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 9, 2005

TERREMARK WORLDWIDE, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	1-12475	84-0873124
(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 is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

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.

     On November 9, 2005, Terremark Worldwide, Inc. (the “Company”) announced its financial results for the quarter ended September 30, 2005. The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K.

     The information in this Item 2.02 of Form 8-K and the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

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

     (a) On November 7, 2005, Terremark Worldwide, Inc. (the “Company”), following a review by its Audit Committee, concluded that the Company would restate its previously disclosed annual and interim period disclosures of diluted earnings per share within fiscal year 2005. In calculating diluted earnings per share using the “if converted’’ method, the Company adjusted the net income or loss attributable to common stockholders for the interest expense on its 9% Senior Convertible Notes due June 15, 2009 (the “Senior Convertible Notes”); however, it did not consider the effect on net income or loss attributable to common stockholders of the change in the fair value of the embedded derivatives within those same Senior Convertible Notes. The Company has determined that this effect was dilutive for the year ended March 31, 2005, the nine months ended December 31, 2004 and the three and six months ended, September 30, 2004, as follows:

	Twelve Months
	Ended			Nine Months Ended			Six Months Ended			Three Months Ended
	March 31, 2005			December 31, 2004			September 30, 2004			September 30, 2004
Net (loss) income per common share:
As previously reported:
Diluted:	$	(0.31	)	$	(0.11	)	$	0.05		$	0.07
As restated:
Diluted:	$	(0.40	)	$	(0.30	)	$	(0.14	)	$	(0.10	)

     Additionally, the Company made an adjustment to its previously reported basic earnings per share for the three and six months ended September 30, 2004 to correct its basic earnings per share calculation under the two-class method. This adjustment reduced basic earnings per share for those periods from $0.07 and $0.05, respectively, to $0.06 and $0.04, respectively. As a result, the Company is also disclosing within the condensed consolidated statements of operations for these periods, the net income available to common stockholders after an allocation of earnings to participating security holders as follows:

		September 30, 2005
		Six Months Ended		Three Months Ended
Net (loss) income attributable to common shareholders
	As previously reported	$	1,750,741	$	2,569,626
	As restated	$	1,510,130	$	2,081,203

     The decision to restate was authorized by the Audit Committee of the Company, upon the recommendation of management. The Company and its Audit Committee concluded that the Company’s previously issued financial statements for the fiscal year ended March 31, 2005 and for the fiscal quarters ended September 30, 2004 and December 31, 2004 should no longer be relied upon, pending their restatements, because of the errors in those financial statements described above. The Company has discussed the matters disclosed in this filing with PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm.

     In connection with the assessment of our internal control over financial reporting included in our Annual Report on Form 10-K, as amended by Form 10-K/A filed on August 5, 2005, we determined that material weaknesses existed in our internal control over financial reporting. A material weakness is a control deficiency, or combination of control deficiencies, that results in a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. These material weaknesses related to (i) maintaining adequate controls to restrict access to key financial applications and data, and controls over custody and processing of disbursements and of customer payments received by mail; and (ii) controls over the billing function to ensure invoices capture all services delivered to customers and that such services are invoiced and recorded accurately as revenue.

2

     In connection with the restatement described above, management determined that the following material weakness also existed as of March 31, 2005 and has not been remediated through September 30, 2005: (iii) The Company did not maintain effective controls over the accounting for and calculation of earnings per share. Specifically, we did not maintain effective controls over the evaluation of the impact of embedded derivatives within the Senior Convertible Notes in the calculation of diluted earnings per share and did not accurately calculate basic earnings per share under the two-class method, in accordance with generally accepted accounting principles. This control deficiency resulted in the restatement of the annual March 31, 2005 and interim September 30, 2004 and December 31, 2004 financial statements, as well as an audit adjustment in the September 30, 2005 interim financial statements. Additionally, this material weakness could result in a misstatement of disclosures of earnings per share that would result in a material misstatement of the annual or interim financial statements that would not be prevented or detected. Accordingly, management determined that this control deficiency constitutes a material weakness.

