U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

   
                                 FORM 10-KSB/A-1
    

(Mark One)
[X]     ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934

For the fiscal year ended May 31, 1997

                                       OR

[  ]    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934

For the transition period from                      to  
                               --------------------    -----------------

Commission File Number    1-13776
                         ---------


                           GREENMAN TECHNOLOGIES,INC.
                  --------------------------------------------
        (Exact name of small business issuer as specified in its charter)


          DELAWARE                                        71-0724248
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)                


        7 KIMBALL LANE, BUILDING A, LYNNFIELD, MA                    01940
        ---------------------------------------------------------------------
        (Address of principal executive offices)                   (Zip Code)


Issuer's  telephone  number, including area code   (781) 224-2411
                                                  ----------------

Securities registered pursuant to Section 12 (b) of the Exchange Act:

Title of each class                    Name of each exchange on which registered
-------------------                    -----------------------------------------

Common Stock, $ .01 par value                              Boston Stock Exchange
------------------------------
   (Title of each class)

Class A Common Stock Purchase Warrants                     Boston Stock Exchange
---------------------------------------
   (Title of each class)

Securities registered pursuant to Section 12 (g) of the Exchange Act:

Common Stock, $ .01 par value
------------------------------
   (Title of each class)

Class A Common Stock Purchase Warrants
--------------------------------------
   (Title of each class)


                                                                               1



Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 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
                                 ----      ---- 

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B in this form, and no disclosure will be contained, to the best of
registrant's   knowledge,   in  definitive   proxy  or  information   statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ X ]

The issuer's revenues for the fiscal year ended May 31, 1997 were  $4,020,670.

The aggregate market value of the voting stock held by  non-affiliates  computed
by reference to the average bid and asked prices of such stock,  as of September
12, 1997 was $9,703,619.

As of  September  12,  1997,  8,255,680  shares of Common  Stock of issuer  were
outstanding.  The  aggregate  market  value of the  shares of  Common  Stock was
$12,383,520.

Transitional Small Business Disclosure Format (check one)       Yes [  ]  No [X]





                                                                               2





                                     PART 1

ITEM  1.       DESCRIPTION OF BUSINESS

GENERAL

        GreenMan   Technologies,   Inc.  (the  "Company"  or   "GreenMan")   was
incorporated  under the laws of the State of Arkansas on September  16, 1992 and
reincorporated  under  the laws of the  State  Delaware  on June 27,  1995.  The
Company was formed primarily to develop,  manufacture and sell  "environmentally
friendly" plastic and thermoplastic rubber feedstocks, rubber parts and products
that are manufactured using recycled  materials and/or are themselves  partially
or wholly recyclable.

MOLDING OPERATIONS

   
        The Company's Molding operations (the "Molding  operation"),  located in
Malvern, Arkansas, provides injection molding manufacturing services to customer
specifications  ("Contract/Custom  Molding")  in the  production  of plastic and
thermoplastic  rubber parts for such products as stereo components and speakers,
water filters and pumps,  plumbing  components and automotive  accessories.  The
Molding  operation uses leased,  state-of-the-art,  injection  molding equipment
that is  energy  and  labor  efficient,  has  fast  cycle  times  and  minimizes
production  waste. The facility also conducts R&D testing and development of the
Company's  proprietary  thermoplastic  material,  GEM-  (GreenMan  Environmental
Materials) Stock(TM), and tests the use of these materials in the manufacture of
a variety of potential applications.
    

        In May 1997, the Company's  Molding  operation began  manufacturing  the
Company's  first consumer  product,  a 34 gallon GEM- Stock(TM)  trash container
which is being  marketed  under the GreenMan  name  ("captive  molding").  Other
proposed products, to be manufactured and sold under the GreenMan name will also
be produced in the future at the Molding operation,  which management expects to
result in balanced contract/custom and captive molding activities.

RECYCLING OPERATIONS

        The Company's Recycling operations (the "Recycling  operation"), located
in Jackson,  Georgia, were established to develop low-cost sources of rubber and
plastic waste ( from tires and recycled  plastics) for use in the  production of
the Company's  GEM-Stock and for the development of markets for  end-products to
be made utilizing GEM-Stock.

        The Company has targeted  several  markets with  products  incorporating
significant  amounts of recovered crumb rubber and plastic waste,  including the
building industry (with anti-fatigue floor mats, roofing products, and timbers);
the lawn and garden  market (with  landscape  timbers);  the  consumer  products
market (with trash containers, recycling totes, and storage containers); and the
transportation  industry (with rubber modified  asphalt,  nose cones,  barriers,
railroad ties and railway crossing mats).

   
        On June 30, 1997,  the Company  acquired all of the capital stock of BFI
Tire  Recyclers of Minnesota,  Inc.  ("BTM") and BFI Tire  Recyclers of Georgia,
Inc. ("BTG"),  both of which were  wholly-owned  subsidiaries of Browning Ferris
Industries,  Inc.  ("BFI")  and whose  business  is scrap  tire  collection  and
processing.  Collectively,  the two operations process  approximately 10 million
tires  annually.  The Company was also granted an  exclusive  option to purchase
certain  assets  (including  certain  contract  rights) of BFI's  Ford  Heights,
Illinois tire recycling  operation  which has the capacity to process between 12
and 15 million tires annually.  Prior to the acquisition,  the Company purchased
tire chips from BTG pursuant to a Put or Pay/Take or Pay Agreement (the "Take or
Pay Agreement")  and leased land in Jackson,  Georgia from BTG. BTM and BTG have
been renamed  GreenMan  Technologies  of Minnesota,  Inc.  ("GMTM") and GreenMan
Technologies of Georgia,  Inc., ("GMTG")  respectively,  and together,  with the
Company's existing Rubber Recycling group will now constitute the Company's Tire
Recycling operations. As a result of the acquisition,  the Company's obligations
under the Take-or-Pay Agreement were eliminated.
    

DURAWEAR

        On October 10, 1995, the Company acquired all of the outstanding  common
stock of DuraWear Corporation ("DuraWear").  DuraWear was incorporated under the
laws of the State of Delaware on September 5, 1972 and was reincorporated  under
the laws of the State of Alabama on December 7, 1990. DuraWear, which is located
in Birmingham,  Alabama,  manufactures,  installs and markets a diverse range of
high-quality,  ceramic,  polymer composite, and alloy steel materials engineered
to resist severely abrasive and corrosive  conditions  typically  encountered in
bulk-material  handling  systems in such  industries as paper and pulp,  mining,
coal handling and grain storage and transportation.


PRODUCTS AND SERVICES

MOLDING OPERATION




                                                                               3


        The Company's  Molding  operation was established  primarily to develop,
manufacture and sell "environmentally friendly" plastic and thermoplastic rubber
feedstocks,  rubber  parts and products  that are  manufactured  using  recycled
materials  and/or are  themselves  partially or wholly  recyclable.  In order to
offset  expenses  associated  with  capital  leases for the  required  injection
molding  equipment,  the Company accepts  third-party,  contract molding jobs in
order  to keep the  resident  equipment  productive.  Accordingly,  the  Molding
operation  has,  since  its  inception,  provided  customers  with  a  reliable,
cost-effective,   high-quality   source  for  the  manufacture  of  plastic  and
thermoplastic rubber parts. Traditional contract manufacturing is widely used in
the plastic and thermoplastic rubber industries as a cost-effective  alternative
to in-house manufacturing.  Generally, the customer owns design molds for use in
the  manufacture  of its  products  or parts and  provides  the molds to outside
injection molding companies, such as the Company.

        The  Company  combines  leased,   state-of-the-art,   injection  molding
equipment;   comprehensive   quality  and  production   control   systems;   and
consultation  on mold design to improve labor costs and assembly  times,  reduce
waste and improve  end-product  quality.  The Company has also assisted  certain
customers in converting their product content from virgin materials to (in whole
or in part) recycled feedstock.

        Initiated as an adjunct to its  injection  molding  operations,  product
assembly  services are also offered by the  Molding  operation.  Components  are
produced  by,  and/or  delivered  to, the Molding  operation  by  customers  and
assembled to the required stage of completion.


RECYCLING OPERATION


        The  Recycling   operation  was   established  to  identify   processing
techniques and alternative lower-cost sources of supply of rubber/used tires and
plastic  waste for  recycling,  as well as to identify  rubber and plastic based
end-products for which there is significant market demand.

   
        The Company has  developed and is  gradually  commercializing  GEM-Stock
using crumb rubber recovered from automobile and truck tires in combination with
recycled  plastic waste and virgin plastic.  In April 1996, the Company signed a
perpetual  license agreement with a privately-held R&D company for the exclusive
world-wide  rights and license to use its  proprietary  additive  technology for
co-mingling (mixing or blending) of dissimilar plastics and rubber. This license
agreement  provides  the Company with the ability to  incorporate  significantly
more types of  low-cost  recycled  plastic  and rubber  into the  production  of
GEM-Stock than it could do in the past. As currently manufactured, products made
using  GEM-Stock  have  properties  that are  comparable to those  products made
incorporating  virgin rubber or plastic,  at a  significant  cost savings to the
Company.  The Company  believes that GEM-Stock is suitable as a raw material for
use in the  manufacture  of many of the types of  commercial  parts and products
currently manufactured by the Molding operation. To date, revenues from products
made using GEM-Stock have accounted for less than 10% of the Company's revenues,
and,  as  yet,  there  can be no  assurance  that  the  Company  will be able to
manufacture  GEM-Stock in quantities  necessary to achieve significant  revenues
and profits.
    

        The Company is currently  using  GEM-Stock in the  manufacture of its 34
gallon trash  container and intends to use GEM-Stock as the primary raw material
in the Company's proposed line of environmentally-friendly,  or "green" consumer
products,  such as  recycling  totes,  playground  and  recreational  furniture,
landscape  timbers,  storage  bins,  and  home-use  composters.  The  Company is
evaluating the economic,  marketing and manufacturing  feasibility of several of
these proposed products and has conducted preliminary  discussions with possible
distributors of such products.  There can be no assurance that such  discussions
will result in orders for the products,  consumer  acceptance of the products or
significant  revenues for the Company.  Management  believes  that the Company's
internal needs for GEM-Stock will allow the  Company to use the raw materials in
the manufacture of its GreenMan products.

