U.S.
        SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON,
        D.C. 20549
 __________________
 
 FORM
        10-QSB/A
 __________________
 
 (MARK
        ONE)
 
 x
              QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
 
 FOR
        THE
        QUARTERLY PERIOD ENDED: MARCH 31, 2005
 
 o
              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 0-29204
 __________________
 
 GLOBAL
        MATRECHS, INC.
 *(Exact
        Name Of Registrant As Specified In Its Charter)*
 
 **Delaware**
              **58-2153309***(State
                  Or Other Jurisdiction Of*
              *(Irs
                  Employer**Incorporation
                  Or Organization)*
              *Identification
                  No.)*
 
 90
        Grove
        Street
 Suite
        201
 Ridgefield,
        CT 06877
 *(Address
        Of Principal Executive Offices)*
 
 (203)
        431-6665
 *(Issuer's
        Telephone Number)*
 __________________
 
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 of
        15(d) of the Exchange Act during the past 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  ̈
 
 As
        of May
        26, 2005, there were 78,322,888 shares of our common stock, par value $0.0001
        per share, outstanding.
 
 Transitional
        Small Business Disclosure Format (check one): Yes  ̈ No x
  
  Global
        Matrechs, Inc.
 
 Form
        10-QSB/A
 
 Quarterly
        Report
 
 March
        31,
        2005
 
 Table
        Of
        Contents
 
 
 PART
                  I.
              FINANCIAL
                  INFORMATIONItem
                  1.
              Financial
                  Statements
              2Consolidated
                  Balance Sheets
              2Consolidated
                  Statements of Operations
              4Consolidated
                  Statements of Cash Flows
              5Notes
                  to Unaudited Consolidated Financial Statements
              6Item
                  2.
              Management's
                  Discussion and Analysis of Financial Conditionand
                  Results of Operations
              12Item
                  3.
              Controls
                  and Procedures
              28PART
                  II.
              OTHER
                  INFORMATIONItem
                  1.
              Legal
                  Proceedings
              29Item
                  6.
              Exhibits
              29
 
  
  PART
        I.
        FINANCIAL INFORMATION
 
 **ITEM
        1. FINANCIAL STATEMENTS**
 
 GLOBAL
        MATRECHS, INC.
 CONSOLIDATED
        BALANCE SHEETS
 AS
        OF
        MARCH 31, 2005 AND DECEMBER 31, 2004
 
 March
                        31,2005restated(unaudited)
              
              December
                  31,
                2004
                (restated)ASSETSCURRENT
                  ASSETS:Cash
                  and cash equivalents
              
              $
              42,905
              
              $
              131,470Accounts
                  receivable, net
              
              
              144,128
              
              
              94,551Inventory
              
              
              142,238
              
              
              67,906Prepaid
                  expenses
              
              
              6,750
              
              
              242,110Loan
                  to Tulix
              
              
              74,083
              
              
              72,858Other
                  current assets
              
              
              5,000
              
              
              —Total
                  current assets
              
              
              415,104
              
              
              608,895Fixed
                  Assets
              
              
              5,568
              
              
              28,430Deposits
              
              
              2,575
              
              
              2,575Note
                  receivable
              
              
              250,000
              
              
              —Investment
                  in Tulix
              
              
              51,949
              
              
              51,949Intangible
                  assets
              
              
              986,223
              
              
              986,223Less:
                  Accumulated amortization
              
              
              (361,615
              )
              
              (312,304
              )Goodwill
              
              
              1,469,108
              
              
              1,469,108Intangibles,
                  net
              
              
              2,093,716
              
              
              2,143,027Total
                  assets
              
              $
              2,818,912
              
              $
              2,834,876LIABILITIES
                  AND STOCKHOLDERS’
                  DEFICITCURRENT
                  LIABILITIES:Accounts
                  payable and accrued expenses
              
              $
              601,822
              
              $
              574,236Loans
                  payable
              
              
              124,631
              
              
              182,784Due
                  to officer
              
              
              89,650
              
              
              147,309Current
                  maturities of long term debt
              
              
              120,684
              
              
              106,860Convertible
                  loans payable - net of discount
              
              
              2,427,261
              
              
              1,327,245Derivative
                  conversion feature - convertible preferred stock
              
              
              842,992
              
              
              1,050,863Total
                  current liabilities
              
              
              4,207,040
              
              
              3,389,297Warrant
                  liability
              
              
              1,928,159
              
              
              742,448Note
                  payable
              
              
              250,000
              
              
              —Long
                  term debt
              
              
              400,000
              
              
              415,302Total
                  liabilities
              
              
              6,785,199
              
              
              4,547,047Convertible
                  preferred stock
              
              
              5,392,783
              
              
              6,128,223
 
  2
  
 STOCKHOLDERS'
                  DEFICIT:Common
                  stock, $.0001 par value, 300,000,000 shares authorized,66,897,187
                  shares issued and outstanding at March 31, 2005 and45,895,431
                  shares issued and outstanding at December 31, 2004
              
              6,609
              
              4,590Preferred
                  stock, Series H, $.01 par value,13,500
                  shares authorized, 12,000 sharesissued
                  and outstanding at March 31, 2005and
                  December 31, 2004, convertible,participating,
                  $12,000,000 liquidationvalue
                  at March 31, 2005 and December31,
                  2004
              
              108
              
              133Preferred
                  stock, Series I, $.01 par value,490.5
                  shares authorized, 490.5 sharesissued
                  and outstanding at March 31, 2005and
                  December 31, 2004, convertible,participating,
                  $49,050 liquidation value atMarch
                  31, 2005
              
              5
              
              5Treasury
                  stock, 5,028,695 shares at March31,
                  2005 and December 31, 2004
              
              
              (327,484
              )
              
              (327,484
              )Additional
                  paid-in capital
              
              
              23,640,094
              
              
              22,844,110Accumulated
                  deficit
              
              
              (32,678,402
              )
              
              (30,361,748
              )Total
                  stockholder deficit
              
              
              (9,359,070
              )
              
              (7,840,394
              )Total
                  liabilities and stockholder deficit
              
              $
              2,818,912
              
              $
              2,834,876
 
 
 
 The
        accompanying notes are an integral part of these financial
        statements.
  3
  GLOBAL
        MATRECHS, INC.
 CONSOLIDATED
        STATEMENTS OF OPERATIONS
 FOR
        THE
        THREE MONTHS ENDED MARCH 31, 2005 AND 2004
 
 Three
                  Months Ended
                March
                  31,2005restated(unaudited)
              
              2004restated(unaudited)Revenues
              
              $
              369,681
              
              $
              620Cost
                  of revenues
              
              
              148,203
              
              
              558Gross
                  profit
              
              
              221,478
              
              
              62Operating
                  expenses:Selling,
                  general and administrative
              
              
              612,611
              
              
              262,566Depreciation
                  and amortization
              
              
              51,268
              
              
              49,311Total
                  operating expenses
              
              
              663,879
              
              
              311,877Operating
                  loss
              
              
              (442,401
              )
              
              (311,815
              )Other
                  expenses (income)Interest
                  expense
              
              
              1,810,560
              
              
              82,212Change
                  in fair value of warrants
              
              
              64,918
              
              
              —Change
                  in fair value of derivative conversion feature
              
              
              —
              
              
              13,460Interest
                  income
              
              
              (1,225
              )
              
              —Loss
                  from continuing operations before incometaxes
              
              
              (2,316,654
              )
              
              (407,487
              )Income
                  tax provision (benefit)
              
              
              —
              
              
              —Loss
                  from continuing operations
              
              
              (2,316,654
              )
              
              (407,487
              )Income
                  from discontinued operations
              
              
              —
              
              
              43,189Net
                  loss
              
              $
              (2,316,654
              )
              $
              (364,298
              )Income
                  (loss) per share - basic and diluted:Continuing
                  operations
              
              $
              (0.04
              )
              $
              (0.02
              )Discontinued
                  operations
              
              
              —
              
              
              —$
              (0.04
              )
              $
              (0.02
              )Weighted
                  number of shares outstanding - basicand
                  diluted
              
              
              57,918,004
              
              
              14,999,157
 
 
 The
        accompanying notes are an integral part of these financial
        statements.
 
  4
  GLOBAL
        MATRECHS, INC.
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS
 FOR
        THE
        THREE MONTHS ENDED MARCH 31, 2005 AND 2004
 
 Three
                  Months Ended
                March
                  31,2005restated
              
              2004restated(unaudited)
              
              (unaudited)Cash
                  flows from operating activities:Net
                  loss
              
              $
              (2,316,654
              )
              $
              (364,298
              )Adjustments
                  to reconcile net income (loss)to
                  cash used in operating activities:Depreciation
              
              
              1,957Barter
                  transaction
              
              
              20,904Provision
                  for bad debts
              
              
              —
              
              
              22,537Amortization
              
              
              49,311
              
              
              —Change
                  in fair value of warrants
              
              
              64,918Amortization
                  of beneficial conversion featureof
                  convertible loans
              
              
              1,786,325
              
              
              —Change
                  in fair value of derivative conversion feature
              
              
              —
              
              
              13,460Common
                  stock issued in exchange for servicesperformed
              
              
              82,261
              
              
              —Loan
                  to Tulix
              
              
              (1,225
              )Change
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              (49,577
              )
              
              113,245Inventory
              
              
              (74,332
              )
              
              —Prepaid
                  expenses
              
              
              17,250
              
              
              15,419Other
                  assets
              
              
              (5,000
              )
              
              —Accounts
                  payable and accrued expenses
              
              
              20,725
              
              
              161,086Net
                  cash used in operating activities
              
              
              (403,137
              )
              
              (38,551
              )Cash
                  flow from financing activities:Net
                  repayments to officer
              
              
              (57,659
              )
              
              —Borrowings
                  of loans payable
              
              
              5,382Repayments
                  of loans payable
              
              
              (58,152
              )
              
              —Proceeds
                  from issuance of convertible loans
              
              
              425,000
              
              
              109,000Net
                  cash provided by financing activities
              
              
              314,571
              
              
              109,000Net
                  increase (decrease) in cash and cash equivalents
              
              
              (88,566
              )
              
              70,449Cash
                  and cash equivalents at beginning of period
              
              
              131,471
              
              
              71,818Cash
                  and cash equivalents at end of period
              
              $
              42,905
              
              $
              142,267Non-cash
                  investing and financing activities:Conversion
                  of preferred sharesinto
                  19,826,606 shares of common stock
              
              
              
              
              $
              735,440Issuance
                  of 1,175,150 shares of commonstock
                  for services rendered
              
              
              
              
              $
              82,261Service
                  vehicle distributed forservices
                  performed
              
              
              
              
              $
              20,904
 The
        accompanying notes are an integral part of these financial
        statements.
  5
  GLOBAL
        MATRECHS, INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 **1.
        BASIS OF PRESENTATION**
 
 Certain
        information and footnote disclosures normally included in financial statements
        prepared in accordance with generally accepted accounting principles have
        been
        condensed or omitted pursuant to Article 10 of Regulation S-X of the Securities
        and Exchange Commission. The accompanying unaudited financial statements
        reflect, in the opinion of management, all adjustments necessary to achieve
        a
        fair statement of the financial position and results of operations of Global
        Matrechs, Inc. (the "Company," "we" or "us") for the interim periods presented.
        All such adjustments are of a normal and recurring nature.
 
