**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: June 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
        August 19, 2005, there were 92,211,198 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 JUNE 30 , 2005**
  
  **TABLE
        OF CONTENTS**
  
 **PART
                  I.**
              **FINANCIAL
                  INFORMATION**
              3Item
                  1.
              Financial
                  Statements (unaudited)
              3Consolidated
                  Balance Sheets
              3Consolidated
                  Statements of Operations
              4Consolidated
                  Statements of Cash Flows
              5Notes
                  to Unaudited Consolidated Financial Statements
              6Item
                  2.
              Management’s
                  Discussion and Analysis or Plan of Operations
              12Item
                  3.
              Controls
                  and Procedures
              29**PART
                  II.**
              **OTHER
                  INFORMATION**
              30Item
                  1.
              Legal
                  Proceedings
              30Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              31Item
                  3.
              Defaults
                  upon Senior Securities
              31Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              31Item
                  5.
              Other
                  Information
              31Item
                  6.
              Exhibits
              32**SIGNATURES**
              
              36
 
 
 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
  **FORWARD
        LOOKING 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”, the
          risks
          outlined in the Risk Factors section below in this report, 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.
  In
        addition to the risks and uncertainties discussed in the risk factor section
        and
        elsewhere as noted above, and those faced generally by participants in our
        industry, we face the following risks and uncertainties:
  ·
              Our
                  business, as currently constituted, has limited operating history.
                  Therefore, we may not be able to accurately forecast future results,
                  and
                  operating losses in future periods could be greater than
                  expected.
  ·
              We
                  have a history of operating losses, and there is no assurance that
                  we will
                  achieve profitability in the
                  future.
  ·
              We
                  have a going-concern qualification in the report by our registered
                  independent public accounting firm for our financial statements
                  for the
                  year ended December 31, 2004, which may make capital raising more
                  difficult and may require us to scale back or cease operations,
                  putting
                  our investors’ funds at risk.
  ·
              We
                  may be unable to obtain additional capital required to fund our
                  operations
                  and finance our growth.
  ·
              The
                  management of our finances and the quality and timeliness of our
                  financial
                  reporting may be adversely affected if we are unable to increase
                  the size
                  and capabilities of our internal administrative and finance function
                  as
                  our business grows.
  ·
              If
                  we fail to realize some or all of the anticipated benefits from
                  our
                  acquisition of True to Form, our business will
                  suffer.
  ·
              We
                  face intense competition, which could result in lower revenues
                  and higher
                  research and development expenditures and could adversely affect
                  our
                  results of operations.
  ·
              If
                  we cannot effectively manage our growth, our business may
                  suffer.
  ·
              We
                  may be unable to hire and retain the skilled personnel we need
                  to expand
                  our operations.
  ·
              Our
                  success depends on the services of our executive officers and key
                  employees.
  ·
              Our
                  business may suffer if we cannot protect our proprietary
                  technology.
  ·
              Claims
                  by others that we infringe their intellectual property rights could
                  harm
                  our business and financial
                  condition.
  2
  ·
              New
                  corporate governance requirements are likely to increase our costs
                  and
                  make it more difficult to attract qualified
                  directors.
  ·
              We
                  are not subject to the same corporate governance standards as listed
                  companies, including without limitation, the requirement that we
                  have a
                  majority of independent directors.
  Because
        of the foregoing and other factors, we may experience material fluctuations
        in
        our future operating results on a quarterly or annual basis which could
        materially adversely affect our business, financial condition and operating
        results.
  
   3
  **PART
        I. FINANCIAL INFORMATION**
  ***Item
        1.***  ***Financial
        Statements***
 **GLOBAL
          MATRECHS, INC.**
 **CONSOLIDATED
            BALANCE SHEETS AS OF JUNE 30, 2005**
 **June
                      30, 2005****(unaudited)****ASSETS**
 CURRENT
                        ASSETS:
 Cash
                        and cash equivalents
                    
                    $
                    19,498Accounts
                        receivable, net
                    
                    
                    93,493Inventory
                    
                    
                    152,082Prepaid
                        expenses
                    
                    
                    87,743TOTAL
                        CURRENT ASSETS
                    
                    
                    352,816Fixed
                        assets, at cost (net)
                    
                    
                    5,513Deposits
                    
                    
                    1,700Note
                        receivable
                    
                    
                    250,000Investment
                        in Tulix
                    
                    
                    51,949Intangible
                        assets
                    
                    
                    986,223Less:
                        Accumulated amortization
                    
                    
                    (410,926
                    )Goodwill
                    
                    
                    1,469,108Intangibles,
                        net
                    
                    
                    2,044,405TOTAL
                        ASSETS
                    
                    $
                    2,706,383
 **LIABILITIES
                          AND STOCKHOLDERS’
                          DEFICIT**
 CURRENT
                          LIABILITIES:Accounts
                          payable and accrued expenses
                      
                      $
                      620,120Loans
                          payable
                      
                      
                      184,631Due
                          to officer
                      
                      
                      89,106Current
                          maturities of long-term debt
                      
                      
                      100,000Convertible
                          loans payable, net of discount
                      
                      
                      3,389,778Derivative
                          conversion feature - convertible preferred stock
                      
                      
                      766,678TOTAL
                          CURRENT LIABILITIES
                      
                      
                      5,150,313Note
                          payable
                      
                      
                      250,000Warrant
                          liability
                      
                      
                      1,842,805Long
                          term debt - net of current maturities
                      
                      
                      400,000TOTAL
                          LIABILITIES
                      
                      
                      7,643,118Convertible
                          preferred stock
                      
                      
                      5,035,075STOCKHOLDERS’
                          DEFICIT:Common
                          Stock, $.0001 par value, 300,000,000 shares authorized
                          79,964,846
                          sharesissued
                          and outstanding at June 30, 2005
                      
                      
                      7,916Preferred
                          stock, Series H, $.01 par value, 13,500 shares authorized,
                          12,732shares
                          issued and outstanding at June 30, 2005, convertible, participating,$12,732,000
                          liquidation value at June 30, 2005
                      
                      
                      127Preferred
                          stock, Series I, $.01 par value, 490.5 shares authorized,
                          490.5
                          sharesissued
                          and outstanding at June 30, 2005, convertible
                          participating,$49,050
                          liquidation value at June 30, 2005
                      
                      
                      5Treasury
                          stock, at cost, 5,028,695 shares at June 30, 2005
                      
                      
                      (327,484
                      )Additional
                          paid-in capital
                      
                      
                      24,072,790Accumulated
                          deficit
                      
                      
                      (33,725,164
                      )TOTAL
                          STOCKHOLDER’S DEFICIT
                      
                      
                      (9,971,810
                      )TOTAL
                          LIABILITIES AND STOCKHOLDER’S
                          DEFICIT
                      
                      $
                      2,706,383The
                          accompanying notes are an integral part of these financial
                          statements
  4
  **GLOBAL
        MATRECHS, INC.**
 CONSOLIDATED
        STATEMENTS OF OPERATIONS FOR THE
        THREE AND SIX MONTHS ENDED
 **JUNE
          30, 2005 AND 2004**
 **Three
                    Months Ended**
                
                **Six
                    Months Ended****June
                    30,**
                
                **June
                    30,****(unaudited)**
                
                **(unaudited)**2005
                
                2004
                  (restated)
                