     Management previously concluded that the Company did not maintain effective internal control over financial reporting as of March 31, 2005 because of the material weaknesses described in (i) and (ii) above. In connection with the restatement of the Company’s consolidated financial statements described above, management determined that the material weakness described in (iii) above also existed as of March 31, 2005. Accordingly, we will restate our report on internal control over financial reporting as of March 31, 2005 to include this additional material weakness. The decision to restate Management’s report, and the underlying reasons for the restatement, were also discussed with our independent registered public accounting firm. Accordingly, we expect that PricewaterhouseCoopers LLP, the Company’s independent registered public accountant, will also amend its opinion to include this additional material weakness.

     The Company, under the supervision of its Chief Executive Officer and Chief Financial Officer, is currently evaluating potential steps that it can take to remediate the material weakness in its disclosure controls and procedures.

     The foregoing adjustments do not affect previously recorded operating revenues, net loss, cash flow from operations or the Company’s financial position as reported on its balance sheets. The Company expects to present the restatements described in this Current Report when it files with the Securities and Exchange Commission amendments to its Annual Report on Form 10-K for the fiscal year ended March 31, 2005 and its Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2004. The Company has presented the restatements related to the three and six month periods ended September 30, 2004 in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 filed on November 9, 2005.

Item 7.01. Regulation FD Disclosure

     On November 9, 2005, the Company issued a press release announcing the Company’s financial results for the quarter ended September 30, 2005 and the restatements described above. A copy of such press release is included as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

     The information in this Item 7.01 of Form 8-K and the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements, Pro Forma Financial Information and Exhibits

     (c) The following exhibits are being furnished herewith:

Exhibit No.	Description
99.1	Press release issued by the Company on November 9, 2005.

3

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 9, 2005	By:	/s/ Jose A. Segrera
		Name:	Jose A. Segrera
		Title:	Executive Vice President and Chief Financial Officer

4

EX-99.1

Exhibit 99.1

For Immediate Release

TERREMARK WORLDWIDE REPORTS
SECOND QUARTER FY 2006 RESULTS

• Net colocation space utilization increased by 11% to 10.1%; Company approaches EBITDA breakeven point

• New bookings during the quarter represented $12.8 million of new annual contract value

• 49 new customers including Broadstar, Forsythe Technology, and Intermedia were added

• Existing customer expansions also represent services delivered out of Herndon, Virginia facility

• NAP of Americas’ disaster plans performed flawlessly during Hurricane Wilma; customer services uninterrupted

Miami, FL., November 9, 2005 – Terremark Worldwide, Inc. (AMEX:TWW) a leading operator of integrated Tier-1 Internet exchanges and a global provider of managed IT infrastructure solutions for government and private sectors, today reported its results for the quarter ended September 30, 2005.

Total revenues for the quarter ended September 30, 2005 were $14.0 million, representing an increase of 31% over the previous quarter. The increase reflects the positive impact of our bookings over the past two quarters and the inclusion of managed services revenue from our Dedigate acquisition. The percentage of data center revenue derived from Federal government customers during the quarter ended September 30, 2005 was 23%.

Data center expenses were $8.7 million for the quarter ended September 30, 2005, representing an increase of $1.7 million over the previous quarter. Gross profit margins, excluding depreciation and amortization, improved to 38%

during the September 30, 2005 quarter compared to 34% during the prior quarter.

EBITDA loss, as adjusted, for the quarter ended September 30, 2005 was $280,000, a significant improvement over an EBITDA loss of $2.3 million the previous quarter. EBITDA, as adjusted, is defined as loss from operations less depreciation, amortization and stock based compensation. EBITDA, as adjusted, should be considered in addition to, but not in lieu of, loss from operations reported under GAAP.

As of September 30, 2005, Terremark’s cash and cash equivalents were $29.2 million, a decrease of only $2.8 million compared to the previous quarter.

Total colocation space utilization increased to 10.1% as of September 30, 2005 from 9.1% as of June 30, 2005. Utilization of built-out colocation space increased to 42.7% as of September 30, 2005 from 39.2% as of June 30, 2005. This utilization rate puts Terremark near its EBITDA break-even point. Cross connects billed to customers increased to 3,182 as of September 30, 2005 from 2,836 the previous quarter and 2,039 a year earlier, representing an increase of 12% and 56%, respectively.

During the quarter ended September 30, 2005, Terremark added 49 new customers, for a total of 396 customers at the end of the period. Terremark booked $12.8 million of new annual contract value during the quarter ended September 30, 2005, an increase of 38% over the previous quarter’s bookings. Furthermore, over 74% of the bookings during the September 2005 quarter were generated from existing customers.