 **2.
        GOING CONCERN MATTERS AND RECENT EVENTS**
 
 The
        Company's financial statements are prepared using generally accepted accounting
        principles applicable to a going concern, which contemplate the realization
        of
        assets and liquidations of liabilities in the normal course of business.
        The
        Company has incurred significant losses since its incorporation resulting
        in an
        accumulated deficit as of March 31, 2005 of approximately $32.7 million.
        The
        Company continues to experience negative cash flows from operations. These
        factors raise doubt about the Company's ability to continue as a going
        concern.
 
 On
        December 31, 2004 we acquired True To Form, Limited. As a result of the merger,
        True To Form is now our wholly owned subsidiary. True To Form designs, develops,
        manufactures and sells specialty lighting products to targeted segments of
        the
        traditional lighting industry and has recently established a division that
        will
        focus on the homeland security market. True To Form markets "high-end" lighting
        and architectural products for both commercial and residential applications,
        including pendants, surface and ceiling luminaries, table and floor lamps,
        commercial down-lights, bath fixtures, and custom fixtures.
 
 On
        May
        31, 2004, the Company completed the sale of its internet hosting and website
        maintenance business to Tulix Systems, Inc. ("Tulix"), a company in which
        Gia
        Bokuchava, Nino Doijashvili and Timothy R. Robinson, who were officers and
        directors of the Company, are officers, directors and founding shareholders.
        The
        Company recorded a loss on the sale of this business of $125,030 in the fourth
        quarter of 2003 and recorded an additional loss of $124,385 in the second
        quarter of 2004 for adjustments to the closing as provided for in the closing
        documents.
 
 Mr.
        Robinson, Dr. Bokuchava, and Dr. Doijashvili have subsequently resigned from
        the
        Company and have released the Company from all further employment
        obligations.
 
 NON-RELIANCE
        ON HISTORICAL FINANCIAL STATEMENTS
 
 On
        April
        15, 2005, the Company's management, in consultation with the Company's
        independent registered public accounting firm, concluded that the Company's
        historical financial information related to fiscal 2001 through fiscal 2003
        and
        for the first three fiscal quarters of 2004 accounted incorrectly for certain
        convertible preferred stock instruments. As such, the management has concluded
        that the Company's historical financial statements should no longer be relied
        upon. While the Company does not
  6
  intend
        to
        amend its previously filed annual and quarterly reports covering the periods
        noted above, the Company has restated historical financial information for
        the
        periods required to be presented in its annual report on Form 10-KSB for
        the
        year ended December 31, 2004 to reflect the correct accounting treatment.
        The
        Company has also included in its annual report on Form 10-KSB five years
        of
        restated financial information highlighting the differences resulting from
        the
        application of the change in accounting treatment to its historical financial
        statements and restated selected quarterly information for 2003 and
        2004.
 
 RESTATED
        FINANCIAL STATEMENTS
 
 On
        October 7, 2005, the Company amended its Annual Report on Form 10-KSB/A for
        the
        year ending December 31, 2004. For a full discussion on the nature of the
        restatements, these financial statements should be read in conjunction with
        the
        financial statements and notes thereto included in the amended filing. The
        Company has amended this Quarterly Report on Form 10-QSB for the quarter
        ending March 31, 2005 to reflect the impact of these changes.
 
 Warrants
  The
        fair
        values of the warrants issued in connection with the convertible promissory
        notes (described in Note 2) were originally recorded as credits to additional
        paid-in capital and debits to unamortized note discount (up to the amount
        of the
        proceeds received), and prepaid expense (representing the value of the warrants
        in excess of the proceeds received). Both the prepaid expense and unamortized
        discount were amortized to interest expense over the lives of the notes.
        In this
        amended filing, the accounting for the warrants has been restated to (a)
        expense
        the value of the warrants in excess of the proceeds received (i.e., write-off
        the prepaid expense), (b) reduce interest expense for the reversal of the
        amortization of the prepaid expense, (c) record the fair values of the warrants
        as a long-term liability, and (d) record the changes in the fair values of
        the
        warrants from their issue dates to the balance sheet date in current income
        under the caption “change in fair value of warrants.”
  ENTRANCE
        INTO EXCHANGE AGREEMENT WITH WOODWARD LLC
 
 On
        January 31, 2005, we entered into an Exchange Agreement with Woodward LLC
        pursuant to which we acquired promissory notes, and have accordingly assumed
        all
        rights pertaining thereto, issued by Eurotech Ltd. The notes are currently
        in
        default and have an aggregate outstanding principal amount of $290,000. The
        notes carry a default annual interest rate of 18% and are past due in their
        entirety. In exchange for these notes, we issued to Woodward a promissory
        note
        in the principal amount of $250,000.
 
 Under
        the
        terms of the Exchange Agreement, in the event we propose to register securities
        under the Securities Act of 1933, as amended, we are required to notify Woodward
        in advance of such registration and, at its request (subject to limited
        exceptions), include the shares of our common stock underlying the note on
        the
        registration statement filed in connection with such registration, and assume
        any expenses associated therewith.
 
 SECOND
        PURCHASE AGREEMENT WITH SOUTHRIDGE PARTNERS
 
 On
        January 31, 2005, we entered into a Second Securities Purchase Agreement
        with
        Southridge Partners LP, one of our existing investors, whereby we agreed
        to sell
        a convertible promissory note in the principal amount of $250,000 and warrant
        to
        purchase up to 10,000,000 shares of our common stock to Southridge in exchange
        for its $250,000 investment. Under the terms of this purchase agreement,
        Southridge may, at its option, and at any time prior to July 1, 2005, purchase
        an additional note in the
  7
  principal
        amount of up to $1,500,000, and otherwise on substantially the same terms
        as the
        note issued on January 31, 2005.
 
 The
        note
        is convertible, at the option of the holder, into shares of our common stock
        at
        a conversion price of $0.02 per share. Southridge may require us to repurchase
        some or all of its note if the market price of our common stock falls below
        $0.03 per share for ten (10) consecutive trading days, at a repurchase price
        equal to 140% of the principal amount of the note. In the event we default
        under
        the terms of the note, the entire outstanding principal (and any outstanding
        interest accrued thereon) shall become immediately due and payable, and the
        interest rate will rise to 18% per annum.
 
 We
        have
        secured the payment of the notes with a subordinated security interest in
        our
        accounts, general intangibles, inventories, and other collateral. In addition,
        in the event we propose to register securities under the Securities Act of
        1933,
        as amended, we are required to notify Southridge in advance of such registration
        and, at its request (subject to limited exceptions), include the shares of
        our
        common stock underlying the note and warrant on the registration statement
        filed
        in connection with such registration (and assume any expenses associated
        therewith).
 
 The
        warrant has an expiration date of January 31, 2010. It contains a cashless
        exercise provision whereby the holder may pay the exercise price associated
        with
        any exercise by having us withhold a number of shares otherwise issuable
        upon
        such exercise having a fair market value equal to the applicable aggregate
        exercise price. In the event such provision is used with respect to an exercise,
        we would receive no proceeds upon such exercise.
 
 The
        beneficial conversion feature was valued at $690,000. Since the conversion
        is at
        the option of the holder, the value of the beneficial conversion feature
        was
        amortized to interest expense in full during the quarter ending March 31,
        2005.
 As
        of
        March 31, 2005, these warrants have been adjusted to their fair value of
        $541,728. During the quarter ended March 31, 2005, the fair value of the
        warrants decreased by $100,314. Since the value of the warrants exceeds the
        proceeds received, the excess of $392,042 has been charged to interest expense
        during the period.
 
 SOUTHRIDGE
        EXERCISES OPTION TO PURCHASE ADDITIONAL NOTES AND WARRANTS
 
 On
        March
        2, 2005, Southridge Partners LP exercised its option to purchase an additional
        note and warrant under its Second Securities Purchase Agreement. In connection
        with such exercise, we issued to Southridge a convertible promissory note
        in the
        principal amount of $175,000 and a warrant to purchase up to 7,000,000 shares
        of
        our common stock in exchange for its $175,000 investment. The note is
        convertible, at the option of the holder, into shares of our common stock
        at a
        conversion price of $0.02 per share. Southridge may require us to repurchase
        some or all of its note if the market price of our common stock falls below
        $0.03 per share for ten (10) consecutive trading days, at a repurchase price
        equal to 140% of the principal amount of the note. In the event we default
        under
        the terms of the note, the entire outstanding principal (and any outstanding
        interest accrued thereon) shall become immediately due and payable, and the
        interest rate will rise to 18% per annum. The note matures on March 2,
        2007.
 
 The
        warrant has an expiration date of March 2, 2010. It contains a cashless exercise
        provision whereby the holder may pay the exercise price associated with any
        exercise by having us withhold a number of shares otherwise issuable upon
        such
        exercise having a fair market value equal to the applicable aggregate exercise
        price. In the event such provision is used with respect to an exercise, we
        would
        receive no proceeds upon such exercise.
 
 8
  In
        determining the value of the beneficial conversion feature of the Southridge
        notes, the Company first allocated $478,751 and $642,042, respectively to
        the
        value of the warrants. Since this value exceeds the proceeds received, the
        differential was recorded as additional paid in capital, discount on notes
        payable and a prepaid expense. The prepaid expense is amortized over the
        24
        month period of the convertible note. The value of beneficial conversion
        feature
        was valued at $690,000 and $350,000, respectively. Since the conversion is
        at
        the option of the holder, the value of the beneficial conversion feature
        was
        amortized to interest expense in full during the quarter ended March 31,
        2005.
 
 The
        beneficial conversion feature was valued at $350,000. Since the conversion
        is at
        the option of the holder, the value of the beneficial conversion feature
        was
        amortized to interest expense in full during the quarter ending March 31,
        2005.
 As
        of
        March 31, 2005, these warrants have been adjusted to their fair value of
        $380,970. During the quarter ended March 31, 2005, the fair value of the
        warrants decreased by $97,781. Since the value of the warrants exceeds the
        proceeds received, the excess of $303,751 has been charged to interest expense
        during the period.
 