        The  Company  has  conducted  extensive  market  research  over the past
several years and has concluded that significant market  opportunities exist for
crumb rubber to be used as chemical feedstocks or for incorporation in parts and
products.  Crumb  rubber can be produced  either  through the use of  mechanical
grinding  methods  ("ambiently")  or  through  the use of  cryogenic  (freezing)
methods  ("cryogenically")  using a feedstock  of tire chips.  GEM-Stock  is one
application  whereby crumb rubber and recycled plastics are combined and used as
a raw material  feedstock in place of more expensive virgin materials.  There is
also research being  conducted in the areas of rubber  modified  asphalt and the
re-incorporation  of crumb rubber into the  manufacture  of new  automobile  and
truck  tires.  The  Company  believes  that the  largest  areas of growth are in
applications  where  ultra-fine  mesh  crumb  rubber  is used in place of virgin
rubber to enhance the characteristics of existing product formulations,  thereby
commanding  premium pricing.  As a result, a decision has been made to focus the
Company's   resources  on  addressing  these  "high  value-added"  crumb  rubber
opportunities. This redirection in strategic market targeting along with certain
limitations of the Company's existing cryogenic  recycling  equipment to produce
sufficient quantities of ultra-fine mesh crumb rubber;  resulted in, the Company
redeploying its cryogenic recycling


                                                                               4


equipment  into a joint venture with the original  equipment  manufacturer  (See
PRODUCT DEVELOPMENT).  The joint venture will address existing opportunities for
larger mesh crumb rubber such as in rubber mats, ground cover and as a filler in
asphalt  applications.  The Company is currently  evaluating several alternative
solutions for producing  ultra-fine mesh crumb rubber and is  supplementing  its
needs through informal market and distribution alliances with other companies.

        On June 30, 1997,  the Company  acquired BTM and BTG, which provides the
Company  with  access to over 10 million  tires  annually.  The Company was also
granted an  exclusive  option to  purchase  certain  assets  (including  certain
contract rights) of BFI's Ford Heights,  Illinois tire recycling operation which
has the capacity to process  between 12 and 15 million tires  annually.  BTM and
BTG are in the scrap tire collection and processing business whereby they charge
a fee to dispose of  customers'  scrap tires and then process the tires into two
inch rubber chips which are then sold as alternative  fuel ("TDF" - Tire Derived
Fuel) to cement  kilns,  paper and pulp  producers  and electric  utilities;  or
utilized in civil engineering projects such as landfill construction  (leach-bed
lining),  soil erosion and road stabilization  projects.  The Company intends to
utilize a portion of the rubber chip flow for the  production of ultra fine mesh
crumb rubber.

DURAWEAR

        DuraWear  manufactures and markets ceramic,  polymer composite and alloy
steel  materials,   specifically   engineered  to  resist  the  highly  abrasive
conditions  typically  encountered in bulk material handling  systems.  DuraWear
sells  its  products   primarily  to  industries  where  the  process  equipment
experiences  significant  wear as a result of material  movement over  equipment
surfaces   ("abrasion-wear")   or   material   impact  on   equipment   surfaces
("impact-wear").  Such  industries  include  paper  and  pulp,  mining,  mineral
processing,  coal  handling,  grain  storage  and  transportation,   cement  and
fertilizers.


        Ceramics.  DuraWear produces CeraDur(R),  a  pale-green-colored  ceramic
plate made of approximately 96% alumina,  less than 2% silica and a small amount
of nickel, which are combined and fired at very high temperatures,  resulting in
high-density and  very-low-porosity  products.  These properties make CeraDur(R)
one of the most  abrasion-resistant  ceramic plates  commercially  available for
application in highly abrasive conditions.  CeraDur(R) is rated 9 on Moh's scale
(an engineering scale which compares  material  hardness) and second in hardness
only to  diamond,  which  is rated  10.  Other  commercially-available  products
generally  contain  less than 96% alumina  and are fired at lower  temperatures,
resulting  in a less-dense  product  with 25% to 50% less wear life  compared to
CeraDur(R).

        The  Company  also   manufactures   another   ceramic   product   called
Aluminox(R),  which  contains  approximately  90% alumina and a small  amount of
nickel.  Aluminox(R) is designed to provide less abrasion resistance as compared
to CeraDur(R)  for markets and  applications  where a lower-cost  alternative is
required.

        Polymer  Composites.  DuraWear  distributes  two polymer  composites for
abrasion-wear   applications.    Xylethon(R)   has   a   high-molecular   weight
cellular-chain  structure which makes it a highly-dense,  plastic material. This
alloyed matrix structure provides superior  adhesion-resistance  and dimensional
stability  when  compared  to  polyvinyl  chloride  ("PVC"),   polyurethane  and
ultra-high-molecular-weight    ("U.H.M.W.")    polyethylene.    Xylethon(R)   is
lightweight  compared to  abrasion-resistant  steel plates,  which are generally
nine times heavier, and is less susceptible than steel to the distortions caused
by thermal cycles.


        Trowellable  Coatings.  In areas where  pre-engineered  shapes cannot be
installed, trowellable cements and mortars are applied to provide wear resistant
linings.  The two basic types of coatings  are ceramic  based epoxy  mortars and
metal based epoxy mortars.  Ceramic  mortars  consist of micromesh  particles of
alpha alumina in an epoxy matrix.  Metal-based  mortars contain metal powders in
an epoxy  matrix.  The coatings  have been  specifically  formulated  for strong
adherence to a great variety of substrates. The linings are used for vertical or
horizontal surfaces including walls, floors, and roofing.

MANUFACTURING

 MOLDING OPERATION

        The Company conducts all its injection  molding and assembly  operations
at its leased 45,000 sq. ft. facility located in Malvern,  Arkansas. The Molding
operation  uses leased  state-of-the-art  injection  molding  equipment  that is
energy and labor  efficient;  has fast cycle  times;  and  minimizes  production
waste.


        The Company  may need to expand its  existing  manufacturing  operations
through strategically-located  satellite operations, to support future expansion
of existing manufacturing  capabilities.  Such expansion may include compression
molding,  (for consumer and  industrial  floor mats) and extrusion  capabilities
(for the manufacture of



                                                                               5



landscape timbers,  and other outdoor products).  There can be no assurance that
the additional  customers,  if any,  gained by  establishing  new  manufacturing
facilities will justify the expense of constructing, staffing and operating such
facilities or that the Company will not experience  difficulties  in supervising
and coordinating the activities of separate locations.


RECYCLING OPERATION

        The  Recycling  operation's  crumb rubber  plant in Jackson,  Georgia is
located in a 15,000 sq. ft.  building that was built by the Company on land that
it leased from BTG under a multi-year  agreement.  This agreement was terminated
as a result of the acquisition of BTG on June 30, 1997.

   
        During the first half of fiscal 1997, the Company refined the production
process of its  cryogenic  recycling  equipment  and  evaluated  the  production
capabilities of the facility.  Based upon extensive market research, the Company
has concluded that significant market  opportunities exist in applications where
ultra-fine  mesh crumb  rubber is used in place of virgin  rubber to enhance the
characteristics of existing production formulations.

        Based  upon the  cryogenic  recycling  equipment's  capacity  to produce
ultra-fine mesh crumb rubber, the Company decided to redeploy the equipment into
a joint venture with the original  equipment  manufacturer.  On August 26, 1997,
the Company  executed an agreement  relating to the formation of a joint venture
between the Company and Crumb  Rubber  Technologies,  Inc. of Jamaica,  New York
("CRT") to collect and process  tires in the state of New York and to market the
crumb rubber derived from the tires. The joint venture will do business as "Tire
Disposal   Services,   Inc.",  and  will  address  existing   opportunities  for
larger-mesh crumb rubber such as in rubber mats, ground cover and as a filler in
asphalt  applications.  The Company will  contribute the cryogenic  crumb rubber
equipment previously purchased from CRT and formerly located in Jackson, Georgia
into the venture as its capital  contribution  while CRT will contribute certain
facilities,  equipment,  customer  contracts,  licenses  and permits and provide
operational and technical expertise.

        The Company is currently  evaluating several  alternative  solutions for
producing  ultra-fine mesh crumb rubber and is  supplementing  its needs through
informal market and distribution alliances with other companies.
    

DURAWEAR


        DuraWear  manufactures  its ceramic  products at its facility located on
five acres of land in Birmingham,  Alabama.  DuraWear's  polymer  composites and
other products are manufactured by third parties on a contract-basis. DuraWear's
polymer composites are currently produced to DuraWear's  specifications  under a
confidentiality  agreement  by only one  supplier;  the  number  of  alternative
suppliers is limited.  Management has identified several  alternative  suppliers
for DuraWear's  polymer composites in the event there are any adverse changes in
its existing  relationship.  With the exception of its polymer  composites,  the
Company  believes that there are multiple  manufacturing  sources  available for
DuraWear's other products.  While DuraWear has long-standing  relationships with
its current suppliers, such facilities are not controlled by DuraWear, and these
suppliers could sever their relationships with DuraWear at any time. As such, it
could be difficult for DuraWear to find other  suppliers that could  manufacture
DuraWear's  products to the  specifications  required by DuraWear on  acceptable
terms.


RAW MATERIALS

MOLDING OPERATION

   
        Raw materials required for the Molding operation are generally purchased
directly from suppliers on a purchase-order  basis rather than a contract basis.
The Molding operation purchases such materials on an "as and when needed" basis,
primarily from five suppliers. There can be no assurance,  absent contracts with
firm price and delivery  terms,  that  suppliers will not increase their prices,
change  their  credit  terms or  impose  other  conditions  of sale  that may be
unfavorable  to the  Company.  While the Company  does not believe that it would
experience any significant  difficulty in obtaining  materials from  alternative
sources on comparable terms,  there can be no assurance that such supplies could
be obtained on price and delivery  terms  favorable  to the Company.  Until such
time,  if ever,  that the  Company  begins to produce  GEM-Stock  in  sufficient
quantities for its own use on a cost-efficient basis, it is and will be required
to purchase  crumb rubber and recycled and virgin  plastic from third parties in
order to produce its proposed GreenMan consumer  products.  Management  believes
that there are  currently a limited  number of suppliers of  high-quality  crumb
rubber that is free of fiber and metal.
    

RECYCLING OPERATION

   
        The Company  believes that as a result of its acquisition of BTM and BTG
and the Company's exclusive option to purchase certain assets (including certain
contract rights) of BFI's Ford Heights,  Illinois tire recycling operation,  the
Company will have access to a supply of tires  sufficient  to meet the Company's
requirements  for crumb rubber in the foreseeable  future.  The three operations
collectively are capable of processing between 22 and 25 million tires annually.
According to Scrap Tire News, nearly 255 million passenger  automobile tires are
currently discarded annually in the U.S., and of that total approximately 1% are
used for asphalt  pavement,  11% are burned to provide energy,  approximately 2%
are processed for retreading;  and the remaining  tires are  landfilled,  adding
more than 200 million  tires  annually to the  estimated 3 billion tires already
stockpiled in landfills.  Accordingly, the Company estimates that as a result of
the  acquisition  of  BTM  and  BTG it  will  process  approximately  20% of all
passenger tires



                                                                               6



in the U.S. that are not placed in landfills,  with the ability to increase that
percentage  to between  40 - 45% with the  exercise  of its  option to  purchase
certain  assets  (including  certain  contract  rights) of BFI's  Ford  Heights,
Illinois tire recycling operation.
    


