8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934

Date of Report (date of earliest event reported): November 1, 2004

TERREMARK WORLDWIDE, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	1-12475	52-1981922
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

2601 S. Bayshore Drive
Miami, Florida 33133

(Address of principal executive office)

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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02  Results of Operations and Financial Condition.

     As more fully discussed below in Item 4.02, on November 3, 2004, Terremark Worldwide, Inc. (“Terremark” or the “Company”) issued a press release announcing that the previously issued financial statements contained in its Form 10-Q for the period ended June 30, 2004 should not be relied upon because certain estimates used in the preparation of those financial statements were not appropriate and that those financial statements would be restated to make the necessary accounting adjustments.

Item 4.02  Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

     In June 2004, Terremark sold $86.25 million in aggregate principal amount of 9% Senior Convertible Notes due June 15, 2009 (the “Senior Notes”), to qualified institutional buyers. The Senior Notes are convertible at the option of the holders, at $1.25 per share. The Senior Notes contain embedded derivatives, which are required to be accounted for separately from the debt, relating to the conversion option, including an early conversion incentive, a dividend participation feature and, upon registration of the Senior Notes, a make whole premium due upon a change in control.

     We estimated that the embedded derivatives had an initial fair value at the date of issuance of approximately $16.1 million and a June 30, 2004 estimated fair value of approximately $12.6 million, resulting primarily from the conversion option. The change of approximately $3.5 million in the estimated fair value of the embedded derivative between the date of issuance and June 30, 2004 was recognized as other income in the three months ended June 30, 2004. As a result of the bifurcation of the embedded derivatives from the Senior Notes, the approximate carrying value of the debt component of the Senior Notes at issuance was approximately $70.3 million. The difference between the face value of the Senior Notes of $86.25 million and their carrying value is accreted to interest expense under the effective interest rate method over the life of the Senior Notes.

     In the previously filed June 30, 2004 financial statements, we incorrectly used a volatility (relative rate at which the price of our stock moves up and down) of 17% as an input in estimating the fair value of the embedded derivatives. A third party valuation subsequently concluded that, because the Senior Notes are not actively traded and we were not able to find other comparable market data, we do not have sufficient quantitative and qualitative market data to support the volatility assumption used in our initial valuation. Therefore, until such a market develops for our Senior Notes or we are able to find comparable market data, we must use a theoretical model to estimate the value of the embedded derivatives based on the historical volatility of 80% over the past year.

     On November 1, 2004, our Audit Committee, upon the recommendation of management, concluded that the previously issued financial statements contained in our 10-Q for the quarter ended June 30, 2004, should not be relied upon because the financial statement impact of the change in the estimated fair value of the embedded derivatives was material to warrant the

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restatement of those financial statements. The restatement corrects the error resulting from the use of an inappropriate volatility assumption in the original valuation of the embedded derivatives required to be accounted for separately in the financial statements for the quarter ended June 30, 2004, and therefore, the estimated fair value of the embedded derivatives at both the date of issuance and at period-end and the resulting adjustments to other income. We also corrected the accretion of the difference between the face value of the Senior Notes of $86.25 million and their restated carrying value to interest expense under the effective interest rate method over the life of the Senior Notes.

     On November 3, 2004, we issued the press release attached to this Form 8-K as exhibit 99.1, referring to the restatement and certain disclosures made in this Item 4.02.

     The following summarizes the restatement for the quarter ended June 30, 2004 (in thousands):

	As reported			Adjustments			As restated
Total assets		109,712						109,712
Current liabilities		13,154			45			13,199
Convertible debt		70,265			(19,320	)		50,945
Derivatives embedded within convertible debt		12,593			19,587			32,180
Other long-term liabilities		14,833						14,833
Total liabilities		110,845			312			111,157
Minority Interest		1,596						1,596
Stockholder’s deficit		(2,729	)		(312	)		(3,041	)
Total liabilities and equity		109,712			—			109,712
Loss from operations		(4,356	)					(4,356	)
Change in estimated fair value of derivatives		3,503			(199	)		3,304
Interest expense		(2,871	)		(113	)		(2,984	)
Other income/expenses		3,459						3,459
Net loss		(265	)		(312	)		(577	)

     We will be filing an amendment to our Form 10-Q for the quarter ended June 30, 2004 to reflect the restatement.