                2005
                
                2004(restated)REVENUES
                
                $
                267,833
                
                $
                —
                
                $
                637,514
                
                $
                620Cost
                    of Revenues
                
                
                201,660
                
                
                —
                
                
                349,863
                
                
                558GROSS
                    PROFIT
                
                
                66,173
                
                
                —
                
                
                287,651
                
                
                62OPERATING
                    EXPENSES:Sales
                    and marketing
                
                
                36,227
                
                
                —
                
                
                78,913General
                    and administrative
                
                
                520,317
                
                
                182,685
                
                
                1,090,242
                
                
                445,251Depreciation
                    and amortization
                
                
                49,659
                
                
                49,311
                
                
                100,927
                
                
                98,622Total
                    operating expenses
                
                
                606,203
                
                
                231,996
                
                
                1,270,082
                
                
                543,873OPERATING
                    LOSS
                
                
                (540,030
                )
                
                (231,996
                )
                
                (982,431
                )
                
                (543,811
                )OTHER
                    (EXPENSES) INCOMEInterest
                    expense
                
                
                (1,274,294
                )
                
                (88,219
                )
                
                (3,084,854
                )
                
                (170,431
                )Change
                    in fair value of warrants
                
                
                764,337
                
                
                —
                
                
                699,419
                
                
                —Change
                    in fair value of derivative conversion feature
                
                
                —
                
                
                (17,037
                )
                
                —
                
                
                (68,948
                )Interest
                    income
                
                
                3,225
                
                
                —
                
                
                4,450Other
                    income, net
                
                
                —
                
                
                3,128
                
                
                —
                
                
                3,128TOTAL
                    OTHER EXPENSES
                
                
                (506,732
                )
                
                (102,128
                )
                
                (2,380,985
                )
                
                (236,251
                )LOSS
                    FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
                
                
                (1,046,762
                )
                
                (334,124
                )
                
                (3,363,416
                )
                
                (780,062
                )INCOME
                    TAX PROVISION
                
                
                —
                
                
                —
                
                
                —
                
                
                —LOSS
                    FROM CONTINUING OPERATIONS
                
                
                (1,046,762
                )
                
                (334,124
                )
                
                (3,363,416
                )
                
                (780,062
                )INCOME
                    FROM DISCONTINUED OPERATIONS
                
                
                —
                
                
                51,174
                
                
                —
                
                
                94,363LOSS
                    ON DISPOSAL OF BUSINESS SEGMENT
                
                
                —
                
                
                (124,385
                )
                
                —
                
                
                (124,385
                )NET
                    LOSS APPLICABLE TO COMMON SHAREHOLDERS
                
                $
                (1,046,762
                )
                $
                (407,335
                )
                $
                (3,363,416
                )
                $
                (810,084
                )LOSS
                    PER SHARE - BASIC AND DILUTED:CONTINUING
                    OPERATIONS
                
                $
                (0.01
                )
                $
                (0.03
                )
                $
                (0.05
                )
                $
                (0.05
                )DISCONTINUED
                    OPERATIONS
                
                
                —
                
                
                —
                
                
                —
                
                
                —NET
                    LOSS PER SHARE
                
                $
                (0.01
                )
                $
                (0.03
                )
                $
                (0.05
                )
                $
                (0.05
                )WEIGHTED
                    NUMBER OF SHARES OUTSTANDING
                
                
                74,771,056
                
                
                14,999,157
                
                
                66,344,530
                
                
                14,999,157The
                    accompanying notes are an integral part of these financial
                    statements
  5
  **GLOBAL
          MATRECHS, INC.**
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS FOR THE
        SIX MONTHS ENDED
 **JUNE
          30, 2005 AND 2004**
 **Six
                    Months Ended****June
                    30,****(unaudited)**2005
                
                2004
                    (restated)CASH
                    FLOWS FROM OPERATING ACTIVITIESNet
                    loss
                
                $
                (3,363,416
                )
                $
                (810,084
                )Adjustments
                    to reconcile net loss to cash used in operating
                    activitiesDepreciation
                
                
                2,305
                
                
                2,501Amortization
                    of intangibles
                
                
                98,622
                
                
                98,622Provision
                    for bad debts
                
                
                —
                
                
                23,481Barter
                    transaction
                
                
                15,904
                
                
                —Stock
                    issued in exchange for services performed
                
                
                82,261
                
                
                —Loss
                    on sale of division
                
                
                —
                
                
                124,385Change
                    in fair value of warrants
                
                
                (699,419
                )
                
                —Excess
                    warrant value on convertible loans
                
                
                2,738,336
                
                
                —Derivative
                    conversion feature - convertible preferred shares
                
                
                284,185
                
                
                68,948Change
                    in operating assets and liabilitiesAccounts
                    receivable
                
                
                1,058
                
                
                (25,499
                )Inventory
                
                
                (84,176
                )
                
                —Prepaid
                    expenses
                
                
                (63,743
                )
                
                (1,243
                )Deposits
                
                
                875
                
                
                —Accounts
                    payable and accrued expenses
                
                
                39,026
                
                
                289,288Net
                    cash used in operating activities
                
                
                (948,182)
                
                
                (229,601)CASH
                    FLOWS FROM INVESTING ACTIVITIES:Investment
                    in Tulix
                
                
                —
                
                
                (51,949
                )Repayment
                    of (advance to) Tulix
                
                
                72,858
                
                
                (70,000
                )Acquisition
                    of property and equipment
                
                
                (292
                )
                
                —Proceeds
                    from sale of property and equipment
                
                
                5,000
                
                
                —Net
                    cash provided by (used in) investing activities
                
                
                77,566
                
                
                (121,949
                )CASH
                    FLOWS FROM FINANCING ACTIVITIESIssuance
                    of note payable
                
                
                —
                
                
                280,000Repayments
                    to officer
                
                
                (58,203
                )
                
                —Net
                    bank borrowings
                
                
                1,847
                
                
                —Proceeds
                    from issuance of convertible loans
                
                
                815,000
                
                
                —Net
                    cash provided by financing activities
                
                
                758,644
                
                
                280,000NET
                    DECREASE IN CASH AND CASH EQUIVALENTS
                
                
                (111,972
                )
                
                (71,550
                )CASH
                    AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
                
                
                131,470
                
                
                71,818CASH
                    AND CASH EQUIVALENTS AT END OF PERIOD
                
                $
                19,498
                
                $
                268Non
                    - cash investing and financing activities:Conversion
                    of preferred shares into 32,894,265 shares of common stock
                
                $
                1,093,173Issuance
                    of 1,175,150 shares of common stock for services rendered
                
                $
                82,261Service
                    vehicle distributed for services performed
                
