Terremark Worldwide, Inc. Pro Forma Financial Info

The following unaudited pro forma condensed consolidated financial statements are derived from and should be read in conjunction with historical consolidated financial statements and related notes of Terremark Worldwide Inc. (“TWW”) and Technology Center of the Americas, LLC (“TECOTA”). From February 23, 2001 until December 31, 2004, TWW, through a wholly owned subsidiary, owned 0.84% equity interest in TECOTA. In July 2004, TWW entered into an agreement under which it assumed the obligation to purchase the other equity interests in TECOTA. On December 31, 2004, TWW completed this acquisition of TECOTA.

The unaudited pro forma condensed consolidated statements of operations for the six months ended September 30, 2004, and the year ended March 31, 2004, give effect to (i) TWW’s acquisition of TECOTA; (ii) certain adjustments that are directly attributable to the acquisition of TECOTA and will have a continuing impact; and (iii) TWW’s financing of the TECOTA acquisition. The unaudited pro forma condensed combined statements of operations assume that each of these transactions was consummated at April 1, 2003.

The unaudited pro form condensed consolidated balance sheet presents the consolidated financial position of TWW and TECOTA as if TWW’s acquisition of TECOTA was consummated on September 30, 2004, and gives effect to (i) the acquisition of TECOTA; (ii) certain adjustments that are directly attributable to the acquisition of TECOTA; and (iii) the estimated incremental debt. The unaudited pro forma condensed consolidated financial statements have been prepared based upon currently available information and assumptions that are deemed appropriate by TWW’s management.

The pro forma information is for informational purposes only and is not intended to be indicative of the actual consolidated results that would have been reported had the transactions occurred on the dates indicated, nor does the information represent a forecast of the combined financial results of TWW and TECOTA for any for future period.

Terremark Worldwide, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of September 30, 2004


	Historical			Historical			Pro Forma			Pro Forma
	Terremark			TECOTA			adjustments			Terremark
	(Note 1)			(Note 1)			(Note 3)
ASSETS
Current assets:
Cash and cash equivalents	$	21,831,286		$	1,011,315		$	(3,500,000	)[h]	$	23,742,601
								2,000,000	[m]
								2,400,000	[l]
Accounts receivable, net		2,207,564			—						2,207,564
Deferred rent receivable		—			11,444,733			(7,955,751	)[d]		—
								(3,488,982	)[b]
Contracts receivable		112,151			—						112,151
Prepaid and other current assets		751,720			291,134						1,042,854
Deferred costs under government contracts		3,592,328			—						3,592,328

Total current assets		28,495,049			12,747,182						30,697,499
Investment in unconsolidated subsidiaries		391,884			—			(391,884	)[e]		—
Restricted cash		794,018			910,458			4,000,000	[a]		5,704,476
Land and building		—			66,927,819			(705,731	)[c]		66,222,088
Property and equipment, net		56,884,223			—						56,884,223
Debt issuance costs and other assets		10,392,631			3,062,609			(3,062,609	)[b]		20,275,564
								(2,400,000	)[l]
								12,282,933	[h]
Goodwill		9,999,870			—						9,999,870

TOTAL ASSETS	$	106,957,675		$	83,648,068					$	189,783,719

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of notes payable	$	3,890,802		$	—					$	3,890,802
Construction payable		2,954,530			—						2,954,530
Accounts payable and accrued expenses		7,865,135			998,862						8,863,997
Current portion of capital lease obligations		1,272,666			—						1,272,666
Interest payable		2,459,515			—						2,459,515

Total current liabilities		18,442,648			998,862						19,441,510
Mortgage payable		—			35,401,567			43,598,433	[a]		79,000,000
Convertible debt		51,971,488			—						51,971,488
Derivatives embedded within convertible debt		21,804,000			—						21,804,000
Deferred rent		9,716,260			—			(7,955,751	)[d]		1,760,509
Capital lease obligations, less current portion		102,335			—						102,335
Deferred revenue		3,225,056			—						3,225,056
Series H redeemable convertible preferred stock		601,711			—						601,711