DURAWEAR


        DuraWear  obtains on a purchase order (rather than a contract basis) its
primary raw materials, consisting of alumina and nickel oxides, from a number of
sources.  The price and other  terms  upon  which such  materials  are  obtained
therefore  are also  subject  to change  over  which  DuraWear  has no  control.
Management  believes that alternate  sources of such raw materials are available
on an  economically-competitive  basis,  but there can be no assurance that this
would be the case at a time when such sources might be needed by the Company.


PRODUCT DEVELOPMENT

   
        In April 1996, the Company signed a perpetual  license  agreement with a
privately-held R&D company for the exclusive,  world-wide  rights and license to
use a proprietary  additive  technology for co-mingling  (mixing or blending) of
dissimilar  plastics and rubber types. The Company paid a one-time licensing fee
at signing of the agreement and no additional  fees are due for the  manufacture
of the Company's own products  (i.e.  GEM-Stock  products).  In May,  1997,  the
Company  commenced  production on a limited basis,  of its first GEM-Stock based
product,  a 34 gallon  trash  container.  A 3% royalty is due when the  additive
technology is sold as raw material. This license agreement allows the Company to
incorporate a broader range of low-cost,  recycled plastic and rubber types into
the  production of  GEM-Stock.  As currently  manufactured,  products made using
GEM-Stock have properties that are comparable to products using virgin rubber or
plastic at a significant cost savings to the Company.
    

        In addition to its efforts  relating to the  conversion  of crumb rubber
and the  production of GEM-Stock,  the Company  intends to develop new products,
which may involve entering into joint ventures or other strategic alliances. The
Company has not to-date  entered  into any such  relationships  other than noted
above,  with respect to new products,  nor can there be any such  assurance that
the Company will be successful in entering into such relationships,  nor that it
will be able to develop new products  which result in revenues or profits to the
Company.

        On August 26, 1997,  the Company  executed an agreement  relating to the
formation of a joint venture (the "GMT/CRT joint  venture")  between the Company
and Crumb Rubber Technologies,  Inc. of Jamaica, New York ("CRT") to collect and
process  tires in the State of New York and to market the crumb  rubber  derived
from the tires.  The joint venture will do business as "Tire Disposal  Services,
Inc." , and will address  existing  opportunities  for larger-mesh  crumb rubber
such as in rubber mats,  ground  cover and as a filler in asphalt  applications.
The  Company will  contribute  the cryogenic crumb rubber  equipment  previously
purchased from CRT and formerly located in Jackson,  Georgia into the venture as
its  capital  contribution  while  CRT  will  contribute  on  its  part  certain
facilities,  equipment,  customer  contracts,  licenses  and permits and provide
operational and technical expertise.


CUSTOMERS

MOLDING OPERATION

        In the  fiscal  year  ended  May 31,  1995,  three  customers,  (Jacuzzi
Brothers Division, Little Rock, ("Jacuzzi"), Stant Manufacturing, Inc. ("Stant")
and R.G.  Sloane & Co.  Inc.,)  accounted  for  approximately  62%, 14%, and 10%
respectively,  of the Company's net sales;  and in the fiscal year ended May 31,
1996, two customers,  (Jacuzzi and Stant) accounted for  approximately  38%, and
14%,  respectively,  of net sales.  In the fiscal year ended May 31,  1997,  one
customer,  Jacuzzi accounted for approximately 29% of the Company's consolidated
net sales.  Currently,  the Molding  operation  serves  customers in a number of
industries such as: Jacuzzi -- water filters and pumps;  Klipsch & Associates --
stereo components and speakers;  Sterling Plumbing,  Inc. - plumbing components,
Stant -- automotive gas caps and R. G. Sloane & Co., Inc. -- plumbing products.

RECYCLING OPERATION

        There were no customers  which accounted for 10% or more of consolidated
net sales during the fiscal years ended 1996 and 1997.

DURAWEAR

   
        DuraWear did not have any customers  which  accounted for 10% or more of
consolidated  net sales during the fiscal years ended 1996 and 1997.  DuraWear's
customers  include Georgia Pacific,  Boise Cascade,  Container Corp. of America,
Champion  International,  Longview Fiber  Company, Union Camp, and various power
utilities and paper processors throughout the U.S.
    



                                                                               7



        The Company does not have any long-term  contracts pursuant to which any
customer is required to purchase any minimum amount of products. There can be no
assurance that the Company will continue to receive orders of the same magnitude
as in the past from  existing  customers  or that it will be able to market  its
current or proposed  products to new  customers.  The loss of any major customer
would have a material, adverse effect on the business of the Company as a whole.


SALES AND MARKETING


        The  Company  utilizes  outside   manufacturer's   sales  representative
organizations,  in addition to its on-going, in-house sales activities. DuraWear
has  in  place  a  network  of  sales  representatives  for  both  domestic  and
international  sales,  which may be used by the Company in  connection  with the
sale of its products.

        As the Company seeks to increase its  manufacturing  of crumb rubber and
GEM-Stock in commercial  quantities at an acceptable cost, of which there can be
no assurance,  a significant portion of the Company's production will be devoted
for internal use in the  manufacture of its 34 gallon trash  container and other
proposed  GreenMan  consumer  products.  Any  excess  material  will  likely  be
compounded  (mixed)  on a  contract  basis and  offered  for sale on a  merchant
chemical basis through such compounder's  traditional sales channels, as well as
directly by the Company.

        The Company's  proposed  consumer products will be sold through Big East
Sales  and  Marketing,  Framingham,  Massachusetts  -- a firm  with  a  national
presence in the wholesale and retail consumer markets through a nationwide sales
representative  network,  and which has more than  25-years  experience  selling
directly  to major  discount  department  store  chains;  builders'  supply  and
hardware store chains;  and lawn and garden stores. Big East Sales and Marketing
has  established  a separate  operating  unit  called  Big East  Green  which is
dedicated    to    marketing,    selling    and    promoting    the    Company's
environmentally-friendly GEM-Stock consumer products.


        DuraWear  markets its products  primarily to the process  industry where
material  movement  typically  causes abrasion  resulting in wear of the process
equipment.  Applications  for DuraWear's  products span many  industries such as
paper and pulp, mining,  mineral  processing,  coal handling,  grain storage and
transportation, cement and fertilizers.

COMPETITION

MOLDING OPERATION


        The   injection    molding    contract    manufacturing    industry   is
highly-competitive  and characterized by severe  price-cutting by small regional
contractors.  While the Company believes that its facility, modern equipment and
advanced quality control are attractive features to potential  customers,  there
can be no assurance that the Company can capture adequate competitive  contracts
to achieve or sustain  profitability,  either at its present  location or at any
satellite location it seeks to establish.

        In marketing its proposed GreenMan consumer  products,  the Company will
be competing with many established  manufacturers of similar  products.  Most of
these competitors have substantially  greater financial and marketing  resources
and significantly  greater  name-recognition  among both retailers and consumers
than the Company.  A number of companies  with products made from recycled tires
have already entered the market. For example,  OMNI Rubber Products manufactures
solid-rubber, non-steel reinforced railroad crossings from recycled crumb rubber
and R.A.S.  Recycling,  Inc.,  together  with Royal  Rubber  Manufacturing,  are
developing  playground  and  recreational  surfacing  mats made of recycled tire
rubber.  In addition,  several  companies  manufacture  products  similar to the
Company's  proposed  GreenMan line of products,  such as industrial  floor mats,
playground furniture,  and landscape timbers. There can be no assurance that the
Company will be able to compete successfully in the consumer market.

        In the manufacture  and sale of its GEM-Stock,  the Company will compete
with other  producers and  suppliers of  traditional  plastic and  thermoplastic
rubber products,  including recycled and virgin products.  The Company's success
in  marketing  its  products  will depend on its  ability to convince  potential
buyers that its products are of  comparable or superior  quality to  alternative
products  and  that  its  products  are  also  comparable  in cost to  competing
products.  There can be no  assurance  that the Company  will be able to compete
effectively with established producers, many of which have substantially greater
financial and manufacturing resources than those of the Company.


RECYCLING OPERATION


        Historically,  companies in the tire processing  industry have generated
significant  quantities  of  tire  derived  fuel  ("TDF")  chips  to be  sold as
alternative fuel to cement kilns, paper and pulp producers or electric utilities
or



                                                                               8



utilized in civil  engineering  projects such as landfill  construction  or road
stabilization projects.  There are several tire recycling companies that produce
crumb rubber in limited  quantities and at varying levels of quality.  There are
also  several  companies  that  simply  process  tires  into TDF to be burned as
supplemental fuel or break down the tire material into its elemental  components
("Pyrolysis")  and sell the components  individually.  Few, if any companies are
vertically  integrated  with  operations that include tire collection -- through
end  product  manufacture.   The  Company  believes  that  the  limited  success
experienced by these companies is due to industry disaggregation among small and
under-capitalized companies and the limited success in identifying and producing
end-user products that incorporate recycled materials. The Company has developed
a strategy for recycling tire and plastic waste which involves  complete "closed
loop"  recycling from waste pile to end product.  GEM-Stock is one example where
crumb  rubber  and  recycled  plastics  are  combined  and used as raw  material
feedstock in place of virgin materials. There is also significant research being
conducted in the areas of rubber modified  asphalt and the  re-incorporation  of
crumb rubber into automobile and truck tires.

        As a result of the  Company's  acquisition  of BTM and BTG in June 1997,
and its exclusive option to purchase certain assets (including  certain contract
rights) of BFI's Ford Heights,  Illinois tire recycling  operation,  the Company
has positioned  itself as a leader in tire recycling  operations.  Collectively,
the Company's  current  operations  process  approximately  20% of all passenger
tires in the U.S. that are not placed in landfills  with the ability to increase
that  percentage  to between 40% and 45% with the  exercise of the Ford  Heights
option.


DURAWEAR

        DuraWear has several  competitors  for  its products,  most of whom have
greater financial and marketing resources than DuraWear. In the ceramics market,
competitors include Coors Ceramics Co., Champion and Packo Industrial  Ceramics,
Inc. and in the polymer composite market include Solidur Plastics, DuPont and BP
America.

   
        DuraWear  competes on the basis of the  longer-lasting  wear  resistance
performance  of its  products as compared  to products  offered by  competitors.
Management believes that on a life cycle costing basis, DuraWear  products offer
customers  significant cost  advantages,  notwithstanding  DuraWear's  products'
higher prices.
    