                $
                5,000The
                    accompanying notes are an integral part of these financial
                    statements
  6
   **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 six months ended June 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
          and are
          in process of being re-audited. These re-audits are expected to be completed
          by
          September 15, 2005. Upon completion of the re-audits, an amended Form 10-KSB
          will be filed with the SEC. Accordingly, the Company's historical financial
          statements shall no longer be relied upon.
  2.
              GOING
                  CONCERN MATTERS, DESCRIPTION OF THE BUSINESS, AND RECENT
                  EVENTS
  **Going
        Concern**
  The
        Company’s financial statements are prepared using generally accepted accounting
        principles applicable to a going concern, which contemplate the realization
        of
        assets and liquidations **** of
        liabilities in the normal course of business. The Company has incurred
        significant losses since its incorporation resulting in an accumulated deficit
        as of June 30, 2005 of approximately $ 33.7 million.
        The Company continues to experience negative cash flows from operations.
        These
        factors raise doubt about the Company’s ability to continue as a going
        concern.
  **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.
  The
            Company has experienced the following significant changes during
            2005:
  7
  For
        the
        period January 1, 2005 through June 30, 2005, 12.4575 shares of Series
        B
        preferred stock and 41.08 shares of Series C preferred stock and 618 shares
        of
        Series H preferred stock were converted into 32,894,265 shares of common
        stock
        of the Company.
  On
        January 30, 2005 we issued options to purchase 900,000 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.
  On
        January 31, 2005, we entered into an Exchange Agreement with Woodward LLC
        pursuant to which we acquired promissory notes issued to Woodward by Eurotech
        Ltd. with an aggregate outstanding principal amount of $290,000 (the “Eurotech
        Notes”) in exchange for a 2% secured convertible promissory note in the
        principal amount of $250,000 with a maturity of two (2) years that is
        convertible, at the option of the holder, into shares of common stock of
        the
        Company at a conversion price of $0.02 per share. The Company has valued
        the
        Eurotech Notes at $250,000. The Eurotech Notes carry a default annual interest
        rate of 18% and are past due in their entirety. This transaction was exempt
        from
        registration under Section 4(2) of the Securities Act of 1993, as amended.
  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 warrants
        to purchase up to 10,000,000 shares of our common stock to Southridge in
        exchange for its $250,000 investment. Under the terms of this purchase
        agreement, Southridge may, at its option, and at any time prior to July 1,
        2005,
        purchase an additional note in the principal amount of up to $1,500,000,
        and
        otherwise on substantially the same terms as the note issued on January 31,
        2005. The
        note
        is convertible, at the option of the holder, into shares of our common stock
        at
        a conversion price of $0.02 per share. Southridge may require us to repurchase
        some or all of its note if the market price of our common stock falls below
        $0.03 per share for ten (10) consecutive trading days, at a repurchase price
        equal to 140% of the principal amount of the note. In the event we default
        under
        the terms of the note, the entire outstanding principal (and any outstanding
        interest accrued thereon) shall become immediately due and payable, and the
        interest rate will rise to 18% per annum. We
        have
        secured the payment of the notes with a subordinated security interest in
        our
        accounts, general intangibles, inventories, and other collateral. In addition,
        in the event we propose to register securities under the Securities Act of
        1933,
        as amended, we are required to notify Southridge in advance of such registration
        and, at its request (subject to limited exceptions), include the shares of
        our
        common stock underlying the note and warrant on the registration statement
        filed
        in connection with such registration (and assume any expenses associated
        therewith). The
        warrant has an expiration date of January 31, 2010. It contains a cashless
        exercise provision whereby the holder may pay the exercise price associated
        with
        any exercise by having us withhold a number of shares otherwise issuable
        upon
        such exercise having a fair market value equal to the applicable aggregate
        exercise price. In the event such provision is used with respect to an exercise,
        we would receive no proceeds upon such exercise.
  On
        March
        2, 2005, Southridge Partners LP exercised its option to purchase an additional
        note and warrant  under
        its
        Second Securities Purchase Agreement. In connection with such exercise, we
        issued to Southridge a convertible promissory note in the principal amount
        of
        $175,000 and warrants to purchase up to 7,000,000 shares of our common
        stock in exchange for its $175,000 investment. The note is convertible, at
        the
        option of the holder, into shares of our common stock at a conversion price
        of
        $0.02 per share. Southridge may require us to repurchase some or all of its
        note
        if the market price of our common stock falls below $0.03 per share for ten
        (10)
        consecutive trading days, at a repurchase price equal to 140% of the principal
        amount of the note. In the event we default under the terms of the note,
        the
        entire outstanding principal (and any outstanding interest accrued thereon)
        shall become immediately due and payable, and the interest rate will rise
        to 18%
        per annum. The note matures on March 2, 2007.
  8
  On
        April
        11, 2005, Southridge Partners LP exercised its option to purchase an additional
        note and warrant pursuant to the Second Securities Purchase Agreement. In
        connection with such exercise, we issued to Southridge a convertible promissory
        note in the principal amount of $125,000 and a warrant to purchase up to
        5,000,000 shares of our common stock to Southridge in exchange for its $125,000
        investment. The note is convertible, at the option of the holder, into shares
        of
        our common stock at a conversion price of $0.02 per share. Southridge may
        require us to repurchase some, or all, of its note if the market price of
        our
        common stock falls below $0.03 per share for ten (10) consecutive trading
        days,
        at a repurchase price equal to 140% of the principal amount of the note.
        In the
        event we default under the terms of the note, the entire outstanding principal
        (and any outstanding interest accrued thereon) shall become immediately due
        and
        payable, and the interest rate will rise to 18% per annum. The note matures
        on
        April 11, 2007.
  On
        May 2,
        2005, Southridge Partners LP exercised its option to purchase an additional
        note
        and warrant under its Second Securities Purchase Agreement. In connection
        with
        such exercise, on May 12, 2005, we issued to Southridge Partners LP
        a
        convertible promissory note in the principal amount of $125,000 and a warrant
        to
        purchase up to 5,000,000 shares of our common stock in exchange for its $125,000
        investment. This transaction was exempt from registration pursuant to the
        provisions of Section 4(2) of the Securities Act, as amended. The private
        placement was exempt from registration under Section 4(2) of the Securities
        Act
        of 1933, as amended. On July 8, 2005, we and Southridge Partners LP terminated
        Southridge’s option to purchase additional notes.
  On
        June
        14, 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 $100,000, and a common stock purchase
        warrant to purchase up to 4,000,000 shares of our common stock, $.0001 par
        value
        per share, for an aggregate purchase price of $100,000. We intend to use
        the
        proceeds for working capital. The private placement was exempt from registration
        under Section 4(2) of the Securities Act of 1933, as amended.
  3.
              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 June 30, 2005**
 LICENSED
                
                SPECIALTYTECHNOLOGIES
                
                LIGHTINGDIVISION
                
                DIVISION
                
                ELIMINATIONS
                
                TOTALTotal
                    Assets
                
                $
                2,848,235
                
                $
                237,603
                
                $
                (379,455
                )
                $
                2,706,383Total
                    Revenue
                
                
                —
                
                $
                267,833
                
                
                —
                
                $
                267,833Net
                    Loss
                
                $
                (799,502
                )
                $
                (247,260
                )
                
                —
                
                $
                (1,046,762
                )
  9
  **For
          The Six Months Ended June 30, 2005**
  LICENSED
                  
                  SPECIALTYTECHNOLOGIES
                  
                  LIGHTINGDIVISION
                  
                  DIVISION
                  
                  ELIMINATIONS
                  
                  TOTALTotal
                      Assets
                  
                  $
                  2,848,235
                  
                  $
                  237,603
                  
                  $
                  (379,455
                  )
                  $
                  2,706,383Total
                      Revenue
                  
                  
                  —
                  
                  $
                  637,514
                  
                  
                  —
                  
                  $
                  637,514Net
                      Loss
                  
                  $
                  (197,275
                  )
                  $
                  (3,166,141
                  )
                  
                  —
                  
                  $
                  (3,363,416
                  )
  Proforma
        Financial Information For The Three Months Ended June 30,
        2004
  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
                    MonthsEndedJune
                    30, 2004Net
                    revenues
                
                $
                202,749Net
                    loss from continuing operations
                
                $
                (396,233
                )Net
                    loss
                
                $
                (475,247
                )Net
                    loss per share
                
                $
                (0.03
                )
  **Proforma
        Financial Information For The Six Months Ended June 30,
        2004**
  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:
  Six
                      Months EndedJune
                      30, 2004Net
                      revenues
                  
                  $
                  406,117Net
                      loss from continuing operations
                  
                  $
                  (800,762
                  )Net
                      loss
                  
                  $
                  (842,390
                  )Net
                      loss per share
                  
