##### 









SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-K



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

Exchange Act of 1934


For the fiscal year ended March 31,
2003



|     |                                                                        
|---- | -----------------------------------------------------------------------
|[  ] | 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(State or Other Jurisdiction of
    Incorporation
    or Organization) |  | 52-1981922(I.R.S. Employer
    Identification No.)

2601 S. Bayshore Drive, Miami, Florida
33133

(Address of Principal Executive Offices,
Including Zip Code)


Registrants telephone number, including
area code: (305) 856-3200

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

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

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

NONE



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

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

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Exchange Act
Rule 12b-2). Yes [  ] No [X]

The aggregate market value of the
registrants common stock held by non-affiliates of the
registrant on September 30, 2002, was approximately
$42,505,087, based on the closing market price of the
registrants common stock ($0.34) 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 25, 2003 was 306,452,865.



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TABLE OF CONTENTS

|               |           |  |                                                                                                    |          |  |    | 
|-------------- | --------- |  | -------------------------------------------------------------------------------------------------- | -------- |  | -- | 
|               |           |  |                                                                                                    | Page No.
|               |           |  |                                                                                                    |         
|PART I         |           |  | 2                                                                                                  |         
|               | ITEM  1.  |  | BUSINESS                                                                                           |          |  | 2  | 
|               | ITEM  2.  |  | PROPERTIES                                                                                         |          |  | 9  | 
|               | ITEM  3.  |  | LEGAL PROCEEDINGS                                                                                  |          |  | 9  | 
|               | ITEM  4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS                                            |          |  | 10 | 
|PART II        |           |  | 10                                                                                                 |         
|               | ITEM  5.  |  | MARKET FOR REGISTRANTS COMMON EQUITY AND
    RELATED STOCKHOLDER MATTERS                          |          |  | 10 | 
|               | ITEM  6.  |  | SELECTED FINANCIAL DATA                                                                            |          |  | 12 | 
|               | ITEM  7.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS          |          |  | 13 | 
|               | ITEM  7A. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK                                     |          |  | 33 | 
|               | ITEM  8.  |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                        |          |  | 34 | 
|               | ITEM  9.  |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE           |          |  | 34 | 
|PART III       |           |  | 34                                                                                                 |         
|               | ITEM  10. |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                                 |          |  | 34 | 
|               | ITEM  11. |  | EXECUTIVE COMPENSATION                                                                             |          |  | 37 | 
|               | ITEM  12. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |          |  | 40 | 
|               | ITEM  13. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                     |          |  | 42 | 
|               | ITEM  14. |  | CONTROLS AND PROCEDURES                                                                            |          |  | 43 | 
|               | ITEM  15. |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                             |          |  | 44 | 
|PART IV        |           |  | 44                                                                                                 |         
|               | ITEM  16. |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
    REPORTS ON FORM 8-K                                |          |  | 44 | 
|SIGNATURES     |           |  | 47                                                                                                 |         
|CERTIFICATIONS |           |  | 48                                                                                                 |         

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PART I

ITEM 1. BUSINESS.

Overview

We operate facilities at strategic locations
around the world from which we assist users of the Internet and
large communications networks in communicating with other users
and networks. Our primary facility is the NAP of the Americas,
where we provide exchange point, colocation and managed services
to carriers, Internet service providers, network service
providers, government entities, multi-national enterprises and
other end users.

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

Initially, four NAPs  in New York,
Washington, D.C., Chicago, and San Francisco  were
created and supported by the National Science Foundation as part
of the transition from the United States government-financed
Internet to a commercially operated Internet. Since that time,
privately owned NAPs have been developed, including the NAP of
the Americas. We refer to our facilities as TerreNAP Centers.

Our TerreNAP Centers are carrier-neutral. We
enable our customers to freely choose from among the many
carriers available at TerreNAP Centers the carriers with which
they wish to do business. We believe the carrier neutrality
provides us with a competitive advantage when compared to
carrier-operated network access points where customers are
limited to conducting business with one carrier.

The NAP of the Americas generates revenue by
providing our customers with:



| |   |                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the site and platform they need to exchange
    Internet and data traffic;                                                                                                                
|
| |  | a menu of related professional and managed
    services; and                                                                                                                              
|
| |  | space to house their equipment and their network
    facilities in order to be close to the Internet and data traffic
    exchange connections that take place at the NAP of the Americas.

Currently, our customers include
telecommunications carriers such as AT&T, MCI, Qwest and
Sprint, enterprises such as Bacardi USA, Intrado and Crescent
Heights, and government agencies including the Diplomatic
Telecommunications Services Programming Office (DTSPO), a
division of the United States Department of State, and the City
of Coral Gables.

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

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

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After the April 28, 2000 merger, and as a
result of changes in our business conditions, including market
changes in the telecommunications industry and the lack of debt
and equity financing vehicles to fund other business expansion,
we began to redefine and focus our strategy, and began
implementing a plan to exit all lines of business and real
estate activities not directly related to the TerreNAP Center
strategy. Lines of business discontinued included IP fax
services, unified messaging services, and telephony. Non-core
real estate activities exited included real estate development,
property management, financing and the ancillary businesses that
complemented the real estate development operations. Our real
estate activities currently include technology construction work
and management of the property where the NAP of the Americas is
located. As of March 31, 2002, we had completed the exit of
lines of business and real estate activities not related to our
TerreNAP Center strategy.

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

Industry

The Internet is a collection of many independent
networks interconnected with each other to form a network of
networks. Users on different networks are able to communicate
with each other through interconnection between these networks.
To accommodate the fast growth of traffic over the Internet, an
organized approach for network interconnection was needed. The
exchange of traffic between these networks became known as
peering. The points and places where these networks exchange
traffic, or peer, with each other are known as network access
points, or NAPs.

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

We own and operate the only carrier-neutral
Tier-1 NAP, which is known as the NAP of the Americas, located
at 50 NE 9th Street, Miami, Florida 33132,
approximately five miles from our corporate headquarters. The
NAP of the Americas enables customers to locate equipment next
to each other, and provides customers with other managed
services. Using the airport analogy again, customers at the NAP
of the Americas exchange and redirect Internet and data traffic
to multiple destinations, and purchase various managed services,
similar to what happens in air terminals with the provision of
fuel, maintenance, spare parts and food. The exchange of
Internet traffic without payment is known as
peering. When a fee is paid, it is referred to as
transit.

During the past few years, the telecommunications
and Internet industry has come under economic and commercial
pressure to restructure and reduce costs. While this uncertain
environment has presented us with some challenges that are more
fully discussed below, there have been some positive effects for
us resulting from the current industry situation. For example,
as many telecom and Internet companies have been forced to
reduce their overhead, the market of talented employees
available to us has increased. As a result, we have been able to
build a robust operations and engineering team, thereby reducing
our reliance on third party vendors and consultants.

Another positive side effect of the industry
downturn is that many telecommunications carriers have
discontinued plans to build their own data centers to provide
high quality colocation space for their customers. This
retrenchment, however, did not reduce the telecommunications
carriers need to present their customers with competitive
offerings that include highly conditioned, carrier-grade
colocation facilities. We built the NAP of the Americas
specifically to address the needs of these telecommunications
and enterprise customers and to provide them with an alternative
to making these expenditures. Consequently, we believe that the
NAP of the Americas has become an attractive solution for these
telecommunications carriers because it provides a
carrier-neutral forum  the airport  for
these companies to sell their connectivity and still maintain
direct

3



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relationships with their end-user customers.
Therefore, while our significant investment in the NAP of the
Americas has placed burdens on our financial resources, we
believe that our strategy will be successful.


Strategy

The NAP of the Americas created a new business
model for NAPs by providing customers with:



| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | the connectivity of a world-class NAP in a
    carrier-neutral facility;                                                                   
|
| |  | the ability to locate equipment next to other
    customers; and                                                                           
|
| |  | managed services meeting the design and
    operational specifications of multinational carriers,
    enterprises and government customers.

Our strategy is to leverage our major
connectivity hubs to sell services to customers within and
outside of our TerreNAP Centers. For example, we are currently
designing, implementing and managing the deployment of a global
commercial Internet access solution for the Diplomatic
Telecommunications Service  Program Office, under
three publicly awarded contracts, to satisfy their requirements
at designated locations overseas. Although the NAP of the
Americas serves as the hub to manage this solution, we are
leveraging our international carrier relationships to provide
this customer with connectivity and technology solutions to
communicate with U.S. government locations around the world.

In an effort to limit the additional capital
required, our business model for expansion is best compared to
that of a management company model in the hospitality industry.
The model contemplates that a local in-country partner would own
and fund the development and build-out of the facility in which
the TerreNAP Center would be located. The facility would ideally
be a new development built to the exacting specifications
required for a top level NAP (as is the case in Miami), but it
may be located in an existing building that is retrofitted to
conform to those specifications. We intend to control the
operations of the NAP and be the primary tenant in our
partners building, sharing data center and services
revenue via a long-term lease or management contract.

In February 2002, we entered into an agreement
with Fundacao de Amparo a Pesquisa do Estado de Sao Paulo, the
research foundation for the State of Sao Paulo, to operate and
manage the NAP created by FAPESP, which we have renamed the NAP
do Brasil. Pursuant to the twenty year agreement, FAPESP turned
over the network access point to Terremark, which we intend to
enhance and intend to move to new facilities modeled after the
operational design of the NAP of the Americas by the end of
2003. Pre-existing FAPESP customers have the right to continue
to receive services at the then existing levels without payment
until February 2004. FAPESP will receive 6% of the revenue
generated by the enhanced NAP do Brazil for the first five years
of operation, 5% during the following five years, and 1% during
the last ten years. The term may be extended for an additional
ten-year period, during which FAPESP would again receive 1% of
the revenues. As of June 13, 2003, we have 30 customers in
Brazil. For the year ended March 31, 2003, our Brazilian
operations generated losses of approximately $605,000.

In June 2002, we entered into an exclusive
agreement with the Comunidad Autonoma de Madrid to develop and
operate carrier-neutral network access points in Spain. As part
of that agreement, the parties formed NAP de las
Americas  Madrid S.A. to own and operate
carrier-neutral NAPs in Spain, modeled after the NAP of the
Americas. The shareholders in this new company are the Comunidad
through its Instituto Madrileno de Desarrollo  IMADE,
the Camara Oficial de Comercio e Industria de Madrid, Red
Electrica Telecomunicaciones, S.A., Telvent Sistemas y Redes
S.A., a subsidiary of Abengoa S.A., and Centro de Transportes de
Coslada, S.A. (CTC). At the time the NAP de las
Americas  Madrid S.A. was formed, we owned 1% of its
equity, which we subsequently increased to 10%. We have the
option to purchase up to another 30% of the shares owned by the
Comunidad, CTC and the Camara at cost, plus LIBOR. We provided
the technical and operational know-how for the development of an
interim NAP which became operational in July 2002. We will work
with NAP de Las Americas  Madrid S.A. to select a
permanent site, design the Madrid NAP and operate the business
going forward. During the year ended March 31, 2003, we
recognized approximately $340,000 in revenues from services
billed to the NAP de Las Americas  Madrid S.A.

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When the facilities in Brazil and Madrid are
operational, we will have TerreNAP Centers located at three
major crossroads of Internet and data traffic. Miami, the home
of the NAP of the Americas, is ranked by Telegeography,
researcher and publisher of international telecom statistics, in
its Packet Geography 2002, as the number one International
Internet Hub City for Latin America and the Caribbean. Sao
Paulo, where the NAP do Brasil is located, is ranked second and
Madrid is ranked eighteenth of the Top 50 International Internet
Hub Cities in the world. We believe the Madrid network access
point will also benefit from Madrids strategic geographic
location by serving as an Internet gateway to the European
Union, North Africa and the Americas.

We continue to explore other locations and have
targeted Mexico as a prospective hub city in Latin America.

Value Proposition

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



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Carrier-neutrality:Carriers and other customers are
    willing to locate their equipment within our facility because we
    neither discriminate against nor give preference to any
    individual or group of customers. Locating equipment at a NAP is
    known in the industry as colocation.                                                                                                                                                         
|
| |  | Connectivity:Our
    customers can access any of the more than 50 network providers
    present at the NAP of the Americas.                                                                                                                                                                                                                                                                                                                                  
|
| |  | Zero-Mile Access:Because the NAP of the Americas
    provides 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 points of failure and
    cost and increases efficiency, and creates a new paradigm,
    connecting all participants at a distance of zero miles.                        
|
| |  | Service Level Agreements:The NAP of the Americas guarantees its
    customers 100% power availability and environmental stability.                                                                                                                                                                                                                                                                                                                           
|
| |  | Outsourcing of Services:Because of the NAP of the
    Americas staffs expertise, our customers find it
    more cost effective to contract the TerreNAP Team to design,
    deploy, operate and manage their equipment and networks at the
    NAP of the Americas 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 of
    providing services to their customers by eliminating local loop
    charges to connect their facility to the peering point, backhaul
    charges to and from connecting points, and the cost of
    redundancy to mitigate risks associated with increased points of
    failure along these routes.

Furthermore, in the wake of September 11 and
given the heightened focus on homeland security, we are focusing
on meeting the security sensitive technology needs of federal,
state and local governments, as well as large enterprises. Our
value proposition to this sector revolves around our security,
critical mass of Internet and data connectivity and carrier
neutrality.

Services

We currently offer the following core services:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Exchange Point Service:The NAP of the Americas provides a
    service called Exchange Point Service, which is designed to
    facilitate both peering and the purchase of transit, among
    customers.                                                                                                                                                                                                                                  
|
| | Colocation Services:The NAP of the Americas provides the
    physical environment necessary to keep a customers
    Internet and telecommunications equipment up and running 24
    hours a day, seven days a week. This facility is custom designed
    to exceed industry standards for electrical and environmental
    systems. In addition, it offers a wide range of physical
    security features, including biometric scanners,

5



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| |                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | man traps, smoke detection, fire suppression
    systems, motion sensors, secured access, video camera
    surveillance and security breach alarms. High levels of
    reliability are achieved through a number of redundant
    subsystems including power and fiber trunks from multiple
    sources.
|
| | Managed Services:Our managed services are designed to
    support our customers mission-critical needs that focus on
    producing faster network response times. The NAP of the Americas
    currently offers the following managed services:                                                         



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Add/ Drop Multiplexer Service
    (ADMS) This service
    provides customers maximum interconnection efficiency. ADMS
    leverages best in class operational support systems to provide
    rapid provisioning, monitoring and management of customer
    circuits.                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Network Deployment and Relocation
    Services This service
    leverages our team of engineers to assist customers with the
    deployment and relocation of critical systems both within and
    outside the NAP of the Americas. Our team will identify,
    schedule, document and monitor activities required for
    successful relocation of equipment as part of the overall
    network relocation project. Our engineers use QED (Quality,
    Efficiency, Delivery) best practices project management
    methodology, to minimize customer effort while maximizing
    efficient utilization of our resources, overall plan quality and
    information transfer to customer personnel.
|
| |  | Engineering
    Services We offer facility
    and equipment design and engineering services, including
    structural, mechanical, electrical and network systems, all
    provided by our staff of industry certified engineers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | 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.                                                                                                                                                                                                                                                                                                            
|
| |  | Managed Router Service
    (MRS) This service offers
    customers cost savings and convenience by providing Internet
    access without the need to purchase or manage an Internet
    router. MRS leverages the mass of carriers at the our facility,
    offering access through the configuration of Border Gateway
    Protocol and the management of necessary hardware. Customer
    networks performance is optimized and multi-home configurations
    offer increased redundancy and reliability.                                                                                                                                                                                        
|
| |  | Network Management
    Services This service
    assists customers in achieving maximum uptime by enlisting our
    engineers at our facilitys Network Operations Center to
    monitor and manage their equipment located within and outside
    the facility.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Systems Monitoring
    Services This service
    assists customers in achieving maximum uptime by enlisting
    engineers to monitor their equipment located at our facilities
    or anywhere else on their network.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Professional Staging
    Service This service turns
    the implementation of any network or telecom environment into a
    simple plug and play process. Customers ship their equipment to
    the NAP or alternate destination for installation, and the
    Staging Services team gathers and inspects all the equipment
    components. The same team then assembles, configures, tests, and
    completes an inventory of the equipment, reducing the time
    required for a customer to install and load final configurations
    on site. The service also ensures that all ordered components
    are configured and installed properly in a controlled and stable
    environment.       
|
| |  | Reference
    Timing We offer a fully
    redundant managed timing reference source from our Datum NetSync
    Plus® SSU-2000 Rubidium system for delivering DS1/ E1
    synchronization and Network Time Protocol. This service allows
    our customers to save on equipment costs, installation times and
    maintenance of our customers network timing reference by
    using our on site Stratum source.                                                                                                                                                                                                                                                                                   

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Remote Hands
    Assistance Remote Hands
    assists customers that need to remotely access their equipment
    to perform simple troubleshooting or minor maintenance tasks on
    a 24x7x365 basis that do not require tools or equipment. Remote
    Hands services are available on demand or per contract.                                                                                                                                                                                                     
|
| |  | Smart Hands
    Assistance Smart Hands
    enhances the Remote Hands service with more complex remote
    assistance using industry certified engineers for
    troubleshooting and maintenance.                                                                                                                                                                                                                                                                                                                    
|
| |  | Turn Key
    Solution Our staff can
    provide full integration activities for all aspects of a
    turn key 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.

Customers

Our customer contracts have terms of between one
year and twenty years, with an average of four years. Our
customer contracts do not allow for early termination before the
stated maturity date and typically provide for penalties if they
are cancelled prior to their expiration. As of June 13,
2003, we have over 100 customers at the NAP of the Americas.
Latin American Nautilus USA Inc. and Progress Telecom accounted
for approximately $1.4 million (or 14%) and
$1.0 million (or 10%) in data center revenues,
respectively, for the twelve months ended March 31, 2003.
No customer accounted for more than 10% of data center revenues
for the twelve months ended March 31, 2002. Listed below
are the 17 of the 20 leading telecommunications carriers,
according to TeleGeography, Inc., a researcher and publisher of
international telecom statistics, which utilize our colocation
services:



| |   |                                            
| | - | -------------------------------------------
| |  | AT&T Corp.                                 
|
| |  | Deutsche Telekom (T-Systems)               
|
| |  | Embratel                                   
|
| |  | Emergia USA (Telefónica)                   
|
| |  | France Telecom                             
|
| |  | Genuity Inc.                               
|
| |  | Global Crossing                            
|
| |  | Latin America Nautilus USA (Telecom Italia)
|
| |  | Level 3 Communications, Inc.               
|
| |  | AboveNet Communications, Inc.              
|
| |  | Verio Inc.                                 
|
| |  | Progress Telecom                           
|
| |  | Qwest Communications International Inc.    
|
| |  | SBC Communications Inc.                    
|
| |  | Sprint Corporation                         

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| |   |                                    
| | - | -----------------------------------
| |  | Williams Communications Group, Inc.
|
| |  | MCI                                

Sales

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

With the NAP of the Americas positioned as the
major connectivity point in the southern United States and in
all of Latin America, in the third quarter of fiscal year 2002,
we started focusing on selling our services to enterprises and
government agencies by leveraging our critical mass of Internet
and data connectivity. We have developed offerings that address
the needs of large enterprises and government agencies that
benefit from colocating their information systems in a
carrier-neutral secure facility with access to multiple
carriers. We believe that this approach has been very successful.

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

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

Competition

The NAP of the Americas is neither a traditional
data center, nor a traditional NAP. Unlike the other four Tier-1
NAPs in the United States, the NAP of the Americas combines
exchange point services (to facilitate peering) with
carrier-grade colocation space and managed services.
Consequently, we believe that the NAP of the Americas is
competitively unique and can only be replicated through the
expenditures of significant funds over a lengthy period, an
unlikely event in todays telecommunications environment.

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

However, our current and potential competition
includes:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Internet data centers operated by established
    U.S. communications carriers such as AT&T, Qwest, and
    Level3.Unlike the major network
    providers, which constructed data centers primarily to help sell
    bandwidth, we have assembled a critical mass of carrier
    connectivity in one location, providing superior diversity,
    pricing and performance. Carrier data centers only provide one
    choice of carriers and generally require capacity minimums as
    part of their pricing structures. Locating in our TerreNAP
    Centers provides access to top tier networks and allows
    customers to negotiate the best prices with a number of carriers
    resulting in better economics and redundancy.

8



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##### 





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Vertically integrated web site hosting,
    collocation and ISP companies such as AboveNet/ MFN, Digex/
    WorkCom and Cable & Wireless/ Exodus.Most managed service providers require
    that customers purchase their entire network and managed
    services directly from them. We are a network and service
    provider hub and allow customers the ability to contract
    directly with the networks and web-hosting partner best for
    their business. By locating in a TerreNAP Center, hosting
    companies add more value to our business proposition 
    by bringing in more partners and customers and thus creating a
    virtual market place.

Employees

As of March 31, 2003, we had 131 full-time
employees in the United States and four full-time employees in
Brazil. Of these employees, 60 were in data center operations,
22 were in sales and marketing and 49 were in general and
administrative.

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



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

We lease 120,000 square feet at the Technology
Center of the Americas for the NAP of the Americas. The term of
the lease commenced in October 2001 and is for 20 years.
Annual rent is approximately $2,500,000. We are also responsible
for other expenses.

We also lease approximately 40,000 square feet
for a colocation facility in Santa Clara, California. The term
of the lease commenced in January 2001 and is for 20 years.
Annual rent is approximately $1,400,000.

We also lease approximately 14,660 square feet
for our corporate office in Miami, Florida. The term of the
lease commenced in April 2000 and is for five years. Annual rent
is approximately $483,000. We are also responsible for other
expenses.

We also lease approximately 12,000 square feet
for office space in Miami, Florida. Annual rent is approximately
$192,000. The term of the lease commenced in February 2001 and
is for five years.



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

On November 8, 2002, Cupertino Electric,
Inc. filed a complaint against Terremark Worldwide, Inc.,
Terremark Technology Contractors, Inc. and Technology Center of
the Americas, Inc. in the Miami-Dade County Circuit Court
Eleventh Judicial Circuit. Cupertino Electric asserted a claim
of breach of contract and sought to foreclose on a construction
lien each in an amount of approximately $15 million,
including interest.

On December 2, 2002, Kinetics Mechanical
Services, Inc. filed a complaint against Terremark Worldwide,
Inc., Terremark Technology Contractors, Inc. and Technology
Center of the Americas, Inc. in the Miami-Dade County Circuit
Court Eleventh Judicial Circuit. Kinetics Mechanical Services
asserted a claim of breach of contract and sought to foreclose
on a construction lien each in an amount of approximately
$2.8 million, not including interest.

In May 2003, in connection with a series of
transactions among CRG LLC, Cupertino Electric and Kinetics
Mechanical Services, both of the Cupertino Electric and Kinetics
Mechanical Services actions were dismissed.

9



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##### 





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

No matters were submitted to a vote of our
stockholders during the year ended March 31, 2003.

PART II



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

Common Stock and Preferred Stock
Information

Our common stock, par value $0.001 per share, is
quoted under the symbol TWW on the American Stock
Exchange. We have the authority to issue:



| |   |                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 400,000,000 shares of common stock, par value
    $0.001 per share; and                                                                                                                                                                                                                                              
|
| |  | 10,000,000 shares of preferred stock, par value
    $0.001 per share, which are issuable in series on terms to be
    determined by our board of directors, of which 20 shares are
    designated as Series G Convertible Preferred Stock, and 294
    shares are designated as Series H Convertible Preferred Stock.

As of June 25, 2003:



| |   |                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 306,452,865 shares of our common stock were
    outstanding;                                                                                                                                                                                                                   
|
| |  | 20 shares of our Series G Convertible
    Preferred Stock were outstanding and held by an entity in which
    Manual Medina, our Chairman and Chief Executive Officer, owns a
    50% interest and could have been converted into 2,036,825 shares
    of our common stock; and
|
| |  | 294 shares of our Series H Convertible
    Preferred Stock were outstanding and held by one holder of
    record. Each share of Series H Convertible Preferred Stock
    may be converted into 1,000 shares of our common stock.                                               

We believe there are approximately 8,800
beneficial owners of our common stock.

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

|                   |  |        |        |     |  |   |        | 
|------------------ |  | ------ | ------ | --- |  | - | ------ | 
|                   |  |       
|                   |  | Prices
|Fiscal Year 2003   |  |       
|Quarter Ended      |  | High   |        | Low
|                   |  |        |        |    
|June 30, 2002      |  | $      | 0.7300 |     |  | $ | 0.2500 | 
|September 30, 2002 |  |        | 0.7700 |     |  |   | 0.3100 | 
|December 31, 2002  |  |        | 0.7100 |     |  |   | 0.2200 | 
|March 31, 2003     |  |        | 0.4900 |     |  |   | 0.2200 | 

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

Dividend Policy

Holders of our common stock are entitled to
receive dividends or other distributions when and if declared by
our board of directors. The right of our board of directors to
declare dividends, however, is subject to any rights of the
holders of other classes of our capital stock and the
availability of sufficient funds under Delaware law to pay
dividends. In accordance with a credit facility agreement with a
financial institution, we may not pay cash or stock dividends
without the written consent of the financial institution.

10



---



##### 



Recent Sales of Unregistered
Securities

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

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

In June 2002, the NAP de las Americas-Madrid
purchased 5 million shares of our common stock at $1.00 per
share. The shares were sold pursuant to Section 4(2) and/or
3(b) of the Securities Act and Regulation S promulgated
thereunder. As a result of subsequent sales of our common
shares, we are obligated to issue an additional 3.6 million
shares to NAP de Las Americas-Madrid S.A. As of June 25,
2003, these additional shares have not yet been issued. We
anticipate issuing these shares in the quarter ended
September 30, 2003.

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

In April 2002, we entered into a Put and Warrant
purchase agreement with TD Global Finance (TDGF). In
July 2002, we exercised our right to sell to TDGF 17,648,842
common shares for $0.58 per share for a total of $10.2 million.
During August 2002, we received $10.2 million in related cash.
In conjunction with the sale, we issued three call warrants,
each granting TDGF the right to purchase 1,176,588 shares of our
common stock. The shares and the warrants were sold pursuant to
Section 4(2) and/or 3(b) of the Securities Act and
Regulation D promulgated thereunder. The warrants expired
without exercise on January 16, 2003.

11



---



##### 





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

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

|                                                              |               |                                              |         |        |  |      |         |        |  |      |          |        |  |   |        |        |  |   |        |        | 
|------------------------------------------------------------- | ------------- | -------------------------------------------- | ------- | ------ |  | ---- | ------- | ------ |  | ---- | -------- | ------ |  | - | ------ | ------ |  | - | ------ | ------ | 
|                                                              |               |                                             
|                                                              |               | Twelve Months Ended March 31,               
|                                                              |               |                                             
|                                                              |               | 2003                                         |         | 2002   |  | 2001 |         | 2000   |  | 1999
|                                                              |               |                                              |         |        |  |      |         |        |  |     
|                                                              |               |                                             
|                                                              |               | (dollars in thousands except per share data)
|Results of Operations:                                        |               |                                              |         |        |  |      |         |        |  |      |          |        |  |   |        |        |  |   |        |       
|Data center                                                   |               | $                                            | 11,033  | (3)    |  | $    | 3,216   |        |  | $    | 253      |        |  | $ |       |        |  | $ |       |       
|Real estate services                                          |               |                                              | 3,661   |        |  |      | 12,656  |        |  |      | 39,894   |        |  |   | 15,390 |        |  |   | 44,456 |       
|                                                              |               |                                              |         |        |  |      |         |        |  |      |          |        |  |   |        |        |  |   |        |       
|                                                              | Total revenue |                                              |         | 14,694 |  |      |         | 15,872 |  |      |          | 40,147 |  |   |        | 15,390 |  |   |        | 44,456 | 
|                                                              |               |                                              |         |        |  |      |         |        |  |      |          |        |  |   |        |        |  |   |        |       
|Data center operations expenses                               |               |                                              | 11,235  |        |  |      | 11,231  |        |  |      | 1,223    |        |  |   |       |        |  |   |       |       
|Construction contract expense                                 |               |                                              | 2,968   |        |  |      | 7,398   |        |  |      | 20,347   |        |  |   | 555    |        |  |   |       |       
|Other expenses                                                |               |                                              | 41,718  |        |  |      | 54,615  |        |  |      | 39,950   |        |  |   | 20,868 |        |  |   | 43,832 |       
|                                                              |               |                                              |         |        |  |      |         |        |  |      |          |        |  |   |        |        |  |   |        |       
|Total expenses                                                |               |                                              | 55,921  |        |  |      | 73,244  |        |  |      | 61,520   |        |  |   | 21,423 |        |  |   | 43,832 |       
|                                                              |               |                                              |         |        |  |      |         |        |  |      |          |        |  |   |        |        |  |   |        |       
|(Loss) income from continuing operations                      |               |                                              | (41,227 | )      |  |      | (57,372 | )      |  |      | (21,373  | )      |  |   | (6,033 | )      |  |   | 624    |       
|Loss from discontinued operations                             |               |                                              |        |        |  |      |        |        |  |      | (82,627  | )      |  |   |       |        |  |   |       |       
|                                                              |               |                                              |         |        |  |      |         |        |  |      |          |        |  |   |        |        |  |   |        |       
|Net (loss) income                                             |               | $                                            | (41,227 | )      |  | $    | (57,372 | )      |  | $    | (104,000 | )      |  | $ | (6,033 | )      |  | $ | 624    |       
|                                                              |               |                                              |         |        |  |      |         |        |  |      |          |        |  |   |        |        |  |   |        |       
|(Loss) income from continuing operations per
    common share |               | $                                            | (0.18   | )      |  | $    | (0.29   | )      |  | $    | (0.11    | )      |  | $ | (0.09  | )      |  | $ | 0.01   |       
|Loss from discontinued operations per common share            |               |                                              |        |        |  |      |        |        |  | $    | (0.44    | )      |  |   |       |        |  |   |       |       
|                                                              |               |                                              |         |        |  |      |         |        |  |      |          |        |  |   |        |        |  |   |        |       
|Net (loss) income per common share                            |               | $                                            | (0.18   | )      |  | $    | (0.29   | )      |  | $    | (0.55    | )      |  | $ | (0.09  | )      |  | $ | 0.01   |       
|                                                              |               |                                              |         |        |  |      |         |        |  |      |          |        |  |   |        |        |  |   |        |       
|Financial condition:                                          |               |                                              |         |        |  |      |         |        |  |      |          |        |  |   |        |        |  |   |        |       
|Real estate inventory                                         |               | $                                            |        |        |  | $    |        |        |  | $    |         |        |  | $ | 11,797 |        |  | $ | 12,888 |       
|Property and equipment, net                                   |               |                                              | 54,483  |        |  |      | 61,089  |        |  |      | 25,066   |        |  |   | 1,011  |        |  |   | 191    |       
|Total assets                                                  |               |                                              | 69,602  |        |  |      | 81,024  |        |  |      | 78,069   |        |  |   | 77,998 |        |  |   | 17,598 |       
|Long term obligations(1)(2)                                   |               |                                              | 74,524  |        |  |      | 38,210  |        |  |      | 16,462   |        |  |   | 28,632 |        |  |   | 8,731  |       
|Stockholders (deficit) equity(2)                             |               |                                              | (46,461 | )      |  |      | (49,276 | )      |  |      | 11,163   |        |  |   | 476    |        |  |   | 6,510  |       



---



|    |                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Long term obligations include convertible debt,
    deferred rent, deferred revenue, notes payable, less current
    portion and capital lease obligations, less current portion.                                                               
|(2) | Stockholders equity as of March 31,
    2000 and 1999 includes approximately $4,777 in convertible
    preferred stock. See Managements Discussion and
    Analysis-Liquidity and Capital Resources regarding certain
    subsequent events.
|(3) | Amount includes a one-time contract termination
    fee of $1,095.                                                                                                                                                                              

12



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##### 



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

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



---



|    |                                                                   
|--- | ------------------------------------------------------------------
|(1) | Amount includes a one time contract termination
    fee of $1,095.

|                                |                |                                              |         |                   |  |                    |         |               |  |   |         |        |  |   |        |        | 
|------------------------------- | -------------- | -------------------------------------------- | ------- | ----------------- |  | ------------------ | ------- | ------------- |  | - | ------- | ------ |  | - | ------ | ------ | 
|                                |                |                                             
|                                |                | Three Months Ended                          
|                                |                |                                             
|                                |                | March 31, 2002                               |         | December 31, 2001 |  | September 30, 2001 |         | June 30, 2001
|                                |                |                                              |         |                   |  |                    |         |              
|                                |                |                                             
|                                |                | (dollars in thousands except per share data)
|Data center                     |                | $                                            | 1,916   |                   |  | $                  | 678     |               |  | $ | 394     |        |  | $ | 228    |       
|Real estate services            |                |                                              | 2,660   |                   |  |                    | 1,067   |               |  |   | 4,003   |        |  |   | 4,926  |       
|                                |                |                                              |         |                   |  |                    |         |               |  |   |         |        |  |   |        |       
|                                | Total revenue  |                                              |         | 4,576             |  |                    |         | 1,745         |  |   |         | 4,397  |  |   |        | 5,154  | 
|                                |                |                                              |         |                   |  |                    |         |               |  |   |         |        |  |   |        |       
|Data center operations expenses |                |                                              | 3,163   |                   |  |                    | 4,019   |               |  |   | 3,167   |        |  |   | 882    |       
|Construction contract expenses  |                |                                              | 2,383   |                   |  |                    | 303     |               |  |   | 1,915   |        |  |   | 2,797  |       
|Other expenses                  |                |                                              | 22,482  |                   |  |                    | 10,028  |               |  |   | 12,651  |        |  |   | 9,454  |       
|                                |                |                                              |         |                   |  |                    |         |               |  |   |         |        |  |   |        |       
|                                | Total expenses |                                              |         | 28,028            |  |                    |         | 14,350        |  |   |         | 17,733 |  |   |        | 13,133 | 
|                                |                |                                              |         |                   |  |                    |         |               |  |   |         |        |  |   |        |       
|Net loss                        |                | $                                            | (23,452 | )                 |  | $                  | (12,605 | )             |  | $ | (13,336 | )      |  | $ | (7,979 | )     
|                                |                |                                              |         |                   |  |                    |         |               |  |   |         |        |  |   |        |       
|Net loss per common share       |                | $                                            | (0.12   | )                 |  | $                  | (0.06   | )             |  | $ | (0.07   | )      |  | $ | (0.04  | )     
|                                |                |                                              |         |                   |  |                    |         |               |  |   |         |        |  |   |        |       



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

The following discussion of results of operations
and financial condition is based upon and should be read in
conjunction with our Consolidated Financial Statements and Notes
thereto contained elsewhere in this filing.

