**U.S.
        SECURITIES AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
 **__________________**
  **FORM
        10-QSB**
 **__________________**
  **(Mark
        One)**
 x
              QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
  **For
        the quarterly period ended: September 30, 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 incorporation or organization*)
              
              (*IRS
                  Employer*
                *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 o
  As
        of
        November 8, 2005, there were 112,891,276 shares of our common stock, par
        value
        $0.0001 per share, outstanding.
 
 Transitional
        Small Business Disclosure Format (check one): Yes o No x
 
  
 
  **GLOBAL
        MATRECHS, INC.**
  **QUARTERLY
        REPORT ON FORM 10-QSB**
 **FOR
        THE QUARTER ENDED SEPTEMBER 30, 2005**
  
  **TABLE
        OF CONTENTS**
 
 
 **PART
                  I.**
              **FINANCIAL
                  INFORMATION**Item
                  1.
              Financial
                  Statements (unaudited)
              2Consolidated
                  Balance Sheets
              2Consolidated
                  Statements of Operations
              4Consolidated
                  Statements of Cash Flows
              6Notes
                  to Unaudited Consolidated Financial Statements
              8Item
                  2.
              Management’s
                  Discussion and Analysis or Plan of Operations
              13Item
                  3.
              Controls
                  and Procedures
              27**PART
                  II.**
              **OTHER
                  INFORMATION**Item
                  1.
              Legal
                  Proceedings
              29Item
                  6.
              Exhibits
              29










In
      this
      report, “Global Matrechs,” “the Company,” “we,” “us” and “our”
      refer to Global Matrechs, Inc. and its subsidiaries, taken as a whole, unless
      the context otherwise requires; “Greenfield” refers to Greenfield Capital
      Partners, LLC, “$” refers to U.S. dollars and “Brittany” refers to Brittany
      Capital Management Limited LLC.









This
      report contains trademarks, service marks and registered marks of Global
      Matrechs, Inc. and its subsidiaries and other companies, as indicated. Unless
      otherwise provided in this prospectus, as amended and supplemented from time
      to
      time, trademarks identified by (R) and (TM) are registered trademarks or
      trademarks, respectively, of Global Matrechs, Inc. or its subsidiaries. All
      other trademarks are the properties of their respective owners.







Our
      executive offices are located at 90 Grove Street, Suite 201, Ridgefield, CT
      06877, and our phone number is (203) 431-6665.








1





**PART
      I**


**FINANCIAL
      INFORMATION**


**Item
      1. Financial Statements**


**GLOBAL
      MATRECHS, INC.**


**CONSOLIDATED
      BALANCE SHEETS**


**September
                30, 2005**
            
            
            **December
                31,**
              **2004****(unaudited)**
            
            
            **(restated)****ASSETS**CURRENT
                ASSETS:Cash
                and cash equivalents
            
            $
            37,774
            
            $
            131,470Accounts
                receivable, net
            
            
            46,082
            
            
            94,551Inventory
            
            
            185,756
            
            
            67,906Prepaid
                expenses
            
            
            65,082
            
            
            242,110Loan
                to Tulix
            
            
            —
            
            
            72,858TOTAL
                CURRENT ASSETS
            
            
            334,694
            
            
            608,895Fixed
                assets, at cost (net)
            
            
            4,371
            
            
            28,430Deposits
            
            
            2,108
            
            
            2,575Note
                receivable
            
            
            250,000Investment
                in Tulix
            
            
            51,949
            
            
            51,949Intangible
                assets
            
            
            986,223
            
            
            986,223Less:
                Accumulated amortization
            
            
            (460,237
            )
            
            (312,304
            )Goodwill
            
            
            1,469,108
            
            
            1,469,108Intangibles,
                net
            
            
            1,995,094
            
            
            2,143,027TOTAL
                ASSETS
            
            $
            2,638,216
            
            $
            2,834,876


**LIABILITIES
                AND STOCKHOLDERS’ DEFICIT**





CURRENT
                  LIABILITIES:Accounts
                  payable and accrued expenses
              
              $
              704,861
              
              $
              574,236Loans
                  payable
              
              
              184,631
              
              
              182,784Due
                  to officer
              
              
              73,848
              
              
              147,309Current
                  maturities of long-term debt
              
              
              100,000
              
              
              106,860Convertible
                  loans payable, net of discount
              
              
              4,060,195
              
              
              1,327,245Derivative
                  conversion feature - convertible preferred stock
              
              
              680,374
              
              
              1,050,863TOTAL
                  CURRENT LIABILITIES
              
              
              5,803,909
              
              
              3,389,297Note
                  payable
              
              
              250,000Warrant
                  liability
              
              
              1,502,117
              
              
              742,448Long
                  term debt - net of current maturities
              
              
              400,000
              
              
              415,302
  2
  TOTAL
                  LIABILITIES
              
              
              7,956,026
              
              
              4,547,047Convertible
                  preferred stock
              
              
              4,628,211
              
              
              6,128,223STOCKHOLDERS’
                  DEFICIT:Common
                  Stock, $.0001 par value, 300,000,000 shares authorized
                100,049,512
                  shares issued and outstanding at September 30, 2005,
                45,895,431
                  shares issued and outstanding at December 31, 2004
              
              
              10,005
              
              
              4,590Preferred
                  stock, Series H, $.01 par value, 13,500 shares authorized,
                12,442
                  shares issued and outstanding at September 30, 2005,
                convertible,
                  participating, $12,442,000 liquidation value at
                September
                  30, 2005, 13,350 shares issued and outstanding at
                December
                  31, 2004
              
              
              124
              
              
              133Preferred
                  stock, Series I, $.01 par value, 490.5 shares authorized,
                490.5
                  shares issued and outstanding at September 30, 2005 and
                December
                  31, 2004, convertible participating, $49,050 liquidation
                value
                  at September 30, 2005
              
              
              5
              
              
              5Treasury
                  stock, at cost, 5,028,695 shares at September 30, 2005
                and
                  December 31, 2004
              
              
              (327,484
              )
              
              (327,484
              )Additional
                  paid-in capital
              
              
              24,609,582
              
              
              22,844,110Accumulated
                  deficit
              
              
              (34,238,253
              )
              
              (30,361,748
              )TOTAL
                  STOCKHOLDERS’ DEFICIT
              
              
              (9,946,021
              )
              
              (7,840,394
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS’ DEFICIT
              
              $
              2,638,216
              
              $
              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 AND NINE MONTHS**


**ENDED** **SEPTEMBER,
      2005 AND 2004**




**Three
                Months Ended**
            
            **Nine
                Months Ended****September
                30,**
            
            **September
                30,****(unaudited)**
            
            **(unaudited)**2005
            
            2004
              (restated)
            
            2005
            
            2004
              (restated)REVENUES
            
            $
            229,647
            
            $
            —
            
            $
            867,161
            
            $
            620Cost
                of Revenues
            
            
            174,128
            
            
            —
            
            
            523,991
            
            
            558GROSS
                PROFIT
            
            
            55,519
            
            
            —
            
            
            343,170
            
            
            62OPERATING
                EXPENSES:Sales
                and marketing
            
            
            17,541
            
            
            —
            
            
            96,454
            
            
            —General
                and administrative
            
            
            686,297
            
            
            153,865
            
            
            1,776,539
            
            
            599,116Depreciation
                and amortization
            
            
            51,616
            
            
            49,311
            
            
            152,543
            
            
            147,933Total
                operating expenses
            
            
            755,454
            
            
            203,176
            
            
            2,025,536
            
            
            747,049OPERATING
                LOSS
            
            
            (699,935
            )
            
            (203,176
            )
            
            (1,682,366
            )
            
            (746,987
            )OTHER
                (EXPENSES) INCOMEInterest
                expense
            
            
            (938,838
            )
            
            (119,790
            )
            
            (4,023,692
            )
            
            (290,221
            )Change
                in fair value of warrants
            
            
            1,125,614
            
            
            —
            
            
            1,825,033
            
            
            —Change
                in fair value of derivative conversion feature
            
            
            —
            
            
            (54,847
            )
            
            —
            
            
            (123,795
            )Interest
                income
            
            
            70
            
            
            —
            
            
            4,520
            
            
            —Other
                income, net
            
            
            —
            
            
            2,170
            
            
            —
            
            
            5,298TOTAL
                OTHER INCOME (EXPENSES)
            
            
            186,846
            
            
            (172,467
            )
            
            (2,194,139
            )
            
            (408,718
            )LOSS
                FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
            
            
            (513,089
            )
            
            (375,643
            )
            
            (3,876,505
            )
            
            (1,155,705
            )INCOME
                TAX PROVISION
            
            
            —
            
            
            —
            
            
            —
            
            
            —LOSS
                FROM CONTINUING OPERATIONS
            
            
            (513,089
            )
            
            (375,643
            )
            
            (3,876,505
            )
            
            (1,155,705
            )INCOME
                FROM DISCONTINUED OPERATIONS
            
            
            —
            
            
            —
            
            
            —
            
            
            94,363LOSS
                ON DISPOSAL OF BUSINESS SEGMENT
            
            
            —
            
            
            —
            
            
            —
            
            
            (124,385
            )NET
                LOSS APPLICABLE TO COMMON SHAREHOLDERS
            
            
            (513,089
            )
            $
            (375,643
            )
            
            (3,876,505
            )
            $
            (1,185,727
            )LOSS
                PER SHARE - BASIC AND DILUTED:CONTINUING
                OPERATIONS
            
            $
            (.01
            )
            $
            (.03
            )
            $
            (.05
            )
            $
            (.08
            )DISCONTINUED
                OPERATIONSNET
                LOSS PER SHARE
            
            $
            (.01
            )
            $
            (.03
            )
            $
            (.05
            )
            $
            (.08
            )WEIGHTED
                NUMBER OF SHARES OUTSTANDING
            
            
            91,934,343
            
            
            14,999,157
            
            
            75,024,726
            
            
            14,999,157The
                accompanying notes are an integral part of these financial
                statements.




