rosenfeld                                                    |  |                         | 273,185   | (6)  |                      |  | *     |  
|Timothy Elwes                                                          |  |                         | 33,500    | (7)  |                      |  | *     |  
|Antonio S. Fernandez                                                   |  |                         | 76,985    | (8)  |                      |  | *     |  
|Fernando Fernandez-Tapias                                              |  |                         | 19,166    | (9)  |                      |  | *     |  
|Arthur L. Money                                                        |  |                         | 21,166    | (9)  |                      |  | *     |  
|Rodolfo A. Ruiz                                                        |  |                         | 15,833    | (9)  |                      |  | *     |  
|Jaime Dos Santos                                                       |  |                         | 75,833    | (9)  |                      |  | *     |  
|Marvin Wheeler                                                         |  |                         | 38,833    | (9)  |                      |  | *     |  
|Jose A. Segrera                                                        |  |                         | 51,666    | (9)  |                      |  | *     |  
|Jose E. Gonzalez                                                       |  |                         | 46,233    | (9)  |                      |  | *     |  
|Ocean Bank(10)                                                         |  |                         | 2,000,000 |      |                      |  | 4.8   | %
|Sun Equity Assets Limited(11)                                          |  |                         | 4,002,234 |      |                      |  | 9.6   | %
|Paradise Stream (Bahamas) Limited(12)                                  |  |                         | 2,500,000 |      |                      |  | 6.0   | %
|Merrill Lynch Investment Managers(13)                                  |  |                         | 2,746,640 |      |                      |  | 6.6   | %
|All directors and executive officers as a group (14 persons)           |  |                         | 5,339,380 |      |                      |  | 12.6  | %
|Series H Preferred Stock:                                              |  |                         |           |      |                      |  |       |  
|One Vision Worldwide, LLC                                              |  |                         | 294       | (14) |                      |  | 100.0 | %
|Series I Preferred Stock:                                              |  |                         |           |      |                      |  |       |  
|Louisa Stude Sarofim 2004 Terremark Grantor Retained Annuity
    Trust |  |                         | 80        | (15) |                      |  | 20.5  | %
|Guazapa Properties, Inc.                                               |  |                         | 48(16     | )    |                      |  | 12.3  | %
|CRG, LLC                                                               |  |                         | 100(17    | )    |                      |  | 25.6  | %
|Asturpizza, S.A.                                                       |  |                         | 20(18     | )    |                      |  | 5.1   | %
|CIG Investments, LLLP                                                  |  |                         | 40(19     | )    |                      |  | 10.3  | %
|Promociones Bursatiles, S.A.                                           |  |                         | 28(20     | )    |                      |  | 7.2   | %






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



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | For purposes of this table, beneficial ownership is computed
    pursuant to Rule 13d-3 under the Exchange Act; the
    inclusion of shares as beneficially owned should not be
    construed as an admission that such shares are beneficially
    owned for purposes of the Exchange Act. Under the rules of the
    Securities and Exchange Commission, a person is deemed to be a
    beneficial owner of a security he or she has or
    shares the power to (i) vote, (ii) direct the voting
    of such security or (iii) dispose of or direct the
    disposition of such security. Accordingly, more than one person
    may be deemed to be a beneficial owner of the same security.
|
| | (2) | Includes 34,500 shares of our common stock underlying
    options. As reported in Mr. Medinas
    Schedule 13D, and any amendments thereto, filed with the
    Securities and Exchange Commission on October 4, 2002,
    these include 702,168 shares as to which Mr. Medina
    has sole voting power but does not have dispositive power.
    Includes 225,523 shares of our common stock which are held
    of record by Communication Investors Group, an entity in which
    Mr. Medina is a partner and holds a 50% interest. See
    Shareholders Agreement below.                                                                                                                   

50



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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (3) | Includes 353,500 shares of our common stock underlying
    options. Does not include 10,000 shares held in trust for
    the benefit of Mr. Wrights grandchildren with respect
    to which Mr. Wright disclaims beneficial ownership.                                                                                                                                                                                                                                                                                           
|
| | (4) | Includes 34,500 shares underlying options,
    17,500 shares owned by Mr. Amores sibling, over
    which Mr. Amore has investment control. Also includes
    (i) 104,393 shares, (ii) 26,667 shares which
    may be acquired upon the conversion of shares of series I
    preferred stock and (iii) 5,600 shares underlying
    warrants, all of which are owned by Margui Family Partners, Ltd.
    with respect to which Mr. Amore disclaims beneficial
    ownership except to the extent of his pecuniary interest therein.
|
| | (5) | Includes 39,000 shares of our common stock underlying
    options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | (6) | Includes 34,500 shares of our common stock underlying
    options and 113,720 shares held indirectly by
    Mr. Rosenfeld. Does not include 5,810 shares held by
    Mr. Rosenfelds children and mother, with respect to
    which Mr. Rosenfeld disclaims beneficial ownership.                                                                                                                                                                                                                                                 
|
| | (7) | Includes 33,500 shares of our common stock underlying
    options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | (8) | Includes 23,500 shares of our common stock underlying
    options, 6,666 shares which may be acquired upon the
    conversion of Series I preferred stock and
    1,400 shares underlying warrants.                                                                                                                                                                                                                                                                                                                               
|
| | (9) | Represents shares of our common stock underlying options except
    in the case of Jose Gonzalez where also represents
    450 shares owned by Mr. Gonzalez.                                                                                                                                                                                                                                                                                                                                                                      



|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | The address of the beneficial owner is 780 N.W.
    42nd Avenue, Miami, Florida 33126.                                                                                                                                                                                                                                                                                                                                                              
|    
|(11) | The address of the beneficial owner is Georgetown, Tortola,
    B.V.I. Francis Lee is the natural person deemed to be the
    beneficial owner of the shares held by Sun Equity Assets
    Limited. See Shareholders Agreement below.                                                                                                                                                                                                             
|    
|(12) | The address of the beneficial owner is P.O. Box N-65,
    Charlotte House, Charlotte Street, Nassau, Bahamas. Francis Lee
    is the natural person deemed to be the beneficial owner of the
    shares held by Paradise Stream (Bahamas) Limited. See
    Shareholders Agreement below.                                                                                                                                                          
|    
|(13) | Based on Schedule 13G, filed February 10, 2005, by
    Merrill Lynch & Co., Inc. as a Parent Holding Company
    (as such term is used in Rule 13d-1 of the Securities
    Exchange Act of 1934, as amended) on behalf of Merrill Lynch
    Investment Managers, an Investment Adviser as defined in
    Rule 13d-1. The address of the beneficial owner is World
    Financial Center, North Tower, 250 Vesey Street, New York, New
    York 10381.
|    
|(14) | Represents 294 shares of series H convertible
    preferred stock which are convertible into, and have voting
    rights equivalent to, 29,400 shares of our common stock.                                                                                                                                                                                                                                                                          
|    
|(15) | Represents 80 shares of series I convertible preferred
    stock which are convertible into, and have voting rights
    equivalent to, 266,672 shares of our common stock.                                                                                                                                                                                                                                                                          
|    
|(16) | Represents 48 shares of series I convertible preferred
    stock which are convertible into, and have voting rights
    equivalent to, 160,003 shares of our common stock. Heinrich
    Adolf Hans Herweg is the natural person with voting and
    investment control over the shares.                                                                                                                                                             
|    
|(17) | Represents 100 shares of series I convertible
    preferred stock which are convertible into, and have voting
    rights equivalent to, 333,340 shares of our common stock.
    Christian Altaba is the natural person with voting and
    investment control over the shares.                                                                                                                                                                      
|    
|(18) | Represents 20 shares of series I convertible preferred
    stock which are convertible into, and have voting rights
    equivalent to, 66,668 shares of our common stock. Antonio
    De Roguery is the natural person with voting and investment
    control over the shares.                                                                                                                                                                      
|    
|(19) | Represents 40 shares of series I convertible preferred
    stock which are convertible into, and have voting rights
    equivalent to, 133,336 shares of our common stock. Vincente
    Perez Cisneros is the natural person with voting and investment
    control over the shares.                                                                                                                                                                
|    
|(20) | Represents 28 shares of series I convertible preferred
    stock which are convertible into, and have voting rights
    equivalent to, 93,335 shares of our common stock. Roberto
    Solis Monsato is the natural person with voting and investment
    control over the shares.                                                                                                                                                                   

51



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Shareholders Agreement




Equity Compensation Plan Information




|                                                           |  |                      |           |  |                      |   |                       |  |  |  |         | 
|---------------------------------------------------------- |  | -------------------- | --------- |  | -------------------- | - | --------------------- |  |  |  | ------- | 
|                                                           |  | Number of Securities |           |  |                      |   |                      
|                                                           |  | to be Issued Upon    |           |  | Weighted Average     |   | Number of Securities  | 
|                                                           |  | Exercise of          |           |  | Exercise Price of    |   | Available for Future  | 
|                                                           |  | Outstanding Options, |           |  | Outstanding Options, |   | Issuance Under Equity | 
|Plan Category                                              |  | Warrants and Rights  |           |  | Warrants and Rights  |   | Compensation Plans    | 
|                                                           |  |                      |           |  |                      |   |                       | 
|Equity compensation plans approved by security holders     |  |                      | 2,265,532 |  |                      | $ |                       |  |  |  | 513,040 | 
|Equity compensation plans not approved by security holders |  |                      | 216,500   |  |                      | $ |                      |  |  |  | 0       | 






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









52



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53



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





Audit Fees




Audit Related Fees




Tax Fees




All Other Fees




Audit Committee Approval




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PART IV







|         |                                            
|-------- | -------------------------------------------
|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.





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



| |   |                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------
| |  | Report of Independent Registered Certified Public Accounting Firm                                                     
|
| |  | Consolidated Balance Sheets as of March 31, 2005 and 2004                                                             
|
| |  | Consolidated Statements of Operations for the Years Ended
    March 31, 2005, 2004 and 2003                           
|
| |  | Consolidated Statement of Changes in Stockholders Equity
    (Deficit) for the Three Year Period Ended March 31, 2005
|
| |  | Consolidated Statements of Cash Flows for the Years Ended
    March 31, 2005, 2004 and 2003                           
|
| |  | Notes to Consolidated Financial Statements                                                                            



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





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

|        |   |                     |  |                                                                                                                                                                                                                              
|------- | - | ------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |                    
|Number  |   | Exhibit Description
|        |   |                    
|        | 1 | .1                  |  | Form of Underwriting Agreement related to the Companys
    offering of common stock on March 14, 2005 (previously
    filed as an exhibit to the Companys registration statement
    filed on February 3, 2005)            
|        | 3 | .1                  |  | Certificate of Merger of Terremark Holdings, Inc. with and into
    AmTec, Inc. (previously filed as an exhibit to the
    Companys Registration Statement on Form S-3 filed on
    May 15, 2000)                           
|        | 3 | .2                  |  | Restated Certificate of Incorporation of the Company (previously
    filed as an exhibit to the Companys Registration Statement
    on Form S-3 filed on May 15, 2000)                                                      
|        | 3 | .3                  |  | Certificate of Amendment to Certificate of Incorporation of the
    Company (previously filed as an exhibit to the Companys
    Registration Statement on Form S-1 filed on
    December 21, 2004)                          
|        | 3 | .4                  |  | Restated Bylaws of the Company (previously filed as an exhibit
    to the Companys Quarterly Report on Form 10-Q filed
    on November 14, 2002)                                                                            
|        | 3 | .5                  |  | Certificate of Designations of Preferences of Series G
    Convertible Preferred Stock of the Company (previously filed as
    an exhibit to the Companys Registration Statement on
    Form S-3 filed on May 15, 2000)     
|        | 3 | .6                  |  | Certificate of Designations of Preferences of Series H
    Convertible Preferred Stock of the Company (previously filed as
    exhibit 3.5 to the Companys Annual Report on
    Form 10-K filed on July 16, 2001)           
|        | 3 | .7                  |  | Certificate of Designations of Preferences of Series I
    Convertible Preferred Stock of the Company (previously filed as
    an exhibit to the Companys Registration Statement on
    Form S-3/ A filed on March 17, 2004)
|        | 3 | .8                  |  | Certificate of Amendment to Certificate of Incorporation of the
    Company (previously files as an exhibit to the Companys
    current report on Form 8-K filed on May 18, 2005).                                          
|        | 4 | .1                  |  | Specimen Stock Certificate (previously filed as exhibit to the
    Companys current report on Form 8-K filed on
    May 18, 2005).                                                                                          
|        | 4 | .4                  |  | Form of Warrant for the Purchase of Common Stock (previously
    filed as exhibit 4.1 to the Companys Current Report
    on Form 8-K filed on April 15, 2003)                                                               
|        | 4 | .5                  |  | Indenture dated June 14, 2004 including form of
    9% Senior Convertible Note due 2009 (previously filed as an
    exhibit to the Companys Quarterly Report on Form 10-Q
    filed on August 9, 2004)                      