Our Going Concern Uncertainty

Our consolidated financial statements as of and
for the year ended March 31, 2003 were prepared on the
assumption that we will continue as a going concern, which
contemplates the realization of assets and liquidation of
liabilities in the normal course of business. Our independent
auditors have issued a report dated June 30, 2003 stating
that our recurring operating losses, negative cash flows, and
liquidity deficit raise substantial doubt as to our ability to
continue as a going concern. Investors in our securities should
review carefully our financial statements and the report of our
independent accountants thereon. See  Liquidity
and Capital Resources below for a description of our plans
to mitigate the effect of our going concern uncertainty.

13



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##### 



Critical Accounting Policies and
Estimates

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

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



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



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

Currently, we derive our revenues from monthly
recurring fees for colocation and exchange point services and
some managed services. We also receive income from non-recurring
installation, managed services and construction activities,
primarily from technology construction work. Revenues from
colocation, exchange point services and some managed services
are billed monthly and recognized ratably over the term of the
contract. Installation fees are generally billed in the period
in which the installation is performed but deferred and
recognized ratably over the term of the related contract.
Managed services fees are billed and recognized in the period in
which the services are provided. Construction activities are
billed in accordance with contract terms, but revenues are
recognized on the percentage-of-completion method.

Revenue is recognized as service is provided when
there is persuasive evidence of an arrangement, the fee is fixed
or determinable and collection of the receivable is reasonably
assured. We assess collection based on a number of factors,
including transaction history with the customer and the
credit-worthiness of the customer. We do not request collateral
from customers. If we determine that collection is not
reasonably assured, we defer the fee and recognize revenue at
the time collection becomes reasonably assured, which is
generally upon receipt of cash. As of March 31, 2003 and
2002, our accounts receivable amounted to $494,736 and
$1,621,978, respectively, and were net of allowance for doubtful
accounts of approximately $120,340 and $270,316, respectively.

Revenues from construction contracts are
recognized on the percentage-of-completion method, measured by
the percentage of costs incurred to date to total estimated
costs for each contract. This method is used because management
considers cost incurred to be the best measure of progress on
these contracts. The duration of a construction contract
generally exceeds one year. Billings in excess of costs and
estimated earnings on uncompleted contracts are classified as
other liabilities and represent billings in excess of revenues
recognized. Construction contract expense costs include all
direct material and labor costs and indirect costs related to
contract performance such as indirect labor, supplies, tools,
repairs, bad debt and depreciation. Provisions for estimated
losses on uncompleted contracts are made in the period in which
losses are determined. Changes in job performance, job
conditions and estimated profitability, including those arising
from contract penalty provisions and final contract settlements
may result in revisions to costs and income and are recognized
in the period in which the revisions can be reasonably
estimated. Accordingly, it is possible that our current
estimates relating to completion cost and profitability of our
uncompleted contracts will vary from actual results. Excluding
depreciation, profit margins (construction contract revenue less
construction contract expenses) on construction contracts for
the years ended March 31, 2003, 2002 and 2001 were
$315,658, $857,163 and $2,097,991, respectively.

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



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

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

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



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

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

As of March 31, 2003 and 2002, our
long-lived assets, including property and equipment and
identifiable intangible assets and goodwill, totaled $64,482,834
and $74,309,157, respectively. For the years ended
March 31, 2003, 2002 and 2001, we recognized impairment
charges amounting to $4,020,300, $18,973,670 and $4,155,178,
respectively.

Results of Operations



| |         
| | --------
| | Overview

For the year ended March 31, 2003,
approximately 75% of our total revenues were generated from data
center operations. The remainder was substantially related to
technology construction work. For the year ended March 31,
2002 approximately 20% of total revenues were generated from
data center operations, approximately 52% was from real estate
projects and technology construction work, and approximately 28%
was from property and construction management. For the year
ended March 31, 2001, approximately 1.0% of total revenues
were generated from data center operations, approximately 60%
was from real estate projects

15



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and technology construction work, and
approximately 39% was from property and construction management.
During the past three years, our results of operations have been
significantly impacted by:




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our shift in focus to the housing and management
    of Internet infrastructure after the NAP of the Americas became
    operational in July 2001;                                                                                                                                                                                                                                                                                       
|
| |  | the sale of our telecom facilities management
    operations in February 2001; and                                                                                                                                                                                                                                                                                                                                                       
|
| |  | our exit from non-core real estate activities by
    March 31, 2002. Non-core real estate activities included
    real estate development, property management, financing and
    other ancillary businesses which complemented the development
    operations. Our real estate activities currently include
    technology infrastructure construction work and management of
    the property where the NAP of the Americas is located.



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

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

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

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

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

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

Construction contract revenue decreased
$5.0 million, or 60.2%, to $3.3 million for the year ended
March 31, 2003 from $8.3 million for the year ended
March 31, 2002. During the year ended March 31, 2003
we completed eleven contracts and, as of March 31, 2003,
had two construction contracts in process. During the year ended
March 31, 2002, we completed two contracts and, as of
March 31, 2002, we had five

16



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construction contracts in process. The decrease
in revenues from construction contracts is due to a decrease in
the average revenue per contract, which went from average
revenue per contract of $3.6 million in fiscal year 2002 to
average revenue per contract of $500,000 in fiscal year 2003.
Due to our opportunistic approach to our construction business,
we expect revenues from construction contracts to significantly
fluctuate from quarter to quarter. We anticipate focusing our
efforts on obtaining construction contracts for projects related
to technology infrastructure.


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

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

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

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

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

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

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

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

17



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##### 



legal action against many of these customers. The
number of employees whose salaries are included in sales and
marketing expenses increased slightly from 21 as of
March 31, 2002 to 22 as of March 31, 2003.


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

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

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

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

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

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

18



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

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

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

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

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

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

Net Loss.Net loss
decreased $16.2 million, or 28.2%, to $41.2 million
for the year ended March 31, 2003 from $57.4 million
for the year ended March 31, 2002. The net loss for the year
ended March 31, 2003 is mainly due to non-cash items,
including impairment charges of long-lived assets of
approximately $4.0 million and depreciation and
amortization expense of approximately $5.1 million,
interest expense of approximately $11.0 million, and
approximately $11.2 million of expenses generated from the
operations of the NAP of the Americas.



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

Revenue.Total
revenue decreased $24.2 million, or 60.3%, to $ 15.9
million for the year ended March 31, 2002 from
$40.1 million for the year ended March 31, 2001,
reflecting our exit of the real estate development business.

Data center revenue increased $2.9 million
to $3.2 million for the year ended March 31, 2002 from
$0.3 million for the year ended March 31, 2001. The
increase in data center revenue was attributable to our peering,
colocation and managed services offered at the NAP of the
Americas, which became operational in July 2001. The data center
revenue in the prior year was derived from our peering and
colocation services offered at the interim NAP which became
operational in December 2000. Our deployed customer base
increased from four as of March 31, 2001 to 40 as of
March 31, 2002. We expect data center revenues to

19



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increase in future periods as customers set up
their operations in the NAP of the Americas. Future data center
revenues will be derived from peering, colocation and managed
services.


Revenue from real estate sales was
$2.8 million for the year ended March 31, 2001 and was
attributable to the sale of twelve condominium units. We exited
our real estate development business as of March 31, 2001.
Accordingly, the real estate sales during year ended
March 31, 2002, consisting of six condominium units sold,
were recorded net of their related cost and included in gain on
the sale of real estate held for sale.

Development, commission and construction fees
decreased $9.3 million to $3.2 million for the year
ended March 31, 2002 from $12.5 million for the year
ended March 31, 2001. This decrease is primarily the result
of our exiting the real estate development business and telecom
facilities management operations as of March 31, 2001.

Management fees decreased $1.0 million, or
45.5%, to $1.2 million for the year ended March 31,
2002 from $2.2 million for the year ended March 31,
2001. The decrease is a result of our exiting the management of
commercial and residential properties.

Revenues from construction contracts decreased
$14.1 million, from $22.4 million for the year ended
March 31, 2001 to $8.3 million for the year ended
March 31, 2002. The decrease is attributable to the
reduction in the number of contracts. During the year ended
March 31, 2002, we completed two contracts and, as of
March 31, 2002, we had five construction contracts in
process. During the year ended March 31, 2001, we completed
twelve contracts and, as of March 31, 2001, we had seven
contracts in process.

Data Center Operations Expenses.Data center operations expenses
increased $10.0 million to $11.2 million for the year
ended March 31, 2002 from $1.2 million for the year ended
March 31, 2001. The increase was attributable to us moving
to our permanent facilities, the NAP of the Americas, which
became operational in July 2001. The data center operations
expense in the prior year was derived from operations of the
interim NAP facility, which became operational in December 2000.
Data center operations consist mainly of rent, operations
personnel, electricity, chilled water and security services.
With the exception of electricity and chilled water, the
majority of these expenses are fixed in nature.

Construction Contract Expenses.Contract construction expenses
decreased $12.9 million to $7.4 million for year ended
March 31, 2002 from $20.3 million for the year ended
March 31, 2001. The decrease is in line with the decrease
in revenues from construction contracts. Construction contract
expenses are primarily the result of the number of contracts in
process, stage of completion and dollar amount of those projects.

Start-up Costs  Data Centers.Start-up costs decreased
$3.1 million to $3.4 million for the year ended
March 31, 2002 from $6.5 million for the year ended
March 31, 2001. The decrease is mainly attributable to our
permanent facilities, the NAP of the Americas, becoming
operational in July 2001. Start-up costs in fiscal year 2001
also included costs of the interim NAP facility.

General and Administrative Expenses.General and administrative expenses
decreased by $4.3 million to $15.6 million for the
year ended March 31, 2002 from approximately
$19.9 million for the year ended March 31, 2001. The
decrease is attributable to staff reductions and corporate
infrastructure related to non-core assets. During fiscal year
2002, our efforts included establishing internal operations to
support our Internet infrastructure services strategy. The
significant components of these expenses include personnel,
insurance, office expenses and professional fees. In addition,
during the year ended March 31, 2002, we implemented
several cost-savings initiatives, including staff reductions and
an overall decrease in discretionary spending.

Sales and Marketing Expenses.Sales and marketing expenses increased
$0.8 million, or 28.6%, to $3.6 million for the year ended
March 31, 2002 from $2.8 million for the year ended
March 31, 2001. The increase is principally due to
$3.1 million in marketing expenses for our TerreNAP Data
Centers including NAP of the Americas, partially offset by a
$2.2 million decrease in marketing expenses associated with
the sale of real estate.

Depreciation and Amortization Expense.Depreciation and amortization expense
increased $4.0 million to $7.3 million for the year
ended March 31, 2001 from $3.3 million for the year
ended March 31, 2002. The

20



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increase resulted primarily from the depreciation
of the leasehold improvements and equipment used in the NAP of
the Americas, which were placed in service on July 1, 2001.
Therefore, no similar expenses were recorded for the comparable
period during 2001.


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

Interest Income.Interest income decreased
$0.4 million to $0.1 million for the year ended
March 31, 2002 from $0.5 million for the year ended
March 31, 2001 due to a decrease in our average cash balances
invested and a decline in short-term interest rates.

Interest Expense.Interest expense increased
$8.7 million to $9.8 million for the year ended
March 31, 2002 from $1.1 million for the year ended
March 31, 2001 due to an increase in our average debt
balance outstanding.

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

Net Loss From Continuing Operations.Net loss from continuing operations
increased $36.0 million to $57.4 million for the year
ended March 31, 2002 from $21.4 million for the year
ended March 31, 2001. The increase was primarily due to
non-cash items, which include impairment of long-lived assets of
approximately $19 million, and depreciation and
amortization expense of approximately $7.3 million. Also
contributing to the loss were interest expense of approximately
$9.8 million and $14.6 million of expenses generated
from the start-up and operations of the NAP of the Americas.

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

Liquidity and Capital Resources

Recent
events

On April 30, 2003, Ocean Bank revised its
$44.0 million credit facility with us by converting
$15.0 million of the outstanding principal balance into
equity and extending the term of the remaining
$29.0 million until April 30, 2006. Concurrent with
this transaction, we paid all past due interest as of
March 31, 2003, plus accrued interest through
April 28, 2003 totaling approximately $1.6 million and
prepaid approximately $900,000 of interest.

21



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##### 



On April 30, 2003, CRG LLC completed the
purchase, at a discount, of our $22.6 million construction
payables (including accrued interest) to Cupertino Electric,
Inc. and Kinetics Mechanical Services, Inc. and Kinetics Systems
Inc. Cupertino and Kinetics were construction contractors for
the NAP of the Americas. At the closing, the construction
payables were converted into 30,133,334 shares of our common
stock.

On April 30, 2003, we issued 10%
Subordinated Secured Convertible Debentures due April 30,
2006 for an aggregate principal amount of $25.0 million. The
debt is convertible into shares of our stock at $0.50 per share.
Interest is payable quarterly beginning July 31, 2003. The
debentures were issued in exchange for $10.3 million in
cash, $9.5 million in a promissory note due in full
May 30, 2003 and $5.2 million of notes payable which
were converted into the Subordinated Debentures. Included in the
$5.2 million is $2.0 million of cash received in March
2003 in anticipation of the transaction.

The maker of the $9.5 million promissory
note failed to pay but agreed on June 16, 2003 to assign
the note and the debenture to an entity newly formed by the son
of a director of the Company. Payments received as of
June 30, 2003 aggregated approximately $5.8 million
and the remaining $3.7 million is due no later than
August 15, 2003. Two of the Companys directors have
guaranteed payment and performance in accordance with the
amended terms of the note. Management believes that collection
on the remaining balance is reasonably assured. In connection
with this transaction, the Company will recognize a beneficial
conversion feature of $9.5 million, based on the
June 16, 2003 measurement date.

The following condensed pro forma balance sheet
gives effect to the following transactions as if they had
occurred on March 31, 2003:



| |   |                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Ocean Bank debt conversion of $15.0 million
    in debt to equity;                                                                                                                                    
|
| |  | payment of $1.6 million past due and accrued
    interest and $0.9 million in prepaid interest to Ocean Bank;                                                                                         
|
| |  | CRG transaction whereby $21.6 million in
    construction payables plus $1.0 million in accrued interest
    was converted to equity;                                                                 
|
| |  | issuance of Subordinated Debentures for
    $16.1 million in cash, $5.2 million in conversion of
    notes payable and $3.7 million in amounts receivables under
    the $9.5 million promissory note.

22



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##### 



|                                               |                                  |                                       |             |             |             |                |             |             |   |   |            |            |            | 
|---------------------------------------------- | -------------------------------- | ------------------------------------- | ----------- | ----------- | ----------- | -------------- | ----------- | ----------- | - | - | ---------- | ---------- | ---------- | 
|                                               |                                  | March 31,                             |             | Proforma    |             | Proforma      
|                                               |                                  | 2003                                  |             | Adjustments |             | March 31, 2003
|                                               |                                  |                                       |             |             |             |               
|Assets                                         |                                  |                                       |             |             |             |                |             |             |   |   |            |           
|Current assets:                                |                                  |                                       |             |             |             |                |             |             |   |   |            |           
|                                               | Cash and cash equivalents        |                                       | $           | 1,408,190   |             |                | $           | 13,600,000  |   |   | $          | 15,008,190 |           
|                                               | Notes receivable                 |                                       |             |            |             |                |             | 3,700,000   |   |   |            | 3,700,000  |           
|                                               | Other current assets             |                                       |             | 523,940     |             |                |             | 900,000     |   |   |            | 1,423,940  |           
|                                               |                                  |                                       |             |             |             |                |             |             |   |   |            |           
|Total current assets                           |                                  |                                       | 1,932,130   |             |             |                |             |             |   |   | 20,132,130 |           
|Long term assets                               |                                  |                                       | 67,669,383  |             |             |                |             |             |   |   | 67,669,383 |           
|                                               |                                  |                                       |             |             |             |                |             |             |   |   |            |           
|                                               |                                  | Total assets                          |             | $           | 69,601,513  |                |             |             |   |   |            | $          | 87,801,513 | 
|                                               |                                  |                                       |             |             |             |                |             |             |   |   |            |           
|                                               |                                  | Liabilities and Stockholders Deficit |             |             |             |                |             |             |   |   |            |            |            | 
|Current liabilities:                           |                                  |                                       |             |             |             |                |             |             |   |   |            |           
|                                               | Current portion of notes payable |                                       |             | 1,464,963   |             |                |             |             |   |   |            | 1,464,963  |           
|                                               | Construction payables            |                                       |             | 22,012,162  |             |                |             | (21,602,343 | ) |   |            | 409,819    |           
|                                               | Accounts payable and other       |                                       |             | 13,011,371  |             |                |             |             |   |   |            | 13,011,371 |           
|                                               | Interest payable                 |                                       |             | 4,492,805   |             |                |             | (2,597,657  | ) |   |            | 1,895,148  |           
|                                               |                                  |                                       |             |             |             |                |             |             |   |   |            |           
|Total current liabilities                      |                                  |                                       | 40,981,301  |             |             |                |             |             |   |   | 16,781,301 |           
|                                              
|Notes payable                                  |                                  |                                       | 56,174,938  |             |             |                | (14,800,000 | )           |   |   | 41,374,938 |           
|Convertible debt, net of beneficial conversion |                                  |                                       | 14,005,000  |             |             |                | 15,500,000  |             |   |   | 29,505,000 |           
|Other long term debt                           |                                  |                                       | 4,344,243   |             |             |                |             |             |   |   | 4,344,243  |           
|                                               |                                  |                                       |             |             |             |                |             |             |   |   |            |           
|                                               |                                  | Total liabilities                     |             |             | 115,505,482 |                |             |             |   |   |            |            | 92,005,482 | 
|                                               |                                  |                                       |             |             |             |                |             |             |   |   |            |           
|                                              
|Redeemable convertible preferred stock         |                                  |                                       | 556,729     |             |             |                |             |             |   |   | 556,729    |           
|                                               |                                  |                                       |             |             |             |                |             |             |   |   |            |           
|                                              
|Total stockholders deficit                    |                                  |                                       | (46,460,698 | )           |             |                | 41,700,000  | (1)         |   |   | (4,760,698 | )         
|                                               |                                  |                                       |             |             |             |                |             |             |   |   |            |           
|Total liabilities and stockholders deficit    |                                  | $                                     | 69,601,513  |             |             |                |             |             |   | $ | 87,801,513 |           
|                                               |                                  |                                       |             |             |             |                |             |             |   |   |            |           



---

(1) Includes $9.5 million from
beneficial conversion, $9.6 million and $14.1 million
in common stock and paid in capital from the Ocean Bank debt
conversion and CRG transaction, respectively, and
$8.5 million in gain from CRG transaction.

Liquidity

From the time of the merger through
March 31, 2003, we have incurred net operating losses of
approximately $202.6 million. Our cash flows from
operations for the years ended March 31, 2003 and 2002 were
negative and our working capital deficit was approximately
$39.0 million and $88.3 million as of March 31,
2003 and 2002, respectively. Due to our recurring losses from
operations, the uncertainty surrounding the anticipated increase
in revenues and the lack of committed sources of additional debt
or equity, substantial doubt exists about our ability to
continue as a going concern.

Historically, we have met our liquidity needs
primarily through obtaining additional debt financing and the
issuance of equity interests. Some of our debt financing was
either provided by or guaranteed by Manuel D. Medina, our Chief
Executive Officer and Chairman of the Board. In prior periods we
also successfully shut down or disposed of non-core operations
and implemented a series of expense reductions to reduce our
liquidity needs.

Based on customer contracts signed as of
June 13, 2003, our monthly cash deficit from operations is
approximately $1.4 million. In order to eliminate this
current monthly cash deficit from operations, the new monthly
revenues required range from $2.0 million to
$3.0 million. This range of new revenue depends on the mix
of the services sold and their corresponding margin. Our
required revenues are based on existing contracts, including
those recently announced with the U.S. Government and
enterprises, and expected future contracts from potential
customers currently in the sales pipeline. We have identified
additional potential customers, including the federal, state and
local governments, and are actively offering available services
to them. However, our projected revenues and planned cash needs
depend on several factors, some of which are beyond

23



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##### 



our control, including the rate at which our
services are sold to the government sector and the commercial
sector, the ability to retain our customer base, the willingness
and timing of potential customers outsourcing the housing and
management of their technology infrastructure to us, the
reliability and cost-effectiveness of our services and our
ability to market our services.


The majority of our planned operating cash
improvement is expected to come from an increase in revenues and
cash collections from customers. If we fail to achieve planned
revenues we will require additional financing. There can be no
assurance that additional financing will be available, or that,
if available the financing will be obtainable on terms
acceptable to us or that any additional financing would not be
substantially dilutive to existing shareholders. If we need to
obtain additional financing and fail to do so, it may have a
material adverse effect on our ability to meet financial
obligations and operate as a going concern. Consequently, the
uncertainty surrounding the anticipated increase in revenues,
including the rate at which services are sold, raises
substantial doubt about our ability to continue as a going
concern.

We will continually evaluate opportunities to
sell additional equity or debt securities, obtain credit
facilities from lenders, or restructure our debt to further
strengthen our financial condition or for strategic reasons.

Sources
and uses of cash

Cash used in operations for the year ended
March 31, 2003 was approximately $18.3 million
compared to cash used in continuing operations of $35.7 million
for the year ended March 31, 2002, a decrease of
$17.4 million. This period over period decrease was
primarily due to a $16.2 million decrease in our net loss
to $41.2 million in fiscal year 2003 when compared to $57.4
million in fiscal year 2002.

Cash used in investing activities for the year
ended March 31, 2003 was $1.3 million compared to cash
used in investing activities of $29.4 million for the year
ended March 31, 2002, a decrease of $28.1 million. The
amount of cash used in investing activities has decreased as we
have now completed the build out of the NAP of the Americas and
a portion of our colocation facility in Santa Clara, California.
For the year ended March 31, 2003, cash of
$1.0 million was used primarily for the purchase of
property and equipment related to the NAP of the Americas. For
the year ended March 31, 2002, cash of $45.8 million
was used primarily for the purchase of property and equipment
related to the NAP of the Americas and our colocation facility
in Santa Clara, California.

Cash provided by financing activities for the
year ended March 31, 2003 was $20.8 million compared
to cash provided by financing activities of $59.9 million for
the year ended March 31, 2002, a decrease of
$39.1 million. The period over period decrease in cash
provided by financing activities resulted primarily from a
decrease of $56.8 million of new borrowings partially
offset by an increase in sale of common stock and warrants of
$17.0 million.

We had a net working capital deficit of
approximately $39.0 million and stockholders deficit
of approximately $46.5 million at March 31, 2003 and
incurred a net loss of approximately $41.2 million for the
year then ended. This loss is principally the result of:



| |   |                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | non-cash items, including impairment charges of
    long-lived assets of approximately $4.0 million, and
    depreciation and amortization expense of approximately
    $5.1 million;
|
| |  | interest expense of approximately
    $11.0 million;                                                                                                                                 
|
| |  | approximately $11.2 million of expenses
    generated from the operations of the NAP of the Americas; and                                                                            
|
| |  | not generating sufficient revenue during the year
    to support the increase in infrastructure.                                                                                     

Debt
and equity activity

Ocean Bank Credit Facility:On September 5, 2001, we
borrowed $48.0 million from Ocean Bank. The Ocean Bank credit
facility is secured by all of our assets and allows for up to a
$25.0 million junior lien

24



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##### 



position on the assets of our NAP of the
Americas, Inc. subsidiary. To obtain the original loan, we paid
a $720,000 commitment fee to Ocean Bank. The proceeds of the
original credit facility were used to:




| |   |                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | repay a $10.0 million short-term loan from
    Manuel D. Medina, our Chief Executive Officer, the proceeds of
    which we had used to fund the build out of the NAP of the
    Americas (Mr. Medina, in turn, used the $10.0 million
    to repay a personal $10.0 million short-term loan from
    Ocean Bank);
|
| |  | repay $3.5 million of debt that we owed to
    Ocean Bank under a line of credit personally guaranteed by
    Mr. Medina;                                                                                                                                                                                        
|
| |  | pay $1.2 million in loan costs related to
    the $48.0 million credit facility (including a $720,000
    commitment fee); and                                                                                                                                                                                   
|
| |  | fund the NAP of the Americas build out costs.                                                                                                                                                                                                                                                                    

Mr. Medina has personally guaranteed the
credit facility. In addition to Mr. Medinas personal
guarantee of the credit facility, and in order to obtain the
facility, the bank required Mr. Medina, prior to the bank
disbursing funds under the credit facility, to (i) provide
$5.0 million certificate of deposit to the bank as
collateral on certain personal loans that Mr. Medina has
with the bank and (ii) commit to accelerate the maturity
date of those personal loans to December 31, 2001.
Subsequent to September 2001, Mr. Medina and the bank
changed the maturity date on the personal loans, first to
December 31, 2001 and later to July 1, 2002. In the
event of our default under the credit facility, Mr. Medina
also agreed to subordinate debt that we owed to Mr. Medina.
Mr. Medina has repaid part of those personal loans to the
bank through liquidation of the $5.0 million certificate of
deposit in January 2002 leaving an outstanding principal balance
of approximately $4.8 million. In addition, he exercised
his right under the personal loan agreements to extend their
maturity date from July 1, 2002 to June 30, 2003. As
of June 30, 2003, such personal loans have matured and are
unpaid. Accordingly, and as further discussed below,
Mr. Medina could demand the Company to provide cash
collateral for Mr. Medinas outstanding loan balances
aggregating approximately $4.8 million. Mr. Medina has
an option under the relevant loan documents to extend the loan
to December 31, 2003 that requires a principal payment of
$300,000. Although the option to extend expires June 30,
2003, Mr. Medina is currently in discussions with Ocean
Bank regarding extending the loan, and believes that Ocean Bank
will agree to extend the loan.

