Terremark Worldwide, Inc. Amendment No. 6

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.


(1)	Estimated solely for the purpose of determining the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended.


(2)	Based on the average of the high and low prices as reported on the American Stock Exchange of the registrant’s common stock on April 8, 2004 for 12,265,657 additional shares.


(3)	Issuable upon the conversion of debentures or the exercise of warrants together with such indeterminate number of shares as may be issuable pursuant to stock splits, stock dividends or similar anti-dilution transactions.


(4)	Under Rule 457(g) and based on a maximum aggregate exercise price of $1,669,075.20, for 1,854,528 additional shares issuable upon the conversion of debentures or the exercise of warrants.



(5)	The filing fee was previously paid.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

The selling stockholders named on page 52 may offer for sale up to 166,214,489 shares of our common stock, 103,601,999 of which are outstanding and 62,612,490 of which may be issued as a result of the conversion of debentures or the exercise of warrants held by some of the selling stockholders.

We will not receive any proceeds from the sale of the shares by the selling stockholders.

Our common stock is listed on the American Stock Exchange under the symbol “TWW.” On April 20, 2004, the closing price of the common stock was $0.65 per share.

This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Investing in our common stock involves certain risks. See “Risk Factors” beginning on page 6.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this prospectus. You should read this entire prospectus carefully.

Our Business

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

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

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

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

• the site and platform they need to exchange Internet and data traffic;

• a menu of related professional and managed services; and

• space to house their equipment and their network facilities in order to be close to the Internet and data traffic exchange connections that take place at the NAP of the Americas.

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

Our Financial Condition

From our April 2000 merger with AmTec through December 31, 2003, we have incurred net operating losses of approximately $219.7 million. Our cash flows from operations for the nine months ended December 31, 2003 and 2002 were negative and our working capital deficit was approximately $17.9 million and $39.0 million as of December 31, 2003 and March 31, 2003, respectively. 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 losses from operations and lack of committed sources of additional debt or equity to support deficits in working capital, raise substantial doubt as to our ability to continue as a going concern.

monthly revenues required range from $700,000 to $800,000. 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 with the U.S. Government and enterprises, and expected future contracts from potential customers currently in our 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 are unsuccessful in increasing revenues, decreasing expenses or extending the maturity of our obligations, we will need additional debt or equity financing by April 2004. Additional financing may not be available, or, if available the financing may not be obtainable on terms acceptable to us and any additional financing may 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.

Our debt to Cupertino Electric, Inc. and Kinetics Mechanical Services, Inc. and Kinetics Systems Inc., which, together, we refer to as “Kinetics”, amounted to an aggregate of $22.6 million, and became past due when it matured in October 2002 and in November 2002. In November 2002 and December 2002, CRG, LLC entered into agreements with Cupertino Electric and Kinetics to purchase our debt. We entered into agreements with CRG to repay the debt at a discount by issuing shares of our common stock. On April 30, 2003, CRG completed the purchase of our debt obligations from Cupertino Electric and Kinetics. Upon closing, CRG converted the debt into equity in accordance with our agreement with CRG.

Our $44.0 million credit facility with Ocean Bank contained a cross-default provision linked to a default under our debt agreements with Cupertino Electric and Kinetics. In addition, as of February 14, 2003, we had not paid to Ocean Bank approximately $1.0 million of accrued interest. Ocean Bank waived the interest default through April 30, 2003 and the event of default related to our indebtedness to Cupertino Electric and Kinetics. On April 30, 2003, Ocean Bank revised its 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 principal balance until April 30, 2006. Concurrent with this transaction, we paid all past due interest.

As of March 31, 2003, we had not paid approximately $1,242,000, $463,000 and $372,000 of accrued interest due March 31, 2003, December 31, 2002 and September 30, 2002, respectively, on our convertible debentures. As a result, $14.9 million of these convertible debentures were in default. We have since paid these amounts. The holders of the convertible debentures had a 30 day period during January 2003 to require us to repay the outstanding principal balance. As of February 14, 2003, eight holders of the convertible debentures, representing a total principal balance of approximately $1.0 million, requested an acceleration of payment. We were obligated to make this payment by March 31, 2003. During April 2003 and May 2003, we made the demanded payments to these holders.

As of December 31, 2002, we had not paid the remaining balance due under a $686,000 note to TotalBank. Accordingly this note was in default. On March 31, 2003, we entered into a forbearance agreement with TotalBank and modified the terms of the note. As of December 31, 2003, the modified note had been assigned to JCH Aston Partners, LLC and we had not paid $367,178 of principal due. Accordingly, this note was in default. In February 2004, we paid a $15,000 fee to extend the modified note to March 31, 2004.

We were past due on our monthly rent payments for the months of January, February and March 2003 to the Technology Center of the Americas LLC totaling approximately $675,000. As of April 2003, we had paid all our past due rents.

As of December 31, 2003 and March 31, 2003, we had not paid approximately $566,000 and $602,740, respectively, relating to a lease. We have negotiated a payment plan with the vendor and are making partial payments.

As of December 31, 2003, we had not paid approximately $792,000 related to our 2002 tangible property taxes. We have negotiated a payment plan with the Miami-Dade Tax Collector and are current with respect to the plan.

As of December 31, 2003, we had not paid approximately $1.1 million of accrued interest related to our convertible debentures. This amount has been subsequently paid.

We do not have sufficient cash to pay approximately $7.8 million of principal and interest which was due April 1, 2004 under some of our short-term notes. Accordingly, these notes are in default. As a result of our default, the holders of the notes could pursue legal action against us. The default on the notes does not result in a cross-default on, or the acceleration of, our senior indebtedness or any other debt. We are currently negotiating an extension of these notes.

Our Strategy

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

• the connectivity of a Tier-1 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 U.S. Diplomatic Telecommunications Services Program Office, under three publicly awarded contracts, to design, implement and manage a system which will permit designated overseas locations to have global internet access. Although the NAP of the Americas serves as the hub, we are leveraging our international carrier relationships to provide this customer with connectivity and technology to communicate with U.S. government locations around the world.

Our History

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

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. In conjunction with our development of the NAP of the Americas, we began to redefine and focus our strategy on providing housing and management of Internet and telecommunications infrastructure 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.

Recent Events

On March 31, 2004, we closed on the issuance of 400 shares of Series I 8% Convertible Preferred Stock for $7.8 million in cash and $2.2 million in promissory notes of which $1.0 million is due April 25, 2004 and $1.2 million is due June 1, 2004, together with warrants to purchase 2.8 million shares of our common stock which are exercisable for five years at $0.90 per share. The Series I Preferred Stock is convertible into shares of our common stock at $0.75 per share. In January 2007, the Series I Preferred Stock dividend rate will increase to 10% per year until January 2009 when it increases to 12%. Dividends are payable, at our discretion, in shares of our common stock or cash. We have the right to redeem the Series I Preferred Stock at $25,000 per share plus accrued dividends at any time after December 31, 2004. Because some of the Series I Preferred Stock shares issued were convertible upon issuance at less than quoted market prices, we will recognize a non-cash preferred dividend of approximately $1.0 million in determining net loss per common share for the period ended March 31, 2004.

On November 10, 2003, a developer agreed to pay us a $3.8 million non-refundable fee for the one-year exclusive right to develop a TerreNAP Center in Australia. The developer paid us $500,000 upon execution of the agreement and paid the remaining balance on December 9, 2003. On February 11, 2004, the developer notified us that it did not wish to proceed with negotiations regarding the construction of a TerraNAP Center in Australia. On February 19, 2004, we acknowledged receipt of the developer’s notification, and terminated our agreement with the developer. We have no further obligations in connection with the agreement with the developer and as a result we will recognize the $3.8 million non-refundable fee in the quarter ending March 31, 2004.

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

SUMMARY CONSOLIDATED FINANCIAL DATA

The following summary consolidated annual financial data has been derived from our audited Consolidated Financial Statements. The nine-month financial data has been derived from our unaudited Consolidated Financial Statements. The data set forth below should be read in conjunction with the Consolidated Financial Statements, related notes and other financial information elsewhere herein.



			Nine Months Ended						Twelve Months Ended
			December 31,						March 31,

			2003			2002			2003			2002			2001			2000			1999


			(Dollars in thousands except per share data)
Results of Operations:
Data center(1)(2)			$	11,835		$	8,131		$	11,033		$	3,216		$	253		$	—		$	—
Real estate services				520			3,577			3,661			12,656			39,894			15,390			44,456

		Total revenue		12,355			11,708			14,694			15,872			40,147			15,390			44,456

Data center operations, excluding depreciation				11,171			8,631			11,235			11,231			1,223			—			—
Construction contract expense				338			2,905			2,968			7,398			20,347			555			—
Other expenses				17,875			31,741			41,718			54,615			39,950			20,868			43,832

	Total expenses			29,384			43,277			55,921			73,244			61,520			21,423			43,832

(Loss) income from continuing operations				(17,029	)		(31,569	)		(41,227	)		(57,372	)		(21,373	)		(6,033	)		624
Loss from discontinued operations				—			—			—			—			(82,627	)		—			—

Net (loss) income			$	(17,029	)	$	(31,569	)	$	(41,227	)	$	(57,372	)	$	(104,000	)	$	(6,033	)	$	624

(Loss) income from continuing operations per common share			$	(0.06	)	$	(0.14	)	$	(0.18	)	$	(0.29	)	$	(0.11	)	$	(0.09	)	$	0.01
Loss from discontinued operations per common share				—			—			—			—			(0.44	)		—			—

Net (loss) income per common share			$	(0.06	)	$	(0.14	)	$	(0.18	)	$	(0.29	)	$	(0.55	)	$	(0.09	)	$	0.01


Financial condition:
Real estate inventory			$	—		$	—		$	—		$	—		$	—		$	11,797		$	12,888
Property and equipment, net				52,900			57,200			54,483			61,089			25,066			1,011			191
Total assets				70,632			76,040			69,602			81,024			78,069			77,998			17,598
Long term obligations(3)(4)				75,309			2,709			75,081			38,710			16,462			28,632			8,731
Stockholders’ (deficit) equity(5)				(27,880	)		(36,913	)		(46,461	)		(49,276	)		11,163			476			6,510

(1) The nine months ended December 31, 2002 and the year ended March 31, 2003 includes a contract termination fee of $1,091.

(2) The nine months ended December 31, 2003 includes a contract termination fee of $422.

(3) Long term obligations include convertible debt, less current portion, deferred rent, deferred revenue, notes payable, less current portion and capital lease obligations, less current portion.

(4) Long-term obligations as of December 31, 2003 and 2002 and March 31, 2003 and 2002 include $500 in redeemable convertible preferred stock plus accrued dividends.

(5) Stockholders equity as of March 31, 2000 and 1999 includes approximately $4,777 in convertible preferred stock.

From the time of our merger with AmTec through December 31, 2003, we have incurred net operating losses of approximately $219.7 million. Our cash flows from operations for the nine months ended December 31, 2003 and 2002 were negative and our working capital deficit was approximately $17.9 million and $39.0 million as of December 31, 2003 and March 31, 2003, respectively.

As of April 19, 2004, our main sources of liquidity are cash and cash equivalents of approximately $5.4 million, and the anticipated collection of $2.2 million due before June 1, 2004 under promissory notes delivered in partial payment for our preferred stock. We plan to fund our business by increasing revenues and cash collections from customers and selling additional debt or equity securities. Our revenues may not increase and additional financing may not be available, or, if available the financing may not be obtainable on terms acceptable to us. Additional financing may be substantially dilutive to existing shareholders. If we are unsuccessful in increasing revenues, decreasing expenses and extending the maturity of our obligations, we will need additional debt or equity financing by April 2004.

As of December 31, 2003, our total liabilities were approximately $98.5 million, obligations guaranteed by us were $10.1 million and our total shareholders’ deficit was $27.9 million. For the twelve months ended December 31, 2004 and 2005, our minimum future lease and debt obligations are $18.8 million and $19.2 million, respectively. Currently, we do not have sufficient cash to meet these obligations.

Each of these obligations requires significant amounts of liquidity. We may need additional capital to fund those obligations. Our ability to arrange financing and the cost of this financing will depend upon many factors, including:


	•	general economic and capital markets conditions, and in particular the non-investment grade debt market;

	•	conditions in the Internet infrastructure market;

	•	credit availability from banks or other lenders;

	•	investor confidence in the telecommunications industry generally and our company specifically; and

	•	the success of our TerreNAP Centers.

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

We do not have sufficient cash to pay approximately $7.8 million of principal and interest which was due April 1, 2004 under some of our short-term notes. As a result, these notes are in default. The holders of these notes could institute a legal action against us. A legal action, if successful, would have a material adverse effect on our financial condition and liquidity.

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 telecommunica-

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.

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.

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.

Generally, U.S. Government contracts are subject to oversight audits by government representatives, to profit and cost controls and limitations, and to provisions permitting modification or termination, in whole or in part, without prior notice, at the government’s convenience. In some cases, government contracts are subject to the uncertainties surrounding congressional appropriations or agency funding. Government contracts are subject to specific procurement regulations. Failure to comply with these regulations and requirements could lead to suspension or debarment from future government contracting for a period of time.

We are highly dependent on the services of key personnel, particularly 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.

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.

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:


	•	our financial condition and operating results appear to be unsatisfactory;

	•	it appears that the extent of public distribution or the aggregate market value of the securities has become so reduced as to make further dealings on the Amex inadvisable; or

	•	we have sustained losses which are so substantial in relation to our overall operations or our existing financial condition has become so impaired that it appears questionable whether we will be able to continue operations and/or meet our obligations as they mature.

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 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.

We will not receive any of the proceeds from the sale of shares of common stock by the selling stockholders under this prospectus. We estimate that our expenses in connection with this offering will be approximately $210,000.

Our common stock, par value $0.001 per share, is quoted under the symbol “TWW” on the American Stock Exchange. As of March 31, 2004, we had the authority to issue:


	•	500,000,000 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, 294 shares are designated as Series H Convertible Preferred Stock and 600 shares are designated as Series I Convertible Preferred Stock.


	•	311,227,482 shares of our common stock were outstanding;

	•	42,662 shares were held in treasury;

	•	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 2,143,492 shares of our common stock;

	•	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; and

	•	400 shares of our Series I Convertible Preferred Stock were outstanding. Each share of Series I Convertible Preferred Stock may be converted into 33,334 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. During the past two fiscal years and for the first nine months of fiscal year 2004, we have not declared or paid any cash dividends on our common stock. 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. We do not intend to declare or pay cash dividends on our common stock in the foreseeable future.

The following selected consolidated annual financial data has been derived from our audited Consolidated Financial Statements. The nine-month financial data has been derived from our unaudited Consolidated Financial Statements. The data set forth below should be read in conjunction with the Consolidated Financial Statements, related notes and other financial information elsewhere herein.


(1)	The nine months ended December 31, 2002 and the year ended March 31, 2003 include a contract termination fee of $1,091.

(2)	The nine months ended December 31, 2003 includes a contract termination fee of $422.

(3)	Long term obligations include convertible debt, less current portion, deferred rent, deferred revenue, notes payable, less current portion and capital lease obligations, less current portion.

(4)	Long-term obligations as of December 31, 2003 and 2002 and March 31, 2003 and 2002 include $500 in redeemable convertible preferred stock plus accrued dividends.

(5)	Stockholders equity as of March 31, 2000 and 1999 includes approximately $4,777 in convertible preferred stock.