55



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|        |    |                     |  |                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | ------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|Number  |    | Exhibit Description
|        |    |                    
|        | 10 | .1                  |  | 1995 Stock Option Plan (previously filed as part of the
    Companys Transition Report on Form 10-KSB for the
    transition period from October 1, 1994 to March 31,
    1995)                                                                                                                                                                  
|        | 10 | .2                  |  | 1996 Stock Option Plan (previously filed as part of the
    Companys Transition Report on Form 10-KSB for the
    transition period from October 1, 1994 to March 31,
    1995)                                                                                                                                                                  
|        | 10 | .3                  |  | Form of Indemnification Agreement for directors and officers of
    the Company (previously filed as an exhibit to the
    Companys Registration Statement on Form S-3, as
    amended, filed on March 11, 2003)                                                                                                                                 
|        | 10 | .4                  |  | Employment Agreement with Manuel Medina (previously filed as
    exhibit 10.6 to the Companys Annual Report on
    Form 10-K filed on July 16, 2001)                                                                                                                                                                                             
|        | 10 | .5                  |  | Amendment to Employment Agreement with Manuel Medina (previously
    filed as an exhibit to the Companys Quarterly Report on
    Form 10-Q filed on November 14, 2001)                                                                                                                                                                           
|        | 10 | .7                  |  | Net Premises Lease by and between Rainbow Property Management,
    LLC and Coloconnection, Inc. (previously filed as an exhibit to
    the Companys Current Report on Form 8-K filed on
    April 15, 2003)                                                                                                                                      
|        | 10 | .13                 |  | Non-qualified Stock Option Agreement with Brian K. Goodkind to
    purchase 1,278,205 shares of the Companys common
    stock (previously filed as an exhibit to the Companys
    Quarterly Report on Form 10-Q filed on August 14, 2003)                                                                                                       
|        | 10 | .14                 |  | Non-qualified Stock Option Agreement with Brian K. Goodkind to
    purchase 1,406,795 shares of the Companys common
    stock (previously filed as an exhibit to the Companys
    Quarterly Report on Form 10-Q filed on August 14, 2003)                                                                                                       
|        | 10 | .15                 |  | First Amendment to the Non-qualified Stock Option Agreement with
    Brian K. Goodkind to purchase 200,000 shares of the
    Companys common stock (previously filed as an exhibit to
    the Companys Quarterly Report on Form 10-Q filed on
    August 14, 2003)                                                                              
|        | 10 | .16                 |  | First Amendment to the Non-qualified Stock Option Agreement with
    Brian K. Goodkind to purchase 115,000 shares of the
    Companys common stock (previously filed as an exhibit to
    the Companys Quarterly Report on Form 10-Q filed on
    August 14, 2003)                                                                              
|        | 10 | .17                 |  | Amended and restated 2000 Stock Option Plan (previously filed as
    an exhibit to the Companys Registration Statement on
    Form S-8 filed on August 19, 2004)                                                                                                                                                                                 
|        | 10 | .18                 |  | 2000 Directors Stock Option Plan (previously filed as
    an exhibit to the Companys Registration Statement on
    Form S-8 filed on August 19, 2002)                                                                                                                                                                                           
|        | 10 | .19                 |  | Agreement between Fundacao De Amparo A Pesquisa Do Estado De Sao
    Paulo  FAPESP and Terremark Latin America (Brazil)
    Ltda. (previously filed as an exhibit to the Companys
    Registration Statement on Form S-3/ A filed on
    December 22, 2003)                                                                                     
|        | 10 | .20                 |  | Employment Agreement with Jose A. Segrera dated
    September 8, 2001 (previously filed as an exhibit to the
    Companys Annual Report on Form 10-K filed
    June 30, 2003)                                                                                                                                                                    
|        | 10 | .21                 |  | Employment Agreement with Jose E. Gonzalez dated November 2002
    (previously filed as an exhibit to the Companys Annual
    Report on Form 10-K filed June 30, 2003)                                                                                                                                                                           
|        | 10 | .23                 |  | Employment Agreement with Jamie Dos Santos dated
    November 1, 2002 (previously filed as an exhibit to the
    Companys Annual Report on Form 10-K filed
    June 14, 2004)                                                                                                                                                                    
|        | 10 | .24                 |  | Employment Agreement with Marvin Wheeler dated November 1,
    2002 (previously filed as an exhibit to the Companys
    Annual Report on Form 10-K filed June 14, 2004)                                                                                                                                                                          
|        | 10 | .26                 |  | Loan Agreement dated as of December 31, 2004 (the
    Loan Agreement), by and among Technology Center of
    the Americas, LLC, as Borrower, Citigroup Global Markets Realty
    Corp., as Agent and each Lender signatory thereto (previously
    filed as an exhibit to the Companys Current Report on
    Form 8-K filed on January 6, 2005)
|        | 10 | .27                 |  | Form of Warrant Certificate of Terremark Worldwide, Inc. issued
    to Citigroup Global Markets Realty Corp. (previously filed as an
    exhibit to the Companys Current Report on Form 8-K
    filed on January 6, 2005)                                                                                                                        

56



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|        |    |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | -- | ------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|Number  |    | Exhibit Description
|        |    |                    
|        | 10 | .28                 |  | Purchase Agreement dated as of December 31, 2004, among
    Terremark Worldwide, Inc., as Issuer, the guarantors named
    therein, FMP Agency Services, LLC, as agent, and each of the
    purchasers named therein (previously filed as an exhibit to the
    Companys Current Report on Form 8-K filed on
    January 6, 2005)                                                                  
|        | 10 | .29                 |  | Security Agreement dated as of December 31, 2004, by
    Terremark Worldwide, Inc., as Issuer, the guarantors named
    therein and FMP Agency Services, LLC, as Agent (previously filed
    as an exhibit to the Companys Current Report on
    Form 8-K filed on January 6, 2005)                                                                                                                
|        | 10 | .30                 |  | Registration Rights Agreement dated as of December 31, 2004
    among Terremark Worldwide, Inc. and Falcon Mezzanine Partners,
    LP, Stichting Pensioenfonds ABP and Stichting Pensioenfonds Voor
    De Gezondheid, Geestelijke En Maatschappelijke Belangen (the
    Purchasers) (previously filed as an exhibit to the
    Companys Current Report on Form 8-K filed on
    January 6, 2005)
|        | 10 | .31                 |  | Form of Warrant Certificate of Terremark Worldwide, Inc. issued
    to the Purchasers (previously filed as an exhibit to the
    Companys Current Report on Form 8-K filed on
    January 6, 2005)                                                                                                                                                                                                 
|        | 10 | .32                 |  | Form of Note of Terremark Worldwide, Inc. issued to the
    Purchasers (previously filed as an exhibit to the Companys
    Current Report on Form 8-K filed on January 6, 2005)                                                                                                                                                                                                                    
|        | 10 | .33                 |  | Guaranty of Nonrecourse Obligations executed by the Company in
    favor of Citigroup Global Markets Realty Corp., as agent, for
    the benefit of the lenders to the Loan Agreement (previously
    filed as an exhibit to the Companys Registration Statement
    on Form S-1 filed on February 3, 2005).                                                                                       
|        | 10 | .34                 |  | Employment Agreement with John Neville dated April 18, 2005*                                                                                                                                                                                                                                                                                                                                        
|        | 21 |                     |  | Subsidiaries of the Company*                                                                                                                                                                                                                                                                                                                                                                        
|        | 23 | .1                  |  | Consent of PricewaterhouseCoopers LLP*                                                                                                                                                                                                                                                                                                                                                              
|        | 31 | .1                  |  | Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a) and 15d-14(a)*                                                                                                                                                                                                                                                                                                              
|        | 31 | .2                  |  | Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a) and 15d-14(a)*                                                                                                                                                                                                                                                                                                              
|        | 32 | .1                  |  | Certification of Chief Executive Officer pursuant to
    18 USC. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002*                                                                                                                                                                                                                                            
|        | 32 | .2                  |  | Certification of Chief Financial Officer pursuant to
    18 USC. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002*                                                                                                                                                                                                                                            






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

57



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| | 
| | 
| | 

SIGNATURES






| |                                     
| | ------------------------------------
| | TERREMARK WORLDWIDE, INC.           
|
| | By: /s/ MANUEL D.
    MEDINA        
| |                                     
| | Manuel D. Medina                    
| | Chairman of the Board, President and
| | Chief Executive Officer             
| | (Principal Executive Officer)       







| |                                                     
| | ----------------------------------------------------
| | By: /s/ JOSE A.
    SEGRERA                         
| |                                                     
| | Jose A. Segrera                                     
| | Executive Vice President and Chief Financial Officer
| | (Principal Financial and Accounting Officer)        







|                                                               |  |                                                                                                    |  |              
|-------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------- |  | -------------
|Signature                                                      |  | Title                                                                                              |  | Date         
|                                                               |  |                                                                                                    |  |              
|/s/ MANUEL D. MEDINAManuel
    D. Medina                       |  | Chairman of the Board, President
    and Chief Executive Officer
    (Principal Executive Officer) |  | June 29, 2005
|                                                              
|/s/ GUILLERMO AMOREGuillermo
    Amore                         |  | Director                                                                                           |  | June 29, 2005
|                                                              
|/s/ TIMOTHY ELWESTimothy
    Elwes                             |  | Director                                                                                           |  | June 29, 2005
|                                                              
|/s/ ANTONIO S.
    FERNANDEZAntonio
    S. Fernandez           |  | Director                                                                                           |  | June 29, 2005
|                                                              
|/s/ FERNANDO
    FERNANDEZ-TAPIASFernando
    Fernandez-Tapias |  | Director                                                                                           |  | June 29, 2005
|                                                              
|/s/ HON. ARTHUR L.
    MONEYHon.
    Arthur L. Money           |  | Director                                                                                           |  | June 29, 2005
|                                                              
|/s/ MARVIN S. ROSENMarvin
    S. Rosen                         |  | Director                                                                                           |  | June 29, 2005
|                                                              
|/s/ MIGUEL J. ROSENFELDMiguel
    J. Rosenfeld                 |  | Director                                                                                           |  | June 29, 2005
|                                                              
|/s/ RODOLFO A. RUIZRodolfo
    A. Ruiz                         |  | Director                                                                                           |  | June 29, 2005
|                                                              
|/s/ JOSEPH R. WRIGHT,
    JR.Joseph
    R. Wright, Jr.         |  | Director                                                                                           |  | June 29, 2005
|                                                              
|/s/ JOSÉ A.
    SEGRERAJosé
    A. Segrera                     |  | Chief Financial Officer
    (Principal Financial and Accounting Officer)                           |  | June 29, 2005

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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING
FIRM






Consolidated financial statements




Internal control over financial reporting








| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. The Company did not maintain effective controls to
    restrict access to key financial applications and data.
    Specifically, the Company did not adequately segregate the
    duties of certain individuals in the information technology and
    accounting departments having access to key financial
    applications and data broader than that required by their roles
    and responsibilities, including an employee with check signing
    authority and another with responsibility over the custody and
    processing of customer payments received by mail. In addition,
    the Company did not have controls to monitor access to financial
    applications and data. This control deficiency did not result in
    an adjustment to the consolidated financial statements. However,
    this control deficiency could result in a misstatement in
    financial statement accounts or disclosures that would result in
    a material misstatement to annual or interim consolidated
    financial statements that would not be prevented or detected.
    Accordingly, management has determined that this control
    deficiency represents a material weakness.