In consideration of Mr. Medinas
agreeing to repay his indebtedness to Ocean Bank earlier than
otherwise required, pledging the certificate of deposit to the
bank and personally guaranteeing our credit facility and
approximately $21.0 million of construction payables, we
entered into an amended and restated employment agreement with
him. Under the terms of the amended and restated employment
agreement, we will indemnify Mr. Medina from any personal
liability related to his guarantees of our debt, use
commercially reasonable efforts to relieve Mr. Medina of
all his guarantees of our debt, provide up to $6.5 million of
cash collateral to the bank should Mr. Medina be unable to
repay the personal loans when due and provide a non
interest-bearing $5.0 million loan to Mr. Medina for
as long as his guarantees of our debt exist. If the loan to Mr.
Medina becomes in default, we have a right of offset against all
amounts payable by us to Mr. Medina, the aggregate of which
is approximately $3.0 million as of March 31, 2003.
Subsequent to March 31, 2003, the amount was reduced to
$1.5 million. Mr. Medina agreed that we have the right
to withhold payment to him of $1,375,000 in convertible
debentures owned by him until the note receivable is repaid. The
note receivable from Mr. Medina is shown as an adjustment
to equity. The $48.0 million credit facility and the note
receivable from Mr. Medina were approved by our board of
directors.

In July 2002, we and Mr. Medina modified the
terms of his $5.0 million non-interest bearing note payable
to us. As amended, the note has a maturity date of
December 5, 2004 and bears interest subsequent to
September 5, 2002 at 2%, the applicable federal rate.
Interest is due in bi-annual installments. We will review the
collectibility of this note on a quarterly basis.

In August 2002, we amended the terms of our
credit facility. The modified credit facility reduced the annual
interest rate to 7.50%. Under the terms of the amended facility,
the initial maturity date was extended to September 2003 and we
had the option to exercise two six-month extension periods each
at a cost of 0.5% of the principal balance outstanding together
with a principal repayment of $2.5 million. During each
extension

25



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##### 



period, a $250,000 monthly principal
repayment plus interest would have been due. At closing, the
total amount of the loan was disbursed except for approximately
$6.6 million that was held as an interest reserve. Through
June 2002, the interest reserve was disbursed monthly to make
interest payments. We commenced making monthly interest payments
in July 2002. All other material provisions of the credit
facility remained unchanged.


On April 30, 2003, Ocean Bank revised its
$44.0 million credit facility with us by converting
$15.0 million of the outstanding principal balance into
20 million shares of our common stock and extending the
term of the remaining $29.0 million until April 30, 2006.
Under the new terms, interest will be payable monthly at an
annual rate of 5.25% for the first twelve months and 7.5%
thereafter. Concurrent with this transaction, we paid all past
due interest.

Construction Payables:On November 8, 2002, CRG, LLC
entered into an agreement with Cupertino to purchase our entire
$18.5 million construction payable (including accrued
interest) to Cupertino. Under the terms of their agreement, CRG
was to pay Cupertino $8.4 million for the
$18.5 million of our debt. On November 11, 2002, we
entered into an agreement with CRG that provided us with the
option, upon the closing of the purchase of our debt by CRG from
Cupertino, to repay the entire debt at a discount by either
issuing shares of our common stock valued at $0.75 per share or
making a cash payment.

On December 5, 2002, CRG entered into an
agreement with Kinetics to purchase our entire $4.1 million
construction payable (including accrued interest) to Kinetics.
Under the terms of their agreement CRG was to pay Kinetics
$1.9 million. On December 5, 2002, we also entered
into an agreement with CRG that provided us the option, upon the
closing of the purchase of the debt by CRG from Kinetics
Mechanical Services, Inc. and Kinetics Systems Inc., to repay
the entire debt at a discount by either issuing shares of our
common stock valued at $0.75 per share or making a cash payment.

On April 30, 2003, CRG completed the
purchase of the obligations to Cupertino and Kinetics in
accordance with the agreements dated November 11, 2002 and
December 5, 2002, respectively. Upon closing, the
construction payables were converted into equity in accordance
with the November 11, 2002 and December 5, 2002 option
agreements.

CRG was created by Mr. Christian Altaba, one
of our shareholders, for the purpose of buying our debt from
Cupertino Electric and Kinetics Mechanical Services. None of the
participants in CRG were or currently are our officers or
directors. There is no affiliation between CRG and Cupertino or
Kinetics. CRG is managed by Mr. Altaba.

Convertible Debentures:As of March 31, 2003, we had
not paid approximately $1,242,000 of accrued interest on our
convertible debt due on or before March 31, 2003.
Subsequent to March 31, 2003, we paid such amounts. During
November 2002, we made an offer to all of the holders of the
convertible debentures to convert their debentures, including
accrued interest as of September 30, 2002, into our common
shares at the lower of their current conversion price or $0.75.
Approximately $26.4 million of the convertible debentures
had stated conversion prices in excess of $0.75 per share. As of
December 31, 2002, approximately $15.8 million of the
convertible debt and accrued interest of approximately $520,000
was converted to equity. As a result, we recognized
$5.0 million inducement on debt conversion expense which
represents the fair value of the additional common shares issued
as a result of the lower conversion price. The holders of the
convertible debt had a 30 day period during January 2003 to
require us to repay the outstanding principal balance. During
April 2003 and May 2003, we made payments totaling approximately
$1.0 million to five holders of the convertible debentures
who exercised their right to request an acceleration of payment.

Other:In
August 2002, we modified the terms of a note payable to a
financial institution. The maturity date was extended until
December 2002 with some principal payments to be made monthly
and the remaining principal and interest due at maturity. In
conjunction with the modification and extension of this note, we
issued 400,000 shares of our common stock valued at $180,000 to
a shareholder, who formerly guaranteed the note. On
March 31, 2003, the principal balance of the note was
$667,178. On March 31, 2003, we entered into a forbearance
agreement with the lender and modified the terms of our note.
Under the modified agreement terms, we made principal payments
of $100,000 and $125,000 in April 2003 and May 2003,
respectively and

26



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##### 



the financial institution retained the right to
enforce accelerated remedies if we default on the modified note.
We are also required to make seven consecutive monthly principal
payments of $25,000 commencing on June 1, 2003, with
interest on the outstanding balance to be paid monthly, and a
balloon payment on or before December 31, 2003,
representing full and final payment of outstanding principal and
accrued interest. We made the required payment on June 1,
2003.


As of March 31, 2003, we had not paid
approximately $602,740 relating to a lease. We have negotiated a
payment plan with the vendor where partial payments are to be
made.

Between April 2002 and June 2003, we borrowed an
aggregate of $9.9 million of short-term debt bearing
interest between 9% and 10%, including $1.6 million from
Manuel D. Medina, our Chief Executive Officer and $80,000 from
Guillermo Amore, a member of our board of directors. During the
same period, we repaid $2.8 million of short-term debt,
including $740,500 to Mr. Medina, $117,000 to
Mr. Amore and $37,500 to Miguel Rosenfeld, who is also a
member of our board of directors.

On October 30, 2002, we entered into an
agreement with Mr. Arturo Ehrlich to assist us in raising
capital. We issued warrants to purchase 1.2 million shares
of our common stock at $0.75 per share to Mr. Ehrlich
together with a cash payment of $180,000 as an advance for
future expenses. Mr. Ehrlich is a director of a corporation
that lent us $3.0 million in October 2002.

In May 2001, we issued 294 shares of
Series H redeemable convertible preferred stock for
$500,000. The preferred stock provides for a preferential annual
dividend of $102 per share and is initially convertible into
294,000 shares of common stock. The preferred stock is
redeemable at $1,700 per share plus unpaid dividends at the
request of One Vision Worldwide on June 1, 2005.

Guaranties and Commitments

The Technology Center of the Americas, LLC,
(TECOTA), an entity in which we have a 0.84%
membership interest, owns the building that leases the space to
us for the NAP of the Americas under a 20 year lease. The
construction of TECOTA was funded with $48.0 million in
equity and $61.0 million in construction financing from a
consortium of banks. We guaranteed these construction loans
during development and construction of TECOTA. After TECOTA was
built, some of the banks released us from the guarantee, the
result of which was to reduce the guarantee to
$5.5 million. As of March 31, 2003, the TECOTA debt
outstanding under the construction loan was $35.4 million.
We do not expect to fund any amounts under our guaranty.

We guarantee up to $6.5 million in personal
debt of Manuel D. Medina, our Chief Executive Officer and
Chairman. See  Liquidity and Capital
Resources for details.

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

|           |  |               |           |                  |  |               |            |                  |  |       |            |  |  |   |            |  |  |   |             | 
|---------- |  | ------------- | --------- | ---------------- |  | ------------- | ---------- | ---------------- |  | ----- | ---------- |  |  | - | ---------- |  |  | - | ----------- | 
|           |  | Capital lease |           |                  |  |               |            |                  |  |      
|           |  | obligations   |           | Operating leases |  | Notes payable |            | Convertible debt |  | Total
|           |  |               |           |                  |  |               |            |                  |  |      
|2004       |  | $             | 2,192,252 |                  |  | $             | 6,024,471  |                  |  | $     | 1,464,963  |  |  |   | 900,000    |  |  | $ | 10,581,686  | 
|2005       |  |               | 1,021,260 |                  |  |               | 6,011,946  |                  |  |       | 6,898,000  |  |  |   | 2,750,000  |  |  |   | 16,681,206  | 
|2006       |  |               | 9,724     |                  |  |               | 5,581,098  |                  |  |       | 48,000     |  |  |   | 11,255,000 |  |  |   | 16,893,822  | 
|2007       |  |               | 11,394    |                  |  |               | 5,548,701  |                  |  |       | 49,222,553 |  |  |   |           |  |  |   | 54,782,648  | 
|2008       |  |               | 5,307     |                  |  |               | 5,347,842  |                  |  |       | 6,385      |  |  |   |           |  |  |   | 5,359,534   | 
|Thereafter |  |               |          |                  |  |               | 70,406,223 |                  |  |       |           |  |  |   |           |  |  |   | 70,406,223  | 
|           |  |               |           |                  |  |               |            |                  |  |       |            |  |  |   |            |  |  |   |             | 
|           |  | $             | 3,239,937 |                  |  | $             | 98,920,281 |                  |  | $     | 57,639,901 |  |  | $ | 14,905,000 |  |  | $ | 174,705,119 | 
|           |  |               |           |                  |  |               |            |                  |  |       |            |  |  |   |            |  |  |   |             | 

27



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##### 



As a result of our sale of common shares in
August 2002 at $0.58 per share, we are committed to issue an
additional 3.6 million shares to NAP de las Americas-Madrid
S.A. As of June 25, 2003, these shares had not yet been
issued.

New Accounting Pronouncements

In March 2003, the FASB reached a consensus on
Emerging Issues Task Force (EITF) Issue No. 00-21,
Revenue Arrangements with Multiple Deliverables. The
consensus provides guidance on the accounting for multiple
element revenue arrangements. It also provides guidance on how
to separate multiple element revenue arrangements into its
separate units of accounting and how to measure and allocate the
arrangements total consideration to each unit. The
effective date of EITF 00-21 is for revenue arrangements entered
into in fiscal periods (interim or annual) beginning after
June 15, 2003. Early application is permitted. We do not
expect the adoption of EITF 00-21, effective July 1, 2003,
to have a material effect on our financial statements.

In January 2003, the FASB issued Interpretation
No. 46, Consolidation of Variable Interest Entities,
an Interpretation of ARB No. 51: This Interpretation
provides guidance for determining a primary beneficiary period.
The effective date of Interpretation No. 46 is the first
interim period beginning after June 15, 2003 for variable
interest entities acquired before February 1, 2003 and
immediately to variable interest entities created after
January 31, 2003. NAP de las Americas  Madrid
S.A. may be a variable interest entity in accordance with
FIN 46. Our maximum related exposure to loss is
approximately $500,000 at March 31, 2003. We do not expect
the adoption of FIN 46, effective July 1, 2003, to
have a material effect on our financial statements.

On December 31, 2002, the FASB issued FASB
Statement No. 148 (SFAS 148), Accounting for
Stock-Based Compensation  Transition and Disclosure,
amending FASB Statement No. 123 (SFAS 123), Accounting for
Stock-Based Compensation. This Statement amends SFAS 123
to provide alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting
for stock-based employee compensation. It also amends the
disclosure provisions of that Statement to require prominent
disclosure about the effects on reported net income of an
entitys accounting policy decisions with respect to
stock-based employee compensation. Finally, SFAS 148 amends APB
Opinion No. 28, Interim Financial Reporting, to require
disclosure about those effects in interim financial information.
For entities that voluntarily change to the fair value based
method of accounting for stock-based employee compensation, the
transition provisions are effective for fiscal years ending
after December 15, 2002. For all other companies, the
disclosure provisions and the amendment to APB No. 28 are
effective for interim periods beginning after December 15,
2002. We do not plan to change to the fair value based method of
accounting for stock-based employee compensation. We have
complied with the disclosure required in the March 31, 2003
financial statements.

In November 2002, the FASB issued Interpretation
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others. For guarantees issued or modified
after December 31, 2002, a liability shall be recognized
for the fair value of the obligation undertaken in issuing the
guarantee. The disclosure requirements were effective for
interim and annual financial statements for periods ending after
December 15, 2002. We currently guarantee the aggregate
amount of approximately $12.0 million in debt.
See  Guarantees and Commitments for
details. FIN 45 will impact our financial position or
results of operations in subsequent periods if these guarantees
are modified.

In April 2002, the Financial Accounting Standards
Board (FASB) approved SFAS 145, Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement
No. 13 and Technical Corrections. In addition to
rescinding SFAS 4, 44, and 64 and amending SFAS 13, SFAS145
establishes a financial reporting standard for classification of
extinguishment of debt in the financial statements in accordance
with APB 30. SFAS 145 will be effective for our fiscal year
ended March 31, 2004. We do not expect the adoption of SFAS
145 to have a material effect on our financial position or
results of operations. However, SFAS 145 will have an impact on
the presentation of our results of operations for the quarter
ended June 30, 2003. On April 30,

28



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##### 



2003, we entered into financing transactions that
will result in debt restructuring gains. See
 Liquidity and Capital Resources.


Forward Looking-Information

This Annual Report may contain
forward-looking statements 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. Our actual results could differ
materially from those anticipated in such forward-looking
statements as a result of several factors more fully described
in Risk Factors and elsewhere in this Annual Report.
The forward-looking statements made in this Annual Report relate
only to events as of the date on which the statements are made.
We undertake no obligation to update publicly any
forward-looking statements for any reason, even if new
information becomes available or other events occur in the
future.

Risk Factors

Our recurring losses from operations and the
lack of committed sources of additional debt or equity to
support working capital deficits raises substantial doubt about
our ability to continue as a going concern.From the time of the merger through
March 31, 2003, we have incurred net operating losses of
approximately $202.6 million. Our cash flows from
operations for the years ended March 31, 2003 and 2002 were
negative and our working capital deficit was approximately
$39.0 million and $88.3 million as of March 31,
2003 and 2002, respectively.

The majority of our planned operating cash
improvement during our fiscal year 2004 is expected to come from
an increase in revenues and cash collections from customers. If
we fail to achieve planned revenues of $2.0 million to
$3.0 million a month, then we will require additional
financing. There can be no assurances that additional financing
will be available, or that, if available the financing will be
obtainable on terms acceptable to us or that any additional
financing would not be substantially dilutive to existing
shareholders. If we need to obtain additional financing and fail
to do so, it may have a material adverse effect on our ability
to meet financial obligations and operate as a going concern.
Consequently, recurring losses from operations, the uncertainty
surrounding the anticipated increase in revenues, including the
rate at which services are sold and the lack of committed
sources of additional debt or equity, raises substantial doubt
about our ability to continue as a going concern.

Our substantial leverage could adversely
affect our ability to fulfill our obligations and operate our
business.As of March 31, 2003,
our total liabilities were approximately $115.5 million,
obligations guaranteed by us were $10.3 million and our
total shareholders deficit was $46.5 million. Our
substantial debt and guarantees could have important
consequences to you, including the following:



| |   |                                                                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our substantial leverage increases our
    vulnerability to economic downturns and adverse competitive and
    industry conditions and could place us at a competitive
    disadvantage compared to those of our competitors that are less
    leveraged;                                                              
|
| |  | our debt service obligations could limit our
    flexibility in planning for, or reacting to, changes in our
    business and our industry and could limit our ability to pursue
    other business opportunities, borrow more money for operations
    or capital in the future and implement our business strategies;
|
| |  | our level of debt may restrict us from raising
    additional financing on satisfactory terms to fund working
    capital, capital expenditures, product development efforts,
    strategic acquisitions, investments and alliances, and other
    general corporate requirements;                                     
|
| |  | covenants in our debt instruments limit our
    ability to pay dividends or make other restricted payments and
    investments; and                                                                                                                                                                                    

29



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##### 





| |   |                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our total guarantees are approximately
    $10.3 million and if we are required to fund under these
    guarantees our liquidity and cash flows would be adversely
    affected.

We may be unable to raise the funds necessary
to repay or refinance our indebtness.We are obligated to make principal and
interest payments on our credit facility with Ocean Bank each
year until it matures in 2006. Additionally, $49.2 million
of our credit facilities mature in 2007. Each of these
obligations requires significant amounts of liquidity. We may
need additional capital to fund those obligations. Our ability
to arrange financing and the cost of this financing will depend
upon many factors, including:



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

If we need additional funds, our inability to
raise them will have an adverse effect on our operations. If we
decide to raise additional funds by incurring debt, we may
become subject to additional or more restrictive financial
covenants and ratios.

We are required to incur significant expenses
in an effort to attract customers to our facilities.Our ability to generate increased
revenue is substantially dependent on the willingness of
potential customers to locate their critical operations at our
facilities. Our ability to attract new customers depends on a
variety of factors, including the willingness of carriers to
exchange traffic at our facilities, the willingness of
businesses to outsource their mission-critical data operations,
the reliability and cost-effectiveness of our services and our
ability to effectively market our services. We expect to
continue to make additional significant investments in sales and
marketing. The increase in our sales and marketing efforts may
not result in increased sales of our services. We intend to
develop alternative distribution and lead generation
relationships with potential channel partners. Any failure by us
to develop these relationships could materially and adversely
impact our ability to generate increased revenues.

If we do not locate financial or strategic
partners, we may have to delay or abandon expansion
plans.Expenditures commence well
before a TerreNAP Center opens, and it may take an extended
period to approach break-even capacity utilization. It takes a
significant period of time to select the appropriate location
for a new TerreNAP Center, construct the necessary facilities,
install equipment and telecommunications infrastructure and hire
operations and sales personnel. As a result, we expect that
individual TerreNAP Centers will experience losses for more than
one year from the time they are opened. As a part of our
TerreNAP Center strategy, we intend to rely on third-party
financial or strategic partners to fund the development costs.
If we are unable to establish such third-party relationships, we
may delay or abandon some or all of our development and
expansion plans or otherwise forego market opportunities, making
it difficult for us to generate additional revenue and to
respond to competitive pressures.

Our operations in Brazil and Spain expose us
to risks not faced by companies transacting business only in the
United States.We have operations in
foreign countries, including NAP facilities, sales personnel and
customer support operations in Sao Paulo, Brazil and Madrid,
Spain. We intend to expand to other international locations in
the future. These operations are subject to economic risks
inherent in doing business in foreign countries, including the
following:



| |   |                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Disruptions in Foreign Markets.Disruptions in financial markets and
    the deterioration of the underlying economic conditions in some
    countries could have an impact on our sales to customers located
    in, or whose end-user customers are located in, these countries.                                         
|
| |  | Fluctuations in Currency Exchange Rates.Currency instability in geographic
    markets other than the United States may make our services more
    expensive than services offered by others that are priced in the
    local currency. Moreover, many of the costs associated with our
    operations located outside the

30



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | United States are denominated in local
    currencies. As a consequence, the increased strength of local
    currencies against the U.S. dollar in countries where we have
    foreign operations would result in higher effective operating
    costs and, potentially, reduced earnings. Currently, we do not
    hedge our foreign exchange risk. We cannot assure you that
    fluctuations in foreign exchange rates will not have a negative
    effect on our operations and profitability.
|
| |  | Longer Payment Cycles.Our customers outside of the United
    States are often allowed longer time periods for payment than
    our U.S. customers. This increases the risk of nonpayment due to
    the possibility that the financial condition of particular
    customers may worsen during the course of the payment period.                                                                                                                                                                 
|
| |  | Tariffs, Duties, Limitations on Trade and
    Price Controls.Our international
    operations are affected by limitations on imports, currency
    exchange control regulations, transfer pricing regulations,
    price controls and other restraints on trade. In addition, the
    governments of some countries in which we have operations, have
    the ability to exercise significant influence over many aspects
    of their domestic economies and international trade.                
|
| |  | Potential Adverse Tax Consequences.Our international operations create a
    risk of potential adverse tax consequences, including imposition
    of withholding or other taxes on payments by our customers.                                                                                                                                                                                                                                                                                     
|
| |  | Credit and Access to Capital Risks.Our local financial or strategic
    partners could have reduced access to working capital due to
    higher interest rates, reduced bank lending resulting from
    contractions in the money supply or the deterioration in their
    financial condition, or the inability to access other financing.                                                                                                                                                       
|
| |  | Distributions and other payments from our
    subsidiaries and affiliates may be subject to foreign
    taxes.Distributions of earnings and
    other payments, including interest, we receive from our
    subsidiaries and affiliates may be subject to withholding taxes
    imposed by the jurisdictions in which these entities are formed
    or operating. These taxes would reduce the amount of after-tax
    cash we would receive from these entities.                                 
|
| |  | New Competitors and Competitive Environment.As we expand our operations in markets
    outside the United States, we will also encounter new
    competitors and competitive environments. Our foreign
    competitors may enjoy a government-sponsored monopoly on
    telecommunications services essential to our business, and will
    generally have a better understanding of their local industry
    and longer working relationships with local infrastructure
    providers.           

We may not be able to compete effectively in
the market for data center services.The market for data center services is
extremely competitive and subject to rapid technological change.
Our current and potential competitors include providers of data
center services, global, regional and local telecommunications
companies and Regional Bell Operating Companies, and information
technology outsourcing firms. Many of our existing competitors
have greater market presence and financial and personnel
resources than we do. Our competitors include Internet data
centers operated by established communications carriers such as
AT&T, Level 3, MCI and Qwest. We also compete with
providers of data services centers, regional Bell operating
companies that offer Internet access and information technology
outsourcing firms. The principal competitive factors in our
market include:



| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | ability to deliver services when requested by the
    customer;                                               
|
| |  | Internet system engineering and other
    professional services expertise;                                    
|
| |  | customer service;                                                                                             
|
| |  | network capability, reliability, quality of
    service and scalability;                                      
|
| |  | variety of managed services offered;                                                                          
|
| |  | access to network resources, including circuits,
    equipment and interconnection capacity to other networks;
|
| |  | broad geographic presence;                                                                                    
|
| |  | price;                                                                                                        

31



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##### 





| |   |                                                          
| | - | ---------------------------------------------------------
| |  | ability to maintain and expand distribution
    channels;
|
| |  | brand name recognition;                                  
|
| |  | timing of introductions of new services;                 
|
| |  | physical and network security;                           
|
| |  | financial resources; and                                 
|
| |  | customer base.                                           

Some of our competitors may be able to develop
and expand their data center services faster, devote greater
resources to the marketing and sale of their products and adopt
more aggressive pricing policies than we can. In addition, these
competitors have entered and will likely continue to enter into
business relationships to provide additional services that
compete with the services we provide.

Our products and services have a long sales
cycle that may materially adversely affect our business,
financial condition and results of
operations.A customers decision
to purchase services at a TerreNAP Center typically involves a
significant commitment of resources and will be influenced by,
among other things, the customers confidence in our
financial strength. As a result, we have a long sales cycle.
Delays due to the length of our sales cycle may materially
adversely affect our business, financial condition and results
of operations.

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

We are dependent on key personnel and the loss
of these key personnel could have a material adverse effect on
our success.We are highly dependent
on the services of Manuel D. Medina, our Chairman. In an attempt
to reduce costs, we have eliminated some management positions.
Our potential growth and expansion and the merger and
integration of separate businesses, are expected to place
increased demands on our management skills and resources.
Therefore, our success also depends upon our ability to hire and
retain additional skilled and experienced management personnel.
Employment and retention of qualified personnel is important due
to the competitive nature of our industry.

Our President, Chairman and Chief Executive
Officer, cannot be removed without cause which could delay,
defer or prevent change in control of our company or impede a
merger, consolidation, takeover or other business combination.Under the terms of our agreement with
Manuel D. Medina, our President, Chairman and Chief Executive
Officer, as long as Mr. Medinas guarantees of our
debt exist, we have agreed to nominate Mr. Medina to our
board of directors and not remove Mr. Medina, unless for
good cause, or remove any of our officers without
Mr. Medinas consent. This could delay, defer or
prevent change in control of our company or impede a merger,
consolidation, takeover or other business combination that you,
as a stockholder, may otherwise view favorably.

If the price of our shares remains low or our
financial condition deteriorates, we may be delisted by the
American Stock Exchange.Our common
stock currently trades on the American Stock Exchange (Amex).
The Amex requires companies to fulfill specific requirements in
order for their shares to continue to be listed. Our securities
may be considered for delisting if:

(i) our financial condition and operating
results appear to be unsatisfactory;

(ii) 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

(iii) 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.

32



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##### 



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

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

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

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

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

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

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

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

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

33



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##### 



ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA.

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



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

None.

PART III



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

Our executive officers, directors and some of our
key employees, and their ages as of June 13, 2003, are as
follows:

|                          |                         |     |    |                    |  |                                                                  |                                                  
|------------------------- | ----------------------- | --- | -- | ------------------ |  | ---------------------------------------------------------------- | -------------------------------------------------
|Name                      |                         | Age |    | Principal Position
|                          |                         |     |    |                   
|Manuel D. Medina          |                         |     | 50 |                    |  | Chairman of the Board, President and Chief
    Executive Officer
|Joseph R. Wright, Jr.     |                         |     | 64 |                    |  | Vice Chairman of the Board                                      
|Guillermo Amore           |                         |     | 65 |                    |  | Director                                                        
|Timothy Elwes             |                         |     | 67 |                    |  | Director                                                        
|Fernando Fernandez-Tapias |                         |     | 64 |                    |  | Director                                                        
|Jose Maria Figueres-Olsen |                         |     | 48 |                    |  | Director                                                        
|Arthur L. Money           |                         |     | 63 |                    |  | Director                                                        
|Marvin S. Rosen           |                         |     | 61 |                    |  | Director                                                        
|Miguel J. Rosenfeld       |                         |     | 53 |                    |  | Director                                                        
|Joel A. Schleicher        |                         |     | 50 |                    |  | Director                                                        
|Brian K. Goodkind         |                         |     | 45 |                    |  | Executive Vice President and Chief Operating
    Officer        
|Jose A. Segrera           |                         |     | 32 |                    |  | Senior Vice President and Chief Financial Officer               
|Jose E. Gonzalez          |                         |     | 42 |                    |  | Senior Vice President, General Counsel and
    Secretary        
|Key Employees             |                         |     |    |                    |  |                                                                 
|                          | Jamie Dos Santos        |     |    | 41                 |  |                                                                  | Senior Vice President and Chief Marketing Officer
|                          | Sandra B. Gonzalez-Levy |     |    | 53                 |  |                                                                  | Senior Vice President, Corporate Communications  
|                          | Marvin Wheeler          |     |    | 48                 |  |                                                                  | Senior Vice President, Worldwide Operations      
|                          | Aviva Budd              |     |    | 63                 |  |                                                                  | Senior Vice President                            

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

Joseph R. Wright,
Jr.has served as our Vice Chairman of
the Board since April 28, 2000. Prior to that,
Mr. Wright served as Chairman of the Board from May 1995 to
April 2000, when Terremark Holdings, Inc. concluded a reverse
merger into Amtec Inc., a telecommunications company of which he
was Chairman and Chief Executive Officer. Mr. Wright
currently is President and Chief Executive Officer of PanAmSat,
a global provider of satellite-based communication services.
Mr. Wright also served as Chairman of the Board of
GRC International, Inc., a United States public company
that provides technical information technology support to
government and private entities, from 1996 to 2000. He is also
Co-Chairman of Baker & Taylor Holdings, Inc., an
international book and video distribution company, and Vice
Chairman of Jefferson Consulting Group, a Washington D.C.
consulting firm. From 1989 to 1994, Mr. Wright served as
Executive Vice President, Vice Chairman and Director of
W.R. Grace & Co., an international chemicals and
health care

34



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company, President of Grace Energy Corporation
and Chairman of Grace Environmental Company. From 1982 to 1989,
Mr. Wright held the positions of Director and Deputy Director of
the Office of Management and Budget, The White House, and was a
member of President Reagans cabinet. Before 1982, he
served as Deputy Secretary, United States Department of
Commerce, President of Citicorp Retail Services and Retail
Consumer Services, held posts in the United States Department of
Agriculture and the United States Department of Commerce, and
was Vice President and Partner of Booz Allen &
Hamilton, a management consulting firm.


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

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

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

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

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

35



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intelligence, signal processing, and information
processing. Mr. Money received his Master of Science Degree
in Mechanical Engineering from the University of Santa Clara and
his Bachelor of Science Degree in Mechanical Engineering from
San Jose State University.


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

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

Joel A. Schleicherhas served as a member of our board of
directors since April 2000. Mr. Schleicher served as
Chairman and Chief Executive Officer of Interpath (the
predecessor company to USinternetworking prior to merger) from
May 2000 to July 2002. He presently serves as consultant and
advisor and is a member of the board of directors of several
domestic and international companies, both public and private.
From June 1998 to January 2000, Mr. Schleicher was the
Chief Executive Officer for Expanets, a roll-up of 26 local
interconnects into a nationwide provider of networked
communications solutions to mid-sized enterprises. From 1989
through 1995, he served as the Chief Operating Officer and
President for Nextel Communications, Inc. Mr. Schleicher
received a BSB in Accounting from the Carlson School of
Management at the University of Minnesota.

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

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

Jose E. Gonzalezhas
served as our Senior Vice President, General Counsel and
Secretary since January 2001. Prior to joining Terremark,
Mr. Gonzalez served as the Vice President and Regional
Counsel for Sunbeam Corporation, responsible for legal affairs
throughout Canada, Latin America/ Caribbean and Asia. From 1995
to 1998, Mr. González was Assistant General Counsel,
International, responsible for the international legal affairs
of Blockbuster Entertainment, a subsidiary of Viacom, Inc. From
1990 to 1995 Mr. González was a member of the General
Counsels Office of the American Express Company, where he
served as Regional Counsel for Latin America and the Caribbean.
Mr. González received his Bachelors of

36



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Arts degree from Fordham University in 1982 and
his Juris Doctor from Fordham University School of Law in 1985.
He is a member of the Bar of the State of New York and certified
to practice as in-house counsel by the Bar of the State of
Florida.


