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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): July 14, 2005
GLOBAL MATRECHS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 000-29204 58-2153309
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
90 Grove Street, Suite 201 Ridgefield, Connecticut 06877
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (203) 431-6665
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
This report on Form 8-K contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. We intend the forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements in these
sections. All statements regarding our expected publicity and marketing
activities, financial position, business and financing plans are forward-looking
statements. These statements can sometimes be identified by our use of
forward-looking words such as "may," "will," "should," "expect," "anticipate,"
"project," "designed," "estimate," "plan" and "continue." Although we believe
that our expectations in such forward-looking statements are reasonable, we
cannot promise that our expectations will turn out to be correct. These
forward-looking statements generally relate to plans and objectives for future
operations and are based upon reasonable estimates and assumptions regarding
future results or trends. These forward-looking statements are subject to
certain risks, uncertainties and assumptions relating to Global Matrechs, Inc.
("Company", "we" or "our"). Factors that could cause actual results to differ
materially from our expectations include the uncertainty regarding the
volatility of the price of our common stock, our possible ability to repay
existing indebtedness and other risks detailed from time to time in our SEC
reports. No assurance can be given that investors of the Company will retain any
level of value. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, the Company's future
performance and actual results of operations may vary significantly from those
anticipated, projected, believed, expected, intended or implied. The Company
undertakes no obligation to update any of the forward-looking statements, which
speak only as of the date they were made.
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF THE REGISTRANT
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
On July 14, 2005, we entered into a Securities Purchase Agreement with
McNab LLC ("McNab") pursuant to which we sold a nonnegotiable 2% secured
convertible promissory note (the "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 (the "Warrant"), for an
aggregate purchase price of $175,000. We intend to use the proceeds for working
capital.
THE NOTE
The Note bears interest at a fixed rate of 2% per annum computed on the
unpaid principal balance, which is payable upon maturity. The Note matures on
July 14, 2007, at which time all remaining principal of the Note is due and
payable in full.
The Note is convertible at any time, at the option of the holder, into
shares of our common stock at a conversion price of $0.02 per share. McNab 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
2
ten (10) consecutive trading days, at a repurchase price equal to 140% of the
principal amount of the note.
We have secured the payment of the note 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 McNab 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 Securities Purchase Agreement and the Note contain customary events of
default, including non-payment of principal or make-whole amount, interest, fees
or other amounts; violation of covenants; inaccuracy of representations and
warranties and certain bankruptcy events. 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 WARRANT
Under the terms of the Warrant, McNab may purchase, at any time, up to
four-million (7,000,000) shares of our common stock at an exercise price of
$0.025 per share. The Warrant has an expiration date of July 14, 2010. The
Warrant 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.
Adjustments to the exercise price of the warrant must be made in the event
that we pay a dividend in common stock or securities convertible to common
stock, or if we subdivide, split or combine our shares of outstanding common
stock. In the event that any of the foregoing occur, then the number of shares
issuable pursuant to the Warrant shall be adjusted so that McNab may thereafter
receive the number of shares of common stock it would have owned immediately
following such action if it had exercised the warrants immediately prior to the
transaction. The exercise price on the Warrant shall be adjusted to reflect the
proportionate increase or decrease in the number of shares.
We are obligated to pay placement fees in connection with this private
placement consisting of cash and non-cash consideration with an the aggregate
estimated fair value of $10,000. The private placement was exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended.
The discussion in this current report is only a summary and is qualified in
its entirety by reference to the Note, the Warrant and the Securities Purchase
Agreement, which are included as Exhibits 4.1, 4.2, and 10.1, respectively, to
this current report on Form 8-K and are incorporated by reference in this
Current Report.
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ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
Number Title
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4.1 Common Stock Purchase Warrant issued to McNab LLC
4.2 Nonnegotiable 2% Secured Convertible Promissory Note issued to
McNab LLC
10.1 Securities Purchase Agreement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GLOBAL MATRECHS, INC.
Date: July 15, 2005
By: /s/ Michael Sheppard
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Michael Sheppard
President, Chief Executive Officer, Chief
Operating Officer and Acting Chief
Financial Officer
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EXHIBIT INDEX
Number Title
- ------ -----
4.1 Common Stock Purchase Warrant issued to McNab LLC
4.2 Nonnegotiable 2% Secured Convertible Promissory Note issued to
McNab LLC
10.1 Securities Purchase Agreement
6