                  $
                  (0.06
                  )
 4.
              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 378 million
        and 332 million as of June 30, 2005 and 2004, respectively, that could
        potentially dilute basic earnings per share in the future were not included
        in
        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.
  5.
              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
  10
  (SFAS
        123), “Accounting for Stock Based Compensation,” to provide alternative methods
        of transition for a voluntary change to the fair value based method of
        accounting for stock-based compensation and also amends the disclosure
        requirements of SFAS 123 to require prominent disclosure in both annual and
        interim financial statements about the methods of accounting for stock-based
        employee compensation and the effect of the method used on report results.
        As
        permitted by SFAS 148 and SFAS 123, the Company continues to apply the
        accounting provisions of APB 25, and related interpretations, with regard
        to the
        measurement of compensation cost for options granted under the Company’s Stock
        Option Plan. No compensation expense has been recorded as all options granted
        had an exercise price equal to the market value of the underlying stock on
        the
        grant date. The pro-forma effect on our results of operations, had expense
        been
        recognized using the fair value method described in SFAS 123, using the
        Black-Scholes option pricing model, is shown below.
  **For
                  the six Months**
                **Ended
                  June 30,****2005**
              
              **2004**Loss
                  applicable to common shareholders:As
                  reported
              
              $
              (3,363,416
              )
              $
              (810,084
              )Pro
                  forma
              
              $
              (3,367,141
              )
              $
              (813,809
              )Basic
                  and diluted loss per share:As
                  reported
              
              $
              (0.05
              )
              $
              (0.05
              )Pro
                  forma
              
              $
              (0.05
              )
              $
              (0.05
              )
  6.
              TAXES
  There
        was
        no provision for cash payment of income taxes for the six months ended June
        30,
        2005, as the Company anticipates a net taxable loss for the year ended December
        31, 2005.
  7.
              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 June 30,
        2005, such registration statement has not been declared effective. As of
        March
        14, 2003, the holders of these series waived all penalties related to the
        registration, along with mandatory conversion dates.
 
 Through
        August 14, 2004, the terms of the Company’s Series B, C, D, and E Convertible
        Preferred Stock provided for a guaranteed return on unconverted shares of
        5% for
        series B, 6% for series C and D, and 8% for series E.
  8.
              SUBSEQUENT
                  EVENTS
  For
        the
        period January 1, 2005 through June 30, 2005, the Company converted 10.4
        shares
        of Series C preferred stock and 140 shares of Series H preferred stock into
        12,246,352 shares of common stock.
  On
        July
        5, 2005, we entered into a Private Equity Credit Agreement with Brittany.
        Pursuant to this agreement, we may, at our discretion, periodically sell
        to
        Brittany shares of common stock for a total
  11
  purchase
        price of up to $15 million. 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. Brittany has not received any shares of our common
        stock
        in connection with the Private Equity Credit Agreement as we have not made
        any
        draws. We will not be able to draw down any funds until the registration
        statement filed with the SEC on July 12, 2005 (SEC File # 333-126526) is
        declared effective. This 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.
  On
        July
        14, 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 $175,000, and a common
        stock purchase warrant to purchase up to 7,000,000 shares of our common stock,
        $.0001 par value per share, for an aggregate purchase price of $175,000.
  On
        August
        1, 2005, we entered into a Securities Purchase Agreement with MacNab LLC
        (pursuant to which we sold a nonnegotiable 2% secured convertible promissory
        note with an aggregate principal amount of $170,000, and a common stock purchase warrant
        to purchase up to 6,800,000 shares of our common stock, $.0001 par value
        per
        share, for an aggregate purchase price of $170,000.
  ***Item
                2.***
              ***Management’s
                  Discussion and Analysis of Financial Condition and Results of Operations***
  **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
                  sectionprovidesa
                  general description of us, as well as recent developments and events
                  that
                  impact the comparability of the results being analyzed.
  ·
              **Results
                  of Operations.**Thissectionprovides
                  an analysis of our results of operations for the six months period
                  ended
                  June 30, 2005. This analysis is presented on a consolidated basis.
  12
  ·
              **Financial
                  Condition and Liquidity.**Thissection provides an analysis of our cash flows for the six months
                  ended
                  June 30, 2005.
  ·
              **Risk
                  Factors and Other Matters.**
  ·
              **Forward
                  Looking Statements.**Pleaserefer to pages 2 through 3.
  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
        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 six-month period ended June 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.
  13
  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.
  **RECENT
        SIGNIFICANT TRANSACTIONS AND OTHER EVENTS**
  We
        have
        recently undergone material changes to our business and our financial structure,
        entered into financing transactions and concluded that our historical financial
        information related to fiscal 2001 through fiscal 2003 and for the first
        three
        fiscal quarters of 2004 accounted incorrectly for some of the convertible
        preferred stock instruments.
  **Acquisition
        of True to From**
  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. It recently established a division focusing on the Homeland
        Security market through the development of specialized lighting solutions
        for a
        range of safety and security 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
  14
  these
        products will continue to be our most significant revenue-producing business
        for
        the remainder of the current fiscal year.
  **June
        14, 2005 Private Placement with McNab LLC**
  On
        June
        14, 2005, we entered into a Securities Purchase Agreement with McNab, an
        accredited investor, pursuant to which we sold a nonnegotiable 2% secured
        convertible promissory note with an aggregate principal amount of $100,000,
        and
        a common stock purchase warrant to purchase up to 4,000,000 shares of our
        common
        stock, $.0001 par value per share, for an aggregate purchase price of $100,000.
        We intend to use the proceeds for working capital. The private placement
        was
        exempt from registration under Section 4(2) of the Securities Act of 1933,
        as
        amended.
  **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, on an as
        needed
        basis, 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.
  We
        will
        not be able to draw down any funds until the registration statement filed
        with
        the SEC on July 12, 2005 (SEC File # 333-126526) is declared effective. That
        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.
  **July
        14, 2005 Private Placement with McNab LLC**
  On
        July
        14, 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 $175,000, and a common stock purchase
        warrant to purchase up to 7,000,000 shares of our common stock, $.0001 par
        value
        per share, for an aggregate purchase price of $175,000.
  15
  **August
        1, 2005 Private Placement with McNab LLC**
  On
        August
        1, 2005, we entered into a Securities Purchase Agreement with MacNab LLC
        pursuant to which we sold a nonnegotiable 2% secured convertible promissory
        note
        with an aggregate principal amount of $170,000, and a common stock purchase
        warrant to purchase up to 6,800,000 shares of our common stock, $.0001 par
        value
        per share, for an aggregate purchase price of $170,000.
  **RESULTS
        OF OPERATIONS**
  The
        results for the six months period ended June 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 June 30, 2005 and 2004**
 
 *Net
        Sales* .
        Net
        sales increased from $0 in the quarter ended June 30, 2004 to $267,833 in
        the
        quarter ended June 30, 2005. Revenues in the quarter ended June 30, 2005
        consisted of $267,833 in sales from our True To Form Ltd. 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
        June 30, 2004 to $201,660 in the quarter ended June 30, 2005, consisting
        of cost
        of sales from our True To Form Ltd. division.
 
 *Gross
        Profit* .
        Gross
        profit increased from $0 in the quarter ended June 30, 2004 to $66,173
        in
        the quarter ended June 30, 2005 consisting of gross profit on sales in our
        True
        To Form Ltd. 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 $182,685 in the quarter ended June 30, 2004 to $520,317 in
        the
        quarter ended June 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 $49,695 was recognized
        in
        the quarters ended June 30, 2004 and June 30, 2005, respectively.
 
 *Other
        Income* .
        Other
        income in the quarter ended June 30, 2004 consisted of $3,128 in interest
        charged to Eurotech for late payment of their invoices.
 