For the quarter ended September 30, 2005, annualized data center services revenue per utilized square foot were $1,534, compared to $1,277 at the end of the previous quarter and $1,280 a year earlier. For the quarter ended September 30, 2005, our data center services revenue churn was less than 1%. The Company defines churn as annualized data center services revenue lost as a percentage of annualized data center services revenue for the most recent quarter.

“We are pleased with the results of the quarter and the growth in our customer base, now totaling 396 customers,” said Manuel D. Medina, Chairman and CEO of Terremark Worldwide, Inc. “We remain optimistic about the fundamentals of our business model and the market drivers we are seeing. With the momentum and visibility in our current business and our confidence in closing various deals with the Federal government, we are very excited about the balance of 2006.”

Business Outlook

Medina continued. “While we remain confident in our ability to close the large Federal deals we are pursuing, the exact timing is difficult to predict. Therefore, in providing guidance for the remainder of the year and next quarter, we have decided to exclude any financial impact of these large deals that we expect to close during the remainder of our fiscal year.”

The Company has updated its previously issued guidance for the fiscal year ending March 31, 2006. The Company expects revenues to be in the range of $65 million to $75 million, EBITDA to range from $2 million to $8 million and capital expenditures to range from $7 million to $8 million for its 2006 fiscal year. The Company is also providing guidance for our quarter ending December 31, 2005 and expects quarterly revenue to range from $17 million to $18 million and EBITDA to range from $0.5 million to $1.25 million. The change in

guidance is primarily due to delays in closing of certain large contracts in the Company’s sales pipeline.

8-K Filing Regarding Correction of EPS Calculation

The Company filed an 8-K this afternoon announcing the restatement of its diluted earnings per share disclosure for its fiscal year 2005. It is important to note that this disclosure modification has no impact on reported revenues, net loss, cash flows assets or liabilities. When the Company previously calculated its earnings per share it did not eliminate the impact on net income/net loss of the change in fair value of the derivative embedded in the Company’s 9% senior convertible notes. The restated diluted earnings per share properly eliminate this impact from our net income/loss to calculate diluted earnings per share. This change to the earnings per share disclosure was deemed to be material and thus warranted a restatement of the Company’s previously issued financial statements based on specific accounting literature that provides guidance on determining materiality. As a result, the Company also disclosed an additional material weakness in its internal control over financial reporting, specifically with regard to the earnings per share calculation. The Company is evaluating steps to be taken to remediate this weakness.

The Company will hold a conference today, November 9, 2005 at 5:30 p.m. ET, to discuss all of the above. Additional information regarding the Company’s financial performance as of and for the quarter ended September 30, 2005 and a comparison to the quarter ended September 30, 2004 can be found on the attached balance sheet and statement of operations and in the Company’s Quarterly Report on Form 10-Q.

About Terremark Worldwide, Inc.

Terremark Worldwide, Inc. (AMEX:TWW) is a leading operator of integrated Tier-1 Internet exchanges and a global provider of managed IT infrastructure solutions for government and private sectors. Terremark delivers its portfolio of services from seven locations in the U.S., Europe and Latin America and from four service aggregation and distribution locations, which aggregate network traffic and distribute network-based services in Europe and Asia to meet specific customer needs. Terremark’s flagship facility, the NAP of the Americas, is the model for the carrier-neutral Internet exchanges 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, colocation and managed services. 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 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.

Contacts:

Terremark Worldwide, Inc., Miami	Investor Relations
Sandra Gonzalez-Levy, 305-860-7829	Market Street Partners
sgonzalez-levy@terremark.com	JoAnn Horne
	415 445 3233
	joann@marketstreetpartners.com

Non-GAAP Financial Measures

Terremark continues to provide all information required in accordance with generally accepted accounting principles (GAAP), but it believes that evaluating its ongoing operating results may be difficult if limited to reviewing only GAAP financial measures. Accordingly, Terremark uses non-GAAP financial measures, such as EBITDA, as adjusted. In presenting these non-GAAP financial measures, Terremark excludes certain non-cash items that it believes are not good indicators of the Company’s current or future operating performance. These non-cash items are depreciation, amortization and stock-based compensation.