4





**GLOBAL
      MATRECHS, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED**


**SEPTEMBER
      30, 2005 AND 2004**





**Nine
                  Months Ended****September
                  30,****(unaudited)**2005
              
              2004
                  (restated)CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  loss
              
              $
              (3,876,505
              )
              $
              (1,185,727
              )1111Adjustments
                  to reconcile net loss to cash used in operating
                  activitiesDepreciation
              
              
              4,610
              
              
              —Amortization
                  of intangibles
              
              
              147,933
              
              
              198,655Provision
                  for bad debts
              
              
              —
              
              
              42,454Barter
                  transaction
              
              
              14,449
              
              
              —Stock,
                  options and warrants issued in exchange for services
                  performed
              
              
              47,052
              
              
              —Loss
                  on sale of division
              
              
              —
              
              
              124,385Change
                  in fair value of warrants
              
              
              (1,825,033
              )
              
              —Excess
                  warrant value on convertible loans
              
              
              3,950,976
              
              
              —Change
                  in operating assets and liabilities
              
              
              —Accounts
                  receivable
              
              
              48,469
              
              
              (27,669
              )Inventory
              
              
              (117,850
              )
              
              —Prepaid
                  expenses
              
              
              177,028
              
              
              (13,993
              )Deposits
              
              
              467
              
              
              —Convertible
                  preferred stock
              
              
              
              
              
              (8,800
              )Accounts
                  payable and accrued expenses
              
              
              130,626
              
              
              459,973Net
                  cash used in operating activities
              
              
              (1,297,778
              )
              
              (410,722
              )CASH
                  FLOWS FROM INVESTING ACTIVITIES:Investment
                  in Tulix
              
              
              —
              
              
              (51,949
              )Repayment
                  of (advance to) Tulix
              
              
              72,858
              
              
              (70,000
              )Proceeds
                  from sale of property and equipment
              
              
              5,000
              
              
              —Net
                  cash provided by (used in) investing activities
              
              
              77,858
              
              
              (121,949
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESIssuance
                  of note payable
              
              
              —
              
              
              460,900Repayments
                  to officer
              
              
              (73,461
              )
              
              —Net
                  bank borrowings
              
              
              1,847
              
              
              —Principal
                  payments on long-term debt
              
              
              (22,162
              )
              
              —Issuance
                  of common shares
              
              
              —
              
              
              27Proceeds
                  from issuance of convertible loans
              
              
              1,220,000
              
              
              —Net
                  cash provided by financing activities
              
              
              1,126,224
              
              
              460,927NET
                  DECREASE IN CASH AND CASH EQUIVALENTS
              
              $
              (93,696
              )
              $
              (71,744
              )CASH
                  AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
              
              $
              131,470
              
              $
              71,818CASH
                  AND CASH EQUIVALENTS AT END OF PERIOD
              
              $
              37,774
              
              $
              74Supplemental
                  disclosure of non - cash investing and financing
                  activities:Conversion
                  of preferred shares into 51,871,120 shares of common stock
              
              $
              1,870,510
              
              
              —Service
                  vehicle distributed for services performed
              
              $
              14,449
              
              
              —


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




The
      accompanying unaudited consolidated financial statements of Global Matrechs,
      Inc. (the “Company”, “we” or “us”), have been prepared in accordance with
      accounting principles generally accepted in the United States (“GAAP”) for
      interim financial information and with the instructions to Form 10-QSB and
      Rule
      310(b) of Regulation S-B. Accordingly, they do not include all of the
      information and footnotes required by GAAP for complete financial statements.
      In
      the opinion of management, all adjustments (consisting of normal recurring
      accruals) considered necessary for a fair presentation have been included.
      Operating results for the quarter and nine months ended September 30, 2005
      are
      not necessarily indicative of the results that may be expected for the calendar
      year ending December 31, 2005.





The
      Company’s consolidated balance sheets for the years ended December 31, 2004 and
      2003 and statements of operations, stockholders' equity (deficit) and cash
      flows
      for the years ended December 31, 2004, 2003 and 2002 have been restated. On
      October 7, 2005, the Company amended its annual report on Form 10-KSB/A to
      reflect these restatements.




2.
            GOING
                CONCERN MATTERS, DESCRIPTION OF THE BUSINESS, AND RECENT
                EVENTS




**Going
      Concern**





As
      reflected in the accompanying unaudited consolidated financial statements,
      the
      Company has a net loss of $3,876,505 and net cash used in operations of
      $1,297,778 for the nine months ended September 30, 2005 and a working capital
      deficiency of $5,469,215, accumulated deficit of $34,238,253 and a stockholders’
      deficiency of $9,946,021 at September 30, 2005.




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 continues to
      experience negative cash flows from operations. These factors raise doubt about
      the Company’s ability to continue as a going concern. Management is planning to
      obtain additional capital principally through the sale of equity securities.
      The
      realization of assets and satisfaction of liabilities in the normal course
      of
      business is dependent upon the Company obtaining additional equity capital
      and
      ultimately obtaining profitable operations. However, no assurances can be given
      that the Company will be successful in these activities. Should any of these
      events not occur, the accompanying consolidated financial statements will be
      materially affected. The consolidated financial statements do not include any
      adjustments that might be necessary if the Company is unable to continue as
      a
      going concern.




**Description
      of the Business**




HomeCom
      Communications, Inc. (“HomeCom”), now Global Matrechs, Inc., was organized in
      1994 to provide complex web-based software applications and integration services
      to businesses seeking to take advantage of the Internet. Over time, we evolved
      into a Web design, financial applications and solutions provider to the
      financial services market, including banking, insurance, securities brokerage
      firms and other financially oriented web portals.





On
      May
      22, 2003, we completed a licensing transaction with Eurotech, Ltd. We license
      the NuCap (TM), Hybrid Nonisocyanate Polyurethane, Electromagnetic
      Radiographyand Acoustic Core, Rad-X,




6




Firesil(TM),
      liquid ebonite material and Rapidly Biodegradable Hydrophobic material
      technologies from them. We intend to use these licenses to derive revenue by
      partnering with other technology firms who may manufacture the raw materials
      and
      sell the product to the market or sublicense the technologies and collect
      royalties and/or licensing fees. There can be no assurance that we will derive
      revenue from these licenses.




On
      May
      31, 2004, we completed the sale of our hosting and website maintenance business
      to Tulix. Following this sale of assets, our assets primarily consist of the
      technologies that we license from Eurotech. Our liabilities primarily consist
      of
      those liabilities currently reflected on our financial statements other than
      the
      liabilities that Tulix assumed from us.





On
      December 31, 2004, we completed the acquisition of True to Form, Limited (“True
      to Form”), a maker of specialized lighting products for a range of markets,
      including homeland security. True to Form, our wholly owned subsidiary, designs,
      develops, manufacturer and sells specialty lighting products for targeted market
      segments of the traditional lighting industry. Among its products is a line
      of
      high-end lighting and architectural products for both commercial and residential
      applications. As a result of this acquisition, our primary sources of operating
      revenues will be the specialty lighting group going forward. We currently expect
      that these products will continue to be our most significant revenue-producing
      business for the remainder of the current fiscal year.





We
      now
      operate in two distinct markets, the specialty lighting group and the licensed
      technology group. The specialty lighting group manufactures and markets a
‘high-end’ line of lighting and architectural products for both commercial and
      residential applications.




The
      licensed technologies group markets and sells to manufacturers technologies
      we
      license from Eurotech, Ltd. These technologies relate to hazardous materials
      handling, electromagnetic radiography, and chemical processing.




The
      Company has experienced the following significant changes during
      2005:




For
      the
      period January 1, 2005 through September 30, 2005, 12.4525 shares of Series
      B
      preferred stock, and 56.63 shares of Series C preferred stock, and 908 shares
      of
      Series H preferred stock were converted into 51,871,120 shares of common stock
      of the Company.





Since
      January 1, 2005 we have issued options to purchase 1,800,000 shares of common
      stock to Mark Allen under the terms of his employment agreement and our equity
      compensation plan for directors and to Michael Sheppard in accordance with
      the
      terms of our option plan for directors. 
 In
        addition, we have issued options to purchase 5,874,775 shares of common stock
        in
        exchange for services rendered. Using the Black-Scholes option pricing model,
        the fair value of these options have been computed at $15,799.
 
 On
        September 26, 2005, we approved the issuance of 1,107,811 shares of common
        stock, valued at $29,911, in exchange for services rendered. The fair value
        of
        these shares was based on the quoted closing trading price on the date of
        grant.
        As of November 16, 2005, these shares have not been physically issued, but
        have
        been included as outstanding at September 30, 2005, for purposes of
        computing loss per share.





Private
      Placements with Southridge Partners LP





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. 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.





Under
      the
      terms of the purchase agreement, Southridge had the 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. During the nine months ended September 30, 2005, Southridge
      exercised this option on March 2, April 11, and May 2, 2005, purchasing notes
      in
      the aggregate principal amount of 425,000 and warrants to purchase up to
      17,000,000 shares of our




7




common
      stock. Each of these transactions was exempt from registration pursuant to
      the
      provisions of Section 4(2) of the Securities Act, as amended. On July 8, 2005,
      we and Southridge Partners LP terminated its option to purchase additional
      notes.





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.