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


(1)	Amount includes contract termination fee of $130, $291 and $1,091 for the three months ended December 31, 2003, June 30, 2003 and June 30, 2002, respectively.

This prospectus may contain “forward-looking statements” based on our current expectations, assumptions, and estimates about us and our industry. These forward-looking statements involve risks and uncertainties. Words such as “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “will,” “may,” and other similar expressions identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of several factors more fully described in “Risk Factors” and elsewhere in this prospectus. The forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. We undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

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 registration statement.

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 losses from operations and lack of committed sources of additional debt or equity to support deficits in working capital 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 about the carrying values of assets and liabilities that are not readily apparent from other sources based on historical experience and on various other factors that are believed to be reasonable under the circumstances. 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 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.

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.

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 carry forwards. 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 the year ended March 31, 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.”

On March 31, 2004, we closed on the issuance of 400 shares of Series I 8% Convertible Preferred Stock for $7.8 million in cash and $2.2 million in promissory notes of which $1.0 million is due April 25, 2004 and $1.2 million is due June 1, 2004, together with warrants to purchase 2.8 million of our common shares and which are exercisable for five years at $0.90 per share. The Series I Preferred Stock is convertible into shares of our common stock at $0.75 per share. In January 2007, the Series I Preferred Stock dividend rate will increase to 10% per year until January 2009 when in increases to 12%. Dividends are payable, at our discretion, in shares of our common stock or cash. We have the right to redeem the Series I Preferred Stock at $25,000 per share plus accrued dividends at any time after December 31, 2004. Because some of the Series I Preferred Stock shares were convertible upon issuance at less than quoted market prices, we will recognize a non-cash preferred dividend of approximately $1.0 million in determining net loss per common share for the period ended March 31, 2004.

On November 10, 2003, a developer agreed to pay us a $3.8 million non-refundable fee for the one-year exclusive right to develop a TerreNAP Center in Australia. The developer paid us $500,000 upon execution of the agreement and paid the remaining balance on December 9, 2003. On February 11, 2004, we received written notification that the developer did not wish to proceed with negotiations regarding the construction of a TerraNAP Center in Australia. On February 19, 2004, we acknowledged receipt of the developer’s notification, and terminated our agreement with the developer. We have no further obligations in connection with the agreement with the developer and as a result we will recognize the $3.8 million non-refundable fee in the quarter ending March 31, 2004.

During the past three years, our results of operations have been significantly impacted by:


	•	our shift in focus to providing housing and management of Internet and telecommunications infrastructure; 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 core development operations.

Our real estate activities currently include technology construction work and management of the property where the NAP of the Americas is located. During the current fiscal year our real estate activities have not been significant. Approximately 98% of our net loss for the nine months ended December 31, 2003 was attributable to our data center segment. We anticipate that our real estate activities will generate sufficient revenues to cover their operating expenses and we do not expect to fund operating losses from our real estate activities. Revenues and expenses directly related to real estate activities are discussed in more detail below. Because general and administrative expenses of our real estate activities are minimal, we currently do not track them separately.

Revenue: The following charts provide certain information with respect to our revenues:

The increase in data center — services revenue was primarily the result of growth in our deployed customer base from 63 customers as of December 31, 2002 to 133 customers as of December 31, 2003. Data center-services includes $512,000 in fixed fees for the monitoring of network connectivity under a U.S. Federal government contract. Data center — connectivity solutions of $700,000 for the nine months ended December 31, 2003 consisted of revenue from the procurement and installation of equipment and the procurement of connectivity under a U.S. Federal government contract. Data center — contract termination fee was $422,000 for the nine months ended December 31, 2003 and represents amounts received from three customers for the termination of their contracted services with the NAP of the Americas. As a result of these contract terminations, we experienced a decrease in monthly recurring revenues of approximately $50,000. Contract termination fee was $1.1 million for the nine months ended December 31, 2002 and represents amounts received from one customer for the termination of their contracted services with the NAP of the Americas. Contract termination fees are recognized upon contract termination when there are no remaining contingencies or obligations on our part. The increases in total data center revenues were partially offset by a reduction in our development, management and construction contracts revenue of approximately $3.1 million.

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 NAP’s, 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-

Development, commission and construction fees decreased $130,000 to $41,000 for the nine months ended December 31, 2003 from $171,000 for the nine months ended December 31, 2002. We do not expect any revenues from development, commission and construction fees in the future.

Management fees decreased $1,000 to $151,000 for the nine months ended December 31, 2003 from $152,000 for the nine months ended December 31, 2002. The only facility we currently manage is TECOTA, the property in which the NAP of the Americas is located. We collect a monthly management fee from TECOTA equal to the greater of approximately $8,000 or 3% of cash collected by TECOTA. Because we do not plan to manage properties other than TECOTA, we anticipate that management fees will not be a significant source of revenue in the future.

Construction contract revenue decreased $3.0 million to $328,000 for the nine months ended December 31, 2003 from $3.3 million for the nine months ended December 31, 2002. During the nine months ended December 31, 2003, we completed three construction contracts and, as of December 31, 2003, had one construction contract in process. During the nine months ended December 31, 2002, we completed six construction contracts and, as of December 31, 2002, we had three construction contracts in process. The decrease in construction contract revenue is due to a decrease in the average revenue per contract, which decreased from $523,000 in the third quarter of fiscal year 2003 to $35,000 in the third quarter of fiscal year 2004. 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 increased $2.6 million, or 30.2%, to $11.2 million for the nine months ended December 31, 2003 from $8.6 million for the nine months ended December 31, 2002. Data center operations expenses consist mainly of rent, operations personnel, electricity, chilled water, procurement of equipment and connectivity and security services. The increase in total data center expenses is due to an increase of $1.4 million in rent and an increase of $1.1 million in costs related to the procurement and installation of equipment and procurement of connectivity under a U.S. Federal government contract. The increase in rent expense is due to the July 2003 opening of NAP-West facilities in Santa Clara, California and the leasing of an additional 149,184 square feet of space in the third floor of TECOTA, which commenced in November 2003. We have been paying rent for our NAP-West facilities since January 2001 but before we decided to open these facilities in July 2003 related expenses were recorded as impairment charges. Rent expense is being recorded on the straight-line method based on contractual amounts even though actual payments for the third floor of TECOTA will not commence until April 2005. We anticipate that certain data center operations expenses, principally electricity, chilled water, payroll and costs related to managed services, will increase as we provide additional services to existing customers and introduce new products and services.

Contract Construction Expenses. Contract construction expenses decreased $2.6 million to $338,000 for the nine months ended December 31, 2003 from $2.9 million for the nine months ended December 31, 2002. This decrease is a result of the decrease in number of construction contracts and average dollar amount of those projects as discussed above in “construction contract revenue.” Decrease in gross margin is due to the fact that the contract in process at December 31, 2003 is in the beginning stage.

General and Administrative Expenses. General and administrative expenses increased $700,000, or 7.3%, to $10.3 million for the nine months ended December 31, 2003 from $9.6 million for the nine months

ended December 31, 2002. General and administrative expenses consist primarily of salaries and related expenses, professional service fees, rent and other general corporate expenses. The increase in general and administrative expenses is primarily due a stock-based compensation charge of $1.8 million, offset by decreases in payroll of $480,000, travel and entertainment of $185,000 and professional fees of $193,000. Effective July 22, 2003, Mr. Goodkind stepped down as our Executive Vice President and Chief Operating Officer and became a strategic advisor to our Chief Executive Officer. In connection with this modification to our employment relationship with Mr. Goodkind, we accelerated the vesting on his outstanding stock options and awarded him new stock options. As a result, we recognized a non-cash, stock-based compensation charge of approximately $1.8 million in the quarter ended September 30, 2003. The decrease in payroll is mainly due to a reduction in staff levels. The number of employees whose salaries are included in general and administrative expenses decreased from 59 for the nine months ended December 31, 2002 to 47 for the nine months ended December 31, 2003. The decreases in professional services and travel and entertainment are principally the result of an overall reduction in spending due to cost containment efforts.

Sales and Marketing Expenses. Sales and marketing expenses decreased $700,000, or 23.3%, to $2.3 million for the nine months ended December 31, 2003 from $3.0 million for the nine months ended December 31, 2002. The significant components of sales and marketing expenses are payroll and benefits. The decrease in sales and marketing expenses is due to decrease in payroll and sales commissions of $45,000, decrease in public relations of $112,000, decrease in travel and entertainment of $140,000 and decrease in investor relations of $331,200. During the nine months ended December 31, 2002, we issued warrants valued at approximately $331,200 to Strategic Growth International for investor relations services. The decrease in payroll and sales commissions is mainly due to staff level reductions. The number of employees whose salaries are included in sales and marketing expenses were 23 as of December 31, 2002 and 19 as of December 31, 2003. The decrease in public relations and travel and entertainment expenses is the result of staff level reductions and overall reduction in spending due to cost containment efforts.

Depreciation and Amortization Expense. Depreciation and amortization expense decreased $300,000 to $3.6 million for the nine months ended December 31, 2003 from $3.9 million for the nine months ended December 31, 2002. The decrease was due to reductions in property and equipment resulting primarily from impairment charges recorded during the year ended March 31, 2003, which in turn decreased depreciation expense.

Impairment of Long-Lived Assets. 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. In addition, during the nine months ended December 31, 2002 we recorded $350,000 in expected carrying costs through March 2003 for our facility in Santa Clara. This facility became operational in July 2003.

Debt Restructuring. During the nine months ended December 31, 2003, we incurred a non-cash gain of $8.5 million related to financing transactions whereby $21.6 million of our construction payables plus $1.0 million in accrued interest was converted to 30.1 million shares of our common stock with a $14.1 million market value upon conversion.

Interest Expense. Interest expense increased $1.4 million, or 15.4%, to $10.5 million for the nine months ended December 31, 2003 from $9.1 million for the nine months ended December 31, 2002. The increase was due to the amortization of approximately $5.9 million related to the beneficial conversion feature on the issuance of convertible debentures issued in April 2003, mostly offset by a decrease in interest expense resulting from the $15 million reduction in the average debt balance outstanding and lower interest rates on new debt and amendments to existing debt.

Inducement on Debt Conversion. During the nine months ended December 31, 2002, 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

Interest Income. Interest income increased $12,000 to $101,000 for the nine months ended December 31, 2003 from $89,000 for the nine months ended December 31, 2002. The period over period increase is related to a combination of the increase in the average cash balances outstanding and interest income resulting from a $5.0 million note receivable from our Chief Executive Officer, which began accruing interest in September 2002.

The net loss from data center operations is primarily the result of insufficient revenues to cover our operating and interest expenses. We expect to generate net losses until we reach required levels of monthly revenues. Although we had a net operating loss for the current period, we anticipate that our real estate activities will generate sufficient revenues to cover their operating expenses and we do not expect to fund operating losses from our real estate activities in the foreseeable future.

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. Other data center 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 $180,000 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, Excluding Depreciation. 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

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

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

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

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

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

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

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

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.

From the time of the merger with AmTec through December 31, 2003, we have incurred net operating losses of approximately $219.7 million including approximately $82.6 million of losses related to discontinued operations. Our cash flows from operations for the nine months ended December 31, 2003 and 2002 were negative and our working capital deficit was approximately $17.9 million and $39.0 million as of December 31, 2003 and March 31, 2003, 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. We have also been successful in working with our creditors to extend payment terms.

Our main sources of liquidity, including cash proceeds from the issuance of Series I Preferred Stock, are cash and cash equivalents amounting to approximately $5.4 million as of April 19, 2004, the anticipated collection of $2.2 million in promissory notes delivered in partial payment for our Series I Preferred Stock and our projected increase in monthly revenues from customer contracts.

Based on customer contracts signed as of April 19, 2004, our monthly cash deficit from operations is approximately $500,000. In order to eliminate this current monthly cash deficit from operations, the new monthly revenues required range from $700,000 to $800,000. This range of new revenue depends on the mix of the services sold and their corresponding margin.

We expect to increase our revenues based on existing contracts, including those with the U.S. Federal government and enterprises, and expected future contracts from potential customers currently in our 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 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 in 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 NAP of the Americas currently occupies the entire second floor of TECOTA. In November 2003, we entered into an agreement to lease an additional 149,184 square feet of space in the third floor of TECOTA, the property in which the NAP of the Americas is located, and extend the Company’s existing lease in the second floor or the same property to co-terminate with the third floor lease on May 31, 2025. This additional space allows us to customize build-outs for large customers. Under the terms of the lease agreement, monthly base rent payments for the third floor space of approximately $200,000 will commence in April 2005. Effective June 1, 2006 and 2009, annual base rent for the third floor will increase to approximately $3.0 million and $3.5 million, respectively, with annual 2.5% increases thereafter. We are currently building out a portion of the third floor. Based on existing and anticipated future contracts from potential customers currently in the sales pipeline, we will require approximately $3 to $4 million in additional debt or equity financing to build out the portion of the third floor necessary to service these customers. If we are unsuccessful in obtaining additional debt or equity financing, we will be forced to negotiate payment terms with the contractors for the build out. These payment terms may restrict our ability to engage in some activities.

Although our real estate activities had a net operating loss of approximately $68,000 for the three months ended December 31, 2003, we anticipate that these activities will generate enough revenues to cover their operating expenses. If our revenues are below amounts anticipated, cash needs are not expected to exceed $200,000 for the next twelve months.

Our current liabilities as of December 31, 2003 amount to approximately $23.2 million, including approximately $14.1 million in debt and capital lease obligations maturing within one year and $5.9 million in accounts payable and accrued expenses. Currently, we do not have the cash to meet these obligations. The limited cash available to us has resulted in our failure to pay approximately $7.8 million of principal and interest under some of our short-term notes. We are currently negotiating an extension of these notes. We further anticipate that revenues will not be sufficient to make principal payments on debt maturing within one year. If we are unsuccessful in our efforts to negotiate an extension of the notes or increase revenues, we would be required to seek financing through the sale of additional debt or equity securities. If additional financing is not available to us on acceptable terms, we may be forced to curtail some of our business activities.

In the past we have been able to work with our lenders and vendors to continue to extend the terms of our debt and accounts payable. We intend to continue these efforts. We further plan to increase revenues and cash collections from customers and to sell additional debt or equity securities. Financing may not be available to us. Further, any additional equity financing may be dilutive to existing shareholders. If we are unsuccessful in obtaining additional financing, extending the terms of our past due and maturing debt or negotiating payment terms with our creditors, we will be forced to curtail certain activities. In addition, some or our creditors may pursue legal rights against us. We do not expect to fund any amounts under our guaranties.

Cash used in operations for the nine months ended December 31, 2003 was approximately $12.9 million compared to cash used in operations of $16.7 million for the nine months ended December 31, 2002, a decrease of $3.8 million. This decrease was primarily due to the collection of $3.8 million fee for the grant of an exclusive right to develop a TerreNAP Center in Australia.

Cash used in investing activities for the nine months ended December 31, 2003 was $1.8 compared to cash used in investing activities of $1.1 million for the nine months ended December 31, 2002, an increase of $700,000. This is due to the increase of approximately $900,000 in leasehold improvements for the third floor of TECOTA.

Cash provided by financing activities for the nine months ended December 31, 2003 was $16.3 million compared to cash provided by financing activities of $18.1 million for the nine months ended December 31, 2002, a decrease of $1.8 million. For the nine months ended December 31, 2003, cash provided by financing activities included $20.3 million of debt financing partially offset by $4.0 million in debt repayments. For the nine months ended December 31, 2002, cash provided by financing activities included $17.0 million of equity financing, partially offset by $3.3 million in payments of construction payables.