F-1



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##### Table of Contents





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. The Company did not maintain effective controls over the
    billing function to ensure that invoices capture all services
    delivered to customers and that such services are invoiced and
    revenue is recorded accurately and timely. Specifically, the
    Company did not have effective controls to reconcile, review and
    monitor revenues recorded to amounts invoiced to customers, to
    data in customer contracts or to customer service delivery data.
    This control deficiency resulted in immaterial audit adjustments
    to the interim and annual consolidated financial statements. In
    addition, this control deficiency could result in a misstatement
    to revenues or receivables that would result in a material
    misstatement to the annual or interim consolidated financial
    statements that would not be prevented or detected. Accordingly,
    management has determined that this control deficiency
    represents a material weakness.



PricewaterhouseCoopers
LLP








F-2



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


|                                                                                                                                                                          |                                                      |           |              |             |      |   |              |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | --------- | ------------ | ----------- | ---- | - | ------------ | ----------- | -
|                                                                                                                                                                          |                                                      | March 31, |             
|                                                                                                                                                                          |                                                      |           |             
|                                                                                                                                                                          |                                                      | 2005      |              |             | 2004 |  
|                                                                                                                                                                          |                                                      |           |              |             |      |  
|ASSETS                                                                                                                                                                   
|Current assets:                                                                                                                                                           |                                                      |           |              |             |      |   |              |            
|Cash and cash equivalents                                                                                                                                                 |                                                      | $         | 44,001,144   |             |      | $ | 4,378,614    |            
|Restricted cash                                                                                                                                                           |                                                      |           | 2,185,321    |             |      |   |             |            
|Accounts receivable, net of allowance for doubtful accounts of
    $200,000 each year                                                                                     |                                                      |           | 4,388,889    |             |      |   | 3,577,144    |            
|Current portion of capital lease receivable                                                                                                                               |                                                      |           | 2,280,000    |             |      |   |             |            
|Note receivable                                                                                                                                                           |                                                      |           |             |             |      |   | 2,285,000    |            
|Prepaid and other current assets                                                                                                                                          |                                                      |           | 942,575      |             |      |   | 1,115,230    |            
|                                                                                                                                                                          |                                                      |           |              |             |      |  
|                                                                                                                                                                          | Total current assets                                 |           |              | 53,797,929  |      |   |              | 11,355,988  |  
|Investment in unconsolidated entities, net                                                                                                                                |                                                      |           |             |             |      |   | 725,319      |            
|Restricted cash                                                                                                                                                           |                                                      |           | 5,641,531    |             |      |   | 789,476      |            
|Property and equipment, net                                                                                                                                               |                                                      |           | 123,406,321  |             |      |   | 53,897,716   |            
|Debt issuance costs, net of accumulated amortization of
    $1,007,734 and $121,691                                                                                       |                                                      |           | 8,797,296    |             |      |   | 175,363      |            
|Other assets                                                                                                                                                              |                                                      |           | 1,182,716    |             |      |   | 488,971      |            
|Capital lease receivable, net of current portion                                                                                                                          |                                                      |           | 6,080,001    |             |      |   |             |            
|Goodwill                                                                                                                                                                  |                                                      |           | 9,999,870    |             |      |   | 9,999,870    |            
|                                                                                                                                                                          |                                                      |           |              |             |      |  
|                                                                                                                                                                          | Total assets                                         |           | $            | 208,905,664 |      |   | $            | 77,432,703  |  
|                                                                                                                                                                          |                                                      |           |              |             |      |  
|                                                                                                                                                                         
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)                                                                                                                           
|Current liabilities:                                                                                                                                                      |                                                      |           |              |             |      |   |              |            
|Current portion of mortgage payable                                                                                                                                       |                                                      | $         | 692,570      |             |      | $ |             |            
|Current portion of notes payable                                                                                                                                          |                                                      |           | 4,489,945    |             |      |   | 9,194,145    |            
|Construction payables                                                                                                                                                     |                                                      |           | 427,752      |             |      |   | 1,363,554    |            
|Accounts payable and accrued expenses                                                                                                                                     |                                                      |           | 8,914,578    |             |      |   | 7,067,319    |            
|Current portion of capital lease obligations                                                                                                                              |                                                      |           | 1,037,459    |             |      |   | 1,799,726    |            
|Interest payable                                                                                                                                                          |                                                      |           | 2,680,882    |             |      |   | 1,952,978    |            
|Current portion of unearned interest                                                                                                                                      |                                                      |           | 724,686      |             |      |   |             |            
|Convertible debt                                                                                                                                                          |                                                      |           |             |             |      |   | 250,000      |            
|                                                                                                                                                                          |                                                      |           |              |             |      |  
|                                                                                                                                                                          | Total current liabilities                            |           |              | 18,967,872  |      |   |              | 21,627,722  |  
|Mortgage payable, less current portion                                                                                                                                    |                                                      |           | 46,034,024   |             |      |   |             |            
|Convertible debt                                                                                                                                                          |                                                      |           | 53,972,558   |             |      |   | 36,895,239   |            
|Derivatives embedded within convertible debt, at estimated fair
    value                                                                                                 |                                                      |           | 20,116,618   |             |      |   |             |            
|Notes payable, less current portion                                                                                                                                       |                                                      |           | 23,664,142   |             |      |   | 31,311,894   |            
|Deferred rent                                                                                                                                                             |                                                      |           | 2,001,789    |             |      |   | 6,938,454    |            
|Unearned interest under capital lease receivables                                                                                                                         |                                                      |           | 898,778      |             |      |   |             |            
|Capital lease obligations, less current portion                                                                                                                           |                                                      |           | 434,441      |             |      |   | 105,886      |            
|Deferred revenue                                                                                                                                                          |                                                      |           | 1,994,598    |             |      |   | 2,686,396    |            
|Series H redeemable convertible preferred stock:
    $.001 par value, 294 shares issued and outstanding, at
    liquidation value                                         |                                                      |           | 616,705      |             |      |   | 586,718      |            
|                                                                                                                                                                          |                                                      |           |              |             |      |  
|                                                                                                                                                                          | Total liabilities                                    |           |              | 168,701,525 |      |   |              | 100,152,309 |  
|                                                                                                                                                                          |                                                      |           |              |             |      |  
|Minority interest                                                                                                                                                         |                                                      |           | 28,090       |             |      |   |             |            
|                                                                                                                                                                          |                                                      |           |              |             |      |  
|Commitments and contingencies                                                                                                                                             |                                                      |           |             |             |      |   |             |            
|                                                                                                                                                                          |                                                      |           |              |             |      |  
|Stockholders equity (deficit):                                                                                                                                           |                                                      |           |              |             |      |   |              |            
|Series G convertible preferred stock: $.001 par value,
    20 shares issued and outstanding                                                                               |                                                      |           |             |             |      |   | 1            |            
|Series I convertible preferred stock: $.001 par value,
    383 shares issued and outstanding
    (liquidation value of approximately $10.5 million and
    $10.0 million) |                                                      |           | 1            |             |      |   | 1            |            
|Common stock: $.001 par value, 100,000,000 shares
    authorized; 42,587,321 and 31,122,748 shares issued                                                                 |                                                      |           | 42,587       |             |      |   | 31,123       |            
|Common stock warrants                                                                                                                                                     |                                                      |           | 13,599,704   |             |      |   | 3,642,006    |            
|Common stock options                                                                                                                                                      |                                                      |           | 1,538,260    |             |      |   | 1,545,375    |            
|Additional paid-in capital                                                                                                                                                |                                                      |           | 279,063,085  |             |      |   | 213,876,605  |            
|Accumulated deficit                                                                                                                                                       |                                                      |           | (246,674,069 | )           |      |   | (236,814,717 | )          
|Accumulated other comprehensive loss                                                                                                                                      |                                                      |           | (172,882     | )           |      |   |             |            
|Treasury stock: 865,202 shares                                                                                                                                            |                                                      |           | (7,220,637   | )           |      |   |             |            
|Note receivable  related party                                                                                                                                           |                                                      |           |             |             |      |   | (5,000,000   | )          
|                                                                                                                                                                          |                                                      |           |              |             |      |  
|                                                                                                                                                                          | Total stockholders equity (deficit)                 |           |              | 40,176,049  |      |   |              | (22,719,606 | )
|                                                                                                                                                                          |                                                      |           |              |             |      |  
|                                                                                                                                                                          | Total liabilities and stockholders equity (deficit) |           | $            | 208,905,664 |      |   | $            | 77,432,703  |  
|                                                                                                                                                                          |                                                      |           |              |             |      |  