Private
      Placements with McNab LLC





On
      June
      14, July 13, August 1, and September 14, 2005, we entered into Securities
      Purchase Agreements with McNab LLC, each in substantially the same form,
      pursuant to which we sold nonnegotiable 2% secured convertible promissory notes
      in the aggregate principal amount of $545,000, and common stock purchase
      warrants to purchase up to 21,800,000 shares of our common stock, $.0001 par
      value per share, for an aggregate purchase price of $445,000. The notes and
      warrants are on substantially the same terms as the notes and warrants issued
      to
      Southridge, as described above. Each of these transactions was exempt from
      registration pursuant to the provisions of Section 4(2) of the Securities Act,
      as amended.







3.
            INVENTORY




Inventories
      are stated at the lower of cost (first-in, first-out basis) or market and
      consist of finished goods. During the nine months ended September 30, 2005,
      the
      Company charged $45,000 of inventory writedowns to cost of good sold. During
      the
      three months ended September 30, 2005, the Company did not have any inventory
      writedowns.







4.
            SEGMENT
                INFORMATION




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 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 September 30, 2005 (unaudited)**




LICENSED
            
            SPECIALTYTECHNOLOGIES
            
            LIGHTINGDIVISION
            
            DIVISION
            
            ELIMINATIONS
            
            TOTALTotal
                Assets
            
            $
            2,927,489
            
            $
            211,148
            
            $
            (500,421
            )
            $
            2,638,216Total
                Revenue
            
            $
            125
            
            $
            229,522
            
            $
            —
            
            $
            229,647Net
                Loss
            
            $
            (377,633
            )
            $
            (135,456
            )
            $
            —
            
            $
            (513,089
            )




8




**For
      The Nine Months Ended September 30, 2005 (unaudited)**




LICENSED
            
            SPECIALTYTECHNOLOGIES
            
            LIGHTINGDIVISION
            
            DIVISION
            
            ELIMINATIONS
            
            TOTALTotal
                Assets
            
            $
            2,927,489
            
            $
            211,148
            
            $
            (500,421
            )
            $
            2,638,216Total
                Revenue
            
            $
            125
            
            $
            867,036
            
            $
            —
            
            $
            867,161Net
                Loss
            
            $
            (3,543,774
            )
            $
            (332,731
            )
            $
            —
            
            $
            (3,876,505
            )




**Proforma
      Financial Information For The Three Months Ended September 30, 2004
      (unaudited)**




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:





Three
                MonthsEndedSeptember
                30, 2004Net
                revenues
            
            $
            282,516Net
                loss from continuing operations
            
            $
            (459,263
            )Net
                loss
            
            $
            (459,263
            )Net
                loss per share
            
            $
            (.03
            )




**Proforma
      Financial Information For The Nine Months Ended September 30, 2004
      (unaudited)**




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:




Nine
                Months EndedSeptember
                30, 2004Net
                revenues
            
            $
            688,634Net
                loss from continuing operations
            
            $
            (1,308,098
            )Net
                loss
            
            $
            (1,338,120
            )Net
                loss per share
            
            $
            (.09
            )




5.
            BASIC
                AND DILUTED LOSS PER SHARE




Loss
      per
      common share is computed by dividing net loss available to common stockholders
      by the weighted average number of shares of common stock outstanding for the
      period of time then ended. Potential common shares of approximately 483 million
      and 338 million as of September 30, 2005 and 2004, respectively, that could
      potentially dilute basic earnings per share in the future were not included
      in




9




the
      computation of diluted loss per share because to do so would have been
      antidilutive for the periods. These potential common shares are related to
      outstanding warrants, options and convertible preferred stock.




6.
            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 Plans. 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.


Since
        January 1, 2005 we have issued options to purchase 1,800,000 shares of common
        stock to Mark Allen under the terms of his employment agreement and our equity
        compensation plan for directors and to Michael Sheppard in accordance with
        the
        terms of our option plan for directors. Using the Black-Scholes option pricing
        model, the fair value of these options has been computed at $91,845. The
        fair
        value of these options is reflected in the following pro forma
        table.


**For
                the Nine Months**
              **Ended
                September 30,****2005**
              **(unaudited)**
            
            **2004**
              **(unaudited)**Loss
                applicable to common shareholders:As
                reported
            
            $
            (3,876,505
            )
            $
            (1,185,727
            )Pro
                forma
            
            $
            (3,968,350
            )
            $
            (1,199,194
            )Basic
                and diluted loss per share:As
                reported
            
            $
            (.05
            )
            $
            (.08
            )Pro
                forma
            
            $
            (.05
            )
            $
            (.08
            )




7.
            TAXES




There
      was
      no provision for cash payment of income taxes for the nine months ended
      September 30, 2005, as the Company anticipates a net taxable loss for the year
      ended December 31, 2005.




8.
            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 September
      30,
      2005, no such registration statement had 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.




10





For
      the
      period January 1, 2005 through September 30, 2005, the Company converted 12.4525
      share of Series B preferred stock, 56.63 shares of Series C preferred stock,
      and
      908 shares of Series H preferred stock into 51,871,120 shares of common stock.




9.
            SUBSEQUENT
                EVENTS





For
      the
      period October 1, 2005 through November 10, 2005, the Company converted 2.5
      shares of Series C preferred stock into 3,338,110 shares of common stock,
      converted $123,028 of promissory notes into 5,927,854 shares of common stock
      and
      issued 3,575,800 shares to Brittany under the terms of the July 14, 2005 Private
      Equity Credit Agreement.




A
      registration statement first filed with the SEC on July 12, 2005 (SEC File
      #
      333-126526) covering 53,000,000 shares of common stock issuable pursuant to
      the
      Private Equity Credit Agreement was declared effective on Tuesday, October
      25,
      2005. In the event we desire to draw down any available amounts remaining under
      the Private Equity Credit Agreement after we have issued the 53,000,000 shares,
      we will have to file a new registration statement to cover such additional
      shares that we would issue for additional draw downs under the Private Equity
      Credit Agreement. To date, we have issued an aggregate 4,784,688 shares of
      common stock in consideration for a draw down of $100,000. The issuances of
      common stock under the equity line was exempt from registration pursuant to
      the
      provisions of Section 4(2) of the Securities Act, as amended.




On
      October 3, 2005, we entered into a Securities Purchase Agreement with McNab
      LLC
      pursuant to which we sold a nonnegotiable 2% secured convertible promissory
      note
      with an aggregate principal amount of $50,000, and a common stock purchase
      warrant to purchase up to 2,000,000 shares of our common stock, $.0001 par
      value
      per share, for an aggregate purchase price of $50,000. This transaction was
      exempt from registration pursuant to the provisions of Section 4(2) of the
      Securities Act, as amended.





**Item
      2.** **Management’s
      Discussion and Analysis of Financial Condition and Results of Operations**




**Introduction**




The
      following information should be read in conjunction with the financial
      statements and notes thereto in Part I, Item 1 of this Quarterly Report
      and
      with Management’s Discussion and Analysis of Financial Condition and Results of
      Operations contained in our Annual Report on Form 10-KSB for the year
      ended
      December 31, 2004, as amended.





**Cautionary
      Statements**




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,” below under the heading “Factors Affecting Future
      Performance,” and, from time to time, in other reports the Company files with
      the Securities and Exchange Commission (the “SEC”).”  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.




11




**Overview**




The
      following management’s discussion and analysis of financial condition and
      results of operations is organized as follows:




·
            *Critical
                Accounting Policies*.
                This section discusses certain critical accounting policies that
                we
                consider important to our financial condition and results of operations.





·
            *Business
                Overview*.This
                section provides a general description of us, as well as recent
                developments and events that impact the comparability of the results
                being
                analyzed.





·
            *Results
                of Operations*.****This
                section provides an analysis of our results of operations for the
                three-
                and nine-month periods ended September 30, 2005. This analysis is
                presented on a consolidated basis.





·
            *Financial
                Condition and Liquidity*.****This
                section provides an analysis of our cash flows for nine-month period
                ended
                September 30, 2005.





**·**
            *Factors
                Affecting Future Performance*.
                This section discussesrisks
                and uncertainties and other important factors facing our business
                and its
                prospects.





Our
      revenues and operating results have varied substantially from period to period,
      and should not be relied upon as an indication of future 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.




Our
      management routinely makes judgments and estimates about the effects of matters
      that are inherently uncertain. As the number of variables and assumptions
      affecting the probable future resolution of the uncertainties increase, these
      judgments become even more subjective and complex. We have identified certain
      accounting policies, described below, that are the most important to the
      portrayal of our current financial condition and results of operations.




Our
      significant accounting policies are disclosed in Note 1 to our December 31,
      2004
      consolidated financial statements. 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. As disclosed in the notes to our unaudited consolidated
      financial statements, we are in the process of restating and re-auditing our
      relevant consolidated financial statements for inclusion in an




12




amended
      Annual Report on Form 10-KSB for the year ended December 31, 2004. Our policy,
      as disclosed in our Annual Report on Form 10-KSB, as filed, is not impacted
      by
      the restatement.




We
      have
      reviewed and determined that our revenue recognition policy remains our critical
      accounting policy for the nine-month period ended September 30, 2005. We did
      not
      make any changes to this policy during this period.




**Business
      Overview**





We
      are
      the successor to a variety of businesses dating back to 1994. We have undergone
      material changes to our business and our financial structure since that
      date.




We
      operate in two distinct markets, the specialty lighting group and the licensed
      technology group. The specialty lighting group manufactures and markets a
‘high-end’ line of lighting and architectural products for both commercial and
      residential applications.




The
      licensed technologies group markets and sells to manufacturers technologies
      we
      license from Eurotech, Ltd. These technologies relate to hazardous materials
      handling, electromagnetic radiography, and chemical processing.