As of December 31, 2003, our total indebtedness, including interest from notes payable, construction payables, capital lease obligations, convertible debt and Series H preferred stock was approximately $81.5 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 was 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, Ocean Bank required Mr. Medina, prior to the bank disbursing funds under the credit facility, to provide a $5.0 million certificate of deposit to the bank as

In consideration of Mr. Medina’s agreeing to repay his indebtedness to Ocean Bank earlier than otherwise required, pledging the certificate of deposit 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 Ocean 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. Mr. Medina and we have 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 matures September 30, 2004 and bears interest subsequent to September 5, 2002 at 2%, the applicable federal rate. Interest is due in bi-annual installments. We review the collectibility of this note on a quarterly basis.

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. Under the new terms, interest is payable quarterly at an annual rate of 5.25% for the first twelve months and 7.5% thereafter.

Construction Payables: On November 8, 2002, CRG, LLC entered into an agreement with Cupertino Electric, Inc. 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 Mechanical Services, Inc. and Kinetics Systems Inc. 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, 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 LLC completed the purchase, at a discount, of our $22.6 million construction payables (including accrued interest) to Cupertino and Kinetics. 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.

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

Convertible Debentures: 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 common 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 Gigabyte, LLC, an entity newly formed by Paolo Amore, the son of Guillermo Amore, one of our directors. Two of our directors, Guillermo Amore and Miguel Rosenfeld, guaranteed payment and performance in accordance with the amended terms of the note. As of September 22, 2003, we had collected in full the promissory note. In connection with this transaction, we recognized a beneficial conversion feature of $9.5 million, based on the June 16, 2003 measurement date.

Other: In August 2002, we modified the terms of a note payable to TotalBank. 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, we entered into a forbearance agreement with TotalBank 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 TotalBank retained the right to enforce accelerated remedies if we default on the modified note. As of December 31, 2003, the modified note had been assigned to JCH Aston Partners, LLC and we had not paid $367,178 of principal balance due. In February 2004, we paid a $15,000 fee to extend the modified note to March 31, 2004.

We have not paid approximately $7.8 million of principal and interest due April 1, 2004 under certain short-term notes. We are currently negotiating an extension of these notes.

As of December 31, 2003, we had not paid approximately $566,000 relating to a lease. We have negotiated a payment plan with the vendor providing for partial payments.

Between April 2003 and December 2003, we borrowed an aggregate of $750,000 of short-term debt bearing interest between at 10%. During the same period, we repaid $1,628,000 of our short-term debt.

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.

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 $35.4 million in construction financing from a consortium of banks. We guaranteed this construction financing during development and construction of TECOTA. After TECOTA was built, some of the banks released us from their portion of the guarantee, the result of which was to reduce the guarantee to $5.5 million. As of December 31, 2003, the TECOTA debt outstanding under the construction loan was $35.4 million. We do not expect to fund any amounts under our guarantee.

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

We lease space for our operations, office equipment and furniture under non-cancelable operating leases. Some equipment is also leased under capital leases, which are included in leasehold improvements, furniture and equipment.

The following table represents the minimum future operating and capital lease payments for these commitments, as well as the combined aggregate maturities for the following obligations for each of the twelve months ended December 31:

In December 2003, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 104, (SAB 104), Revenue Recognition. SAB 104 updates portions of existing interpretative guidance in order to make this consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The adoption of SAB 104 did not have a material effect on our consolidated financial statements.

In May 2003, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This Statement requires that an issuer classify financial instruments which are within its scope as a liability. Many of those instruments were classified as equity under previous guidance. Most of the guidance in SFAS No. 150 is effective for all financial instruments entered into or modified after May 31, 2003, and otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The impact of the Company’s adoption of SFAS 150 on its consolidated financial statements was to present Series H redeemable preferred stock as a liability.

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 provided 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. The Company’s adoption of EITF 00-21 as of July 1, 2003 has not impacted its consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51.” This interpretation clarifies consolidation requirements for variable interest entities. It establishes additional factors beyond ownership of a majority voting interest to indicate that a company has a controlling financial interest in an entity (or a relationship sufficiently similar to a controlling financial interest that it requires consolidation). This interpretation applies immediately to variable interest entities created or obtained after January 31, 2003 and must be retroactively applied to holdings in variable interest entities acquired before February 1, 2003 in interim and annual financial statements issued for periods ending after December 15, 2003. NAP de las Americas-Madrid S.A. is a variable interest entity but our current relationship indicates that it does not require consolidation. The Company’s maximum related exposure to loss is approximately $500,000 at December 31, 2003. Management does not expect that the adoption of FIN 46 to have a significant impact in the Company’s consolidated financial position or result of operations.

In April 2002, the 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, SFAS 145 establishes a financial reporting standard for classification of extinguishment of debt in the financial statements in accordance with APB 30. SFAS 145 is effective for the Company’s fiscal year ended March 31, 2004. Management does not expect the adoption of SFAS 145 to

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

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

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

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

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

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

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.”


	•	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 Yahoo!, 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, the United States Southern Command and the City of Coral Gables.

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 NAP of the Americas became operational in July 2001, we began to redefine and focus our strategy in providing housing and management of Internet and telecommunications infrastructure and began implementing a plan to exit all lines of business and real estate activities not directly related to the

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 a 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 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, Brazil 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. We have approximately 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

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

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.

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.

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 December 31, 2003, we have over 140 customers at the NAP of the Americas. During the twelve months ended March 31, 2003, 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. 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

	•	Williams Communications Group, Inc.

	•	MCI

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.


	•	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 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.

As of December 31, 2003, we had 124 full-time employees in the United States. Of these employees, 59 were in data center operations, 20 were in sales and marketing and 49 were in general and administrative. We also had four full-time employees in Brazil.

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 (“TECOTA”) for the NAP of the Americas. The term of the lease commenced in October 2001 and is for 20 years. Monthly base rent is approximately $226,000. We are also responsible for some common area maintenance expenses and real estate taxes which amount to approximately $40,000 per month. On November 3, 2003, we entered into an agreement to lease an additional 149,184 square feet of space in the third floor of TECOTA, and extend our existing lease in the second floor to co-terminate with the third floor lease on May 31, 2025. Monthly base rent of approximately $200,000 will commence in April 2005. We will also be responsible for our share of common area maintenance expenses and real estate taxes.

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.

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.

Our executive officers, directors and some of our key employees, and their ages as of February 26, 2004, are as follows:


(1)	Jamie Dos Santos and Marvin Wheeler became executive officers on December 19, 2003.

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

Joseph R. Wright, Jr. has served as our Vice Chairman of the Board since April 28, 2000. Prior to that, Mr. Wright served as Chairman of the Board from May 1995 to April 2000, when Terremark Holdings, Inc. concluded a reverse merger into Amtec Inc., a telecommunications company of which he was Chairman and Chief Executive Officer. Mr. Wright currently is President and Chief Executive Officer of PanAmSat, a global provider of satellite-based communication services. He is also a director of The Titan Corporation. Mr. Wright also served as Chairman of the Board of GRC International, Inc., a United States public company that provides technical information technology support to government and private entities, from 1996 to 2000. He is also Co-Chairman of Baker & Taylor Holdings, Inc., an international book and video distribution company, and Vice Chairman of Jefferson Consulting Group, a Washington D.C. consulting firm. From 1989 to 1994, Mr. Wright served as Executive Vice President, Vice Chairman and Director of W.R. Grace & Co., an international chemicals and health care company, President of Grace Energy Corporation and Chairman of Grace Environmental Company. From 1982 to 1989, Mr. Wright held the positions of Director and Deputy Director of the Office of Management and Budget, The White House, and was a member of President Reagan’s cabinet. Before 1982, he served as Deputy Secretary, United States Department of Commerce, President of Citicorp Retail Services and Retail Consumer Services, held posts in the United States Department of Agriculture and the United States Department of Commerce, and was Vice President and Partner of Booz Allen & Hamilton, a management consulting firm.

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

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

Antonio S. Fernandez was elected to our Board Directors in September 2003. In 1970, Mr. Fernandez worked as a Systems Engineering Manager at Electronic Data Systems (EDS). In 1971, Mr. Fernandez joined duPont Glore Forgan as a Vice-President in Operations. In 1974, he joined Thomson McKinnon as Director of Operations and Treasurer. In 1979, he worked at Oppenheimer & Co. Inc. as Director of Operations and Treasurer where he also served as Chief Financial Officer from 1987 until 1994 and a member of the Board of Directors from 1991 until 1998. In 1991, Mr. Fernandez founded and headed the International Investment Banking Department at Oppenheimer & Co. and served in that capacity until 1999. Mr. Fernandez served on the Board of Banco Latinoamericano de Exportaciones from 1992 until 1999. He also served as Trustee of Mulhenberg College, PA from 1995 until 1998. He graduated from Pace University, NY in 1968 with a B.B.A.

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

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

Arthur L. Money has served as a member of our board of directors since May 2003. Since September 2002, Mr. Money has been a member of the board of directors of Rainbow Technologies, Inc., a provider of Information Technology security solutions. From 1999 to 2001, Mr. Money was the Assistant Secretary of Defense (C3I) and Department of Defense CIO. Prior to this, Mr. Money served as the Assistant Secretary of the Air Force for Research, Development, and Acquisition, and was Vice President and Deputy General

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

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

Rodolfo A. Ruiz has served as a member of our Board of Directors since July 2003. Since 1999, Mr. Ruiz has served as the President and CEO of Bacardi U.S.A. and has held a series of senior management positions within the Bacardi organization since 1979, inclusive of having served as President and CEO of Bacardi Global Brands, President and CEO of Bacardi Asia/Pacific Region, and several senior executive sales, marketing, financial and operations positions within Bacardi USA. Prior to joining Bacardi, from 1966 to 1979, Mr. Ruiz, in his capacity as a certified public accountant, served as a Senior Auditor, Senior Internal Auditor, and Audit Manager with Price Waterhouse & Co. for a wide variety of public and private clients and projects in the United States and Mexico, as well as throughout Latin America, interspersed by a term, from 1973 to 1975, with International Basic Economy Corp, otherwise known as IBEC/Rockefeller Group. Mr. Ruiz holds a Bachelor of Business degree, Cum Laude, from the University of Puerto Rico.

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

Jose E. Gonzalez has served as our Chief Legal Officer and Secretary since November 2003. Previously he served as our Senior Vice President, General Counsel and Secretary since January 2001. Prior to joining Terremark, Mr. Gonzalez served as the Vice President and Regional Counsel for Sunbeam Corporation, responsible for legal affairs throughout Canada, Latin America/Caribbean and Asia. From 1995 to 1998, Mr. González was Assistant General Counsel, International, responsible for the international legal affairs of Blockbuster Entertainment, a subsidiary of Viacom, Inc. From 1990 to 1995 Mr. González was a member of the General Counsel’s Office of the American Express Company, where he served as Regional Counsel for Latin America and the Caribbean. Mr. González received his Bachelors of Arts degree from Fordham University in 1982 and his Juris Doctor from Fordham University School of Law in 1985. He is a member of the Bar of the State of New York and certified to practice as in-house counsel by the Bar of the State of Florida.

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

Marvin Wheeler has served as our Chief Operations Officer since November 2003. Previously he served as our Senior Vice President, Worldwide Operations since March 2003. From March 2001 to March 2003, Mr. Wheeler served as Senior Vice President of Operations and General Manager of the NAP of the Americas. From June 1978 to March 2000, Mr. Wheeler managed the Data Center and WAN/LAN Operations for BellSouth, Mr. Wheeler graduated from the University of Florida, where he earned a degree in Business Administration with a concentration in marketing.

Section 16(a) of the Securities Exchange Act of 1934 requires our officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than 10% shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

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

The following table presents information concerning compensation for our chief executive officer and the three most highly compensated executive officers, which we refer to as our named executive officers, for services in all capacities during the fiscal years indicated. Effective July 22, 2003, Brian Goodkind stepped down as our Executive Vice President and Chief Operating Officer. In connection with the change of Mr. Goodkind’s title, on July 10, 2003, we granted Mr. Goodkind options to purchase 2,685,000 shares of our common stock, with an exercise price of $ 0.62 per share.

The following table sets forth information concerning grants of stock options made during the fiscal year ended March 31, 2003 to our named executive officers. No stock appreciation rights were granted during the fiscal year ended March 31, 2003. Effective July 22, 2003, Brian Goodkind stepped down as our Executive Vice President and Chief Operating Officer. We granted Mr. Goodkind options to purchase 2,685,000 shares of our common stock, with an exercise price of $ 0.62 per share.


(1)	These amounts are based on assumed appreciation rates of 5% and 10% set by the Securities and Exchange Commission rules and are not intended to forecast possible future appreciation, if any, of our stock price.
(2)	The options became fully exercisable on July 22, 2003.
(3)	The options become exercisable in accordance with the following vesting schedule: one-third of the shares vest as of the first anniversary of the date of grant, one-third vest as of the second anniversary of the date of grant, and one-third vest as of the third anniversary of the date of grant.


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

(2)	In connection with the change of Mr. Goodkind’s title, on July 22, 2003, we accelerated the vesting of 315,000 of the 326,666 unexercisable options.

The following directors served as members of the compensation committee during the 2003 fiscal year: Timothy Elwes, Miguel J. Rosenfeld and Kenneth I. Starr. None of the members of the compensation committee was, at any time either during or before such fiscal year, an employee of ours or any of our subsidiaries. On May 6, 2003, Mr. Starr resigned from our Board of Directors.

In the quarter ended December 31, 2002, an aggregate of $517,000 including accrued interest, of debt payable to Mr. Rosenfeld was converted to equity at approximately $0.75 per share.

In April 2002, we received a binding commitment from a group that included Mr. Rosenfeld, for the purchase of 10 million shares of common stock at $0.75 per share. In May 2002, the transaction was

Upon conversion of an outstanding promissory note in April 2002, Mr. Rosenfeld received 1,134,641 shares of our common stock. The original principal amount of the note converted by Mr. Rosenfeld was $850,980. The conversion price of $0.75 per share was determined by our management and approved by the board of directors, with Mr. Rosenfeld abstaining, after considering recent quoted market prices of our stock, recent equity transactions and our business plan and financial projections.

We maintain a policy of compensating our directors using stock option grants. Upon their election as a member of our board of directors, each of our directors received 100,000 stock options. Our employee directors receive the same compensation as our non-employee directors. The options granted to our directors vest as follows: options to purchase one-third of the shares vest as of the date of grant, one-third vests as of the first anniversary of the date of grant, and one-third vests as of the second anniversary of the date of grant. We reimburse our directors for all out-of-pocket expenses incurred in the performance of their duties as directors. We currently do not pay fees to our directors for attendance at meetings.