 SOUTHRIDGE
        EXERCISES OPTION TO PURCHASE ADDITIONAL NOTES AND WARRANTS
 
 On
        April
        11, 2005, Southridge Partners LP exercised its option to purchase an additional
        note and warrant pursuant to the Second Securities Purchase Agreement. In
        connection with such exercise, we issued to Southridge a convertible promissory
        note in the principal amount of $125,000 and a warrant to purchase up to
        5,000,000 shares of our common stock to Southridge in exchange for its $125,000
        investment. The note is convertible, at the option of the holder, into shares
        of
        our common stock at a conversion price of $0.02 per share. Southridge may
        require us to repurchase some, or all, of its note if the market price of
        our
        common stock falls below $0.03 per share for ten (10) consecutive trading
        days,
        at a repurchase price equal to 140% of the principal amount of the note.
        In the
        event we default under the terms of the note, the entire outstanding principal
        (and any outstanding interest accrued thereon) shall become immediately due
        and
        payable, and the interest rate will rise to 18% per annum. The note matures
        on
        April 11, 2007.
 
 The
        beneficial conversion feature was valued at $325,000. Since the conversion
        is at
        the option of the holder, the value of the beneficial conversion feature
        will be
        amortized to interest expense in full during the quarter ending June 30,
        2005.
 Since
        the
        value of the warrants exceeds the proceeds received, the excess of $130,957
        has
        been charged to interest expense during the period.
 
 **3.
        SEGMENT INFORMATION**
 
 On
        May
        31, 2004 the Company sold substantially all of the remaining assets of the
        Company's Internet Services segment. With the execution of the licensing
        agreement with Eurotech on May 22, 2003, and the closing of the sale to Tulix
        Systems on May 31, 2004, our Licensed Technologies Division is now the Company's
        only operating segment. The Internet Services segment has been presented
        as a
        discontinued operation.
 
 The
        Company is currently operating in two major segments. These segments are
        defined
        as the Licensed Technologies Division which consists of the marketing of
        the
        technologies licensed from and
  9
  the
        Specialty Lighting Division which consists of the design, development,
        manufacture and sales of specialty lighting and architectural products acquired
        in the merger with True To Form, Limited.
 
 For
                  The Three Months Ended
                March
                  31, 2005Licensed
              
              SpecialtyTechnologies
              
              LightingDivision
              
              Division
              
              Eliminations
              
              TotalTotal
                  Assets
              
              $
              2,739,251
              
              $
              323,209
              
              $
              (243,548
              )
              $
              2,818,912Total
                  Revenue
              
              
              —
              
              $
              369,681
              
              
              —
              
              $
              369,681Net
                  Income (Loss)
              
              $
              (2,366,639
              )
              $
              49,985
              
              
              —
              
              $
              (2,316,654
              )
 
 Proforma
        Financial Information
 
 The
        following unaudited pro forma consolidated results of operations have been
        prepared as if the acquisition of True to Form had occurred as of the beginning
        of the following period:
 
 Quarter
                  EndedMarch
                  31, 2004Net
                  revenues
              
              $
              203,369Net
                  loss from continuing operations
              
              $
              (404,529
              )Net
                  loss
              
              $
              (367,143
              )Net
                  loss per share
              
              $
              (0.025
              )
 
 Pro
        forma
        data does not purport to be indicative of the results that would have been
        obtained had these events actually occurred at the beginning of the period
        presented and is not intended to be a projection of future results.
 
 **4.
        STOCK OPTIONS**
 
 The
        Company has adopted the disclosure requirement of Statement of Financial
        Accounting Standards No. 148 (SFAS 148), "Accounting for Stock-Based
        Compensation-Transition and Disclosure" effective December 15, 2002. SFAS
        148
        amends Statement of Financial Accounting Standards No. 123 (SFAS 123),
        "Accounting for Stock Based Compensation," to provide alternative methods
        of
        transition for a voluntary change to the fair value based method of accounting
        for stock-based compensation and also amends the disclosure requirements
        of SFAS
        123 to require prominent disclosure in both annual and interim financial
        statements about the methods of accounting for stock-based employee compensation
        and the effect of the method used on report results. As permitted by SFAS
        148
        and SFAS 123, the Company continues to apply the accounting provisions of
        APB
        25, and related interpretations, with regard to the measurement of compensation
        cost for options granted under the Company's Stock Option Plan. No compensation
        expense has been recorded as all options granted had an exercise price equal
        to
        the market value of the underlying stock on the grant date. The pro-forma
        effect
        on our results of operations, had expense been recognized using the fair
        value
        method described in SFAS 123, using the Black-Scholes option pricing model,
        is
        shown below.
  10
 
 For
                  The Three MonthsEnded
                  March 31,2005
              
              2004Loss
                  applicable to common shareholders:As
                  reported
              
              $
              (2,316,654
              )
              $
              (364,298
              )Pro
                  forma
              
              $
              (2,320,379
              )
              $
              (369,023
              )Basic
                  and diluted loss per share:As
                  reported
              
              $
              (0.04
              )
              $
              (0.02
              )Pro
                  forma
              
              $
              (0.04
              )
              $
              (0.02
              )
 
 **5.
        TAXES**
 
 There
        was
        no provision for cash payment of income taxes for the three months ended
        March
        31, 2005, as the Company anticipates a net taxable loss for the year ended
        December 31, 2005.
 
 **6.
        CONVERTIBLE PREFERRED STOCK**
 
 As
        a
        requirement of the private placements of the Company's Series B, C, D and
        E
        Convertible Preferred Stock, originally, the Company was obligated to file
        and
        have declared effective, within a specified time period, a registration
        statement with respect to a minimum number of shares of common stock issuable
        upon conversion of the Series B, C, D and E Preferred Stock. As of March
        31,
        2005, such registration statement has not been declared effective. As of
        March
        14, 2003, the holders of these series waived all penalties related to the
        registration, along with mandatory conversion dates.
 
 Through
        August 14, 2004, the terms of the Company's Series B, C, D, and E Convertible
        Preferred Stock provided for a guaranteed return on unconverted shares of
        5% for
        series B, 6% for series C and D, and 8% for series E.
 
 **7.
        SUBSEQUENT EVENTS**
 
 From
        April 1, 2005 through May 18, 2005, the Company converted 12.5 shares of
        Series
        C preferred stock and 540 shares of Series H preferred stock into 11,425,701
        shares of common stock.
 
 On
        April
        13, 2005 Carey Naddell, CEO of Eurotech, Ltd., filed suit against the Company
        for damages based upon an alleged breach of a written service agreement.
        The
        Company has responded and feels at this time there is no merit to this action.
        We will diligently defend this action.
  11
  **ITEM
        2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF
        OPERATIONS**
 
 THE
        STATEMENTS INCLUDED IN THIS QUARTERLY REPORT ON FORM 10-QSB MADE BY OUR
        MANAGEMENT, OTHER THAN STATEMENTS OF HISTORICAL FACT, ARE FORWARD-LOOKING
        STATEMENTS. EXAMPLES OF FORWARD-LOOKING STATEMENTS INCLUDE STATEMENTS REGARDING
        OUR FUTURE FINANCIAL RESULTS, OPERATING RESULTS, BUSINESS STRATEGIES, PROJECTED
        COSTS, PRODUCTS, COMPETITIVE POSITIONS AND PLANS, CUSTOMER PREFERENCES, CONSUMER
        TRENDS, ANTICIPATED PRODUCT DEVELOPMENT, AND OBJECTIVES OF MANAGEMENT FOR
        FUTURE
        OPERATIONS. IN SOME CASES, FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY
        TERMINOLOGY SUCH AS "MAY," "WILL," "SHOULD," "WOULD," "EXPECTS," "PLANS,"
        "ANTICIPATES," "BELIEVES," "ESTIMATES," "PREDICTS," "POTENTIAL," "CONTINUE,"
        OR
        THE NEGATIVE OF THESE TERMS OR OTHER COMPARABLE TERMINOLOGY. ANY EXPECTATIONS
        BASED ON THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES
        AND OTHER IMPORTANT FACTORS, INCLUDING THOSE DISCUSSED IN OUR ANNUAL REPORT
        ON
        FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2004 IN "MANAGEMENT'S DISCUSSION
        AND
        ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" UNDER THE HEADING
        "FACTORS AFFECTING FUTURE PERFORMANCE." THESE AND MANY OTHER FACTORS COULD
        AFFECT OUR FUTURE FINANCIAL AND OPERATING RESULTS, AND COULD CAUSE ACTUAL
        RESULTS TO DIFFER MATERIALLY FROM EXPECTATIONS BASED ON FORWARD-LOOKING
        STATEMENTS MADE IN THIS DOCUMENT OR ELSEWHERE BY US OR ON OUR BEHALF. THE
        FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH OUR
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES APPEARING
        ELSEWHERE IN THIS REPORT.
 
 In
        addition to the risks and uncertainties faced generally by participants in
        our
        industry, we face the following risks and uncertainties:
 
 ·
              Our
                  business, as currently constituted, has limited operating history.
                  Therefore, we may not be able to accurately forecast future results,
                  and
                  operating losses in future periods could be greater than
                  expected.
 
 ·
              We
                  have a history of operating losses, and there is no assurance that
                  we will
                  achieve profitability in the
                  future.
 
 ·
              We
                  have a going-concern qualification in the report by our registered
                  independent public accounting firm for our financial statements
                  for the
                  year ended December 31, 2004, which may make capital raising more
                  difficult and may require us to scale back or cease operations,
                  putting
                  our investors' funds at risk.
 
 ·
              We
                  may be unable to obtain additional capital required to fund our
                  operations
                  and finance our growth.
 
 ·
              The
                  management of our finances and the quality and timeliness of our
                  financial
                  reporting may be adversely affected if we are unable to increase
                  the size
                  and capabilities of our internal administrative and finance function
                  as
                  our business grows.
 
 12
 ·
              If
                  we fail to realize some or all of the anticipated benefits from
                  our
                  acquisition of True to Form, our business will
                  suffer.
 
 ·
              We
                  face intense competition, which could result in lower revenues
                  and higher
                  research and development expenditures and could adversely affect
                  our
                  results of operations.
 
 ·
              If
                  we cannot effectively manage our growth, our business may
                  suffer.
 
 ·
              We
                  may be unable to hire and retain the skilled personnel we need
                  to expand
                  our operations.
 
 ·
              Our
                  success depends on the services of our executive officers and key
                  employees.
 
 ·
              Our
                  business may suffer if we cannot protect our proprietary
                  technology.
 
 ·
              Claims
                  by others that we infringe their intellectual property rights could
                  harm
                  our business and financial
                  condition.
 
 ·
              New
                  corporate governance requirements are likely to increase our costs
                  and
                  make it more difficult to attract qualified
                  directors.
 
 ·
              We
                  are not subject to the same corporate governance standards as listed
                  companies, including without limitation, the requirement that we
                  have a
                  majority of independent directors.
 
 Because
        of the foregoing and other factors, we may experience material fluctuations
        in
        our future operating results on a quarterly or annual basis which could
        materially adversely affect our business, financial condition and operating
        results.
 