***Background***




Historically,
      we developed and marketed specialized software applications, products and
      services that enabled financial institutions and their customers to use the
      Internet and intranets/extranets to obtain and communicate important business
      information, conduct commercial transactions and improve business productivity.
      We provided Internet/intranet solutions in three areas: (i) the design,
      development and integration of customized software applications, including
      World
      Wide Web site development and related network outsourcing; (ii) the development,
      sale and integration of our existing software applications into the client’s
      operations; and (iii) security consulting and integration services.




Until
      we
      sold substantially all of our hosting and website maintenance assets, we derived
      our revenue primarily from professional web development services and hosting
      fees. On March 23, 2001, we announced our intentions to wind down our
      operations. On March 27, 2003, we entered into an agreement to sell
      substantially all of our assets used in our web development, hosting and website
      maintenance business to Tulix. Accordingly, results of operations from the
      Internet services unit have been shown as discontinued operations. Certain
      revenues and expenses have been reclassified for the periods presented.




On
      May
      22, 2003, we completed a licensing transaction with Eurotech, Ltd. We license
      the NuCap (TM), Hybrid Nonisocyanate Polyurethane, Electromagnetic
      Radiographyand Acoustic Core, Rad-X, Firesil(TM), liquid ebonite material and
      Rapidly Biodegradable Hydrophobic material technologies from them. We intend
      to
      use these licenses to derive revenue by partnering with other technology firms
      who may manufacture the raw materials and sell the product to the market or
      sublicense the technologies and collect royalties and/or licensing fees. There
      can be no assurance that we will derive revenue from these licenses.




On
      May
      31, 2004, we completed the sale of our hosting and website maintenance business
      to Tulix. Following this sale of assets, our assets primarily consist of the
      technologies that we license from Eurotech. Our liabilities primarily consist
      of
      those liabilities currently reflected on our financial statements other than
      the
      liabilities that Tulix assumed from us.





On
      December 31, 2004, we completed the acquisition of True to Form, Limited (“True
      to Form”), a maker of specialized lighting products for a range of markets,
      including homeland security. True to Form, our wholly owned subsidiary, designs,
      develops, manufacturer and sells specialty lighting products for targeted market
      segments of the traditional lighting industry. Among its products is a line
      of
      high-end lighting and architectural products for both commercial and residential
      applications. As a result of this




13




acquisition,
      our primary sources of operating revenues will be the specialty lighting group
      going forward. We currently expect that these products will continue to be
      our
      most significant revenue-producing business for the remainder of the current
      fiscal year.




**Recent
      Significant Transactions and Other Events**




***October
      3, 2005 Private Placement***





On
      October 3, 2005, we entered into a Securities Purchase Agreement with McNab
      LLC
      pursuant to which we sold a nonnegotiable 2% secured convertible promissory
      note
      with an aggregate principal amount of $50,000, and a common stock purchase
      warrant to purchase up to 2,000,000 shares of our common stock, $.0001 par
      value
      per share, for an aggregate purchase price of $50,000.





***Private
      Equity Credit Agreement with Brittany Capital Management
      LLC***





On
      July
      5, 2005 we entered into a Private Equity Credit Agreement with Brittany Capital
      Management LLC (“Brittany”). Under the Private Equity Credit Agreement, we may
      draw up to $15 million in exchange for shares of our common stock, subject
      to
      conditions outside of the control of Brittany. Each draw under the Private
      Equity Credit Agreement is structured as a put option, wherein we require
      Brittany to purchase a number of shares of our common stock after a discount
      to
      the market price is applied. Specifically, each share is sold at a price equal
      to 92% of the average of the three lowest of the bid prices for the ten (10)
      trading days immediately following the put date. Under the terms of the Private
      Equity Credit Agreement, we are required to draw down a minimum of one (1)
      million dollars and a maximum of fifteen (15) million dollars. If we draw less
      than one (1) million dollars, we must pay Brittany an amount equal to 9% of
      the
      difference between that amount and the minimum.





Our
      ability to place put options is contingent upon there being, at the time of
      the
      applicable put, an effective registration statement on file with the SEC
      covering the shares subject to the put. We filed a registration statement with
      the SEC on July 12, 2005 (SEC File # 333-126526) covering 53,000,000 shares
      of
      our common stock, which registration statement was declared effective by the
      SEC
      on October 25, 2005. In the event we desire to draw down any available amounts
      remaining under the Private Equity Credit Agreement after we have issued the
      53,000,000 shares, we will have to file a new registration statement to cover
      such additional shares that we would issue for additional draw downs under
      the
      Private Equity Credit Agreement. In addition, because the number of shares
      we
      must issue for a given draw will fluctuate depending on the market price of
      our
      common stock, we cannot anticipate the amount of funding we will be able to
      obtain from our puts from time to time of all or a portion of the 53,000,000
      shares covered by the registration statement.





**Results
      of Operations**




The
      results for the nine-month period ended September 30, 2005 (which reflects
      sales
      by the lighting division) are not directly comparable to the results for the
      same period for the previous year because we acquired our lighting division
      on
      December 31, 2004.




***Three
      months ended September 30, 2005 and 2004***





*Net
      Sales* .
      Net
      sales increased from $0 in the quarter ended September 30, 2004 to $229,647
      in
      the quarter ended September 30, 2005. Revenues in the quarter ended September
      30, 2005 consisted of $229,522 in sales from our True To Form Ltd. Division
      and
      $125 in sales from our licensed technologies division.





*Cost
      of Sales* .
      Cost of
      sales includes the cost of materials, handling, shipping, and any associated
      customs clearance costs. Cost of sales increased from $0, in the quarter ended
      September 30, 2004 to $174,128 in the quarter ended September 30, 2005,
      consisting of $174,098 of cost of sales from our True To Form Ltd. Division
      and
      $30 of cost of sales from our licensed technologies division.




14





*Gross
      Profit* .
      Gross
      profit increased from $0 in the quarter ended September 30, 2004 to
      $55,519
      in the quarter ended September 30, 2005 consisting of $55,424 of gross profit
      on
      sales in our True To Form Ltd. Division and $95 of gross profit on sales from
      our licensed technologies division.





*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 $153,865 in the quarter ended September 30, 2004 to $686,297
      in
      the quarter ended September 30, 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.





*Depreciation
      and Amortization* .
      Depreciation and amortization expense of $49,311 and $51,616 was recognized
      in
      the quarters ended September 30, 2004 and September 30, 2005, respectively.




*Other
        Income (Expense).*  Other
        income in the quarter ended September 30, 2004 consisted of $2,170 in interest
        charges to Eurotech for late payment of their invoices and an expense of
        $54,847
        due to the change in fair value of the derivative conversion feature related
        to
        our preferred shares.





*Interest
      Expense* .
      Interest expense for the quarter ended September 30, 2005 was $938,838. It
      consisted of $911,146 of interest in connection with the beneficial conversion
      features and amortization of warrant features related to convertible notes,
      and
      $27,692 in accrued interest expense on other borrowings. Interest expense for
      the quarter ended September 30, 2004 was of $119,790. It consisted of $62,883
      in
      interest charges on the Series B, C, D and E preferred stock, which represents
      the accrual of the guaranteed return on these series of preferred stock. During
      the quarter ended September 30, 2004, we also accrued $8,686 in interest expense
      on the notes related to our licensed technologies division and amortized $48,221
      of the beneficial conversion feature of the convertible notes issued to Brittany
      and McNab.




***Nine
      months ended September 30, 2005 and 2004***




*Net
      Sales.* Net
      sales increased from $620 in the nine months ended September 30, 2004 compared
      to $867,161 in the nine months ended September 30, 2005. Sales are recognized
      at
      the time that products are shipped or services are provided. Revenues in the
      nine months ended September 30, 2005 consisted of sales from our True To Form
      Ltd. division; acquired on December 31, 2004 and of sales of
      NuCapTM.




*Cost
      of Sales.* Cost
      of
      sales includes the cost of materials, handling, shipping, and any associated
      customs clearance costs. Cost of sales increased from $558 in the nine months
      ended September 30, 2004 compared to $523,991 in the nine months ended September
      30, 2005 as a result of cost of sales from our True to Form Ltd. division.




*Gross
      Profit.* Gross
      profit increased from $62 in the nine months ended September 30, 2004 to
      $343,170 in the nine months ended September 30, 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 $599,116 in the nine months ended September 30, 2004 to
      $1,776,539 in the nine months ended September 30, 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.




*Depreciation
      and Amortization.* Amortization
      expense of $147,933, which includes nine months of amortization of the
      intangible licensed technologies, was recognized in the nine months ended




15




September
      30, 2005 and $152,543 for the nine months ended September 30, 2004. Depreciation
      expense of $4,610 which represents nine months of depreciation on fixed assets
      in service was recognized in the nine months ended September 30, 2005.




Other
        income. Other
        income in the nine months ended September 30, 2005 consisted of $4,520 in
        interest charged to Tulix for interest on their notes and $1,825,033 due
        to the
        change in fair value of warrants.




*Interest
      Expense.* ****** Interest
      expense for the nine months ended September 30, 2005 was $4,023,692. It
      consisted of interest in connection with the beneficial conversion features
      and amortization of warrant features related to convertible notes
      and accrued interest expense on other borrowings.




Interest
      expense for the nine months ended September 30, 2004 was $290,221. It consisted
      of $211,707 in interest charges on the Series B, C, D and E preferred stock
      and
      $25,793 in interest expense on the notes related to the Licensed Technologies
      Division and amortized $50,721 of the beneficial conversion feature of the
      convertible notes issued to Brittany and McNab.