 *Interest
        Expense* .
        Interest expense for the quarter ended June 30, 2005 was $1,274,294. It
        consisted of $1,265,389 of interest in connection with the beneficial conversion
        features and amortization of warrant features related to convertible notes,
        and
        $ 8,905 in accrued interest expense on other borrowings. Interest expense
        for
        the quarter ended June 30, 2004 was of $88,219. It consisted of $74,412 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 June 30, 2004, we also accrued $11,307 in interest expense
        on
        the notes related to our licensed technologies division and amortized $2,500
        of
        the beneficial conversion feature of the convertible note issued to
        Brittany.
  16
  **Six
        months ended June 30, 2005 and 2004**
  *Net
        Sales.* Net
        sales increased from $620 in the six months ended June 30, 2004 compared
        to
        $637,514 in the six months ended June 30, 2005. Sales are recognized at the
        time
        that products are shipped or services are provided. Revenues in the six months
        ended June 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 six months
        ended June 30, 2004 compared to $349,863 in the six months ended June 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 six months ended June 30, 2004 to $287,651
        in
        the six months ended June 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 $445,251 in the six months ended June 30, 2004 to $1,090,242
        in
        the six months ended June 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 a mortization
        expense of $98,622, which includes six months of amortization of the intangible
        licensed technologies, was recognized in the six months ended June 30, 2005
        and
        2004. Depreciation expense of $2,305 and $2,501 which represents six months
        of
        depreciation on fixed assets in service was recognized in the six months
        ended
        June 30, 2005 and 2004.
  *Interest
        Income.* Other
        income in the six months ended June 30, 2005 consisted of $4,450 in interest
        charged to Tulix for interest on their notes.
  *Interest
        Expense.* ****** Interest
        expense for the six months ended June 30, 2005 was $3,084,854. 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 six months ended June 30, 2004 was $170,431. It consisted
        of
        $148,824 in interest charges on the Series B, C, D and E preferred stock
        and
        $19,107 in interest expense on the notes related to the Licensed Technologies
        Division and amortized $2,500 of the beneficial conversion feature of the
        convertible note issued to Brittany.
  17
  **LIQUIDITY
        AND CAPITAL RESOURCES**
  Our
        sources of capital are extremely limited. We have incurred operating losses
        since inception and as of June 30, 2005, we had an accumulated deficit of
        $33,725,164 and a working capital deficit of $4,797,497.
  **Cash
        and Working Capital**
  PercentageAt
                    June 30, 2005
                
                At
                    December 31, 2004
                
                Increase
                    / (Decrease)Current
                    Assets
                
                $
                352,816
                
                $
                608,895
                
                
                (42%)Current
                    Liabilities
                
                
                5,150,312
                
                
                3,389,297
                
                
                52%Working
                    Capital (Deficit)
                
                $
                (4,797,497
                )
                $
                (2,780,402
                )
                
                (73%)





We
      had
      cash of $19,498 as at June 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
      Used in Operating Activities**




Cash
      used
      in operating activities for the six months ended June 30, 2005 was $948,182
      compared to $229,601 for the comparative period in 2004, representing an
      increase, of $718,581 or 313%. This increase was 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 six months ended June 30, 2005 was $758,644, compared
          to
          $280,000 for the six months ended June 30, 2004.






**Financing
      activities during the six months ended June 30, 2005**




·
            On
                January 30, 2005 we issued options to purchase 900,000 shares of
                common
                stock to Mark Allen under the terms of his employmentagreementand our equity compensation plan for directors and to Michael Sheppard
                in
                accordance with the terms of our option plan for directors.




·
            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


18
  note
                  in the principal amount of $250,000 and warrant to purchase up
                  to
                  10,000,000 shares of our common stock to Southridge in exchange
                  for its
                  $250,000 investment. Under the terms of this purchase agreement,
                  Southridge may, at its option, and at any time prior to July 1,
                  2005,
                  purchase an additional note in the principal amount of up to $1,500,000,
                  and otherwise on substantially the same terms as the note issued
                  on
                  January 31, 2005. The note is convertible, at the option of the
                  holder,
                  into shares of our common stock at a conversion price of $0.02
                  per share.
                  Southridge may require us to repurchase some or all of its note
                  if the
                  market price of our common stock falls below $0.03 per share for
                  ten (10)
                  consecutive trading days, at a repurchase price equal to 140% of
                  the
                  principal amount of the note. In the event we default under the
                  terms of
                  the note, the entire outstanding principal (and any outstanding
                  interest
                  accrued thereon) shall become immediately due and payable, and
                  the
                  interest rate will rise to 18% per annum. We have secured the payment
                  of
                  the notes with a subordinated security interest in our accounts,
                  general
                  intangibles, inventories, and other collateral. In addition, in
                  the event
                  we propose to register securities under the Securities Act of 1933,
                  as
                  amended, we are required to notify Southridge in advance of such
                  registration and, at its request (subject to limited exceptions),
                  include
                  the shares of our common stock underlying the note and warrant
                  on the
                  registration statement filed in connection with such registration
                  (and
                  assume any expenses associated therewith). The warrant has an expiration
                  date of January 31, 2010. It contains a cashless exercise provision
                  whereby the holder may pay the exercise price associated with any
                  exercise
                  by having us withhold a number of shares otherwise issuable upon
                  such
                  exercise having a fair market value equal to the applicable aggregate
                  exercise price. In the event such provision is used with respect
                  to an
                  exercise, we would receive no proceeds upon such exercise.





·
            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.







·
            On
                March 2, 2005, Southridge Partners LP exercised its option to purchase
                an
                additional note and warrant under its Second Securities Purchase
                Agreement. In connection with such exercise, we issued to Southridge
                a
                convertible promissory note in the principal amount of $175,000 and
                a
                warrant to purchase up to 7,000,000 shares of our common stock in
                exchange
                for its $175,000 investment. The note is convertible, at the option
                of the
                holder, into shares of our common stock at a conversion price of
                $0.02 per
                share. Southridge may require us to repurchase some or all of its
                note if
                the market price of our common stock falls below $0.03 per share
                for ten
                (10) consecutive trading days, at a repurchase price equal to 140%
                of the
                principal amount of the note. In the event we default under the terms
                of
                the note, the entire outstanding principal (and any outstanding interest
                accrued thereon) shall become immediately due and payable, and the
                interest rate will rise to 18% per annum. The note matures on March
                2,
                2007.




19





·
            From
                April 1, 2005 through May 18, 2005, the Company converted 12.5 shares
                of
                Series C preferred stock and 540 shares of Series H preferred stock
                into
                11,425,701 shares of common stock.




·
            On
                April 11, 2005, Southridge Partners LP exercised its option to purchase
                an
                additional note and warrant pursuant to the Second Securities Purchase
                Agreement. In connection with such exercise, we issued to Southridge
                a
                convertible promissory note in the principal amount of $125,000 and
                a
                warrant to purchase up to 5,000,000 shares of our common stock to
                Southridge in exchange for its $125,000 investment. The note is
                convertible, at the option of the holder, into shares of our common
                stock
                at a conversion price of $0.02 per share. Southridge may require
                us to
                repurchase some, or all, of its note if the market price of our common
                stock falls below $0.03 per share for ten (10) consecutive trading
                days,
                at a repurchase price equal to 140% of the principal amount of the
                note.
                In the event we default under the terms of the note, the entire
                outstanding principal (and any outstanding interest accrued thereon)
                shall
                become immediately due and payable, and the interest rate will rise
                to 18%
                per annum. The note matures on April 11,
                2007.




**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 have an
      accumulated deficit of approximately $30,361,748 and $33,725,164 as of December
      31, 2004 and June 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 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 financi a l
      statements, we had negative working capital of approximately
      $4,797,497.




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.




**RISK
      FACTORS**




WE
      HAVE A
      HISTORY OF OPERATING LOSSES AND THERE IS NO ASSURANCE THAT WE WILL ACHIEVE
      PROFITABILITY IN THE FUTURE.