F-3



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS


|                                             |                                                                          |                               |                          |             |            |             |             |             |            |             |             |             |             |             |  
|-------------------------------------------- | ------------------------------------------------------------------------ | ----------------------------- | ------------------------ | ----------- | ---------- | ----------- | ----------- | ----------- | ---------- | ----------- | ----------- | ----------- | ----------- | ----------- | -
|                                             |                                                                          | For the Year Ended March 31,  |                         
|                                             |                                                                          |                               |                         
|                                             |                                                                          | 2005                          |                          |             | 2004       |             |             | 2003        |           
|                                             |                                                                          |                               |                          |             |            |             |             |             |           
|Revenues                                     |                                                                          |                               |                          |             |            |             |             |             |            |             |             |            
|                                             | Data center  services                                                   |                               | $                        | 34,985,343  |            |             | $           | 17,034,377  |            |             | $           | 11,032,985  |            
|                                             | Data center  technology infrastructure build-out                        |                               |                          | 11,832,745  |            |             |             |            |            |             |             |            |            
|                                             | Construction contracts and fees                                          |                               |                          | 1,329,526   |            |             |             | 1,179,362   |            |             |             | 3,660,718   |            
|                                             |                                                                          |                               |                          |             |            |             |             |             |           
|                                             |                                                                          | Operating revenues            |                          |             | 48,147,614 |             |             |             | 18,213,739 |             |             |             | 14,693,703  |            
|                                             |                                                                          |                               |                          |             |            |             |             |             |           
|Expenses                                     |                                                                          |                               |                          |             |            |             |             |             |            |             |             |            
|                                             | Data center operations  services, excluding
    depreciation            |                               |                          | 26,377,861  |            |             |             | 16,413,021  |            |             |             | 11,234,833  |            
|                                             | Data center operations  technology infrastructure
    build-out         |                               |                          | 9,711,022   |            |             |             |            |            |             |             |            |            
|                                             | Construction contract expenses, excluding depreciation                   |                               |                          | 809,372     |            |             |             | 918,022     |            |             |             | 2,968,142   |            
|                                             | General and administrative                                               |                               |                          | 13,243,073  |            |             |             | 13,336,400  |            |             |             | 12,507,121  |            
|                                             | Sales and marketing                                                      |                               |                          | 5,402,886   |            |             |             | 3,424,411   |            |             |             | 4,200,858   |            
|                                             | Depreciation and amortization                                            |                               |                          | 5,697,071   |            |             |             | 4,698,292   |            |             |             | 5,092,749   |            
|                                             | Impairment of long-lived assets and goodwill                             |                               |                          | 813,073     |            |             |             |            |            |             |             | 4,020,300   |            
|                                             |                                                                          |                               |                          |             |            |             |             |             |           
|                                             |                                                                          | Operating expenses            |                          |             | 62,054,358 |             |             |             | 38,790,146 |             |             |             | 40,024,003  |            
|                                             |                                                                          |                               |                          |             |            |             |             |             |           
|                                             |                                                                          |                               | Loss from operations     |             |            | (13,906,744 | )           |             |            | (20,576,407 | )           |             |             | (25,330,300 | )
|                                             |                                                                          |                               |                          |             |            |             |             |             |           
|Other income (expenses)                      |                                                                          |                               |                          |             |            |             |             |             |            |             |             |            
|                                             | Change in fair value of derivatives embedded within convertible
    debt |                               |                          | 15,283,500  |            |             |             |            |            |             |             |            |            
|                                             | Gain on debt restructuring and extinguishment, net                       |                               |                          | 3,420,956   |            |             |             | 8,475,000   |            |             |             |            |            
|                                             | Inducement on debt conversion                                            |                               |                          |            |            |             |             |            |            |             |             | (4,871,245  | )          
|                                             | Interest expense                                                         |                               |                          | (15,493,610 | )          |             |             | (14,624,922 | )          |             |             | (11,007,683 | )          
|                                             | Interest income                                                          |                               |                          | 666,286     |            |             |             | 131,548     |            |             |             | 136,278     |            
|                                             | Other, net                                                               |                               |                          | 170,260     |            |             |             | 4,104,204   |            |             |             | (154,355    | )          
|                                             |                                                                          |                               |                          |             |            |             |             |             |           
|                                             |                                                                          | Total other income (expenses) |                          |             | 4,047,392  |             |             |             | (1,914,170 | )           |             |             | (15,897,005 | )          
|                                             |                                                                          |                               |                          |             |            |             |             |             |           
|                                             |                                                                          |                               | Loss before income taxes |             |            | (9,859,352  | )           |             |            | (22,490,577 | )           |             |             | (41,227,305 | )
|                                             | Income taxes                                                             |                               |                          |            |            |             |             |            |            |             |             |            |            
|                                             |                                                                          |                               |                          |             |            |             |             |             |           
|                                             |                                                                          |                               | Net loss                 |             |            | (9,859,352  | )           |             |            | (22,490,577 | )           |             |             | (41,227,305 | )
|Preferred dividend                           |                                                                          |                               | (915,250                 | )           |            |             | (1,158,244  | )           |            |             | (160,000    | )          
|                                             |                                                                          |                               |                          |             |            |             |             |             |           
|Net loss attributable to common shareholders |                                                                          | $                             | (10,774,602              | )           |            | $           | (23,648,821 | )           |            | $           | (41,387,305 | )          
|                                             |                                                                          |                               |                          |             |            |             |             |             |           
|Basic and diluted net loss per common share  |                                                                          | $                             | (0.31                    | )           |            | $           | (0.78       | )           |            | $           | (1.76       | )          
|                                             |                                                                          |                               |                          |             |            |             |             |             |           
|Weighted average common shares outstanding   |                                                                          |                               | 35,147,503               |             |            |             | 30,502,819  |             |            |             | 23,520,931  |            
|                                             |                                                                          |                               |                          |             |            |             |             |             |           



F-4



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS
EQUITY (DEFICIT)


|                                                                        |  |           |    |   |           |                  |   |               |  |  |              |   |  |          |        |   |               |            |             |               |  |   |             |       |  |               |          |            |          |   |             |         |  |   |              |   |  |   |          |   |  |   |            |   |  |   |            |  
|----------------------------------------------------------------------- |  | --------- | -- | - | --------- | ---------------- | - | ------------- |  |  | ------------ | - |  | -------- | ------ | - | ------------- | ---------- | ----------- | ------------- |  | - | ----------- | ----- |  | ------------- | -------- | ---------- | -------- | - | ----------- | ------- |  | - | ------------ | - |  | - | -------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                                                        |  |           |    |   |           | Common Stock Par |   |               |  |  |              |   |  |          |        |   |               |            | Accumulated |               |  |   |             | Notes | 
|                                                                        |  | Preferred |    |   | Preferred |                  |   | Value $.001   |  |  |              |   |  |          | Common |   |               | Additional |             |               |  |   | Other       |       |  |               |          | Receivable |         
|                                                                        |  | Stock     |    |   | Stock     |                  |   |               |  |  | Common Stock |   |  | Common   |        |   | Stock         |            |             | Paid-In       |  |   | Accumulated |       |  | Comprehensive |          |            | Treasury |   |             | Related | 
|                                                                        |  | Series G  |    |   | Series I  |                  |   | Issued Shares |  |  | Amount       |   |  | Warrants |        |   | Stock Options |            |             | Subscriptions |  |   | Capital     |       |  | Deficit       |          |            | Loss     |   |             | Stock   |  |   | Party        |  
|                                                                        |  |           |    |   |           |                  |   |               |  |  |              |   |  |          |        |   |               |            |             |               |  |   |             |       |  |               |          |            |          |   |             |         |  |   |              |  
|Balance at March 31, 2002                                               |  | $         | 1  |   |           | $                |  |               |  |  | 20,088,225   |   |  | $        | 20,088 |   |               | $          | 2,879,413   |               |  | $ | 1,566,801   |       |  | $             | 950,000  |            |          | $ | 125,832,913 |         |  | $ | (173,096,835 | ) |  | $ |         |   |  | $ | (2,428,125 | ) |  | $ | (5,000,000 | )
|Sale of Common stock                                                    |  |           |   |   |           |                  |  |               |  |  | 3,314,882    |   |  |          | 3,315  |   |               |            |            |               |  |   |            |       |  |               | (950,000 | )          |          |   | 21,424,995  |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Retirement of treasury shares                                           |  |           |   |   |           |                  |  |               |  |  | (140,000     | ) |  |          | (140   | ) |               |            |            |               |  |   |            |       |  |               |         |            |          |   | (2,427,985  | )       |  |   |             |   |  |   |         |   |  |   | 2,428,125  |   |  |   |           |  
|Warrants issued                                                         |  |           |   |   |           |                  |  |               |  |  |             |   |  |          |       |   |               |            | 1,221,979   |               |  |   |            |       |  |               |         |            |          |   |            |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Exercise of warrants                                                    |  |           |   |   |           |                  |  |               |  |  | 81,800       |   |  |          | 82     |   |               |            | (364,738    | )             |  |   |            |       |  |               |         |            |          |   | 372,836     |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Warrants expired                                                        |  |           |   |   |           |                  |  |               |  |  |             |   |  |          |       |   |               |            | (1,879,073  | )             |  |   |            |       |  |               |         |            |          |   | 1,879,073   |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Conversion of debt                                                      |  |           |   |   |           |                  |  |               |  |  | 2,282,779    |   |  |          | 2,283  |   |               |            |            |               |  |   |            |       |  |               |         |            |          |   | 22,331,599  |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Forfeiture of stock options                                             |  |           |   |   |           |                  |  |               |  |  |             |   |  |          |       |   |               |            |            |               |  |   | (21,426     | )     |  |               |         |            |          |   | 21,426      |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Net loss                                                                |  |           |   |   |           |                  |  |               |  |  |             |   |  |          |       |   |               |            |            |               |  |   |            |       |  |               |         |            |          |   |            |         |  |   | (41,227,305  | ) |  |   |          |   |  |   |           |   |  |   |            |  
|                                                                        |  |           |    |   |           |                  |   |               |  |  |              |   |  |          |        |   |               |            |             |               |  |   |             |       |  |               |          |            |          |   |             |         |  |   |              |  
|Balance at March 31, 2003                                               |  |           | 1  |   |           |                  |  |               |  |  | 25,627,686   |   |  |          | 25,628 |   |               |            | 1,857,581   |               |  |   | 1,545,375   |       |  |               |         |            |          |   | 169,434,857 |         |  |   | (214,324,140 | ) |  |   |         |   |  |   |           |   |  | $ | (5,000,000 | )
|Conversion of debt                                                      |  |           |   |   |           |                  |  |               |  |  | 5,121,183    |   |  |          | 5,121  |   |               |            |            |               |  |   |            |       |  |               |         |            |          |   | 24,303,755  |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Exercise of stock options                                               |  |           |   |   |           |                  |  |               |  |  | 7,727        |   |  |          | 8      |   |               |            |            |               |  |   |            |       |  |               |         |            |          |   | 38,397      |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Warrants issued                                                         |  |           |   |   |           |                  |  |               |  |  |             |   |  |          |       |   |               |            | 644,597     |               |  |   |            |       |  |               |         |            |          |   | (309,998    | )       |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Exercise of warrants                                                    |  |           |   |   |           |                  |  |               |  |  | 950          |   |  |          | 1      |   |               |            | (3,971      | )             |  |   |            |       |  |               |         |            |          |   | 8,529       |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Warrants expired                                                        |  |           |   |   |           |                  |  |               |  |  |             |   |  |          |       |   |               |            | (528,449    | )             |  |   |            |       |  |               |         |            |          |   | 528,449     |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Beneficial conversion feature on issuance of convertible
    debentures |  |           |   |   |           |                  |  |               |  |  |             |   |  |          |       |   |               |            |            |               |  |   |            |       |  |               |         |            |          |   | 9,500,000   |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Stock Options issued                                                    |  |           |   |   |           |                  |  |               |  |  |             |   |  |          |       |   |               |            | 1,672,248   |               |  |   |            |       |  |               |         |            |          |   | 2,185,463   |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Series I Preferred stock issued                                         |  |           |   |   |           |                  |  |               |  |  |             |   |  |          |       |   |               |            |            |               |  |   |            |       |  |               |         |            |          |   | 8,187,518   |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Common stock issued                                                     |  |           |   |   |           |                  | 1 |               |  |  | 365,202      |   |  |          | 365    |   |               |            |            |               |  |   |            |       |  |               |         |            |          |   | (365        | )       |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Net loss                                                                |  |           |   |   |           |                  |  |               |  |  |             |   |  |          |       |   |               |            |            |               |  |   |            |       |  |               |         |            |          |   |            |         |  |   | (22,490,577  | ) |  |   |         |   |  |   |           |   |  |   |           |  
|                                                                        |  |           |    |   |           |                  |   |               |  |  |              |   |  |          |        |   |               |            |             |               |  |   |             |       |  |               |          |            |          |   |             |         |  |   |              |  
|Balance at March 31, 2004                                               |  |           | 1  |   |           |                  | 1 |               |  |  | 31,122,748   |   |  |          | 31,123 |   |               |            | 3,642,006   |               |  |   | 1,545,375   |       |  |               |         |            |          |   | 213,876,605 |         |  |   | (236,814,717 | ) |  |   |         |   |  |   |           |   |  | $ | (5,000,000 | )
|Sale of Common stock                                                    |  |           |   |   |           |                  |  |               |  |  | 6,301,778    |   |  |          | 6,302  |   |               |            |            |               |  |   |            |       |  |               |         |            |          |   | 42,587,192  |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Conversion of debt                                                      |  |           |   |   |           |                  |  |               |  |  | 5,524,927    |   |  |          | 5,525  |   |               |            |            |               |  |   |            |       |  |               |         |            |          |   | 28,030,500  |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Conversion of preferred stock                                           |  |           | (1 | ) |           |                  |  |               |  |  | 281,089      |   |  |          | 281    |   |               |            |            |               |  |   |            |       |  |               |         |            |          |   | 1,448       |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Exercise of stock options                                               |  |           |   |   |           |                  |  |               |  |  | 33,667       |   |  |          | 33     |   |               |            |            |               |  |   |            |       |  |               |         |            |          |   | 122,720     |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Warrants issued                                                         |  |           |   |   |           |                  |  |               |  |  |             |   |  |          |       |   |               |            | 10,365,483  |               |  |   |            |       |  |               |         |            |          |   |            |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Exercise of warrants                                                    |  |           |   |   |           |                  |  |               |  |  | 35,162       |   |  |          | 35     |   |               |            | (261,640    | )             |  |   |            |       |  |               |         |            |          |   | 263,603     |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Warrants expired                                                        |  |           |   |   |           |                  |   |               |  |  |             |   |  |          |       |   |               |            | (146,145    | )             |  |   |            |       |  |               |         |            |          |   | 146,145     |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Preferred stock issuance costs                                          |  |           |   |   |           |                  |  |               |  |  |             |   |  |          |       |   |               |            |            |               |  |   |            |       |  |               |         |            |          |   | (587,858    | )       |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Dividends on preferred stock                                            |  |           |   |   |           |                  |  |               |  |  |             |   |  |          |       |   |               |            |            |               |  |   |            |       |  |               |         |            |          |   | (795,249    | )       |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Issuance of common stock in lieu of cash  preferred
    stock dividend |  |           |   |   |           |                  |   |               |  |  | 61,685       |   |  |          | 62     |   |               |            |            |               |  |   |            |       |  |               |         |            |          |   | 361,997     |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Stock tendered in payment of loan and retired                           |  |           |   |   |           |                  |  |               |  |  | (773,735     | ) |  |          | (774   | ) |               |            |            |               |  |   |            |       |  |               |         |            |          |   | (4,951,133  | )       |  |   |             |   |  |   |         |   |  |   |           |   |  |   | 5,000,000  |  
|Net assets acquired from NAP Madrid                                     |  |           |   |   |           |                  |  |               |  |  |             |   |  |          |       |   |               |            |            |               |  |   |            |       |  |               |         |            |          |   |            |         |  |   |             |   |  |   |         |   |  |   | (7,220,637 | ) |  |   |           |  
|Forfeiture of stock options                                             |  |           |   |   |           |                  |  |               |  |  |             |   |  |          |       |   |               |            |            |               |  |   | (7,115      | )     |  |               |         |            |          |   | 7,115       |         |  |   |             |   |  |   |         |   |  |   |           |   |  |   |           |  
|Foreign currency translation adjustment                                 |  |           |   |   |           |                  |  |               |  |  |             |   |  |          |       |   |               |            |            |               |  |   |            |       |  |               |         |            |          |   |            |         |  |   |             |   |  |   | (172,882 | ) |  |   |           |   |  |   |           |  
|Net loss                                                                |  |           |   |   |           |                  |  |               |  |  |             |   |  |          |       |   |               |            |            |               |  |   |            |       |  |               |         |            |          |   |            |         |  |   | (9,859,352   | ) |  |   |         |   |  |   |           |   |  |   |           |  
|                                                                        |  |           |    |   |           |                  |   |               |  |  |              |   |  |          |        |   |               |            |             |               |  |   |             |       |  |               |          |            |          |   |             |         |  |   |              |  
|Balance at March 31, 2005                                               |  | $         |   |   |           | $                | 1 |               |  |  | 42,587,321   |   |  | $        | 42,587 |   |               | $          | 13,599,704  |               |  | $ | 1,538,260   |       |  | $             |         |            |          | $ | 279,063,085 |         |  | $ | (246,674,069 | ) |  | $ | (172,882 | ) |  | $ | (7,220,637 | ) |  | $ |           |  
|                                                                        |  |           |    |   |           |                  |   |               |  |  |              |   |  |          |        |   |               |            |             |               |  |   |             |       |  |               |          |            |          |   |             |         |  |   |              |  