 CRITICAL
        ACCOUNTING POLICIES
 
 Our
        consolidated financial statements are prepared in accordance with accounting
        principles generally accepted in the United States. These accounting principles
        require us to make certain estimates, judgments and assumptions. We believe
        that
        the estimates, judgments and assumptions upon which we rely are reasonable
        based
        upon information available to us at the time that these estimates, judgments
        and
        assumptions are made. These estimates, judgments and assumptions can affect
        the
        reported amounts of assets and liabilities as of the date of the financial
        statements, as well as the reported amounts of revenues and expenses during
        the
        periods presented. Those estimates and judgments are based on management's
        historical experience, the terms of existing agreements, our observance of
        trends in the industry, information that we obtain from our customers and
        outside sources, and on various other assumptions that management believes
        to be
        reasonable and appropriate under the circumstances, the results of which
        form
        the basis for making judgments about the carrying values of assets and
        liabilities that are not readily apparent from other sources. To the extent
        there are material differences between these estimates, judgments or assumptions
        and actual results, our financial statements will be affected.
 
 The
        significant accounting policy that we believe is most critical in fully
        understanding and evaluating our reported financial results is our policy
        regarding revenue recognition which is discussed in detail in our Annual
        Report
        on Form 10-KSB filed with the Securities and Exchange Commission. We have
        reviewed and determined that our revenue recognition policy remains our critical
        accounting
  13
  policy
        for the three-month period ended March 31, 2005. We did not make any changes
        to
        this policy during this period.
 
 BUSINESS
        OVERVIEW
 
 The
        Company is currently operating in two major segments. These segments are
        defined
        as the Licensed Technologies Sector which consists of the marketing and sales
        of
        the technologies licensed from Eurotech and the Specialty Lighting subsidiary
        which consists of the design, development, manufacture and sales of specialty
        lighting and architectural products acquired in the merger with True To Form
        Ltd
        acquired December 31, 2004. The Company is targeting the pursuit of the Homeland
        Securities market with both segments.
 
 On
        May
        22, 2003, we completed a transaction with Eurotech pursuant to which we now
        license EKOR(TM), now called NuCap(TM), HNIPU, EMR/AC, Rad-X, Firesil, LEM
        and
        RBHM technologies from Eurotech. Currently, we are licensing the EKOR(TM),
        HNIPU, EMR/AC, Rad-X, Firesil, LEM and RBHM technologies from Eurotech, Ltd.
        We
        intend to use these licenses to derive revenue by partnering with other
        technology firms to sell raw materials to producers or to sublicense the
        technologies and collect royalties and/or licensing fees.
 
 On
        December 31, 2004 we acquired True To Form Ltd, Inc.. As a result of the
        merger,
        True To Form is now our wholly owned subsidiary. True To Form designs, develops,
        manufactures and sells specialty lighting products to targeted segments of
        the
        traditional lighting industry and has recently established a division that
        will
        focus on the homeland security market. True To Form markets "high-end" lighting
        and architectural products for both commercial and residential applications,
        including pendants, surface and ceiling luminaries, table and floor lamps,
        commercial down-lights, bath fixtures, and custom fixtures.
 
 The
        Company's Internet related business was sold on May 31, 2004 to Tulix Systems,
        Inc. As a part of the sales agreement the Company acquired 15% equity ownership
        of Tulix. The Company is a minority stock holder in Tulix and exercises no
        management input or control of its operations.
 
 We
        expanded our offerings when, on December 31, 2004, we acquired our subsidiary
        True To Form Ltd, Inc. ("True To Form"), a company in the business of True
        To
        Form designing, developing, and manufacturing specialty lighting products.
        We
        acquired True To Form from its sole shareholder, Mark J. Allen, who is also
        a
        member of our board of directors. Mr. Allen will continue as the President
        of
        True To Form and was appointed Executive Vice President of the Company. The
        transaction was the result of arm's length negotiations and was unanimously
        approved by the disinterested directors of the Company. The consideration
        was
        determined on the basis of these negotiations and the advice of our financial
        advisor, who is not affiliated with us or Mr. Allen.
 
 The
        consideration paid to Mr. Allen in the transaction consisted of:
 
 ·
              the
                  issuance by True To Form of a secured note in the initial principal
                  amount
                  of $500,000; and
 
 ·
              the
                  issuance to Mr. Allen by Global Matrechs of 10,000,000 shares of
                  our
                  common stock.
 
 The
        number of shares of common stock issued in the transaction is subject to
        adjustment based on the price of our common stock and the revenues of the
        acquired business on December 31, 2006. In general, assuming that True To
        Form
        generates gross revenues of at least $3,000,000 for the twelve
  14
  months
        ended December 31, 2006, the value of the shares issued in the transaction
        (based on the average closing price of the shares for the five trading days
        ended on or prior to December 31, 2006) will be at least $2.5 million but
        no
        more than $3.5 million. If the value is less than $2.5 million, we are obligated
        to issue additional shares or, at our option, make cash payments to make
        up the
        difference. If the value of the shares is greater than $3.5 million, any
        excess
        shares will be returned to us and retired or held as treasury stock. If True
        To
        Form does not meet the revenue target, the share consideration will be a
        minimum
        of $2.0 million and a maximum of $3.0 million.
 
 Global
        Matrechs has provided True To Form with an initial working capital loan of
        approximately $200,000 and will enter into an employment agreement with Mr.
        Allen. In connection with the transaction, we have also issued a warrant
        to our
        financial advisor in the amount of 2,000,000 shares of common stock at an
        exercise price of $0.03 per share. The merger agreement provides that until
        the
        secured note is paid in full, Mr. Allen has the right to designate a majority
        of
        the directors of True To Form. The merger agreement also provides Mr. Allen
        with
        limited registration rights related to the share consideration.
 
 PRODUCTS
        AND SERVICES
 
 Licensed
        Technologies
 
 NUCAP(TM)
 
 NuCap(TM),
        formerly called EKOR(TM), was developed jointly by scientists at the I.V.
        Kurchatov Institute, or Kurchatov, and members of the Euro-Asian Physical
        Society, or EAPS, both based in Moscow, Russia. EKOR(TM) was the brand name
        for
        a family of materials designed for long-term isolation of hazardous and
        radioactive materials. As a silicon-based elastomer, NuCap(TM)'s adhesive
        properties allow it to stick to a wide variety of wet or dry surfaces and
        materials. When applied, NuCap(TM) materials surround and immobilize radioactive
        or hazardous debris ranging from fine dust to large pieces of equipment and,
        in
        combination with their fire-resistant and water-proof properties, prevent
        such
        debris from migrating by water or as air-borne particles. NuCap(TM) materials
        also possess other highly desirable performance characteristics such as chemical
        resistance, fire resistance, heat resistance, and resistance to environmental
        aging and degradation from radiation. In addition to its unique combination
        of
        performance characteristics, NuCap(TM) comes in multiple product forms and
        can
        be applied using specified methods for waste-coating and encapsulation. We
        believe that this allows NuCap(TM) to be used as a solution for a broad spectrum
        of nuclear and hazardous waste management problems.
 
 The
        NuCap(TM) product family's performance characteristics and flexibility of
        form
        make it a tool for a broad spectrum of applications. There are currently
        five
        basic forms of NuCap(TM)
 
 1.
              Sealer
                  Plus, which can be sprayed to coat containers or cover contaminated
                  surfaces;
 
 2.
              Foam,
                  which is pumped in a range of densities to fill crevices, ducts
                  or
                  pipes;
 
 3.
              Grout,
                  applied in a pour and mix method, which can be used to make shapes
                  for
                  shielding or to macroencapsulate items to form an unleachable monolith
                  for
                  transportation or disposal;
 
 4.
              Matrix,
                  applied in a pour and mix method, which can be used to microencapsulate
                  radioactive or hazardous wastes to form an elastomeric monolith
                  for
                  transportation or disposal; and
 
 15
 5.
              StoneStore,
                  applied in a pour and mix method, which can be used to microencapsulate
                  highly radioactive waste and will form a ceramic monolith for permanent
                  disposal. StoneStore is still in the research and development
                  stage.
 
 In
        tests
        conducted at Kurchatov, NuCap(TM) has been shown to be highly resistant to
        radiation and structural degradation from exposure to radiation. It has also
        proven to be fire resistant, waterproof, and capable of being formulated
        in
        densities that display considerable structural strength and weight-bearing
        properties of 100 pounds per square inch.
 
 MARKETING
        OF NUCAP(TM)
 
 Eurotech
        described its efforts to market NuCap(TM) as it was called prior to our changing
        the name as well as the other technologies in its public filings. These
        descriptions are summarized in this report. NuCap(TM)'s acceptance into nuclear
        waste management has been slower than Eurotech anticipated. Eurotech has
        stated
        that it believes that significant technical issues remain, including those
        dealing with the residue from production of nuclear weapons and the disposal
        of
        nuclear fuel being discharged from nuclear power plants. With respect to
        residue
        from the production of nuclear weapons, the technical issues relate to the
        fact
        that the residue could take a number of forms (liquid, wet slurry, partially
        dried sludge, calcined salts, etc.) and have a variety of ph factors. The
        amount
        of waste that NuCap(TM) can effectively encapsulate differs depending on
        the
        form and ph factor of the waste. Thus, each project must be addressed
        separately, and sometimes we will need to develop the appropriate form of
        NuCap(TM) on a project-by-project basis. We do not believe, that this issue
        will
        be a significant obstacle for us, as we believe that the modification of
        NuCap(TM) is no longer as resource-intensive as previously expected and can
        be
        accomplished relatively efficiently, especially with our new manufacturing
        partners. For example, a sheet form of NuCap(TM) was recently developed by
        Global Matrechs for use in a project with INEEL. With respect to the technical
        issues that Eurotech had perceived with respect to the disposal of nuclear
        fuel
        being discharged from nuclear power plants, we do not intend to market NuCap(TM)
        for this purpose. We believe that NuCap(TM) is a technologically advanced
        material that has properties that make it a superior cost effective and safer
        isolation technology even for some non-radioactive hazardous materials and
        a
        unique sealant for potential applications in the construction
        industry.
 