GOVERNMENT REGULATION


        The Company's tire recycling and manufacturing activities may be subject
to  extensive  and  rigorous  government  regulation  designed  to  protect  the
environment  (as is the  case  with  other  tire  recycling  processes  such  as
pyrolysis). Management does not expect that the Company's activities will result
in the emission of air pollutants,  the disposal of combustion residues,  or the
storage of hazardous  substances.  The establishment and operation of plants for
tire recycling, however, are subject to obtaining numerous permits and complying
with environmental and other government  regulations,  both in the U.S. and most
foreign countries. The process of obtaining required regulatory approvals can be
lengthy and expensive.  Moreover,  regulatory approvals, if granted, may include
significant  limitations  on the Company's  operations.  The EPA and  comparable
state and local regulatory agencies actively enforce  environmental  regulations
and  conduct  periodic  inspections  to  determine  compliance  with  government
regulations.  Failure to comply  with  applicable  regulatory  requirements  can
result in, among other  things,  fines,  suspensions  of  approvals,  seizure or
recall  of  products,   operating   restrictions,   and  criminal  prosecutions.
Furthermore,  changes in existing  regulations  or  adoption of new  regulations
could impose costly new procedures for  compliance,  or prevent the Company from
obtaining, or affect the timing of, regulatory approvals.


        The effect of government  regulation  may be to delay for a considerable
period of time or to prevent the Company from developing its business as planned
and/or impose costly requirements on the Company,  the result of which may be to
furnish an advantage to its  competitors or to make the Company's  business less
profitable, or unprofitable, to operate.

PROTECTION OF INTELLECTUAL PROPERTY RIGHTS AND PROPRIETARY RIGHTS


        None  of the  equipment  or  machinery  that  the  Company  or  DuraWear
currently  uses  or  intends  to use  in  its  respective  current  or  proposed
manufacturing activities are proprietary;  any competitor can acquire equivalent
equipment  and  machinery on the open market.  The Company  believes that it has
developed specialized know-how in the blending of plastics and rubber for use in
its molding  machines and that its  processes are  proprietary.  The Company has
acquired  exclusive,  perpetual,  world-wide  rights to a  proprietary  additive
technology  which will enable the Company to blend a broader range of virgin and
recycled plastics together,  and/or combine such plastics with crumb rubber from
recycled  tires.  The  Company  also  believes  that  many of the  formulae  and
processes  used  in  manufacturing  DuraWear's  products  are  proprietary,  and
DuraWear has executed confidentiality  agreements with the appropriate employees
and subcontractors. However, there can be no assurance that competitors will not
develop  processes or products of comparable  efficiency  and quality.  DuraWear
does  not  have  any  patents  and does  not  believe  any of its  products  are
patentable.  Moreover,  there can be no  assurance  that any patents that may be



                                                                               9


granted in the future will be enforceable or provide the Company with meaningful
protection from  competitors.  Even if a competitor's  products were to infringe
patents owned by the Company, it could be very costly for the Company to enforce
its rights in an infringement  action, and such an action would divert funds and
resources otherwise available for use in the Company's operations. Consequently,
there can be no assurance  that the Company  would elect to prosecute  potential
patent infringement claims it might have. Furthermore, there can be no assurance
that the Company's  proposed products will not infringe any patents or rights of
others.

        The  Company  has used the name  "GreenMan"  and  other  trade  names in
interstate  commerce  and  asserts a common  law right in and to such  names.  A
trademark  search has been  conducted for the name  "GreenMan"  which found that
there are no  significantly  similar names currently being used in the Company's
current and intended industries. The Company intends to file an application with
the U.S.  Department of Commerce,  Patent and  Trademark  Office to register its
name and establish trademark rights.  There can be no assurance,  however,  that
such a trademark  application  will be  approved.  Although the Company has been
using the GreenMan name in interstate  commerce for its custom molding  services
and has not yet begun  significant  marketing  for its  consumer  products,  the
inability  of the Company to continue  to use the name in  connection  with such
services, as well as in connection with the proposed GreenMan consumer products,
could  have an  adverse  effect  on the  Company's  efforts  to  establish  name
recognition for its products in the commercial and consumer marketplaces.


        DuraWear  has  registered  trademarks  for a  number  of  its  products,
including  CeraDur and Xylethon and has used the name  "ExcelloSlide"  and other
trade names in interstate commerce and asserts a common law right in and to such
names.  There can be no assurance,  however,  that such right would sufficiently
protect the  Company's  right to use such names or that, if and when the Company
files trademark  applications for such names,  that such  applications  would be
approved.

EMPLOYEES


        As of May 31, 1997, the Company had approximately 98 employees including
20 employees at DuraWear.  With the acquisition of BTM and BTG, the total number
of employees as of June 30, 1997 was 150.


        Neither  the  Company  nor  DuraWear  are  a  party  to  any  collective
bargaining  agreements,  and they each  consider  the  relationship  with  their
employees to be satisfactory.

ITEM 2.        DESCRIPTION OF PROPERTIES

        The Molding operation  currently  occupies  approximately  45,000 square
feet of combined  industrial/manufacturing space in Malvern, Arkansas, including
2,000 square feet of office space under a lease at a monthly rent of $5,325 with
an unaffiliated  third party.  The lease expired on May 31, 1997 and the Company
is in the process of re-negotiating the lease and is currently a tenant at will.


        The  Company  currently  occupies  approximately  2,700  square  feet of
administrative  office space, located in Lynnfield,  Massachusetts under a three
year lease at a monthly rental of $3,238 which expires in October 1998.


        In December 1995, the Company  entered into a five year lease  agreement
with BTG whereby the Company would lease for $1 per year,  approximately  15,000
square  feet of land  located in Jackson,  Georgia on which the Company  built a
tire recycling facility. As a result of the acquisition of BTG on June 30, 1997,
the Company now owns such facility.

        DuraWear  owns  two  industrial  buildings  and an  office  building  in
Birmingham,  Alabama,  located  on five  acres  of  land  zoned  for  industrial
expansion.  Both industrial buildings are suitable for  manufacturing/production
operations.  DuraWear currently utilizes 75% of the available space, with excess
capacity to handle  approximately  three times their current  production volume.
There is readily available space for possible expansion if needed.

        Management  believes that the Company's existing facilities are adequate
for its current needs.

ITEM 3. LEGAL PROCEEDINGS

        In October  1994,  the Company  was sued in Robert H. Jones v.  GreenMan
Technologies,  Inc. in the 15th Judicial District Court in Lafayette, Louisiana,
by a former consultant who seeks, among other things, unpaid consulting fees, as
well as  licensing  fees/royalties  relating to the  Company's  alleged use of a
cryogenic  process  for  recovering  crumb  rubber  that Mr.  Jones  alleges  he
developed.  The Company has retained  Louisiana  counsel and is contesting  this
lawsuit  vigorously. 

        Discovery  has  been  conducted  and  the  parties  are now  awaiting  a
pre-trial  status  conference.  No trial date has been set.  Because the Company
believes that it never entered into any agreement with the plaintiff, never used
the  plaintiff's  proprietary  technology and paid all  consulting  fees due the
plaintiff,  the Company  believes that the  litigation  will not have a material
adverse effect on its business.


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

        There were no matters  submitted  to a vote of  shareholders  during the
fiscal year ended May 31, 1997.


                                                                              10




                                     PART II

ITEM  5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        The  Company's  Common  Stock  and the  Class A  Common  Stock  Purchase
Warrants are traded on the NASDAQ  SmallCap  Market under the symbols "GMTI" and
"GMTIW", respectively, and listed on the Boston Stock Exchange under the symbols
"GMY" and "GMYW",  respectively  since October 2, 1995. The following table sets
forth the high and low bid  quotations  for the Common  Stock and Class A Common
Stock  Purchase  Warrants for the periods  indicated as quoted by NASDAQ.  These
quotations reflect  inter-dealer  prices,  without retail mark-up,  mark-down or
commission and may not necessarily represent actual transactions.


                                                            Class A Common Stock
                                            Common Stock      Purchase  Warrants
                                            ------------      ------------------
                                            High    Low          High    Low
                                            ----    ---          ----    ---
FISCAL 1996                                                  
-----------                                                  
Quarter Ended November 30, 1995
 (from October 2)                        $   8.63  $ 6.00      $ 3.00  $ 1.00
Quarter Ended February 29, 1996              7.50    2.50        3.00    1.00
Quarter Ended May 31,1996                    6.38    4.00        3.00     .75
                                                             
FISCAL 1997                                                  
-----------                                                  
Quarter Ended August 31, 1996            $   4.13  $ 2.25      $ 1.38  $  .13
Quarter Ended November 30, 1996              3.22    1.34         .78     .25
Quarter Ended February 28, 1997              1.63    1.00         .31     .13
Quarter Ended May 31,1997                    2.00     .69         .28     .09
                                                             
FISCAL 1998                                                  
-----------                                                  
Quarter Ended August 31, 1997            $   1.72  $  .56    $    .28  $  .13
                                                                   
        On  September  12,  1997,  the closing bid price of the Common Stock was
$1.50 and the closing bid price for the Class A Common Stock  Purchase  Warrants
was $.22.


        As of September 12, 1997, the Company estimated that the number of stock
holders of record of the Company's Common Stock were approximately 1,550.


        The Company has not paid any cash  dividends  on its Common  Stock since
inception  and  it  does  not  anticipate  paying  any  cash  dividends  in  the
foreseeable future.

   
        In October 1996, Landmark International Equities,  Inc., the underwriter
of the  Company's  initial  public  offering  and  primary  market  maker of the
Company's  securities  ceased  operations.  There are currently  in excess of 20
registered  market  makers  of the  Company's  securities  and  the  Company  is
continuing  its  efforts  to expand  the  number of firms  making  market in the
Company's securities.
    

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

        GreenMan  Technologies,  Inc.  was  incorporated  in 1992  primarily  to
develop,  manufacture,  assemble and sell environmentally friendly plastic parts
and  products.  The  Company's  Molding  operation  provides  injection  molding
manufacturing  services in the  production of plastic and  thermoplastic  rubber
parts for such products as stereo  components  and  speakers,  water filters and
pumps and computer accessories.

        The Company's  Recycling operation was established to develop lower cost
sources  of supply of  rubber  and  plastic  waste for  recycling  as well as to
identify rubber and plastic based  end-products  for which  management  believes
there is a significant  market demand.  The Company has targeted several markets
with  products  incorporating  recovered  crumb  rubber  including  the building
industry with  anti-fatigue  floor mats,  roofing products and timbers,  and the
lawn and garden market with landscape timbers and fencing.

        In  October  1995,  the  Company  sold in its  initial  public  offering
("IPO"),  1,265,000  shares  of common  stock at $5.00  per share and  1,265,000
redeemable  Class A common  stock  purchase  warrants  at $.10 per  warrant  and




                                                                              11


received net proceeds of approximately $5,390,000 after underwriting commissions
and other issuance costs paid at the closing.








        Simultaneous  with the closing of the IPO,  the Company  acquired all of
the outstanding  common stock of DuraWear  Corporation  ("DuraWear"),  a company
which  manufactures,  installs  and  markets  a  diverse  range of high  quality
ceramic,  polymer  composite,  and alloy steel  materials  engineered  to resist
severely  abrasive  and  corrosive  conditions  typically  encountered  in  bulk
handling systems in such industries as paper and pulp, mining, coal handling and
grain storage and transportation.  The consolidated financial statements include
the results of DuraWear since October 10, 1995.