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

Brian K. Goodkind entered into an agreement, commencing March 3, 2003 employing him as our Executive Vice President. The agreement was for an indefinite term until either party gives written notice of its intention to terminate. The agreement provided for an annual base salary of $250,000 and was subject to increases. Pursuant to the terms of his agreement, Mr. Goodkind is prohibited from competing with Terremark for a one year period following termination of his employment with Terremark. On July 22, 2003, Mr. Goodkind stepped down as our Executive Vice President and Chief Operating Officer and became a strategic advisor to our Chief Executive Officer. We entered into a new employment agreement with Mr. Goodkind. Pursuant to the terms of this new agreement, Mr. Goodkind will serve as a Senior Strategic Advisor to the company for a period of 12 months commencing July 22, 2003. The new agreement provides for a bi-weekly salary of $9,615.38 and provides for Mr. Goodkind to receive all of the benefits he was receiving as our Executive Vice President, including medical and dental coverage, disability and 401K participation. Mr. Goodkind is not eligible for any vacation benefits or any bonus that we may pay to our employees. In connection with this modification to our employment relationship with Mr. Goodkind, we accelerated the vesting on his 315,000 outstanding stock options and awarded him new stock options to purchase 2,685,000 shares of our common stock. The new stock options have an exercise price of $0.62 per share and expire on July 22, 2013. The new stock options were issued pursuant to the our Amended and Restated 1996 Stock Option Plan.

Jose E. Gonzalez has entered into an agreement, commencing March 3, 2003, employing him as our Senior Vice President and General Counsel. The agreement is for an indefinite term until either party gives

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

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

If Jose E. Gonzalez is terminated without cause, he is entitled to continue to receive his annual base salary and other benefits for a period of six months from the date of termination.

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

Our certificate of incorporation and bylaws designate the relative duties and responsibilities of our officers, establish procedures for actions by directors and stockholders and other items. Our certificate of incorporation and bylaws also contain indemnification provisions that permit us to indemnify our officers and directors to the maximum extent provided by Delaware law.

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

We have obtained directors’ and officers’ liability insurance with an aggregate liability for the policy year, inclusive of costs of defense, in the amount of $10,000,000. This policy expires April 3, 2004.

Under our 1995 Stock Option Plan, we have reserved for issuance an aggregate of 500,000 shares of our common stock. As of July 30, 2003, we had granted options to purchase 385,000 shares of common stock pursuant to this plan, of which 267,500 have been exercised and 117,500 are vested but have not been exercised.

Under our 1996 Stock Option Plan, we have reserved for issuance an aggregate of 12,000,000 shares of common stock, 10,604,372 of which have been granted. As of July 30, 2003, 7,421,065 granted options have vested but remain unexercised, 3,192,307 granted options remain subject to vesting schedules and 54,001 options have been exercised.

Under our 2000 Stock Option Plan, we have reserved for issuance an aggregate of 10,000,000 shares of common stock. As of July 30, 2003, we had granted options to purchase 3,242,259 shares of common stock pursuant to this plan, 1,605,133 of which have vested. No options under this plan have been exercised.

Unless sooner terminated by the board of directors, the 1995 Stock Option Plan, the 1996 Stock Option Plan and the 2000 Stock Option Plan will terminate on February 8, 2005, May 7, 2006 and September 21, 2010 respectively, the tenth anniversary date of the effectiveness of each stock option plan.

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

Some of our options to purchase common stock have been issued outside of our stock option plans and have not been approved by our shareholders. On October 19, 2001, our board of directors approved the grant of options to purchase 100,000 shares of our common stock at $0.67 per share to each of the then nine members of our board of directors. All of the options immediately vested and are exercisable. The options expire on October 19, 2011.

The following table sets forth information regarding the beneficial ownership of shares of our capital stock as of March 31, 2004 by:


	•	each of our directors and director nominees;

	•	each of our executive officers named in the Executive Compensation Table;

	•	all of our directors and executive officers as a group; and

	•	each person known by us to beneficially own more than 5% of our outstanding common stock, Series G Preferred Stock, Series H Preferred Stock or Series I Preferred Stock.

As of March 31, 2004, 311,227,482 shares of our common stock were outstanding, 42,662 shares were held in treasury, 20 shares of Series G Convertible Preferred Stock outstanding, 294 shares of Series H Convertible Preferred Stock outstanding and 400 shares of Series I Convertible Preferred Stock. The outstanding shares of Series G, Series H and Series I Convertible Preferred Stock, as of March 31, 2004, were convertible into 2,143,492, 294,000 and 13,333,600 shares of our common stock, respectively.

For purposes of the following table, a person is deemed to be the beneficial owner of securities that can be acquired by the person within 60 days from March 31, 2004 upon the exercise of warrants or options or upon the conversion of debentures or preferred shares. Each beneficial owner’s percentage is determined by assuming that options, warrants or conversion rights that are held by the person, but not those held by any other person, and which are exercisable within 60 days from March 31, 2004, have been exercised. Unless otherwise indicated, we believe that all persons named in this table have sole voting power and investment


	(1)	For purposes of this table, beneficial ownership is computed pursuant to Rule 13d-3 under the Exchange Act; the inclusion of shares as beneficially owned should not be construed as an admission that such shares are beneficially owned for purposes of the Exchange Act. Under the rules of the Securities and Exchange Commission, a person is deemed to be a “beneficial owner” of a security he or she has or shares the power to vote or direct the voting of such security or the power to dispose of or direct the disposition of such security. Accordingly, more than one person may be deemed to be a beneficial owner of the same security.

	(2)	Includes 200,000 shares of common stock underlying options and 889,277 shares of common stock underlying convertible debentures. As reported in Mr. Medina’s Schedule 13D, and any amendments thereto, filed with the Securities and Exchange Commission on October 4, 2002, these include 7,021,682 shares as to which Mr. Medina has sole voting power but does not have dispositive power. Includes 2,143,492 shares of common stock which may be acquired upon conversion of the Series G Preferred Stock held by Communications Investors Group, an entity in which Mr. Medina is a partner and holds a 50% interest.

	(3)	Includes 3,400,000 shares of common stock underlying options and 10,000 shares owned by Mr. Wright’s sibling, over which Mr. Wright has investment control. Does not include 50,000 shares held in trust for the benefit of Mr. Wright’s grandchildren with respect to which Mr. Wright disclaims beneficial ownership.

	(4)	Includes 200,000 shares underlying options, 400,008 shares which may be acquired upon the conversion of shares of Series I Preferred Stock and 84,000 shares underlying warrants. Also includes 843,936 shares, 2,154,201 shares underlying convertible debentures, 280,006 shares which may be acquired upon


		the conversion of shares of Series I Preferred Stock and 58,800 shares underlying warrants which are owned by an entity with respect to which Mr. Amore disclaims beneficial ownership except to the extent of his pecuniary interest therein. Does not include 1,745,550 shares and 580,000 shares underlying convertible debentures held in a trust for the benefit of Mr. Amore’s grandchildren, with respect to which Mr. Amore disclaims beneficial ownership.

	(5)	Includes 200,000 shares of common stock underlying options.

	(6)	Includes 34,000 shares of common stock underlying options and 242,884 shares of common stock underlying convertible debentures held by an entity with respect to which Mr. Fernandez disclaims beneficial ownership except to the extent of his pecuniary interest therein.

	(7)	Represents shares of common stock underlying options.

	(8)	Includes 245,000 shares of common stock underlying options and 205,810 shares underlying convertible debentures.

	(9)	Includes 200,000 shares of common stock underlying options and 1,137,208 shares held indirectly by Mr. Rosenfeld. Does not include 58,105 shares held by Mr. Rosenfeld’s children and mother, with respect to which Mr. Rosenfeld disclaims beneficial ownership.


(10)	As reported in CRG, LLC’s Schedule 13D, and any amendments thereto, filed with the Securities and Exchange Commission on May 9, 2003. Christian Altaba is the manager and sole member of CRG, LLC. Christian Altaba is deemed the beneficial owner of the shares held by CRG, LLC. Also includes 3,333,400 shares of common stock which may be acquired upon conversion of shares of Series I Preferred Stock and 700,000 shares underlying warrants which are currently exercisable.

(11)	The address of the beneficial owner is 780 N.W. 42nd Avenue, Miami, Florida 33126.

(12)	The address of the beneficial owner is P.O. Box N-65, Charlotte House, Charlotte Street, Nassau, Bahamas. Francis Lee is the natural person deemed to be the beneficial owner of the shares held by this entity.

(13)	Represents 20 shares of Series G Convertible Preferred Stock which are convertible into 2,107,936 shares of common stock. The partners of Communications Investors Group are Manuel D. Medina and Andres Altaba, each of whom has a 50% interest.

(14)	Represents 294 shares of Series H Convertible Preferred Stock which are convertible into, and had voting rights equivalent to, 294,000 shares of common stock. Jose Navalon is the natural person with voting and investment control over the shares.

(15)	Represents 80 shares of Series I Convertible Preferred Stock which are convertible into 2,666,720 shares of common stock.

(16)	Represents 48 shares of Series I Convertible Preferred Stock which are convertible into 1,600,032 shares of common stock. Heinrich Adolf Hans Herweg is the natural person with voting and investment control over the shares.

(17)	Represents 100 shares of Series I Convertible Preferred Stock which are convertible into 3,333,334 shares of common stock. Christian Altaba is the natural person with voting and investment control over the shares.

(18)	Represents 20 shares of Series I Convertible Preferred Stock which are convertible into 666,680 shares of common stock. Antonio De Reguero is the natural person with voting and investment control over the shares.

(19)	Represents 40 shares of Series I Convertible Preferred Stock which are convertible into 1,333,360 shares of common stock. Vincente Perez Cisneros is the natural person with voting and investment control over the shares.

(20)	Represents 28 shares of Series I Convertible Preferred Stock which are convertible into 933,352 shares of common stock. Roberto Solis Monsato is the natural person with voting and investment control over the shares.

The following table sets forth information with respect to the selling stockholders as of March 31, 2004. All of the information contained in the table below is based upon information provided to us by the selling stockholders and we have not independently verified this information. Except as otherwise disclosed, the selling stockholders do not have and within the past three years have not had any position, office or other material relationship with us or any of our predecessors or affiliates or are broker-dealers or affiliates of broker-dealers.

Of the shares that may be offered for sale by the selling stockholders named below, 62,612,490 may be issued as a result of the exercise of warrants or the conversion of debentures. The number of shares of common stock that may be actually purchased by some selling stockholders under the warrants and/or debentures and the number of shares of common stock that may be actually sold by each selling stockholder will be determined by such selling stockholder. Because some selling stockholders may purchase all, some or none of the shares of common stock which can be purchased under the warrants and/or debentures and each selling stockholder may sell all, some or none of the shares of common stock which each holds, and because the offering contemplated by this prospectus is not currently being underwritten, no estimate can be given as to the number of shares of common stock that will be held by the selling stockholders upon termination of the offering. The information set forth in the following table regarding the beneficial ownership after resale of shares is based on the basis that each selling stockholder will purchase the maximum number of shares of common stock provided for by the warrants and/or debentures owned by the selling stockholder and each selling stockholder will sell all of the shares of common stock owned by that selling stockholder and covered by this prospectus.

Of the shares listed below, 50,000,000 are shares underlying our 10% Subordinated Secured Convertible Debentures. The 10% debentures are due April 30, 2006 and are convertible into shares of our common stock at $0.50 per share. The debentures bear interest at the rate of 10.0% per annum which is paid quarterly on July 31, October 31, January 31, and April 30 of each year. The 10% debentures are convertible by the holder at any time after May 1, 2004. We can redeem the 10% debentures at our option, at any time after May 1, 2004.

Of the shares listed below, 1,241,288 are shares underlying our 13% Subordinated Secured Convertible Debentures. The 13% debentures are due December 31, 2005 and our convertible into shares of our common stock at a price equal to 120% of the average market price of our common stock for the 20 trading days preceding the date of the closing of the sale of each 13% debenture. The debentures bear interest at the rate of 13.0% per annum which is paid quarterly on June 30, September 30, December 31 and March 31 of each year. The 13% debentures are convertible by the holder at any time. We can redeem the 13% debentures at our option at any time.

Of the shares listed below, 5,039,068 are shares underlying our 13.125% Subordinated Secured Convertible Debentures. The 13.125% debentures are due August 30, 2004 and our convertible into shares of our common stock at a price equal to 125% of the average market price of our common stock for the 30 trading days preceding the date of the closing of the sale of each 13.125% debenture. The debentures bear interest at the rate of 13.125% per annum which is paid on each calendar quarter. The 13.125% debentures are convertible by the holder at any time. We can redeem the 13.125% debentures at our option at any time.

Of the shares listed below, 6,332,134 are shares underlying warrants. Warrants to purchase 6,198,801 shares are currently exercisable, warrants to purchase 66,666 shares will become exercisable on July 10, 2004,


	*	Less than one percent.

	**	The shares offered may be acquired upon the conversion of outstanding debentures.

	***	These shares may be acquired upon the exercise of outstanding warrants.

	(1)	Except as otherwise noted, we determine beneficial ownership in accordance with Rule 13d-3(d) promulgated by the Commission under the Securities and Exchange Act of 1934, as amended. We include shares of common stock issuable pursuant to options, warrants and convertible securities, to the extent these securities are currently exercisable or convertible within 60 days of March 31, 2004, as outstanding for computing the percentage of the person holding such securities. Unless otherwise noted, each identified person or group possesses sole voting and investment power with respect to shares, subject to community property laws where applicable. We treat shares not outstanding but deemed beneficially owned by virtue of the right of a person or group to acquire them within 60 days as outstanding only to determine the number and percent owned by such person or group.

	(2)	Assuming that all shares offered here are sold but no other securities held by the selling security holder are sold.

	(3)	Ted L. Kretzschmar is the natural person who exercises voting and investment control over the shares.

	(4)	George T. Yoss is the natural person who exercises voting and investment control over the shares. Adorno & Yoss is a law firm which has provided legal services to us.

	(5)	Andrew Harrington is the natural person who exercises voting and investment control over the shares.

	(6)	Guillermo Amore is a member of our Board of Directors. Includes 400,008 shares of common stock which may be acquired upon conversion of shares of our Series I Preferred Stock and 84,000 shares underlying warrants.

	(7)	Antonio Rodriguez is the natural person who exercises voting and investment control over the shares.

	(8)	Gustavo Tavares is the natural person who exercises voting and investment control over the shares.

	(9)	Miguel J. Rosenfeld is the natural person who exercises voting and investment control over the shares.


(10)	Joseph Steinberg is the natural person who exercises voting and investment control over the shares.

(11)	Andres Altaba is the natural person who exercises voting and investment control over the shares.

(12)	Willy A. Bermello is the natural person who exercises voting and investment control over the shares.

(13)	Edward R. Shohat is the natural person who exercises voting and investment control over the shares.

(14)	Kenneth I. Starr is the natural person who exercises voting and investment control over the shares.

(15)	Aviva Budd is our Senior Vice President of Business Development.

(16)	Ramon Montes is the natural person who exercises voting and investment control over the shares.

(17)	Christian Altaba is the natural person who exercises voting and investment control over the shares. Includes 3,333,400 shares of common stock which may be acquired upon conversion of shares of our Series I Preferred Stock and 700,000 shares underlying warrants.


(18)	Jean Edwards Kuriger is the natural person who exercises voting and investment control over the shares.

(19)	Seth P. Joseph and Jacqueline Joseph, Tenants by the Entireties are the natural persons who exercise voting and investment control over the shares.

(20)	Laurence M. Kashdin is the natural person who exercises voting and investment control over the shares.

(21)	Jose Maria Figueres-Olsen is a member of our Board of Directors.

(22)	Includes 200,000 shares of common stock underlying currently exercisable options and 500,00 shares underlying convertible debentures.

(23)	Lynn D. Dooley is the natural person who exercises voting and investment control over the shares.

(24)	Brian Goodkind was our Executive Vice President and Chief Operating Officer until July 21, 2003.

(25)	Richard Snyder and Roberta Snyder are the natural persons who exercise voting and investment control over the shares.