**Liquidity
      and Capital Resources**




Our
      sources of capital are extremely limited. We have incurred operating losses
      since inception and as of September 30, 2005, we had an accumulated deficit
      of
      $34,238,253 and a working capital deficit of $5,469,215.




***Cash
      and Working Capital***


At
                September 30, 2005****
              (unaudited)
            
            At
                December 31, 2004
              (restated)
            
            Percentage
              Increase
                /
              (Decrease)Current
                Assets
            
            $
            334,694
            
            $
            608,895
            
            
            (45%)Current
                Liabilities
            
            
            5,803,909
            
            
            3,389,297
            
            
            71%Working
                Capital (Deficit)
            
            $
            (5,469,215
            )
            $
            (2,780,402
            )
            
            97%





We
      had
      cash of $37,774 as at September 30, 2005, compared with cash of $131,470 as
      at
      December 31, 2004. The decrease in our working capital deficit was primarily
      attributed to an increase of our convertible loans payable. The largest
      components of our working capital deficit are Convertible loans payable and
      the
      derivative conversion feature attributed to our convertible preferred
      stock.




***Cash
        Provided by Investing Activities***
 
 Cash
        provided by investing activities for the nine months ended September 30,
        2005
        was $77,858 compared to the utilization of cash for investment activities
        of
        $121,949 for the nine months ended September 30, 2004. During the nine months
        ended September 30, 2004, the Company loaned Tulix $70,000 which was repaid,
        with interest, during the nine months ended September 30, 2005. In addition,
        during the nine months ended September 30, 2004, the Company invested $51,949
        in
        Tulix. During the nine months ended September 30, 2005, the Company received
        $5,000 in proceeds in connection with the sale of property and
        equipment.





***Cash
      Used in Operating Activities***




Cash
      used
      in operating activities for the nine months ended September 30, 2005 was
      $1,297,778 compared to $410,722 for the comparative period in 2004. This
      increase was primarily due to increased operating losses.




***Cash
      Provided by Financing Activities***




We
      have
      continued to finance our business primarily through private placement sales
      of
      our common stock, convertible securities, and notes. Cash provided by financing
      activities for the nine months ended September 30, 2005 was $1,126,224, compared
      to $460,927 for the nine months ended September 30, 2004.




16




***Financing
      activities during the nine months ended September 30,
      2005***




Private
      Placements with Southridge Partners LP





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. 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.





Under
      the
      terms of the purchase agreement, Southridge had the 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. During the nine months ended September 30, 2005, Southridge
      exercised this option on March 2, April 11, and May 2, 2005, purchasing notes
      in
      the aggregate principal amount of 425,000 and warrants to purchase up to
      17,000,000 shares of our common stock. All of these transactions were exempt
      from registration pursuant to the provisions of Section 4(2) of the Securities
      Act, as amended. On July 8, 2005, we and Southridge Partners LP terminated
      its
      option to purchase additional notes.





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.





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.





Private
      Placements with McNab LLC





On
      June
      14, July 13, August 1, and September 14, 2005, we entered into Securities
      Purchase Agreements with McNab LLC, each in substantially the same form,
      pursuant to which we sold nonnegotiable 2% secured convertible promissory notes
      in the aggregate principal amount of $545,000, and common stock purchase
      warrants to purchase up to 21,800,000 shares of our common stock, $.0001 par




17




value
      per
      share, for an aggregate purchase price of $445,000. The notes and warrants
      are
      on substantially the same terms as the notes and warrants issued to Southridge,
      as described above.





**Going
      Concern and Financing Requirements**





The
      report of our registered independent public accounting firm dated May 10, 2005
      includes a going-concern qualification, which indicates an absence of obvious
      or
      reasonably assured sources of future funding that will be required by us to
      maintain ongoing operations. If we are unable to obtain additional funding,
      we
      may not be able to continue operations. To date, we have funded our operations
      through equity investments and issuances of debt. Additionally, we had an
      accumulated deficit of approximately $30,361,748 and $34,238,253 as of December
      31, 2004 and September 30, 2005, respectively. This deficit indicates that
      we
      may be unable to meet our future obligations unless additional funding sources
      are obtained. There is no assurance that we will be able to raise any additional
      capital that we require to continue operations.




Our
      consolidated unaudited interim financial statements included with this Quarterly
      Report on Form 10-QSB have been prepared assuming that we will continue as
      a
      going concern. As shown in the accompanying consolidated unaudited financial
      statements, we had negative working capital of approximately
      $5,469,215.




In
      the
      event that we are unable to raise additional financing on acceptable terms,
      then
      we may have to scale back our plan of operations and operating expenditures
      or
      seek the protection of the bankruptcy courts. We anticipate that we will
      continue to incur losses until such time as the revenues we are able to generate
      revenue from sales and licensing of our products exceed our increased operating
      expenses. There can be no assurance that we will be able to generate
      revenue.





**Factors
      Affecting Future Performance**





An
      investment in our common stock involves a high degree or risk. You should
      carefully consider the following risk factors in evaluating our business. If
      any
      of the events described below were to actually occur, then our business,
      financial condition or results of operations could be seriously harmed and
      the
      trading price of our common stock could decline. There is no assurance that
      we
      will be able to implement our operating plans as anticipated or achieve
      projected revenue and earnings goals.





In
      addition to the risks and uncertainties faced generally by participants in
      the
      industries in which we compete, we face the following risks and
      uncertainties:




***We
      have a history of operating losses, and there is no assurance we will achieve
      profitability in the future.***





We
      have a
      history of operating losses. For the nine months ended September 30, 2005 and
      for the fiscal year ended December 31, 2004, we incurred a net loss of
      $3,876,505 and $2,998,429, respectively. As of December 31, 2004 and September
      30, 2005, we had an accumulated deficit of approximately $30,361,748 and
      $34,238,253 respectively. If we continue to experience operating losses, an
      investment in our common stock is at risk of being lost. We cannot predict
      when,
      or if, we will ever achieve profitability.




***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 difficult and may require us to scale
      back or cease operations.***




The
      report of our registered independent public accounting firm dated May 10, 2005
      includes a going-concern qualification, which indicates an absence of obvious
      or
      reasonably assured sources of future funding that will be required by us to
      maintain ongoing operations. Our ability to obtain additional funding will
      determine our ability to continue as a going concern. Accordingly, there is
      substantial doubt about our




18




ability
      to continue as a going concern. Our financial statements do not include any
      adjustments that might result from the outcome of this uncertainty.




***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.***




We
      have
      engaged an outside accounting firm (other than our independent registered public
      accounting firm) to provide financial management and accounting services on
      a
      temporary basis. If we are unable to retain sufficient financial management
      and
      accounting services on a cost-effective basis, our ability to effectively manage
      our finances and the quality and timeliness of our financial reporting could
      be
      adversely affected.




***Because
      we recently acquired True To Form Limited, our most important line of business,
      it is difficult to evaluate our business and future operating
      results.***




We
      derive
      substantially all of our revenues from the operations of our subsidiary, True
      To
      Form, a company we acquired on December 31, 2004. Our limited operating history
      makes it difficult to evaluate our business and expected results.




***If
      we fail to realize the anticipated benefits from our acquisition of True to
      Form, our business will suffer.***




Our
      combined company may fail to realize of the anticipated benefits and synergies
      of the transaction as a result of, among other things, lower than expected
      revenues for True To Form, unanticipated costs, deterioration in the U.S.
      economy as a whole or the commercial lighting industry in particular, and other
      factors. In addition, the integration of True to Form’s business and operations
      with those of Global Matrechs may take longer than anticipated, may be more
      costly than anticipated and may have unanticipated adverse effects on Global
      Matrechs existing strategic focus.




***If
      we cannot obtain additional capital required to fund our operations and finance
      our growth, our business will suffer.***




The
      continued development of our current technologies or acquisitions of new
      technologies will require additional capital. We incurred net losses of
      $2,998,429 for the year ended December 31, 2004 and $3,876,505 for the nine
      months ended September 30, 2005. Additionally, we had a working capital
      deficiency of $5,469,215 and an accumulated deficit of $34,238,253 as of
      September 30, 2005. We may be unable to obtain additional funds in a timely
      manner or on acceptable terms, which would render us unable to fund our
      operations or expand our business.




If
      we are
      unable to obtain capital when needed, we may have to restructure our business
      or
      delay or abandon our development and expansion plans. Although we have been
      successful in the past in obtaining financing for working capital and capital
      expenditures, we will have ongoing capital needs as we expand our business.
      Our
      inability to obtain adequate financing will result in the need to curtail
      business operations and you could lose your entire investment. Our financial
      statements do not include any adjustments that might result from the outcome
      of
      this uncertainty. If we raise additional funds through the sale of equity or
      convertible securities,




·
            your
                ownership percentage of our common stock will be reduced;






·
            the
                value of your stock may be diluted;






·
            We
                may issue securities that have rights, preferences and privileges
                senior
                to our common stock; and




19




·
            The
                terms of any additional indebtedness may include restrictive financial
                and
                operating covenants that would limit our ability to compete and expand,
                thereby increasing the price of our stock.







***We
      are currently dependent upon external financing (including our Private Equity
      Credit Agreement with Brittany Capital Management) to fund our operations and
      may not be able to access sufficient funds when needed. As a result, our
      business may suffer.***





Currently,
      we are dependent upon external financing to fund our operations. Our financing
      needs are expected to be provided, in large part, by our Private Equity Credit
      Agreement dated July 5, 2005. Therefore, we are dependent on our Private Equity
      Credit Agreement with Brittany to fund our operations. On July 12, 2005, we
      filed a registration statement covering the resale of 53,000,000 shares we
      may
      issue to Brittany under the Private Equity Credit Agreement, which has
      subsequently been declared effective by the SEC (File No. 333-126526). However,
      the registration statement only covers the resale of 53,000,000 shares issuable
      to Brittany under the Private Equity Credit Agreement. In the event we desire
      to
      draw down any available amounts remaining under the Private Equity Credit
      Agreement after we have issued the 53,000,000 shares, we will have to file
      a new
      registration statement to cover such additional shares that we would issue
      for
      additional draw downs under the Private Equity Credit Agreement. To date, we
      have issued an aggregate 4,784,688 shares of common stock in consideration
      for a
      draw down of $100,000.