RESULTS OF OPERATIONS

YEAR ENDED MAY 31,1997 COMPARED TO YEAR ENDED MAY 31,1996

        Consolidated  net sales for the year ended May 31, 1997 ("fiscal  1997")
were  $4,020,670  as  compared  to  $4,338,538  for the year ended May 31,  1996
("fiscal 1996").  The decrease in net  consolidated  sales of $317,868 or 7% was
due to a 39% or $1,263,191 decrease in contract molding and assembly business as
customers in south-central  Arkansas  utilized existing  inventories  during the
first half of fiscal 1997. The decrease in revenues of the molding operation was
partially  offset by the inclusion of DuraWear  sales for the full year compared
to  approximately  eight months in fiscal  1996,  resulting in a $907,122 or 80%
increase in revenue as DuraWear was acquired on October 10, 1995.  During fiscal
1997,  approximately 29% of consolidated net sales were accounted for by Jacuzzi
Brothers Division,  Little Rock, ("Jacuzzi").  During fiscal 1996, approximately
38% and 14% of  consolidated  net sales were  accounted for by Jacuzzi and Stant
Manufacturing Inc., respectively. The effort to secure additional custom molding
business  from new  customers  is ongoing  and will  continue  until the Company
concludes the transition from custom to captive molding.

   
        Gross profit for fiscal 1997 was $621,360 or 15% of  consolidated  sales
as compared to  $1,108,540  or 26% of sales for fiscal 1996.  This  decrease was
attributable to the reduction in contract molding and assembly  business and the
Company's  decision to upgrade its  Jackson,  Georgia  crumb  rubber  production
facility to produce higher-grade product. During the refacilitation, the Company
lacked the capability to process the tire chips received from BFI Tire Recyclers
of Georgia,  Inc.  ("BTG")  into higher  value-added  feedstock  material,  thus
necessitating  the sale of lower gross margin TDF ("Tire Derived Fuel") as a way
to fulfill its tire chip obligation.  The Company was obligated to "take or pay"
for 605 tons of TDF chips  starting in  September  1996 from BTG  (pursuant to a
December 1995 agreement,  as amended).  BTG acknowledged the delay in production
and agreed to reduce the  Company's  obligation  by fifty  percent  through June
1997.  The  Company  had a gross loss of  $416,840  on the sale of TDF chips for
fiscal 1997.  The "take or pay"  obligation  was  terminated  as a result of the
Company's acquisition of BTG in June 1997.
    


        Research and development  expenditures were $353,250 for fiscal 1997, an
increase of over 400%, as compared to $66,610 for fiscal 1996.  The  significant
increase is  attributable  to the  Company's  ongoing  efforts to  identify  new
proprietary  products and  formulations  and expand the applications of existing
product lines.


   
        Selling,  general and administrative expenses were $4,126,611 for fiscal
1997, or 103% of consolidated sales as compared to $2,406,794,  or 55% of sales,
for fiscal 1996.  The increase of $1,719,817 was partially  attributable  to the
inclusion of a full year of DuraWear's  operating  expenses totaling  $1,082,091
which resulted in a $264,260  increase in expenses  compared to fiscal 1996. The
Company also  recognized  $646,000 in non-cash  expenses in connection  with the
issuance of common  stock  warrants  and options  and the  repricing  of certain
previously  issued common stock warrants and options in accordance with SFAS No.
123,  "Accounting  for  Stock-Based  Compensation".  In  addition,  the  Company
initiated a significant  financial public relations  campaign during fiscal 1997
which resulted in a one-time  charge of  approximately  $200,000.  This campaign
consisted of  newsprint  articles,  television  features and the mailing of over
100,000 financial information packages to potential investors.  The Company also
took a $150,000 charge for the potential  uncollectibility of a note receivable.
The fiscal 1997  results  also  reflect  $578,408 of costs  associated  with the
Company's  recycling  operation  which operated under limited  conditions as the
Company refined the production process of the cryogenic  recycling equipment and
evaluated  the  production  capabilities  of the Jackson,  Georgia  crumb rubber
facility.

        As a result of the  Company's  decision to refocus its  resources on the
opportunities  for  "high-value-added"  crumb  rubber,  the  limitations  of the
Company's   existing  cryogenic   recycling   equipment  to  produce  sufficient
quantities of ultra-fine mesh crumb rubber,  the risks associated with a startup
venture, and the Company's minority interest in the joint



                                                                              12



venture  the Company  wrote-down  the  carrying  value of the  equipment  to its
estimated  liquidation  value.  Accordingly,  the Company  recorded a $1,000,000
impairment  loss in fiscal 1997 against the  Company's  deposit on the cryogenic
recycling  equipment  pursuant to SFAS No. 121 "Accounting for the Impairment of
Long-Lived  Assets and for Long-Lived  Assets to be Disposed Of". This writedown
was effected even though  subsequent to year-end,  the Company  contributed  the
equipment  as its capital  contribution  to a joint  venture  with the  original
equipment  manufacturer  who  in  turn  will  contribute  on  its  part  certain
facilities,  equipment,  customer  contracts,  licenses  and permits and provide
operational and technical expertise.

        As a  result  of the  foregoing,  the  operating  loss for  fiscal  1997
increased by $3,493,637 to $4,858,501 or 121% of consolidated sales, as compared
to an operating loss of $1,364,864, or 31% of sales for fiscal 1996.
    

        Interest and financing  costs  increased by $1,826,024 to $2,114,803 due
to increased  borrowings  related to the issuance of $3,025,000  in  convertible
debentures  during  fiscal  1997.  Approximately  $843,000  of the  increase  is
associated  with the impact of  amortizing  the 30%  discount  from market to be
realized upon conversion of the debentures. The Company also recognized $860,118
of financing expense amortization associated with the Company's efforts to raise
additional  capital  during  fiscal 1997.  This expense  included  approximately
$556,560 of non-cash  expense in  connection  with the  issuance of common stock
warrants  and  options  in  accordance  with  SFAS  No.  123,   "Accounting  for
Stock-Based Compensation".

        The Company experienced a net loss of $7,006,479, or $1.25 per share for
fiscal  1997 as  compared  to a net loss of  $1,578,321,  or $.34 per  share for
fiscal 1996.


   
YEAR ENDED MAY 31, 1996 COMPARED TO YEAR ENDED MAY 31, 1995
    

        Consolidated  net sales for the year ended May 31, 1996 were  $4,338,538
as compared to $2,127,745 for the year ended May 31, 1995 ("fiscal  1995").  The
increase in net  consolidated  sales of  $2,210,793  or 104% was due to a 50% or
$1,071,896  increase in contract molding and assembly business and the inclusion
of $1,138,897 of DuraWear sales.  During fiscal 1996,  approximately 38% and 14%
of  consolidated  net sales were  accounted  for by Jacuzzi  Brothers  Division,
Little Rock,  ("Jacuzzi") and Stant  Manufacturing Inc. ("Stant")  respectively.
During fiscal 1995,  approximately  62%, 14% and 10% of net sales were accounted
for by Jacuzzi, Stant and R. G. Sloane & Co., Inc. ("Sloane"), respectively.

        Gross profit for fiscal 1996 was $1,108,540 or 26% of consolidated sales
as compared to $312,063 or 15% of sales for fiscal  1995.  This  improvement  in
gross  profit  was  primarily  due to the  inclusion  of  DuraWear  sales  which
generated a 54% gross margin while molding and assembly  operations  generated a
consistent 15% gross margin for the fiscal 1996 period.

        Research and  development  expenditures  were $66,610 for fiscal 1996 as
compared  to  $223,061  for fiscal  1995.  The  majority of the 70 % decrease is
attributable  to the termination of two product  development  projects in fiscal
1995. This decrease was offset by the Company's  ongoing efforts to identify new
proprietary products and expand the applications of existing product lines.

        Selling,  general and administrative expenses were $2,406,794 for fiscal
1996, or 55% of consolidated sales as compared to $619,163, or 29% of sales, for
fiscal 1995.  The  increase of  $1,787,631  was  primarily  attributable  to the
inclusion of DuraWear's  operating expenses of $817,831,  which included $77,778
relating to amortization of the three-year non-competition agreement and $33,232
relating to goodwill amortization. In addition, the Company's expenses increased
due to the  addition  of new  employees,  increased  corporate  development  and
marketing  activities and increased expenses related to the Company's becoming a
public company in October 1995.

        As a  result  of the  foregoing,  the  operating  loss for  fiscal  1996
increased by $834,703 to $1,364,864 or 31% of consolidated sales, as compared to
an operating loss of $530,161, or 25% of sales for fiscal 1995.

        The Company repaid  approximately  $1,073,000 of bridge loans in October
1995 from the proceeds of its IPO which  contributed to the $235,025 decrease in
interest  and  financing  costs for fiscal 1996 as compared to fiscal  1995.  In
addition,  the Company recorded  additional  interest expense in fiscal 1995, in
connection  with  the  March  1995  modification  of the note  payable  to Budra
Management Corporation. These decreases were slightly offset by the inclusion of
DuraWear's interest expense of $28,900 for fiscal 1996.

        The Company experienced a net loss of $1,578,321,  or $.34 per share for
fiscal  1996 as  compared  to a net loss of  $1,092,006,  or $.27 per  share for
fiscal 1995.



                                                                              13


LIQUIDITY AND CAPITAL RESOURCES

        Since its inception,  the Company has satisfied its capital requirements
through the sale of common and preferred stock and debt securities to investors,
loans from affiliated and unaffiliated lenders, the acquisition of machinery and
equipment  through capital leases and notes payable,  and the issuance of common
stock in lieu of cash for services rendered.

INITIAL PUBLIC OFFERING

   
        On October 10, 1995, the Company raised  approximately  $5,390,000  from
its IPO,  after  underwriting  commissions  and other issuance costs paid at the
closing.  The proceeds of the IPO were used to repay  outstanding  bridge loans,
and past due accounts payable, to acquire DuraWear,  to construct a crumb rubber
recycling facility,  to expand the injection molding  operations,  to retain the
underwriter  as a  financial  consultant  for a period  of three  years  and for
general working capital needs.

LOANS FROM RELATED COMPANY

        During the period from February  1996 to June 1996 the Company  borrowed
$1,700,000 in aggregate from a company that owns a subsidiary  whose Chairman is
also a director of the Company.  These notes  payable  bear  interest at 10% per
annum with  principal and interest due at the earlier of (1) the tenth  business
day  following  the  consummation  by the  Company  of a minimum  $3,000,000  of
additional  financing or (2) $500,000 on September 30, 1996, $700,000 on January
1, 1997 and  $500,000  June 1, 1997,  respectively.  In  addition,  the  Company
granted  warrants to purchase 200,000 shares of the Company's common stock at an
exercise price of $3.88 per share and warrants to purchase 100,000 shares of the
Company's  common  stock at an exercise  price of $4.00 per share.  In September
1996, the Company repaid $500,000 of the amounts owed the lender.

