SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| [X] | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
| For the quarterly period ended September 30, 2002 | ||
| [ ] | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
| For the transition period from to | ||
Commission file number 0-22520
| TERREMARK WORLDWIDE, INC (Exact Name of Registrant as Specified in Its Charter) |
| Delaware | 52-1981922 | |
|
|
||
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
| 2601 S. Bayshore Drive, Miami, Florida 33133 |
| (Address of Principal Executive Offices, Including Zip Code) |
| Registrant’s telephone number, including area code: (305) 856-3200 |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
The registrant had 232,631,074 shares of common stock, $0.001 par value, outstanding as of November 11, 2002.
TABLE OF CONTENTS
| Page No. | ||||||||
| PART I. |
FINANCIAL INFORMATION |
1 | ||||||
| ITEM 1. |
Financial Statements |
1 | ||||||
Condensed Consolidated Balance Sheets as of September 30, 2002
(unaudited) and March 31, 2002 |
1 | |||||||
Condensed Consolidated Statements of Operations for
the Three and Six Months ended
September 30, 2002 and 2001
(unaudited) |
2 | |||||||
Condensed Consolidated Statement of Changes in
Stockholder’s Deficit for the
Six Months Ended September 30,
2002 (unaudited) |
3 | |||||||
Condensed Consolidated Statements of Cash Flows for
the Six Months ended September
30, 2002 and 2001 (unaudited) |
4 | |||||||
Notes to Condensed Consolidated Financial Statements
(unaudited) |
5 | |||||||
| ITEM 2. |
Management’s Discussion and Analysis of Financial Condition
and Results of Operations |
19 | ||||||
| ITEM 3. |
Quantitative and Qualitative Disclosures About Market Risk |
37 | ||||||
| ITEM 4. |
Controls
and Procedures |
38 | ||||||
| PART II. |
OTHER INFORMATION |
39 | ||||||
| ITEM 1. |
Legal Proceedings |
39 | ||||||
| ITEM 3. |
Defaults Upon Senior Securities |
39 | ||||||
| ITEM 6. |
Exhibits and Reports on Form 8-K |
39 | ||||||
| SIGNATURES |
40 | |||||||
| CERTIFICATIONS |
41 | |||||||
i
Terremark Worldwide, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
| September 30, | March 31, | |||||||||
| 2002 | 2002 | |||||||||
| (unaudited) | ||||||||||
ASSETS
|
||||||||||
Current assets: |
||||||||||
Cash and cash equivalents |
$ | 848,594 | $ | 283,078 | ||||||
Restricted cash |
768,905 | 757,573 | ||||||||
Accounts receivable, net of allowance for doubtful accounts of
$249,687 and $234,767 respectively |
1,443,889 | 1,621,978 | ||||||||
Contracts receivable |
382,206 | 1,362,836 | ||||||||
Total current assets |
3,443,594 | 4,025,465 | ||||||||
Investment in unconsolidated entities |
688,296 | 489,855 | ||||||||
Property and equipment, net |
58,423,997 | 61,088,987 | ||||||||
Other assets |
2,036,624 | 2,199,454 | ||||||||
Identifiable intangible assets and goodwill |
13,220,170 | 13,220,170 | ||||||||
Total Assets |
$ | 77,812,681 | $ | 81,023,931 | ||||||
Liabilities and Stockholders’ Deficit
|
||||||||||
Current liabilities: |
||||||||||
Current portion of notes payable (includes $4,600,000 and $4,250,000 due to
related parties) |
$ | 50,578,180 | $ | 50,752,209 | ||||||
Construction payables — property and equipment |
21,715,884 | 26,250,729 | ||||||||
Trade payables and other liabilities |
11,071,339 | 10,240,698 | ||||||||
Current portion of capital lease obligations |
1,972,052 | 2,079,294 | ||||||||
Interest payable |
2,450,740 | 2,347,742 | ||||||||