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

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

Marvin Wheelerhas
served as our Senior Vice President, Worldwide Operations since
March 2003. From March 2001 to March 2003, Mr. Wheeler
served as Senior Vice President of Operations and General
Manager of the NAP of the Americas. From June 1978 to March
2000, Mr. Wheeler worked at BellSouth managing Data Center
and WAN/ LAN Operations in addition to directing some of the
24/7 operations centers in the Southeast United States.
Mr. Wheeler graduated from the University of Florida, where
he earned a degree in Business Administration with a
concentration in marketing.

Aviva Buddhas
served as our Senior Vice President since April 2000.
Mrs. Budd is responsible for obtaining and managing
relationships with financial institutions and other strategic
partners. Mrs. Budd has previously been involved with us
for over 20 years as counselor and advisor. Mrs. Budd began
her career as an attorney in New York City with the firm of Paul
Weiss Rifkin Wharton & Garrison. Mrs. Budd received her
Bachelor of Science degree from the University of Connecticut,
Summa Cum Laude, and her JD from Harvard Law School, Cum Laude.

Section 16(a) Beneficial Ownership
Reporting Compliance

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

Based solely on our review of the copies of the
forms furnished to us and written representations of the
reporting persons, we believe that during the fiscal year ended
March 31, 2003 all Section 16(a) filing requirements
applicable to our officers, directors and greater than ten
percent beneficial owners were complied with, except each of
Manuel Medina, Guillermo Amore and Miguel Rosenfeld filed a
Form 4 on December 23, 2002 which Form 4 should
have been filed no later than May 10, 2002.

ITEM 11. EXECUTIVE
COMPENSATION.

Summary Compensation Table

The following table presents information
concerning compensation for the chief executive officer and our
three most highly compensated executive officers for services in
all capacities during the fiscal years indicated. We
collectively refer to our chief executive officer and our three
most highly compensated executive officers as

37



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the named executive officers. No
other compensation was received by our named executive officers
during the last 3 fiscal years.


|                                                                                    |  |                |  |                         |  |          |                       |  |  | 
|----------------------------------------------------------------------------------- |  | -------------- |  | ----------------------- |  | -------- | --------------------- |  |  | 
|                                                                                    |  |                |  |                        
|                                                                                    |  | Annual         |  | Long Term              
|                                                                                    |  | Compensation   |  | Compensation Awards    
|                                                                                    |  |                |  |                        
|Name and                                                                            |  | Fiscal         |  | Salary                  |  | Options/
|Principal Position                                                                  |  | Year           |  | ($)                     |  | SARS (#)
|                                                                                    |  |                |  |                         |  |         
|Manuel D. Medina Chairman of the Board, President
    &
    Chief Executive Officer |  | 200320022001   |  | 350,000 350,000 350,000 |  |          | 100,000100,000       | 
|Brian K. Goodkind Executive Vice President
    &
    Chief Operating Officer        |  | 2003 2002 2001 |  | 250,000 250,000 250,000 |  |          | 115,000150,000150,000 | 
|Jose A. Segrera Executive Vice President &
    Chief Financial Officer              |  | 2003 2002 2001 |  | 170,000 170,000 150,000 |  |          | 100,000200,000150,000 | 
|Jose E. Gonzalez Senior Vice President &
    General Counsel                        |  | 2003 2002 2001 |  | 185,000 175,000 175,000 |  |          | 75,000200,000150,000  | 

Option/SAR Grants In Last Fiscal
Year

The following table sets forth information
concerning grants of stock options made during the fiscal year
ended March 31, 2003 to our named executive officers. No
stock appreciation rights were granted during the fiscal year
ended March 31, 2003.

|                  |  |                    |         |                  |  |          |     |            |  |                      |      |         |  |  |         |  |  |  |        |  |  |  |        | 
|----------------- |  | ------------------ | ------- | ---------------- |  | -------- | --- | ---------- |  | -------------------- | ---- | ------- |  |  | ------- |  |  |  | ------ |  |  |  | ------ | 
|                  |  |                    |         |                  |  |          |     |            |  |                     
|                  |  |                    |         |                  |  |          |     |            |  | Potential Realizable
|                  |  |                    |         |                  |  |          |     |            |  | Value At Assumed    
|                  |  |                    |         |                  |  |          |     |            |  | Annual Rates Of     
|                  |  |                    |         |                  |  |          |     |            |  | Stock Price         
|                  |  | Appreciation For  
|Individual Grants |  | Option Term(1)    
|                  |  |                   
|                  |  | Number of          |         | Percent of Total |  |          |     |           
|                  |  | Securities         |         | Options Granted  |  | Exercise |     |            |  |                     
|                  |  | Underlying Options |         | to Employees in  |  | Price    |     | Expiration |  |                     
|Name              |  | Granted (#)        |         | Fiscal Year      |  | ($/Sh)   |     | Date       |  | 5% ($)               |      | 10% ($)
|                  |  |                    |         |                  |  |          |     |            |  |                      |      |        
|Manuel D. Medina  |  |                    |        |                  |  |          |    |            |  |                      |     |         |  |  |        |  |  |  |       |  |  |  |       | 
|Brian K. Goodkind |  |                    | 115,000 |                  |  |          | 4.9 | %          |  |                      | 0.51 |         |  |  | 04/2/12 |  |  |  | 36,885 |  |  |  | 93,473 | 
|Jose A. Segrera   |  |                    | 100,000 |                  |  |          | 4.3 | %          |  |                      | 0.51 |         |  |  | 04/2/12 |  |  |  | 32,074 |  |  |  | 81,281 | 
|Jose E. Gonzalez  |  |                    | 75,000  |                  |  |          | 3.2 | %          |  |                      | 0.51 |         |  |  | 04/2/12 |  |  |  | 24,055 |  |  |  | 60,961 | 



---



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

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

The following table sets forth information
regarding option exercises by our named executive officers
during the fiscal year ended March 31, 2003 and options
they held on March 31, 2003. No stock appreciation rights
were granted during the fiscal year ended March 31, 2003.

|                  |  |             |   |          |  |                            |   |                       |  |             |         |               |  |  |         |  |  |  |   |  |  |  |   | 
|----------------- |  | ----------- | - | -------- |  | -------------------------- | - | --------------------- |  | ----------- | ------- | ------------- |  |  | ------- |  |  |  | - |  |  |  | - | 
|                  |  |             |   |          |  |                            |   |                      
|                  |  |             |   |          |  | Number of Securities       |   | Value of Unexercised 
|                  |  |             |   |          |  | Underlying Unexercised     |   | In-the-Money Options 
|                  |  | Shares      |   |          |  | Options at Fiscal Year End |   | at Fiscal Year End(1)
|                  |  | Acquired on |   | Value    |  |                            |   |                      
|Name              |  | Exercise    |   | Realized |  | Exercisable                |   | Unexercisable         |  | Exercisable |         | Unexercisable
|                  |  |             |   |          |  |                            |   |                       |  |             |         |              
|Manuel D. Medina  |  |             |  |          |  |                            |  |                       |  |             | 200,000 |               |  |  |        |  |  |  |  |  |  |  |  | 
|Brian K. Goodkind |  |             |  |          |  |                            |  |                       |  |             | 288,334 |               |  |  | 326,666 |  |  |  |  |  |  |  |  | 
|Jose A. Segrera   |  |             |  |          |  |                            |  |                       |  |             | 200,001 |               |  |  | 349,999 |  |  |  |  |  |  |  |  | 
|Jose E. Gonzalez  |  |             |  |          |  |                            |  |                       |  |             | 191,667 |               |  |  | 283,333 |  |  |  |  |  |  |  |  | 

38



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---



|    |                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Based on a per share price of $0.36, the closing
    price of the common stock as reported on the American Stock
    Exchange on March 31, 2003, minus the exercise price of the
    option, multiplied by the number of shares underlying the option.

Compensation of Directors

We maintain a policy of compensating our
directors using stock option grants. For their services as our
directors for our fiscal year ended March 31, 2003, each of our
directors received 100,000 stock options. These options are
granted to both employee and independent directors on the same
terms. We reimburse our directors for all out-of-pocket expenses
incurred in the performance of their duties as directors. We
currently do not pay fees to our directors for attendance at
meetings.

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

Employment Agreements

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

Brian K. Goodkind has entered into an
agreement, commencing March 3, 2003, employing him as our
Executive Vice President. The agreement is for an indefinite
term until either party gives written notice of its intention
not to terminate. The agreement provides for an annual base
salary of $250,000 and is subject to increases. Pursuant to the
terms of his agreement, Mr. Goodkind is prohibited from
competing with Terremark for a one year period following
termination of his employment with Terremark.

Jose E. Gonzalez has entered into an agreement,
commencing March 3, 2003, employing him as our Senior Vice
President and General Counsel. The agreement is for an
indefinite term until either party gives written notice of its
intention not to terminate. The agreement provides for an annual
base salary of $185,000 and is subject to increases. Pursuant to
the terms of his agreement, Mr. Gonzalez is prohibited from
competing with Terremark for a one year period following
termination of his employment with Terremark.

Jose A. Segrera has entered into a one year
employment agreement, commencing September 25, 2001,
employing him as our Chief Financial Officer. The agreement
automatically renews for successive one year terms until either
party gives written notice of its intention not to renew. In
June 2001, Mr. Segreras title was changed to Senior
Vice President and Chief Financial Officer. The agreement
provides for an annual base salary of $150,000 and is subject to
increases. Pursuant to the terms of his agreement,
Mr. Segrera is prohibited from competing with Terremark for
a one year period following termination of his employment with
Terremark.

39



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

If either of Brian K. Goodkind or
Jose E. Gonzalez is terminated without cause, each is
entitled to continue to receive his annual base salary and
certain other benefits for a period of six months from the date
of termination.

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

Compensation Committee Interlocks and Insider
Participation

The following directors served as members of the
compensation committee during the 2003 fiscal year: Timothy
Elwes, Miguel J. Rosenfeld and Kenneth I. Starr. None
of the members of the compensation committee was, at any time
either during or before such fiscal year, an employee of ours or
any of our subsidiaries.



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

The following table sets forth information
regarding the beneficial ownership of shares of our voting stock
as of June 13, 2003 by:



| |   |                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------
| |  | each director;                                                                                                             
|
| |  | each of our named executive officers;                                                                                      
|
| |  | each person that is known by us to beneficially
    own more than 5% of the outstanding shares of our voting stock;
    and
|
| |  | all of our directors and named executive officers
    as a group.                                                          

As of June 13, 2003, we had 306,410,198
shares of our common stock outstanding, 20 shares of
Series G Convertible Preferred Stock outstanding and 294
shares of Series H Convertible Preferred Stock outstanding.
The outstanding shares of Series G and Series H
Convertible Preferred Stock, as of June 13, 2003, were
convertible into, and had voting rights equivalent to, 2,036,825
and 294,000 shares of our common stock, respectively.

For purposes of the following table, a person is
deemed to be the beneficial owner of securities that can be
acquired by the person within 60 days from June 13, 2003
upon the exercise of warrants or options or upon the conversion
of debentures or preferred shares. Each beneficial owners
percentage is determined by assuming that options or warrants
that are held by the person, but not those held by any other
person, and which are exercisable within 60 days from
June 13, 2003, have been exercised. Unless otherwise
indicated, we believe that all persons named in this table have
sole voting power and investment power over all the shares
beneficially owned by them. Unless otherwise indicated, the
address of each person listed in the following table is
2601 South Bayshore Drive, Miami, Florida 33133.

|                         |  |                         |            |            |  |  |      | 
|------------------------ |  | ----------------------- | ---------- | ---------- |  |  | ---- | 
|                         |  | Amount and Nature of    |            | Percent of
|Name of Beneficial Owner |  | Beneficial Ownership(1) |            | Class     
|                         |  |                         |            |           
|Common Stock:            |  |                         |            |            |  |  |      | 
|Manuel D. Medina         |  |                         | 42,561,790 | (2)        |  |  | 13.8 | 

40



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|                                                                 |  |                         |            |            |  |  |      | 
|---------------------------------------------------------------- |  | ----------------------- | ---------- | ---------- |  |  | ---- | 
|                                                                 |  | Amount and Nature of    |            | Percent of
|Name of Beneficial Owner                                         |  | Beneficial Ownership(1) |            | Class     
|                                                                 |  |                         |            |           
|Joseph R. Wright, Jr.                                            |  |                         | 4,738,459  | (3)        |  |  | 1.5  | 
|Guillermo Amore                                                  |  |                         | 3,781,034  | (4)        |  |  | 1.2  | 
|Miguel J. Rosenfeld                                              |  |                         | 2,586,855  | (5)        |  |  | *    | 
|Marvin S. Rosen                                                  |  |                         | 1,362,150  | (6)        |  |  | *    | 
|Brian K. Goodkind                                                |  |                         | 492,538    | (7)        |  |  | *    | 
|Jose Maria Figueres-Olsen                                        |  |                         | 300,000    | (8)        |  |  | *    | 
|Joel Schleicher                                                  |  |                         | 240,000    | (9)        |  |  | *    | 
|Jose A. Segrera                                                  |  |                         | 200,001    | (10)       |  |  | *    | 
|Timothy Elwes                                                    |  |                         | 200,000    | (8)        |  |  | *    | 
|Jose E. Gonzalez                                                 |  |                         | 196,167    | (11)       |  |  | *    | 
|Fernando Fernandez-Tapias                                        |  |                         | 34,000     | (12)       |  |  | *    | 
|Arthur L. Money                                                  |  |                         | 34,000     | (12)       |  |  | *    | 
|CRG, LLC                                                         |  |                         | 28,133,334 | (13)       |  |  | 9.2  | 
|Ocean Bank                                                       |  |                         | 20,000,000 | (14)       |  |  | 6.5  | 
|Vistagreen Holdings (Bahamas) Ltd.                               |  |                         | 29,909,128 | (15)       |  |  | 9.8  | 
|Paradise Stream (Delaware) LLC                                   |  |                         | 25,000,000 | (15)       |  |  | 8.2  | 
|All directors and executive officers as a group
    (14 persons) |  |                         | 56,726,994 |            |  |  | 18.1 | 
|Series G Preferred Stock:                                        |  |                         |            |            |  |  |      | 
|Communications Investors Group                                   |  |                         | 2,036,825  | (16)       |  |  | *    | 
|Series H Preferred Stock:                                        |  |                         |            |            |  |  |      | 
|One Vision Worldwide, LLC                                        |  |                         | 294,000    | (17)       |  |  | *    | 



---



| |   |                       
| | - | ----------------------
| | * | Less than one percent.

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For purposes of this table, beneficial ownership
    is computed pursuant to Rule 13d-3 under the Exchange Act;
    the inclusion of shares as beneficially owned should not be
    construed as an admission that such shares are beneficially
    owned for purposes of the Exchange Act. Under the rules of the
    Securities and Exchange Commission, a person is deemed to be a
    beneficial owner of a security he or she has or
    shares the power to vote or direct the voting of such security
    or the power to dispose of or direct the disposition of such
    security. Accordingly, more than one person may be deemed to be
    a beneficial owner of the same security.
|(2) | Includes 200,000 shares of common stock
    underlying options and 889,277 shares of common stock underlying
    convertible debentures. As reported in Mr. Medinas
    Schedule 13D, and any amendments thereto, filed with the
    Securities and Exchange Commission on October 4, 2002,
    these include 7,021,682 shares as to which Mr. Medina has
    sole voting power but does not have dispositive power. Does not
    include shares of common stock which may be acquired upon
    conversion of the Series G Preferred Stock held by
    Communications Investors Group, an entity in which
    Mr. Medina is a partner and holds a 50% interest.                                
|(3) | Includes 3,400,000 shares of common stock
    underlying options and 10,000 shares owned by
    Mr. Wrights sibling, over which Mr. Wright has
    investment control. Does not include 50,000 shares held in trust
    for the benefit of Mr. Wrights grandchildren, with
    respect to which Mr. Wright disclaims beneficial ownership.                                                                                                                                                                                                                                                                                                                                                    
|(4) | Includes 167,000 shares of common stock
    underlying options, 1,131,807 shares of common stock underlying
    convertible debentures, and 10,000 shares owned by Mr.
    Amores sibling, over which Mr. Amore has investment
    control. Also includes 610,909 shares of common stock held by a
    trust, with respect to which Mr. Amore disclaims beneficial
    ownership except to the extent of his pecuniary interest
    therein. Does not include 1,745,550 shares held in a trust for
    the benefit of Mr. Amores grandchildren, with respect
    to which Mr. Amore disclaims beneficial ownership.                                                                           
|(5) | Includes 200,000 shares of common stock
    underlying options and 1,137,208 shares held indirectly by
    Mr. Rosenfeld. Does not include 58,105 shares held by
    Mr. Rosenfelds children and mother, with respect to
    which Mr. Rosenfeld disclaims beneficial ownership.                                                                                                                                                                                                                                                                                                                                                                                                               

41



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##### 



|    |                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------
|(6) | Includes 245,000 shares of common stock
    underlying options and 205,810 shares underlying convertible
    debentures.
|(7) | Includes 288,334 shares of common stock
    underlying options.                                                         
|(8) | Includes 200,000 shares of common stock
    underlying options.                                                         
|(9) | Includes 240,000 shares of common stock
    underlying options.                                                         

|     |                                                                                                                                                                                                                                                                                                   
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Includes 200,001 shares of common stock
    underlying options.                                                                                                                                                                                                                                   
|(11) | Includes 191,667 shares of common stock
    underlying options.                                                                                                                                                                                                                                   
|(12) | Includes 34,000 shares of common stock underlying
    options.                                                                                                                                                                                                                                    
|(13) | As reported in CRG, LLCs Schedule 13D,
    and any amendments thereto, filed with the Securities and
    Exchange Commission on May 9, 2003. Christian Altaba is the
    manager and sole member of CRG, LLC. Christian Altaba is deemed
    the beneficial owner of the shares held by CRG, LLC.
|(14) | The address of the beneficial owner is 780 N.W.
    42nd Avenue, Miami, Florida 33126.                                                                                                                                                                                                            
|(15) | 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 this entity.                                                                      
|(16) | Represents 20 shares of Series G Convertible
    Preferred Stock which are convertible into 2,036,825 shares of
    common stock. The partners of Communications Investors Group are
    Manuel D. Medina and Andres Altaba, each of whom has a 50%
    interest.                                 
|(17) | Represents 294 shares of Series H
    Convertible Preferred Stock which are convertible into 294,000
    shares of common stock.                                                                                                                                                                  

Equity Compensation Plan Information

This table summarizes share and exercise price
information about our equity compensation plans as of
March 31, 2003.

|                                                               |  |                      |            |                      |  |                       |        |  |  |  |           | 
|-------------------------------------------------------------- |  | -------------------- | ---------- | -------------------- |  | --------------------- | ------ |  |  |  | --------- | 
|                                                               |  | 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     |  |                      | 14,608,951 |                      |  | $                     | 1.6862 |  |  |  | 4,391,049 | 
|Equity compensation plans not approved by
    security holders |  |                      | 900,000    |                      |  | $                     | 0.6700 |  |  |  | N/A       | 

ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS

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

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

In the quarter ended September 30, 2001 in
connection with our borrowing of $48.0 million from Ocean
Bank we issued a non-interest bearing note receivable to
Mr. Medina. Mr. Medina has personally guaranteed the
debt with Ocean Bank. Mr. Medina also agreed to repay his
personal indebtedness to Ocean Bank. At that

42



---



##### 



time, we amended Mr. Medinas
employment agreement to indemnify Mr. Medina from any
personal liability related to his guarantees of our debt, to
provide him up to $6.5 million of cash collateral to the
bank should he be unable to repay his personal loans (which is
not anticipated), and provide him the non-interest bearing
$5.0 million loan. (Mr. Medina also guaranteed payment
of approximately $18.0 million in construction payables
until CRG, LLC converted those payables into our shares on
April 30, 2003).


The note was non-interest bearing and did not
have a definite due date. No fee was paid to Medina for his
guarantee of the Ocean Bank loan. In July 2002, the terms of the
non-interest bearing $5.0 million loan were amended. The
amended note has a maturity date of December 5, 2004 and
bears interest subsequent to September 5, 2002.

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

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

In January 2003, we obtained a $53,000 unsecured,
due on demand loan at 10% interest, from Manuel Medina, our
Chief Executive Officer. The loan, including accrued interest
was repaid during January 2003.

In January 2003, we obtained an $80,000
unsecured, due on demand loan at 10% interest from Guillermo
Amore, a member of our board of directors. The loan, including
accrued interest was repaid during February 2003.

In January 2003, we obtained a $38,000 unsecured,
due on demand loan at 10% interest from a corporation controlled
by Andres Altaba, one of our shareholders.

In the quarter ended December 31, 2002,
approximately $1.4 million including accrued interest, of
related party debt was converted to equity at approximately
$0.75 per share.

In November 2002, we obtained a $600,000
unsecured loan at 9% interest due on demand from CRG, LLC.
Subsequent to March 31, 2003, the note, including accrued
interest was repaid.

In March 2003 and October 2002, we made interest
payments of approximately $60,000 and $162,000, respectively
related to notes payable to Mr. Medina and Miguel
Rosenfeld, one of our directors.

In June 2002, we acquired for $250,000, 10% of
the equity in the NAP de las Americas-Madrid S.A. During the
twelve months ended March 31, 2003, we recognized
approximately $340,000 in revenues from NAP de las
Americas-Madrid S.A. In January 2003, we made an additional
investment of $84,000 in NAP de las Americas  Madrid
S.A. We also have the option to purchase up to another 30% of
the NAP de las Americas-Madrid shares owned by the Comunidad and
the Camara at cost, plus LIBOR.

Included in accounts receivable is a non-trade
receivable of approximately $59,000 due from an entity
controlled by Marvin Rosen, a member of our board of directors.
There is also a corresponding payable of approximately $59,000
to the same entity.

Included in interest income is approximately
$61,000 from a $5.0 million receivable from Mr. Medina.

ITEM 14. CONTROLS AND
PROCEDURES

Based on their evaluation as of a date within
90 days prior to the filing date of this Form 10-K,
our Chief Executive Officer and Chief Financial Officer have
concluded that our disclosure controls and procedures (as
defined in Rules 13a-14(c) and 15d-14(c) under the
Securities Exchange Act of 1934, as amended) are effective.
There have been no significant changes in internal controls or
in other factors that could significantly affect these controls
subsequent to the date of their evaluation.

43



---



##### 



ITEM 15. PRINCIPAL ACCOUNTANT FEES
AND SERVICES

Audit
Fees

We were billed $329,000, in aggregate, by
PricewaterhouseCoopers LLP for professional services
rendered for the audit of our annual financial statements for
the fiscal year ended March 31, 2003 and the reviews of the
financial statements included in our filings on Forms 10-Q
for that fiscal year.

All Other
Fees

PricewaterhouseCoopers LLP did not provide
any professional services, other than the audit and review
services described above, for the fiscal year ended
March 31, 2003. PricewaterhouseCoopers LLP did not
provide any services related to financial information systems
design and implementation during the fiscal year ended
March 31, 2003.

PART IV



|          |                                                                     
|--------- | --------------------------------------------------------------------
|ITEM  16. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
    REPORTS ON FORM 8-K.

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

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

(b) No reports were filed on Form 8-K
during the fourth quarter of the fiscal year ended
March 31, 2003.

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

|        |     |                     |  |                                                                                                                                                                                                                                            
|------- | --- | ------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |                    
|Number  |     | Exhibit Description
|        |     |                    
|        | 2.1 |                     |  | Agreement for Sale of Assets by and between ITV
    Communications, Inc. and Netmatics, Inc., dated January 11,
    1996, and Promissory Note and Security Agreement dated
    January 16, 1996(1)                                         
|        | 2.2 |                     |  | Agreement of Merger between AVIC Group
    International, Inc., a Colorado corporation, with and into AVIC
    Group International, Inc., a Delaware corporation dated
    July 10, 1996(2)                                                
|        | 2.3 |                     |  | Agreement and Plan of Merger by and between
    Terremark Holdings, Inc. and AmTec, Inc., dated as of
    November 24, 1999, as amended by that certain Amendment to
    Agreement and Plan of Merger, dated as of February 11,
    2000(3)
|        | 2.4 |                     |  | Letter Agreement dated January 12, 2001
    among MP Telecom, LLC, Terremark Worldwide, Inc., Clifford J.
    Preminger, Thomas M. Mulroy and Manuel Medina(4)                                                                             
|        | 3.1 |                     |  | Certificate of Merger of Terremark Holdings, Inc.
    with and into AmTec, Inc.(5)                                                                                                                                                         
|        | 3.2 |                     |  | Restated Certificate of Incorporation of the
    Company(5)                                                                                                                                                                                
|        | 3.3 |                     |  | Restated Bylaws of the Company(5)                                                                                                                                                                                                          
|        | 3.4 |                     |  | Certificate of Designations of Preferences of
    Series G Convertible Preferred Stock of the Company(5)                                                                                                                                   
|        | 3.5 |                     |  | Certificate of Designations of Preferences of
    Series H Convertible Preferred Stock of the Company(6)                                                                                                                                   
|        | 4.1 |                     |  | Specimen Stock Certificate(1)                                                                                                                                                                                                              
|        | 4.2 |                     |  | Form of 13% Subordinated Convertible Debenture,
    due December 31, 2005(7)                                                                                                                                                               
|        | 4.3 |                     |  | Form of 13.125% Subordinated Convertible
    Debenture, due December 31, 2005(8)                                                                                                                                                           
|        | 4.4 |                     |  | Form of 9% Subordinated Convertible Debenture,
    due April 30, 2006                                                                                                                                                                      
|        | 4.5 |                     |  | Form of Warrant for the Purchase of Common
    Stock(9)                                                                                                                                                                                    
|        | 4.6 |                     |  | Form of 10% Subordinated Convertible Debenture,
    due April 30, 2006                                                                                                                                                                     

44



---



##### 



|        |       |                     |  |                                                                                                                                                                                                    
|------- | ----- | ------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                    
|Number  |       | Exhibit Description
|        |       |                    
|        | 10.1  |                     |  | 1995 Stock Option Plan(10)                                                                                                                                                                         
|        | 10.2  |                     |  | 1996 Stock Option Plan(10)                                                                                                                                                                         
|        | 10.3  |                     |  | Real Property Lease between Lexreal Associates
    and the Company dated May 8, 1995(10)                                                                                                           
|        | 10.4  |                     |  | Form of Indemnification Agreement for directors
    and officers of the Company(2)                                                                                                                 
|        | 10.5  |                     |  | Employment Agreement with Joseph R. Wright(11)                                                                                                                                                     
|        | 10.6  |                     |  | Employment Agreement with Manuel Medina(12)                                                                                                                                                        
|        | 10.7  |                     |  | Amendment to Employment Agreement with Manuel
    Medina(13)                                                                                                                                       
|        | 10.8  |                     |  | Employment Agreement with Brian Goodkind(14)                                                                                                                                                       
|        | 10.9  |                     |  | Amended and Restated Credit Agreement between the
    Company and Ocean Bank, dated September 5, 2001(15)                                                                                          
|        | 10.10 |                     |  | Net Premises Lease by and between Rainbow
    Property Management, LLC and Coloconnection, Inc.(16)                                                                                                
|        | 10.11 |                     |  | Basic Lease Information Rider T-Rex Technology
    Center of the Americas @ Miami, dated October 16, 2000,
    between Technology Center of the Americas, LLC and NAP of the
    Americas, Inc.(16)
|        | 10.12 |                     |  | Agreements between the Company and Telcordia
    Technologies, Inc.(16)                                                                                                                            
|        | 10.13 |                     |  | Agreement between Terremark Technology
    Contractors Inc., and Cupertino Electric, Inc., dated
    November 1, 2000(16)                                                                          
|        | 10.14 |                     |  | Amended and Restated Debt Satisfaction Agreement
    between the Registrant and CRG, LLC, dated December 5,
    2002(16)                                                                           
|        | 10.15 |                     |  | Debt Satisfaction Agreement between the Company
    and CRG, LLC, dated November 11, 2002(16)                                                                                                      
|        | 10.16 |                     |  | Agreement between Terremark Technology
    Contractors Inc., and Kinetics Systems, Inc., dated
    December 28, 2000(16)                                                                           
|        | 10.17 |                     |  | Collateral Agent Agreement between the Company,
    NAP of the Americas, Inc. and Bank of New York Trust Company of
    Florida, N.A., dated April 30, 2003*                                       
|        | 10.18 |                     |  | Second Leasehold Mortgage and Security Agreement
    between NAP of the Americas, Inc. and Bank of New York Trust
    Company of Florida, N.A., dated April 30, 2003*                              
|        | 10.19 |                     |  | Subordination Agreement between Bank of New York
    Trust Company of Florida, N.A. and Ocean Bank, dated
    April 30, 2003*                                                                      
|        | 10.20 |                     |  | Second Assignment of Leases and Rents and
    Security Deposits between NAP of the Americas, Inc. and Bank of
    New York Trust Company of Florida, N.A., dated April 30,
    2003*               
|        | 10.21 |                     |  | Debt Conversion Agreement between the Company,
    NAP of the Americas and Ocean Bank, dated April 30, 2003*                                                                                       
|        | 21    |                     |  | Subsidiaries of the Company*                                                                                                                                                                       
|        | 99.1  |                     |  | Certification of the Chief Executive Officer
    pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*                                     
|        | 99.2  |                     |  | Certification of the Chief Financial Officer
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002*                                     






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

| |     |                                                                                                               
| | --- | --------------------------------------------------------------------------------------------------------------
| | (1) | Previously filed as part of the Companys
    Current Report on Form 8-K dated March 6, 1997.                 
| | (2) | Previously filed as part of the Companys
    Definitive Proxy Statement filed on April 18, 1996.             
| | (3) | Previously filed as part of the Companys
    Definitive Proxy Statement filed on March 24, 2000.             
| | (4) | Previously filed as part of the Companys
    Current Report on Form 8-K dated February 28, 2001.             
| | (5) | Previously filed as an exhibit to the
    Companys Registration Statement on Form S-3 filed
    May 15, 2000.
| | (6) | Previously filed as exhibit 3.5 to the
    Companys Annual Report on Form 10-K filed on
    July 16, 2001.   