        On December 30, 1996, the Company  renegotiated the remaining  principal
balance  of  $1,200,000  due  under  these 10% notes  payable.  The  outstanding
principal balance was exchanged for a 10% secured  convertible note payable (the
"Note"),  due July 1, 1997 and convertible  into the Company's  common stock, at
the  holder's  option,  at a  conversion  price of $1.00 per share.  The Note is
secured by an interest in the Company's cryogenic tire recycling equipment.  The
Company also reduced the exercise price of the 300,000  warrants granted in 1996
to $1.13 per share.

        On June 30, 1997,  the Company  received a 90-day  extension of the Note
and a waiver allowing it to contribute  it's cryogenic tire recycling  equipment
into the GreenMan/CRT joint venture in return for granting the holder piggy-back
registration  rights for the shares of common stock underlying the Note, accrued
interest and the 300,000 warrants granted in 1996.
    

CRUMB RUBBER FACILITY

        The Company allocated approximately  $1,000,000 of the proceeds from its
IPO for the construction of the crumb rubber recycling  facility.  As of May 31,
1997,  the  construction  had been  completed  at a total cost of  approximately
$902,000.

        In October  1995,  the  Company  placed a purchase  order for  cryogenic
recycling  equipment  and placed a 50% or $700,000  deposit  with the  equipment
manufacturer  for the first cryogenic  recycling  equipment line. In March 1996,
the Company  paid an  additional  $1,100,000  deposit  towards  the  purchase of
additional  cryogenic recycling equipment lines. As a result of the formation of
a joint  venture (the  "GMT/CRT  joint  venture")  between the Company and Crumb
Rubber  Technologies,  Inc.  ("CRT")  on  August  26,  1997,  the  Company  will
contribute the cryogenic recycling equipment  previously  purchased from CRT and
formerly   located  in  Jackson,   Georgia  into  the  venture  as  its  capital
contribution  while  CRT  will  contribute  on  its  part  certain   facilities,
equipment,  customer contracts, licenses and permits and provide operational and
technical expertise. CRT will refund $300,000 of the deposits previously made by
the Company towards  additional  cryogenic  recycling  equipment lines that were
cancelled.

LOANS FROM OFFICERS

   
        In May 1996, the Company  borrowed  $325,000 from Maurice  Needham,  the
Company's Chief Executive Officer. This unsecured note payable bears interest at
prime plus 1.5% per annum with  principal and interest due on the earlier of 120
days  after  the date of  issuance  or the  tenth  business  day  following  the
consummation  of a minimum  $3,000,000 of  additional  financing by the Company.
From September 1996 to May 1997, the Company borrowed an additional  $624,300 in
the aggregate  from Mr.  Needham and Joseph E.  Levangie,  the  Company's  Chief
Financial  Officer, and repaid $345,000 in aggregate during January 1997 and May
1997.

                                                                              14


        On May 30, 1997, the Company refinanced the remaining  principle balance
and accrued interest ($18,000) owed to Messrs. Needham and Levangie plus accrued
business  expenses  ($17,700)  by issuing to Messrs.  Needham and  Levangie  10%
convertible  notes,  due October 30, 1998 in the amount of $555,000 and $85,000,
respectively  and  warrants to  purchase  128,000  shares of common  stock at an
exercise price of $.88 per share. The notes are convertible  after a one hundred
and twenty day holding period into shares of common stock at a conversion  price
equal to the lower of the average of the closing bid prices on the five  trading
days  preceding  May 30, 1997 or 70% of the average of the closing bid prices on
the five trading days preceding the date of the conversion of such notes.

                                                                              15


DEBENTURE OFFERINGS
    

        In January  1997,  the  Company  concluded a  $1,525,000  offering of 7%
convertible  subordinated  debentures  ("Debentures")  and  warrants to purchase
762,500 shares of common stock (the "January  Offering") at an exercise price of
$1.25 per share. The Debentures are convertible after a sixty day holding period
into  shares of common  stock at a  conversion  price  equal to the lower of the
closing  bid price on the date of the  January  Offering  closing  or 70% of the
closing bid price on the date prior to the  conversion of such  Debentures.  The
Debentures  automatically  convert  into  shares of common  stock one year after
issuance.  The  net  proceeds  from  the  January  Offering  were  approximately
$1,310,000 after deducting  commissions and expenses of approximately  $214,000.
As of  May  31,  1997,  $825,000  of  the  Debentures  had  been  converted  for
approximately 1,249,813 shares of the Company's common stock.

   
        In  April  1997,  the  Company   concluded  a  $1,500,000   offering  of
convertible  notes (the "Notes") due eighteen  months after closing and warrants
to purchase  300,000  shares of common stock (the "April  Offering") at exercise
prices ranging from $.97 to $1.05 per share.  The Notes are convertible  after a
sixty day holding period into shares of common stock at a conversion price equal
to the lower of the average of the closing bid prices on the five  trading  days
preceding the date of the closing of the April Offering or 70% of the average of
the  closing  bid  prices on the five  trading  days  preceding  the date of the
conversion  of such Notes.  The Note holders  will  receive  4,000 shares of the
Company's  common stock upon  conversion  in lieu of interest for each  $100,000
invested. The net proceeds from the April Offering were approximately $1,247,000
after   deducting   commissions   and   expenses  of   approximately   $253,000.
Approximately  $650,000  of the  proceeds  were  paid  to BFI  as a  deposit  in
connection with the acquisition of BTM and BTG.
    

AQUISITION OF BTM AND BTG 

        On June 30, 1997,  GreenMan acquired all of the capital stock of BTM and
BTG which are wholly-owned  subsidiaries of BFI for approximately  $5,331,000. A
deposit of  $650,000  has been paid to BFI at May 31,  1997 and the  balance was
financed by a short-term  loan from BFI to the Company,  which must be repaid by
September 30, 1997.  The repayment of such loan is guaranteed by the Company and
is secured by all of the assets and capital stock of the acquired companies. The
Company  anticipates  refinancing such loans prior to maturity,  but has not yet
received any firm  commitments.  No assurances  can be given that such financing
will be concluded prior to the maturity, if at all.

   
WORKING CAPITAL        

        At May 31,  1997,  the Company had cash of $104,193,  a working  capital
deficit of  $3,016,098,  net capital of  $1,123,465  and  accumulated  losses of
$10,704,933.  The working  capital  deficit  includes  $1,200,000 of convertible
debentures  and  approximately  $434,000  relating  to the  reclassification  of
certain long term capital lease  obligations to current as several leases are in
default.  The  Company  is  currently  working  with the  lessor  to  bring  its
obligations  current and has not  received  any written or verbal  notice of the
lessor's intention to enforce the default  provisons.  From June to August 1997,
$700,000 of debentures  from the January  offering were converted into 1,243,384
shares of common stock.
    

        Based on the Company's  operating  plans,  Management  believes that the
available  working  capital  together  with  revenues  from  operations  and the
purchase of equipment through lease financing  arrangements,  and the successful
refinancing  of the June 30, 1997 short term loan will be sufficient to meet the
Company's  cash  requirements  through the second  quarter of fiscal  1998.  The
Company  expects that  additional  financing will be required after this time in
order to fund  continued  growth.  Management  has  identified  and is currently
evaluating  several immediate  financing  alternatives and diligently working to
determine the feasibility of each  alternative.  No assurances can be given that
such  financing will be concluded in the near future on favorable  terms,  if at
all. If the  Company is unable to obtain  additional  financing,  its ability to
maintain its current  level of  operations  could be  materially  and  adversely
affected  and  the  Company  may be  required  to  adjust  its  operating  plans
accordingly.


FACTORS AFFECTING FUTURE RESULTS


   
        The Company's  revenue and operating  results may fluctuate from quarter
to quarter and from year to year due to a combination of factors,  including (i)
refacilitation  of the Company's  crumb rubber  facility and production of crumb
rubber in  commercial  quantities  at a price  that will be  competitive  in the
market;  (ii) the  Company's  ability  to secure  additional  customers  for its
products,  thereby  reducing  its reliance on a few major  customers;  (iii) the
Company's  ability to refinance the BTM and BTG  acquisition  related short term
loan and the Company's ability to integrate and manage the operations of BTM and
BTG, its recently acquired subsidiaries; (iv) market acceptance of the Company's
proposed  GEM Stock  material  and GreenMan  consumer  products;  (v) ability to
obtain raw materials from suppliers on terms acceptable to the Company; and (vi)
general economic  conditions.  The Company's plans and objectives,  are based on
assumptions  that the Company will be successful in completing  its crumb rubber
facility,  that it will produce crumb rubber at a price that will be competitive
in the market,  that the Company  will be  successful  in  receiving  additional
financing  to fund  future  growth and that there  will be no  material  adverse
change in the Company's operations or business.
    



                                                                              16


        Assumptions relating to the foregoing involve judgments with respect to,
among other things, future economic,  competitive and market conditions,  all of
which are difficult or impossible  to predict  accurately  and many of which are
beyond the control of the Company.  As a result,  there can be no assurance that
the Company will be able to achieve or sustain  profitability  on a quarterly or
annual  basis.  In  light  of  the  significant  uncertainties  inherent  in the
Company's business, forward-looking statements made in this report should not be
regarded  as a  representation  by the  Company  or any  other  person  that the
objectives and plans of the Company will be achieved.


ENVIRONMENTAL LIABILITY

        The  Company  has  no  known   material   environmental   violations  or
assessments.

RECENT ACCOUNTING PRONOUNCEMENTS
   
        The Financial  Accounting  Standards Board ("FASB") issued  Statement of
Financial  Accounting  Standards  ("SFAS")  No.  128,  "Earnings  per  Share" in
February 1997. SFAS No. 128  establishes  standards for computing and presenting
earnings-per-share, and is effective for financial statements issued for periods
ending after December 15, 1997, earlier  application is not permitted.  SFAS No.
128  requires  the  restatement  of all  prior  period  earnings-per-share  data
presented.
    
        In June 1997,  the FASB issued SFAS No.  130,  "Reporting  Comprehensive
Income". SFAS No. 130 is effective for fiscal years beginning after December 15,
1997. Accounting  principles generally require all recognized revenue, expenses,
gains  and  losses to be  included  in net  income.  Various  FASB  statements,
however,  require  companies to report certain changes in assets and liabilities
as a separate  component  of the equity  section  of the  balance  sheet such as
unrealized gains and losses on available for sale  securities,  foreign currency
items and  minimum  pension  liability  adjustments.  These items along with net
income, are components of comprehensive income.