TOTAL LIABILITIES		105,863,498			36,400,429						177,906,609

Minority Interest		142,885			—						142,885

Commitments and Contingencies		—			—						—

Series G convertible preferred stock		1			—						1
Series I convertible preferred stock		1			—						1
Common stock		359,761			—						359,761
Common stock warrants		4,933,016			—			8,782,933	[h]		13,715,949
Common stock options		1,545,375			—						1,545,375
Partner’s capital		—			48,404,025			(48,404,025	)[f]		—
Additional paid-in capital		236,023,806			—			2,000,000	[m]		238,023,806
Accumulated deficit		(234,577,155	)		(1,156,386	)		1,156,386	[f]		(234,577,155	)
Accumulated other comprehensive loss		(112,876	)		—						(112,876	)
Treasury Stock		(7,220,637	)		—						(7,220,637	)

TOTAL STOCKHOLDERS’ EQUITY		951,292			47,247,639						11,734,225

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	106,957,675		$	83,648,068					$	189,783,719

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations.

Historical financial information for TWW has been derived from its historical financial statements for the year ended March 31, 2004 (audited) and for the six months ended September 30, 2004 (unaudited). Historical financial information for TECOTA has been derived from its historical financial statements for the year ended December 31, 2003 (audited) and for the six months ended September 30, 2004 (unaudited). No adjustments have been made to the pro forma financial information to account for the difference between the financial reporting dates used by TECOTA and TWW due to the close proximity of the period-end dates.

From February 23, 2001 until December 31, 2004, the Company owned a 0.84% interest in Technology Center of the Americas, LLC (“TECOTA”), the entity that owns the building in which the NAP of the Americas is housed (“TECOTA building”). In July 2004, the Company entered into an agreement under which it assumed the obligation to purchase the other outstanding equity interests in TECOTA. On December 31, 2004, the Company completed the purchase of those other outstanding equity interests such that TECOTA became a wholly-owned subsidiary. In connection with this purchase, the Company paid approximately $40.0 million for the equity interests and repaid an approximately $35.0 million mortgage to which the TECOTA building was subject.

Following are brief descriptions of the pro forma adjustments to reflect the acquisition of TECOTA:


	(a)	Records TWW new borrowings to purchase other equity interest in TECOTA and pay off of existing mortgage. This adjustment is calculated as follows:


	(b)	Records purchase accounting adjustment for the elimination of deferred financing costs and deferred leasing commissions included in other assets of TECOTA. Further, records the elimination of deferred rent balances with tenants other than TWW. See (d) below.
	(c)	Records purchase accounting adjustment for the allocation of the fair value of identifiable net current assets acquired over the TECOTA purchase price.
	(d)	Records the elimination of deferred rent balances between TWW and TECOTA as of the balance sheet date.
	(e)	Records the elimination of TWW’s ownership interest in TECOTA as of September 30, 2004.
	(f)	Records the elimination of TECOTA equity accounts acquired in the purchase.
	(g)	Records the elimination of transactions between TWW and TECOTA resulting from TECOTA leasing space to TWW.
	(h)	Records the estimated debt issuance costs of $12,282,933, of which $8,782,933 is estimated to be paid in TWW stock warrants.
	(i)	Records the elimination of transactions between TWW and TECOTA resulting from TWW management fees charged to TECOTA pursuant to a property management agreement.
	(j)	Records the elimination of historical depreciation and amortization expense related to TECOTA and the depreciation resulting from the allocation of the purchase price to the building using the straight-line method over a 39 year period.


	Six Months Ended			Year Ended
	September 30, 2004			March 31, 2004

Elimination of historical amounts of TECOTA	$	(938,279	)	$	(1,882,836	)
Depreciation of the cost of acquired building (estimated to be $56,000,000) using a 39 year life		719,006			1,438,010

	$	(219,273	)	$	(444,826	)


	(k)	Records the interest on new borrowings for the acquisition of TECOTA and the elimination of interest on existing debt to be repaid. Adjustment also records amortization of debt issuance costs. The adjustment is calculated as follows:


		The effect of a .0125% variance on interest expense is $46,875 and $93,750 for the six months ended September 30, 2004 and the year ended March 31, 2004, respectively.
	(l)	Records the return to the company of a deposit totalling $2.4 million at September 30, 2004, for the acquisition of TECOTA.
	(m)	Records anticipated issuance of stock for cash as part of the TECOTA acquisition.