45



---



##### 



| |     |                                                                                                                   
| | --- | ------------------------------------------------------------------------------------------------------------------
| | (7) | Previously filed as exhibit 4.1 to the
    Companys Quarterly Report on Form 10-Q filed on
    February 14, 2001.
| | (8) | Previously filed as exhibit 4.5 to the
    Companys Annual Report on Form 10-K filed on
    July 15, 2002.       
| | (9) | Previously filed as exhibit 4.1 to the
    Companys Current Report on Form 8-K filed on
    April 15, 2003.      

|     |                                                                                                                                                     
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | 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.
|(11) | Previously filed as exhibit 10.6 to the
    Companys Annual Report on Form 10-KSB filed
    June 29, 2000.                                         
|(12) | Previously filed as exhibit 10.6 to the
    Companys Annual Report on Form 10-K filed on
    July 16, 2001.                                        
|(13) | Previously filed as exhibit 10.1 to the
    Companys Quarterly report on Form 10-Q filed on
    November 14, 2001.                                 
|(14) | Previously filed as exhibit 10.2 to the
    Companys Quarterly Report on Form 10-Q filed on
    November 14, 2000.                                 
|(15) | Previously filed as exhibit 10.2 to the
    Companys Quarterly report on Form 10-Q filed on
    November 14, 2001.                                 
|(16) | Previously filed as an exhibit to the
    Companys Current Report on Form 8-K filed on
    April 15, 2003.                                         

46



---



##### 



SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 30th day of June
2003.



| |                          
| | -------------------------
| | 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/ JOSÉ A. SEGRERA

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

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

|                                                       |  |                                                                                                    |  |              
|------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------- |  | -------------
|Signature                                              |  | Title                                                                                              |  | Date         
|                                                       |  |                                                                                                    |  |              
|/s/ MANUEL D. MEDINAManuel D. Medina                   |  | Chairman of the Board, President
    and Chief Executive Officer
    (Principal Executive Officer) |  | June 30, 2003
|                                                      
|/s/ GUILLERMO AMOREGuillermo Amore                     |  | Director                                                                                           |  | June 30, 2003
|                                                      
|/s/ TIMOTHY ELWESTimothy Elwes                         |  | Director                                                                                           |  | June 30, 2003
|                                                      
|Fernando Fernandez-Tapias                              |  | Director                                                                                           |  |              
|                                                      
|/s/ JOSÉ MARIA FIGUERES-OLSENJosé Maria Figueres-Olsen |  | Director                                                                                           |  | June 30, 2003
|                                                      
|/s/ HON. ARTHUR L. MONEYHon. Arthur L. Money           |  | Director                                                                                           |  | June 30, 2003
|                                                      
|/s/ MARVIN S. ROSENMarvin S. Rosen                     |  | Director                                                                                           |  | June 30, 2003
|                                                      
|/s/ MIGUEL J. ROSENFELDMiguel J. Rosenfeld             |  | Director                                                                                           |  | June 30, 2003
|                                                      
|/s/ JOEL A. SCHLEICHERJoel A. Schleicher               |  | Director                                                                                           |  | June 30, 2003
|                                                      
|/s/ JOSEPH R. WRIGHT, JR.Joseph R. Wright, Jr.         |  | Director                                                                                           |  | June 30, 2003
|                                                      
|/s/ JOSÉ A. SEGRERAJosé A. Segrera                     |  | Executive Vice President
    and Chief Financial Officer
    (Principal Accounting Officer)        |  | June 30, 2003

47



---



##### 



CERTIFICATIONS

I, Manuel D. Medina, certify that:

1. I have reviewed this annual report on
Form 10-K of Terremark Worldwide, Inc.;

2. Based on my knowledge, this annual report
does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial
statements, and other financial information included in this
annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;

4. The registrants other certifying
officers and I are responsible for establishing and maintaining
disclosure controls and procedures(as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5. The registrants other certifying
officers and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons
performing the equivalent functions):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6. The registrants other certifying
officers and I have indicated in this annual report whether
there were significant changes in internal controls or in other
factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.

Date: June 30, 2003

/s/ Manuel D. Medina




Manuel D. Medina 
 Chief Executive Officer


48



---



##### 



I, Jose A. Segrera, certify that:

1. I have reviewed this annual report on
Form 10-K of Terremark Worldwide, Inc.;

2. Based on my knowledge, this annual report
does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial
statements, and other financial information included in this
annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;

4. The registrants other certifying
officers and I are responsible for establishing and maintaining
disclosure controls and procedures(as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5. The registrants other certifying
officers and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons
performing the equivalent functions):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6. The registrants other certifying
officers and I have indicated in this annual report whether
there were significant changes in internal controls or in other
factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.

Date: June 30, 2003

/s/ Jose A. Segrera




Jose A. Segrera 
 Chief Financial Officer


49



---



##### 



REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS

To the Board of Directors and

Shareholders of Terremark Worldwide, Inc.


In our opinion, the accompanying consolidated
balance sheets and the related consolidated statements of
operations, of changes in stockholders deficit and of cash
flows present fairly, in all material respects, the financial
position of Terremark Worldwide, Inc. and its subsidiaries at
March 31, 2003 and 2002, and the results of their
operations and their cash flows for each of the three years in
the period ended March 31, 2003 in conformity with
accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of
the Companys management, our responsibility is to express
an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.

The accompanying consolidated financial
statements have been prepared assuming the Company will continue
as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has suffered
recurring losses from operations and lack of committed sources
of additional debt or equity to support deficits in working
capital that raise substantial doubt about its ability to
continue as a going concern. Managements plans in regard
to these matters are also described in Note 2. The
consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

As discussed in Note 3 to the consolidated
financial statements, on April 1, 2002, the Company adopted
Financial Accounting Standards No. 142 Goodwill and
Other Intangible Assets and No. 144 Accounting
for the Impairment or Disposal of Long-Lived Assets.

/s/ PRICEWATERHOUSECOOPERS LLP

Fort Lauderdale, Florida

June 30, 2003


F-1



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

|                                                                                                                                                                       |                                             |           |              |             |   |   |              |             |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | --------- | ------------ | ----------- | - | - | ------------ | ----------- | -
|                                                                                                                                                                       |                                             |          
|                                                                                                                                                                       |                                             | March 31,
|                                                                                                                                                                       |                                             |          
|                                                                                                                                                                       |                                             | 2003      |              | 2002       
|                                                                                                                                                                       |                                             |           |              |            
|ASSETS                                                                                                                                                                 |                                             |           |              |             |   |   |              |            
|Current assets:                                                                                                                                                        |                                             |           |              |             |   |   |              |            
|Cash and cash equivalents                                                                                                                                              |                                             | $         | 1,408,190    |             |   | $ | 283,078      |            
|Accounts receivable, net of allowance for
    doubtful accounts of $120,340 and $270,316                                                                               |                                             |           | 494,736      |             |   |   | 1,621,978    |            
|Contracts receivable                                                                                                                                                   |                                             |           | 29,204       |             |   |   | 1,362,836    |            
|                                                                                                                                                                       |                                             |           |              |             |   |   |              |            
|                                                                                                                                                                       | Total current assets                        |           |              | 1,932,130   |   |   |              | 3,267,892   |  
|Investment in unconsolidated entities, net                                                                                                                             |                                             |           | 827,667      |             |   |   | 489,855      |            
|Restricted cash                                                                                                                                                        |                                             |           | 768,905      |             |   |   | 757,573      |            
|Property and equipment, net                                                                                                                                            |                                             |           | 54,482,964   |             |   |   | 61,088,987   |            
|Other assets                                                                                                                                                           |                                             |           | 1,589,977    |             |   |   | 2,199,454    |            
|Identifiable intangible assets                                                                                                                                         |                                             |           |             |             |   |   | 904,964      |            
|Goodwill                                                                                                                                                               |                                             |           | 9,999,870    |             |   |   | 12,315,206   |            
|                                                                                                                                                                       |                                             |           |              |             |   |   |              |            
|                                                                                                                                                                       | TOTAL ASSETS                                |           | $            | 69,601,513  |   |   | $            | 81,023,931  |  
|                                                                                                                                                                       |                                             |           |              |             |   |   |              |            
|                                                                                                                                                                      
|LIABILITIES AND STOCKHOLDERS
    DEFICIT                                                                                                                              |                                             |           |              |             |   |   |              |            
|Current liabilities:                                                                                                                                                   |                                             |           |              |             |   |   |              |            
|Current portion of notes payable (includes
    $138,000 and $4,250,000 due to related parties)                                                                         |                                             | $         | 1,464,963    |             |   | $ | 50,752,209   |            
|Construction payables                                                                                                                                                  |                                             |           | 22,012,162   |             |   |   | 26,250,729   |            
|Accounts payable and accrued expenses                                                                                                                                  |                                             |           | 8,434,373    |             |   |   | 8,765,523    |            
|Current portion of capital lease obligations                                                                                                                           |                                             |           | 2,477,467    |             |   |   | 2,079,294    |            
|Interest payable                                                                                                                                                       |                                             |           | 4,492,805    |             |   |   | 2,347,742    |            
|Net liabilities of discontinued operations                                                                                                                             |                                             |           | 1,199,531    |             |   |   | 1,394,010    |            
|Convertible debt                                                                                                                                                       |                                             |           | 900,000      |             |   |   |             |            
|                                                                                                                                                                       |                                             |           |              |             |   |   |              |            
|                                                                                                                                                                       | Total current liabilities                   |           |              | 40,981,301  |   |   |              | 91,589,507  |  
|Notes payable, less current portion (includes
    $4,100,000 and $2,950,000 due to related parties)                                                                    |                                             |           | 56,174,938   |             |   |   | 3,128,091    |            
|Convertible debt (includes $3,450,000 and
    $4,700,000 due to related parties)                                                                                       |                                             |           | 14,005,000   |             |   |   | 30,655,000   |            
|Deferred rent                                                                                                                                                          |                                             |           | 2,610,623    |             |   |   | 1,475,175    |            
|Capital lease obligations, less current portion                                                                                                                        |                                             |           | 762,470      |             |   |   | 2,136,076    |            
|Deferred revenue                                                                                                                                                       |                                             |           | 971,150      |             |   |   | 815,826      |            
|                                                                                                                                                                       |                                             |           |              |             |   |   |              |            
|                                                                                                                                                                       | TOTAL LIABILITIES                           |           |              | 115,505,482 |   |   |              | 129,799,675 |  
|                                                                                                                                                                       |                                             |           |              |             |   |   |              |            
|Commitments and contingencies (Note 14)                                                                                                                                |                                             |           |             |             |   |   |             |            
|                                                                                                                                                                       |                                             |           |              |             |   |   |              |            
|Series H redeemable convertible preferred
    stock: $.001 par value, 294 shares issued and outstanding                                                                |                                             |           | 556,729      |             |   |   | 500,000      |            
|                                                                                                                                                                       |                                             |           |              |             |   |   |              |            
|Series G convertible preferred stock: $.001
    par value, 20 shares issued and outstanding                                                                            |                                             |           | 1            |             |   |   | 1            |            
|Common stock: $.001 par value, 400,000,000 shares
    authorized; 256,276,864 and 200,882,250 shares issued, of which
    -0-and 1,400,000 shares are held in treasury |                                             |           | 256,277      |             |   |   | 200,882      |            
|Paid in capital                                                                                                                                                        |                                             |           | 169,204,208  |             |   |   | 125,652,119  |            
|Accumulated deficit                                                                                                                                                    |                                             |           | (214,324,140 | )           |   |   | (173,096,835 | )          
|Common stock subscriptions                                                                                                                                             |                                             |           |             |             |   |   | 950,000      |            
|Common stock warrants                                                                                                                                                  |                                             |           | 1,857,581    |             |   |   | 2,879,413    |            
|Common stock options                                                                                                                                                   |                                             |           | 1,545,375    |             |   |   | 1,566,801    |            
|Treasury stock, at cost                                                                                                                                                |                                             |           |             |             |   |   | (2,428,125   | )          
|Note receivable  related party (Note 9)                                                                                                                               |                                             |           | (5,000,000   | )           |   |   | (5,000,000   | )          
|                                                                                                                                                                       |                                             |           |              |             |   |   |              |            
|                                                                                                                                                                       | TOTAL STOCKHOLDERS DEFICIT                 |           |              | (46,460,698 | ) |   |              | (49,275,744 | )
|                                                                                                                                                                       |                                             |           |              |             |   |   |              |            
|                                                                                                                                                                       | TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT |           | $            | 69,601,513  |   |   | $            | 81,023,931  |  
|                                                                                                                                                                       |                                             |           |              |             |   |   |              |            

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

F-2



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                             |                                                                                 |                                       |             |             |             |      |             |             |            |   |              |             |            |  
|-------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------- | ----------- | ----------- | ----------- | ---- | ----------- | ----------- | ---------- | - | ------------ | ----------- | ---------- | -
|                                             |                                                                                 |                                      
|                                             |                                                                                 | For the twelve months ended March 31,
|                                             |                                                                                 |                                      
|                                             |                                                                                 | 2003                                  |             | 2002        |             | 2001
|                                             |                                                                                 |                                       |             |             |             |     
|Revenues                                     |                                                                                 |                                       |             |             |             |      |             |             |            |   |              |            
|                                             | Data center                                                                     |                                       | $           | 9,937,899   |             |      | $           | 3,215,897   |            |   | $            | 252,906     |           
|                                             | Data center  contract termination fee                                          |                                       |             | 1,095,086   |             |      |             |            |            |   |              |            |           
|                                             | Real estate sales                                                               |                                       |             |            |             |      |             |            |            |   |              | 2,752,748   |           
|                                             | Development, commission and construction fees                                   |                                       |             | 197,413     |             |      |             | 3,218,330   |            |   |              | 12,484,272  |           
|                                             | Management fees                                                                 |                                       |             | 179,505     |             |      |             | 1,183,570   |            |   |              | 2,212,326   |           
|                                             | Construction contracts                                                          |                                       |             | 3,283,800   |             |      |             | 8,254,687   |            |   |              | 22,445,156  |           
|                                             |                                                                                 |                                       |             |             |             |      |             |             |            |   |              |            
|                                             |                                                                                 | Operating revenues                    |             |             | 14,693,703  |      |             |             | 15,872,484 |   |              |             | 40,147,408 |  
|                                             |                                                                                 |                                       |             |             |             |      |             |             |            |   |              |            
|Expenses                                     |                                                                                 |                                       |             |             |             |      |             |             |            |   |              |            
|                                             | Data center operations, excluding depreciation                                  |                                       |             | 11,234,833  |             |      |             | 11,230,513  |            |   |              | 1,223,112   |           
|                                             | Start up costs  data centers                                                   |                                       |             |            |             |      |             | 3,383,127   |            |   |              | 6,507,517   |           
|                                             | Cost of real estate sold                                                        |                                       |             |            |             |      |             |            |            |   |              | 2,134,572   |           
|                                             | Construction contract expenses, excluding
    depreciation                      |                                       |             | 2,968,142   |             |      |             | 7,397,524   |            |   |              | 20,347,165  |           
|                                             | General and administrative                                                      |                                       |             | 12,507,121  |             |      |             | 15,561,042  |            |   |              | 19,929,438  |           
|                                             | Sales and marketing                                                             |                                       |             | 4,200,858   |             |      |             | 3,621,176   |            |   |              | 2,768,890   |           
|                                             | Depreciation and amortization                                                   |                                       |             | 5,092,749   |             |      |             | 7,257,151   |            |   |              | 3,257,292   |           
|                                             | Impairment of long-lived assets                                                 |                                       |             | 4,020,300   |             |      |             | 18,973,670  |            |   |              | 4,155,178   |           
|                                             |                                                                                 |                                       |             |             |             |      |             |             |            |   |              |            
|                                             |                                                                                 | Operating expenses                    |             |             | 40,024,003  |      |             |             | 67,424,203 |   |              |             | 60,323,164 |  
|                                             |                                                                                 |                                       |             |             |             |      |             |             |            |   |              |            
|                                             | Loss from operations                                                            |                                       |             | (25,330,300 | )           |      |             | (51,551,719 | )          |   |              | (20,175,756 | )         
|                                             |                                                                                 |                                       |             |             |             |      |             |             |            |   |              |            
|Other (expenses) income                      |                                                                                 |                                       |             |             |             |      |             |             |            |   |              |            
|                                             | Inducement on debt conversion                                                   |                                       |             | (4,871,245  | )           |      |             |            |            |   |              |            |           
|                                             | Interest expense                                                                |                                       |             | (11,007,683 | )           |      |             | (9,750,473  | )          |   |              | (1,097,683  | )         
|                                             | Dividend on preferred stock                                                     |                                       |             | (29,988     | )           |      |             | (26,741     | )          |   |              | (34,806     | )         
|                                             | Gain on sale of real estate held for sale                                       |                                       |             |            |             |      |             | 4,185,728   |            |   |              |            |           
|                                             | Other                                                                           |                                       |             | (124,367    | )           |      |             | (326,247    | )          |   |              | (570,749    | )         
|                                             | Interest income                                                                 |                                       |             | 136,278     |             |      |             | 97,237      |            |   |              | 505,743     |           
|                                             |                                                                                 |                                       |             |             |             |      |             |             |            |   |              |            
|                                             |                                                                                 | Total other expenses                  |             |             | (15,897,005 | )    |             |             | (5,820,496 | ) |              |             | (1,197,495 | )
|                                             |                                                                                 |                                       |             |             |             |      |             |             |            |   |              |            
|                                             | Loss from continuing operations before income
    taxes                         |                                       |             | (41,227,305 | )           |      |             | (57,372,215 | )          |   |              | (21,373,251 | )         
|Income taxes                                 |                                                                                 |                                       |            |             |             |      |            |             |            |   |             |            
|                                             |                                                                                 |                                       |             |             |             |      |             |             |            |   |              |            
|Loss from continuing operations              |                                                                                 |                                       | (41,227,305 | )           |             |      | (57,372,215 | )           |            |   | (21,373,251  | )          
|                                             |                                                                                 |                                       |             |             |             |      |             |             |            |   |              |            
|                                             | Loss from discontinued operations, net of income
    taxes of $-0-              |                                       |             |            |             |      |             |            |            |   |              | (21,499,587 | )         
|                                             | Loss on disposition of discontinued operations,
    net of income taxes of $-0- |                                       |             |            |             |      |             |            |            |   |              | (61,126,824 | )         
|                                             |                                                                                 |                                       |             |             |             |      |             |             |            |   |              |            
|Net loss                                     |                                                                                 | $                                     | (41,227,305 | )           |             | $    | (57,372,215 | )           |            | $ | (103,999,662 | )          
|                                             |                                                                                 |                                       |             |             |             |      |             |             |            |   |              |            
|Basic and diluted net loss per common share: |                                                                                 |                                       |             |             |             |      |             |             |            |   |              |            
|                                             | Continuing operations                                                           |                                       | $           | (.18        | )           |      | $           | (.29        | )          |   | $            | (.11        | )         
|                                             | Discontinued operations                                                         |                                       |             |            |             |      |             |            |            |   |              | (.44        | )         
|                                             |                                                                                 |                                       |             |             |             |      |             |             |            |   |              |            
|                                             | Net loss                                                                        |                                       | $           | (.18        | )           |      | $           | (.29        | )          |   | $            | (.55        | )         
|                                             |                                                                                 |                                       |             |             |             |      |             |             |            |   |              |            
|                                             | Weighted average common shares outstanding                                      |                                       |             | 235,209,310 |             |      |             | 199,243,146 |            |   |              | 188,550,498 |           
|                                             |                                                                                 |                                       |             |             |             |      |             |             |            |   |              |            

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

F-3



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS DEFICIT

|                                        |                               |                      |           |                  |   |            |             |            |  |               |         |          |  |         |             |            |  |                 |          |          |  |   |            |           |  |   |           |   |  |   |            |   |  |   |            |   |  |   |              |   | 
|--------------------------------------- | ----------------------------- | -------------------- | --------- | ---------------- | - | ---------- | ----------- | ---------- |  | ------------- | ------- | -------- |  | ------- | ----------- | ---------- |  | --------------- | -------- | -------- |  | - | ---------- | --------- |  | - | --------- | - |  | - | ---------- | - |  | - | ---------- | - |  | - | ------------ | - | 
|                                        |                               |                     
|                                        |                               | Stockholders Equity
|                                        |                               |                     
|                                        |                               |                      |           |                  |   |           
|                                        |                               |                      |           | Common Stock Par |   |           
|                                        |                               |                      |           | Value $.001      |   |           
|                                        |                               |                      |           |                  |   | Additional |             |            |  | Common        |         | Common   |  |        
|                                        |                               | Preferred            |           | Issued           |   |            |             | Paid-in    |  | Stock         |         | Stock    |  | Stock   |             | Treasury   |  | Note Receivable |          | Retained
|                                        |                               | Stock                |           | Shares           |   | Amount     |             | Capital    |  | Subscriptions |         | Warrants |  | Options |             | Stock      |  | Related Party   |          | Deficit 
|                                        |                               |                      |           |                  |   |            |             |            |  |               |         |          |  |         |             |            |  |                 |          |         
|Balance at March 31, 2000               |                               |                      | 4,176,693 |                  |   |            | 70,685,845  |            |  |               | 70,686  |          |  |         | 7,954,010   |            |  |                 |         |          |  |   |           |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   | (11,724,958  | )
|Effect of AmTec merger:                 |                               |                      |           |                  |   |            |             |            |  |               |         |          |  |         |             |            |  |                 |          |          |  |   |            |           |  |   |           |   |  |   |            |   |  |   |            |   |  |   |              |  
|                                        | conversion of preferred stock |                      |           | (4,176,693       | ) |            |             | 7,853,985  |  |               |         | 7,854    |  |         |             | 4,168,839  |  |                 |          |         |  |   |            |          |  |   |           |  |  |   |            |  |  |   |            |  |  |   |              |  | 
|                                        | assumption of AmTec equity    |                      |           | 1                |   |            |             | 38,289,500 |  |               |         | 38,289   |  |         |             | 46,923,782 |  |                 |          |         |  |   |            | 1,687,038 |  |   |           |  |  |   |            |  |  |   |            |  |  |   |              |  | 
|Sale of common stock                    |                               |                      |          |                  |   |            | 68,722,349  |            |  |               | 68,722  |          |  |         | 28,054,203  |            |  |                 |         |          |  |   |           |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Common stock issued in
    acquisitions |                               |                      |          |                  |   |            | 14,412,500  |            |  |               | 14,413  |          |  |         | 37,531,045  |            |  |                 |         |          |  |   |           |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Exercise of warrants                    |                               |                      |          |                  |   |            | 54,000      |            |  |               | 54      |          |  |         | 190,161     |            |  |                 |         |          |  |   | (21,640    | )         |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Exercise of stock options               |                               |                      |          |                  |   |            | 489,000     |            |  |               | 489     |          |  |         | 517,504     |            |  |                 |         |          |  |   |           |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Warrants issued                         |                               |                      |          |                  |   |            |            |            |  |               |        |          |  |         |            |            |  |                 |         |          |  |   | 394,000    |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Stock options issued                    |                               |                      |          |                  |   |            |            |            |  |               |        |          |  |         |            |            |  |                 |         |          |  |   |           |           |  |   | 1,716,138 |   |  |   |           |   |  |   |           |   |  |   |             |  
|Treasury stock acquisitions             |                               |                      |          |                  |   |            |            |            |  |               |        |          |  |         |            |            |  |                 |         |          |  |   |           |           |  |   |          |   |  |   | (2,428,125 | ) |  |   |           |   |  |   |             |  
|Net loss                                |                               |                      |          |                  |   |            |            |            |  |               |        |          |  |         |            |            |  |                 |         |          |  |   |           |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   | (103,999,662 | )
|                                        |                               |                      |           |                  |   |            |             |            |  |               |         |          |  |         |             |            |  |                 |          |          |  |   |            |           |  |   |           |   |  |   |            |   |  |   |            |   |  |   |              |  
|Balance at March 31, 2001               |                               |                      | 1         |                  |   |            | 200,507,179 |            |  |               | 200,507 |          |  |         | 125,339,544 |            |  |                 |         |          |  |   | 2,059,398  |           |  |   | 1,716,138 |   |  |   | (2,428,125 | ) |  |   |           |   |  |   | (115,724,620 | )
|Exercise of stock options               |                               |                      |          |                  |   |            | 115,000     |            |  |               | 115     |          |  |         | 40,135      |            |  |                 |         |          |  |   |           |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Forfeiture of stock options             |                               |                      |          |                  |   |            |            |            |  |               |        |          |  |         |            |            |  |                 |         |          |  |   |           |           |  |   | (169,337  | ) |  |   |           |   |  |   |           |   |  |   |             |  
|Warrants issued                         |                               |                      |          |                  |   |            |            |            |  |               |        |          |  |         |            |            |  |                 |         |          |  |   | 849,015    |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Exercise of warrants                    |                               |                      |          |                  |   |            | 100,000     |            |  |               | 100     |          |  |         | 29,900      |            |  |                 |         |          |  |   | (29,000    | )         |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Stock options issued                    |                               |                      |          |                  |   |            |            |            |  |               |        |          |  |         |            |            |  |                 |         |          |  |   |           |           |  |   | 20,000    |   |  |   |           |   |  |   |           |   |  |   |             |  
|Conversion of debt                      |                               |                      |          |                  |   |            | 160,071     |            |  |               | 160     |          |  |         | 242,540     |            |  |                 |         |          |  |   |           |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Common stock subscriptions              |                               |                      |          |                  |   |            |            |            |  |               |        |          |  |         |            |            |  |                 | 950,000  |          |  |   |           |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   |              |  
|Note receivable-related party           |                               |                      |          |                  |   |            |            |            |  |               |        |          |  |         |            |            |  |                 |         |          |  |   |           |           |  |   |          |   |  |   |           |   |  |   | (5,000,000 | ) |  |   |             |  
|Net loss                                |                               |                      |          |                  |   |            |            |            |  |               |        |          |  |         |            |            |  |                 |         |          |  |   |           |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   | (57,372,215  | )
|                                        |                               |                      |           |                  |   |            |             |            |  |               |         |          |  |         |             |            |  |                 |          |          |  |   |            |           |  |   |           |   |  |   |            |   |  |   |            |   |  |   |              |  
|Balance at March 31, 2002               |                               |                      | 1         |                  |   |            | 200,882,250 |            |  |               | 200,882 |          |  |         | 125,652,119 |            |  |                 | 950,000  |          |  |   | 2,879,413  |           |  |   | 1,566,801 |   |  |   | (2,428,125 | ) |  |   | (5,000,000 | ) |  |   | (173,096,835 | )
|Sale of common stock                    |                               |                      |          |                  |   |            | 33,148,824  |            |  |               | 33,149  |          |  |         | 21,395,161  |            |  |                 | (950,000 | )        |  |   |           |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Retirement of treasury shares           |                               |                      |          |                  |   |            | (1,400,000  | )          |  |               | (1,400  | )        |  |         | (2,426,725  | )          |  |                 |         |          |  |   |           |           |  |   |          |   |  |   | 2,428,125  |   |  |   |           |   |  |   |             |  
|Warrants issued                         |                               |                      |          |                  |   |            |            |            |  |               |        |          |  |         |            |            |  |                 |         |          |  |   | 1,221,979  |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Exercise of warrants                    |                               |                      |          |                  |   |            | 818,000     |            |  |               | 818     |          |  |         | 372,100     |            |  |                 |         |          |  |   | (364,738   | )         |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Conversion of debt                      |                               |                      |          |                  |   |            | 22,827,790  |            |  |               | 22,828  |          |  |         | 22,311,054  |            |  |                 |         |          |  |   |           |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Warrants expired                        |                               |                      |          |                  |   |            |            |            |  |               |        |          |  |         | 1,879,073   |            |  |                 |         |          |  |   | (1,879,073 | )         |  |   |          |   |  |   |           |   |  |   |           |   |  |   |             |  
|Forfeiture of stock options             |                               |                      |          |                  |   |            |            |            |  |               |        |          |  |         | 21,426      |            |  |                 |         |          |  |   |           |           |  |   | (21,426   | ) |  |   |           |   |  |   |           |   |  |   |             |  
|Net loss                                |                               |                      |          |                  |   |            |            |            |  |               |        |          |  |         |            |            |  |                 |         |          |  |   |           |           |  |   |          |   |  |   |           |   |  |   |           |   |  |   | (41,227,305  | )
|                                        |                               |                      |           |                  |   |            |             |            |  |               |         |          |  |         |             |            |  |                 |          |          |  |   |            |           |  |   |           |   |  |   |            |   |  |   |            |   |  |   |              |  
|Balance at March 31, 2003               |                               |                      | 1         |                  |   |            | 256,276,864 |            |  | $             | 256,277 |          |  | $       | 169,204,208 |            |  | $               |         |          |  | $ | 1,857,581  |           |  | $ | 1,545,375 |   |  | $ |           |   |  | $ | (5,000,000 | ) |  | $ | (214,324,140 | )
|                                        |                               |                      |           |                  |   |            |             |            |  |               |         |          |  |         |             |            |  |                 |          |          |  |   |            |           |  |   |           |   |  |   |            |   |  |   |            |   |  |   |              |  