 In
        2001,
        Eurotech successfully replicated the formula for NuCap(TM) to make Nucap(TM)
        products in the United States. In March 2001, the NuCap(TM) family of products
        was presented to waste management professionals at the annual Waste Management
        Symposium in Tucson, Arizona. As a result of the interest generated at the
        symposium, Eurotech presented EKOR(TM) for use in a variety of applications
        at
        Department of Energy ("DOE") sites to various waste management professionals.
        Specifically, Eurotech had discussions with the Savannah River Site (or SRS,
        near Aiken, South Carolina), Oak Ridge National Laboratory (or ORNL, in Oak
        Ridge, Tennessee), Fernald Closure Site (in Fernald, Ohio), Battelle Memorial
        Institute (or BMI, in Columbus, Ohio), Rocky Flats Environmental Testing
        Site
        (or RFETS, near Denver, Colorado), Los Alamos National Laboratory (or LANL,
        Los
        Alamos, New Mexico), Lawrence Livermore National Laboratory (or LLNL, Livermore,
        California), Hanford Reservation (Richland, Washington) and Idaho National
        Engineering & Environmental Laboratory (or INEEL, Idaho Falls, Idaho).
        Eurotech also had a number of meetings with DOE staff at their headquarters
        in
        Washington, D.C. and Germantown, Maryland. This included the introduction
        to
        companies doing project and management work at DOE and commercial sites,
        and had
        arranged demonstrations at the above mentioned facilities and at its production
        facility in California for staff from RFETS and ORNL. Early demonstrations
        of
        the Sealer product, as a solution that required
  16
  mixing
        of
        a paste and catalyst and significant monitoring of specialized application
        equipment, revealed that the Sealer product needed further development to
        be
        more user-friendly. The Sealer product is a paste, with the consistency of
        thick
        brick mortar. While this thickness enables Sealer to be applied to vertical
        walls, tanks, drums, and ceilings, a sprayable version of Sealer, or even
        a
        thinner paste version that could be more easily applied, would be more
        user-friendly. To address this issue, Sealer Plus was developed, which Eurotech
        introduced in November 2001 and initially demonstrated at BMI in January
        2002.
        Sealer Plus is a low viscosity version of NuCap(TM). Sealer that can be sprayed
        with high-pressure paint spray equipment. We seek to further develop Sealer
        to
        make the Sealer more easily applied in a foam consistency, which we believe
        will
        make Sealer more user-friendly. The demonstration of NuCap(TM) Grout at INEEL
        enabled Eurotech to demonstrate its ability to operate in an underwater
        environment. INEEL has certain components that are being stored underwater
        because of their behavior when exposed to air. Global Matrechs has prepared
        specially-requested samples for further testing at INEEL and Hanford Where
        Global Matrechs had a successful demonstration in April of this
        year.
 
 During
        2002, NuCap(TM) was selected as an approved waste stabilization material
        at
        multiple DOE sites. This selection meant that NuCap(TM) had passed the
        applications testing necessary to be judged usable on specific forms of waste
        at
        specific sites. For example, Battelle Memorial Institute, Columbus, Ohio,
        under
        a site decommissioning contract from the DOE, applied NuCap(TM) within a
        series
        of reactor drain pipes to immobilize residual radioactive contamination,
        to
        protect workers, the public and the environment during facility sectioning
        and
        disposal. NuCap(TM) is being considered by the Pacific Northwest National
        Laboratory, a DOE national laboratory, to stabilize Alpha Dust in the H-Basin
        Fuel Pool, which could provide protection to workers during facility
        decommissioning. NuCap(TM) has been tested at the DOE Argonne National
        Laboratory to immobilize surrogate radioactive calcined waste and salts.
        Initial
        evaluations of NuCap(TM) is promising for applications in the area of High
        Level
        Waste Immobilization.
 
 During
        2003 and 2004, the Company manufactured a number of samples for potential
        customers in the European community. The Company is in the process of completing
        agreements with a commercial partner to manufacture, market and deliver
        NuCap(TM) to these potential customers.
 
 We
        intend
        to market NuCap(TM) for use in nuclear waste encapsulation and nuclear debris
        fixation for nuclear cleanup projects, nuclear facility decontamination and
        decommissionings, and nuclear waste transportation and disposal. As part
        of this
        strategy, we intend to seek affiliations and joint ventures with large prime
        contractors in the nuclear industry on a project by project basis. While
        we see
        opportunities for NuCap(TM) and our other technologies, however, we can offer
        no
        assurance that our efforts will be more successful, or as successful as
        Eurotech's efforts.
 
 HNIPU
 
 HNIPU
        is
        a hybrid polyurethane that does not involve the toxic isocyanates utilized
        in
        the production of conventional polyurethane and that has lower permeability
        and
        greater chemical resistance qualities as compared to conventional polyurethane.
        We believe that these advanced characteristics, in addition to the potential
        reduced risk from the elimination of isocyanates in its production, make
        HNIPU
        superior to conventional polyurethanes in connection with their use in a
        number
        of industrial application contexts such as manufacturing automotive components,
        paints, foams, plastics and truck bed liners; aerospace sealants, industrial
        adhesives, coatings, flooring, glues; industrial equipment and machinery;
        and
        consumer goods such as appliances, footwear, furniture and plastic products.
        Because of HNIPU's
  17
  lower
        permeability and improved chemical resistance, we think that industrial paints
        and coatings are a potential target market for HNIPU.
 
 MARKETING
        OF HNIPU
 
 On
        November 17, 2003, Global Matrechs entered into an agreement with Environmental
        Friendly Materials, GMBH ("EFM"), a German company, for the manufacture and
        sale
        of HNIPU for the European marketplace. EFM has been given non-exclusive license
        to manufacture and distribute HNIPU and intends to manufacture it at various
        locations across Europe. We have applied for approval to sell HNIPU in the
        United States from the EPA and if and when we are on their approved list
        of
        products we expect to complete another non-exclusive agreement for the North
        American territory.
 
 Because
        HNIPU represents a new class of polymer compounds closely related to
        polyurethanes, we expect that a variety of products will emerge from the
        development of variations and improvements to the existing HNIPU binders
        that
        have worldwide industrial applications. For this reason, we intend to seek
        to
        license HNIPU to large industrial polymer and chemical manufacturers who
        can
        sell the various HNIPU binders to international industrial manufacturers.
        The
        focus will be to transfer the existing binder product technologies under
        licensing agreements from the laboratory to the manufacturer. We intend to
        follow up on existing agreements, current evaluations, and active discussion
        for
        HNIPU binder production.
 
 EMR/AC
 
 Eurotech
        licensed certain rights to Acoustic Core and Electromagnetic Radiography
        for
        specific markets, consisting of (i) illicit material detection, (ii) above
        surface or subsurface nuclear or other hazardous material remediation, (iii)
        marine dredging sites (inland and ocean) and (iv) oil exploration, from Trylon
        Metrics, Inc. pursuant to an agreement dated July 2001, as amended in October
        2001. Eurotech licenses the illicit materials detection application to another
        company and licenses the remaining three applications to Global
        Matrechs.
 
 Both
        technologies use a non-contact inspection methodology that creates signals
        that
        are then interpreted by a digital analyzer that allows identification of
        elemental or compound materials from their empirically determined properties.
        Acoustic Core is used in applications that are predominately wet (i.e.,
        riverbeds, wetlands, etc.) and EMR is used in dry environments. Completed
        research and development studies have verified that Acoustic Core and EMR
        can
        identify materials by their acoustic or electromagnetic signatures, but the
        feature of these technologies that we believe is unique is their ability
        to map
        in three dimensions the existence of target materials at extremely low
        concentrations at depths of up to 300 feet. The capabilities of these
        technologies complement the NuCap(TM) product line by, for example, allowing
        tanks of waste to be monitored for leaks and the leaks, when discovered,
        targeted for repair. Acoustic Core and EMR may have applications in markets
        that
        involve subsurface evaluation, from contamination discovery and monitoring
        to
        resource discovery.
 
 Both
        Acoustic Core and EMR have been tested at DOE sites (Oak Ridge and INEEL)
        on a
        variety of materials. Sandia National Laboratory conducted an in-depth
        evaluation of the science behind these technologies in 1999 and concluded
        that
        they provide a unique capability to identify and map in three dimensions
        low
        levels of material concentration at substantial depths. We believe that these
        products are more cost effective than other current methods. During the fourth
        quarter of 2001, Eurotech submitted several proposals to the DOE for evaluation
        of areas of potential contamination and to
  18
  commercial
        entities being pressured by the EPA for potential subsurface contamination,
        but
        these technologies have not been selected for inclusion in currently funded
        programs to date.
 
 MARKETING
        OF EMR/AC
 
 In
        conjunction with the marketing of NuCap(TM), we intend to market EMR/AC(TM)
        to a
        variety of facilities requiring detection of nuclear waste contaminants and
        other environmentally hazardous substances in subsurface soil and ground
        water
        resulting from leaking storage tanks or toxic chemical spills. We are currently
        seeking a manufacturing partner for EMR/AC(TM), and we are waiting until
        we find
        such a partner to pursue our marketing strategy for EMR/AC(TM).
 
 RAD-X
 
 Rad-X
        is
        a technology intended for use as an interior fire-resistant fixative for
        equipment or facilities with contaminated surfaces. Rad-X differs from NuCap(TM)
        Sealer Plus in that it is not weather-resistant and does not have the chemical,
        radiation and aging resistance needed for long-term protection. Rad-X provides
        a
        low-cost fixative for surfaces that are scheduled for disassembly or
        dismantlement and need strong adhesion (glue-down of contaminated particles
        that
        could become airborne) and fire-resistance properties. Rad-X was first marketed
        in 2001.
 
 MARKETING
        OF RAD-X
 
 According
        to Eurotech's public filings, Eurotech had invested less than $20,000 in
        the
        creation of the Rad-X product line. Rad-X was initially created for feasibility
        testing at DOE's Rocky Flats Environmental Testing Site, or RFETS, and was
        delivered in late September 2001. Testing of Rad-X at other laboratories
        occurred in November 2001. This testing confirmed its fire and smoke resistance
        properties. We believe that Rad-X can satisfy proposed DOE fire/smoke criteria
        for certain specialized applications. Eurotech has marketed Rad-X in connection
        with NuCap(TM) at DOE sites that performed decommissioning or hazardous material
        management in 2002, and if the opportunity arises, we will continue this
        strategy. We are currently seeking a manufacturing partner for Rad-X, and
        we are
        waiting until we find such a partner to pursue our marketing strategy for
        Rad-X.
 
 RAPIDLY
        BIODEGRADABLE HYDROPHOBIC MATERIAL ("RBHM")
 
 RBHM
        is a
        new, hydrophobic (water resistant), strong, cheap, and completely biodegradable
        cellulose-based composite material. RBHM is intended to improve the properties
        of both paper and plastic packaging materials. The material can be used as
        a
        commodity in trade, industry, and agriculture for a wide range of applications.
        To date, most attempts to produce biodegradable products for consumers have
        focused on developing plastics that could biodegrade. RBHM takes a different
        approach - making cellulose-based material with the same physical properties
        as
        plastic, except the material biodegrades completely in the same time as regular
        paper bags. RBHM consists of cellulose (paper) and biodegradable organic
        additives. Biodegradation of RBHM occurs in wet soil through normal enzymatic
        action of various microorganisms - fungi and bacteria. We believe that the
        main
        advantages of RBHM are:
 
 ·
              Strength.
                  RBHM's strength characteristics, especially combined with low elongation
                  and acquired water resistance of the material, make RBHM unique
                  and
                  desirable for packaging
                  applications.
 