				Historical			Historical			Pro Forma			Pro Forma
				Terremark			TECOTA			adjustments			Terremark

				(Note 1)			(Note 1)			(Note 3)
Revenues
	Data center			$	15,025,915		$	—					$	15,025,915
	Rental				—			5,134,971		$	(3,878,750	)[g]		1,256,221
	Operating expense reimbursements				—			437,589			(259,135	)[g]		178,454
	Management fees				90,922			—			(90,922	)[i]		—
	Construction contracts				996,786			—						996,786
	Other income				—			24,878						24,878

		Operating revenues			16,113,623			5,597,438						17,482,254

Expenses
	Data center operations				12,200,670			—			(4,137,885	)]g]		8,062,785
	Construction contract expenses				948,813			—						948,813
	General and administrative				6,979,446			1,408,576			(90,922	)[i]		8,297,100
	Sales and marketing				2,033,119			77,648						2,110,767
	Depreciation and amortization				2,573,054			938,279			(219,273	)[j]		3,292,060

		Operating expenses			24,735,102			2,424,503						22,711,525

			Income (loss) from operations		(8,621,479	)		3,172,935						(5,229,271	)

Other income (expense)
	Change in estimated fair value of derivatives embedded within convertible debt				13,679,250									13,679,250
	Gain on debt restructuring				3,420,956									3,420,956
	Interest expense				(6,433,148	)		(1,105,346	)		(4,164,467	)[k]		(11,702,961	)
	Interest Income				196,243									196,243
	Other				(4,260	)		—						(4,260	)

		Total other income (expense)			10,859,041			(1,105,346	)					5,589,228

	Income before income taxes			$	2,237,562			2,067,589					$	359,957

Basic and diluted net loss before income taxes per common share				$	0.01								$	0.00

Weighted average common shares outstanding					336,054,804									336,054,804


			Historical			Historical			Pro Forma			Pro Forma
			Terremark			TECOTA			adjustments			Terremark

			(Note 1)			(Note 1)			(Note 3)
Revenues
	Data center		$	17,034,377		$	—					$	17,034,377
	Rental			—			6,808,912		$	(4,304,151	)[g]		2,504,761
	Operating expense reimbursements			—			776,740			(526,767	)[g]		249,973
	Development, commission and construction fees			41,081			—						41,081
	Management fees			197,827			—			(184,133	)[i]		13,694
	Construction contracts			940,454			—						940,454
	Other income			—			81,496						81,496

		Operating revenues		18,213,739			7,667,148						20,865,836

Expenses
	Data center operations			16,413,021			—			(4,830,918	)[g]		11,582,103
	Construction contract expenses			918,022			—						918,022
	General and administrative			13,336,400			2,180,277			(184,133	)[i]		15,332,544
	Sales and marketing			3,424,411			176,001						3,600,412
	Depreciation and amortization			4,698,292			1,882,836			(444,826	) [j]		6,136,302

		Operating expenses		38,790,146			4,239,114						37,569,383

	Income (loss) from operations			(20,576,407	)		3,428,034						(16,703,547	)
Other income (expense)
	Gain on debt restructuring			8,475,000			—						8,475,000
	Interest expense			(14,624,922	)		(2,561,095	)		(7,978,530	)[k]		(25,164,547	)
	Interest Income			131,548			—						131,548
	Other			4,104,204			—						4,104,204

		Total other income (expense)		(1,914,170	)		(2,561,095	)					(12,453,795	)

	Income (loss) before income taxes		$	(22,490,577	)		866,939					$	(29,157,342	)

Basic and diluted loss before income taxes per common share			$	(0.07	)							$	(0.10	)

Weighted average common shares outstanding				305,028,194									305,028,194


New borrowings	$	79,000,000	)
Pay off of existing mortgage		(35,401,567	)

Adjustment		43,598,433
Tenant improvement cash reserve		(4,000,000	)

Cash paid to sellers	$	(39,598,433	)


	Six Months Ended			Year Ended
	September 30, 2004			March 31, 2004

Elimination of historical amounts of TECOTA	$	(1,105,346	)	$	(2,561,095	)
Interest expense on $79 million of new borrowings at a variable rate of 9.5%		3,794,771			7,589,541
Amortization of debt issuance costs of new borrowings using a four year term		1,475,042			2,950,084

	$	4,164,467		$	7,978,530