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

F-4



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                               |                                                 |                                                                                |                                            |                                                   |                                                         |           |           |             |             |            |            |             |              |            |            |             |  
|---------------------------------------------- | ----------------------------------------------- | ------------------------------------------------------------------------------ | ------------------------------------------ | ------------------------------------------------- | ------------------------------------------------------- | --------- | --------- | ----------- | ----------- | ---------- | ---------- | ----------- | ------------ | ---------- | ---------- | ----------- | -
|                                               |                                                 |                                                                               
|                                               |                                                 | For the twelve months ended                                                   
|                                               |                                                 | March 31,                                                                     
|                                               |                                                 |                                                                               
|                                               |                                                 | 2003                                                                           |                                            | 2002                                              |                                                         | 2001     
|                                               |                                                 |                                                                                |                                            |                                                   |                                                         |          
|Cash flows from operating activities:          |                                                 |                                                                                |                                            |                                                   |                                                         |           |           |             |             |            |            |            
|                                               |                                                 | Net loss                                                                       |                                            | $                                                 | (41,227,305                                             | )         |           | $           | (57,372,215 | )          |            | $           | (103,999,662 | )         
|                                               |                                                 | Adjustments to reconcile net loss to net cash
    used in operating activities |                                            |                                                   |                                                         |           |           |             |             |            |            |             |              |           
|                                               |                                                 |                                                                                | Depreciation and amortization              |                                                   |                                                         | 5,092,749 |           |             |             | 7,257,151  |            |             |              | 3,257,292  |           
|                                               |                                                 |                                                                                | Amortization of loan costs                 |                                                   |                                                         | 908,321   |           |             |             | 1,097,922  |            |             |              | 132,481    |           
|                                               |                                                 |                                                                                | Provision for bad debt                     |                                                   |                                                         | 197,774   |           |             |             | 234,767    |            |             |              |           |           
|                                               |                                                 |                                                                                | Gain on sales of real estate held for sale |                                                   |                                                         |          |           |             |             | (4,185,728 | )          |             |              |           |           
|                                               |                                                 |                                                                                | Loss on sale of property and equipment     |                                                   |                                                         |          |           |             |             | 373,369    |            |             |              |           |           
|                                               |                                                 |                                                                                | Equity issued for services                 |                                                   |                                                         | 313,968   |           |             |             |           |            |             |              |           |           
|                                               |                                                 |                                                                                | Impairment of long-lived assets            |                                                   |                                                         | 4,020,300 |           |             |             | 18,973,670 |            |             |              | 4,155,178  |           
|                                               |                                                 |                                                                                | Inducement on debt conversion              |                                                   |                                                         | 4,871,245 |           |             |             |           |            |             |              |           |           
|                                               |                                                 |                                                                                | Discontinued operations                    |                                                   |                                                         |          |           |             |             |           |            |             |              | 82,626,411 |           
|                                               |                                                 |                                                                                | Other, net                                 |                                                   |                                                         | 312,252   |           |             |             | (44,167    | )          |             |              | 164,167    |           
|                                               |                                                 |                                                                                | (Increase) decrease in:                    |                                                   |                                                         |           |           |             |             |            |            |             |              |            |           
|                                               |                                                 |                                                                                |                                            | Accounts receivable                               |                                                         |           | 929,468   |             |             |            | 1,014,374  |             |              |            | (3,982,744 | )          
|                                               |                                                 |                                                                                |                                            | Contracts receivable                              |                                                         |           | 1,333,632 |             |             |            | 3,275,080  |             |              |            | (2,312,896 | )          
|                                               |                                                 |                                                                                |                                            | Notes receivable                                  |                                                         |           |          |             |             |            |           |             |              |            | 1,809,254  |            
|                                               |                                                 |                                                                                |                                            | Other assets                                      |                                                         |           | (123,369  | )           |             |            | (285,764   | )           |              |            | (315,198   | )          
|                                               |                                                 |                                                                                |                                            | Real estate inventories                           |                                                         |           |          |             |             |            |           |             |              |            | (1,063,351 | )          
|                                               |                                                 |                                                                                | Increase (decrease) in:                    |                                                   |                                                         |           |           |             |             |            |            |             |              |            |           
|                                               |                                                 |                                                                                |                                            | Accounts payable and accrued expenses             |                                                         |           | 649,006   |             |             |            | (9,214,398 | )           |              |            | 9,125,452  |            
|                                               |                                                 |                                                                                |                                            | Interest payable                                  |                                                         |           | 2,947,252 |             |             |            | 2,024,589  |             |              |            | 250,239    |            
|                                               |                                                 |                                                                                |                                            | Deferred revenue                                  |                                                         |           | 155,324   |             |             |            | 531,133    |             |              |            | 284,693    |            
|                                               |                                                 |                                                                                |                                            | Net assets/liabilities of discontinued operations |                                                         |           | 175,521   |             |             |            | (1,306,837 | )           |              |            | 2,700,847  |            
|                                               |                                                 |                                                                                |                                            | Deferred rent                                     |                                                         |           | 1,135,448 |             |             |            | 1,908,575  |             |              |            | 338,072    |            
|                                               |                                                 |                                                                                |                                            |                                                   |                                                         |           |           |             |             |            |            |            
|                                               |                                                 |                                                                                |                                            |                                                   | Net cash used in continuing operations                  |           |           | (18,308,414 | )           |            |            | (35,718,479 | )            |            |            | (6,829,765  | )
|                                               |                                                 |                                                                                |                                            |                                                   | Net cash used in discontinued operations                |           |           |            |             |            |            |            |              |            |            | (22,236,555 | )
|                                               |                                                 |                                                                                |                                            |                                                   |                                                         |           |           |             |             |            |            |            
|                                               |                                                 |                                                                                |                                            |                                                   | Net cash used in operating activities                   |           |           | (18,308,414 | )           |            |            | (35,718,479 | )            |            |            | (29,066,320 | )
|                                               |                                                 |                                                                                |                                            |                                                   |                                                         |           |           |             |             |            |            |            
|Cash flows from investing activities:          |                                                 |                                                                                |                                            |                                                   |                                                         |           |           |             |             |            |            |            
|                                               | Restricted cash                                 |                                                                                |                                            | (11,332                                           | )                                                       |           |           | (725,534    | )           |            |            | 504,737     |             
|                                               | Purchase of property and equipment              |                                                                                |                                            | (994,892                                          | )                                                       |           |           | (45,785,047 | )           |            |            | (24,412,720 | )           
|                                               | Cash paid in disposals                          |                                                                                |                                            |                                                  |                                                         |           |           |            |             |            |            | (900,000    | )           
|                                               | Investment in unconsolidated entities           |                                                                                |                                            | (337,812                                          | )                                                       |           |           |            |             |            |            | (4,202,004  | )           
|                                               | Proceeds from sale of real estate held for sale |                                                                                |                                            |                                                  |                                                         |           |           | 17,046,385  |             |            |            | 55,781,259  |             
|                                               | Proceeds from sale of property and equipment    |                                                                                |                                            |                                                  |                                                         |           |           | 30,000      |             |            |            |            |             
|                                               | Cash acquired in acquisitions                   |                                                                                |                                            |                                                  |                                                         |           |           |            |             |            |            | 2,368,273   |             
|                                               |                                                 |                                                                                |                                            |                                                   |                                                         |           |           |             |             |            |            |            
|                                               |                                                 |                                                                                |                                            |                                                   | Net cash (used in) provided by investing
    activities |           |           | (1,344,036  | )           |            |            | (29,434,196 | )            |            |            | 29,139,545  |  
|                                               |                                                 |                                                                                |                                            |                                                   |                                                         |           |           |             |             |            |            |            
|Cash flows from financing activities:          |                                                 |                                                                                |                                            |                                                   |                                                         |           |           |             |             |            |            |            
|                                               | (Payments) borrowings of construction payables  |                                                                                |                                            | (2,948,554                                        | )                                                       |           |           | 9,290,277   |             |            |            | 16,960,452  |             
|                                               | New borrowings                                  |                                                                                |                                            | 10,032,220                                        |                                                         |           |           | 66,750,175  |             |            |            | 17,947,892  |             
|                                               | Note receivable-related party                   |                                                                                |                                            |                                                  |                                                         |           |           | (5,000,000  | )           |            |            |             |             
|                                               | Payments on loans                               |                                                                                |                                            | (2,295,138                                        | )                                                       |           |           | (26,550,718 | )           |            |            | (73,563,352 | )           
|                                               | Issuance of convertible debt                    |                                                                                |                                            |                                                  |                                                         |           |           | 15,042,318  |             |            |            | 11,955,000  |             
|                                               | Payments under capital lease obligations        |                                                                                |                                            | (975,433                                          | )                                                       |           |           | (1,162,236  | )           |            |            |            |             
|                                               | Exercise of stock options and warrants          |                                                                                |                                            | 9,180                                             |                                                         |           |           | 41,250      |             |            |            | 686,568     |             
|                                               | Sale of common stock and warrants               |                                                                                |                                            | 16,955,287                                        |                                                         |           |           |            |             |            |            | 28,122,925  |             
|                                               | Cash received for common stock subscriptions    |                                                                                |                                            |                                                  |                                                         |           |           | 950,000     |             |            |            |            |             
|                                               | Sale of preferred stock                         |                                                                                |                                            |                                                  |                                                         |           |           | 500,000     |             |            |            |            |             
|                                               |                                                 |                                                                                |                                            |                                                   |                                                         |           |           |             |             |            |            |            
|                                               |                                                 |                                                                                |                                            |                                                   | Net cash provided by financing activities               |           |           | 20,777,562  |             |            |            | 59,861,066  |              |            |            | 2,109,485   |  
|                                               |                                                 |                                                                                |                                            |                                                   |                                                         |           |           |             |             |            |            |            
|                                               |                                                 |                                                                                |                                            |                                                   | Net increase (decrease) in cash                         |           |           | 1,125,112   |             |            |            | (5,291,609  | )            |            |            | 2,182,710   |  
|Cash and cash equivalents at beginning of year |                                                 |                                                                                | 283,078                                    |                                                   |                                                         |           | 5,574,687 |             |             |            | 3,391,977  |            
|                                               |                                                 |                                                                                |                                            |                                                   |                                                         |           |           |             |             |            |            |            
|Cash and cash equivalents at end of year       |                                                 | $                                                                              | 1,408,190                                  |                                                   |                                                         | $         | 283,078   |             |             | $          | 5,574,687  |            
|                                               |                                                 |                                                                                |                                            |                                                   |                                                         |           |           |             |             |            |            |            

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

F-5



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

MARCH 31, 2003


1. BUSINESS AND ORGANIZATION

Terremark Worldwide, Inc. (together with its
subsidiaries, the Company) operates facilities at
strategic locations around the world from which we assist users
of the worldwide Internet and large communications networks in
communicating with other users and networks. Our primary
facility is the NAP of the Americas, a carrier-neutral Tier-1
network access point (NAP). The NAP of the Americas,
which became operational in July 2001, is located in Miami,
Florida, and provides exchange point, colocation and managed
services to carriers, Internet service providers, network
service providers, government entities, multinational
enterprises and other end users. The Companys strategy is
to leverage its connectivity to sell services to customers
within and outside of the Companys TerreNAP Data Centers.

In February 2002, the Company entered into an
agreement with Fundacao de Amparo a Pesquisa do Estado de Sao
Paulo (FAPESP), the research foundation for the
State of Sao Paulo, to operate and manage the NAP created by
FAPESP, which the Company has renamed the NAP do Brasil.
Pursuant to the twenty year agreement, FAPESP turned over the
network access point to the Company, which the Company intends
to enhance and intends to move to new facilities modeled after
the operational design of the NAP of the Americas by the end of
2003. Pre-existing FAPESP customers have the right to continue
to receive services at the early levels without payment until
February 2004. FAPESP will receive 6% of the revenue generated
by the enhanced NAP do Brazil for the first five years of
operation, 5% during the following five years, and 1% during the
last ten years. The term may be extended for an additional
ten-year period, during which FAPESP would again receive 1% of
the revenues. For the year ended March 31, 2003, the
Brazilian operations generated losses of approximately $695,000.

In June 2002, the Company entered into an
exclusive agreement with the Comunidad Autonoma de Madrid
(Comunidad), to develop and operate carrier-neutral
network access points in Spain. As part of that agreement, the
parties formed NAP de las Americas  Madrid S.A. to
own and operate carrier-neutral NAPs in Spain, modeled after the
NAP of the Americas. The shareholders in the new company are the
Comunidad through its Instituto Madrileno de
Desarrollo  IMADE, the Camara Oficial de Comercio e
Industria de Madrid (Camara), Red Electrica
Telecomunicaciones, S.A., Telvent Sistemas y Redes S.A., a
subsidiary of Abengoa S.A., and Centro de Transportes de
Coslada, S.A. (CTC). At the time the NAP de las
Americas È Madrid S.A. was formed, the Company owned 1% of
the equity, which the Company subsequently increased to 10%. The
Company acquired for $250,000, 10% of the equity in the NAP de
las Americas  Madrid S.A. In January 2003, the
Company made an additional investment of $84,000 in NAP de Las
Americas  Madrid S.A. and maintained its 10% equity
interest. The Company has the option to purchase up to another
30% of the shares owned by the Comunidad, CTC and the Camara at
cost, plus LIBOR. The Company provided the technical and
operational know-how for the development of an interim NAP which
became operational in July 2002.

On April 28, 2000, the predecessor to the
Company, Terremark Holdings, Inc. (THI) merged with and into
AmTec, Inc., a publicly traded international telecommunications
and services company. For accounting purposes the merger was
treated as a reverse acquisition with the Company being the
acquirer. As a result, historical information is that of THI.

Prior to the merger with AmTec, the Company was
engaged in the development, sales, leasing, management and
financing of retail, high-rise office buildings, mixed-use
projects, condominiums, hotels and government-assisted housing.
The Company was also involved in a number of ancillary
businesses that complemented its development operations.
Specifically, the Company engaged in offering financial
services, property management, construction management,
condominium hotel management, residential and commercial leasing
brokerage, and advisory services. By March 31, 2002, the
Company exited non-core real estate activities, real estate
development, property management, financing and the ancillary
businesses that

F-6



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

complimented these real-estate development
operations. Our real estate activities currently include
technology construction work and management of the properties
where the NAP of the Americas is located.

2. LIQUIDITY AND RECENT
DEVELOPMENTS

The accompanying financial statements have been
prepared on a going concern basis, which contemplates the
realization of assets and liabilities and commitments in the
normal course of business. From the time of the merger through
March 31, 2003, the Company has incurred net operating losses of
approximately $202.6 million. The Companys cash flows
from operations for the years ended March 31, 2003 and 2002
were negative and the working capital deficit was approximately
$39.0 million and $88.3 million as of March 31,
2003 and 2002, respectively. Due to recurring losses from
operations and the lack of committed sources of additional debt
or equity to support working capital deficits, substantial doubt
exists about the Companys ability to continue as a going
concern.

On April 30, 2003, Ocean Bank revised its
$44.0 million credit facility with the Company by
converting at $.75 per common share $15.0 million of
the outstanding principal balance under the credit facility into
20 million shares of the Companys common stock with
an approximate $9.6 million market value and extending the
term of the remaining $29.0 million until April 30,
2006. The resulting $5.4 million debt restructuring gain
will be deferred in notes payable and amortized as reductions in
interest expense over the life of the remaining debt. Concurrent
with this transaction, the Company paid all past due interest as
of March 31, 2003, plus accrued interest through
April 28, 2003 totaling approximately $1.6 million and
prepaid interest of approximately $900,000.

On April 30, 2003, CRG, LLC
(CRG), an entity newly formed by a shareholder of
the Company, completed the purchase, at a discount, of the
Companys $22.6 million construction payables
(including accrued interest) to Cupertino Electric, Inc.,
Kinetics Mechanical Services, Inc. and Kinetics Systems Inc.,
all of which were construction contractors for the NAP of the
Americas. At the closing, CRGs purchased construction
payables were converted at $.75 per common share into
30,133,334 shares of the Companys common stock with an
approximate $14.1 million market value in accordance with
the November 11, 2002 and the December 5, 2002 option
agreements (see Note 10). The Company will record an approximate
$8.5 million debt restructuring gain from these
transactions.

On April 30, 2003, the Company issued 10%
Subordinated Secured Convertible Debentures (the
Subordinated Debentures) due April 30, 2006 for
an aggregate principal amount of $25.0 million. The
debentures are convertible into shares of the Companys
stock at $0.50 per share. Interest is payable quarterly
beginning July 31, 2003. The debentures were issued in
exchange for $10.3 million in cash, $9.5 million in a
promissory note due in full May 30, 2003 and
$5.2 million of notes payable converted to the Subordinated
Debentures. Included in the $5.2 million is
$2.0 million of cash received in March 2003 in anticipation
of the debenture transaction.

The maker of the $9.5 million promissory
note failed to pay but agreed on June 16, 2003 to assign
the note and the debenture to an entity newly formed by the son
of a director of the Company. Payments received as of
June 30, 2003 aggregated approximately $5.8 million
and the remaining $3.7 million is due no later than
August 15, 2003. Two of the Companys directors have
guaranteed payment and performance in accordance with the
amended terms of the note. Management believes that collection
on the remaining balance is reasonably assured. In connection
with this transaction, the Company will recognize a beneficial
conversion feature of $9.5 million, based on the
June 16, 2003 measurement date.

The following condensed pro forma balance sheet
gives effect to the following transactions as if they had
occurred on March 31, 2003: (1) Ocean Bank debt
conversion of $15.0 million in debt to equity,
(2) Payment of $1.6 million in past due and accrued
interest and $.9 million in prepaid interest to Ocean Bank,
(3) CRG transaction whereby $21.6 million in
construction payables plus $1.0 million in accrued interest
was converted

F-7



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

to equity, and (4) issuance of Subordinated
Debentures for $16.1 million in cash collected,
$5.2 million in conversion of notes payable and
$3.7 million in amounts receivable under the
9.5 million promissory note.

|                                      |                      |                                                |                                             |             |            |                |   |   |             |            |     |            |            |            |  
|------------------------------------- | -------------------- | ---------------------------------------------- | ------------------------------------------- | ----------- | ---------- | -------------- | - | - | ----------- | ---------- | --- | ---------- | ---------- | ---------- | -
|                                      |                      |                                                |                                             | Proforma    |            | Proforma      
|                                      |                      | March 31, 2003                                 |                                             | Adjustments |            | March 31, 2003
|                                      |                      |                                                |                                             |             |            |               
|Assets                                |                      |                                                |                                             |             |            |                |   |   |             |            |     |           
|                                      | Current assets:      |                                                |                                             |             |            |                |   |   |             |            |     |            |           
|                                      |                      | Cash and cash equivalents                      |                                             | $           | 1,408,190  |                |   | $ | 13,600,000  |            |     | $          | 15,008,190 |           
|                                      |                      | Note receivable                                |                                             |             |           |                |   |   | 3,700,000   |            |     |            | 3,700,000  |           
|                                      |                      | Other current assets                           |                                             |             | 523,940    |                |   |   | 900,000     |            |     |            | 1,423,940  |           
|                                      |                      |                                                |                                             |             |            |                |   |   |             |            |     |           
|                                      |                      |                                                | Total current assets                        |             |            | 1,932,130      |   |   |             |            |     |            |            | 20,132,130 |  
|                                      | Long term assets     |                                                |                                             | 67,669,383  |            |                |   |   |             |            |     | 67,669,383 |           
|                                      |                      |                                                |                                             |             |            |                |   |   |             |            |     |           
|                                      |                      |                                                | Total assets                                |             | $          | 69,601,513     |   |   |             |            |     |            | $          | 87,801,513 |  
|                                      |                      |                                                |                                             |             |            |                |   |   |             |            |     |           
|Liabilities and Stockholders Deficit |                      |                                                |                                             |             |            |                |   |   |             |            |     |           
|                                      | Current liabilities: |                                                |                                             |             |            |                |   |   |             |            |     |            |           
|                                      |                      | Current portion of notes payable               |                                             |             | 1,464,963  |                |   |   |             |            |     |            | 1,464,963  |           
|                                      |                      | Construction payables                          |                                             |             | 22,012,162 |                |   |   | (21,602,343 | )          |     |            | 409,819    |           
|                                      |                      | Accounts payable and other                     |                                             |             | 13,011,371 |                |   |   |             |            |     |            | 13,011,371 |           
|                                      |                      | Interest payable                               |                                             |             | 4,492,805  |                |   |   | (2,597,657  | )          |     |            | 1,895,148  |           
|                                      |                      |                                                |                                             |             |            |                |   |   |             |            |     |           
|                                      |                      |                                                | Total current liabilities                   |             |            | 40,981,301     |   |   |             |            |     |            |            | 16,781,301 |  
|                                      |                      | Notes payable                                  |                                             |             | 56,174,938 |                |   |   | (14,800,000 | )          |     |            | 41,374,938 |           
|                                      |                      | Convertible debt, net of beneficial conversion |                                             |             | 14,005,000 |                |   |   | 15,500,000  |            |     |            | 29,505,000 |           
|                                      |                      | Other long term debt                           |                                             |             | 4,344,243  |                |   |   |             |            |     |            | 4,344,243  |           
|                                      |                      |                                                |                                             |             |            |                |   |   |             |            |     |           
|                                      |                      |                                                | Total liabilities                           |             |            | 115,505,482    |   |   |             |            |     |            |            | 92,005,482 |  
|                                      |                      |                                                |                                             |             |            |                |   |   |             |            |     |           
|                                      |                      | Redeemable convertible preferred stock         |                                             |             | 556,729    |                |   |   |             |            |     |            | 556,729    |           
|                                      |                      |                                                |                                             |             |            |                |   |   |             |            |     |           
|                                      |                      |                                                | Total stockholders deficit                 |             |            | (46,460,698    | ) |   |             | 41,700,000 | (1) |            |            | (4,760,698 | )
|                                      |                      |                                                |                                             |             |            |                |   |   |             |            |     |           
|                                      |                      |                                                | Total liabilities and stockholders deficit |             | $          | 69,601,513     |   |   |             |            |     |            | $          | 87,801,513 |  
|                                      |                      |                                                |                                             |             |            |                |   |   |             |            |     |           




(1) Includes $9.5 million from
beneficial conversion, $9.6 million and $14.1 million
in common stock and paid in capital from the Ocean Bank debt
conversion and CRG transaction, respectively, and
$8.5 million in gain from the CRG transaction.


Historically, the Company has met its liquidity
needs primarily through obtaining additional debt financing and
the issuance of equity interests. Some of the debt financing was
either provided by or guaranteed by Manuel D. Medina, the
Companys Chief Executive Officer and Chairman of the Board
of Directors. In prior periods, the Company also shut down or
disposed of non-core operations and implemented expense
reductions to reduce the Companys liquidity needs.

Based on customer contracts signed as of
June 13, 2003, the Companys monthly cash deficit from
operations is approximately $1.4 million. In order to
eliminate this monthly cash deficit from operations, the new
monthly revenues required range from $2.0 million to
$3.0 million. This range of new revenue depends on the mix
of the services sold and their corresponding margin. The
Companys required revenues are based on existing
contracts, including those recently announced with the U.S.
Government and enterprises, and expected future contracts from
potential customers currently in the sales pipeline. The Company
has identified potential customers, including the federal, state
and local governments, and is actively offering available
services to them. However, the Companys projected revenues
and planned cash needs depend on several factors, some of which
are beyond the Companys control, including the rate at
which its services are sold, the ability to retain its customer
base, the willingness and timing of potential customers
outsourcing the housing

F-8



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

and management of their technology infrastructure
to the Company, the reliability and cost-effectiveness of the
Companys services and the Companys ability to market
its services.

The majority of the Companys planned
operating cash improvement is expected to come from an increase
in revenues and cash collections from customers. If the Company
fails to achieve planned revenues, it will require additional
financing. There can be no assurances that additional financing
will be available, or that, if available the financing will be
obtainable on terms acceptable to the Company or that any
additional financing would not be substantially dilutive to
existing shareholders. If the Company needs to obtain additional
financing and fails to do so, it may have a material adverse
effect on the Companys ability to meet financial
obligations and operate as a going concern.

3. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

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

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

Use of estimates

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

Reclassifications

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

Cash and cash equivalents

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

Investment in unconsolidated
entities

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

Restricted cash

Restricted cash at March 31, 2003 and
March 31, 2002 represents cash deposits with a financial
institution collateralizing a $750,000 letter of credit issued
to the lessor of the Companys colocation facility in Santa
Clara, California (Note 6). The Company is actively
attempting to sublease the facility or to sell the
Companys leasehold interest. Due to the uncertainties
surrounding the future release of this collateral, the Company
has classified such cash deposits as long term assets.

F-9



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Property and equipment

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

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

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

Other assets

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

Identifiable intangible assets and
goodwill

As of April 1, 2002, the Company adopted
Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets
(SFAS 142). SFAS 142 addresses financial
accounting and reporting for acquired goodwill and other
intangible assets. Under SFAS 142, goodwill and intangible
assets that have indefinite lives are not amortized but rather
are tested at least annually for impairment or whenever events
or changes in circumstances indicate that the carrying amount of
these assets may not be fully recoverable. The goodwill
impairment test involves a two-step approach. Initially the fair
value of the Companys reporting units are compared with
their carrying amount, including goodwill, to identify potential
impairment. If the carrying amount of a reporting unit exceeds
its fair value, an impairment loss is recognized for the excess,
if any, of the carrying value of goodwill over the implied fair
value of goodwill. Intangible assets that have finite useful
lives continue to be amortized over their useful lives.

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

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

F-10



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Rent expense

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

Fair value of financial instruments

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

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

|                                                  |  |                |            |                |  |            |            |            |  |   |            |  |  |   |            | 
|------------------------------------------------- |  | -------------- | ---------- | -------------- |  | ---------- | ---------- | ---------- |  | - | ---------- |  |  | - | ---------- | 
|                                                  |  |                |            |               
|                                                  |  | March 31, 2003 |            | March 31, 2002
|                                                  |  |                |            |               
|                                                  |  | Book value     |            | Fair value     |  | Book value |            | Fair value
|                                                  |  |                |            |                |  |            |            |           
|Notes payable, including current portion          |  | $              | 57,639,901 |                |  | $          | 52,014,901 |            |  | $ | 53,880,300 |  |  | $ | 53,880,300 | 
|Construction payables, including accrued interest |  |                | 23,009,819 |                |  |            | 13,537,162 |            |  |   | 26,250,729 |  |  |   | 26,250,729 | 

As of March 31, 2003, fair value of the
Companys notes payable was based on April 30, 2003 partial
settlement and other information, including recent activity of
the Companys debt instruments. As of March 31, 2002,
fair value of the Companys notes payable was based on
quotes from financial institutions and other information.

As of March 31, 2003, fair value of
construction payables, including accrued interest was determined
to be $13,537,162 based on April 30, 2003 settlement. See
Note 10 for additional information. As of March 31,
2002, fair value of construction payables was estimated to equal
their carrying value due their short-term nature.

Stock options and warrants

The Company uses the fair value method to value
warrants granted to non-employees. The Company determined the
fair value for non-employee warrants using the Black-Scholes
option-pricing model with the same assumption used for employee
grants, except for expected life which was assumed to be between
1 and 10 years.

Revenue and profit recognition and allowance
for bad debts

Revenue is recognized as service is provided when
there is persuasive evidence of an arrangement, the fee is fixed
or determinable and collection of the receivable is reasonably
assured. The Company assesses collection based on a number of
factors, including transaction history with the customer and the
credit-worthiness of the customer. The Company does not request
collateral from customers. If the Company

F-11



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

determines that collection is not reasonably
assured, the Company defers the fee and recognizes revenue at
the time collection becomes reasonably assured, which is
generally upon receipt of cash.

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

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

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

Income taxes

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

Stock-based compensation

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

F-12



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Had compensation costs been determined using the
fair value method for the Companys stock-based
compensation plans, net loss and loss per common share would
have been as follows:

|                                                       |  |      |             |      |  |      |             |   |  |   |              |  
|------------------------------------------------------ |  | ---- | ----------- | ---- |  | ---- | ----------- | - |  | - | ------------ | -
|                                                       |  | 2003 |             | 2002 |  | 2001
|                                                       |  |      |             |      |  |     
|Net loss applicable to common shares 
    as reported |  | $    | (41,227,305 | )    |  | $    | (57,372,215 | ) |  | $ | (103,999,662 | )
|                                                       |  |      |             |      |  |      |             |   |  |   |              |  
|Net loss applicable to common shares 
    proforma    |  | $    | (45,255,489 | )    |  | $    | (62,138,405 | ) |  |   | (106,477,216 | )
|                                                       |  |      |             |      |  |      |             |   |  |   |              |  
|Loss per common share  as reported                    |  | $    | (.18        | )    |  | $    | (.29        | ) |  |   | (.55         | )
|                                                       |  |      |             |      |  |      |             |   |  |   |              |  
|Loss per common share  proforma                       |  | $    | (.19        | )    |  | $    | (.31        | ) |  |   | (.56         | )
|                                                       |  |      |             |      |  |      |             |   |  |   |              |  

The Companys fair value calculations for
employee grants were made using the Black-Scholes option pricing
model with the following weighted average assumptions:

|                   |  |      |               |      |  |      |               |  |  |  |               | 
|------------------ |  | ---- | ------------- | ---- |  | ---- | ------------- |  |  |  | ------------- | 
|                   |  | 2003 |               | 2002 |  | 2001
|                   |  |      |               |      |  |     
|Risk-free rate     |  |      | 2.65% - 4.84% |      |  |      | 3.91% - 6.41% |  |  |  | 4.64% - 6.41% | 
|Volatility         |  |      | 135% - 155%   |      |  |      | 80% - 139%    |  |  |  | 80% - 139%    | 
|Expected life      |  |      | 5 years       |      |  |      | 5 years       |  |  |  | 5 years       | 
|Expected dividends |  |      | 0%            |      |  |      | 0%            |  |  |  | 0%            | 

Loss per share

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

Significant concentrations

Two customers accounted for approximately
$1.4 million and $1.0 million of data center revenues
for the twelve months ended March 31, 2003. No customer
accounted for more than 10% of Data Center revenues for the year
ended March 31, 2002.

Recent accounting standards

In March 2003, the FASB reached a consensus on
Emerging Issues Task Force (EITF) Issue No. 00-21,
Revenue Arrangements with Multiple Deliverables. The
consensus provides guidance on the accounting for multiple
element revenue arrangements. It also provides guidance on how
to separate multiple element revenue arrangements into its
separate units of accounting and how to measure and allocate the
arrangements total consideration to each unit. The
effective date of EITF 00-21 is for revenue arrangements
entered into in fiscal periods (interim or annual) beginning
after June 15, 2003. Early application is permitted. The
Company does not expect the adoption of EITF 00-21,
effective July 1, 2003, to have a material effect on its
financial statements.

In January 2003, the FASB issued Interpretation
No. 46 (FIN 46), Consolidation of Variable
Interest Entities, an Interpretation of ARB No. 51.
This Interpretation provides guidance for determining a primary
beneficiary period. The effective date of FIN 46 is the
first interim period beginning after June 15, 2003 for
variable interest entities acquired before February 1, 2003
and immediately to variable interest entities created after
January 31, 2003. NAP de las Americas  Madrid
S.A. may be a variable interest entity in accordance

F-13



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

with FIN 46. The Companys maximum
related exposure to loss is approximately $500,000 at
March 31, 2003. The Company does not expect the adoption of
FIN 46, effective beginning on July 1, 2003, to have a
material effect on its financial statements.

On December 31, 2002, the FASB issued FASB
Statement No. 148 (SFAS 148), Accounting for
Stock-Based Compensation  Transition and Disclosure,
amending FASB Statement No. 123 (SFAS 123), Accounting
for Stock-Based Compensation. This Statement amends
SFAS 123 to provide alternative methods of transition for
an entity that voluntarily changes to the fair value based
method of accounting for stock-based employee compensation. It
also amends the disclosure provisions of that Statement to
require prominent disclosure about the effects on reported net
income of an entitys accounting policy decisions with
respect to stock-based employee compensation. Finally,
SFAS 148 amends APB Opinion No. 28, Interim Financial
Reporting, to require disclosure about those effects in interim
financial information. For entities that voluntarily change to
the fair value based method of accounting for stock-based
employee compensation, the transition provisions are effective
for fiscal years ending after December 15, 2002. For all
other companies, the disclosure provisions and the amendment to
APB No. 28 are effective for interim periods beginning
after December 15, 2002. The Company does not plan to
change to the fair value based method of accounting for
stock-based employee compensation.