The
      number of shares we have to issue for a given draw-down under the Private Equity
      Credit Agreement has an inverse relationship to our market price. Therefore,
      the
      lower our market price, the less we will be able to raise by issuing the
      53,000,000 registered shares to Brittany. In addition, our access to funds
      under
      the Private Equity Credit Agreement may be limited by the following
      factors:





·
            *Maximum
                Put Amount.*The maximum amount of each put is equal to the lesser of (a) $500,000,
                or
                (b) 500% percent of the weighted average volume for the 20 trading
                days
                immediately preceding the put date.




·
            *9.99%
                Cap*.
                Our Private Equity Credit Agreement provides that in no event shall
                the
                number of shares issuable to Brittany cause it to own in excess of
                9.99%
                of the then outstanding shares of our common stock. Because of this
                maximum advance restriction, we may not be able to access sufficient
                funds
                when needed.




·
            *Authorized
                Shares of Common Stock.*Due
                to the inverse relationship of the price of our common stock and
                the
                number of shares we would have to issue for a given draw under the
                Private
                Equity Credit Agreement, it may be necessary for our shareholders
                to
                approve an increase in our authorized common stock and for us to
                register
                additional shares of common stock. Based on the last reported sale
                price
                of our common stock of $0.03 on October 17, 2005, we would have to
                issue
                543,478,260 shares to draw down the full $15 million available under
                our
                Private Equity Credit Agreement. However, we are only authorized
                to issue
                up to 300 million shares of common stock and as of November 8, 2005,
                we
                had 111,783,465 shares of common stock outstanding.




***Existing
      stockholders will experience significant dilution from our sale of shares under
      the Private Equity Credit Agreement, the conversion of notes and preferred
      stock, and the exercise of warrants.***




To
      date,
      we have funded our operations through equity investments and issuances of debt.
      Stockholders will experience substantial dilution as a result of our agreements
      with our investors. The number of shares issuable under some of these
      arrangements is indeterminate. The issuance and sale of common stock to our
      investors will reduce the ownership interest of our existing stockholders in
      our
      company, and may depress the value of our common stock. In addition, the
      subsequent resale by the investors of those shares may further reduce our share
      price.




20




***If
      the price of our stock continues to decline and we cannot prepay the notes
      we
      have issued, we will be in default and the holders of the notes will have the
      remedies available to creditors. Some or all of our assets could be liquidated,
      our operations may be disrupted and our business may
      suffer.***





If
      the
      market price of our common stock falls below $0.03 per share for 10 consecutive
      trading days, holders of the notes may require us to prepay (within 60 days
      of
      the receipt of a notice of such election) the principal outstanding at the
      time
      of such prepayment plus a premium equal to 140% of the principal amount being
      prepaid. If we cannot prepay the notes, we will be in default, and the holders
      of the notes will have the remedies available to creditors. All of our assets
      are subject to security agreements, and the holders of these notes, in the
      event
      of default, could foreclose and liquidate some or all of our assets. The claims
      of our creditors to our assets are senior to those of our stockholders. As
      a
      result, if we default under the notes, you may lose all or part of your
      investment.




***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 do
      not develop or acquire new and enhanced products, or if we are not able to
      invest adequately in our research and development activities, our business,
      financial condition and results of operations could be negatively impacted.
      Many
      of our competitors have significantly more cash and resources than we have.
      Our
      competitors may introduce products that are competitively priced, have increased
      performance or functionality, or incorporate technological advances that we
      have
      not yet developed or implemented. To remain competitive, we must continue to
      develop, market and sell new and enhanced systems and products at competitive
      prices, which will require significant research and development expenditures.




***If
      we cannot effectively manage our growth, our business may
      suffer.***




Recently,
      we have expanded our operations to pursue existing and potential new market
      opportunities. This growth has placed, and is expected to continue to place,
      a
      strain on our personnel, management, financial and other resources. To manage
      our growth effectively, we must, among other things:




·
            successfully
                attract, train, motivate and manage a larger number of employees
                for sales
                and customer support activities;




·
            control
                working capital requirements; and




·
            improve
                the efficiency of our operating, administrative, financial and accounting
                systems, procedures and controls.





If
      we
      fail to manage our growth properly, we may incur unnecessary expenses and the
      efficiency of our operations may decline.




***We
      may be unable to hire and retain the skilled personnel we need to expand our
      operations.***




To
      meet
      our growth objectives, we must attract and retain highly skilled technical,
      operational, managerial and sales and marketing personnel. If we fail to attract
      and retain the necessary personnel, we may be unable to achieve our business
      objectives and may lose our competitive position, which could lead to a
      significant decline in net sales. We face significant competition for these
      skilled professionals from other companies, research and academic institutions,
      government entities and other organizations.




21




***Our
      success depends on the services of our executive officers and key
      employees.***





We
      depend
      upon the continued services of our senior management for our continued success.
      The loss of any member of senior management could have a serious negative impact
      upon our business and operating results. We can provide no assurances that
      we
      will be able to retain our senior management or other key personnel.




***Our
      business may suffer if we cannot protect our proprietary
      technology.***




Our
      ability to compete depends significantly upon our trade secrets and our other
      proprietary technology. We have filed patents in connection with HNIPU and
      have
      a trade secret on NuCap(TM). These steps that we have taken to protect our
      technology may be inadequate to prevent others from using what we regard as
      our
      technology to compete with us. Existing trade secrets, copyright and trademark
      laws offer only limited protection. In addition, the laws of some foreign
      countries do not protect our proprietary technology to the same extent as the
      laws of the United States, which could increase the likelihood of
      misappropriation. Furthermore, other companies could independently develop
      similar or superior technology without violating our intellectual property
      rights. Any misappropriation of our technology or the development of competing
      technology could seriously harm our competitive position, which could lead
      to a
      substantial reduction in net sales.





If
      we
      resort to legal proceedings to enforce our intellectual property rights, the
      proceedings could be burdensome, disruptive and expensive, distract the
      attention of management, and there can be no assurance that we would prevail.




***Claims
      by others that we infringe their intellectual property rights could harm our
      business and financial condition.*** ******





Our
      industries are characterized by the existence of a large number of patents
      and
      frequent claims and related litigation regarding patent and other intellectual
      property rights. We cannot be certain that our products do not and will not
      infringe issued patents, patents that may be issued in the future, or other
      intellectual property rights of others.




We
      do not
      conduct exhaustive patent searches to determine whether the technology used
      in
      our products infringes patents held by third parties. In addition, product
      development is inherently uncertain in a rapidly evolving technological
      environment in which there may be numerous patent applications pending, many
      of
      which are confidential when filed, with regard to similar technologies.




We
      may
      face claims by third parties that our products or technology infringe their
      patents or other intellectual property rights. Any claim of infringement could
      cause us to incur substantial costs defending against the claim, even if the
      claim is invalid, and could distract the attention of our management. If any
      of
      our products are found to violate third-party proprietary rights, we may be
      required to pay substantial damages. In addition, we may be required to
      re-engineer our products or obtain licenses from third parties to continue
      to
      offer our products. Any efforts to re-engineer our products or obtain licenses
      on commercially reasonable terms may not be successful, which would prevent
      us
      from selling our products, and, in any case, could substantially increase our
      costs and have a material adverse effect on our business, financial condition
      and results of operations.




***If
      an active and liquid market for our common stock does not develop, or is not
      sustained, it may be difficult for you to resell your shares. As a result,
      you
      may not be able to sell your shares when you want.***




Our
      common stock is not traded on a registered securities exchange and we do not
      meet the initial listing criteria for any registered securities exchange or
      the
      NASDAQ Capital Market. It is quoted on the less recognized OTC Bulletin Board.
      This factor may impair your ability to sell your shares when you want and/or
      could depress our stock price. As a result, you may find it difficult to dispose
      of, or to obtain accurate quotations of the price of, our securities because
      smaller quantities of shares could be bought and




22




sold,
      transactions could be delayed and security analyst and news coverage of our
      company may be reduced. These factors could result in lower prices and larger
      spreads in the bids and ask prices for our shares. Due to the current price
      of
      our common stock, many brokerage firms may not be willing to effect transactions
      in our securities, particularly because of an SEC rule imposing additional
      sales
      requirements on broker-dealers who sell low-priced securities (generally those
      below $5.00 per share). These factors severely limit the liquidity of our common
      stock and likely have a material adverse effect on our market price and on
      our
      ability to raise additional capital. We cannot predict the extent to which
      investor interest in our stock, if any, will lead to an increase in our market
      price or the development of a more active trading market or how liquid that
      market might become.




***Our
      common stock is deemed to be a “penny stock,” which may make it more difficult
      for investors to sell these shares due to suitability and disclosure
      requirements.***




Due
      to
      the current price of our common stock ($0.03 on October 17, 2005), many
      brokerage firms may not be willing to effect transactions in its securities,
      particularly because low-priced securities are subject to SEC rules (referred
      to
      as the “penny stock rules”) imposing additional sales requirements on
      broker-dealers who sell low-priced securities (generally those below $5.00
      per
      share). These disclosure requirements may have the effect of reducing the
      trading activity in the secondary market for Global Matrechs common stock as
      it
      is subject to these penny stock rules. These rules severely limit the liquidity,
      if any, of our common stock, and would likely have a material adverse effect
      on
      its market price and on our ability to raise additional capital.




