TERREMARK WORLDWIDE, INC. FORM 10-K/A

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.

We operate facilities at strategic locations in Florida, California and Sao Paulo 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 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.

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.

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

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.

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 have been retained by the Diplomatic Telecommunications Service Program Office, under three publicly awarded contracts, to design, implement and manage the system which will permit designated overseas locations to have global Internet access. 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.

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 Interregional 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.

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.


	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,


	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.


	•	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.

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

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.

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.



		customers to negotiate the best prices with a number of carriers resulting in better economics and redundancy.



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



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



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

We are not a telecommunications carrier, and as such we rely on third parties to provide our customers with carrier services. We have fiber available from most major land and undersea network service providers. We also have multiple connectivity options available in our two meet point rooms. We limit our exposure to system downtime by using fully redundant commercial power feeds and having backup power systems.

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.

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 some common area maintenance expenses and real estate taxes which amount to approximately $40,000 per month.

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 are also responsible for real estate taxes and property and casualty insurance expenses which in the aggregate amount to approximately $46,000 annually.

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

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.

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.

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

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

Our common stock, par value $0.001 per share, is quoted under the symbol “TWW” on the American Stock Exchange. As of June 25, 2003, we had 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.


	•	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.

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.

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.

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.

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 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.

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.

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.

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.

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.

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.

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 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.

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

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

Data center services revenues consist of colocation services, such as leasing of space and provisioning of power; exchange point services, such as peering and interconnection; and managed and professional services, such as network management, procurement and installation of equipment and procurement of connectivity, managed router services, technical support and consulting. We anticipate an increase in revenue from colocation and exchange point services as we add more customers to our network of NAPs, sell additional services to existing customers and introduce new products and services. We also expect managed and professional services to become an important source of revenue and increase as a percentage of data center- services. For the years ended March 31, 2003 and 2002, data center services revenues consisted of the following:

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 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 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:

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.

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.

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

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 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

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 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 for our reportable segments was as follows:

The increase in the total net loss from continuing operations 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. The net loss for our data center operations segment is primarily the result of insufficient revenues at the NAP of the Americas, which became operational in July 2001, to cover our operating and interest expenses. We expect to continue generating net losses from the data center operations segment until we reach required levels of monthly revenues. The net loss from our telecom facilities management segment for the year ended March 31, 2002 resulted primarily from impairments, interest and general expenses from our collocation facility in Santa Clara, California. There were no revenues generated from the facility during the period. For the year ended March 31, 2001, the net loss from our telecom facilities management segment resulted primarily from insufficient revenues, impairment charges and general expenses. The net loss from real

estate activities for the years ended March 31, 2002 and 2001 resulted from insufficient revenues to support general and interest costs, along with impairments related to Post Shell.

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.

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.

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.

Supra Group, Inc., 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 Paolo Amore, 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, Guillermo Amore and Miguel Rosenfeld, 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.

(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.

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

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.

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.

As of March 31, 2003, our total indebtness, including interest from notes payable, construction payables, capital lease obligations, convertible debt and Series H preferred stock was approximately $115.5 million.

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 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 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 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 SBP Investments, Inc., 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.

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

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.

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, 2003, we entered into financing transactions that will result in debt restructuring gains. See “— Liquidity and Capital Resources.”

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. Our revenues may not increase and additional financing may not be available and, if available the financing may not be obtainable on terms acceptable to us. Additional financing may 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.

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

	•	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.

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.

We commenced operations in Brazil in February 2002. The Brazilian government’s actions to control inflation and effect other policies have often involved wage and price controls, currency devaluations, capital controls and limits on imports, among other things. Luiz Inacio Lula da Silva, the left-wing candidate, was elected president of Brazil on October 27, 2002. The economic and fiscal policies of Mr. Lula da Silva could have an adverse effect on the Brazilian economy and our results of operation.