Terremark intends to calculate the various non-GAAP financial measures in future periods on a basis consistent with its calculation of those measures for the three and six months ended September 30, 2005 and 2004 and the three months ended June 30, 2005, presented within this press release.

Terremark Worldwide, Inc.
Consolidated Statement of Operations

	For the Three Months Ended
	September 30,			June 30,			September 30,
	2005			2005			2004
	(Unaudited)			(Unaudited)			(Unaudited)
Revenues
Data Center	$	13,961,080		$	10,671,120		$	7,914,744
Construction contracts and fees		—			—			303,368
Operating revenues		13,961,080			10,671,120			8,218,112
Expenses
Data center operations, excluding depreciation		8,718,207			7,011,649			6,463,989
Construction contract expenses, excluding depreciation		—			—			243,467
General and administrative		3,503,439			4,180,644			3,417,332
Sales and marketing		2,021,059			1,759,074			1,062,773
Depreciation and amortization		2,047,154			1,864,461			1,296,305
Operating expenses		16,289,859			14,815,828			12,483,866
Loss from operations		(2,328,779	)		(4,144,708	)		(4,265,754	)
Other income (expenses)
Change in fair value of derivatives embedded within convertible debt		10,441,700			(464,025	)		10,375,875
Gain on debt restructuring and extinguishment, net		—			—			—
Interest expense		(6,305,142	)		(5,996,853	)		(3,449,314	)
Interest income		439,261			460,173			129,924
Gain on sale of asset		499,388			—			—
Other, net		(80,276	)		14,141			23,406
Total other income (expenses)		4,994,931			(5,986,564	)		7,079,891
Loss before income taxes		2,666,152			(10,131,272	)		2,814,137
Income taxes		—			—			—
Net loss		2,666,152			(10,131,272	)		2,814,137
Preferred dividend		(184,700	)		(187,789	)		(244,511	)
Earnings allocation to participating security holders		(396,616	)		—			(488,423	)
Net (loss) income attributable to common shareholders	$	2,084,836		$	(10,319,061	)	$	2,081,203
Reconciliation of Loss from Operations to EBITDA, as adjusted
Loss from operations		(2,328,779	)		(4,144,708	)		(4,265,754	)
Depreciation and amortization		2,047,154			1,864,461			1,296,305
EBITDA, as adjusted	$	(281,625	)	$	(2,280,247	)	$	(2,969,449	)
Calculation of Gross Profit Margin
Operating revenues		13,961,080			10,671,120			8,218,112
Less:
Data center operations — services, excluding depreciation		8,718,207			7,011,649			6,463,989
Construction contract expenses		—			—			243,467
Gross Profit	$	5,242,873		$	3,659,471		$	1,510,656
Gross Profit Margin as a % of operating revenues		38	%		34	%		18	%

Terremark Worldwide, Inc.
Consolidated Statement of Operations

	For the Six Months Ended
	September 30,
	2005			2004
	(Unaudited)			(Unaudited)
Revenues
Data center	$	24,632,200		$	15,025,915
Construction contracts and fees		—			1,087,708
Operating revenues		24,632,200			16,113,623
Expenses
Data center operations, excluding depreciation		15,729,856			12,200,670
Construction contract expenses, excluding depreciation		—			948,813
General and administrative		7,684,085			6,979,446
Sales and marketing		3,780,133			2,033,119
Depreciation and amortization		3,911,615			2,573,054
Operating expenses		31,105,689			24,735,102
Loss from operations		(6,473,489	)		(8,621,479	)
Other income (expenses)
Change in fair value of derivatives embedded within convertible debt		9,977,675			13,679,250
Gain on debt restructuring and extinguishment, net		—			3,420,956
Interest expense		(12,301,995	)		(6,433,148	)
Interest income		899,434			196,243
Gain on sale of asset		499,388			—
Other, net		(66,136	)		(4,260	)
Total other income (expenses)		(991,634	)		10,859,041
Loss before income taxes		(7,465,123	)		2,237,562
Income taxes		—			—
Net loss		(7,465,123	)		2,237,562
Preferred dividend		(372,489	)		(486,821	)
Earnings allocation to participating security holders		—			(240,611	)
Net (loss) income attributable to common shareholders	$	(7,837,612	)	$	1,510,130
Reconciliation of Loss from Operations to EBITDA, as adjusted
Loss from operations		(6,473,489	)		(8,621,479	)
Depreciation and amortization		3,911,615			2,573,054
EBITDA, as adjusted	$	(2,561,874	)	$	(6,048,425	)
Calculation of Gross Profit Margin
Operating revenues		24,632,200			16,113,623
Less:
Data center operations — services, excluding depreciation		15,729,856			12,200,670
Construction contract expenses		—			948,813
Gross Profit	$	8,902,344		$	2,964,140
Gross Profit Margin as a % of operating revenues		36	%		18	%