The
      penny
      stock rules require a broker-dealer, prior to a transaction in a penny stock,
      to
      deliver a standardized risk disclosure document prepared by the Commission,
      that: (a) contains a description of the nature and level of risk in the market
      for penny stocks in both public offerings and secondary trading; (b) contains
      a
      description of the broker’s or dealer’s duties to the customer and of the rights
      and remedies available to the customer with respect to a violation to such
      duties or other requirements of Securities’ laws; (c) contains a brief, clear,
      narrative description of a dealer market, including bid and ask prices for
      penny
      stocks and the significance of the spread between the bid and ask price; (d)
      contains a toll-free telephone number for inquiries on disciplinary actions;
      (e)
      defines significant terms in the disclosure document or in the conduct of
      trading in penny stocks; and (f) contains such other information and is in
      such
      form, including language, type, size and format, as the SEC may require by
      rule
      or regulation.




In
      addition, the broker-dealer also must provide, prior to effecting any
      transaction in a penny stock, the customer with: (a) bid and offer quotations
      for the penny stock; (b) the compensation of the broker-dealer and its
      salesperson in the transaction; (c) the number of shares to which such bid
      and
      ask prices apply, or other comparable information relating to the depth and
      liquidity of the market for such stock; and (d) monthly account statements
      showing the market value of each penny stock held in the customer’s account.




Finally,
      the penny stock rules require that prior to a transaction in a penny stock
      not
      otherwise exempt from those rules, the broker-dealer must make a special written
      determination that the penny stock is a suitable investment for the purchaser
      and receive the purchaser’s written acknowledgment of the receipt of a risk
      disclosure statement, a written agreement to transactions involving penny
      stocks, and a signed and dated copy of a written suitability statement. These
      requirements may reduce the potential market for our common stock by reducing
      the number of potential investors, brokers and traders. This may make it more
      difficult for investors in our common stock to sell shares to third parties
      or
      to otherwise dispose of them. This could cause our stock price to decline.




We
      cannot
      predict the extent to which investor interest in our common stock or a business
      combination, if any, will lead to an increase in its market price or the
      development of an active trading market or how liquid that market, if any,
      might
      become.




23




***The
      market price of our common stock may be volatile.***




Our
      stock
      price has been volatile. From January 1, 2005 to November 10, 2005, the trading
      price of our common stock ranged from $0.022 to $0.108. Many factors may cause
      the market price of our common stock to fluctuate, including:




·
            variations
                in our quarterly results of operations;




·
            the
                introduction of new products by us or our competitors;




·
            acquisitions
                or strategic alliances involving us or our competitors;




·
            future
                sales of shares of common stock in the public market; and




·
            market
                conditions in our industries and the economy as a whole.




In
      addition, the stock market has recently experienced extreme price and volume
      fluctuations. These fluctuations are often unrelated to the operating
      performance of particular companies. These broad market fluctuations may
      adversely affect the market price of our common stock. When the market price
      of
      a company’s stock drops significantly, stockholders often institute securities
      class action litigation against that company. Any litigation against us could
      cause us to incur substantial costs, divert the time and attention of our
      management and other resources or otherwise harm our business.




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.




**Off-Balance
      Sheet Arrangements**




We
      have
      no off-balance sheet arrangements that have or are reasonably likely to have
      a
      current or future effect on our financial condition, changes in financial
      condition, revenues or expenses, results of operations, liquidity, capital
      expenditures or capital resources.




**Commitments
      and Contingencies**




***Bank
      Line of Credit***





True
      to
      Form Ltd. has entered into a revolving line of credit facility, due on demand,
      with Sovereign Bank (the Bank). The revolving line of credit facility provides
      for a maximum line of credit of $185,000. Interest at the lenders prime rate
      plus 1.0%. The bank has a security interest in all assets of the Company. The
      line of credit is guaranteed by the former shareholder of the
      Company.




***Facilities
      Leases***




As
      of
      September 30, 2005 the Company occupied approximately 550 square feet in one
      office building in Ridgefield, Connecticut on a lease that goes through
      September 2006. With the acquisition of True To Form we have added approximately
      10,000 sq feet combined warehouse and offices. True to Form leases its warehouse
      and administrative offices located in Braintree, Massachusetts under a month
      to
      month lease arrangement.





24




The
      total
      rent expense was $91,648 for the nine months ended September 30, 2005.




***Operating
      Leases***




The
      Company has entered into various operating leases for equipment, which expire
      at
      different times through May 2006; these leases call for, among other things,
      monthly rental payment of approximately $407.




**Recently
      Issued Accounting Pronouncements**




In
      April
      2005, the Securities and Exchange Commission’s Office of the Chief Accountant
      and its Division of Corporation Finance has released Staff Accounting Bulletin
      (SAB) No. 107 to provide guidance regarding the application of FASB Statement
      No. 123 (revised 2004), Share-Based Payment.  Statement No. 123(R) covers
      a
      wide range of share-based compensation arrangements including share options,
      restricted share plans, performance-based awards, share appreciation rights,
      and
      employee share purchase plans.  SAB 107 provides interpretative guidance
      related to the interaction between Statement No. 123R and certain SEC rules
      and
      regulations, as well as the staff’s views regarding the valuation of chare-based
      payment arrangements for public companies. SAB 107 also reminds public companies
      of the importance of including disclosures within filings made with the SEC
      relating to the accounting for share-based payment transactions, particularly
      during the transition to Statement No. 123R. The Company does not believe that
      the adoption of this pronouncement will have a significant effect on its
      financial statements.




In
      May 2005, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards No. 154, “Accounting Changes
      and Error Corrections-a replacement of APB Opinion No. 20 and FASB
      Statement No. 3” (“SFAS 154”).  This Statement replaces APB Opinion
      No. 20, Accounting Changes, and FASB Statement No. 3, Reporting
      Accounting Changes in Interim Financial Statements, and changes the requirements
      for the accounting for and reporting of a change in accounting principle. This
      Statement applies to all voluntary changes in accounting principle. It also
      applies to changes required by an accounting pronouncement in the unusual
      instance that the pronouncement does not include specific transition provisions.
      When a pronouncement includes specific transition provisions, those provisions
      should be followed.




Opinion
      20 previously required that most voluntary changes in accounting principle
      be
      recognized by including in net income of the period of the change the cumulative
      effect of changing to the new accounting principle. This Statement requires
      retrospective application to prior periods’ financial statements of changes in
      accounting principle, unless it is impracticable to determine either the
      period-specific effects or the cumulative effect of the change. When it is
      impracticable to determine the period-specific effects of an accounting change
      on one or more individual prior periods presented, this Statement requires
      that
      the new accounting principle be applied to the balances of assets and
      liabilities as of the beginning of the earliest period for which retrospective
      application is practicable and that a corresponding adjustment be made to the
      opening balance of retained earnings (or other appropriate components of equity
      or net assets in the statement of financial position) for that period rather
      than being reported in an income statement. When it is impracticable to
      determine the cumulative effect of applying a change in accounting principle
      to
      all prior periods, this Statement requires that the new accounting principle
      be
      applied as if it were adopted prospectively from the earliest date practicable.
      This Statement shall be effective for accounting changes and corrections of
      errors made in fiscal years beginning after December 15, 2005. The Company
      does not believe that the adoption of SFAS 154 will have a significant effect
      on
      its financial statements.




Other
      accounting standards that have been issued or proposed by the FASB or other
      standards-setting bodies that do not require adoption until a future date are
      not expected to have a material impact on the consolidated financial statements
      upon adoption.




25




**ITEM
      3.** **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 September 30, 2005 based on 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
                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 our annual report on Form 10-KSB for the year ended
                December 31, 2004, as amended, to reflect the correct accounting
                treatment. We also included in our annual report, as amended, four
                years
                of restated financial information highlighting the differences resulting
                from the application of the change in accounting treatment to our
                historical financial statements.




**•**
            We
                have restated certain financial information contained in our quarterly
                report on Form 10-QSB for the quarter ended March 31,
                2005.





**•**
            The
                design of disclosure controls at the subsidiary level was insufficient
                to
                ensure that management at the parent level responsible for financial
                reporting would receive information required for timely and accurate
                financial reporting.





**  ***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 quarterly report on Form 10-QSB
      for the quarters ended March 31, 2005 and June 30, 2005.




**  ***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 our
      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 our capabilities related to interpretive research
      into
      complex accounting issues promptly after we raise sufficient financing




26




to
      permit
      it to do so. In addition, management is currently considering methods to and
      improve the timeliness of reporting between subsidiary and parent. 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.




Furthermore,
      management intends to hire an accounting professional to increase the Company’s
      capabilities related to interpretive research into complex accounting issues
      promptly after the Company raises 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.







27





**PART
      II. OTHER INFORMATION**




**Item
      1. Legal
      Proceedings.**




Other
      than as described below, we are not a party to any material legal proceedings
      and to our knowledge, no such proceedings are threatened or
      contemplated.




**Action
      filed against Eurotech, Ltd.**





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.





**Action
      filed by Carey Nadell**




On
      April
      13, 2005 Carey Nadell, 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.





To
      the
      best of our knowledge, we are not subject to any other active or pending legal
      proceedings or claims against us or our subsidiaries or any of our properties
      that will have a material effect on our business or results of operations.
      However, from time to time, we may become subject to claims and litigation
      generally associated with any business venture.