F-5



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                      |                                                                                |                                                                                         |                                                    |                                           |             |            |             |             |            |            |             |             |           |           |             |  
|----------------------------------------------------- | ------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------- | -------------------------------------------------- | ----------------------------------------- | ----------- | ---------- | ----------- | ----------- | ---------- | ---------- | ----------- | ----------- | --------- | --------- | ----------- | -
|                                                      |                                                                                | For the Year Ended March 31,                                                            |                                                   
|                                                      |                                                                                |                                                                                         |                                                   
|                                                      |                                                                                | 2005                                                                                    |                                                    |                                           | 2004        |            |             | 2003        |           
|                                                      |                                                                                |                                                                                         |                                                    |                                           |             |            |             |             |           
|Cash flows from operating activities:                 |                                                                                |                                                                                         |                                                    |                                           |             |            |             |             |            |            |             |            
|                                                      | Net loss                                                                       |                                                                                         | $                                                  | (9,859,352                                | )           |            | $           | (22,490,577 | )          |            | $           | (41,227,305 | )        
|                                                      | Adjustments to reconcile net loss to net cash used in operating
    activities |                                                                                         |                                                    |                                           |             |            |             |             |            |            |             |             |          
|                                                      |                                                                                | Depreciation and amortization of long-lived assets                                      |                                                    |                                           | 5,697,071   |            |             |             | 4,698,292  |            |             |             | 5,092,749 |          
|                                                      |                                                                                | Change in estimated fair value of embedded derivatives                                  |                                                    |                                           | (15,283,500 | )          |             |             |           |            |             |             |          |          
|                                                      |                                                                                | Accretion on convertible debt and mortgage payable                                      |                                                    |                                           | 3,303,168   |            |             |             |           |            |             |             |          |          
|                                                      |                                                                                | Amortization of beneficial conversion feature on issuance of
    convertible debentures |                                                    |                                           | 904,761     |            |             |             | 8,595,239  |            |             |             |          |          
|                                                      |                                                                                | Amortization of debt issue costs                                                        |                                                    |                                           | 1,402,010   |            |             |             | 130,483    |            |             |             | 908,321   |          
|                                                      |                                                                                | Provision for bad debt                                                                  |                                                    |                                           | 317,603     |            |             |             | 167,135    |            |             |             | 197,774   |          
|                                                      |                                                                                | Equity issued for services                                                              |                                                    |                                           |            |            |             |             |           |            |             |             | 313,968   |          
|                                                      |                                                                                | Impairment of long-lived assets                                                         |                                                    |                                           | 813,073     |            |             |             |           |            |             |             | 4,020,300 |          
|                                                      |                                                                                | Stock-based compensation                                                                |                                                    |                                           |            |            |             |             | 2,185,463  |            |             |             |          |          
|                                                      |                                                                                | Inducement on debt conversion expense                                                   |                                                    |                                           |            |            |             |             |           |            |             |             | 4,871,245 |          
|                                                      |                                                                                | Gain on debt restructuring and extinguishment                                           |                                                    |                                           | (3,626,956  | )          |             |             | (8,475,000 | )          |             |             |          |          
|                                                      |                                                                                | Other, net                                                                              |                                                    |                                           | (44,425     | )          |             |             | 74,034     |            |             |             | 312,252   |          
|                                                      |                                                                                | Warrants issued for services                                                            |                                                    |                                           | 202,550     |            |             |             |           |            |             |             |          |          
|                                                      |                                                                                | (Increase) decrease in:                                                                 |                                                    |                                           |             |            |             |             |            |            |             |             |           |          
|                                                      |                                                                                |                                                                                         | Accounts receivable                                |                                           |             | (1,129,348 | )           |             |            | (3,220,339 | )           |             |           | 2,263,100 |            
|                                                      |                                                                                |                                                                                         | Capital lease receivable, net of unearned interest |                                           |             | (6,736,537 | )           |             |            |           |             |             |           |          |            
|                                                      |                                                                                |                                                                                         | Restricted cash                                    |                                           |             | (1,355,975 | )           |             |            |           |             |             |           |          |            
|                                                      |                                                                                |                                                                                         | Other assets                                       |                                           |             | (984,947   | )           |             |            | 279,530    |             |             |           | (123,369  | )          
|                                                      |                                                                                | Increase (decrease) in:                                                                 |                                                    |                                           |             |            |             |             |            |            |             |             |           |          
|                                                      |                                                                                |                                                                                         | Accounts payable and accrued expenses              |                                           |             | (1,857,528 | )           |             |            | (1,166,016 | )           |             |           | 649,006   |            
|                                                      |                                                                                |                                                                                         | Interest payable                                   |                                           |             | 1,001,428  |             |             |            | (1,526,664 | )           |             |           | 2,947,252 |            
|                                                      |                                                                                |                                                                                         | Deferred revenue                                   |                                           |             | (691,798   | )           |             |            | 1,715,246  |             |             |           | 155,324   |            
|                                                      |                                                                                |                                                                                         | Net assets/liabilities of discontinued operations  |                                           |             |           |             |             |            | (1,170,980 | )           |             |           | 175,521   |            
|                                                      |                                                                                |                                                                                         | Construction payables                              |                                           |             | (820,146   | )           |             |            |           |             |             |           |          |            
|                                                      |                                                                                |                                                                                         | Deferred rent                                      |                                           |             | 4,387,360  |             |             |            | 4,327,831  |             |             |           | 1,135,448 |            
|                                                      |                                                                                |                                                                                         |                                                    |                                           |             |            |             |             |           
|                                                      |                                                                                |                                                                                         |                                                    | Net cash used in operating activities     |             |            | (24,361,488 | )           |            |            | (15,876,323 | )           |           |           | (18,308,414 | )
|                                                      |                                                                                |                                                                                         |                                                    |                                           |             |            |             |             |           
|Cash flows from investing activities:                 |                                                                                |                                                                                         |                                                    |                                           |             |            |             |             |            |            |             |            
|                                                      | Restricted cash                                                                |                                                                                         |                                                    | (4,000,000                                | )           |            |             | (20,571     | )          |            |             | (11,332     | )        
|                                                      | Purchase of property and equipment                                             |                                                                                         |                                                    | (10,508,261                               | )           |            |             | (4,054,741  | )          |            |             | (994,892    | )        
|                                                      | Investment in unconsolidated entities                                          |                                                                                         |                                                    |                                          |             |            |             |            |            |            |             | (337,812    | )        
|                                                      | Acquisition of a majority interest in NAP Madrid                               |                                                                                         |                                                    | (2,537,627                                | )           |            |             |            |            |            |             |            |          
|                                                      | Acquisition of TECOTA, net of cash acquired                                    |                                                                                         |                                                    | (73,936,374                               | )           |            |             |            |            |            |             |            |          
|                                                      | Acquisition of interest rate cap agreement                                     |                                                                                         |                                                    | (100,000                                  | )           |            |             |            |            |            |             |            |          
|                                                      | Proceeds from notes receivable                                                 |                                                                                         |                                                    | 50,000                                    |             |            |             |            |            |            |             |            |          
|                                                      |                                                                                |                                                                                         |                                                    |                                           |             |            |             |             |           
|                                                      |                                                                                |                                                                                         |                                                    | Net cash used in investing activities     |             |            | (91,032,262 | )           |            |            | (4,075,312  | )           |           |           | (1,344,036  | )
|                                                      |                                                                                |                                                                                         |                                                    |                                           |             |            |             |             |           
|Cash flows from financing activities:                 |                                                                                |                                                                                         |                                                    |                                           |             |            |             |             |            |            |             |            
|Increase in restricted cash                           |                                                                                |                                                                                         | (1,681,401                                         | )                                         |             |            |            |             |            |            |            |            
|Proceeds from mortgage loan and warrants              |                                                                                |                                                                                         | 49,000,000                                         |                                           |             |            | 750,000     |             |            |            | 10,032,220  |            
|Issuance of senior secured notes and warrants         |                                                                                |                                                                                         | 30,000,000                                         |                                           |             |            |            |             |            |            |            |            
|Increase (decrease) in construction payables          |                                                                                |                                                                                         |                                                   |                                           |             |            | 1,215,505   |             |            |            | (2,948,554  | )          
|Payments on loans                                     |                                                                                |                                                                                         | (36,667,782                                        | )                                         |             |            | (2,996,517  | )           |            |            | (2,295,138  | )          
|Issuance of convertible debt                          |                                                                                |                                                                                         | 86,257,312                                         |                                           |             |            | 19,550,000  |             |            |            |            |            
|Payments on convertible debt                          |                                                                                |                                                                                         | (10,131,800                                        | )                                         |             |            | (1,605,000  | )           |            |            |            |            
|Debt issuance costs                                   |                                                                                |                                                                                         | (6,007,370                                         | )                                         |             |            |            |             |            |            |            |            
|Proceeds from issuance of common stock                |                                                                                |                                                                                         | 42,593,594                                         |                                           |             |            |            |             |            |            |            |            
|Proceeds from sale of preferred stock                 |                                                                                |                                                                                         | 2,131,800                                          |                                           |             |            | 7,309,765   |             |            |            |            |            
|Preferred stock issuance costs                        |                                                                                |                                                                                         | (587,860                                           | )                                         |             |            |            |             |            |            |            |            
|Payments of preferred stock dividends                 |                                                                                |                                                                                         | (433,253                                           | )                                         |             |            |            |             |            |            |            |            
|Other borrowings                                      |                                                                                |                                                                                         | 850,262                                            |                                           |             |            |            |             |            |            |            |            
|Payments under capital lease obligations              |                                                                                |                                                                                         | (433,712                                           | )                                         |             |            | (1,334,325  | )           |            |            | (975,433    | )          
|Proceeds from exercise of stock options and warrants  |                                                                                |                                                                                         | 124,760                                            |                                           |             |            | 32,631      |             |            |            | 9,180       |            
|Sale of common stock and warrants                     |                                                                                |                                                                                         |                                                   |                                           |             |            |            |             |            |            | 16,955,287  |            
|Proceeds from exercise of preferred stock conversions |                                                                                |                                                                                         | 1,730                                              |                                           |             |            |            |             |            |            |            |            
|                                                      |                                                                                |                                                                                         |                                                    |                                           |             |            |             |             |           
|                                                      |                                                                                |                                                                                         |                                                    | Net cash provided by financing activities |             |            | 155,016,280 |             |            |            | 22,922,059  |             |           |           | 20,777,562  |  
|                                                      |                                                                                |                                                                                         |                                                    |                                           |             |            |             |             |           
|                                                      |                                                                                |                                                                                         |                                                    | Net increase in cash                      |             |            | 39,622,530  |             |            |            | 2,970,424   |             |           |           | 1,125,112   |  
|                                                      | Cash and cash equivalents at beginning of period                               |                                                                                         |                                                    | 4,378,614                                 |             |            |             | 1,408,190   |            |            |             | 283,078     |          
|                                                      |                                                                                |                                                                                         |                                                    |                                           |             |            |             |             |           
|                                                      | Cash and cash equivalents at end of period                                     |                                                                                         | $                                                  | 44,001,144                                |             |            | $           | 4,378,614   |            |            | $           | 1,408,190   |          
|                                                      |                                                                                |                                                                                         |                                                    |                                           |             |            |             |             |           