In November 2002, the FASB issued Interpretation
No. 45 (FIN 45), Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. For guarantees
issued or modified after December 31, 2002, a liability
will be recognized for the fair value of the obligation
undertaken in issuing the guarantee. The disclosure requirements
were effective for interim and annual financial statements for
periods ending after December 15, 2002. The Company
currently guarantees the aggregate amount of approximately
$12 million in debt (see Note 14). FIN 45 will
impact the Companys financial position or results of
operations in subsequent periods, if these guarantees are
modified.

In April 2002, the FASB approved FASB
Statement No. 145 (SFAS 145), Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement
No. 13 and Technical Corrections. In addition to
rescinding SFAS 4, 44, and 64 and amending SFAS 13,
SFAS 145 establishes a financial reporting standard for
classification of extinguishment of debt in the financial
statements in accordance with APB 30. SFAS 145 will be
effective for the Companys fiscal year ended
March 31, 2004. Management does not expect the adoption of
SFAS 145 to have a material effect on the Companys
financial position. However, SFAS 145 will impact the
presentation of the results of operations for the quarter ended
June 30, 2003 (see Note 2).

4. ACQUISITIONS AND
DISPOSITIONS

During the year ended March 31, 2001, the
Company issued $37,545,457 of common stock to acquire five
businesses, Telecom Routing Exchange Developers, Inc., Post
Shell Technology Contractors, Inc., Spectrum Telecommunications,
IXS.Net and Asia Connect L.L.C. In the same period the Company
disposed of all of these businesses except for Post Shell
Technology Contractors.

F-14



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Acquisitions during the year ended March 31,
2001 is summarized as follows:

|                                 |                                     |                           |             |            |             | 
|-------------------------------- | ----------------------------------- | ------------------------- | ----------- | ---------- | ----------- | 
|Assets:                          |                                     |                           |             |           
|                                 | Cash and cash equivalents           |                           | $           | 2,368,273  |            
|                                 | Restricted cash                     |                           |             | 30,000     |            
|                                 | Accounts receivable                 |                           |             | 3,279,956  |            
|                                 | Investments and option agreements   |                           |             | 12,401,179 |            
|                                 | Reclassification of option          |                           |             | (8,900,000 | )          
|                                 | Notes receivable                    |                           |             | 344,438    |            
|                                 | Furniture and equipment             |                           |             | 5,720,432  |            
|                                 | Other assets                        |                           |             | 1,647,882  |            
|                                 | Identifiable intangible assets      |                           |             | 17,068,558 |            
|                                 | Goodwill                            |                           |             | 72,212,319 |            
|                                 |                                     |                           |             |           
|                                 |                                     | Total assets acquired     |             | $          | 106,173,037 | 
|                                 |                                     |                           |             |           
|Liabilities                      |                                     |                           |             |           
|                                 | Notes payable                       |                           | $           | 10,716,049 |            
|                                 | Trade payable and other liabilities |                           |             | 6,256,245  |            
|                                 |                                     |                           |             |           
|                                 |                                     | Total liabilities assumed |             |            | 16,972,294  | 
|                                 | Minority interest                   |                           |             | 475,306    |            
|Equity assumed                   |                                     |                           | 48,649,111  |           
|Issuance of common stock         |                                     |                           | 37,545,457  |           
|Estimated merger costs and other |                                     |                           | 2,530,869   |           
|                                 |                                     |                           |             |           
|                                 |                                     | $                         | 106,173,037 |           
|                                 |                                     |                           |             |           

Sale of telecom facilities management
operations

On February 23, 2001, the Company sold
certain of its telecom facilities management operations to MP
Telecom, LLC (MP), an entity owned by certain
officers and a director of the Company. Assets sold included all
of the Companys equity ownership interests (including any
rights to promote interests) in the T-Rex branded
Telecom Hotel together with assets owned by Telecom.
Routing Exchange Developers, Inc., a wholly owned subsidiary of
the Company. As part of the transaction, the Company retained
its management rights for The Technology Center of the Americas
(TECOTA), in which the NAP of the Americas is
located. The purchaser conveyed to the Company its rights to the
promote and equity interests in TECOTA. As a result of these
transactions, effective March 31, 2001, the Company owned
100% of the promote interest and .84% of the equity interests in
TECOTA.

As part of the transaction, MP conveyed to the
Company 1,400,000 shares of the Companys common stock,
representing a portion of 8,000,000 shares issued to MP and its
affiliates in conjunction with the T-Rex acquisition. MP also
conveyed its minority interest in the Companys colocation
business. The Company paid $900,000 to the purchaser in
connection with the transaction. The principals of MP and
certain Company officers agreed, until December 25, 2001,
to limit the aggregate number of Company shares sold by them
during any trading day.

Discontinued operations

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

F-15



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

As of March 31, 2001, $2,245,896 in assets,
exclusive of goodwill, had been disposed. Remaining assets to be
disposed amounted to $6,390,009. Subsequent to March 31,
2001, these assets were sold for proceeds aggregating $500,000
in cash and assumption by the purchaser of approximately
$1,740,838 in liabilities. The loss on disposition of
discontinued operations includes the write-off of $54,381,681 in
goodwill. For the year ended March 31, 2001, discontinued
operations had $1,760,640 of total revenues and a loss of
$11,346,447, net of $10,153,140 in goodwill amortization. The
net liabilities for discontinued operations at March 31,
2002 and 2001 primarily represent trade payables, which remain
an obligation of the Company. In addition, the Company at
March 31, 2003 and 2002 has guaranteed approximately
$550,000 in debt related to discontinued operations.

Other

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

5. CONTRACTS RECEIVABLE

Contracts receivable consist of the following:

|                      |  |           |        |      |  |   |           | 
|--------------------- |  | --------- | ------ | ---- |  | - | --------- | 
|                      |  |          
|                      |  | March 31,
|                      |  |          
|                      |  | 2003      |        | 2002
|                      |  |           |        |     
|Completed contracts   |  | $         | 7,559  |      |  | $ | 96,035    | 
|Contracts in progress |  |           | 21,645 |      |  |   | 1,214,167 | 
|Retainage             |  |           |       |      |  |   | 52,634    | 
|                      |  |           |        |      |  |   |           | 
|                      |  | $         | 29,204 |      |  | $ | 1,362,836 | 
|                      |  |           |        |      |  |   |           | 

6. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

|                                  |  |           |            |      |  |   |            |  
|--------------------------------- |  | --------- | ---------- | ---- |  | - | ---------- | -
|                                  |  |          
|                                  |  | March 31,
|                                  |  |          
|                                  |  | 2003      |            | 2002
|                                  |  |           |            |     
|Leasehold improvements            |  | $         | 50,105,292 |      |  | $ | 51,173,835 |  
|Furniture, equipment and software |  |           | 12,240,409 |      |  |   | 13,249,020 |  
|                                  |  |           |            |      |  |   |            |  
|                                  |  |           | 62,345,701 |      |  |   | 64,422,855 |  
|Less accumulated depreciation     |  |           | (8,010,413 | )    |  |   | (3,888,412 | )
|                                  |  |           |            |      |  |   |            |  
|                                  |  |           | 54,335,288 |      |  |   | 60,534,443 |  
|Equipment held for installation   |  |           | 147,676    |      |  |   | 554,544    |  
|                                  |  |           |            |      |  |   |            |  
|                                  |  | $         | 54,482,964 |      |  | $ | 61,088,987 |  
|                                  |  |           |            |      |  |   |            |  

Property and equipment includes approximately
$53.7 million and $60.0 million in assets related to
the NAP of the Americas at March 31, 2003 and 2002,
respectively. These amounts are net of accumulated depreciation.

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

F-16



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

During the fiscal years ended March 31, 2003
and 2002, the Company reached a compromise with vendors
regarding certain invoices and adjusted the asset value to the
amount finally paid. As a result the Company recorded a
reduction of approximately $1.3 million and
$1.0 million, respectively, in property and equipment.

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

7. OTHER ASSETS

Other assets consist of the following:

|                                                                                         |  |           |           |      |  |   |           | 
|---------------------------------------------------------------------------------------- |  | --------- | --------- | ---- |  | - | --------- | 
|                                                                                         |  |          
|                                                                                         |  | March 31,
|                                                                                         |  |          
|                                                                                         |  | 2003      |           | 2002
|                                                                                         |  |           |           |     
|Prepaid expenses and other                                                               |  | $         | 628,121   |      |  | $ | 349,437   | 
|Accrued interest on note receivable 
    related party                                  |  |           | 61,000    |      |  |   |          | 
|Receivable from related party                                                            |  |           | 471,000   |      |  |   | 434,000   | 
|Security Deposits                                                                        |  |           | 343,155   |      |  |   | 494,996   | 
|Loan costs, net of accumulated amortization of
    $1,526,484 and $618,163, respectively |  |           | 86,701    |      |  |   | 921,021   | 
|                                                                                         |  |           |           |      |  |   |           | 
|                                                                                         |  | $         | 1,589,977 |      |  | $ | 2,199,454 | 
|                                                                                         |  |           |           |      |  |   |           | 

Included in prepaid expenses and other is a note
receivable from a corporation controlled by a shareholder of the
Company for $360,000 and related accrued interest of
approximately $111,000. The note receivable matures on
March 31, 2004.

8. IDENTIFIABLE INTANGIBLE ASSETS AND
GOODWILL

Identifiable intangible assets and goodwill
consist of the following:

|                    |  |                |            |              |  |              |           |  |  |   |           | 
|------------------- |  | -------------- | ---------- | ------------ |  | ------------ | --------- |  |  | - | --------- | 
|                    |  |               
|                    |  | March 31, 2003
|                    |  |               
|                    |  | Gross Carrying |            | Accumulated  |  | Net Carrying
|                    |  | Amount         |            | Amortization |  | Amount      
|                    |  |                |            |              |  |             
|NAP of the Americas |  | $              | 11,764,554 |              |  | $            | 1,764,684 |  |  | $ | 9,999,870 | 

F-17



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                    |                |                |            |              |  |              |           |           |  |   |           |            | 
|------------------- | -------------- | -------------- | ---------- | ------------ |  | ------------ | --------- | --------- |  | - | --------- | ---------- | 
|                    |                |               
|                    |                | March 31, 2002
|                    |                |               
|                    |                | Gross Carrying |            | Accumulated  |  | Net Carrying
|                    |                | Amount         |            | Amortization |  | Amount      
|                    |                |                |            |              |  |             
|NAP of the Americas |                | $              | 11,764,554 |              |  | $            | 1,764,684 |           |  | $ | 9,999,870 |           
|Post Shell          |                |                | 5,279,748  |              |  |              | 2,964,412 |           |  |   | 2,315,336 |           
|                    |                |                |            |              |  |              |           |           |  |   |           |           
|                    | Total Goodwill |                |            | 17,044,302   |  |              |           | 4,729,096 |  |   |           | 12,315,206 | 
|                    |                |                |            |              |  |              |           |           |  |   |           |           

A reconciliation of net loss and loss per share
to exclude amortization expense in the prior year period follows:

|                                    |  |                                       |             |      |  |      |             |   |  |   |              |  
|----------------------------------- |  | ------------------------------------- | ----------- | ---- |  | ---- | ----------- | - |  | - | ------------ | -
|                                    |  |                                      
|                                    |  | For the twelve Months Ended March 31,
|                                    |  |                                      
|                                    |  | 2003                                  |             | 2002 |  | 2001
|                                    |  |                                       |             |      |  |     
|Reported net loss                   |  | $                                     | (41,227,305 | )    |  | $    | (57,372,215 | ) |  | $ | (103,999,662 | )
|Add back: goodwill and amortization |  |                                       |            |      |  |      | 3,458,633   |   |  |   | 2,849,018    |  
|                                    |  |                                       |             |      |  |      |             |   |  |   |              |  
|Adjusted net loss                   |  | $                                     | (41,227,305 | )    |  | $    | (53,913,582 | ) |  | $ | (101,150,644 | )
|                                    |  |                                       |             |      |  |      |             |   |  |   |              |  
|Basic and diluted loss per share:   |  |                                       |             |      |  |      |             |   |  |   |              |  
|Reported net loss                   |  | $                                     | (0.18       | )    |  | $    | (0.29       | ) |  | $ | (0.55        | )
|Goodwill amortization               |  |                                       |            |      |  |      | 0.02        |   |  |   | 0.02         |  
|                                    |  |                                       |             |      |  |      |             |   |  |   |              |  
|Adjusted net loss                   |  | $                                     | (0.18       | )    |  | $    | (0.27       | ) |  | $ | (0.53        | )
|                                    |  |                                       |             |      |  |      |             |   |  |   |              |  

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

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

During the quarter ended December 31, 2000,
the Company recognized an impairment of intangible assets of
$4,155,178 in contemplation of the sale of telecom facilities
management operation (see Note 5), which closed during the
quarter ended March 31, 2001.

F-18



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

9. NOTES PAYABLE

Notes payable consist of the following:

|                                                                                                                                                                                                                                                                                                                                                                    |                                      |           |            |            |  |   |            |            | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | --------- | ---------- | ---------- |  | - | ---------- | ---------- | 
|                                                                                                                                                                                                                                                                                                                                                                    |                                      |          
|                                                                                                                                                                                                                                                                                                                                                                    |                                      | March 31,
|                                                                                                                                                                                                                                                                                                                                                                    |                                      |          
|                                                                                                                                                                                                                                                                                                                                                                    |                                      | 2003      |            | 2002      
|                                                                                                                                                                                                                                                                                                                                                                    |                                      |           |            |           
|Notes payable to third parties:                                                                                                                                                                                                                                                                                                                                     |                                      |           |            |            |  |   |            |           
|Note payable to Ocean Bank, collateralized by
    substantially all assets of the NAP of the Americas and a
    personal guaranty of the Chief Executive Officer (see
    Note 2). On April 30, 2003, the credit facility was
    revised to convert $15 million of principal to equity and
    extend the terms of the remaining balance until April 30,
    2006. |                                      | $         | 43,974,553 |            |  | $ | 43,293,333 |           
|Unsecured note payable to a corporation, interest
    accrues at 10%. In April 30, 2003, $1,000,000 was converted
    to Subordinated Debentures (see Note 2) and remaining
    principal and interest is due on April 1, 2004.                                                                                                                                     |                                      |           | 4,450,000  |            |  |   |           |           
|Note payable to a financial institution,
    collateralized by certain assets of a director and certain
    shareholders of the Company Interest accrues at 1% over prime,
    due on December 31, 2003.                                                                                                                                                            |                                      |           | 667,178    |            |  |   | 1,375,000  |           
|Unsecured note payable to a corporation, interest
    accrues at 9%. Due on demand                                                                                                                                                                                                                                                                                  |                                      |           | 518,501    |            |  |   |           |           
|Unsecured note payable to a corporation, interest
    accrues at 10% Principal and interest due on May 30, 2003.
    In April 30, 2003, amount was converted to Subordinated
    Debentures (see note 2)                                                                                                                                                            |                                      |           | 1,500,000  |            |  |   |           |           
|Unsecured note payable to a corporation, interest
    accrues at 15%. Principal and interest due on April 1, 2004.                                                                                                                                                                                                                                                  |                                      |           | 1,000,000  |            |  |   | 1,000,000  |           
|Unsecured notes payable to individuals, interest
    accrues at 10% Principal and interest due on March 31,
    2003. On April 30, 2003, amounts were converted to
    Subordinated Debentures (see Note 2)                                                                                                                                                         |                                      |           | 1,000,000  |            |  |   |           |           
|Unsecured note payable to a corporation in
    seventy-five monthly installments of principal and interest
    which began January 1, 1999. Interest accrues at 9.5%                                                                                                                                                                                                |                                      |           | 198,385    |            |  |   | 226,092    |           
|Unsecured notes payable to individuals, interest
    accrues at 8%, with interest due monthly. Matured and currently
    due                                                                                                                                                                                                                                        |                                      |           |           |            |  |   | 138,442    |           
|Unsecured note payable to a corporation, interest
    accrues at 13% Principal and interest due on June 30, 2002.                                                                                                                                                                                                                                                   |                                      |           |           |            |  |   | 250,000    |           
|Unsecured notes payable to corporations. Interest
    ranges from 10%  15%. Principal and interest
    generally due in monthly installments                                                                                                                                                                                                                       |                                      |           | 63,284     |            |  |   | 397,433    |           
|Unsecured note payable to a corporation, interest
    accrues at 10%. Due on demand                                                                                                                                                                                                                                                                                 |                                      |           | 30,000     |            |  |   |           |           
|                                                                                                                                                                                                                                                                                                                                                                    |                                      |           |            |            |  |   |            |           
|                                                                                                                                                                                                                                                                                                                                                                    | Total notes payable to third parties |           |            | 53,401,901 |  |   |            | 46,680,300 | 
|                                                                                                                                                                                                                                                                                                                                                                    |                                      |           |            |            |  |   |            |           

F-19



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                                                                                                                                                                                                                                                                               |                                        |           |            |           |  |   |            |           | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------- | --------- | ---------- | --------- |  | - | ---------- | --------- | 
|                                                                                                                                                                                                                                                                                                               |                                        |          
|                                                                                                                                                                                                                                                                                                               |                                        | March 31,
|                                                                                                                                                                                                                                                                                                               |                                        |          
|                                                                                                                                                                                                                                                                                                               |                                        | 2003      |            | 2002     
|                                                                                                                                                                                                                                                                                                               |                                        |           |            |          
|Notes payable to related parties:                                                                                                                                                                                                                                                                              |                                        |           |            |           |  |   |            |          
|Unsecured note payable to certain directors and a
    shareholder of the Company. Interest accrues at 8.25%, with
    principal installments of $150,000 and interest due quarterly
    commencing March 31, 2002 and maturing on June 23,
    2003.                                                           |                                        |           |           |           |  |   | 3,500,000  |          
|Unsecured note payable to a corporation
    controlled by a shareholder, interest accrues at 15%. Principal
    and interest due on April 1, 2004.                                                                                                                                                             |                                        |           | 1,600,000  |           |  |   | 1,600,000  |          
|Note payable to the Chief Executive Officer.
    Interest accrues at 10%. Principal and interest due on
    June 30, 2003. On April 30, 2003, amount was converted
    to Subordinated Debentures (see Note 2)                                                                                                 |                                        |           | 1,000,000  |           |  |   |           |          
|Unsecured notes payable to certain executives and
    directors of the Company and third party corporations, interest
    accrues at 13%. On April 30, 2003, $700,000 of principal
    was converted to Subordinated Debentures (see Note 2) and
    remaining principal and interest is due on April 1, 2004. |                                        |           | 1,500,000  |           |  |   | 1,850,000  |          
|Unsecured note payable to the Chief Executive
    Officer. Interest accrues at 7.5%, payable monthly, with
    principal installments of $50,000 due on a quarterly basis
    commencing on June 26, 2002, and maturing on June 26,
    2003.                                                                  |                                        |           | 100,000    |           |  |   | 250,000    |          
|Unsecured note payable to a shareholder, interest
    accrues at 10%. Due on demand                                                                                                                                                                                                                            |                                        |           | 38,000     |           |  |   |           |          
|                                                                                                                                                                                                                                                                                                               |                                        |           |            |           |  |   |            |          
|                                                                                                                                                                                                                                                                                                               | Total notes payable to related parties |           |            | 4,238,000 |  |   |            | 7,200,000 | 
|                                                                                                                                                                                                                                                                                                               |                                        |           |            |           |  |   |            |          
|                                                                                                                                                                                                                                                                                                               |                                        | $         | 57,639,901 |           |  | $ | 53,880,300 |          
|Less: current portion of notes payable                                                                                                                                                                                                                                                                         |                                        |           | 1,464,963  |           |  |   | 50,752,209 |          
|                                                                                                                                                                                                                                                                                                               |                                        |           |            |           |  |   |            |          
|Notes payable, less current portion                                                                                                                                                                                                                                                                            |                                        |           | 56,174,938 |           |  |   | 3,128,091  |          
|                                                                                                                                                                                                                                                                                                               |                                        |           |            |           |  |   |            |          

In May 2002, the Company obtained a
$1.5 million loan at 10% interest from its Chief Executive
Officer, Mr. Manuel D. Medina, which became due in
September 2002. During September 2002, the Company repaid
$500,000 plus accrued interest of $48,493 and Mr. Medina
agreed to extend the note until June 30, 2003.

On September 5, 2001, the Company closed on
a $48 million loan from Ocean Bank. During August 2002, the
Company modified the facility. Under the modified terms, the
initial maturity date was extended to September 2003 and the
Company had the option to exercise two six-month extension
periods. At closing, the total amount of the loan was disbursed
except for approximately $6.6 million that was held as an
interest reserve. Through June 2002, the interest reserve was
disbursed monthly to make interest payments. The amendment
reduced the annual interest rate to 7.50%. The Company commenced
making monthly interest payments in July 2002. All other
material provisions of the credit facility remained unchanged.
To obtain the original loan, the Company paid a $720,000
commitment fee to the lender. The proceeds of the original
credit facility were used to:



| |   |                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | repay a $10 million short-term loan from
    Mr. Medina, the proceeds of which the Company had used to
    fund the build out of the NAP of the Americas (Mr. Medina,
    in turn, used the $10 million to repay a personal
    $10 million short-term loan from Ocean Bank);
|
| |  | repay $3.5 million of debt that the Company
    owed to Ocean Bank under a line of credit personally guaranteed
    by Mr. Medina;                                                                                                                                           

F-20



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |   |                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------
| |  | pay $1.2 million in loan costs related to
    the $48 million credit facility (including $720,000
    commitment fee); and
|
| |  | fund the NAP of the Americas build out costs.                                                                             

On April 30, 2003, Ocean Bank revised its
credit facility by converting $15.0 million into equity and
extending the term of the remaining balance until April 2006.
Under the new terms, interest will be payable monthly at an
annual rate of 5.25% for the first twelve months and 7.5%
thereafter. As of March 31, 2003, the Company was past due
in its payment to Ocean Bank of approximately $1.4 million
of accrued interest. Concurrent with this transaction, the
Company paid all past due interest (see Note 2).

The credit facility is secured by all of the
Companys assets and allows for up to a $25 million
junior lien position on the assets of its NAP of the Americas,
Inc. subsidiary. Mr. Medina has personally guaranteed the
$48 million credit facility.

In addition to Mr. Medinas personal
guarantee of the credit facility, and in order to obtain the
facility, the bank further required Mr. Medina, prior to
the bank disbursing funds under the credit facility, to
(i) provide a $5.0 million certificate of deposit to
the bank as collateral for certain personal loans that
Mr. Medina has with the bank and (ii) commit to
accelerate the maturity date of those personal loans to
December 31, 2001. Subsequent to September 2001,
Mr. Medina and the bank changed the maturity date on the
personal loans, first to December 31, 2001 and later to
July 1, 2002. In the event of the Companys default
under the credit facility Mr. Medina also agreed to
subordinate any debt that the Company owed to Mr. Medina
until the loan is repaid in full. Mr. Medina has repaid
part of those personal loans to the bank through liquidation of
the $5.0 million certificate of deposit in January 2002
leaving an outstanding principal balance of approximately
$4.8 million and he has exercised his right under such
personal loan agreements to extend their maturity date from
July 1, 2002 to June 30, 2003. As of June 30,
2003, such personal loans have matured and are unpaid.
Accordingly, and as further discussed below, Mr. Medina
could demand the Company to provide cash collateral for
Mr. Medinas outstanding loan balances aggregating
approximately $4.8 million. Mr. Medina has an option
under the relevant loan documents to extend the loan to
December 31, 2003 that requires a principal payment of
$300,000. Although the option to extend expires June 30,
2003, Mr. Medina is currently in discussions with Ocean
Bank regarding extending the loan, and believes that Ocean Bank
will agree to extend the loan.

On September 5, 2001 and in consideration of
Mr. Medinas agreeing to repay his indebtedness to the
bank earlier than otherwise required, pledging the certificate
of deposit to the bank and personally guaranteeing the
$48 million credit facility and approximately
$21 million of construction payables, the Company entered
into an amended and restated employment agreement with him
dated                     .
Under the terms of the amended and restated employment
agreement, the Company will indemnify Mr. Medina from any
personal liability related to his guarantees of the
Companys debt, use commercially reasonable efforts to
relieve Mr. Medina of all his guarantees of the
Companys debt, provide up to $6.5 million of cash
collateral to the bank should Mr. Medina be unable to repay
the personal loans when due and provide a non interest-bearing
$5.0 million loan to Mr. Medina for as long as his
guarantees of the Companys debt exist. If the loan to
Mr. Medina becomes in default, the Company has a right of
offset against all amounts payable by the Company to
Mr. Medina, the aggregate of which is approximately
$3.0 million as of March 31, 2003. Subsequent to
March 31, 2003, the amount was reduced to
$1.5 million. Mr. Medina and the Company have agreed
that the Company has the right to withhold payment to
Mr. Medina of the $1,375,000 in convertible debt held by
him until the note to the Company is repaid. The note receivable
from Mr. Medina is shown as an adjustment to equity. The
$48 million credit facility and the note receivable from
Mr. Medina were approved by the Board of Directors.

F-21



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Mr. Medinas note to the Company has a
maturity date of December 5, 2004 and bears interest
subsequent to September 5, 2002 at 2%, the applicable
federal rate. Interest is due in bi-annual installments
beginning on June 30, 2003. The Company will review the
collectibility of this note on a quarterly basis.

In August 2002 the Company modified the terms of
a note payable to a financial institution to extend the maturity
date to December 2002 with certain principal payments to be made
monthly with remaining principal and interest due at maturity.
In conjunction with the modification and extension of this note,
the Company issued 400,000 shares of the Companys common
stock valued at $180,000 to a shareholder, a former guarantor of
the note. The principal balance on the note on March 31,
2003 was $667,178. On March 31, 2003, this financial
institution and the Company entered into a forbearance agreement
and modified the terms of their note. Under the modified
agreement terms, the Company made principal payments of $100,000
and $125,000 in April 2003 and May 2003, respectively and the
financial institution retained the right to enforce accelerated
remedies if the Company defaults on the modified note. The
Company is also required to make seven consecutive monthly
principal payments of $25,000 commencing on June 1, 2003,
with interest on the outstanding balance to be paid monthly, and
a balloon payment on December 31, 2003; representing full
and final payment of outstanding principal and accrued interest.
We made the required payment on June 1, 2003.

Interest expense of approximately
$11.1 million, $9.8 million, and $1.1 million,
net of amounts capitalized to leasehold improvements and real
estate inventories totaling $0, $891,644, and $605,332 was
recognized in fiscal years 2003, 2002 and 2001, respectively.

Aggregate maturities for notes payable as of
March 31 are as follows:

|           |       |   |            |            | 
|---------- | ----- | - | ---------- | ---------- | 
|2004       |       | $ | 1,464,963  |           
|2005       |       |   | 6,898,000  |           
|2006       |       |   | 48,000     |           
|2007       |       |   | 49,222,553 |           
|2008       |       |   | 6,385      |           
|Thereafter |       |   |           |           
|           |       |   |            |           
|           | Total |   | $          | 57,639,901 | 
|           |       |   |            |           

10. CONSTRUCTION PAYABLES

Construction payables relate to construction of
the NAP of the Americas and the Companys colocation
facility in Santa Clara, California and include approximately
$21.7 million due to two vendors under promissory notes
originally bearing interest at annual rates ranging from 8.5 to
10 percent. Mr. Medina guaranteed $18 million due
under these promissory notes but was subsequently released upon
closing of the April 30, 2003 financing transactions (see
Note 2).

On November 8, 2002, CRG, LLC entered into
an agreement with Cupertino Electric, Inc. to purchase the
entire $18.5 million construction payable (including
accrued interest) owed to Cupertino. On November 11, 2002,
the Company entered into an agreement with CRG that provided the
Company the option, upon the closing of the purchase of the debt
by CRG from Cupertino, to repay the entire debt at a discount by
either issuing shares of the Companys common stock valued
at $0.75 per share or making a cash payment of $9.9 million
(see Note 2).

On December 5, 2002, CRG, LLC entered into
an agreement with Kinetics Mechanical Services, Inc. and
Kinetics Systems Inc. to purchase the Companys
$4.1 million construction payable (including accrued
interest) to Kinetics Mechanical Services, Inc. and Kinetics
Systems Inc. On December 5, 2002, the Company entered into
an agreement with CRG that provided the Company with the option,
upon the closing of the purchase of the debt by CRG from
Kinetics Mechanical Services, Inc. and Kinetics Systems Inc., to

F-22



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

repay the entire debt at a discount by either
issuing shares of the Companys common stock valued at
$0.75 per share or making a cash payment of $2.4 million
(see Note 2).

11. CONVERTIBLE DEBT

The Company has outstanding approximately
$12,155,000 and $2,750,000 of 13% and 13.125%
subordinated convertible debt, respectively, as of
March 31, 2003. The 13% debt matures on December 31,
2005 and the 13.125% debt matures on August 30, 2004. The
debt is convertible into the Companys stock at a weighted
average conversion price of $1.82 and $0.61 for the convertible
debt issued at 13% and 13.125%, respectively. Prepayment by the
Company is permitted under both debt instruments, but will
entitle holders of the 13% subordinated debentures to warrants
or a premium over their outstanding principal and interest based
upon the following schedule:

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

As of March 31, 2003, the Company had not
paid approximately $1,242,000 of accrued interest due on or
before March 31, 2003. Subsequent to March 31, 2003,
the Company paid such amounts.

During November 2002, the Company made an offer
to all of the holders of the convertible debentures to convert
their debentures, including accrued interest as of
September 30, 2002, into the Companys common shares
at the lower of their current conversion price or $0.75.
Approximately $26.4 million of the convertible debentures
had stated conversion prices in excess of $0.75 per share. As of
December 31, 2002, approximately $15.8 million of the
convertible debt and accrued interest of approximately $520,000
was converted to 21.8 million shares of the Companys
common stock. As a result, the Company recognized a
$4.9 million inducement on debt conversion expense which
represents the fair value of the additional common shares issued
by the Company as a result of the lower conversion price.

The holders of the 13% debt had a 30 day
period during January 2003 to require the Company to repay the
outstanding principal balance. During April 2003 and May 2003,
the Company made payments totaling approximately
$0.9 million to five holders of the convertible debentures
who exercised their right to request an acceleration of payment.