**Action
      Filed by Eurotech**




On
      June
      22, 2005, Eurotech, Ltd. filed suit in the Supreme Court of the State of New
      York in New York County against us. The complaint alleges that we failed to
      issue shares of common stock to Eurotech in a timely fashion upon their delivery
      of conversion notices with respect to an aggregate 700 shares of Series H
      preferred stock. We have denied having received the conversion notices in
      question. Eurotech is seeking injunctive relief and damages in the amount of
      $100,000. Eurotech filed for summary judgment on August 31, 2005. We filed
      a
      memorandum in opposition to Eurotech’s motion on September 27,
      2005.





**Item
      6. Exhibits.**




**EXHIBITS**




**Incorporated
                  by Reference****Exhibit
                  No.**
              **Description**
              **Filed
                  with**
                **this
                  Form**
                **10-QSB**
              **Form**
              **Filing
                  Date**
              **Exhibit
                  No.**2.1
              Agreement
                  and Plan of Merger dated December 31, 2004 with True To Form, Limited,
                  TTF
                  Acquisition Corp. and Mark J. Allen
              
              8-K
              January
                  6, 2005
              2.13.1
              Certificate
                  of Amendment of Amended and Restated Certificate of
                  Incorporation
              
              8-K
              June
                  15, 2004
              3.13.2
              Amended
                  and Restated Certificate of Incorporation
              
              S-1
              September
                  18, 1996
              3.13.3
              Amended
                  and Restated By-Laws
              
              S-1
              September
                  18, 1996
              3.23.4
              Certificate
                  of Designation, Rights, Preferences, Qualifications, Limitations
                  and
                  Restrictions of Series A Convertible Preferred Stock
              
              S-1/A
              January
                  29, 1998
              3.3
  28
  **Incorporated
                      by Reference****Exhibit
                      No.**
                  **Description**
                  **Filed
                      with**
                    **this
                      Form**
                    **10-QSB**
                  **Form**
                  **Filing
                      Date**
                  **Exhibit
                      No.**
 3.5
                Certificate
                    of Amendment of Certificate of Designations, Preferences and
                    Rights of
                    Series B Convertible Preferred Stock
                
                8-K
                June
                    15, 2004
                3.23.6
                Certificate
                    of Designations, Preferences and Rights of Series B Convertible
                    Preferred
                    Stock
                
                10-K
                March
                    31, 1999
                10.493.7
                Certificate
                    of Amendment of Certificate of Designations, Preferences and
                    Rights of
                    Series C Convertible Preferred Stock
                
                8-K
                June
                    15, 2004
                3.43.8
                Certificate
                    of Designations, Preferences and Rights of Series C Convertible
                    Preferred
                    Stock
                
                S-1
                May
                    10, 1999
                3.53.9
                Certificate
                    of Amendment of Certificate of Designations, Preferences and
                    Rights of
                    Series D Convertible Preferred Stock
                
                S-1
                May
                    10, 1999
                3.63.10
                Amended
                    Certificate of Designations, Preferences and Rights of Series
                    E
                    Convertible Preferred Stock
                
                S-3
                June
                    1, 2000
                3.73.11
                Certificate
                    of Designations, Preferences and Rights of Series F Convertible
                    Preferred
                    Stock
                
                10-K
                April
                    15, 2003
                3.83.12
                Certificate
                    of Designations, Preferences and Rights of Series G Convertible
                    Preferred
                    Stock
                
                10-K
                April
                    15, 2003
                3.93.13
                Certificate
                    of Designations, Preferences and Rights of Series H Convertible
                    Preferred
                    Stock
                
                10-Q
                October
                    29, 2003
                3.14.1
                Specimen
                    stock certificate
                
                S-1
                November
                    1, 1996
                4.210.1
                Common
                    Stock Purchase Warrant issued to McNab LLC
                
                8-K
                July
                    15, 2005
                4.110.2
                Nonnegotiable
                    2% Secured Convertible Promissory Note issued to McNab LLC
                
                8-K
                July
                    15, 2005
                4.2
  29
  **Incorporated
                      by Reference****Exhibit
                      No.**
                  **Description**
                  **Filed
                      with**
                    **this
                      Form**
                    **10-QSB**
                  **Form**
                  **Filing
                      Date**
                  **Exhibit
                      No.**
 10.3
                Securities
                    Purchase Agreement
                
                8-K
                July
                    15, 2005
                10.110.4
                Common
                    Stock Purchase Warrant issued to McNab LLC
                
                8-K
                August
                    5, 2005
                4.110.5
                Nonnegotiable
                    2% Secured Convertible Promissory Note issued to McNab LLC
                
                8-K
                August
                    5, 2005
                4.210.6
                Securities
                    Purchase Agreement
                
                8-K
                August
                    5, 2005
                10.110.7
                Common
                    Stock Purchase Warrant issued to McNab LLC
                
                8-K
                September
                    16, 2005
                4.110.8
                Nonnegotiable
                    2% Secured Convertible Promissory Note issued to McNab LLC
                
                8-K
                September
                    16, 2005
                4.210.9
                Securities
                    Purchase Agreement
                
                8-K
                September
                    16, 2005
                10.131.1
                Certification
                    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
                X31.2
                Certification
                    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
                X





















30





**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:     November
                17, 2005
            By:
            /s/ Michael
                SheppardName:Michael
                Sheppard
              (*duly
                authorized officer and principal financial officer*)








31





**EXHIBIT
      INDEX**




**Incorporated
                  by Reference****Exhibit
                  No.**
              **Description**
              **Filed
                  with**
                **this
                  Form**
                **10-QSB**
              **Form**
              **Filing
                  Date**
              **Exhibit
                  No.**2.1
              Agreement
                  and Plan of Merger dated December 31, 2004 with True To Form, Limited,
                  TTF
                  Acquisition Corp. and Mark J. Allen
              
              8-K
              January
                  6, 2005
              2.13.1
              Certificate
                  of Amendment of Amended and Restated Certificate of
                  Incorporation
              
              8-K
              June
                  15, 2004
              3.13.2
              Amended
                  and Restated Certificate of Incorporation
              
              S-1
              September
                  18, 1996
              3.13.3
              Amended
                  and Restated By-Laws
              
              S-1
              September
                  18, 1996
              3.23.4
              Certificate
                  of Designation, Rights, Preferences, Qualifications, Limitations
                  and
                  Restrictions of Series A Convertible Preferred Stock
              
              S-1/A
              January
                  29, 1998
              3.33.5
              Certificate
                  of Amendment of Certificate of Designations, Preferences and Rights
                  of
                  Series B Convertible Preferred Stock
              
              8-K
              June
                  15, 2004
              3.23.6
              Certificate
                  of Designations, Preferences and Rights of Series B Convertible
                  Preferred
                  Stock
              
              10-K
              March
                  31, 1999
              10.493.7
              Certificate
                  of Amendment of Certificate of Designations, Preferences and Rights
                  of
                  Series C Convertible Preferred Stock
              
              8-K
              June
                  15, 2004
              3.43.8
              Certificate
                  of Designations, Preferences and Rights of Series C Convertible
                  Preferred
                  Stock
              
              S-1
              May
                  10, 1999
              3.53.9
              Certificate
                  of Amendment of Certificate of Designations, Preferences and Rights
                  of
                  Series D Convertible Preferred Stock
              
              S-1
              May
                  10, 1999
              3.63.10
              Amended
                  Certificate of Designations, Preferences and Rights of Series E
                  Convertible Preferred Stock
              
              S-3
              June
                  1, 2000
              3.7
  32
  **Incorporated
                    by Reference****Exhibit
                    No.**
                **Description**
                **Filed
                    with**
                  **this
                    Form**
                  **10-QSB**
                **Form**
                **Filing
                    Date**
                **Exhibit
                    No.**
 3.11
                Certificate
                    of Designations, Preferences and Rights of Series F Convertible
                    Preferred
                    Stock
                
                10-K
                April
                    15, 2003
                3.83.12
                Certificate
                    of Designations, Preferences and Rights of Series G Convertible
                    Preferred
                    Stock
                
                10-K
                April
                    15, 2003
                3.93.13
                Certificate
                    of Designations, Preferences and Rights of Series H Convertible
                    Preferred
                    Stock
                
                10-Q
                October
                    29, 2003
                3.14.1
                Specimen
                    stock certificate
                
                S-1
                November
                    1, 1996
                4.210.1
                Common
                    Stock Purchase Warrant issued to McNab LLC
                
                8-K
                July
                    15, 2005
                4.110.2
                Nonnegotiable
                    2% Secured Convertible Promissory Note issued to McNab LLC
                
                8-K
                July
                    15, 2005
                4.210.3
                Securities
                    Purchase Agreement
                
                8-K
                July
                    15, 2005
                10.110.4
                Common
                    Stock Purchase Warrant issued to McNab LLC
                
                8-K
                August
                    5, 2005
                4.110.5
                Nonnegotiable
                    2% Secured Convertible Promissory Note issued to McNab LLC
                
                8-K
                August
                    5, 2005
                4.210.6
                Securities
                    Purchase Agreement
                
                8-K
                August
                    5, 2005
                10.110.7
                Common
                    Stock Purchase Warrant issued to McNab LLC
                
                8-K
                September
                    16, 2005
                4.110.8
                Nonnegotiable
                    2% Secured Convertible Promissory Note issued to McNab LLC
                
                8-K
                September
                    16, 2005
                4.210.9
                Securities
                    Purchase Agreement
                
                8-K
                September
                    16, 2005
                10.131.1
                Certification
                    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
                X
  33
  **Incorporated
                      by Reference****Exhibit
                      No.**
                  **Description**
                  **Filed
                      with**
                    **this
                      Form**
                    **10-QSB**
                  **Form**
                  **Filing
                      Date**
                  **Exhibit
                      No.**
 31.2
                Certification
                    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
                X








34