Net liabilities of discontinued operations |
1,246,731 | 1,394,010 | ||||||||
Convertible debt (includes $4,450,000 due to related
parties) |
30,655,000 | 0 | ||||||||
Total current liabilities |
119,689,926 | 93,064,682 | ||||||||
Convertible debt (includes $4,450,000 due to related
parties) |
0 | 30,655,000 | ||||||||
Notes payable, less current portion (includes $-0- and $2,950,000 due
to related parties) |
164,567 | 3,128,091 | ||||||||
Capital lease obligations, less current portion |
1,729,052 | 2,136,076 | ||||||||
Deferred revenue |
1,006,005 | 815,826 | ||||||||
Total Liabilities |
122,589,550 | 129,799,675 | ||||||||
Series H redeemable convertible preferred stock: $.001 par value, 294
shares authorized, issued and outstanding, respectively |
500,000 | 500,000 | ||||||||
Series G convertible preferred stock: $.001 par value,
20 shares authorized, issued and outstanding |
1 | 1 | ||||||||
Common stock: $.001 par value, 300,000,000 shares authorized;
232,631,074 and 200,882,250 shares issued, of which -0-
and 1,400,000 shares are held in treasury, respectively |
232,631 | 200,882 | ||||||||
Paid in capital |
144,620,555 | 125,652,119 | ||||||||
Retained deficit |
(190,487,449 | ) | (173,096,835 | ) | ||||||
Common stock subscriptions |
— | 950,000 | ||||||||
Common stock warrants |
3,790,592 | 2,879,413 | ||||||||
Common stock options |
1,566,801 | 1,566,801 | ||||||||
Less cost of shares of common stock in treasury |
— | (2,428,125 | ) | |||||||
Note receivable — related party (Note 9) |
(5,000,000 | ) | (5,000,000 | ) | ||||||
Commitments and contingencies |
||||||||||
Total Stockholders’ Deficit |
(45,276,869 | ) | (49,275,744 | ) | ||||||
Total Liabilities and Stockholders’ Deficit |
$ | 77,812,681 | $ | 81,023,931 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
1
Terremark Worldwide, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
| For the six months | For the three months | |||||||||||||||||
| ended September 30, | ended September 30, | |||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||
Revenues
|
||||||||||||||||||
Data center |
$ | 4,483,409 | $ | 621,453 | $ | 2,424,280 | $ | 393,508 | ||||||||||
Data center — contract termination fee |
1,090,638 | — | — | — | ||||||||||||||
Development, commission and
construction fees |
76,820 | 1,934,917 | 59,216 | 1,144,696 | ||||||||||||||
Management fees |
117,576 | 818,202 | 35,031 | 405,658 | ||||||||||||||
Construction contracts |
3,106,851 | 6,175,679 | 1,173,882 | 2,452,678 | ||||||||||||||
Operating revenues |
8,875,294 | 9,550,251 | 3,692,409 | 4,396,540 | ||||||||||||||
Expenses
|
||||||||||||||||||
Data center operations |
5,863,424 | 4,049,144 | 2,768,744 | 3,167,068 | ||||||||||||||
Start-up costs — data centers |
— | 3,383,127 | — | — | ||||||||||||||
Construction contract expenses |
2,771,314 | 4,711,854 | 937,805 | 1,915,247 | ||||||||||||||
General and administrative |
6,478,545 | 8,901,385 | 3,192,623 | 4,753,031 | ||||||||||||||
Sales and marketing |
1,979,002 | 1,878,287 | 1,209,396 | 1,398,464 | ||||||||||||||
Depreciation and amortization |
2,565,221 | 2,617,024 | 1,333,977 | 2,048,748 | ||||||||||||||
Impairment of long-lived assets |
350,000 | 6,462,315 | 350,000 | 6,462,315 | ||||||||||||||
Operating expenses |
20,007,506 | 32,003,136 | 9,792,545 | 19,744,873 | ||||||||||||||
Loss from operations |
(11,132,212 | ) | (22,452,885 | ) | (6,100,136 | ) | (15,348,333 | ) | ||||||||||
Other
(expense) income |
||||||||||||||||||