        It is required under SFAS No. 130 that all items of comprehensive income
are to be reported in a "financial  statement"  that is displayed  with the same
prominence as other financial  statements.  Additionally,  SFAS No. 130 requires
the  classification  of items  comprising  other  comprehensive  income by their
nature,  and  the  accumulated  balance of other  comprehensive  income  must be
displayed  separately  from retained  earnings and additional paid in capital in
the  equity  section  of the  balance  sheet.  Management  will  adopt  this new
disclosure requirement beginning in the fiscal year ending May 31, 1999.


        Also in June 1997,  the FASB  isssued SFAS No. 131,  "Disclosures  about
Segments of an Enterprise  and Related  Information".  SFAS No. 131 is effective
for financial statements for periods beginning after December 15, 1997. SFAS No.
131 establishes  standards for the way that public companies report  information
about operating segments in annual financial statements and selected information
about operating segments in interim financial reports issued to shareholders. It
also establishes  standards for related disclosures about products and services,
geographic  areas and  major  customers.  Generally,  financial  information  is
required to be reported on the basis that it is used  internally  for evaluating
segment performance and deciding how to allocate resources to segments.

        SFAS No. 131 also requires companies to report information about the way
that the operating  segments were determined,  the product and services provided
by  the  operating  segments,  differences  between  the  measurements  used  in
reporting  segment  information  and those used by the  Company  in its  general
purpose financial statements,  and changes in the measurement of segment amounts
from  period to  period.  Management  has not yet  determined  the  impact  that
adoption of SFAS No. 131 will have on its financial statement presentation.

ITEM 7. FINANCIAL STATEMENTS

For  information  required  with  respect  to  this  Item 7,  see  "Consolidated
Financial Statements" on pages F-1 through F-24 of this report.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

None

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The Directors and executive officers of the Company are as follows:

                  Name            Age                   Position
                  ----            ----                  --------
Maurice E. Needham ............    57     Chairman of the Board of Directors
Robert H. Davis ...............    54     Chief Executive Officer, Director
James F. Barker................    56     President, Director
Joseph E. Levangie.............    52     Chief Financial Officer; Treasurer;
                                             Secretary; Director
Robert D. Maust ...............    59     President of Recycling Operations, 
                                             Director
Lew F. Boyd....................    52     Director


        On July  30,  1997,  subject  to  shareholder  approval,  the  Board  of
Directors established three classes of directors, each class ordinarily to serve
for three  years.  Class I  directors  will serve  until the  Annual  Meeting of
Stockholders to be held in 1998,  Class II directors will serve until the Annual
Meeting of  Stockholders  to be held in 1999, and Class III directors will serve
until the Annual  Meeting of  Stockholders  to be held in 2000. As adopted,  the
staggered  board  would be  comprised  of James F. Barker and Robert D. Maust as
Class I directors; Maurice E. Needham and Robert H. Davis as Class II directors;
and Joseph E.  Levangie and Lew F. Boyd as Class III  directors.  The  Company's
officers are appointed by the Board of Directors and serve at the  discretion of
the Board of  Directors.  No director  receives  compensation  for services as a
director.

        The Company has  established  an Audit  Committee  consisting of Messrs.
Levangie and Boyd and a Compensation Committee consisting of Messrs. Needham and
Boyd .

        MAURICE E.  NEEDHAM has been  Chairman  of the Company  since June 1993.
From June 1993 to July 21,  1997,  Mr.  Needham  also served as Chief  Executive
Officer  of the  Company.  He also  serves as  Chairman  of  Dynaco  Corporation
("Dynaco"),  a manufacturer of flexible  printed circuit boards which he founded
in 1987. Dynaco filed for an orderly liquidation under bankruptcy  protection in
July 1993 and emerged from such  protection  in February  1994, as a division of
Palomar Medical Technologies,  Inc., a Beverly, Massachusetts company engaged in
the development of advanced medical equipment.  Prior to 1987, Mr. Needham spent
17 years at Hadco Corporation,  a printed circuit board  manufacturer,  where he
served as President, Chief Operating Officer and Director.


                                                                              17



        ROBERT H. DAVIS has been Chief  Executive  Officer of the Company  since
July 21,  1997 and a  Director  of the  Company  since July 30,  1997.  Prior to
joining the  Company,  Mr.  Davis  served as Vice  President  of  Recycling  for
Browning-Ferris  Industries,  Inc. of Houston,  Texas  ("BFI") since 1990. As an
early leader of BFI's  recycling  division,  Mr. Davis grew that  operation from
startup to $650 million  per-year in profitable  revenues.  A 25-year veteran of
the recycling industry,  Mr. Davis has also held executive positions with Fibres
International, Garden State Paper Company, and SCS Engineers, Inc.

        JAMES F. BARKER has been  President  and a Director of the Company since
its inception in September 1992. Mr. Barker has over 15 years  experience in the
plastics  industry  with both  manufacturing  and OEM sales  activities in areas
including injection molding,  extrusion, blow molding,  machinery rebuilding and
repair  services and  manufacturing  plant  operations and design.  From 1991 to
September  1992,  Mr.  Barker  was a Sales  Engineer  with Adams  Engineering  &
Equipment, a distributor of injection molding machines,  extruders and auxiliary
equipment.

        JOSEPH E.  LEVANGIE has been Chief  Financial  Officer and a Director of
the Company since its inception and Treasurer and Secretary since June 1993. Mr.
Levangie  is the  founder and has been since its  inception  in 1981,  the Chief
Executive  Officer of JEL & Associates,  which  specializes in corporate finance
and business strategy.  Mr. Levangie also serves as a Director of Nexar, Inc., a
publicly-traded company.

        LEW F. BOYD has been a Director of the Company  since August  1994.  Mr.
Boyd is the  founder  and has been  since  1986 the Chief  Executive  Officer of
Coastal   International,   Inc.,  an  international   business  development  and
technology transfer firm.

        ROBERT D. MAUST has been President of the Company's  Recycling Operation
since December 1996 and a Director of the Company since July 30, 1997.  Prior to
joining the  Company,  Mr.  Maust was Vice  President  for BFI's tire  recycling
operations from July 1991 to 1996 and was instrumental in growing that operation
from 5 million  tires/year to 22 million tires/year over a five year period.  An
entrepreneur/manager with over ten years experience in tire recycling, Mr. Maust
was  President  of Maust  Tire  Recycling  from  1988 to 1991,  when he sold the
business to BFI and joined BFI as Vice President.

KEY EMPLOYEES


   
        CYNTHIA  BARKER,  38, is a co-founder and has been director of Corporate
Administration  of the Company since its inception in September  1992.  Prior to
joining GreenMan,  she was a Senior Associate with JEL & Associates from 1982 to
1995.  She has  extensive  experience  in business  planning,  marketing,  human
resources, administration management and investor relations.
    

        CHARLES E. COPPA, 34, has served as the Company's  Corporate  Controller
since  October,  1995.  A CPA, he most  recently  was CFO and  Treasurer of Food
Integrated  Technologies of Brookline,  MA, a publicly-traded  development stage
company  from  July 1994 to  October  1995.  Prior to  joining  Food  Integrated
Technologies,  Inc., Mr. Coppa served as Corporate Controller for Boston Pacific
Medical, Inc., a manufacturer and distributor of disposable medical products and
Corporate  Controller  for Avatar  Technologies,  Inc.,  a  computer  networking
company.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES AND EXCHANGE ACT OF 1934

        Section  16(a) of the  Securities  and Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10% of
the Company's Common Stock ("10% Stockholders"), to file with the Securities and
Exchange  Commission  ("the SEC") initial  reports of ownership of the Company's
Common  Stock and other  equity  securities  on Form 3 and reports of changes in
such  ownership on Form 4 and Form 5. Officers,  directors and 10%  Stockholders
are  required  by SEC  regulations  to furnish  the  Company  with copies of all
Section 16 (a) forms they file.



                                                                              18

        To the Company's knowledge, based solely on review of the copies of such
reports  furnished  to the Company  during and with  respect to, its most recent
fiscal year, and written representation that no other reports were required, all
Section 16 (a) filing requirements applicable to its officers, directors and 10%
Stockholders were complied with.


ITEM 10.  EXECUTIVE COMPENSATION


        The following table summarizes the  compensation  paid or accrued by the
Company  for  services  rendered  during the years  indicated  to the  Company's
Chairman and Chief  Executive  Officer,  and its President.  The Company did not
grant  any  restricted  stock  awards or stock  appreciation  rights or make any
long-term plan payouts during the years indicated.


                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                                    LONG-TERM
                                                    ANNUAL COMPENSATION            COMPENSATION
                                                    -------------------            ------------
                               FISCAL YEAR                                          SECURITIES
            NAME AND               ENDED                            OTHER ANNUAL     UNDERLYING     ALL OTHER
      PRINCIPAL POSITION          MAY 31,       SALARY    BONUS     COMPENSATION      OPTIONS    COMPENSATION(2)
      ------------------          ------        ------    -----    -------------     --------    ---------------
<S>                                 <C>        <C>       <C>       <C>               <C>             <C>   
Maurice E. Needham............      1997       $72,691        --        --             387,500 (3)     $3,600
  Chairman                          1996       42,924    $    --    $ 18,000 (1)        --                 --
                                    1995          --          --      36,000 (1)        --               2,850

   
James F. Barker...............      1997       $83,600   $25,000         --           175,000 (3)       11,764
   President                        1996       81,057         --         --             --               7,804
                                    1995       66,000         --         --             --               3,383
---------
    
(1) Represents consulting fees paid or accrued.
(2)  Represents  payments made to or on behalf of Mr. Barker in fiscal 1997 and 1996 for health  insurance and auto
allowances.  Represents  payments in fiscal 1997 to Mr.  Needham for auto  allowances.  In August 1994, the Company
forgave stock subscriptions  receivable from Messrs.  Needham and Barker for services rendered during the Company's
start-up operations.
(3) Represents options granted in July 1996. These options were repriced in December 1996. Does not include 111,000  
warrants to purchase  shares of common stock granted to Mr. Needham  pursuant to the terms of a loan made to the
Company by Mr. Needham.

</TABLE>



        The  following  table sets  forth  information  concerning  the value of
unexercised  options  as of May 31,  1997  held by the  executives  named in the
Summary  Compensation  Table above.  No options were exercised by such executive
officers during the fiscal year ended May 31, 1997.

                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                      AND FISCAL YEAR END OPTION VALUES(1)
<TABLE>
<CAPTION>

   

                                                                                        VALUE OF UNEXERCISED
                                                     NUMBER OF UNEXERCISED              IN-THE-MONEY OPTIONS
                                                    OPTIONS AT MAY 31, 1997(1)           AT MAY 31, 1997 (2)
                                                    -----------------------              -------------------
                    NAME                           EXERCISABLE    UNEXERCISABLE      EXERCISABLE    UNEXERCISABLE
                    -----                          -----------   --------------     ------------    -------------
<S>                                                  <C>              <C>              <C>              <C>     
Maurice E. Needham..........................         147,000          411,500          $28,440          $ 18,960
James F. Barker.............................         36,000           199,000          $28,440          $ 18,960
---------
(1) There were no options  exercised by any of the executive  officers  named in
the Summary  Compensation  Table in the twelve  months ended May 31,  1997.  The
options granted to the executive officers became exercisable commencing June 10,
1994,  at an  annual  rate of 20% of the  underlying  shares  of  Common  Stock.
Includes  111,000  immediately  exercisable  warrants to be  purchase  shares of
common stock granted to Mr. Needham  pursuant to the terms of a loan made to the
Company by Mr. Needham.
    