(26)	Antonio Hernandez Mancha is the natural person who exercises voting and investment control over the shares.

(27)	Alberto De Palilo is the natural person who exercises voting and investment control over the shares.

(28)	Includes 2,000,000 shares underlying convertible debentures.

(29)	John H. Reynolds is the natural person who exercises voting and investment control over the shares.

(30)	Richard M. Siedel, Jr. and Ben S. Jaffe are the natural persons who exercise voting and investment control over the shares.

(31)	Joseph Dooley and Jean Edwards Kuriger are the natural persons who exercise voting and investment control over the shares.

(32)	Craig Kirk is the natural person who exercises voting and investment control over the shares.

(33)	Includes 387,708 shares underlying convertible debentures.

(34)	John Goodman is the natural person who exercises voting and investment control over the shares.

(35)	Lynn Wiener is the natural person who exercises voting and investment control over the shares.

(36)	Carlos Vasallo Tome is the natural person who exercises voting and investment control over the shares. Miguel Rosenfeld, one of our directors, has power of attorney to take action on behalf of La Rochelle Corp. as instructed by this entity. Mr. Rosenfeld does not have voting or investment control over the shares.

(37)	Guillermo Amore, one of our directors, is the natural person who exercises voting and investment control over the shares.

(38)	Includes 1,000,000 shares underlying convertible debentures.

(39)	Manuel Medina is our Chairman, President and Chief Executive Officer.

(40)	Includes 9,533,507 shares underlying convertible debentures.

(41)	Antonio Hernandez Mancha is the natural person who exercises voting and investment control over the shares.

(42)	Jose Maria Isardo is the natural person who exercises voting and investment control over the shares.

(43)	Alberto Vega, Ocean Bank’s Chief Financial Officer, is the natural person who exercises voting and investment control over the shares.

(44)	Charles G. Palmer is the natural person who exercises voting and investment control over the shares.

(45)	Orlando Guerrero Vargas is the natural person who exercises voting and investment control over the shares. Miguel Rosenfeld, one of our directors, has power of attorney to take action on behalf of Probedel S.A. as instructed by this entity. Mr. Rosenfeld does not have voting or investment control over the shares.

(46)	Includes 2,000,000 shares underlying convertible debentures.


(47)	Roberto Solis Monsato is the natural person who exercises voting and investment control over the shares.

(48)	Includes 1,000,000 shares underlying convertible debentures which are not currently convertible and 496,000 shares underlying exercisable warrants. Includes 933,352 shares of common stock which may be acquired upon conversion of shares of Series I Preferred Stock.

(49)	Beile Gross is the natural person who exercises voting and investment control over the shares. Miguel Rosenfeld, one of our directors, has power of attorney to take action on behalf of Quantum Overseas, Inc. as instructed by this entity. Mr. Rosenfeld does not have voting or investment control over the shares. Includes 387,708 shares underlying convertible debentures.

(50)	R. Carlisle Roberts is the natural person who exercises voting and investment control over the shares.

(51)	Miguel J. Rosenfeld is a member of our board of directors.

(52)	Carlos Pedreschi is the natural person who exercises voting and investment control over the shares. Miguel Rosenfeld, one of our directors, has power of attorney to take action on behalf of Sarati Ocean Corp. as instructed by this entity. Mr. Rosenfeld does not have voting or investment control over the shares.

(53)	Arturo Ehrlich is the natural person who exercises voting and investment control over the shares.

(54)	Jose Miguel Alfaro Masis is the natural person who exercises voting and investment control over the shares.

(55)	Nestor Eijo and Mario Eijo are the natural persons who exercise voting and investment control over the shares.

(56)	Stanley Altschuler is the natural person who exercises voting and investment control over the shares. In April 2002, we appointed Strategic Growth International to serve as our investor relations advisor.

(57)	Joseph R. Wright is Vice-Chairman of our board of directors.

(58)	Includes 300,000 shares underlying convertible debentures.

(59)	Represents the shares held by Bercotrac Investments, Inc. Mr. Altaba is the natural person who exercises voting and investment control over these shares.

(60)	Represents the shares held by SBP Investments, Inc. Mr. Ehrlich is the natural person who exercises voting and investment control over these shares.

(61)	Represents the shares held by Associated Resources, Inc. Mr. Steinberg is the natural person who exercises voting and investment control over these shares.

(62)	Represents the shares held by HugoSabel, SA and MGM Mancha. Mr. Mancha is the natural person who exercises voting and investment control over these shares.

(63)	Represents the shares held by RGR, Inc. Mr. Roberts is the natural person who exercises voting and investment control over these shares.

(64)	Verny Huerta is the natural person who exercises voting and investment control over the shares.

(65)	Howard Glicken is the natural person who exercises voting and investment control over the shares.

(66)	Includes 100,000 shares underlying convertible debentures.

(67)	Includes 580,000 shares underlying convertible debentures.

(68)	Includes 1,000,000 shares underlying convertible debentures and 250,000 shares underlying exercisable warrants.

(69)	Paolo Amore is the natural person who exercises voting and investment control over the shares. Paolo Amore is the son of Guillermo Amore, one of our directors.

(70)	Includes 42,000 shares underlying exercisable warrants.

(71)	Includes 140,000 shares underlying exercisable warrants.

(72)	Includes 21,000 shares underlying exercisable warrants.

(73)	Includes 280,000 shares underlying exercisable warrants.

(74)	Includes 7,000 shares underlying exercisable warrants.


(75)	Includes 4,200 shares underlying exercisable warrants.

(76)	Includes 14,000 shares underlying exercisable warrants.

(77)	Includes 28,000 shares underlying exercisable warrants.

(78)	Includes 560,000 shares underlying exercisable warrants.

(79)	Includes 70,000 shares underlying exercisable warrants.

(80)	Includes 392,000 shares underlying exercisable warrants.

(81)	Alexander Gallo is the natural person who exercises voting and investment control over the shares.

(82)	Antonio De Reguero is the natural person who exercises voting and investment control over the shares.

(83)	R. Alan Chase is the natural person who exercises voting and investment control over the shares.

(84)	Vicente Perez Cisneros is the natural person who exercises voting and investment control over the shares.

(85)	George Brandt is the natural person who exercises voting and investment control over the shares.

(86)	Heinrich Adolf Hans Herweg is the natural person who exercises voting and investment control over the shares.

(87)	Hector R. Viñas is the natural person who exercises voting and investment control over the shares.

(88)	Bernadino de Paulo is the natural person who exercises voting and investment control over the shares.

(89)	Casilda Cynthia de Raveneau is the natural person who exercises voting and investment control over the shares.

(90)	Robert Moore is the natural person who exercises voting and investment control over the shares.

(91)	James Fry, Attorney in fact, is the natural person who exercises voting and investment control over the shares.

(92)	Pascual J. Theodora is the natural person who exercises voting and investment control over the shares.

(93)	Includes 165,557 shares underlying convertible debentures which are not currently exercisable.

(94)	Ricardo Rivas is the natural person who exercises voting and investment control over the shares.

(95)	Andrew Pashby is the natural person who exercises voting and investment control over the shares.

(96)	J.L. Hoffman is the natural person who exercises voting and investment control over the shares.

(97)	Joshep Prost is the natural person who exercises voting and investment control over the shares.

(98)	Patrick Theodora is the natural person who exercises voting and investment control over the shares.

We are registering the shares on behalf of the selling stockholders. The selling stockholders may sell their shares offered here to purchasers directly. Alternatively, the selling stockholders may offer the shares to or through underwriters, brokers/dealers or agents. The selling stockholders may pledge or grant a security interest in some or all of the common stock owned by them and, if any selling stockholders default in the performance of such secured obligations, the pledgees or secured parties may offer and sell the relevant common stock pursuant to this prospectus. To our knowledge, there are currently no plans, arrangements or understandings between any selling stockholders and any underwriter, broker-dealer or agent regarding the sale of the common stock by the selling stockholders. There can be no assurance that the selling stockholders will not transfer, devise or gift the shares by other means not described in this prospectus. The selling stockholders and any underwriters, brokers/dealers or agents that participate in the distribution of the shares may be deemed to be “underwriters” within the meaning of the Securities Act. Any profit realized by them on the sale of such shares and any discounts, commissions, concessions or other compensation received by any underwriter, broker/dealer or agent may be deemed to be underwriting discounts and commissions under the Securities Act. These discounts, commissions or concessions may be in excess of those customary in the types of transactions involved.


	•	at fixed prices;

	•	at market prices prevailing at the time of sale;

	•	at prices related to prevailing market prices; and/or

	•	at varying prices determined at the time of sale or at negotiated prices.

The sale of shares may be effected in transactions (which may involve crosses or block transactions):


	•	on any national securities exchange or quotation service on which the shares may be listed or quoted at the time of sale;

	•	in the over-the-counter market;

	•	in transactions otherwise than on such exchanges or in the over-the-counter market; or

	•	through the writing of options.

Because the selling stockholders may be deemed to be “underwriters” within the meaning of Section 2(11) of the Securities Act of 1933, as amended, the selling stockholders may be subject to the prospectus delivery requirements of the Securities Act. We have informed the selling stockholders that the anti-manipulative provisions of Regulation M promulgated under the Securities Act may apply to their sales in the market.

Upon being notified by a selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if required, which supplement will disclose:


	•	the name of each such selling stockholder and of the participating broker-dealer(s);

	•	the number of shares involved;

	•	the price at which the shares were sold;

	•	the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable; and

	•	such other facts as may be material to the transaction.

Pursuant to our agreement with the selling stockholders, we will pay all expenses of the registration of the shares, including, without limitation, commission filing fees and expenses of compliance with state securities or “blue sky” laws. The selling stockholders will pay all underwriting discounts and selling commissions, if any.

On March 31, 2004, Guillermo Amore, one of our directors, purchased 12 shares of our Series I 8% Convertible Preferred Stock. and Margi Family Partners, Ltd., an entity in which Mr. Amore has an interest, purchased 8.4 shares of our Series I 8% Convertible Preferred Stock. As payment for the shares, Mr. Amore issued a note for $300,000 and Margi Family Partners, Ltd. issued a note for $210,000. Both notes bear interest at 10% and are due on June 1, 2004.

On April 30, 2003, Ocean Bank revised its loan with us by converting, at $0.75 per common share, $15.0 million of the outstanding principal balance under the credit facility into 20 million shares of our common stock with an approximate $9.6 million market value and extending the term of the remaining $29.0 million until April 30, 2006. The resulting $5.4 million debt restructuring gain was deferred and recorded in notes payable and is being amortized as reductions in interest expense over the life of the remaining debt. 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 interest of

The loan is secured by all of our assets and allows for up to a $25 million junior lien position on the assets of our NAP of the Americas, Inc. subsidiary. Mr. Medina has personally guaranteed the loan with Ocean Bank.

In April 2003, two directors, Joseph Wright, Jr. and Jose Maria Figueres-Olsen, purchased an aggregate of $400,000 of our 10% Subordinated Debentures.

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

In the nine months ended December 31, 2003 and in the year ended March 31, 2003, we made interest payments on notes payable of approximately $40,233 and $197,992, respectively, to Manuel D. Medina, our Chairman of the Board, President and Chief Executive Officer and payments of approximately $126,944 and $74,858, respectively, to Miguel Rosenfeld, one of our directors. In February 2003, we made a principal payment of $53,000 on a note payable to Mr. Medina. We also made principal payments of $100,000 and $65,000 in July 2003 and May 2003, respectively, on notes payable to Mr. Rosenfeld.

In the quarter ended December 31, 2002, an aggregate of $1.4 million including accrued interest, of debt payable to Joseph Wright, Jr. and Miguel Rosenfeld, members of our board of directors, and Aviva Budd, one of our officers, was converted to equity at approximately $0.75 per share.

In May 2002, we received a $1.5 million short-term loan at a 10% interest rate from Mr. Medina. Principal and interest under this loan were originally due September 2002. In August 2002, we made a $500,000 principal payment. We extended the outstanding principal balance of $1.0 million under the loan until it was converted to our 10% subordinated convertible debentures in April 2003.

In April 2002, we received a binding commitment from a group that includes two of our directors, Guillermo Amore and Miguel Rosenfeld, for the purchase of 10 million shares of common stock at $.75 per share. In May 2002, the transaction was completed by receiving $3.6 million in cash and the conversion of $3.9 million in short-term promissory notes to equity. The short-term promissory notes were not convertible by their terms.

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

On September 5, 2001, we closed on a $48.0 million credit facility with Ocean Bank. In addition to Mr. Medina personally guaranteeing the credit facility, and in order for us to obtain the facility, the bank further required Mr. Medina to, prior to the bank disbursing funds under the credit facility provide a $5.0 million certificate of deposit to the bank as collateral for certain personal loans Mr. Medina has with the bank and commit to accelerate the maturity date of those personal loans to December 31, 2001. Subsequent to September 2001, Mr. Medina and the bank changed the maturity date on the personal loans, first to December 31, 2001 and later to July 1, 2002. Mr. Medina also agreed to subordinate debt that we owed to Mr. Medina in the event of our default under the credit facility. Mr. Medina has repaid part of those personal loans to Ocean Bank, leaving an outstanding principal balance of approximately $4.6 million as of December 31, 2003. On February 11, 2004, Mr. Medina extended one loan with a principal amount of approximately $3.3 million to February 11, 2005 and made an interest payment of $63,500. On March 8, 2004, Mr. Medina extended the maturity date on the other loan which had a principal amount of approximately $1.3 million to March 8, 2005 and made a $73,446 payment of principal and interest.

On September 5, 2001, in consideration of Mr. Medina agreeing to repay his indebtedness to the bank earlier than otherwise required, pledging the certificate of deposit to the bank and personally guaranteeing the

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

In July 2002, the terms of non-interest bearing note from Mr. Medina were amended. As amended, the note has a maturity date of December 5, 2004 and bears interest subsequent to September 5, 2002 at the applicable federal rate. Interest is due in bi-annual installments. On a quarterly basis, we will review the collectibility of this note. As of June 30, 2003, we owed Mr. Medina approximately $3.7 million. We have the right to withhold payment to Mr. Medina of $1,375,000 in amounts due.

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

As of March 31, 2000, Fusion Telecommunications International, Inc. was our joint venture partner in IXS.Net, Inc. and in IP.Com, LLC. Mr. Medina is a member of the board of directors of Fusion and, through his interest in a general partnership, owns approximately 695,500 shares of Fusion common stock, along with options and warrants. There are also interlocking directors between us and Fusion. The interlocking directors consist of Messrs. Medina, Rosen and Wright. One of our subsidiaries, Terremark Financial Services, Inc. acts as consultant to a subsidiary of Fusion, Fusion Asia, LLC, in connection with telecommunications operations in China. During the nine months ended December 31, 2003, we purchased $296,056 in services from Fusion. Included in our accounts receivable as of March 31, 2003 was a non-trade receivable of approximately $59,000 due from Fusion. There was also a corresponding payable of approximately $59,000 to the same entity.

Included in our interest income for the nine months ended December 31, 2003 and for the year ended March 31, 2003 are approximately $56,000 and $61,000, respectively, from a $5.0 million receivable from Mr. Medina.

Technology Center of the Americas LLC (“TECOTA”), an entity in which we own a 0.84% member interest, owns the building which leases the space for the NAP of the Americas to us under a 20 year lease. Rent expense under the lease amounted to approximately $3.6 million, $2.7 million and $0 for the years ended March 31, 2003, 2002 and 2001 and $3.0 million for the nine months ended December 31, 2003.