 19
 ·
              Water
                  Resistance. RBHM keeps water resistance for one week. Most of the
                  existing
                  biodegradable packaging products are not hydrophobic at all and
                  will fail
                  if wetted during use.
 
 ·
              Biodegradable
                  Nature. Enzymes begin breaking down RBHM in the presence of moisture
                  in
                  natural environments such as soil. Then microorganisms decompose
                  the
                  material with rapidly occurring metabolic reactions. RBHM is completely
                  converted into carbon dioxide, water, and biomass in two to three
                  months
                  in wet soil.
 
 ·
              Reproducible
                  Natural Raw Materials. RBHM uses cellulose, a widely available
                  and
                  renewable raw material.
 
 ·
              Relatively
                  Low Cost. The main obstacle to widespread use of biodegradable
                  polymers
                  has been cost. Biodegradable polymers are traditionally significantly
                  more
                  expensive than commodity polymers. The high costs involved in the
                  production of biodegradable polymers means that they cannot compete
                  favorably with conventional polymers. This high cost has deterred
                  the
                  widespread adoption of biodegradable plastics in major consumer
                  applications. At an additional cost of less than 10%, and sometimes
                  less
                  depending on the type of material treated, materials treated with
                  RBHM
                  provide plastic-like performance and are
                  biodegradable.
 
 We
        believe that there is a large number of potential applications for a technology
        like RBHM. Because RBHM can be applied on sheets, films and fibers, it is
        suitable for a range of single-use products, including, among others, grocery
        and waste bags, the top, and back sheets of disposable diapers, and disposable
        eating utensils.
 
 MARKETING
        OF RBHM
 
 Eurotech
        had marketed RBHM through its web site during 2001 and 2002. We are currently
        seeking a manufacturing partner for RBHM, and we are waiting until we find
        such
        a partner to pursue our marketing strategy for RBHM, which will be through
        our
        website.
 
 LIQUID
        EBONITE MATERIAL ("LEM")
 
 LEM
        is a
        synthetic liquid rubber with enhanced mechanical, permeability and
        anti-corrosive qualities as compared to conventional sheet rubber coverings.
        In
        laboratory testing, coverings made with LEM, as compared to conventional
        sheet
        rubber coverings, have displayed greater resistance to harsh chemicals such
        as
        acids, alkalis and benzene, and have been successfully applied to intricate
        and
        complex surfaces such as sieve meshing. Based on the physical and chemical
        properties of LEM, and on the basis of such tests, we believe that LEM coverings
        are capable of providing superior protection to small-diameter piping and
        to the
        intricate parts of pumps, fans, and centrifuge rotors. LEM can be applied
        to
        form surface coverings using standard coating techniques, including spraying
        and
        dipping.
 
 MARKETING
        OF LEM
 
 Eurotech
        had marketed LEM through its web site during 2001 and 2002. We are currently
        seeking a manufacturing partner for LEM, and we are waiting until we find
        such a
        partner to pursue our marketing strategy for LEM, which will be through our
        website.
 
 20
 FIRESIL(TM)
        - FIRE PROTECTION ORGANOMINERAL COATING - FIRE-STOP FOR RESIDENTIAL AND
        COMMERCIAL APPLICATION
 
 Firesil(TM)
        is an environmentally compatible fire-stop material with good adhesion
        properties to hydrophilic and hydrophobic surfaces and exhibits strong fire
        resistance, thermostability, and water resistance characteristics.
 
 MARKETING
        OF FIRESIL(TM)
 
 We
        intend
        to market Firesil(TM) directly to corporations that are prospective candidates
        for sub-licensing the technology. Eurotech had Firesil(TM) tested by an
        accredited lab to ASTM protocol and it passed these tests. We are currently
        seeking a manufacturing partner for Firesil(TM), and will wait until we find
        such a partner to pursue a marketing strategy for Firesil(TM).
 
 COMPETITION
 
 The
        licensed technologies are targeted at highly competitive markets. Due to
        the
        nature and size of some of the markets and some of the projects for which
        the
        licensed technologies may be applicable, there are sometimes other competitors
        who may have significantly greater name recognition and greater financial
        and
        other resources than we do. Many of these competitors also have technologies
        that are very competitive with the licensed technologies. For example, NuCap(TM)
        is a composite material based on a silicone polymer that is different from
        other
        silicones produced by manufacturers such as GE Silicones and Dow Corning,
        but
        the products produced by those manufacturers compete with NuCap(TM). As another
        example, some of the major producers of polyurethanes used in coatings and
        finishes, sealants and adhesives, which products may compete with the HNIPU
        technology, include Akzo Nobel, Dow Chemical and Kansai.
 
 INTELLECTUAL
        PROPERTY RIGHTS
 
 GENERAL
 
 Many
        entities, including some developing technologies similar to ours, now have
        and
        may in the future obtain patents and other intellectual property rights that
        cover or affect products or services directly or indirectly related to the
        technologies that we license from Eurotech. In general, if a court determines
        that one or more of the licensed technologies infringes on intellectual property
        held by others, we would be required to cease infringing on intellectual
        property held by others, we would be required to cease developing or marketing
        those products or to obtain licenses to develop and market those products
        from
        the holders of the intellectual property, or to redesign those products in
        such
        a way as to avoid infringing the patent claims. If a competitor holds
        intellectual property rights, the entity might be predisposed to exercise
        its
        right to prohibit our use of its intellectual property in our products and
        services, thus impacting our competitive position.
 
 We
        cannot
        assure you that we are aware of all patents and other intellectual property
        rights that the licensed technologies may potentially infringe. In addition,
        patent applications in the United States are confidential until the Patent
        and
        Trademark Office issues a patent and, accordingly, we cannot evaluate the
        extent
        to which the licensed technologies may infringe claims contained in pending
        patent applications. Further, it is often not possible to determine definitively
        whether a claim of infringement is valid, absent protracted litigation, which
        we
        may not have the resources to pursue.
 
 We
        cannot
        estimate the extent to which we may be required in the future to obtain licenses
        with respect to patents held by others and the availability and cost of any
        such
        licenses. Those costs, and their
  21
 impact
        on
        our financial position, could be material. Damages in patent infringement
        cases
        can also include a tripling of actual damages in certain cases. To the extent
        that we are required to pay royalties to third parties to whom we are not
        currently making payments, these increased costs of doing business could
        negatively affect our liquidity and operating results.
 
 In
        addition, there may be entities developing and marketing technologies which
        infringe on patents and intellectual property rights held by us. Patent
        infringement claims are protracted and costly. We may not have the resources
        to
        adequately protect our intellectual property. Any expenditures to pursue
        intellectual property rights by us could negatively affect us.
 
 NUCAP(TM)
        INTELLECTUAL PROPERTY RIGHTS
 
 The
        Euro-Asian Physical Society (EAPS) has patented EKOR(TM) in the U.S., Russia,
        and other industrialized countries. On March 23, 1999, the U.S. Patent and
        Trademark Office issued to EAPS Patent No. 5,886,060 on the process for
        manufacturing one of the EKOR(TM) compound variants. Pursuant to sub-license
        agreement, Eurotech became the exclusive global licensee of all right, title
        and
        interest (inclusive of all patent and other intellectual property rights
        now or
        in the future) in EKOR(TM). We are the sole licensee of Eurotech for NuCap(TM)
        and have renamed the product NuCap(TM). We do not know if additional proprietary
        technology that we have developed relating to NuCap(TM) will prove patentable.
        We have applied for trademark protection for the mark "NuCap" with the U.S.
        Patent and Trademark Office.
 
 HNIPU
        INTELLECTUAL PROPERTY RIGHTS
 
 U.S.
        Patent Number 6120905 for HNIPU network polymers and composites formed there
        from was issued on September 19, 2000. Patents for this technology have also
        been issued in Europe (EP 1088021, PCT WO 9965969) and Australia (4441099).
        These patents have been assigned to Eurotech. The method of synthesis of
        cyclocarbonates and nonisocyanate or hybrid nonisocyanate network polyurethanes
        is patent applied for in the United States, which application has been assigned
        to Eurotech. We are a licensee of Eurotech. As a regular part of our business
        activities, we intend to submit patent applications to protect our developed
        intellectual property, improvements and extensions, although we do not know
        whether any technologies that we develop will be patentable.
 
 EMR/AC
        INTELLECTUAL PROPERTY RIGHTS
 
 U.S.
        Patent Number 4,922,467 for Acoustic Detection Apparatus (Acoustic Core)
        was
        issued to David Caulfield on May 1, 1990 and subsequently assigned to Ocean
        Data
        Equipment Corporation. This patent was significantly improved, for which
        U.S.
        Patent Number 6,545,945 was issued on April 8, 2003. Electromagnetic Radiography
        technology has been protected under trade secret laws. The worldwide exclusive
        licensing rights to these technologies for the detection of nuclear and
        hazardous materials at nuclear remediation and marine dredging sites, and
        for
        oil exploration, were obtained by Eurotech and, except to the extent related
        to
        the illicit materials detection application of these technologies, were
        subsequently licensed to Global Matrechs.
 
 RAD-X
        INTELLECTUAL PROPERTY RIGHTS
 
 Eurotech
        had protected its interest in Rad-X by treating the formulation as proprietary
        property and entering into confidentiality agreements with its
        partners.
 
 22
 RBHM
        INTELLECTUAL PROPERTY RIGHTS
 
 Rademate,
        an entity in which Eurotech is an investor, was issued U.S. Patent #6294265
        for
        "Hydrophobic biodegradable cellulose-containing material" for RBHM on September
        25, 2001. Rademate has one application with the Israeli Patent Office (126306),
        dated September 23, 1998, which is pending. Eurotech has licensed to us the
        intellectual property rights that it has in RBHM.
 
 LEM
        INTELLECTUAL PROPERTY RIGHTS
 
 Eurotech
        has acquired the intellectual property rights associated with U.S. Patent
        #6303683 (issued October 16, 2001) for Liquid Ebonite mixtures and coatings,
        and
        concretes formed therefrom and an application filed under the Patent Cooperation
        Treaty (PCT/US99/16883) on July 26,1999 by Dr. Igor Figovsky, the inventor
        of
        these technologies. We are a licensee of Eurotech.
 
 FIRESIL(TM)
        INTELLECTUAL PROPERTY RIGHTS
 
 Eurotech
        acquired the formula for Firesil(TM) from Dr. Figovsky, its inventor, in
        2000.
        Eurotech terminated previously initiated patent applications and has elected
        to
        protect this formula as a trade secret. Eurotech owns the federally registered
        trademark "Firesil". We are a licensee of Eurotech.
 