Exhibit
No.	Document
99.1	Press Release dated November 3, 2004

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	TERREMARK WORLDWIDE, INC.
Date: November 3, 2004	By:	/s/ Jose Segrera
		Name:	Jose Segrera
		Title:	Chief Financial Officer

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Index to Exhibits

Exhibit No.	Exhibit Title
99.1	Press Release dated November 3, 2004

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EX-99.1

Exhibit 99.1

[terremark logo]

For Immediate Release

TERREMARK AMENDS FORM 10-Q

MIAMI, FLA. (November 3, 2004) Terremark Worldwide, Inc. (AMEX:TWW), a leading operator of integrated Tier-1 Internet exchanges and best-in-class network services, today announced that it is amending its Quarterly Report on Form 10-Q for the quarter ended June 30, 2004. In the previously filed June 30, 2004 financial statements, the Company used an inappropriate assumption in estimating the fair value of certain embedded derivatives contained in the Company’s 9% Senior Convertible Notes due June 15, 2009 (the “Senior Notes”). As a result of this error, the previously filed June 30, 2004 financial statements should not be relied upon. The Company’s Form 10-Q for the quarter ended June 30, 2004 is being amended to reflect the necessary accounting adjustments and restate those financial statements. The Company is filing a current report on Form 8-K with the Securities and Exchange Commission.

The decision to restate the Company’s Form 10-Q was made by the Company after receiving a third party valuation of the embedded derivatives contained in the Senior Notes. The Company’s initial valuation model used an inappropriate assumption relating to the Company’s stock price volatility. After discussing the matter with its Audit Committee and the resulting accounting with its independent accountants, the Company determined it would be appropriate to restate its financial statements for the quarter ended June 30, 2004.

The following summarizes the restatement for the quarter ended June 30, 2004 (in thousands):

	As reported			Adjustments			As restated
Current liabilities		13,154			45			13,199
Convertible debt		70,265			(19,320	)		50,945
Derivatives embedded within convertible debt		12,593			19,587			32,180
Other long-term liabilities		14,833						14,833
Total liabilities		110,845			312			111,157
Minority Interest		1,596						1,596
Stockholder’s deficit		(2,729	)		(312	)		(3,041	)
Total liabilities and equity		109,712			—			109,712
Loss from operations		(4,356	)					(4,356	)
Change in estimated fair value of derivatives		3,503			(199	)		3,304
Interest expense		(2,871	)		(113	)		(2,984	)
Other income/expenses		3,459						3,459
Net loss		(265	)		(312	)		(577	)

     For further information regarding the restatement of the Company’s financial statements for the quarter ended June 30, 2004, the current report on Form 8-K may be accessed through the EDGAR database maintained by the SEC at www.sec.gov.

-more-

Terremark Amends 10Q
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About Terremark Worldwide, Inc.:

Terremark Worldwide Inc. (AMEX:TWW) is a leading operator of integrated Tier-1 Internet exchanges and best-in-class network services, creating technology marketplaces in strategic global locations. Terremark is the owner and operator of the NAP of the Americas, the 5th Tier-1 Network Access Point in the world and the model for the carrier-neutral TerreNAP(sm) Data Centers the company has in Santa Clara, California (NAP of the Americas/West), in Sao Paulo, Brazil (NAP do Brasil) and in Madrid, Spain (NAP de las Americas — Madrid). The carrier-neutral NAP of the Americas is a state-of-the-art facility that provides exchange point, collocation and managed services to carriers, Internet service providers, network service providers, government entities, multi-national enterprises and other end users. The NAP, which connects fiber networks in Latin America, Europe, Asia and Africa to those in the U.S., enables customers to freely choose among the many carriers available at the TerreNAP Centers to do business. Terremark is headquartered at 2601 S. Bayshore Drive, 9th Floor, Miami, Florida USA, (305) 856-3200. More information about Terremark Worldwide can be found at http://www.terremark.com.

Statements contained in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Terremark’s actual results may differ materially from those set forth in the forward-looking statements due to a number of risks, uncertainties and other factors, as discussed in Terremark’s filings with the SEC. These factors include, without limitation, Terremark’s ability to obtain funding for its business plans, uncertainty in the demand for Terremark’s services or products and Terremark’s ability to manage its growth. Terremark does not assume any obligation to update these forward-looking statements.

For more information contact:

Terremark Worldwide Inc.
Sandra B. Gonzalez-Levy
305-860-7829
sgonzalez-levy@terremark.com

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