The following description of the terms of our common stock sets forth certain general terms and provisions of our common stock. This section also summarizes relevant provisions of the Delaware General


	•	500,000,000 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, 294 shares are designated as Series H Convertible Preferred Stock and 600 shares are designated as Series I Convertible Preferred Stock.


	•	311,227,482 shares of our common stock were outstanding;

	•	42,662 shares were held in treasury;

	•	20 shares of our Series G Convertible Preferred Stock were outstanding. The shares of Series G Convertible Preferred Stock, including premiums, may be converted into an aggregate of 2,143,492 shares of our common stock;

	•	294 shares of our Series H Convertible Preferred Stock were outstanding. Each share of Series H Convertible Preferred Stock may be converted into 1,000 shares of our common stock;

	•	400 shares of our Series I Convertible Preferred Stock were outstanding. Each share of Series I Convertible Preferred Stock may be converted into 33,334 shares of our common stock; and

	•	approximately 67,000,000 shares of our common stock have been reserved for issuance upon the exercise of outstanding stock options, warrants and convertible debentures.

Preemptive Rights. The holders of our common stock do not have preemptive rights to purchase or subscribe for any stock or other securities of ours.

Voting Rights. Each outstanding share of our common stock is entitled to one vote per share.

Dividends. 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.

Liquidation Rights. In the event of the liquidation of our company, subject to the rights, if any, of the holders of other classes of our capital stock, the holders of our common stock are entitled to receive any of our assets available for distribution to our stockholders ratably in proportion to the number of shares held by them.

We list our common stock on the American Stock Exchange under the symbol “TWW.”

Anti-Takeover Effects of Provisions of the Charter and Bylaws and of Delaware Law

Our amended and restated certificate of incorporation and bylaws, contain provisions that could discourage, delay or prevent a tender offer or takeover attempt at a price which many stockholders may find

Blank Check Preferred Stock. Our board of directors, without stockholder approval, has the authority under our amended and restated certificate of incorporation to issue preferred stock with rights superior to the rights of the holders of common stock. As a result, preferred stock could be issued quickly and easily, could impair the rights of holders of common stock and could be issued with terms calculated to delay or prevent a change of control or make removal of management more difficult.

Election of Directors. Our amended and restated certificate of incorporation provides that a majority of directors then in office may fill any vacancy occurring on the board of directors, even though less than a quorum may then be in office. These provisions may discourage a third party from voting to remove incumbent directors and simultaneously gaining control of the board of directors by filling the vacancies created by that removal with its own nominees.

Stockholder Action. Our amended and restated certificate of incorporation provides that stockholders may only act at meetings of stockholders and not by written consent in lieu of a stockholders’ meeting, unless the action that requires stockholder approval is approved by a majority of our continuing directors.

Stockholder Meetings. Our bylaws provide that stockholders may not call a special meeting of the stockholders. Rather, only our board of directors, acting pursuant to a resolution of a majority of the directors then in office, will be able to call special meetings of stockholders. Our bylaws also provide that stockholders may only conduct business at special meetings of stockholders that was specified in the notice of the meeting. These provisions may discourage another person or entity from making a tender offer, even if it acquired a majority of our outstanding voting stock, because the person or entity could only take action at a duly called stockholders’ meeting relating to the business specified in the notice of meeting and not by written consent.

Requirements for Advance Notification of Stockholder Nominations and Proposals. Our bylaws provide that a stockholder seeking to bring business before an annual meeting of stockholders, or to nominate candidates for election as directors at an annual meeting of stockholders, must provide timely notice of this intention in writing. To be timely, a stockholder must deliver or mail the notice and we must receive the notice at our principal executive offices not less than 5 days prior to the date our directors determine for proposals to be received. The bylaws also include a similar requirement for making director nominations and specify requirements as to the form and content of the stockholder’s notice. These provisions could delay stockholder actions that are favored by the holders of a majority of our outstanding stock until the next stockholders’ meeting.

Super-Majority Voting. Delaware law generally provides that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation’s certificate of incorporation, unless a corporation’s certificate of incorporation requires a greater percentage. We have provisions in our restated certificate of incorporation which require a vote of at least 66 2/3% of the stockholders entitled to vote in the election of directors to amend, alter, change or repeal certain provisions of our restated certificate of incorporation.

We are a Delaware corporation subject to Section 203 of the Delaware General Corporation Law. Under Section 203, some business combinations between a Delaware corporation whose stock generally is publicly-traded or held of record by more than 2,000 stockholders and an interested stockholder are prohibited for a three-year period following the date that the stockholder became an interested stockholder, unless:


	•	the corporation has elected in its restated certificate of incorporation not to be governed by Section 203;

	•	the board of directors of the corporation approved the transaction which resulted in the stockholder becoming an interested stockholder before the stockholder became an interested stockholder;


	•	upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the commencement of the transaction, excluding voting stock owned by directors who are also officers or held in employee benefit plans in which the employees do not have a confidential right to tender stock held by the plan in a tender or exchange offer; or

	•	the board of directors approves the business combination and holders of two-thirds of the voting stock which the interested stockholder did not own authorize the business combination at a meeting.

We have not made an election in our amended and restated certificate of incorporation to opt out of Section 203. In addition to the above exceptions to Section 203, the three-year prohibition does not apply to some business combinations proposed by an interested stockholder following the announcement or notification of an extraordinary transaction involving the corporation and a person who was not an interested stockholder during the previous three years or who became an interested stockholder with the approval of a majority of the corporation’s directors. For the purposes of Section 203, a business combination generally includes mergers or consolidations, transactions involving the assets or stock of the corporation or its majority-owned subsidiaries and transactions which increase an interested stockholder’s percentage ownership of stock. Also, an interested stockholder generally includes a stockholder who becomes beneficial owner of 15% or more of a Delaware corporation’s voting stock, together with the affiliates or associates of that stockholder.

Our amended and restated certificate of incorporation limits the liability of our directors to the maximum extent permitted by Delaware law. Delaware law provides that directors will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except liability for:


	•	any breach of their duty of loyalty to the corporation or its stockholders;

	•	acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

	•	unlawful payments of dividends or unlawful stock repurchases or redemptions; or

	•	any transaction from which the director derived an improper personal benefit.

This provision has no effect on any non-monetary remedies that may be available to us or our stockholders, nor does it relieve us or our officers or directors from compliance with federal or state securities laws.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us under the provisions that we describe above or otherwise, we have been informed that in the opinion of the Securities and Exchange Commission, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Our bylaws also permit us to purchase and maintain insurance on behalf of any officer or director for any liability arising out of his or her actions in that capacity, regardless of whether our bylaws would otherwise permit indemnification for that liability. We have obtained liability insurance for our officers and directors in the amount of $10 million. At the present time, there is no pending litigation or proceeding involving any of our directors, officers, employees or agents in which indemnification will be required or permitted. We are not aware of any threatened litigation or proceeding which may result in a claim for indemnification.

Holders of approximately 11,187,823 shares of our common stock have registration rights with respect to those shares.

We are required to bear all registration expenses incurred in connection with these registrations. The holders of shares registered by us will pay all underwriting discounts and selling commissions applicable to the

The registration rights of these holders will terminate when all of the registrable shares may be sold without registration under the Securities Act pursuant to Rule 144(k).

The validity of the securities being registered hereunder is being passed upon for us by Greenberg Traurig, P.A., Miami, Florida. Marvin S. Rosen, a member of Greenberg Traurig, is one of our directors. Mr. Rosen beneficially owns 1,362,150 shares of common stock, of which 245,000 shares of common stock underlying options and 205,810 shares underlying convertible debentures in the principal amount of $325,000.

Greenberg Traurig, P.A., Miami, Florida, have passed upon the validity of the issuance of the shares being offered by this prospectus.

The consolidated financial statements as of March 31, 2003 and 2002 and for each of the three years in the period ended March 31, 2003 included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent certified public accountants, given on the authority of said firm as experts in auditing and accounting.

This prospectus is part of a registration statement on Form S-1 which was filed with the Securities and Exchange Commission. This prospectus and any subsequent prospectus supplements do not contain all of the information in the registration statement as permitted by the rules and regulations of the SEC. In addition, we file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any documents that we have filed with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our Securities and Exchange Commission filings are also available to the public at the Securities and Exchange Commission’s website at http://www.sec.gov. Copies of documents filed by us with the Securities and Exchange Commission are also available at the offices of The New York Stock Exchange, which is located at 20 Broad Street, New York, New York 10005. In addition, our Internet website, http://www.terremark.com, contains all of the annual, quarterly and special reports, proxy statements and other information we file with the SEC.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

credit-worthiness of the customer. The Company does not request collateral from customers. If the Company determines that collection is not reasonably assured, the Company defers the fee and recognizes revenue at the time collection becomes reasonably assured, which is generally upon receipt of cash.

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

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

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

Income taxes 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.

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

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

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

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

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

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

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

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

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

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

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

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

On February 23, 2001, the Company sold certain of its telecom facilities management operations to MP Telecom, LLC (“MP”), an entity owned by certain officers and a director of the Company. Assets sold included all of the Company’s equity ownership interests (including any rights to “promote” interests) in the T-Rex branded “Telecom Hotel” together with assets owned by Telecom. Routing Exchange Developers, Inc., a wholly owned subsidiary of the Company. As part of the transaction, the Company retained its management rights for The Technology Center of the Americas (“TECOTA”), in which the NAP of the Americas is located. The purchaser conveyed to the Company its rights to the promote and equity interests in TECOTA. As a result of these transactions, effective March 31, 2001, the Company owned 100% of the promote interest and .84% of the equity interests in TECOTA.

As part of the transaction, MP conveyed to the Company 1,400,000 shares of the Company’s common stock, representing a portion of 8,000,000 shares issued to MP and its affiliates in conjunction with the T-Rex acquisition. MP also conveyed its minority interest in the Company’s colocation business. The Company paid $900,000 to the purchaser in connection with the transaction. The principals of MP and certain Company officers agreed, until December 25, 2001, to limit the aggregate number of Company shares sold by them during any trading day.

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

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

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

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

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

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

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

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

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

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

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

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

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

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


	•	repay a $10 million short-term loan from Mr. Medina, the proceeds of which the Company had used to fund the build out of the NAP of the Americas (Mr. Medina, in turn, used the $10 million to repay a personal $10 million short-term loan from Ocean Bank);


	•	repay $3.5 million of debt that the Company owed to Ocean Bank under a line of credit personally guaranteed by Mr. Medina;

	•	pay $1.2 million in loan costs related to the $48 million credit facility (including $720,000 commitment fee); and

	•	fund the NAP of the Americas build out costs.

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

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

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

On September 5, 2001 and in consideration of Mr. Medina’s agreeing to repay his indebtedness to the bank earlier than otherwise required, pledging the certificate of deposit to the bank and personally guaranteeing the $48 million credit facility and approximately $21 million of construction payables, the Company entered into an amended and restated employment agreement with him dated September 6, 2001. Under the terms of the amended and restated employment agreement, the Company will indemnify Mr. Medina from any personal liability related to his guarantees of the Company’s debt, use commercially reasonable efforts to relieve Mr. Medina of all his guarantees of the Company’s debt, provide up to $6.5 million of cash collateral to the bank should Mr. Medina be unable to repay the personal loans when due and provide a non interest-bearing $5.0 million loan to Mr. Medina for as long as his guarantees of the Company’s debt exist. If the loan to Mr. Medina becomes in default, the Company has a right of offset against all amounts payable by the Company to Mr. Medina, the aggregate of which is approximately $3.0 million as of March 31, 2003. Subsequent to March 31, 2003, the amount was reduced to $1.5 million. Mr. Medina and the Company have agreed that the Company has the right to withhold payment to Mr. Medina of the $1,375,000 in convertible debt held by him until the note to the Company is repaid. The note receivable from Mr. Medina is shown as an adjustment to equity. The $48 million credit facility and the note receivable from Mr. Medina were approved by the Board of Directors.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Terremark Worldwide, Inc. (together with its subsidiaries, the “Company”) operates facilities located in Florida, California and Sao Paulo from which the Company assist users of the Internet and large communications networks in communicating with other users and networks. The Company’s primary facility is the NAP of the Americas located in Miami, Florida, a carrier-neutral Tier-1 network access point (the “NAP”) in Miami, Florida. The NAP provides exchange point, colocation and managed services to carriers, Internet service providers, network service providers, government entities, multinational enterprises and other end users. The Company’s strategy is to leverage its concentration of connectivity and carrier-neutral status to sell services to customers within and outside of the Company’s TerreNAP Data Centers.

Prior to April 2000, the Company was engaged in the development, sales, leasing, management and financing of retail, high-rise office buildings, mixed-use projects, condominiums, hotels and government-assisted housing. The Company was also involved in a number of ancillary businesses that complemented its development operations. Specifically, the Company engaged in offering financial services, property management, construction management, condominium hotel management, residential and commercial leasing brokerage, and advisory services. By March 31, 2002, the Company had exited non-core real estate activities, real estate development, property management, financing and the ancillary businesses that complimented these real-estate development operations. The Company’s remaining real estate activities include technology construction work and management of the property where the NAP of the Americas is located.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liabilities and commitments in the normal course of business. From April 28, 2000 through December 31, 2003, the Company has incurred net operating losses of approximately $219.7 million, including approximately $82.6 million of losses related to discontinued operations. The Company’s cash flows from operations for the nine months ended December 31, 2003 and 2002 were negative and its working capital deficit was approximately $17.9 million and $39.0 million as of December 31, 2003 and March 31, 2003, respectively. Due to recurring losses from operations and the lack of committed sources of additional debt or equity to support working capital deficits, substantial doubt exists about the Company’s ability to continue as a going concern.

The Company’s primary sources of liquidity, including cash proceeds from the issuance of Series I Preferred Stock, are cash and cash equivalents amounting to approximately $5.4 million as of April 19, 2004 and the anticipated collection of $2.2 million due before June 1, 2004 under promissory notes exchanged for preferred stock and our projected increase in monthly revenues from customer contracts.

Based on customer contracts signed as of March 31, 2004, the Company’s monthly cash deficit from operations is approximately $500,000. In order to eliminate this current monthly cash deficit from operations, the new monthly revenues required range from $700,000 to $800,000. This range of new revenue depends on the mix of the services sold and their corresponding margin.

The Company expects to increase its revenues based on existing contracts, including those with the U.S. Federal government and enterprises, and expected future contracts from potential customers currently in its sales pipeline. The Company has identified additional potential customers, including the Federal, state and

local governments, and is actively offering available services to them. However, projected revenues depend on several factors, some of which are beyond the Company’s control, including the rate at which services are sold to the government sector and the commercial sector, the Company’s ability to retain its customer base, the willingness and timing of potential customers outsourcing the housing and management of their technology infrastructure to the Company, the reliability and cost-effectiveness of the Company’s services and its ability to market services.

On November 4, 2003, the Company entered into an agreement to lease an additional 149,184 square feet of space in the third floor of TECOTA, the property in which the NAP of the Americas is located, and extend the Company’s existing lease in the second floor of the same property to co-terminate with the third floor lease on May 31, 2025. This additional space allows the Company to customize build-outs for large customers. Under the terms of the lease agreement, monthly base rent payments for the third floor space of approximately $200,000 will commence in April 2005. Effective June 1, 2006 and 2009, annual base rent for the third floor will increase to approximately $3.0 million and $3.5 million, respectively, with annual 2.5% increases thereafter. The Company is currently building out a portion of the third floor. Based on existing and anticipated future contracts from potential customers currently in the sales pipeline, the Company will require approximately $3 to $4 million in additional debt or equity financing to complete the build out of the portion of the third floor necessary to service these customers. The build out has commenced and it is anticipated that it will be completed in 2004. If the Company is unsuccessful in obtaining additional debt or equity financing, it plans on negotiating payment terms with the contractors for the build out. These payment terms may restrict the Company’s ability to engage in some activities.