 GOVERNMENT
        REGULATION
 
 The
        use
        of NuCap(TM) is subject to U.S. environmental safety laws and regulations
        pertaining to the safe use and containment of hazardous and nuclear waste.
        Based
        on the results of tests conducted by Eurotech, we believe that the NuCap(TM)
        compounds meet current applicable regulations for safe use, containment and
        storage of hazardous and nuclear materials. It is, however, possible that
        more
        stringent or different standards may be adopted or applied in the future
        that
        might influence the intended use for NuCap(TM) and it is also possible that
        the
        standards, if adopted or applied, may materially increase the cost to us
        of
        using NuCap(TM) compounds or prevent their use altogether. We are not aware
        of
        any other U.S. or foreign laws or regulations that significantly hinder the
        marketing, sale, or use of NuCap(TM) based materials.
 
 The
        manufacture of HNIPU and operation of EMR/AC(TM) equipment is not expected
        to be
        impacted adversely by government regulations. HNIPU's MSDS identifies the
        limited risks associated with the manufacture, handling and application of
        the
        non-isocyanate polyurethane. OSHA outlines operational regulations as related
        to
        acoustic frequencies and power levels as might be applied to EMR/AC(TM)
        operations. We have currently applied to the EPA for approval of HNIPU to
        be
        sold in the United States.
 
 The
        manufacture and use of HNIPU is subject to U.S. environmental safety laws
        and
        regulations pertaining to the safe use of chemicals and polymeric materials.
        While HNIPU does not use highly toxic compounds like isocyanates, it is still
        subject to governmental regulations, but based on preliminary assessments
        by
        Eurotech we believe that HNIPU compounds will meet current and future
        regulations. If we are successful in licensing various HNIPU binders to chemical
        and polymer manufacturers, we expect that the licensees will bear the costs
        of
        applying for governmental approvals required for manufacturing and industrial
        usage. We are not aware of any other U.S. or foreign laws or regulations
        that
        significantly hinder the marketing, sale, or use of HNIPU based
        materials.
 
 23
  Specialty
        Lighting
 
 True
        To
        Form designs, develops, manufactures and sells specialty lighting products
        to
        targeted segments of the traditional lighting industry and has recently
        established a division that will focus on the homeland security market. True
        To
        Form designs, manufactures and markets high-end lighting and architectural
        products for commercial, hospitality and residential applications, including
        pendants, surface and ceiling luminaries, table and floor lamps, commercial
        down-lights, bath fixtures, and custom fixtures.
 
 SALES
        AND
        MARKETING
 
 True
        To
        Form markets primarily to architects, interior designers, lighting consultants
        and high-end designer showrooms.
 
 CUSTOMERS
 
 The
        Company's specialty fixtures subsidiary has recently worked on projects for
        Wynn
        Design and Development, The Mandalay Bay Group and the Luxor Hotel.
 
 RESULTS
        OF OPERATIONS
 
 THREE
        MONTHS ENDED MARCH 31, 2005 AND 2004
 
 *Net
        Sales* .
        Net
        sales from $620 in the quarter ended March 31, 2004 compared to $369,681
        in the
        quarter ended March 31, 2005. Revenues in the quarter ended March 31, 2004
        consisted of sales of NuCap(TM) and are recognized at the time that products
        are
        shipped or services are provided. Revenues in the quarter ended March 31,
        2005
        consisted of sales from our True To Form Ltd. division, acquired on December
        31,
        2004.
 
 *Cost
        Of Sales* .
        Cost of
        sales includes the cost of materials, handling, shipping, and any associated
        customs clearance costs. Cost of sales increased by $147,645 from the quarter
        ended March 31, 2004 as a result of cost of sales from our True to Form Ltd.
        division.
 
 *Gross
        Profit* .
        Gross
        profit increased from $62 in the quarter ended March 31, 2004 to $221,478
        in the
        quarter ended March 31, 2005. This reflects the results from our acquisition
        of
        True To Form.
 
 *General
        And Administrative* .
        General
        and administrative expense includes salaries for administrative personnel,
        insurance and other administrative expenses, as well as expenses associated
        with
        maintaining our records and SEC reporting. General and administrative expenses
        increased from $ 262,566 in the quarter ended March 31, 2004 to $612,611
        in the
        quarter ended March 31, 2005. This increase is primarily due to increased
        fees
        being paid to consultants and attorneys to put the Company's long term financing
        in place, along with the general and administrative expenses incurred at
        our
        True To Form Ltd. division, which was acquired on December 31,
        2004.
 
 *Depreciation
        And Amortization* .
        Amortization expense of $49,311, which represents three months of amortization
        of the intangible licensed technologies, was recognized in the quarter ended
        March 31, 2005 and 2004. Depreciation expense of $1,957 represents depreciation
        expense on assets in service at our True to Form Ltd. division.
 
 24
 *Other
        Income* .
        Other
        income in the quarter ended March 31, 2005 consisted of $1,225 in interest
        charged to Tulix for interest on their notes.
 
 *Interest
        Expense.* Interest
        expense for the quarter ended March 31, 2005 was $1,810,560. It consisted
        of
        $1,795,989 of interest in connection with the beneficial conversion features
        and
        amortization of warrant features related to convertible notes, and $14,571
        in
        accrued interest expense on other borrowings.
 
 Interest
        expense for the quarter ended March 31, 2004 consisted of $74,412 in interest
        charges on the Series B, C, D and E preferred stock and $7,800 in interest
        expense on the notes related to the Licensed Technologies Division.
 
 *Other
        Expenses* .
        Other
        expenses for the quarter ending March 31, 2005 consisted of $64,918 due to
        the
        change in fair value of our warrants. Other expenses for the year ending
        March
        31, 2004 consisted of $13,460 due to the change in fair value of the derivative
        conversion feature.
 
 LIQUIDITY
        AND CAPITAL RESOURCES
 
 Our
        sources of capital are extremely limited. We have incurred operating losses
        since inception and as of March 31, 2005, we had an accumulated deficit of
        $32,678,402 and a working capital deficit of $3,791,936.
 
 On
        September 30, 2003, we entered into a private equity credit agreement with
        Brittany Capital Management LLC under which we had an option to issue and
        sell
        to Brittany up to $10,000,000 of our common stock over three years. In
        connection with this agreement, we filed a registration statement on Form
        SB-2
        with the Securities Exchange Commission to register 25,651,000 shares of
        our
        common stock for resale by Brittany and Econ Investor Relations. However,
        the
        registration statement was not declared effective by the Securities and Exchange
        Commission. In December 2004, the private equity credit agreement terminated
        in
        accordance with its terms, and we withdrew the registration
        statement.
 
 In
        June
        2004 we entered into a second exchange agreement with Brittany to acquire
        certain of their shares of our common stock at a price of $0.10 per share.
        On
        September 22, 2004, we issued 490.5 shares of our Series I convertible preferred
        stock to Brittany in exchange for Brittany's surrender of 4,905,000 shares
        of
        our common stock. In addition Brittany agreed to loan us $100,000 under a
        convertible note. As of March 31, 2005 we had borrowed $75,000 under this
        agreement.
 
 On
        October 19, 2004, the Company entered into a Securities Purchase Agreement
        with
        Southridge Partners LP. Under the Securities Purchase Agreement Southridge
        shall
        purchase a nonnegotiable 2% secured convertible promissory note with a maturity
        date of October 19, 2006 in the amount of $250,000. Southridge may, at its
        option, convert the note into Common Stock at a conversion price of $0.02.
        Conversion rights are restricted in that Southridge may not at any time have
        beneficial ownership of more than 4.999% of the total number of issued and
        outstanding shares of Common Stock. Should the Company's Common Stock fall
        below
        $0.03 cents for ten consecutive trading days Southridge may force prepayment
        at
        140% of the principle amount. Also as a part of the Securities Purchase
        Agreement the Company issued a Common Stock Purchase Warrant entitling
        Southridge to purchase 10,000,000 shares of Common Stock at an exercise price
        of
        $0.025 per share. Conversion rights are restricted in that Southridge may
        not at
        any time have beneficial ownership of more than 4.999% of the total number
        of
        issued and outstanding shares of Common Stock. The Warrant may be exercised
        on a
        "cashless" basis at the election of the holder.
 
 25
 On
        October 21, 2004, the Company entered into a Securities Purchase Agreement
        with
        Dean M. DeNuccio. Under the Securities Purchase Agreement Mr. DeNuccio shall
        purchase a nonnegotiable 2% secured convertible promissory note with a maturity
        date of October 21, 2006 in the amount of $25,000. Mr. DeNuccio may, at his
        option, convert the note into Common Stock at a conversion price of $0.02.
        Conversion rights are restricted in that Mr. DeNuccio may not at any time
        have
        beneficial ownership of more than 4.999% of the total number of issued and
        outstanding shares of Common Stock. Should the Company's Common Stock fall
        below
        $0.03 cents for ten consecutive trading days Mr. DeNuccio may force prepayment
        at 140% of the principle amount. Also as a part of the Securities Purchase
        Agreement the Company issued a Common Stock Purchase Warrant entitling Mr.
        DeNuccio to purchase 1,000,000 shares of Common Stock at an exercise price
        of
        $0.025 per share. Conversion rights are restricted in that Mr. DeNuccio may
        not
        at any time have beneficial ownership of more than 4.999% of the total number
        of
        issued and outstanding shares of Common Stock. The Warrant may be exercised
        on a
        "cashless" basis at the election of the holder.
 
 On
        November 5, 2004, the Company entered into a Securities Purchase Agreement
        with
        Colonial Fund, LLC ("Colonial"). Under the Securities Purchase Agreement
        Colonial shall purchase a nonnegotiable 2% secured convertible promissory
        note
        with a maturity date of November 5, 2006 in the amount of $50,000. Colonial
        may,
        at their option, convert the note into Common Stock at a conversion price
        of
        $0.02. Conversion rights are restricted in that Colonial may not at any time
        have beneficial ownership of more than 4.999% of the total number of issued
        and
        outstanding shares of Common Stock. Should the Company's Common Stock fall
        below
        $0.03 cents for ten consecutive trading days Colonial may force prepayment
        at
        140% of the principle amount. Also as a part of the Securities Purchase
        Agreement the Company issued a Common Stock Purchase Warrant entitling Colonial
        to purchase 2,000,000 shares of Common Stock at an exercise price of $0.025
        per
        share. Conversion rights are restricted in that Southridge may not at any
        time
        have beneficial ownership of more than 4.999% of the total number of issued
        and
        outstanding shares of Common Stock. The Warrant may be exercised on a "cashless"
        basis at the election of the holder.
 