F-6



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




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





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







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









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





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



F-7



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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





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





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



|                                 |  |  |               | 
|-------------------------------- |  |  | ------------- | 
|Building                         |  |  | 40 years      | 
|Improvements                     |  |  | 5 - 20  years | 
|Computer software                |  |  | 3 years       | 
|Furniture, fixture and equipment |  |  | 5 - 20  years | 





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







F-8



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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





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





|                                           |  |                |            |  |                |   |            |            |  |   |            |  |  |   |            | 
|------------------------------------------ |  | -------------- | ---------- |  | -------------- | - | ---------- | ---------- |  | - | ---------- |  |  | - | ---------- | 
|                                           |  | March 31, 2005 |            |  | March 31, 2004 |  
|                                           |  |                |            |  |                |  
|                                           |  | Book Value     |            |  | Fair Value     |   |            | Book Value |  |   | Fair Value | 
|                                           |  |                |            |  |                |   |            |            |  |   |            | 
|Mortgage payable including current portion |  | $              | 46,726,594 |  |                | $ | 48,822,510 |            |  | $ |           |  |  | $ |           | 
|Notes payable, including current portion   |  |                | 28,154,087 |  |                |   | 25,572,448 |            |  |   | 40,506,039 |  |  |   | 30,978,196 | 
|Convertible debt                           |  |                | 53,972,558 |  |                |   | 75,350,377 |            |  |   | 37,145,239 |  |  |   | 36,895,239 | 







| |                                    
| | -----------------------------------
| | Revenue and allowance for bad debts





F-9



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
















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



F-10



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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





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













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



F-11



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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





|                                                                               |  |                             |             |   |      |   |             |      |  |   |             |  
|------------------------------------------------------------------------------ |  | --------------------------- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                                               |  | For the Year Ended March 31 |            
|                                                                               |  |                             |            
|                                                                               |  | 2005                        |             |   | 2004 |   |             | 2003 | 
|                                                                               |  |                             |             |   |      |   |             |      | 
|Net loss attributable to common shareholders as reported                       |  | $                           | (10,774,602 | ) |      | $ | (23,648,821 | )    |  | $ | (41,387,305 | )
|Stock-based compensation expense included in net loss                          |  |                             |            |   |      |   | 2,185,463   |      |  |   |            |  
|Stock-based compensation expense if the fair value method had
    been adopted |  |                             | (2,112,914  | ) |      |   | (3,288,790  | )    |  |   | (4,028,184  | )
|                                                                               |  |                             |             |   |      |   |             |      | 
|Pro forma net loss attributable to common shareholders                         |  |                             | (12,887,516 | ) |      |   | (24,752,148 | )    |  |   | (45,415,489 | )
|                                                                               |  |                             |             |   |      |   |             |      | 
|Loss per common share  as reported                                            |  | $                           | (0.31       | ) |      | $ | (0.78       | )    |  | $ | (1.76       | )
|                                                                               |  |                             |             |   |      |   |             |      | 
|Loss per common share  pro forma                                              |  |                             | (0.37       | ) |      |   | (0.81       | )    |  |   | (1.93       | )
|                                                                               |  |                             |             |   |      |   |             |      | 



|                   |  |      |               |  |      |  |               |      |  |  |               | 
|------------------ |  | ---- | ------------- |  | ---- |  | ------------- | ---- |  |  | ------------- | 
|                   |  | 2005 |               |  | 2004 |  |               | 2003 | 
|                   |  |      |               |  |      |  |               |      | 
|Risk Free Rate     |  |      | 2.87% - 4.33% |  |      |  | 2.14% - 3.50% |      |  |  | 2.65% - 4.84% | 
|Volatility         |  |      | 126% - 137%   |  |      |  | 150%          |      |  |  | 135% - 150%   | 
|Expected Life      |  |      | 5 years       |  |      |  | 5 years       |      |  |  | 5 years       | 
|Expected Dividends |  |      | 0%            |  |      |  | 0%            |      |  |  | 0%            | 



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





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





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



F-12



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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











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



| |       
| | ------
| | TECOTA



F-13



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                             |  |   |             |  
|------------------------------------------------------------ |  | - | ----------- | -
|Assets                                                      
|Cash                                                         |  | $ | 1,574,000   |  
|Other current assets                                         |  |   | 383,000     |  
|Land and building                                            |  |   | 64,973,000  |  
|Liabilities                                                 
|Accounts payable                                             |  |   | (462,000    | )
|                                                             |  |   |            
|Fair value of net assets acquired                            |  |   | 66,468,000  |  
|Adjustments:                                                 |  |   |             |  
|Write off of Terremarks deferred rent liability to TECOTA   |  |   | 9,324,000   |  
|Terremarks partnership interest in TECOTA under cost method |  |   | (392,000    | )
|Repayment of mortgage                                        |  |   | (35,736,000 | )
|                                                             |  |   |            
|Cash paid to former TECOTA partners                          |  | $ | 39,664,000  |  
|                                                             |  |   |            



|                                            |  |      |            |   |      |   |            |  
|------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                            |  | 2004 |            |   | 2003 |  
|                                            |  |      |            |   |      |  
|Revenues                                    |  | $    | 50,200,000 |   |      | $ | 20,900,000 |  
|                                            |  |      |            |   |      |  
|Net loss                                    |  | $    | 11,800,000 |   |      | $ | 28,500,000 |  
|                                            |  |      |            |   |      |  
|Basic and diluted net loss per common share |  | $    | (0.35      | ) |      | $ | (0.94      | )
|                                            |  |      |            |   |      |  





| |           
| | ----------
| | NAP Madrid



F-14



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








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



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

|                                              |  |           |            |   |      |   |         | 
|--------------------------------------------- |  | --------- | ---------- | - | ---- | - | ------- | 
|                                              |  | March 31, |           
|                                              |  |           |           
|                                              |  | 2005      |            |   | 2004 |  
|                                              |  |           |            |   |      |  
|Capital improvements reserve                  |  | $         | 4,000,000  |   |      | $ |        | 
|Security deposits under bank loan agreement   |  |           | 1,681,400  |   |      |   |        | 
|Security deposits under operating leases      |  |           | 1,641,531  |   |      |   | 789,476 | 
|Escrow deposits under mortgage loan agreement |  |           | 503,921    |   |      |   |        | 
|                                              |  |           |            |   |      |  
|                                              |  |           | 7,826,852  |   |      |   | 789,476 | 
|Less: current portion                         |  |           | (2,185,321 | ) |      |   |        | 
|                                              |  |           |            |   |      |  
|                                              |  | $         | 5,641,531  |   |      | $ | 789,476 | 
|                                              |  |           |            |   |      |  

F-15



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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



|                                                                                           |  |           |             |   |      |   |             |  
|------------------------------------------------------------------------------------------ |  | --------- | ----------- | - | ---- | - | ----------- | -
|                                                                                           |  | March 31, |            
|                                                                                           |  |           |            
|                                                                                           |  | 2005      |             |   | 2004 |  
|                                                                                           |  |           |             |   |      |  
|Land                                                                                       |  | $         | 10,393,877  |   |      | $ |            |  
|Building and improvements                                                                  |  |           | 96,643,573  |   |      |   | 50,992,419  |  
|Furniture, equipment and software, including $958,230 and
    $4,530,101 in capital leases |  |           | 34,479,387  |   |      |   | 15,472,428  |  
|                                                                                           |  |           |             |   |      |  
|                                                                                           |  |           | 141,516,837 |   |      |   | 66,464,847  |  
|Less accumulated depreciation, including $192,959 and $3,205,036
    in capital leases     |  |           | (18,110,516 | ) |      |   | (12,650,402 | )
|                                                                                           |  |           |             |   |      |  
|                                                                                           |  |           | 123,406,321 |   |      |   | 53,814,445  |  
|Equipment held for installation                                                            |  |           |            |   |      |   | 83,271      |  
|                                                                                           |  |           |             |   |      |  
|                                                                                           |  | $         | 123,406,321 |   |      | $ | 53,897,716  |  
|                                                                                           |  |           |             |   |      |  





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





F-16



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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



|                                                                                                                                                                                                                                                         |  |           |            |  |      |   |            |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | ---------- |  | ---- | - | ---------- | -
|                                                                                                                                                                                                                                                         |  | March 31, |           
|                                                                                                                                                                                                                                                         |  |           |           
|                                                                                                                                                                                                                                                         |  | 2005      |            |  | 2004 |  
|                                                                                                                                                                                                                                                         |  |           |            |  |      |  
|Senior Convertible Notes, face value of $86.25 million, due
    June 15, 2009, and convertible into shares of the
    Companys common stock at $12.50 per share. Interest
    at 9% is payable semi-annually, on December 15 and June 15                |  | $         | 53,972,558 |  |      | $ |           |  
|Subordinated secured 10% convertible debentures due
    April 30, 2006; converted into shares of the Companys
    common stock at $0.50 per share during May 2004 (face value
    of $25.0 million)                                                     |  |           |           |  |      |   | 24,095,239 |  
|Subordinated secured 13% convertible debentures due
    December 31, 2005; converted into shares of the
    Companys common stock at a weighted average conversion
    price of $21.40 per share during June 2004                                       |  |           |           |  |      |   | 10,300,000 |  
|Subordinated secured 13.125% convertible debentures due
    August 30, 2004; repaid or converted into shares of the
    Companys common stock at a weighted average conversion
    price of $6.60 per share during the period from May to July
    2004 |  |           |           |  |      |   | 2,750,000  |  
|                                                                                                                                                                                                                                                         |  |           |            |  |      |  
|                                                                                                                                                                                                                                                         |  | $         | 53,972,558 |  |      | $ | 37,145,239 |  
|Less: Current portion of convertible debt                                                                                                                                                                                                                |  |           |           |  |      |   | (250,000   | )
|                                                                                                                                                                                                                                                         |  |           |            |  |      |  
|Convertible debentures, less current portion                                                                                                                                                                                                             |  | $         | 53,972,558 |  |      | $ | 36,895,239 |  
|                                                                                                                                                                                                                                                         |  |           |            |  |      |  





F-17



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)














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







F-18



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |   |                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------
| |  | 5.0% per annum, starting January 4, 2005;                                                                       
|
| |  | 5.75% per annum, starting August 11, 2005;                                                                      
|
| |  | 6.5% per annum, starting February 11, 2006;                                                                     
|
| |  | 7.25% per annum, starting August 11, 2006; and                                                                  
|
| |  | 7.72% per annum, starting February 11, 2007 until the
    termination date of the rate cap protection agreement.