The Company’s current liabilities as of December 31, 2003 are approximately $23.2 million, including approximately $14.1 million in debt and capital lease obligations maturing within one year and $5.9 million in accounts payable and accrued expenses. Currently, the Company does not have the cash to meet these obligations. The Company further anticipates that revenues will not be sufficient to make principal payments on debt maturing within one year.

In the past the Company has been able to work with lenders and vendors to continue to extend the terms of the debt and accounts payable. The Company intends to continue these efforts. The Company further plans to fund the business by increasing revenues and cash collections from customers and by selling additional debt or equity securities. Financing may not be available. Further, any additional equity financing may be dilutive to existing shareholders. If the Company is unsuccessful in obtaining additional financing, extending the terms of the Company’s maturing debt or negotiating payment terms with creditors, the Company will curtail activities. In addition, some of the creditors may pursue legal rights against the Company. The Company also does not expect to fund any amounts under the Company’s guaranties.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles for complete annual financial statements. The unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, which are, in the opinion of management, necessary to present a fair presentation of the results for the interim periods presented. Operating results for the quarter ended December 31, 2003 may not be indicative of the results that may be expected for the year ending March 31, 2004. Amounts as of March 31, 2003, included in the condensed consolidated financial statements have been derived from audited consolidated financial statements as of that date.

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended March 31, 2003.

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

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

One customer accounted for approximately 11% of data center-services revenues for the nine months ended December 31, 2003. Two customers accounted for approximately 13% and 10% of data center-services revenues for the nine months ended December 31, 2002, respectively. One customer accounted for approximately 13% of data center-services revenues for the three months ended December 31, 2003. Two customers accounted for approximately 12% and 10% in data center-services revenues for the three months ended December 31, 2002, respectively.

The Company has adopted the disclosure requirements of SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — An Amendment of SFAS No. 123”. The following table presents what the net loss and net loss per share would have been had the Company adopted SFAS No. 123 (in thousands, except per share data):

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

When the Company issues debt or equity which is convertible into common stock at a discount from the common stock market price at the date the debt is issued, the Company recognizes a beneficial conversion feature for the difference between the closing price and the conversion price multiplied by the number of shares issuable upon conversion. The beneficial conversion feature is presented as a discount to the related debt or equity, with an offsetting amount increasing additional paid in capital. The discount is amortized as additional interest expense or dividend from the date the instrument is issued to the date it first becomes convertible.

In December 2003, the Securities and Exchange Commission, (“SEC”), issued Staff Accounting Bulletin No. 104, (“SAB 104”), Revenue Recognition. SAB 104 updates portions of existing interpretative guidance in order to make this consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The adoption of SAB 104 did not have a material impact on the Company’s consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51.” This interpretation clarifies consolidation requirements for variable interest entities. It establishes additional factors beyond ownership of a majority voting interest to indicate that a company has a controlling financial interest in an entity (or a relationship sufficiently similar to a controlling financial interest that it requires consolidation). This interpretation applies immediately to variable interest entities created or obtained after January 31, 2003 and must be retroactively applied to holdings in variable interest entities acquired before February 1, 2003 in interim and annual financial statements issued for periods ending after December 15, 2003. NAP de las Americas-Madrid S.A. is a variable interest entity but the Company’s current relationship indicates that it does not require consolidation. The Company’s maximum related exposure to loss is approximately $500,000 at December 31, 2003. Management does not expect the adoption of FIN 46 to have a significant impact on the Company’s consolidated financial position or result of operations.

Company’s fiscal year ended March 31, 2004. Management does not expect the adoption of SFAS 145 to have a material impact on the Company’s financial position. However, SFAS 145 had an impact on the presentation of the results of operations for the nine months ended December 31, 2003 (see Note 6).

On November 10, 2003, a developer agreed to pay the Company a $3.8 million non-refundable fee to develop a TerreNAP Center in Australia. The developer paid the Company $500,000 upon execution of the agreement and the remaining balance of $3.3 million on December 10, 2003. On February 11, 2004, the Company received written notification that the developer did not wish to proceed with negotiations regarding the construction of a TerraNAP Center in Australia. On February 19, 2004, the Company acknowledged receipt of the developer’s notification, and pursuant thereto, terminated our agreement with the developer. The Company have no further obligations in connection with the agreement with the developer and as a result the Company will recognize the $3.8 million non-refundable fee in the quarter ending March 31, 2004.

Connectivity solutions include procurement and installation of equipment and procurement of connectivity. Revenues for connectivity solutions are not recognized until the complete solution is accepted by the customer.

On September 5, 2001, the Company closed on a $48 million credit facility from Ocean Bank. The proceeds of the original credit facility were used to:


	•	repay a $10 million short-term loan from Mr. Medina, the proceeds of which the Company had used to fund the build out of the NAP of the Americas (Mr. Medina, in turn, used the $10 million to repay a personal $10 million short-term loan from Ocean Bank);

	•	repay $3.5 million of debt that the Company owed to Ocean Bank under a line of credit personally guaranteed by Mr. Medina;

	•	pay $1.2 million in loan costs related to the $48 million credit facility (including $720,000 commitment fee); and

	•	fund the NAP of the Americas build out costs.

On April 30, 2003, Ocean Bank revised its loan with the Company by converting, at $.75 per common share, $15.0 million of the outstanding principal balance under the credit facility into 20 million shares of the Company’s common stock with an approximate $9.6 million market value and extending the term of the remaining $29.0 million until April 30, 2006. The resulting $5.4 million debt restructuring gain was deferred and recorded in notes payable and is being amortized as reductions in interest expense over the life of the remaining debt. Concurrent with this transaction, the Company paid all past due interest as of March 31,

2003, plus accrued interest through April 28, 2003 totaling approximately $1.6 million and prepaid interest of approximately $900,000. Under the new terms, interest is payable quarterly at an annual stated rate of 5.25% for the first twelve months and 7.5% thereafter.

The loan is secured by all of the Company’s assets and allows for up to a $25 million junior lien position on the assets of its NAP of the Americas, Inc. subsidiary. Mr. Medina has personally guaranteed the loan with Ocean Bank.

In addition to Mr. Medina’s personal guarantee of the loan, and in order to obtain the credit facility, the bank further required Mr. Medina, prior to the bank disbursing funds under the credit facility, to (i) provide a $5.0 million certificate of deposit to the bank as collateral for certain personal loans that Mr. Medina has with the bank and (ii) commit to accelerate the maturity date of those personal loans. In the event of the Company’s default under the credit facility Mr. Medina also agreed to subordinate any debt that the Company owed to Mr. Medina until the credit facility is repaid in full. Mr. Medina has repaid part of his personal loans to the bank, leaving an outstanding principal balance of approximately $4.6 million on December 31, 2003. On February 11, 2004, Mr. Medina extended one loan with a principal amount of approximately $3.3 million to February 11, 2005 and made an interest payment of $63,500. On March 8, 2004, Mr. Medina extended the maturity date on the other loan with a principal amount of approximately $1.3 million to March 8, 2005 and made a $73,446 payment of principal and interest.

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

Mr. Medina’s note to the Company has a maturity date of September 30, 2004 and bears interest at 2%, the applicable federal rate. Interest is due in bi-annual installments. The Company reviews the collectibility of this note on a quarterly basis.

Construction payables at December 31, 2003 relate to construction of the Company’s colocation facility in Santa Clara, California and technology construction work, including the build out of the third floor at TECOTA.

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

interest) to Kinetics Mechanical Services, Inc. and Kinetics Systems Inc. On December 5, 2002, the Company entered into an agreement with CRG that provided the Company with the option, upon the closing of the purchase of the debt by CRG from Kinetics Mechanical Services, Inc. and Kinetics Systems Inc., to repay the entire debt at a discount by either issuing shares of the Company’s common stock valued at $0.75 per share or making a cash payment of $2.4 million.

On April 30, 2003, CRG, LLC completed the purchase, at a discount, of the Company’s $22.6 million construction payables (including accrued interest) to Cupertino Electric, Inc., Kinetics Mechanical Services, Inc. and Kinetics Systems Inc., all of which were construction contractors for the NAP of the Americas. At the closing, CRG’s purchased construction payables were converted at $.75 per common share into 30,133,334 shares of the Company’s common stock with an approximate $14.1 million market value in accordance with the November 11, 2002 and the December 5, 2002 option agreements. As a result of these transactions, the Company recorded a gain on debt restructuring of approximately $8.5 million.

The maker of the $9.5 million promissory note failed to pay but agreed on June 16, 2003 to assign the note and the debenture to an entity newly formed by the son of a director of the Company. As of September 22, 2003, the Company had collected in full the promissory note. In connection with this transaction, the Company recognized a beneficial conversion feature of $9.5 million, based on the June 16, 2003 measurement date.

Prepayment by the Company is permitted under the 10% debt instrument subsequent to April 30, 2004. Prepayment by the Company is permitted under the 13% and 13.125% debt instruments, but will entitle holders of the 13% subordinated debentures to warrants or a premium over their outstanding principal and interest based upon the following schedule:

During the nine months ended December 31, 2003, the Company entered into the following equity transactions:

In October 2003, approximately $258,306 of debt was converted to 344,407 shares of common stock at $0.75 per share.

In September 2003, 1,000 shares of common stock were issued in conjunction with the exercise of 1,000 employee stock options at $0.42.

In August 2003, approximately $45,004 of debt was converted to 60,005 shares of common stock at $0.75 per share.

In August 2003, as a result of the subsequent sale of certain common shares, the Company issued an additional 3.7 million shares to NAP de Las Americas-Madrid S.A.

In July 2003, 11,334 shares of common stock were issued in conjunction with the exercise of 2,000 employee stock options at $0.78, 3,334 at $0.51 and 6,000 at $0.52.

In June 2003, warrants valued at approximately $4,000 were converted to 9,500 shares of common stock at $0.48 per share.

In June 2003, 42,667 shares of common stock were issued in conjunction with the exercise of 36,667 employee stock options at $0.51 and 6,000 employee stock options at $0.52.

In April 2003, in conjunction with the Ocean Bank debt conversion of $15.0 million in debt to equity, the Company issued 20.0 million shares of common stock at $0.75 per share.

In April 2003, in conjunction with the CRG transaction whereby $21.6 million in construction payables plus $1.0 million in accrued interest was converted to equity, the Company issued 30.1 million shares of common stock at $0.75 per share.

During the period from March 2001 through December 31, 2003, the Company issued warrants to third parties for services and to facilitate certain debt and equity transactions. The following table summarizes information about stock warrants outstanding as of December 31, 2003:

Effective July 22, 2003, Brian Goodkind stepped down as the Company’s Executive Vice President and Chief Operating Officer and became a strategic advisor to the Company’s Chief Executive Officer. In connection with this modification to the employment relationship with Mr. Goodkind, the Company accelerated the vesting on his outstanding stock options and awarded him new stock options. As a result, the Company recognized a non-cash, stock-based compensation charge of approximately $1.8 million in the quarter ended September 30, 2003.

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

The Company’s Chief Executive Officer and other related parties have either provided or guaranteed some of the Company’s debt or equity financing. In addition, services are provided to entities in which the Company owns stock.

Following is a summary of transactions for the nine months ended December 31, 2003 and 2002 and balances with related parties included in the accompanying balance sheet as of December 31, 2003 and March 31, 2003.

During the nine months ended December 31, 2003, the Company purchased services from Fusion Telecommunications International, Inc. (“Fusion”). The Company’s Chief Executive Officer and Chairman of the Board of Directors has a minority ownership in Fusion and is a member of its Board of Directors.

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

A reconciliation of total segment loss from operations to loss before income taxes follows:

On March 31, 2004, the Company closed on the issuance of 400 shares of Series I 8% Convertible Preferred Stock (the “Preferred Stock”) for $7.8 million in cash and $2.2 million in promissory notes of which $1.0 million is due April 25, 2004 and $1.2 million is due June 1, 2004, together with warrants (the “Warrants”) to purchase 2.8 million of the Company’s common shares. The warrants are exercisable for five years at $0.90 per share. The Preferred Stock is convertible into shares of the Company’s common stock at $0.75 per share. For the first three years the Preferred Stock accrues dividends at a rate of 8%. In January 2007, the Preferred Stock dividend rate will increase to 10% per year until January 2009 when it increases to 12%. Dividends are payable, at our discretion, in shares of the Company’s common stock or cash. The Company has the right to redeem the Preferred Stock at $25,000 per share plus accrued dividends at any time after December 31, 2004. Because some of the Series I Preferred Stock shares issued were convertible upon issuance at less than quoted market prices, we will recognize a non-cash preferred dividend of approximately $1.0 million in determining net loss per share to common stockholders for the period ended March 31, 2004.

As of April 2, 2004, the Company had not paid approximately $7.8 million of principal and interest due under certain short-term notes. The Company is currently negotiating an extension of these notes.

The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by us in connection with the sale of common stock being registered. All amounts are estimates except the SEC registration fee.

Section 145 of the Delaware General Corporation Law authorizes a court to award or a corporation’s Board of Directors to grant indemnification to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities, including reimbursement for expenses incurred, arising under the Securities Act of 1933, as amended. The Registrant’s bylaws provide for mandatory indemnification of its directors and officers and permissible indemnification of employees and other agents to the maximum extent permitted by the Delaware General Corporation Law. The Registrant’s certificate of incorporation provides that, pursuant to Delaware law, its directors shall not be liable for monetary damages for breach of the directors’ fiduciary duty as our director and our stockholders. This provision in the certificate of incorporation does not eliminate the directors’ fiduciary duty, and in appropriate circumstances equitable remedies such as injunctive or other forms of non-monetary relief will remain available under Delaware law. In addition, each director will continue to be subject to liability for breach of the director’s duty of loyalty to us for acts or omissions not in good faith or involving intentional misconduct, for knowing violations of law, for actions leading to improper personal benefit to the director, and for payment of dividends or approval of stock repurchases or redemptions that are unlawful under Delaware law. The provision also does not affect a director’s responsibilities under any other law, such as the federal securities laws or state or federal environmental laws.

We have obtained directors’ and officers’ liability insurance with an aggregate liability for the policy year, inclusive of costs of defense, in the amount of $10,000,000.

On March 31, 2004, we closed on the issuance of 400 shares of Series I 8% Convertible Preferred Stock for $7.8 million in cash and $2.2 million in promissory notes due before June 1, 2004, together with warrants to purchase 2.8 million shares of our common stock and which are exercisable for five years at $0.90 per share. The Series I Preferred Stock is convertible into shares of our common stock at $0.75 per share. In January 2007, the Series I Preferred Stock dividend rate will increase to 10% per year until January 2009 when it increases to 12%. Dividends are payable, at our discretion, in shares of our common stock or cash. We have the right to redeem the Series I Preferred Stock at $25,000 per share plus accrued dividends at any time after December 31, 2004.