Our business, financial condition and results of operations in Brazil may be adversely affected by changes in policy involving factors outside of our control, such as:



	•	monetary and fiscal policies;



	•	currency fluctuations;



	•	energy shortages; and



	•	other political, social and economic developments in or affecting Brazil.

In early 1999, the Brazilian government allowed the real to float freely, resulting in a significant devaluation against the U.S. dollar. Since that time, Brazil’s currency has experienced further significant devaluations against the U.S. dollar. The devaluation of the real and the decline in growth in the Brazilian economy have been caused in part by the continued recession in the region, a general aversion to emerging markets by foreign direct and financial investors and the overall decline in worldwide economy.

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;

	•	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:

(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.

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.

(a) 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.


	*	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.
	(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.

(17)	Previously filed as an exhibit to the Company’s Annual Report on Form 10-K filed on June 30, 2003.

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 4th day of March 2004.


	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)

35 EX-31.1 3 g87428exv31w1.htm CERTIFICATION OF CEO PURSUANT RULE 13A-14(A) CERTIFICATION OF CEO PURSUANT RULE 13A-14(A)

1. I have reviewed this amended annual report on Form 10-K/A of Terremark Worldwide, Inc. (the “Registrant”);

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and we have:


	(a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

	(b) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

	(c) disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent function):


	a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

	b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.


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


			Page No.

PART I				2
	ITEM 1.	BUSINESS		2
	ITEM 2.	PROPERTIES		9
	ITEM 3.	LEGAL PROCEEDINGS		10
	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 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		12
PART IV				32
SIGNATURES				35
CERTIFICATION OF CEO PURSUANT RULE 13A-14(A)
CERTIFICATION OF CFO PURSUANT RULE 13A-14(A)



	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



	2003				2002

Colocation & exchange point services	$	8,146,149	82	%	$	2,967,207	92	%
Managed & professional services		1,791,750	18	%		248,690	8	%

	$	9,937,899	100	%	$	3,215,897	100	%

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


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


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


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


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


ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.


ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


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



	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



	For the Year Ended March 31,

	2003		2002

Data center operations	$	37,565,136	$	34,971,359
Telecom facilities management		—		16,682,059
Real estate services		3,662,169		5,718,797

	$	41,227,305	$	57,372,215


ITEM 2.	PROPERTIES.


ITEM 3.	LEGAL PROCEEDINGS.


	Accounting for Income Taxes


	Impairment of Long-Lived Assets



	For the Year Ended March 31,

	2002		2001

Data center operations	$	34,971,359	$	9,219,416
Telecom facilities management		16,682,059		8,383,329
Real estate services		5,718,797		3,770,506

	$	57,372,215	$	21,373,251


			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


		March 31, 2003

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. 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
Unsecured note payable to SBP Investments, Inc. and Caerulea, Ltd., interest accrues at 10%. In April 30, 2003, $1,000,000 was converted to Subordinated Debentures 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
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			1,500,000
Unsecured note payable to a corporation, interest accrues at 15%. Principal and interest due on April 1, 2004.			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			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
Unsecured notes payable to individuals, interest accrues at 8%, with interest due monthly. Matured and currently due			—
Unsecured note payable to a corporation, interest accrues at 13% Principal and interest due on June 30, 2002.			—
Unsecured notes payable to corporations. Interest ranges from 10% — 15%. Principal and interest generally due in monthly installments			63,284
Unsecured note payable to a corporation, interest accrues at 10%. Due on demand			30,000

	Total notes payable to third parties		53,401,901

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.			—
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
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			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 and remaining principal and interest is due on April 1, 2004.			1,500,000


		March 31, 2003

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
Unsecured note payable to a shareholder, interest accrues at 10%. Due on demand			38,000

	Total notes payable to related parties		4,238,000

		$	57,639,901
Less: current portion of notes payable			1,464,963

Notes payable, less current portion			56,174,938


	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


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


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


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
	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)