 On
        November 10, 2004, the Company entered into a Securities Purchase Agreement
        with
        Deer Creek. Under the Securities Purchase Agreement Deer Creek shall purchase
        a
        nonnegotiable 2% secured convertible promissory note with a maturity date
        of
        November 10, 2006 in the amount of $50,000. Deer Creek may, at their option,
        convert the note into Common Stock at a conversion price of $0.02. Conversion
        rights are restricted in that Deer Creek may not at any time have beneficial
        ownership of more than 4.999% of the total number of issued and outstanding
        shares of Common Stock. Should the Company's Common Stock fall below $0.03
        cents
        for ten consecutive trading days Deer Creek may force prepayment at 140%
        of the
        principle amount. Also as a part of the Securities Purchase Agreement the
        Company issued a Common Stock Purchase Warrant entitling Deer Creek to purchase
        2,000,000 shares of Common Stock at an exercise price of $0.025 per share.
        Conversion rights are restricted in that Southridge may not at any time have
        beneficial ownership of more than 4.999% of the total number of issued and
        outstanding shares of Common Stock. The Warrant may be exercised on a "cashless"
        basis at the election of the holder.
 
 SECOND
        PURCHASE AGREEMENT WITH SOUTHRIDGE PARTNERS
 
 On
        January 31, 2005, we entered into a Second Securities Purchase Agreement
        with
        Southridge Partners LP, one of our existing investors, whereby we agreed
        to sell
        a convertible promissory note in the principal amount of $250,000 and warrant
        to
        purchase up to 10,000,000 shares of our common stock to Southridge in exchange
        for its $250,000 investment. Under the terms of this purchase agreement,
  26
  Southridge
        may, at its option, and at any time prior to July 1, 2005, purchase an
        additional note in the principal amount of up to $1,500,000, and otherwise
        on
        substantially the same terms as the note issued on January 31,
        2005.
 
 The
        note
        is convertible, at the option of the holder, into shares of our common stock
        at
        a conversion price of $0.02 per share. Southridge may require us to repurchase
        some or all of its note if the market price of our common stock falls below
        $0.03 per share for ten (10) consecutive trading days, at a repurchase price
        equal to 140% of the principal amount of the note. In the event we default
        under
        the terms of the note, the entire outstanding principal (and any outstanding
        interest accrued thereon) shall become immediately due and payable, and the
        interest rate will rise to 18% per annum.
 
 We
        have
        secured the payment of the notes with a subordinated security interest in
        our
        accounts, general intangibles, inventories, and other collateral. In addition,
        in the event we propose to register securities under the Securities Act of
        1933,
        as amended, we are required to notify Southridge in advance of such registration
        and, at its request (subject to limited exceptions), include the shares of
        our
        common stock underlying the note and warrant on the registration statement
        filed
        in connection with such registration (and assume any expenses associated
        therewith).
 
 The
        warrant has an expiration date of January 31, 2010. It contains a cashless
        exercise provision whereby the holder may pay the exercise price associated
        with
        any exercise by having us withhold a number of shares otherwise issuable
        upon
        such exercise having a fair market value equal to the applicable aggregate
        exercise price. In the event such provision is used with respect to an exercise,
        we would receive no proceeds upon such exercise.
 
 ENTRANCE
        INTO EXCHANGE AGREEMENT WITH WOODWARD LLC
 
 On
        January 31, 2005, we entered into an Exchange Agreement with Woodward LLC
        pursuant to which we acquired promissory notes, and have accordingly assumed
        all
        rights pertaining thereto, issued by Eurotech Ltd. The notes are currently
        in
        default and have an aggregate outstanding principal amount of $290,000. The
        notes carry a default annual interest rate of 18% and are past due in their
        entirety. In exchange for these notes, we issued to Woodward a promissory
        note
        in the principal amount of $250,000.
 
 Under
        the
        terms of the Exchange Agreement, in the event we propose to register securities
        under the Securities Act of 1933, as amended, we are required to notify Woodward
        in advance of such registration and, at its request (subject to limited
        exceptions), include the shares of our common stock underlying the note on
        the
        registration statement filed in connection with such registration, and assume
        any expenses associated therewith.
 
 SOUTHRIDGE
        EXERCISES OPTION TO PURCHASE ADDITIONAL NOTES AND WARRANTS
 
 On
        March
        2, 2005, Southridge Partners LP exercised its option to purchase an additional
        note and warrant under its Second Securities Purchase Agreement. In connection
        with such exercise, we issued to Southridge a convertible promissory note
        in the
        principal amount of $175,000 and a warrant to purchase up to 7,000,000 shares
        of
        our common stock in exchange for its $175,000 investment. The note is
        convertible, at the option of the holder, into shares of our common stock
        at a
        conversion price of $0.02 per share. Southridge may require us to repurchase
        some or all of its note if the market price of our common stock falls below
        $0.03 per share for ten (10) consecutive trading days, at a repurchase price
        equal to 140% of the principal amount of the note. In the event we default
        under
        the terms of the note,
  27
  the
        entire outstanding principal (and any outstanding interest accrued thereon)
        shall become immediately due and payable, and the interest rate will rise
        to 18%
        per annum. The note matures on March 2, 2007.
 
 SOUTHRIDGE
        EXERCISES OPTION TO PURCHASE ADDITIONAL NOTES AND WARRANTS
 
 On
        April
        11, 2005, Southridge Partners LP exercised its option to purchase an additional
        note and warrant pursuant to the Second Securities Purchase Agreement. In
        connection with such exercise, we issued to Southridge a convertible promissory
        note in the principal amount of $125,000 and a warrant to purchase up to
        5,000,000 shares of our common stock to Southridge in exchange for its $125,000
        investment. The note is convertible, at the option of the holder, into shares
        of
        our common stock at a conversion price of $0.02 per share. Southridge may
        require us to repurchase some, or all, of its note if the market price of
        our
        common stock falls below $0.03 per share for ten (10) consecutive trading
        days,
        at a repurchase price equal to 140% of the principal amount of the note.
        In the
        event we default under the terms of the note, the entire outstanding principal
        (and any outstanding interest accrued thereon) shall become immediately due
        and
        payable, and the interest rate will rise to 18% per annum. The note matures
        on
        April 11, 2007.
 
 We
        can
        provide no assurance that the financing sources described above, or any other
        financing that we may obtain in the future (if we are able to obtain financing
        from any other sources, and we can provide no assurances that we will be
        able to
        obtain any such financing), will enable us to sustain our operations. The
        aforementioned factors raise substantial doubt about our ability to continue
        as
        a going concern. The financial statements included herein have been prepared
        assuming we are a going concern and do not include any adjustments that might
        result should we be unable to continue as a going concern.
 
 ITEM
        3.
        CONTROLS AND PROCEDURES
 
 EVALUATION
        OF DISCLOSURE CONTROLS AND PROCEDURES
  **Disclosure
        Controls and Procedures**  Our
        principal executive officer, who is also our principal financial
        officer, has concluded that our disclosure controls and procedures (as defined
        in Rule 13a-15(e) under the Securities Exchange Act of 1934,
        as
        amended (the “Exchange Act”)) were not effective as of March 31, 2005 based an
        evaluation of our disclosure controls and procedures, as further described
        below:  **•**
              Our
                  historical financial information related to fiscal 2001 through
                  fiscal 2003 and for the first three fiscal quarters of 2004 accounted
                  incorrectly for certain convertible preferred stock instruments.
                  As such,
                  management has concluded that our historical financial statements
                  should
                  no longer be relied upon.
  **•**
              We
                  have restated historical financial information for the periods
                  required to be presented in this annual report on Form 10-KSB for
                  the year
                  ended December 31, 2004, as amended, to reflect the correct accounting
                  treatment. We have also included in this report four years of restated
                  financial information highlighting the differences resulting from
                  the
                  application of the change in accounting treatment to its historical
                  financial statements.
  **•**
              Finally,
                  we have restated certain financial information contained
                  in this quarterly report on Form
                  10-QSB.
  **Late
                  Reports**
  Due
        to the significant commitment of Company time and resources required
        in connection with the review of our financial statements and the auditing
        of
        our 2004 financial statements, we did not timely file our annual report on
        Form
        10-KSB for the fiscal year ended December 31, 2004 or this quarterly report
        on
        Form 10-QSB.  **Other
                  Issues**
  The
        review also observed other issues that may have contributed to the
        misstatement. These issues relate to staffing, competence and segregation
        of
        duties in our accounting and financial reporting functions and insufficient
        analysis, documentation and review of the selection and application of generally
        accepted accounting principles to significant non-routine transactions. We
        plan
        to address these issues by hiring additional personnel promptly after we
        raise
        additional financing.  **Remedial
                  measures**
  Management
        believes that at this time, in light of the recent addition of
        an outside consultant to assist with some of the highly technical issues
        relating to its capital structure, the risks associated with a lack of
        segregation of duties and limited staff have been largely mitigated. Management
        believes that additional progress in strengthening its controls and procedures
        will continue through the end of fiscal year 2005. Furthermore, management
        intends to hire an accounting professional to increase the our capabilities
        related to interpretive research into complex accounting issues promptly
        after
        we raise sufficient financing to permit it to do so. Finally, management
        will
        periodically reevaluate the situation, and as necessary, will put in place
        additional internal staff and controls to prevent a lack of discipline around
        policies and procedures in our administrative and financial matters.  **Changes
        in Internal Control over Financial Reporting**  As
        described above, management believes that our recent addition of an
        outside consultant to assist with some of the highly technical issues relating
        to our capital structure, we have significantly mitigated the risks associated
        with a lack of segregation of duties that had existed previously.   
 28
  PART
        II.
        OTHER INFORMATION
 
 ITEM
        1.
        LEGAL PROCEEDINGS
 
 LEGAL
        PROCEEDINGS:
 
 On
        February 9, 2005 Global Matrechs, Inc, filed suit in the Supreme Court of
        the
        State of New York, County of New York against Eurotech, Ltd. for its failure
        to
        fulfill its obligations under the license agreement between the parties dated
        May 22, 2003. The suit also seeks the enforcement of the notes issued by
        Eurotech to Woodward, LLC which were assumed by Global Matrechs in the exchange
        agreement between Global Matrechs and Woodward on January 31, 2005. The
        complaint seeks damages totaling $672,677 plus interest and attorney's fees
        which are yet to be determined.
 
 On
        April
        13, 2005 Carey Naddell, CEO of Eurotech, Ltd., filed suit against the Company
        for damages based upon an alleged breach of a written service agreement.
        The
        Company has responded and feels at this time there is no merit to this action.
        We will diligently defend this action.
 
 ITEM
        6.
        EXHIBITS
 
 (a)
        Exhibits
 
 
 Exhibit
                  No.
              Description31.1
              Certification
                  pursuant to Section 302 of the Sarbanes-Oxley Act of
                  200232.1
              Certification
                  pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002
 
  29
  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 thereunto
        duly authorized.
 
  **GLOBAL
                  MATRECHS, INC.**Date:
                  October 7, 2005
              By:
              /s/ 
                  Michael SheppardName:
                  Michael SheppardTitle:
                  President, Chief Executive Officer, and Acting Chief Financial
                  Officer
 
 
  30
  EXHIBIT
        INDEX
 
 Exhibit
                  No.
              Description31.1
              Certification
                  pursuant to Section 302 of the Sarbanes-Oxley Act of
                  200232.1
              Certification
                  pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002
 
             31