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 debentures are convertible into shares of our common stock at $0.50 per share. Interest is payable quarterly beginning July 31, 2003. The debentures were issued in

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. In the Share Purchase Agreement with the NAP de las Americas — Madrid the Company agreed that if prior to June 13, 2003 it issued any shares of common stock for a purchase price of less than $1.00 per share (the “Anti-Dilution Price”), we would issue to the NAP de las Americas — Madrid that number of additional shares of common stock determined by dividing 5,000,000 by the Anti-Dilution Price, and subtracting from the quotient thereof the number of shares previously issued to the NAP de las Americas — Madrid in respect of the Agreement. In August 2002, we sold approximately 17.6 million shares at $0.58 per share, and, as a result NAP de las Americas — Madrid had the right to Invoke the Anti-Dilution Provision of the Agreement and request that the Company adjust the sale price. NAP de las Americas — Madrid did not request those shares until July, 2003 and, as a result, the Company issued an additional 3,600,000 shares of common stock to the NAP de las Americas — Madrid.

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, or 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.

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

On May 14, 2001, we sold 294 shares of our Series H Convertible Preferred Stock to a third party for $500,000. The Series H Convertible Preferred Stock accrues dividends when, as and if declared by the Board at an annual rate of $102.00 per share and has preference over dividends paid on common stock. The dividends are payable, in our sole discretion, in cash or additional shares of Series H Convertible Preferred Stock. Each share of Series H Convertible Preferred Stock is convertible at any time at the holder’s election into 1,000 shares of common stock.

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

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

(b) The following exhibits, which are furnished with this Registration Statement on Form S-1 or incorporated herein by reference, are filed as part of this Registration Statement on Form S-1.


	(1)	Previously filed as part of the Company’s Current Report on Form 8-K dated January 19, 1996.

	(2)	Previously filed as an exhibit to the Company’s Registration Statement on Form S-3, as amended, filed on March 11, 2003.

	(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 on 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 on 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 an exhibit to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2001.

(14)	Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on April 15, 2003.

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

(16)	Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2003.

(17)	Previously filed as an exhibit to the Company’s Registration Statement on Form S-8 filed on August 19, 2002.

(18)	Previously filed as an exhibit to the Company’s Annual Report on Form 10-KSB filed on July 15, 1997.

(19)	Previously filed as an exhibit to the Company’s Registration Statement on Form S-3/A filed on December 22, 2003.

(20)	Previously filed as an exhibit to the Company’s Registration Statement on Form S-3/A filed on March 17, 2004.

(21)	Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2002.

1. To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:


	(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933.

	(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

	(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

2. That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

3. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

4. For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.

5. For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

6. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Miami, State of Florida, on April 23, 2004.


	By:	/s/ MANUEL D. MEDINA



	Manuel D. Medina
	Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)


	By:	/s/ JOSE A. SEGRERA



	Jose A. Segrera
	Chief Financial Officer (Principal Accounting Officer)

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.


*	Executed on behalf of these individuals by Manuel D. Medina as attorney-in-fact.


Delaware	4813	52-1981922
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)






		Proposed Maximum	Proposed Maximum	Amount of
Title of Each Class	Amount to be	Offering Price	Aggregate Offering	Registration
of Securities to be Registered	Registered	Per Unit(1)	Price	Fee(5)


Common Shares, par value $0.001 per share	103,601,999	$0.70(2)	$8,585,959.90(2)	$8,075.41

Common Shares, par value $0.001 par value(3)	62,612,490	$0.40-$0.90(4)	$1,669,075.20(4)	$3,310.38


PROSPECTUS SUMMARY
RISK FACTORS
USE OF PROCEEDS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
BUSINESS
MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SELLING STOCKHOLDERS
PLAN OF DISTRIBUTION
CERTAIN TRANSACTIONS
DESCRIPTION OF CAPITAL STOCK
INTERESTS OF NAMED EXPERTS AND COUNSEL
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND ADDITIONAL INFORMATION
INDEX TO FINANCIAL STATEMENTS
		UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
		CONDENSED CONSOLIDATED BALANCE SHEETS
		CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
		CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
EXHIBIT INDEX
EX-5.1 Opinion of Greenberg Traurig, P.A.
EX-21 Subsidiaries of the Company
EX-23.2 Consent of PricewaterhouseCoopers LLP



	Prices
Fiscal Year 2003
Quarter Ended	High		Low

June 30, 2004 (through April 8, 2004)	$	0.74	$	0.65



	Prices
Fiscal Year 2004
Quarter Ended	High		Low

June 30, 2003	$	1.21	$	0.33
September 30, 2003		1.00		0.53
December 31, 2003		0.78		0.55
March 31, 2004		0.94		0.60


	Page

Prospectus Summary		1
Risk Factors		6
Use of Proceeds		9
Market for Our Common Equity and Related Stockholder Matters		9
Selected Consolidated Financial Data		11
Cautionary Note Regarding Forward-Looking Statements		13
Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Quantitative and Qualitative Disclosures About Market Risk		33
Business		34
Management		42
Security Ownership of Certain Beneficial Owners and Management		49
Selling Stockholders		52
Plan of Distribution		59
Certain Transactions		60
Description of Capital Stock		62
Interests of Named Experts and Counsel		65
Legal Matters		66
Experts		66
Where You can Find Additional Information		66
Index to Financial Statements


	•	the connectivity of a Tier-1 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 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.


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


	*We are in default on some of our short-term notes which could result in the holders of those notes bringing a legal action against us.*


	*If we do not locate financial or strategic partners, we may have to delay or abandon expansion plans.*


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


	*We may not be able to compete effectively in the market for data center services.*


	*Potential customers may be unwilling to contract with us based on our financial condition.*


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


	*Dividend Policy*



			Three Months Ended

			March 31, 2002			December 31, 2001			September 30, 2001			June 30, 2001


			(dollars in thousands except per share data)
Data center			$	1,916		$	678		$	394		$	228
Real estate services				2,660			1,067			4,003			4,926

	Total revenue			4,576			1,745			4,397			5,154

Data center operations, excluding depreciation				3,163			4,019			3,167			882
Construction contract expenses				2,383			303			1,915			2,797
Other expenses				22,482			10,028			12,651			9,454

		Total expenses		28,028			14,350			17,733			13,133

Net loss			$	(23,452	)	$	(12,605	)	$	(13,336	)	$	(7,979	)

Net loss per common share			$	(0.12	)	$	(0.06	)	$	(0.07	)	$	(0.04	)


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


	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.


	*If the price of our shares remains low or our financial condition deteriorates, we may be delisted by the American Stock Exchange.*


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



		Nine Months Ended
		December 31,						Twelve Months Ended March 31,

		2003			2002			2003			2002			2001			2000			1999


		(dollars in thousands except per share data)
Results of Operations:
Data center(1)(2)		$	11,835		$	8,131		$	11,033		$	3,216		$	253		$	—		$	—
Real estate services			520			3,577			3,661			12,656			39,894			15,390			44,456

	Total revenue		12,355			11,708			14,694			15,872			40,147			15,390			44,456

Data center operations, excluding depreciation			11,171			8,631			11,235			11,231			1,223			—			—
Construction contract expense			338			2,905			2,968			7,398			20,347			555			—
Other expenses			17,875			31,741			41,718			54,615			39,950			20,868			43,832

	Total expenses		29,384			43,277			55,921			73,244			61,520			21,423			43,832

(Loss) income from continuing operations			(17,029	)		(31,569	)		(41,227	)		(57,372	)		(21,373	)		(6,033	)		624
Loss from discontinued operations			—			—			—			—			(82,627	)		—			—

Net (loss) income		$	(17,029	)	$	(31,569	)	$	(41,227	)	$	(57,372	)	$	(104,000	)	$	(6,033	)	$	624

(Loss) income from continuing operations per common share		$	(0.06	)	$	(0.14	)	$	(0.18	)	$	(0.29	)	$	(0.11	)	$	(0.09	)	$	0.01
Loss from discontinued operations per common share			—			—			—			—			(0.44	)		—			—

Net (loss) income per common share		$	(0.06	)	$	(0.14	)	$	(0.18	)	$	(0.29	)	$	(0.55	)	$	(0.09	)	$	0.01

Financial condition:
Real estate inventory		$	—		$	—		$	—		$	—		$	—		$	11,797		$	12,888
Property and equipment, net			52,900			57,200			54,483			61,089			25,066			1,011			191
Total assets			70,632			76,040			69,602			81,024			78,069			77,998			17,598
Long term obligations(3)(4)			75,309			2,709			75,081			38,710			16,462			28,632			8,731
Stockholders’ (deficit) equity(5)			(27,880	)		(36,913	)		(46,461	)		(49,276	)		11,163			476			6,510



		Three Months Ended

		December 31, 2003			September 30, 2003			June 30, 2003


		(dollars in thousands except per share data)
Results of Operations:
Data center		$	4,591	(1)	$	3,941		$	3,302	(1)
Real estate services			274			108			139

	Total revenue		4,865			4,049			3,441

Data center operations, excluding depreciation			4,664			3,950			2,557
Construction contract expenses			229			63			46
Other expenses, net			9,124			10,843			6,383

	Total expenses		14,017			14,856			8,986

Debt restructuring			—			—			8,475

Net income (loss)		$	(9,152	)	$	(10,807	)	$	2,930

Net income (loss) per common share		$	(0.03	)	$	(0.04	)	$	0.01



		Three Months Ended

		March 31, 2003			December 31, 2002			September 30, 2002			June 30, 2002


		(dollars in thousands except per share data)
Results of Operations:
Data center		$	2,902		$	2,557		$	2,424		$	3,150	(1)
Real estate services			84			276			1,268			2,033

	Total revenue		2,986			2,833			3,692			5,183

Data center operations, excluding depreciation			2,603			2,768			2,769			3,095
Construction contract expenses			62			134			938			1,834
Other expenses, net			9,979			14,110			9,403			8,226

	Total expenses		12,644			17,012			13,110			13,155

Net loss		$	(9,658	)	$	(14,179	)	$	(9,418	)	$	(7,972	)

Net loss per common share		$	(0.04	)	$	(0.06	)	$	(0.04	)	$	(0.04	)


	*Results of Operations for the Nine Months Ended December 31, 2003 as Compared to the Nine Months Ended December 31, 2002*



		For the Nine Months
		Ended December 31,

		2003			2002

Revenue
	U.S.		97	%		97	%
	Outside U.S.		3	%		3	%

			100	%		100	%

	Data Center		96	%		69	%
	Technology Construction Work		3	%		30	%
	Property and Construction Management		1	%		1	%

			100	%		100	%



	For the Nine Months Ended December 31,


	2003				2002


Colocation & exchange point services	$	9,146,644	85	%	$	5,843,754	83	%
Managed & professional services		1,614,114	15	%		1,196,914	17	%

	$	10,760,758	100	%	$	7,040,668	100	%


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



	Fiscal 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


		December 31,
		2003

Notes payable to unrelated parties:
Unsecured notes payable to SBP Investments, Inc. and Caerulea, Ltd., Principal and interest accruing at 10% due April 1, 2004.			2,800,000
Unsecured note payable to Slivovitz Design Limited, Inc., interest accrues at 15%. Principal and interest due on April 1, 2004.			1,000,000
Unsecured notes payable to various individuals, interest ranges from 10% to 15%. Principal and interest due between March 2004 and March 2005.			829,771
Note payable to JCH Aston Partners, LLC, collateralized by certain assets of a director and certain of our shareholders. Interest accrues at 1% over prime, due on March 31, 2004.			367,178

	Total notes payable to unrelated parties		4,996,949

Notes payable to related 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. Amount includes approximately $4.5 million of gain on debt restructuring to be amortized monthly to reduce interest expense over the life of the remaining debt			33,643,591
Unsecured note payable to Centre Credit Corporation, a corporation controlled by a shareholder, interest accrues at 15%. Principal and interest due on April 1, 2004.			1,600,000
Unsecured notes payable to certain of our executives and directors and corporations in which related parties have an interest, interest accrues at 13%. Principal and interest is due April 1, 2004.			632,660

	Total notes payable to related parties		35,876,251

			40,873,200
Less: current portion of notes payable			9,029,914

Notes payable, less current portion		$	31,843,286


	Capital Lease		Operating				Convertible
	Obligations		Leases		Notes Payable		Debt		Total

2004	$	2,347,715	$	4,686,207	$	9,029,914	$	2,750,000	$	18,813,836
2005		314,818		6,269,709		2,144,292		10,500,000		19,228,819
2006		37,444		7,289,540		29,667,180		21,378,953		58,373,117
2007		7,701		7,617,099		31,814		—		7,656,614
2008		—		7,735,637		—		—		7,735,637
Thereafter		—		166,096,613		—		—		166,096,613

	$	2,707,678	$	199,694,805	$	40,873,200	$	34,628,953	$	277,904,636


Name	Age		Principal Position

Manuel D. Medina		51	Chairman of the Board, President and Chief Executive Officer
Joseph R. Wright, Jr.		65	Vice Chairman of the Board
Guillermo Amore		65	Director
Timothy Elwes		68	Director
Antonio S. Fernandez		64	Director
Fernando Fernandez-Tapias		65	Director
Jose Maria Figueres-Olsen		49	Director
Arthur L. Money		64	Director
Marvin S. Rosen		62	Director
Miguel J. Rosenfeld		54	Director
Rodolfo A. Ruiz		56	Director
Jose A. Segrera		33	Chief Financial Officer
Jose E. Gonzalez		43	Chief Legal Officer
Jamie Dos Santos(1)		42	Chief Marketing Officer
Marvin Wheeler(1)		49	Chief Operations Officer



		Annual
		Compensation				Long Term
						Compensation Awards
		Fiscal		Salary
Name and Principal Position		Year		($)		Options/SARS (#)

Manuel D. Medina			2003		350,000		—
	Chairman of the Board, President &		2002		350,000		100,000
	Chief Executive Officer		2001		350,000		100,000
Brian K. Goodkind			2003		250,000		115,000
	Executive Vice President &		2002		250,000		150,000
	Chief Operating Officer		2001		250,000		150,000
Jose A. Segrera			2003		170,000		100,000
	Executive Vice President &		2002		170,000		200,000
	Chief Financial Officer		2001		150,000		150,000
Jose E. Gonzalez			2003		185,000		75,000
	Senior Vice President & General Counsel		2002		175,000		200,000
			2001		175,000		150,000



										Potential Realizable
										Value At Assumed
Individual Grants										Annual Rate Of
										Stock Price
	Number of			% of Total						Appreciation For
	Securities			Options Granted		Exercise				Option Term(1)
	Underlying Options			to Employees in		Price		Expiration
Name	Granted (#)			Fiscal Year		($/Sh)		Date		5% ($)		10% ($)

Manuel D. Medina		—			—		—		—		—		—
Brian K. Goodkind		115,000	(2)		4.9		0.51		4/2/12		36,885		93,473
Jose A. Segrera		100,000	(3)		4.3		0.51		4/2/12		32,074		81,281
Jose E. Gonzalez		75,000	(3)		3.2		0.51		4/2/12		24,055		60,961


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



					Number of Securities				Value of Unexercised
					Underlying Unexercised				In-the-Money Options at
					Options at Fiscal Year End				Fiscal Year End(1)
	Shares Acquired		Value
Name	on Exercise		Realized		Exercisable		Unexercisable		Exercisable		Unexercisable

Manuel D. Medina		—		—		200,000		—		—		—
Brian K. Goodkind(2)		—		—		288,334		326,666		—		—
Jose A. Segrera		—		—		200,001		349,999		—		—
Jose E. Gonzalez		—		—		191,667		283,333		—		—