We
      have a
      history of operating losses. For the six months ended June 30, 2005 and for
      the
      fiscal year ended December 31, 2004, we incurred a net loss of $3,363,416 and
      $2,998,429, respectively. As of December 31, 2004 and June 30, 2005, we had
      an
      accumulated deficit of approximately $30,361,748 and $33,725,164 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




20




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




THERE
      IS
      SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN DUE TO
      INSUFFICIENT REVENUES TO COVER OUR OPERATING COSTS, WHICH MEANS THAT WE MAY
      NOT
      BE ABLE TO CONTINUE OPERATIONS UNLESS WE OBTAIN ADDITIONAL FUNDING.




There
      is
      substantial doubt about our ability to continue as a going concern due to our
      losses from operations. We anticipate that we will incur net losses for the
      immediate future. We expect our operating expenses to increase significantly,
      and, as a result, we will need to generate monthly revenue if we are to continue
      as a going concern. To the extent that we do not generate revenue at anticipated
      rates, we do not obtain additional funding, or that increases in our operating
      expenses precede or are not subsequently followed by commensurate increases
      in
      revenue, or that we are unable to adjust operating expense levels accordingly,
      we may not have the ability to continue on as a going concern.




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 continue to obtain 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, INC. 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 SOME OR ALL OF THE ANTICIPATED BENEFITS FROM OUR ACQUISITION
      OF
      TRUE TO FORM, OUR BUSINESS WILL SUFFER.




Our
      combined company may fail to realize some or all 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.




21




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 $3,363,416 for the six
      months ended June 30, 2005. Additionally, we had a working capital deficiency
      of
      $4,797,497 and an accumulated deficit of $33,725,164 as of June 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

- 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) 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 (the “Private Equity Credit Agreement”). Therefore,
      we are dependent on our Private Equity Credit Agreement with Brittany to fund
      our operations. We will not be able to draw down any funds until the
      registration statement filed with the SEC on July, 12, 2005 (SEC File #
      333-126526) is declared effective. That 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.




If
      we are
      unable to draw down on our Private Equity Credit Agreement or obtain adequate
      financing when needed, we may be forced to scale down our operations or seek
      protection of the bankruptcy courts. As a result, you may lose all or part
      of
      your investment. We may not be able to access sufficient funds when needed
      because of the following reasons.


·  MAXIMUM
        PUT AMOUNT. The maximum amount of each put is equal to the lesser of (a)
        Five
        Hundred Thousand Dollars ($500,000), or (b) Five Hundred (500%) percent of
        the
        weighted average volume for the twenty (20) trading days immediately preceding
        the put date.
  22
 ·  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.
  ·  INVERSE
        RELATIONSHIP BETWEEN THE PRICE OF OUR COMMON STOCK AND THE NUMBER OF SHARES
        ISSUABLE UNDER THE PRIVATE EQUITY CREDIT AGREEMENT. There is an inverse
        relationship between the price of our common stock and the number of shares
        of
        common stock issuable to Brittany under the Private Equity Credit Agreement.
        As
        our stock price declines, we would be required to issue a greater number
        of
        shares under the Private Equity Credit Agreement for a given put. As we draw
        down on our Private Equity Credit Agreement and more shares of our common
        stock
        are sold, our stock price could decrease significantly and make further puts
        impractical or impossible during time periods in which we may need financing.
        Unless we become profitable, it is unlikely that we will be able to secure
        additional financing from external sources other than our Private Equity
        Credit
        Agreement.
  ·  IF
        WE
        DESIRE TO SELL MORE THAN 53,000,000 TO BRITTANY, WE WILL HAVE TO FILE A NEW
        REGISTRATION STATEMENT. 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 being registered in the registration statement filed on
        July 12, 2005 (SEC File # 333-126526), and we
        have enough authorized and unissued shares, we will have to file a new
        registration statement to cover such additional shares that we would issue
        for
        additional draw downs on the Private Equity Credit Agreement.
  ·  WE
        MAY BE
        REQUIRED TO SEEK STOCKHOLDER APPROVAL TO INCREASE THE NUMBER OF AUTHORIZED
        SHARES OF COMMON STOCK. You should also be aware that in order for us to
        utilize
        the full $15 million available under the Private Equity Credit Agreement
        after
        the sale of 53,000,000 shares, registered
        in the registration statement filed on July 12, 2005 (SEC File #
        333-126526), 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 July 5, 2005,
        we
        would have to issued 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 July
        7,
        2005, we had 82,580,760 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. We do not know the number of shares issuable as a result
      of
      these arrangements.




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. While our agreement with our
      investors limits to 9.99% or to 4.99% the percentage of our outstanding common
      stock that they may own at any one time, it does not limit the number of shares
      we may sell to them over the course of these agreements. In addition, the
      investors may elect to resell the shares we issue, which would allow us to
      sell
      additional shares to them without reaching the 9.9% cap or the 4.99% cap, as
      applicable. In this way, they could sell more than 9.9% or 4.99% of our
      outstanding common stock in a relatively short period of time while never
      holding more than 9.9% or 4.99% at one time.




23




IF
      THE
      PRICE OF OUR STOCK CONTINUES TO DECLINE AND WE CANNOT PREPAY THE NOTES ISSUED
      FROM TIME TO TIME, WE WILL BE IN DEFAULT AND THE HOLDERS OF THE NOTES WILL
      HAVE
      THE REMEDIES AVAILABLE TO CREDITORS.




If
      the
      market price of our common stock falls below $0.03 per share for ten (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. You
      may
      lose all or part of your investment.




IF
      WE
      DEFAULT ON ANY OF OUR OUTSTANDING NOTES, SOME OR ALL OF OUR ASSETS COULD BE
      LIQUIDATED, OUR OPERATIONS WILL BE DISRUPTED AND OUR BUSINESS WILL SUFFER.




All
      of
      our assets are subject to security agreements. As a result, if we default under
      the terms of any of these notes issued to investors in the private placements
      completed on October 19, 2004; October 22, 2004; November 5, 2004; December
      3,
      2004; December 28, 2004; December 31, 2004; March 2, 2005; April 11, 2005;
      May
      12, 2005; and June 14, 2005, holders of the notes could foreclose and liquidate
      some or all of our assets. As a result, 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.




24




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.




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




25




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, 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 SmallCap 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 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 “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 July 5, 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.




26





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.




THE
      MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE.




Our
      stock
      price has been volatile. From January 1, 2003 to July 5, 2005, the trading
      price
      of our common stock ranged from $0.03 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.




27




**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
      June 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 lease
      arrangement, which provides for, among other things, monthly base rental
      payments of approximately $3,500 through February 28, 2005 plus real estate
      taxes and insurance. The total rent expense under this arrangement was $52,200
      for the six months ended June 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.


28






**ITEM
      3.**  **CONTROLS
      AND PROCEDURES**




**Evaluation
      of Disclosure Controls and Procedures**




Our
      principal executive officer, who is also our principal financial officer, after
      evaluting the effectiveness of our internal controls and procedures (as defined
      in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934 as
      of
      June 30, 2005 has examined our disclosure controls and procedures and concluded
      that they were not effective as of such date based on the criteria established
      by the Commission of Sponsoring Organizations of the Treadway Commission. Our
      liquidity has been a primary factor in preventing us from hiring a Chief
      Financial Officer as well as other staff to assist in that function. We intend
      to hire a Chief Financial Officer and additional staff as soon as we obtain
      sufficient financing.