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







| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | incur more debt;                                                              
|
| |  | pay dividends, redeem or repurchase its stock or make other
    distributions;
|
| |  | make acquisitions or investments;                                             
|
| |  | enter into transactions with affiliates;                                      
|
| |  | merge or consolidate with others;                                             
|
| |  | dispose of assets or use asset sale proceeds;                                 
|
| |  | create liens on our assets; and                                               
|
| |  | extend credit.                                                                





F-19



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|    |                               
|--- | ------------------------------
|10. | Stockholders Equity (Deficit)



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



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





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





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



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







F-20



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










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







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

















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



F-21



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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







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









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





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





F-22



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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



|              |  |                  |           |  |          |  |           |                 |  |               |  |   |            | 
|------------- |  | ---------------- | --------- |  | -------- |  | --------- | --------------- |  | ------------- |  | - | ---------- | 
|              |  |                  |           |  |          |  |           | Estimated       | 
|              |  | No. of shares    |           |  | Exercise |  |           |                 |  | Fair Value at | 
|Issuance Date |  | able to purchase |           |  | Price    |  |           | Expiration Date |  | Issuance      | 
|              |  |                  |           |  |          |  |           |                 |  |               | 
|March 2005    |  |                  | 10,000    |  |          |  | 7.20      |                 |  | March 2007    |  | $ | 29,900     | 
|December 2004 |  |                  | 2,000,000 |  |          |  | 6.80-8.80 |                 |  | March 2009    |  |   | 8,782,933  | 
|June 2004     |  |                  | 181,579   |  |          |  | 9.50      |                 |  | June 2007     |  |   | 1,380,000  | 
|April 2004    |  |                  | 5,000     |  |          |  | 7.00      |                 |  | April 2009    |  |   | 32,450     | 
|March 2004    |  |                  | 285,397   |  |          |  | 9.00      |                 |  | March 2009    |  |   | 1,672,248  | 
|February 2004 |  |                  | 1,210     |  |          |  | 9.00      |                 |  | February 2009 |  |   | 8,652      | 
|January 2004  |  |                  | 5,000     |  |          |  | 7.10      |                 |  | January 2009  |  |   | 33,750     | 
|October 2003  |  |                  | 5,000     |  |          |  | 7.30      |                 |  | October 2008  |  |   | 33,700     | 
|July 2003     |  |                  | 10,000    |  |          |  | 6.20      |                 |  | July 2008     |  |   | 114,400    | 
|June 2003     |  |                  | 30,000    |  |          |  | 5.00      |                 |  | June 2006     |  |   | 220,200    | 
|June 2003     |  |                  | 25,000    |  |          |  | 7.50      |                 |  | June 2006     |  |   | 177,750    | 
|March 2003    |  |                  | 30,000    |  |          |  | 7.50      |                 |  | March 2007    |  |   | 110,400    | 
|December 2002 |  |                  | 30,000    |  |          |  | 7.50      |                 |  | March 2007    |  |   | 110,400    | 
|July 2002     |  |                  | 10,000    |  |          |  | 5.40      |                 |  | July 2005     |  |   | 20,900     | 
|April 2002    |  |                  | 27,000    |  |          |  | 4.00      |                 |  | March 2007    |  |   | 99,360     | 
|June 2001     |  |                  | 1,300     |  |          |  | 17.20     |                 |  | June 2011     |  |   | 22,490     | 
|January 2002  |  |                  | 950       |  |          |  | 4.80      |                 |  | June 2011     |  |   | 3,971      | 
|March 2001    |  |                  | 30,000    |  |          |  | 20.00     |                 |  | March 2006    |  |   | 352,200    | 
|November 2000 |  |                  | 25,000    |  |          |  | 27.60     |                 |  | November 2008 |  |   | 394,000    | 
|              |  |                  |           |  |          |  |           |                 |  |               | 
|              |  |                  | 2,712,436 |  |          |  |           |                 |  |               |  | $ | 13,599,704 | 
|              |  |                  |           |  |          |  |           |                 |  |               | 







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



F-23



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|                                                                  |                     |        |           |          |                |   |       |       | 
|----------------------------------------------------------------- | ------------------- | ------ | --------- | -------- | -------------- | - | ----- | ----- | 
|                                                                  |                     |        |           | Weighted |               
|                                                                  |                     |        |           | Average  |               
|                                                                  |                     | Number |           |          | Exercise Price |  
|                                                                  |                     |        |           |          |                |  
|Outstanding at March 31, 2003                                     |                     |        | 1,486,396 |          |                | $ | 13.70 |      
|Granted                                                           |                     |        | 551,577   |          |                |   | 5.60  |      
|Expired/ Terminated                                               |                     |        | (71,977   | )        |                |   | 7.30  |      
|Exercised                                                         |                     |        | (7,060    | )        |                |   | 4.90  |      
|                                                                  |                     |        |           |          |                |  
|Outstanding at March 31, 2004                                     |                     |        | 1,958,936 |          |                | $ | 11.70 |      
|Granted                                                           |                     |        | 519,128   |          |                |   | 6.20  |      
|                                                                  | Expired/ Terminated |        |           | (51,549  | )              |   |       | 13.50 | 
|                                                                  | Exercised           |        |           | (33,667  | )              |   |       | 3.70  | 
|                                                                  |                     |        |           |          |                |  
|Outstanding at March 31, 2005                                     |                     |        | 2,392,848 |          |                | $ | 10.60 |      
|                                                                  |                     |        |           |          |                |  
|Options exercisable at:                                           |                     |        |           |          |                |   |       |      
|March 31, 2005                                                    |                     |        | 1,744,419 |          |                |   | 1.23  |      
|                                                                  |                     |        |           |          |                |  
|March 31, 2004                                                    |                     |        | 1,444,245 |          |                |   | 1.39  |      
|                                                                  |                     |        |           |          |                |  
|Weighted average fair value of options granted during year ended: |                     |        |           |          |                |   |       |      
|March 31, 2005                                                    |                     | $      | 0.54      |          |                |   |       |      
|                                                                  |                     |        |           |          |                |  
|March 31, 2004                                                    |                     | $      | 0.51      |          |                |   |       |      
|                                                                  |                     |        |           |          |                |  



|                                        |  |                |           |             |              |  |          |       |  |             |            |  |  |  |           | 
|--------------------------------------- |  | -------------- | --------- | ----------- | ------------ |  | -------- | ----- |  | ----------- | ---------- |  |  |  | --------- | 
|                                        |  |                |           | Average     |              |  |          |       | 
|                                        |  |                |           | Remaining   |              |  | Average  |       |  | Number      |           
|                                        |  |                |           | Contractual |              |  | Exercise |       |  | Exercisable |           
|Range of Exercise Prices March 31, 2005 |  | Outstanding at |           |             | Life (Years) |  |          | Price |  |             | Options at | 
|                                        |  |                |           |             |              |  |          |       |  |             |            | 
|$0.25-0.50                              |  |                | 592,108   |             |              |  | 7.6      |       |  | $           | 3.50       |  |  |  | 532,460   | 
|$0.51-1.00                              |  |                | 1,251,261 |             |              |  | 8.1      |       |  |             | 6.40       |  |  |  | 662,507   | 
|$1.01-1.50                              |  |                | 85,156    |             |              |  | 4.3      |       |  |             | 12.70      |  |  |  | 85,156    | 
|$1.51-2.00                              |  |                | 36,171    |             |              |  | 5.8      |       |  |             | 17.50      |  |  |  | 36,171    | 
|$2.01-3.00                              |  |                | 139,790   |             |              |  | 5.6      |       |  |             | 24.80      |  |  |  | 139,763   | 
|$3.01-5.00                              |  |                | 288,362   |             |              |  | 5.2      |       |  |             | 33.30      |  |  |  | 288,362   | 
|                                        |  |                |           |             |              |  |          |       |  |             |            | 
|                                        |  |                | 2,392,848 |             |              |  | 7.1      |       |  |             | 12.40      |  |  |  | 1,744,419 | 
|                                        |  |                |           |             |              |  |          |       |  |             |            | 

F-24



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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



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













|           |                              |                                             |           |           |           |   |            |            |  | 
|---------- | ---------------------------- | ------------------------------------------- | --------- | --------- | --------- | - | ---------- | ---------- |  | 
|           |                              | Capital                                     |           |           | Operating |  
|           |                              | Leases                                      |           |           | Leases    |  
|           |                              |                                             |           |           |           |  
|2006       |                              | $                                           | 1,117,962 |           |           | $ | 3,198,752  |           
|2007       |                              |                                             | 300,807   |           |           |   | 3,167,573  |           
|2008       |                              |                                             | 181,541   |           |           |   | 3,129,655  |           
|2009       |                              |                                             |          |           |           |   | 3,087,242  |           
|2010       |                              |                                             |          |           |           |   | 3,172,557  |           
|Thereafter |                              |                                             |          |           |           |   | 31,172,525 |           
|           |                              |                                             |           |           |           |  
|           | Total minimum lease payments |                                             | $         | 1,600,310 |           |   | $          | 46,928,304 | 
|           |                              |                                             |           |           |           |  
|           | Amount representing interest |                                             |           | (128,410  | )         |   |            |            | 
|           |                              |                                             |           |           |           |  
|           |                              | Present value of net minimum lease payments |           | $         | 1,471,900 |   |            |            |  | 
|           |                              |                                             |           |           |           |  

F-25



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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