Terremark Worldwide, Inc.
Consolidated Balance Sheets

	September 30,			June 30,			March 31,
	2005			2005			2005
	(Unaudited)			(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	29,201,130		$	32,072,143		$	44,001,144
Restricted cash		2,834,743			2,508,465			2,185,321
Accounts receivable, net of allowance for doubtful accounts of $200,000 each year		8,295,936			5,942,434			4,388,889
Current portion of capital lease receivable		2,495,269			2,280,000			2,280,000
Prepaid expenses and other current assets		2,602,352			1,312,610			942,575
Total current assets		45,429,430			44,115,652			53,797,929
Restricted cash		5,647,501			5,647,501			5,641,531
Property and equipment, net of accumulated depreciation		123,538,626			123,143,500			123,406,321
Debt issuance costs, net of accumulated amortization		7,878,186			8,336,768			8,797,296
Other assets		2,386,957			1,680,489			1,182,716
Capital lease receivable, net of current portion		5,233,464			5,510,001			6,080,001
Intangibles, net of accumulated amortization of $130,000		4,070,000			—			—
Goodwill		16,483,530			9,999,870			9,999,870
Total assets	$	210,667,694		$	198,433,781		$	208,905,664
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of mortgage payable	$	718,341		$	705,338		$	692,570
Current portion of notes payable		4,201,549			4,233,236			4,489,945
Construction payables		—			33,747			427,752
Accounts payable and accrued expenses		11,617,988			8,568,927			8,914,578
Current portion of capital lease obligations		1,202,843			1,026,321			1,037,459
Interest payable		3,787,525			765,204			2,680,882
Current portion of unearned interest		660,820			677,559			724,686
Series H redeemable convertible preferred stock: $.001 par value, 294 shares issued and outstanding, at liquidation value		631,699			624,202			—
Total current liabilities		22,820,765			16,634,534			18,967,872
Mortgage payable, less current portion		45,924,733			45,980,001			46,034,024
Convertible debt		56,398,741			55,118,677			53,972,558
Derivatives embedded within convertible debt, at estimated fair value		10,138,943			20,580,643			20,116,618
Notes payable, less current portion		24,469,885			24,195,754			23,664,142
Deferred rent		2,239,678			2,129,977			2,001,789
Unearned interest under capital lease receivables		628,933			747,501			898,778
Capital lease obligations, less current portion		593,980			362,544			434,441
Deferred revenue		4,248,119			2,561,713			1,994,598
Series H redeemable convertible preferred stock: $.001 par value, 294 shares issued and outstanding, at liquidation value		—			—			616,705
Total liabilities		167,463,777			168,311,344			168,701,525
Minority interest		—			—			28,090
Commitments and contingencies		—			—			—
Stockholder’s equity:
Series I convertible preferred stock: $.001 par value, 369 and 383 shares issued and outstanding (liquidation value of approximately $10.2 million and $10.3 million)		1			1			1
Common stock: $.001 par value, 100,000,000 shares authorized; 44,384,029 and 42,745,336 shares issued		44,384			42,745			42,587
Common stock warrants		13,603,860			13,624,760			13,599,704
Common stock options		1,538,260			1,538,260			1,538,260
Additional paid-in capital		289,870,765			279,051,205			279,063,085
Accumulated deficit		(254,139,192	)		(256,805,341	)		(246,674,069	)
Accumulated other comprehensive loss		(148,994	)		(108,556	)		(172,882	)
Treasury stock: 865,202 shares		(7,220,637	)		(7,220,637	)		(7,220,637	)
Note receivable — related party		(344,530	)		—			—
Total stockholders’ equity		43,203,917			30,122,437			40,176,049
Total liabilities and stockholders’ equity	$	210,667,694		$	198,433,781		$	208,905,664