**Changes
      in Internal Control over Financial Reporting**





Management
        believes that at this time, in light of the recent addition of an outside
        consultant to assist with some of the highly technical issues relating to
        its
        capital structure, the risks associated with a lack of segregation of duties
        and
        limited staff have been largely mitigated. Management believes that additional
        progress in strengthening its controls and procedures will continue through
        the
        end of fiscal year 2005.
 
 Furthermore,
        management intends to hire an accounting professional to increase the 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.




29


**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.




**1.** **Action
      filed by 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.





**2.** **Action
      filed by Carey Nade** **ll**




On
      April
      13, 2005 Carey Naddell, CEO of Eurotech, Ltd., filed suit against the Company
      for damages based upon an
      alleged breach
      of a written service agreement. The Company has responded and feels at this
      time
      there is no merit to this action. We will diligently defend this
      action.








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.




30




**ITEM
      2. UNREGISTERED SALES
      OF
      EQUITY SECURITIES AND USE OF PROCEEDS.**




None.




**ITEM
      3. DEFAULTS UPON SENIOR
      SECURITIES.**




None.




**ITEM
      4. SUBMISSION OF MATTERS
      TO A VOTE OF SECURITY HOLDERS.**




No
      matters were submitted to our security holders for a vote during the fiscal
      quarter ended June 30, 2005.




**ITEM
      5. OTHER
      INFORMATION.**





None.





31




**ITEM
      6.** **EXHIBITS
      AND CURRENT REPORTS ON FORM 8-K**




**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
              3.33.5
              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
              3.73.11
              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
              3.9
  32
  **Incorporated
                  by Reference****Exhibit
                    No.**
                **Description**
                **Filed
                    with**
                  **this
                    Form**
                  **10-QSB**
                **Form**
                **Filing
                    Date**
                **Exhibit
                    No.**
 3.13
                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
                4.24.2
                2%
                    Secured Convertible Promissory issued to Southridge Capital Partners
                    dated
                    October 19, 2004
                
                8-K
                October
                    19, 2005
                4.14.3
                Common
                    Stock Purchase Warrant issued to Southridge Capital Partners,
                    LC dated
                    October 19, 2004
                
                8-K
                October
                    19, 2005
                99.24.4
                2%
                    Secured Convertible Promissory Note dated December 3, 2004 issued
                    to Deer
                    Creek Fund, LLC
                
                8K
                December
                    8, 2004
                99.14.5
                Common
                    Stock Purchase Warrant dated December 3, 2004 issued to Deer
                    Creek Fund,
                    LLC
                
                8K
                December
                    8, 2004
                99.24.6
                Warrant
                    issued to Trilogy Capital Partners, Inc.
                
                8-K
                December
                    16, 2004
                99.14.7
                Warrant
                    issued to Michael Rosenblum on December 28, 20044.8
                Secured
                    Note issued to Mark Allen on December 31, 2004
                
                8-K
                January
                    6, 2005
                10.14.9
                Guaranty
                    issued by Global Matrechs, Inc. to mark Allen on December 31,
                    2004
                
                8-K
                January
                    6, 2005
                10.34.10
                2%
                    Secured Convertible Promissory Note issued to Woodward LLC
                
                8-K
                February
                    2, 2005
                10.44.11
                Common
                    Stock Purchase Warrant issued to Southridge Partners LP on January
                    31,
                    2005
                
                8-K
                February
                    2, 2005
                4.14.12
                2%
                    Secured Convertible Promissory Note issued to Southridge Partners
                    LP on
                    January 31, 2005
                
                8-K
                February
                    2, 2005
                10.24.13
                Common
                    Stock Purchase Warrant issued to Southridge Partners LP on March
                    2,
                    2005
                
                8-K
                March
                    7, 2005
                4.1
  33
  **Incorporated
                    by Reference****Exhibit
                      No.**
                  **Description**
                  **Filed
                      with**
                    **this
                      Form**
                    **10-QSB**
                  **Form**
                  **Filing
                      Date**
                  **Exhibit
                      No.**
 4.14
                  Nonnegotiable
                      2% Secured Convertible Promissory Note issued to Southridge
                      Partners LP on
                      March 2, 2005
                  
                  8-K
                  March
                      7, 2005
                  4.24.15
                  Common
                      Stock Purchase Warrant issued to Southridge Partners LP on
                      April 11, 2005
                  
                  8-K
                  April
                      15, 2005
                  4.14.16
                  Non-negotiable
                      2% Secured Convertible Promissory Note issued to Southridge
                      Partners LP on
                      April 11, 2005
                  
                  8-K
                  April
                      15, 2005
                  4.24.17
                  Common
                      Stock Purchase Warrant issued to Southridge Partners LP on
                      May 12, 2005
                  
                  8-K
                  May
                      17, 2005
                  4.14.18
                  Non-negotiable
                      2% Secured Convertible Promissory Note issued to Southridge
                      Partners LP on
                      May 12, 2005
                  
                  8-K
                  May
                      17, 2005
                  4.24.19
                  Non-negotiable
                      2% Secured Convertible Promissory Note issued to McNab LLC
                      on June 14,
                      2005
                  
                  8-K
                  June
                      20, 2005
                  4.14.20
                  Common
                      Stock Purchase Warrant Issued to McNab LLC on June 14,
                      2005
                  
                  8-K
                  June
                      20, 2005
                  4.210.2
                  Letter
                      of Engagement with Trilogy Capital Partners, Inc. dated December 22,
                      2004
                  
                  8-K
                  December
                      16, 2004
                  99.210.5
                  Securities
                      Purchase Agreement dated October 19, 2004 between Global Matrechs,
                      Inc.
                      and Southridge Partners LP
                  
                  8-K
                  October
                      19, 2004
                  99.110.7
                  Securities
                      Purchase Agreement dated December 3, 2004 between Global Matrechs,
                      Inc.
                      and Deer Creek Fund, LLC
                  
                  8-K
                  December
                      8, 2004
                  99.310.8
                  Second
                      Securities Purchase Agreement dated April 11, 2005 between
                      Global
                      Matrechs, Inc. and Southridge Partners LP
                  
                  8-K
                  April
                      15, 2005
                  10.110.9
                  Securities
                      Purchase Agreement dated May 12, 2005 between Global Matrechs,
                      Inc. and
                      Southridge Partners LP
                  
                  8-K
                  May
                      17, 2005
                  10.110.10
                  Securities
                      Purchase Agreement dated June 14, 2005 between Global Matrechs
                      and McNab
                      LLC
                  
                  8-K
                  July
                      6, 2005
                  10.1
  34
  **Incorporated
                      by Reference****Exhibit
                        No.**
                    **Description**
                    **Filed
                        with**
                      **this
                        Form**
                      **10-QSB**
                    **Form**
                    **Filing
                        Date**
                    **Exhibit
                        No.**
 10.11
                  Private
                      Equity Credit Agreement dated July 5, 2005 with Brittany Capital
                      Management LLC
                  
                  8-K
                  July
                      6, 2005
                  10.110.12
                  Registration
                      Rights Agreement dated July 5, 2005 with Brittany Capital Management
                      LLC
                  
                  8-K
                  June
                      30, 2005
                  10.210.13
                  Employment
                      Agreement between Global Matrechs and Mark Allen dated January
                      31,
                      2005
                  X10.15
                  Security
                      Agreement between True To Form, Limited, Mark Allen and Global
                      Matrechs,
                      Inc. dated December 31, 2004
                  
                  8-K
                  January
                      6, 2005
                  10.210.16
                  Collateral
                      Pledge Agreement dated as of December 31, 2004 is made by Global
                      Matrechs,
                      Inc. in favor of Mark Allen
                  
                  8-K
                  January
                      6, 2005
                  10.410.17
                  Second
                      Securities Purchase Agreement dated January 31, 2005 between
                      Global
                      Matrechs, Inc. and Southridge Partners LP
                  
                  8-K
                  February,
                      2005
                  10.110.18
                  Exchange
                      Agreement between Global Matrechs and Woodward LLC dated January
                      31,
                      2005
                  
                  8-K
                  February
                      4, 2005
                  10.331.1
                  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







35


**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: August
                22, 2005
              By:
              /s/ Michael
                SheppardName:Michael
                SheppardTitle:President,
                Chief Executive Officer, and Acting Chief Financial Officer
                (1)





(1)
       Mr. Sheppard also performs the functions of a chief accounting officer
      for
      the company although he has not officially been appointed as such.


