Interest income |
52,351 | 79,769 | 23,486 | 32,911 | ||||||||||||||
Interest expense |
(6,273,682 | ) | (3,318,755 | ) | (3,258,055 | ) | (2,264,556 | ) | ||||||||||
Other (expense) income |
(22,077 | ) | 400,209 | (75,993 | ) | 368,188 | ||||||||||||
Dividend on preferred stock |
(14,994 | ) | (11,747 | ) | (7,497 | ) | (7,497 | ) | ||||||||||
Gain on real estate held for sale |
— | 3,988,633 | — | 3,882,020 | ||||||||||||||
Total other (expense) income |
(6,258,402 | ) | 1,138,109 | (3,318,059 | ) | 2,011,066 | ||||||||||||
Loss before income taxes |
(17,390,614 | ) | (21,314,776 | ) | (9,418,195 | ) | (13,337,267 | ) | ||||||||||
Income taxes |
— | — | — | — | ||||||||||||||
Net loss |
$ | (17,390,614 | ) | $ | (21,314,776 | ) | $ | (9,418,195 | ) | $ | (13,337,267 | ) | ||||||
Basic and diluted loss per common share: |
||||||||||||||||||
Net loss |
$ | (0.08 | ) | $ | (0.11 | ) | $ | (0.04 | ) | $ | (0.07 | ) | ||||||
Weighted average common shares
outstanding |
214,895,564 | 200,622,179 | 225,154,386 | 200,622,179 | ||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
2
Terremark Worldwide, Inc. and Subsidiaries
Condensed Consolidated Statement of Changes in Stockholders’ Deficit
| Stockholders' Deficit | ||||||||||||||||||||||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||||||||||||||||||
| Par Value $.001 | Note | |||||||||||||||||||||||||||||||||||||||
| Additional | Common | Common | Common | Receivable- | ||||||||||||||||||||||||||||||||||||
| Preferred | Issued | Paid-in | Stock | Stock | Stock | Treasury | Related | Retained | ||||||||||||||||||||||||||||||||
| Stock | Shares | Amount | Capital | Subscriptions | Warrants | Options | Stock | Party | Deficit | |||||||||||||||||||||||||||||||
Balance at March 31, 2002 |
$ | 1 | 200,882,250 | $ | 200,882 | $ | 125,652,119 | $ | 950,000 | $ | 2,879,413 | $ | 1,566,801 | $ | (2,428,125 | ) | $ | (5,000,000 | ) | $ | (173,096,835 | ) | ||||||||||||||||||
Sale of common stock |
— | 33,148,824 | 33,149 | 21,395,161 | (950,000 | ) | — | — | — | — | - | |||||||||||||||||||||||||||||
Retirement of treasury shares |
— | (1,400,000 | ) | (1,400 | ) | (2,426,725 | ) | — | — | — | 2,428,125 | — | - | |||||||||||||||||||||||||||
Warrants issued |
— | — | — | — | — | 911,179 | — | — | — | - | ||||||||||||||||||||||||||||||
Net loss |
— | — | — | — | — | — | — | — | — | (17,390,614 | ) | |||||||||||||||||||||||||||||
Balance at September 30, 2002
(unaudited) |
$ | 1 | 232,631,074 | $ | 232,631 | $ | 144,620,555 | $ | — | $ | 3,790,592 | $ | 1,566,801 | $ | — | $ | (5,000,000 | ) | $ | (190,487,449 | ) | |||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
Terremark Worldwide, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
| For the six months ended | ||||||||||||
| September 30, | ||||||||||||
| 2002 | 2001 | |||||||||||
| (unaudited) | ||||||||||||
Cash flows from operating activities: |
||||||||||||
Net loss |
$ | (17,390,614 | ) | $ | (21,314,776 | ) | ||||||
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization of capital leases |
2,571,829 | 1,137,889 | ||||||||||
Amortization of intangible assets and goodwill |
— | 1,479,135 | ||||||||||
Amortization of loan costs to interest expense |
468,931 | 645,425 | ||||||||||
Amortization
of prepaid compensation and other |
93,168 | 70,401 | ||||||||||
Bad debt |
8,907 | |||||||||||
Gain on sale of real estate held for sale |
— | (3,988,633 | ) | |||||||||
Loss on sale of property and | ||||||||||||