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





|                                                    |  |                              |           |  |      |   |            |      |  |   |           | 
|--------------------------------------------------- |  | ---------------------------- | --------- |  | ---- | - | ---------- | ---- |  | - | --------- | 
|                                                    |  | For the Year Ended March 31, |          
|                                                    |  |                              |          
|                                                    |  | 2005                         |           |  | 2004 |   |            | 2003 | 
|                                                    |  |                              |           |  |      |   |            |      | 
|Rent expense                                        |  | $                            | 5,818,784 |  |      | $ | 5,308,272  |      |  | $ | 3,558,196 | 
|Services purchased from related parties             |  |                              | 957,483   |  |      |   | 501,080    |      |  |   |          | 
|Property management and construction fees           |  |                              | 144,826   |  |      |   | 198,000    |      |  |   | 510,000   | 
|Revenues from NAP de las Americas  Madrid          |  |                              |          |  |      |   | 43,000     |      |  |   | 340,000   | 
|Interest income on notes receivable  related party |  |                              | 50,278    |  |      |   | 76,284     |      |  |   | 61,000    | 
|Interest income from shareholder                    |  |                              | 28,944    |  |      |   | 32,489     |      |  |   | 37,000    | 
|Interest expense                                    |  |                              | 670,649   |  |      |   | 2,065,695  |      |  |   | 1,198,076 | 
|Services provided to a related party                |  |                              | 2,475     |  |      |   |            |      |  |   |           | 
|Other assets                                        |  | $                            | 477,846   |  |      | $ | 499,009    |      |  |   |           | 
|Note receivable  related party                     |  |                              |          |  |      |   | 5,000,000  |      |  |   |           | 
|Notes payable to related parties                    |  |                              |          |  |      |   | 35,516,977 |      |  |   |           | 
|Convertible debt                                    |  |                              |          |  |      |   | 4,150,000  |      |  |   |           | 





F-26



---



##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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



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



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





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





|                                                                           |  |           |             |   |      |   |             |  
|-------------------------------------------------------------------------- |  | --------- | ----------- | - | ---- | - | ----------- | -
|                                                                           |  | March 31, |            
|                                                                           |  |           |            
|                                                                           |  | 2005      |             |   | 2004 |  
|                                                                           |  |           |             |   |      |  
|Deferred tax assets:                                                       |  |           |             |   |      |   |             |  
|Charitable contributions                                                   |  | $         | 225,055     |   |      | $ | 223,947     |  
|Capitalized start-up costs                                                 |  |           | 1,163,296   |   |      |   | 2,063,736   |  
|Allowances and other                                                       |  |           | 2,234,326   |   |      |   | 11,246,433  |  
|Net operating loss carryforwards                                           |  |           | 47,796,808  |   |      |   | 34,211,590  |  
|Net operating loss carryforwards retained from discontinued
    operations |  |           | 17,280,709  |   |      |   | 17,280,709  |  
|Tax credits                                                                |  |           | 245,780     |   |      |   | 245,780     |  
|                                                                           |  |           |             |   |      |  
|Total deferred tax assets                                                  |  |           | 68,945,974  |   |      |   | 65,272,195  |  
|                                                                           |  |           |             |   |      |  
|Valuation allowance                                                        |  |           | (65,949,914 | ) |      |   | (63,283,833 | )
|                                                                           |  |           |             |   |      |  
|Deferred tax liability:                                                    |  |           |             |   |      |   |             |  
|Other                                                                      |  |           | (2,996,060  | ) |      |   | (1,988,362  | )
|                                                                           |  |           |             |   |      |  
|Total deferred tax liability                                               |  |           | (2,996,060  | ) |      |   | (1,988,362  | )
|                                                                           |  |           |             |   |      |  
|Net deferred tax asset                                                     |  | $         |            |   |      | $ |            |  
|                                                                           |  |           |             |   |      |  

F-27



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                                                      |  |                              |       |    |      |  |       |      |  |  |       |   
|----------------------------------------------------- |  | ---------------------------- | ----- | -- | ---- |  | ----- | ---- |  |  | ----- | --
|                                                      |  | For the Year Ended March 31, |      
|                                                      |  |                              |      
|                                                      |  | 2005                         |       |    | 2004 |  |       | 2003 | 
|                                                      |  |                              |       |    |      |  |       |      | 
|Rate reconciliation                                   |  |                              |       |    |      |  |       |      |  |  |       |   
|Statutory rate                                        |  |                              | (34.0 | )% |      |  | (34.0 | )%   |  |  | (34.0 | )%
|State income taxes, net of federal income tax benefit |  |                              | (2.9  | )  |      |  | (3.2  | )    |  |  | (3.2  | ) 
|Permanent differences                                 |  |                              | 9.0   |    |      |  | 14.0  |      |  |  | 6.8   |   
|Increase in valuation allowance                       |  |                              | 27.9  |    |      |  | 23.2  |      |  |  | 30.4  |   
|                                                      |  |                              |       |    |      |  |       |      | 
|Effective tax rate                                    |  |                              |      | %  |      |  |      | %    |  |  |      | % 
|                                                      |  |                              |       |    |      |  |       |      | 





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





F-28



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                             |  |             |             |   |             |   |            |       |  |   |             |  
|---------------------------- |  | ----------- | ----------- | - | ----------- | - | ---------- | ----- |  | - | ----------- | -
|                             |  | Data center |             |   | Real Estate |   |            |      
|For the year ended March 31, |  | operations  |             |   | services    |   |            | Total | 
|                             |  |             |             |   |             |   |            |       | 
|2005                         |  |             |             |   |             |   |            |       |  |   |             |  
|                             |  |             |             |   |             |   |            |       | 
|Revenue                      |  |             | 46,818,088  |   |             |   | 1,329,526  |       |  |   | 48,147,614  |  
|Loss from operations         |  |             | (13,506,734 | ) |             |   | (400,010   | )     |  |   | (13,906,744 | )
|Net loss                     |  |             | (9,490,543  | ) |             |   | (368,809   | )     |  |   | (9,859,352  | )
|                            
|2004                         |  |             |             |   |             |   |            |       |  |   |             |  
|                             |  |             |             |   |             |   |            |       | 
|Revenue                      |  | $           | 17,034,377  |   |             | $ | 1,179,362  |       |  | $ | 18,213,739  |  
|Loss from operations         |  |             | (20,237,820 | ) |             |   | (338,587   | )     |  |   | (20,576,407 | )
|Net loss                     |  |             | (22,152,261 | ) |             |   | (338,316   | )     |  |   | (22,490,577 | )
|                            
|2003                         |  |             |             |   |             |   |            |       |  |   |             |  
|                             |  |             |             |   |             |   |            |       | 
|Revenue                      |  | $           | 11,032,984  |   |             | $ | 3,660,719  |       |  | $ | 14,693,703  |  
|Loss from operations         |  |             | (21,658,738 | ) |             |   | (3,671,562 | )     |  |   | (25,330,300 | )
|Net loss                     |  |             | (37,565,136 | ) |             |   | (3,662,169 | )     |  |   | (41,227,305 | )
|                            
|Assets, as of                |  |             |             |   |             |   |            |       |  |   |             |  
|                             |  |             |             |   |             |   |            |       | 
|March 31, 2005               |  |             | 208,905,664 |   |             |   |           |       |  |   | 208,905,664 |  
|March 31, 2004               |  | $           | 77,101,579  |   |             | $ | 331,124    |       |  | $ | 77,432,703  |  



|                                    |                          |                              |             |            |      |   |             |             |   |   |             |             |  
|----------------------------------- | ------------------------ | ---------------------------- | ----------- | ---------- | ---- | - | ----------- | ----------- | - | - | ----------- | ----------- | -
|                                    |                          | For the Year Ended March 31, |            
|                                    |                          |                              |            
|                                    |                          | 2005                         |             |            | 2004 |   |             | 2003        |  
|                                    |                          |                              |             |            |      |   |             |             |  
|Total segment loss from operations  |                          |                              | (13,906,744 | )          |      | $ | (20,576,407 | )           |   | $ | (25,330,300 | )          
|Change in fair value of derivatives |                          |                              | 15,283,500  |            |      |   |            |             |   |   |            |            
|Debt restructuring                  |                          |                              | 3,420,956   |            |      |   | 8,475,000   |             |   |   |            |            
|Inducement on debt conversion       |                          |                              |             |            |      |   |            |             |   |   | (4,871,245  | )          
|Interest income                     |                          |                              | 666,286     |            |      |   | 131,548     |             |   |   | 136,278     |            
|Interest expense                    |                          |                              | (15,493,610 | )          |      |   | (14,624,922 | )           |   |   | (11,007,683 | )          
|Gain on real estate held for sale   |                          |                              |             |            |      |   |            |             |   |   |            |            
|Other income (expense)              |                          |                              | 170,260     |            |      |   | 4,104,204   |             |   |   | (154,355    | )          
|                                    |                          |                              |             |            |      |   |             |             |  
|                                    | Loss before income taxes |                              | $           | (9,859,352 | )    |   | $           | (22,490,577 | ) |   | $           | (41,227,305 | )
|                                    |                          |                              |             |            |      |   |             |             |  

F-29



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##### Table of Contents



TERREMARK WORLDWIDE, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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

|                                                        |                                                                                             |                              |   |            |      |  |   |            |   |  |   |            |  
|------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ---------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                        |                                                                                             | For the Year Ended March 31, |  
|                                                        |                                                                                             |                              |  
|                                                        |                                                                                             | 2005                         |   |            | 2004 |  |   | 2003       |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            |  
|Supplemental disclosures of cash flow information:      |                                                                                             |                              |   |            |      |  |   |            |   |  |   |           
|                                                        | Cash paid for interest                                                                      |                              | $ | 6,399,840  |      |  | $ | 7,349,467  |   |  | $ | 7,321,545  |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            |  
|Non-cash operating, investing and financing activities: |                                                                                             |                              |   |            |      |  |   |            |   |  |   |           
|                                                        | Warrants issued                                                                             |                              |   | 1,380,000  |      |  |   | 644,597    |   |  |   | 612,500    |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            |  
|                                                        | Conversion of notes payable to convertible debt                                             |                              |   |           |      |  |   | 5,450,000  |   |  |   |           |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            |  
|                                                        | Beneficial conversion feature on issuance of convertible
    debentures and preferred stock |                              |   |           |      |  |   | 10,472,021 |   |  |   |           |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            |  
|                                                        | Assets acquired under capital leases                                                        |                              |   |           |      |  |   | 196,211    |   |  |   |           |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            |  
|                                                        | Warrants exercised and converted to equity                                                  |                              |   | 261,640    |      |  |   | 3,971      |   |  |   |           |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            |  
|                                                        | Conversion of accounts payable to equity                                                    |                              |   |           |      |  |   | 229,588    |   |  |   | 361,491    |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            |  
|                                                        | Conversion of debt and related accrued interest to equity                                   |                              |   | 262,500    |      |  |   | 9,420,004  |   |  |   | 4,205,686  |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            |  
|                                                        | Conversion of construction payables and accrued interest to
    equity                      |                              |   |           |      |  |   | 14,400,977 |   |  |   |           |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            |  
|                                                        | Conversion of liabilities of discontinued operations to equity                              |                              |   |           |      |  |   |           |   |  |   | 370,000    |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            |  
|                                                        | Forgiveness of construction payables                                                        |                              |   |           |      |  |   |           |   |  |   | 1,290,013  |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            |  
|                                                        | Conversion of convertible debt and related accrued interest to
    equity                   |                              |   | 27,773,524 |      |  |   | 258,306    |   |  |   | 17,080,476 |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            |  
|                                                        | Settlement of note receivable through extinguishment of
    convertible debt                |                              |   | 418,200    |      |  |   |           |   |  |   |           |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            |  
|                                                        | Issuance of note payable for other asset                                                    |                              |   |           |      |  |   |           |   |  |   | 1,000,000  |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            |  
|                                                        | Cancellation and expiration of warrants                                                     |                              |   | 146,145    |      |  |   | 26,575     |   |  |   |           |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            |  
|                                                        | Settlement of notes receivable  related party by
    tendering Terremark Stock             |                              |   | 4,951,904  |      |  |   |           |   |  |   |           |  
|                                                        |                                                                                             |                              |   |            |      |  |   |            |  
|                                                        | Non-cash preferred dividend                                                                 |                              |   | 481,947    |      |  |   | (1,158,244 | ) |  |   | (160,000   | )
|                                                        |                                                                                             |                              |   |            |      |  |   |            |  

F-30