36




**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
              3.33.5
              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
              3.73.11
              Certificate
                  of Designations, Preferences and Rights of Series F Convertible
                  Preferred
                  Stock
              
              10-K
              April
                  15, 2003
              3.8
 37
  **Incorporated
                    by Reference****Exhibit
                      No.**
                  **Description**
                  **Filed
                      with**
                    **this
                      Form**
                    **10-QSB**
                  **Form**
                  **Filing
                      Date**
                  **Exhibit
                      No.**
  3.12
                  Certificate
                      of Designations, Preferences and Rights of Series G Convertible
                      Preferred
                      Stock
                  
                  10-K
                  April
                      15, 2003
                  3.9
 3.13
                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
                4.24.2
                2%
                    Secured Convertible Promissory issued to Southridge Capital Partners
                    dated
                    October 19, 2004
                
                8-K
                October
                    19, 2005
                4.14.3
                Common
                    Stock Purchase Warrant issued to Southridge Capital Partners,
                    LC dated
                    October 19, 2004
                
                8-K
                October
                    19, 2005
                99.24.4
                2%
                    Secured Convertible Promissory Note dated December 3, 2004 issued
                    to Deer
                    Creek Fund, LLC
                
                8K
                December
                    8, 2004
                99.14.5
                Common
                    Stock Purchase Warrant dated December 3, 2004 issued to Deer
                    Creek Fund,
                    LLC
                
                8K
                December
                    8, 2004
                99.24.6
                Warrant
                    issued to Trilogy Capital Partners, Inc.
                
                8-K
                December
                    16, 2004
                99.14.7
                Warrant
                    issued to Michael Rosenblum on December 28, 20044.8
                Secured
                    Note issued to Mark Allen on December 31, 2004
                
                8-K
                January
                    6, 2005
                10.14.9
                Guaranty
                    issued by Global Matrechs, Inc. to mark Allen on December 31,
                    2004
                
                8-K
                January
                    6, 2005
                10.34.10
                2%
                    Secured Convertible Promissory Note issued to Woodward LLC
                
                8-K
                February
                    2, 2005
                10.44.11
                Common
                    Stock Purchase Warrant issued to Southridge Partners LP on January
                    31,
                    2005
                
                8-K
                February
                    2, 2005
                4.14.12
                2%
                    Secured Convertible Promissory Note issued to Southridge Partners
                    LP on
                    January 31, 2005
                
                8-K
                February
                    2, 2005
                10.2
 38
  **Incorporated
                      by Reference****Exhibit
                        No.**
                    **Description**
                    **Filed
                        with**
                      **this
                        Form**
                      **10-QSB**
                    **Form**
                    **Filing
                        Date**
                    **Exhibit
                        No.**
  4.13
                    Common
                        Stock Purchase Warrant issued to Southridge Partners LP on
                        March 2,
                        2005
                    
                    8-K
                    March
                        7, 2005
                    4.1
 4.14
                  Nonnegotiable
                      2% Secured Convertible Promissory Note issued to Southridge
                      Partners LP on
                      March 2, 2005
                  
                  8-K
                  March
                      7, 2005
                  4.24.15
                  Common
                      Stock Purchase Warrant issued to Southridge Partners LP on
                      April 11, 2005
                  
                  8-K
                  April
                      15, 2005
                  4.14.16
                  Non-negotiable
                      2% Secured Convertible Promissory Note issued to Southridge
                      Partners LP on
                      April 11, 2005
                  
                  8-K
                  April
                      15, 2005
                  4.24.17
                  Common
                      Stock Purchase Warrant issued to Southridge Partners LP on
                      May 12, 2005
                  
                  8-K
                  May
                      17, 2005
                  4.14.18
                  Non-negotiable
                      2% Secured Convertible Promissory Note issued to Southridge
                      Partners LP on
                      May 12, 2005
                  
                  8-K
                  May
                      17, 2005
                  4.24.19
                  Non-negotiable
                      2% Secured Convertible Promissory Note issued to McNab LLC
                      on June 14,
                      2005
                  
                  8-K
                  June
                      20, 2005
                  4.14.20
                  Common
                      Stock Purchase Warrant Issued to McNab LLC on June 14,
                      2005
                  
                  8-K
                  June
                      20, 2005
                  4.210.2
                  Letter
                      of Engagement with Trilogy Capital Partners, Inc. dated December 22,
                      2004
                  
                  8-K
                  December
                      16, 2004
                  99.210.5
                  Securities
                      Purchase Agreement dated October 19, 2004 between Global Matrechs,
                      Inc.
                      and Southridge Partners LP
                  
                  8-K
                  October
                      19, 2004
                  99.110.7
                  Securities
                      Purchase Agreement dated December 3, 2004 between Global Matrechs,
                      Inc.
                      and Deer Creek Fund, LLC
                  
                  8-K
                  December
                      8, 2004
                  99.310.8
                  Second
                      Securities Purchase Agreement dated April 11, 2005 between
                      Global
                      Matrechs, Inc. and Southridge Partners LP
                  
                  8-K
                  April
                      15, 2005
                  10.110.9
                  Securities
                      Purchase Agreement dated May 12, 2005 between Global Matrechs,
                      Inc. and
                      Southridge Partners LP
                  
                  8-K
                  May
                      17, 2005
                  10.1
 39
  **Incorporated
                        by Reference****Exhibit
                          No.**
                      **Description**
                      **Filed
                          with**
                        **this
                          Form**
                        **10-QSB**
                      **Form**
                      **Filing
                          Date**
                      **Exhibit
                          No.**
  10.10
                      Securities
                          Purchase Agreement dated June 14, 2005 between Global Matrechs
                          and McNab
                          LLC
                      
                      8-K
                      July
                          6, 2005
                      10.1
 10.11
                  Private
                      Equity Credit Agreement dated July 5, 2005 with Brittany Capital
                      Management LLC
                  
                  8-K
                  July
                      6, 2005
                  10.110.12
                  Registration
                      Rights Agreement dated July 5, 2005 with Brittany Capital Management
                      LLC
                  
                  8-K
                  June
                      30, 2005
                  10.210.13
                  Employment
                      Agreement between Global Matrechs and Mark Allen dated January
                      31,
                      2005
                  X10.15
                  Security
                      Agreement between True To Form, Limited, Mark Allen and Global
                      Matrechs,
                      Inc. dated December 31, 2004
                  
                  8-K
                  January
                      6, 2005
                  10.210.16
                  Collateral
                      Pledge Agreement dated as of December 31, 2004 is made by Global
                      Matrechs,
                      Inc. in favor of Mark Allen
                  
                  8-K
                  January
                      6, 2005
                  10.410.17
                  Second
                      Securities Purchase Agreement dated January 31, 2005 between
                      Global
                      Matrechs, Inc. and Southridge Partners LP
                  
                  8-K
                  February,
                      2005
                  10.110.18
                  Exchange
                      Agreement between Global Matrechs and Woodward LLC dated January
                      31,
                      2005
                  
                  8-K
                  February
                      4, 2005
                  10.331.1
                  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







40