12. CHANGES TO STOCKHOLDERS
EQUITY

The Company entered into the following equity
transactions:

Common stock

In December 2002, $373,000 of warrants were
converted to 818,000 shares of common stock at $0.01 per share.

During the quarter ended December 31, 2002,
holders of notes payable entered into irrevocable agreements to
converted approximately $.8 million in debt and accrued
interest into approximately 1.0 million shares of the
Companys common stock at $0.75 per share.

In August 2002, the Company issued 100,000
warrants valued at $61,000, which were subsequently converted to
100,000 shares of common stock.

In June 2002, the NAP de las Americas 
Madrid S.A. purchased 5 million shares of the
Companys common stock at $1.00 per share. As a result of
the subsequent sale of certain common shares, the Company is
obligated to issue an additional 3.6 million shares to NAP
de Las Americas-Madrid S.A. As of June 25,

F-23



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

2003, these shares have not yet been issued. The
Company anticipates issuing these shares in the quarter ended
September 30, 2003.

In April 2002, the Company received a binding
commitment from two directors and some of the Companys
shareholders for the purchase of $7.5 million of common
stock at $.75 per share. In May 2002, the Company issued
10 million shares of the Companys common stock for
$3.6 million in cash and the conversion of
$3.9 million in short term promissory notes to equity.

In April 2002, the Company entered into a Put and
Warrant purchase agreement with TD Global Finance
(TDGF). On July 19, 2002, the Company exercised
its right to sell to TDGF 17,648,824 common shares for $0.58 per
share for a total of $10.2 million. During August 2002, the
Company received the $10.2 million in related cash. The
Company used these proceeds for general corporate purposes. In
conjunction with the sale, the Company issued three call
warrants, each granting TDGF the right to purchase 1,176,588
shares of the Companys common stock. The warrants expired
without exercise on January 16, 2003.

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

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

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

Preferred stock

The Company has the authority to issue 10,000,000
shares of preferred stock, par value $0.001 per share, which are
issuable in series on terms to be determined by its board of
directors.

Convertible preferred stock

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

Series H redeemable convertible preferred
stock

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

Series G convertible preferred
stock

The Company has 20 outstanding shares of
Series G convertible preferred stock (Series G
Preferred), which do not bear dividends. Conversion of the
Series G Preferred into common stock is based on the issue
price plus an 8% per annum non-compounding premium, divided by
the lesser of: (a) $1.50 per Series G Preferred share
or (b) the closing price of the Companys common
stock, as reported on the American Stock Exchange, on the
business day immediately preceding the conversion. The
Series G Preferred also has a stated liquidation preference
value of $100,000 per share plus 8% in-kind dividends since
March 1999, the date of issuance. The holders have no voting
rights except with respect to matters that affect rights related
to the Series G Preferred. The holder of these shares is a
corporation owned by Mr. Medina, Chief Executive Officer

F-24



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

and a shareholder of the Company. As of
March 31, 2003, the Series G Preferred shares could
have been converted into 2,016,508 of the Companys common
shares.

Stock options and warrants

During the period from March 2001 through
March 2003, the Company issued stock options and warrants
to third parties for services and to facilitate certain debt and
equity transactions.

The following table summarizes information about
stock options and warrants outstanding as of March 31, 2003:

|              |       |                  |           |           |  |            |      |             |  |  |               |  |  |   |         |           | 
|------------- | ----- | ---------------- | --------- | --------- |  | ---------- | ---- | ----------- |  |  | ------------- |  |  | - | ------- | --------- | 
|              |       |                  |           |           |  |            |      | Estimated  
|              |       | No. of shares    |           | Exercise  |  | Expiration |      | Fair Value 
|Issuance Date |       | able to purchase |           | Price     |  | Date       |      | at Issuance
|              |       |                  |           |           |  |            |      |            
|March 2003    |       |                  | 300,000   |           |  | $          | 0.75 |             |  |  | March 2007    |  |  | $ | 110,400 |          
|December 2002 |       |                  | 300,000   |           |  |            | 0.75 |             |  |  | March 2007    |  |  |   | 110,400 |          
|October 2002  |       |                  | 1,200,000 |           |  |            | 0.75 |             |  |  | October 2004  |  |  |   | 90,000  |          
|July 2002     |       |                  | 100,000   |           |  |            | 0.54 |             |  |  | July 2003     |  |  |   | 20,900  |          
|April 2002    |       |                  | 600,000   |           |  |            | 0.40 |             |  |  | March 2007    |  |  |   | 220,800 |          
|June 2001     |       |                  | 25,000    |           |  |            | 2.00 |             |  |  | June 2003     |  |  |   | 26,575  |          
|June 2001     |       |                  | 13,000    |           |  |            | 1.72 |             |  |  | June 2011     |  |  |   | 22,490  |          
|January 2002  |       |                  | 19,000    |           |  |            | 0.48 |             |  |  | June 2011     |  |  |   | 7,942   |          
|March 2001    |       |                  | 300,000   |           |  |            | 2.00 |             |  |  | March 2006    |  |  |   | 352,200 |          
|November 2000 |       |                  | 250,000   |           |  |            | 2.76 |             |  |  | November 2008 |  |  |   | 394,000 |          
|April 2000    |       |                  | 600,000   |           |  |            | 1.25 |             |  |  | March 2004    |  |  |   | 501,874 |          
|              |       |                  |           |           |  |            |      |             |  |  |               |  |  |   |         |          
|              | Total |                  |           | 3,707,000 |  |            |      |             |  |  |               |  |  |   | $       | 1,857,581 | 
|              |       |                  |           |           |  |            |      |             |  |  |               |  |  |   |         |          

Stock options

The Company has three stock option plans,
whereby incentive and nonqualified options and stock
appreciation rights may be granted to employees, officers,
directors, and consultants of the Company. There are 17,500,000
shares of common stock reserved for issuance under these plans.
The exercise price of the options is determined by the Board of
Directors, but in the case of an incentive stock option, the
exercise price may not be less than 100% of the fair market
value at the time of grant. Options vest over periods not to
exceed ten years.

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

F-25



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

A summary of the status of the Companys
stock options is presented below:

|                                                                      |                |        |            |                  |  |   |      |      | 
|--------------------------------------------------------------------- | -------------- | ------ | ---------- | ---------------- |  | - | ---- | ---- | 
|                                                                      |                |        |            | Weighted Average
|                                                                      |                | Number |            | Exercise Price  
|                                                                      |                |        |            |                 
|Outstanding at March 31, 2001                                         |                |        | 10,898,826 |                  |  | $ | 2.31 |     
|Granted                                                               |                |        | 4,072,125  |                  |  |   | .91  |     
|Expired/ Terminated                                                   |                |        | (2,106,500 | )                |  |   | 2.75 |     
|Exercised                                                             |                |        | (115,000   | )                |  |   | .35  |     
|                                                                      |                |        |            |                  |  |   |      |     
|Outstanding at March 31, 2002                                         |                |        | 12,749,451 |                  |  |   | 1.92 |     
|                                                                      |                |        |            |                  |  |   |      |     
|Granted                                                               |                |        | 2,203,100  |                  |  |   | .46  |     
|Expired/ Terminated                                                   |                |        | (258,500   | )                |  |   | 1.69 |     
|Exercised                                                             |                |        |           |                  |  |   |     |     
|                                                                      |                |        |            |                  |  |   |      |     
|Outstanding at March 31, 2003                                         |                |        | 14,694,051 |                  |  |   | 1.70 |     
|                                                                      |                |        |            |                  |  |   |      |     
|Options exercisable at:                                               |                |        |            |                  |  |   |      |     
|                                                                      | March 31, 2003 |        |            | 9,818,051        |  |   |      | 1.90 | 
|                                                                      |                |        |            |                  |  |   |      |     
|                                                                      | March 31, 2002 |        |            | 7,382,793        |  |   |      | 1.74 | 
|                                                                      |                |        |            |                  |  |   |      |     
|Weighted average fair value of options granted
    during year ended: |                |        |            |                  |  |   |      |     
|                                                                      | March 31, 2003 |        | $          | 0.41             |  |   |      |      | 
|                                                                      |                |        |            |                  |  |   |      |     
|                                                                      | March 31, 2002 |        |            | 0.81             |  |   |      |      | 
|                                                                      |                |        |            |                  |  |   |      |     

The following table summarizes information about
options outstanding at March 31, 2003:

|               |            |                |  |              |            |          |  |             |     |  |  |   |      |  |  |  |           | 
|-------------- | ---------- | -------------- |  | ------------ | ---------- | -------- |  | ----------- | --- |  |  | - | ---- |  |  |  | --------- | 
|               |            |                |  | Average      |            |          |  |            
|Range of       |            |                |  | Remaining    |            | Average  |  | Number     
|Exercise       |            |                |  | Contractual  |            | Exercise |  | Exercisable
|Prices         |            | Outstanding at |  | Life (Years) |            | Price    |  | Options at 
|               |            |                |  |              |            |          |  |            
|March 31, 2003 |            |                |  |              |            |          |  |             |     |  |  |  
|               | $0.25-0.50 |                |  |              | 2,779,500  |          |  |             | 3.8 |  |  | $ | 0.35 |  |  |  | 2,189,667 | 
|               | $0.51-1.00 |                |  |              | 4,306,500  |          |  |             | 8.6 |  |  |   | 0.63 |  |  |  | 1,650,634 | 
|               | $1.01-1.50 |                |  |              | 1,354,500  |          |  |             | 6.1 |  |  |   | 1.41 |  |  |  | 1,096,833 | 
|               | $1.51-2.00 |                |  |              | 264,874    |          |  |             | 7.8 |  |  |   | 1.75 |  |  |  | 175,874   | 
|               | $2.01-3.00 |                |  |              | 1,495,725  |          |  |             | 4.8 |  |  |   | 2.85 |  |  |  | 1,295,575 | 
|               | $3.01-5.00 |                |  |              | 4,492,952  |          |  |             | 7.3 |  |  |   | 3.26 |  |  |  | 3,409,468 | 
|               |            |                |  |              |            |          |  |             |     |  |  |   |      |  |  |  |           | 
|               |            |                |  |              | 14,694,051 |          |  |             |     |  |  |   |      |  |  |  | 9,818,051 | 
|               |            |                |  |              |            |          |  |             |     |  |  |   |      |  |  |  |           | 

13. Income taxes

No provision for income taxes was recorded for
each of the three years in the period ended March 31, 2003
as the Company incurred net operating losses in each year. The
Company considered future taxable income and tax planning
strategies in assessing the need for a valuation allowance.
Based on the available objective evidence, the Company believes
it is more likely than not that the net deferred tax assets will
not be fully realizable. Accordingly, the Company has provided a
full valuation allowance against its net deferred tax assets as
of March 31, 2003 and 2002.

F-26



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Deferred tax assets (liabilities) consists
of the following:

|                             |                                                                            |           |             |            |   |   |             |            |  
|---------------------------- | -------------------------------------------------------------------------- | --------- | ----------- | ---------- | - | - | ----------- | ---------- | -
|                             |                                                                            |          
|                             |                                                                            | March 31,
|                             |                                                                            |          
|                             |                                                                            | 2003      |             | 2002      
|                             |                                                                            |           |             |           
|Deferred tax assets:         |                                                                            |           |             |            |   |   |             |           
|                             | Charitable contributions                                                   |           | $           | 251,010    |   |   | $           | 230,293    |  
|                             | Capitalized start-up costs                                                 |           |             | 2,935,612  |   |   |             | 3,807,488  |  
|                             | Allowances and other                                                       |           |             | 6,873,925  |   |   |             | 5,574,458  |  
|                             | Net operating loss carryforwards                                           |           |             | 31,131,334 |   |   |             | 18,432,832 |  
|                             | Net operating loss carryforwards retained from
    discontinued operations |           |             | 17,280,709 |   |   |             | 17,280,709 |  
|                             | Tax credits                                                                |           |             | 245,780    |   |   |             | 245,780    |  
|                             |                                                                            |           |             |            |   |   |             |           
|Total deferred tax assets    |                                                                            |           | 58,718,370  |            |   |   | 45,571,560  |           
|                             |                                                                            |           |             |            |   |   |             |           
|Valuation allowance          |                                                                            |           | (58,061,244 | )          |   |   | (45,506,913 | )         
|                             |                                                                            |           |             |            |   |   |             |           
|Deferred tax liability:      |                                                                            |           |             |            |   |   |             |           
|                             | Other                                                                      |           |             | (657,126   | ) |   |             | (64,647    | )
|                             |                                                                            |           |             |            |   |   |             |           
|Total deferred tax liability |                                                                            |           | (657,126    | )          |   |   | (64,647     | )         
|                             |                                                                            |           |             |            |   |   |             |           
|Net deferred tax asset       |                                                                            | $         |            |            |   | $ |            |           
|                             |                                                                            |           |             |            |   |   |             |           

The Companys federal and state net
operating loss carryforwards begin to expire in 2011.
Utilization of the net operating losses generated prior to the
AmTec merger may be limited by the Internal Revenue Code.

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

|                                                          |  |                              |       |      |  |      |       |    |  |  |       |   
|--------------------------------------------------------- |  | ---------------------------- | ----- | ---- |  | ---- | ----- | -- |  |  | ----- | --
|                                                          |  |                             
|                                                          |  | For the year ended March 31,
|                                                          |  |                             
|                                                          |  | 2003                         |       | 2002 |  | 2001
|                                                          |  |                              |       |      |  |     
|Rate reconciliation                                       |  |                              |       |      |  |      |       |    |  |  |       |   
|Statutory rate                                            |  |                              | (34.0 | )%   |  |      | (34.0 | )% |  |  | (34.0 | )%
|State income taxes, net of federal income tax
    benefit |  |                              | (3.2  | )%   |  |      | (3.3  | )% |  |  | (3.4  | )%
|Other permanent differences                               |  |                              | 6.8   | %    |  |      | 6.2   | %  |  |  | 4.7   | % 
|Increase in valuation allowance                           |  |                              | 30.4  | %    |  |      | 31.1  | %  |  |  | 32.7  | % 
|                                                          |  |                              |       |      |  |      |       |    |  |  |       |   
|Effective tax rate                                        |  |                              | 0     | %    |  |      | 0     | %  |  |  | 0     | % 
|                                                          |  |                              |       |      |  |      |       |    |  |  |       |   

14. COMMITMENTS AND
CONTINGENCIES

Leasing activities

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

Technology Center of the Americas LLC
(TECOTA), an entity in which the Company has a .84%
member interest, owns the building which leases the space for
the NAP of the Americas to the Company under a 20 year
lease. Rent expense under the lease amounted to approximately
$3.6 million, $2.7 million and $0 for the years ended
March 31, 2003, 2002 and 2001.

The Company has entered into capital lease
agreements with third parties for equipment related primarily to
the NAP of the Americas. Generally, the lease terms are for
48 months, and the aggregate related gross assets total
approximately $6.1 million. As of March 31, 2003 the
Company had not paid approximately $359,000 relating to these
leases. Subsequent to March 31, 2003, the Company paid such
amounts.

F-27



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

As of March 31, 2003, the Company had not
paid approximately $602,740 relating to a certain lease. The
Company has negotiated a payment plan with the vendor where
partial payments are to be made.

Operating lease expense, in the aggregate,
amounted to approximately $6.0 million, $7.0 million,
and $1.3 million for the years ended March 31, 2003,
2002 and 2001, respectively.

At March 31, 2003, future minimum lease
payments for each of the following five years and thereafter
under non-cancellable operating and capital leases having a
remaining term in excess of one year are as follows:

|           |                              |                                             |           |           |           |   |            |            |  | 
|---------- | ---------------------------- | ------------------------------------------- | --------- | --------- | --------- | - | ---------- | ---------- |  | 
|           |                              | Capital                                     |           | Operating
|           |                              | Leases                                      |           | Leases   
|           |                              |                                             |           |          
|2004       |                              | $                                           | 2,477,467 |           |           | $ | 6,024,471  |           
|2005       |                              |                                             | 1,087,504 |           |           |   | 6,011,946  |           
|2006       |                              |                                             | 13,248    |           |           |   | 5,581,098  |           
|2007       |                              |                                             | 13,248    |           |           |   | 5,548,701  |           
|2008       |                              |                                             | 5,520     |           |           |   | 5,347,842  |           
|Thereafter |                              |                                             |          |           |           |   | 70,406,223 |           
|           |                              |                                             |           |           |           |   |            |           
|           | Total minimum lease payments |                                             |           | 3,596,987 |           |   | $          | 98,920,281 | 
|           |                              |                                             |           |           |           |   |            |           
|           | Amount representing interest |                                             |           | 357,050   |           |   |            |            | 
|           |                              |                                             |           |           |           |   |            |           
|           |                              | Present value of net minimum lease payments |           | $         | 3,239,937 |   |            |            |  | 
|           |                              |                                             |           |           |           |   |            |           

Investments

In connection with its investment in NAP de las
Americas  Madrid S.A., the Company is committed to
make an additional capital contribution of approximately
$200,000.

Litigation

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

Guarantees

The construction of TECOTA was funded with
$48 million in equity and $61 million in construction
loans from a consortium of banks. The Company guaranteed such
construction loans during the development and construction of
TECOTA. After TECOTA was built, certain banks released the
Company from the guarantee, the result of which was to reduce
the guarantee to $5.5 million. As of March 31, 2003,
TECOTA debt outstanding under the construction loan was
$35.4 million. The Company does not expect to fund any
amounts under the guarantee.

The Company has guaranteed $4.8 million in
personal debt of Manuel D. Medina, the Companys Chief
Executive Officer and Chairman.

F-28



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Other

The Company has entered into an agreement to
provide construction and management services to TECOTA for fees.
For the year ended March 31, 2003, 2002 and 2001 the
Company earned approximately $510,000, $515,000 and
$1.4 million in related fees, respectively.

15. RELATED PARTY TRANSACTIONS

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

The Companys Chief Executive Officer and
other related parties have either provided or guaranteed some of
our debt or equity financing. In addition, services are provided
to entities in which the Company owns stock. Following is a
summary of transactions in each of the three years ended
March 31, 2003 and balances with related parties included
in the accompanying balance sheet as of March 31, 2003 and
2002.

|                                                                |  |      |           |      |  |      |           |  |  |  |           | 
|--------------------------------------------------------------- |  | ---- | --------- | ---- |  | ---- | --------- |  |  |  | --------- | 
|                                                                |  | 2003 |           | 2002 |  | 2001
|                                                                |  |      |           |      |  |     
|Property management and construction fees
    (Note 14)         |  |      | 510,000   |      |  |      | 516,000   |  |  |  | 1,400,000 | 
|Revenues from NAP de las Americas 
    Madrid (Note 1)         |  |      | 340,000   |      |  |      |          |  |  |  |          | 
|Interest income on note receivable 
    related party (Note 9) |  |      | 61,000    |      |  |      |          |  |  |  |          | 
|Interest income from shareholder (Note 7)                       |  |      | 37,000    |      |  |      | 37,000    |  |  |  | 37,000    | 
|Rent expense (Note 14)                                          |  |      | 3,558,196 |      |  |      | 2,668,647 |  |  |  |          | 
|Interest expense (Notes 9 and 11)                               |  |      | 1,198,076 |      |  |      | 897,824   |  |  |  | 148,521   | 
|Other Assets (Note 7)                                           |  |      | 471,000   |      |  |      | 434,000   |  |  |  |           | 
|Note receivable  related party
    (Note 9)                    |  |      | 5,000,000 |      |  |      | 5,000,000 |  |  |  |           | 
|Notes payable to related parties (Note 9)                       |  |      | 4,238,000 |      |  |      | 7,200,000 |  |  |  |           | 
|Convertible debt (Note 11)                                      |  |      | 3,450,000 |      |  |      | 4,700,000 |  |  |  |           | 
|Common stock subscriptions (Note 12)                            |  |      |          |      |  |      | 950,000   |  |  |  |           | 

During the year ended March 31, 2003,
approximately $1.4 million, including accrued interest, of
related party debt was converted to equity at $.75 per
share.

In April 2003, in connection with the issuance of
the Subordinated Debentures the Company received $400,000 from
two directors and $50,000 from an employee and shareholder.

In January 2003, the Company obtained $53,000 and
$80,000 unsecured, due on demand loans at 10% interest, from its
Chief Executive Officer and a member of the Companys Board
of Directors. The loans, including accrued interest were repaid
during January 2003 and February 2003.

Included in accounts receivable is a non-trade
receivable of approximately $59,000, net of $151,000 in
write-offs during the year ended March 31, 2003 due from a
related party. There is also a corresponding payable of
approximately $59,000 to the same related party.

In February 2001, the Company sold certain
operations to related parties (Note 4).

16. INFORMATION ABOUT THE COMPANYS
OPERATING SEGMENTS

As of March 31, 2003 and 2002, the Company
had two reportable business segments, data center operations and
real estate services. The data center operations segment
provides Tier 1 NAP, Internet infrastructure and managed
services in a data center environment. The real estate services
segment constructs and manages real estate projects focused in
the technology sector. The Companys reportable segments
are strategic business operations that offer different products
and services.

F-29



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

During the year ended March 31, 2001, the
Company had an additional segment, telecom facilities
management, which developed, managed and leased facilities
catering primarily to the telecommunications industry. In
conjunction with the Companys change in its strategy
related to its colocation facility in Santa Clara, California,
the Company no longer considers the remaining operations to be
separate from its other two segments. Therefore, amounts related
to the colocation facility have been reclassified in the current
and prior year presentations to their respective March 31,
2003 segments.

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

|                             |  |             |             |            |  |             |             |              |  |       |            |   |  |   |             |   |  |   |              |  
|---------------------------- |  | ----------- | ----------- | ---------- |  | ----------- | ----------- | ------------ |  | ----- | ---------- | - |  | - | ----------- | - |  | - | ------------ | -
|                             |  |             |             |            |  |             |             | Discontinued |  |      
|                             |  |             |             | Telecom    |  |             |             | Operations  |  |      
|                             |  | Data Center |             | Facilities |  | Real Estate |             | Telecom      |  |      
|For the Year Ended March 31, |  | Operations  |             | Management |  | Services    |             | Services     |  | Total
|                             |  |             |             |            |  |             |             |              |  |      
|2003                         |  |             |             |            |  |             |             |              |  |       |            |   |  |   |             |   |  |   |              |  
|                             |  |             |             |            |  |             |             |              |  |       |            |   |  |   |             |   |  |   |              |  
|Revenue                      |  | $           | 11,032,984  |            |  | $           |            |              |  | $     | 3,660,719  |   |  | $ |            |   |  | $ | 14,693,703   |  
|Loss from operations         |  |             | (21,658,738 | )          |  |             |            |              |  |       | (3,671,562 | ) |  |   |            |   |  |   | (25,330,300  | )
|Net loss                     |  |             | (37,565,136 | )          |  |             |            |              |  |       | (3,662,169 | ) |  |   |            |   |  |   | (41,227,305  | )
|2002                         |  |             |             |            |  |             |             |              |  |       |            |   |  |   |             |   |  |   |              |  
|                             |  |             |             |            |  |             |             |              |  |       |            |   |  |   |             |   |  |   |              |  
|Revenue                      |  | $           | 3,215,897   |            |  | $           |            |              |  | $     | 12,656,587 |   |  | $ |            |   |  | $ | 15,872,484   |  
|Loss from operations         |  |             | (26,249,509 | )          |  |             | (16,340,634 | )            |  |       | (8,961,576 | ) |  |   |            |   |  |   | (51,551,719  | )
|Net loss                     |  |             | (34,971,359 | )          |  |             | (16,682,059 | )            |  |       | (5,718,797 | ) |  |   |            |   |  |   | (57,372,215  | )
|2001                         |  |             |             |            |  |             |             |              |  |       |            |   |  |   |             |   |  |   |              |  
|                             |  |             |             |            |  |             |             |              |  |       |            |   |  |   |             |   |  |   |              |  
|Revenue                      |  | $           | 252,906     |            |  | $           | 2,863,443   |              |  | $     | 37,031,059 |   |  | $ |            |   |  | $ | 40,147,408   |  
|Loss from operations         |  |             | (9,158,888  | )          |  |             | (7,758,575  | )            |  |       | (3,258,293 | ) |  |   |            |   |  |   | (20,175,756  | )
|Net loss                     |  |             | (9,219,416  | )          |  |             | (8,383,329  | )            |  |       | (3,770,506 | ) |  |   | (82,626,411 | ) |  |   | (103,999,662 | )
|Assets, as of March 31,      |  |             |             |            |  |             |             |              |  |       |            |   |  |   |             |   |  |   |              |  
|                             |  |             |             |            |  |             |             |              |  |       |            |   |  |   |             |   |  |   |              |  
|2003                         |  | $           | 67,595,113  |            |  | $           |            |              |  | $     | 2,006,400  |   |  |   |             |   |  | $ | 69,601,513   |  
|2002                         |  | $           | 69,644,606  |            |  | $           |            |              |  | $     | 11,379,325 |   |  | $ |            |   |  | $ | 81,023,931   |  

A reconciliation of total segment loss from
operations to loss before income taxes for the twelve months
ended March 31, 2003, 2002 and 2001 follows:

|                                               |                          |                             |             |             |   |      |             |             |   |   |             |              |  
|---------------------------------------------- | ------------------------ | --------------------------- | ----------- | ----------- | - | ---- | ----------- | ----------- | - | - | ----------- | ------------ | -
|                                               |                          |                            
|                                               |                          | For the twelve months ended
|                                               |                          | March 31,                  
|                                               |                          |                            
|                                               |                          | 2003                        |             | 2002        |   | 2001
|                                               |                          |                             |             |             |   |     
|Total segment loss from operations             |                          | $                           | (25,330,300 | )           |   | $    | (51,551,719 | )           |   | $ | (20,175,756 | )           
|Interest income                                |                          |                             | 136,278     |             |   |      | 97,237      |             |   |   | 505,743     |             
|Inducement on debt conversion                  |                          |                             | (4,871,245  | )           |   |      |            |             |   |   |            |             
|Interest expense                               |                          |                             | (11,007,683 | )           |   |      | (9,750,473  | )           |   |   | (1,097,683  | )           
|Dividend on preferred stock                    |                          |                             | (29,988     | )           |   |      | (26,741     | )           |   |   | (34,806     | )           
|Gain on real estate held for sale              |                          |                             |            |             |   |      | 4,185,728   |             |   |   |            |             
|Other expense                                  |                          |                             | (124,367    | )           |   |      | (326,247    | )           |   |   | (570,749    | )           
|Loss from discontinued operations              |                          |                             |            |             |   |      |            |             |   |   | (21,499,587 | )           
|Loss on disposition of discontinued operations |                          |                             |            |             |   |      |            |             |   |   | (61,126,824 | )           
|                                               |                          |                             |             |             |   |      |             |             |   |   |             |             
|                                               | Loss before income taxes |                             | $           | (41,227,305 | ) |      | $           | (57,372,215 | ) |   | $           | (103,999,662 | )
|                                               |                          |                             |             |             |   |      |             |             |   |   |             |             

F-30



---



##### 



TERREMARK WORLDWIDE, INC. AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

17. SUPPLEMENTAL CASH FLOW
INFORMATION

|                                                            |                                                                              |                                       |   |            |  |      |   |           |  |  |   |            | 
|----------------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------------------------- | - | ---------- |  | ---- | - | --------- |  |  | - | ---------- | 
|                                                            |                                                                              |                                      
|                                                            |                                                                              | For the twelve months ended March 31,
|                                                            |                                                                              |                                      
|                                                            |                                                                              | 2003                                  |   | 2002       |  | 2001
|                                                            |                                                                              |                                       |   |            |  |     
|Supplemental disclosures of cash flow information:          |                                                                              |                                       |   |            |  |      |   |           |  |  |   |           
|                                                            | Cash paid for interest                                                       |                                       | $ | 7,321,545  |  |      | $ | 5,318,320 |  |  | $ | 178,718    | 
|                                                            |                                                                              |                                       |   |            |  |      |   |           |  |  |   |           
|                                                            | Taxes Paid                                                                   |                                       |   |           |  |      |   |          |  |  |   |           | 
|                                                            |                                                                              |                                       |   |            |  |      |   |           |  |  |   |           
|Non-cash operating, investing and financing
    activities: |                                                                              |                                       |   |            |  |      |   |           |  |  |   |           
|                                                            | Warrants issued for services                                                 |                                       |   | 612,500    |  |      |   | 944,113   |  |  |   | 394,000    | 
|                                                            |                                                                              |                                       |   |            |  |      |   |           |  |  |   |           
|                                                            | Conversion of notes and accounts payable to
    convertible debt             |                                       |   |           |  |      |   |          |  |  |   | 3,900,382  | 
|                                                            |                                                                              |                                       |   |            |  |      |   |           |  |  |   |           
|                                                            | Reclassification of real estate inventories to
    real estate held for sale |                                       |   |           |  |      |   |          |  |  |   | 12,860,657 | 
|                                                            |                                                                              |                                       |   |            |  |      |   |           |  |  |   |           
|                                                            | Warrants exercised and converted to equity                                   |                                       |   |           |  |      |   | 29,000    |  |  |   |            | 
|                                                            |                                                                              |                                       |   |            |  |      |   |           |  |  |   |           
|                                                            | Conversion of debt and related accrued interest
    to equity                |                                       |   | 4,205,686  |  |      |   |          |  |  |   |           | 
|                                                            |                                                                              |                                       |   |            |  |      |   |           |  |  |   |           
|                                                            | Conversion of accounts payable to equity                                     |                                       |   | 361,491    |  |      |   |          |  |  |   |           | 
|                                                            |                                                                              |                                       |   |            |  |      |   |           |  |  |   |           
|                                                            | 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    |                                       |   | 17,080,476 |  |      |   | 242,700   |  |  |   |           | 
|                                                            |                                                                              |                                       |   |            |  |      |   |           |  |  |   |           
|                                                            | Assets acquired under capital lease                                          |                                       |   |           |  |      |   | 4,293,762 |  |  |   |           | 
|                                                            |                                                                              |                                       |   |            |  |      |   |           |  |  |   |           
|                                                            | Cancellation of warrants                                                     |                                       |   |           |  |      |   | 614,822   |  |  |   |           | 
|                                                            |                                                                              |                                       |   |            |  |      |   |           |  |  |   |           
|                                                            | Issuance of note payable for other asset                                     |                                       |   | 1,000,000  |  |      |   |          |  |  |   |           | 
|                                                            |                                                                              |                                       |   |            |  |      |   |           |  |  |   |           

* * * * *

F-31