(2) Assumes that the value of shares of Common Stock is equal to $.88 per share,
which was the  closing  bid  price of the  Company's  Common  Stock as listed by
NASDAQ on May 31, 1997.

</TABLE>



EMPLOYMENT AGREEMENTS


        In  October  1995,  the  Company  entered  into  three-year   employment
agreements with each of Messrs.  Needham,  Barker and Levangie pursuant to which
Messrs.  Needham and Levangie each receive a salary of $72,000 per annum and Mr.
Barker receives a salary of $80,000 per annum. Any increases or bonuses are made
at the 


                                                                              19


discretion of the Board of Directors upon the recommendation of the Compensation
Committee.  The  agreements  provide for the payment of  six-months  salary as a
severance payment for termination without cause. Prior thereto,  Messrs. Needham
and Levangie were  compensated  through  consulting  fees paid or accrued by the
Company for their services as officers of the Company.

        In December  1996,  the Company  entered  into a  three-year  employment
agreement  with Mr.  Robert D. Maust  pursuant to which Mr. Maust will receive a
salary  of  $125,000  per  annum.  Any  increases  or  bonuses  are  made at the
discretion of the Board of Directors upon the recommendation of the Compensation
Committee.  The agreement provides for the payment of twelve-months  salary as a
severance payment for termination without cause.

        All of the Company's executive  employees have executed  confidentiality
and non-disclosure agreements concerning the Company's proprietary processes.

STOCK OPTION PLAN

        The  Company's  1993 Stock  Option Plan (the  "Plan") was adopted by the
Board of Directors on June 10, 1993 and approved by the stockholders on June 10,
1993.

        Options  granted  under the Plan may be either (i)  options  intended to
qualify as "incentive  stock options" under Section 422 of the Internal  Revenue
Code of 1986, as amended (the "Internal  Revenue Code"),  or (ii)  non-qualified
stock  options.  Incentive  stock  options  may be  granted  under  the  Plan to
employees,  including  officers and directors who are  employees.  Non-qualified
options may be granted to employees, directors and consultants of the Company.

        The Plan is administered by the Board of Directors.  Under the Plan, the
Board has the  authority  to  determine  the  persons  to whom  options  will be
granted, the number of shares to be covered by each option,  whether the options
granted are intended to be incentive stock options, the manner of exercise,  and
the time, manner and form of payment upon exercise of an option. On June 7, 1996
a Special Meeting of Stockholders  was held and the Company  increased the total
number of  shares  of  Common  Stock  reserved  for  issuance  under the Plan to
1,000,000.

        Incentive  stock options  granted under the Plan may not be granted at a
price less than the fair market  value of the Common  Stock on the date of grant
(or less than 110% of fair  market  value in the case of persons  holding 10% or
more of the voting stock of the  Company).  Non-qualified  stock  options may be
granted at an exercise price established by the Board which may not be less than
85% of fair  market  value of the shares on the date of grant.  Incentive  stock
options  granted under the Plan must expire no more than ten years from the date
of  grant,  and no more than  five  years  from the date of grant in the case of
incentive stock options granted to an employee holding 10% or more of the voting
stock of the Company.

        As of May 31, 1997,  there were 716,700  options granted and outstanding
under the Plan of which 137,500 options were  exercisable at prices ranging from
$.09 to $1.00.

NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

        On January 24, 1996,  the Board of Directors of the Company  adopted the
1996 Non-Employee Director Stock Option Plan ("Director Plan") and the Company's
stockholders'  approved  the Director  Plan on June 7, 1996.  The purpose of the
Director  Plan is to  promote  the  interests  of the  Company by  providing  an
inducement  to obtain and retain the services of  qualified  persons who are not
officers  or  employees  of the  Company  to serve as  members  of the  Board of
Directors. The Board of Director has reserved 300,000 shares of common stock for
issuance and as of May 31,  1997,  options to purchase  30,000  shares of Common
Stock have been granted under the Director Plan.


        Each  person who was a member of the Board of  Directors  on January 24,
1996,  and was not an officer or  employee  of the  Company,  was  automatically
granted an option to purchase  10,000 shares of the Company's  Common Stock.  In
addition,  after an individual's initial election to the Board of Directors, any
director who is not an officer or employee of the Company who continues to serve
as a director will automatically be granted on the date of the Annual Meeting of
Stockholders  an  additional  option to purchase  10,000 shares of the Company's
Common Stock. The exercise price per share of options granted under the Director
Plan is 100% of the  fair-market  value  of the  Company's  Common  Stock on the
business day  immediately  prior to the date of the grant.  Each option  granted
under the 1996  Director  Plan is  immediately  exercisable  for a period of ten
years from the date of the grant.

ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information regarding beneficial
ownership of the Company's  Common Stock as of May 31, 1997:  (i) by each person
who is known by the Company to own  beneficially  5% or



                                                                              20


more of the  outstanding  shares  of Common  Stock;  (ii) by each  director  and
officer of the Company (including any "group" as used in Section 13(d)(3) of the
Securities Exchange Act of 1934); and (iii) by all directors and officers of the
Company as a group.  Unless  otherwise  indicated below, to the knowledge of the
Company,  all persons  listed below have sole voting and  investment  power with
respect  to their  shares of Common  Stock,  except to the extent  authority  is
shared by spouses under  applicable  law. As of May 31, 1997,  there were issued
and outstanding 6,873,296 shares of Common Stock.

   
                                               NUMBER OF SHARES    PERCENTAGE OF
NAME (1)                                     BENEFICIALLY OWNED(2)     CLASS
--------                                     ---------------------     -----
Palomar Medical Technologies, Inc. (3)......      1,690,000             17.23%
 66 Cherry Hill Road Beverly MA, 01915
Maurice E. Needham (4)......................        484,000              5.85%
James F. Barker (5).........................        390,300              4.78%
Joseph E. Levangie (6)......................        307,500              3.78%
Dhananjay G. Wadekar........................        539,083              6.64%
Lew F. Boyd (7).............................         25,000               --
Robert D. Maust.............................             --               --
Robert H. Davis.............................             --               --
All officers and directors as a group
      (6 persons)(4,5,6,7)..................      1,206,800             14.40%
-----------------------------------------
 * Less than 1% of the outstanding Common Stock.
 (1) Each  person's  address is in care of GreenMan Technologies, Inc.,7 Kimball
     Lane,  Building A,  Lynnfield,  MA 01940 with the  exception  of  Dhananjay
     Wadekar,  whose address is c/o DynaGen  Inc., 99 Erie Street,  Cambridge,MA
     02139.
    
 (2) Pursuant to the rules of the Securities and Exchange Commission,  shares of
     Common Stock that an individual  or group has a right to acquire  within 60
     days  pursuant  to the  exercise  of options or  warrants  are deemed to be
     outstanding  for the purpose of computing the percentage  ownership of such
     individual or group,  but are not deemed to be outstanding  for the purpose
     of  computing  the  percentage  ownership  of any other person shown in the
     table.
   
 (3) Consists of shares issuable upon  conversion of the  outstanding  principal
     and accrued interest on a 10% secured convertible  promissory note and upon
     exercise of warrants to purchase Common Stock.
    
 (4) Includes  159,000 shares of Common Stock  issuable  pursuant to immediately
     exercisable  stock  options and warrants.  Also  includes  20,000 shares of
     Common Stock owned by Mr.  Needham's  wife. Does not include 399,500 shares
     of Common Stock issuable pursuant to outstanding stock options and warrants
     that are not currently exercisable and 60,000 shares owned by Mr. Needham's
     adult children, as to which he disclaims beneficial ownership.
 (5) Includes  48,000 shares of Common Stock  issuable  pursuant to  immediately
     exercisable  stock  options  and  4,000  shares of  Common  Stock  issuable
     pursuant to  immediately  exercisable  stock options owned by Mr.  Barker's
     wife.  Does not include 1,000 shares of Common Stock  issuable  pursuant to
     stock  options  owned  by  Mr.  Barker's  wife  that  are  not  immediately
     exercisable,  and 137,700 shares owned by Cynthia M. Barker,  Mr.  Barker's
     adult daughter,  as to which he disclaims beneficial  ownership.  Also does
     not include 188,000 shares of Common Stock issuable pursuant to outstanding
     stock options that are not currently exercisable.
 (6) Includes  27,500 shares of Common Stock  issuable  pursuant to  immediately
     exercisable stock options and warrants.  Does not include 352,000 shares of
     Common Stock issuable  pursuant to  outstanding  stock options and warrants
     that are not currently exercisable. Does not include 40,000 shares owned by
     Mr.  Levangie's  adult  children,  as  to  which  he  disclaims  beneficial
     ownership.
 (7) Includes  25,000 shares of Common Stock  issuable  pursuant to  immediately
     exercisable  options.  Does not  include  85,000  shares  of  Common  Stock
     issuable  pursuant to  outstanding  stock  options  that are not  currently
     exercisable.



                                                                              21


ITEM 12.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

STOCK ISSUANCES; STOCK OPTIONS; WARRANTS

        In connection with its incorporation in 1992, the Company authorized the
issuance at a price of $.01 per share of 338,300 shares of Common Stock to James
F. Barker,  the Company's  President,  116,700 shares to Cynthia M. Barker,  Mr.
Barker's adult daughter and an employee of the Company, 250,000 shares to Joseph
E. Levangie, the Company's Chief Financial Officer, 285,000 shares to Maurice E.
Needham,  the Company's Chairman and Chief Executive Officer, and 220,000 shares
to Dhananjay G. Wadekar, a principal stockholder. The Company also issued 44,500
shares to one unaffiliated person.  (Hereinafter,  these shares are collectively
referred to as "Founders' Shares").  Although stock subscription  agreements for
the Founders'  Shares were  executed,  no payment for the  Founders'  Shares was
received.  In August 1994, the Company's Board of Directors voted to forgive the
stock  subscriptions  receivable  in  exchange  for  services  rendered by these
persons to the Company during its start-up  operations.  The Company also issued
140,000 shares of Common Stock to Budra Management Corp. ("Budra"),  at the time
a principal stockholder of the Company, in connection with the loans made to the
Company.


        In July 1995,  Mr.  Wadekar  purchased an additional  58,333 shares from
previous  stockholders of the Company as a condition to the Company's listing on
the NASDAQ SmallCap Market.


        In  July  1994,   the  Company   granted  to  Mr.   Wadekar   five-year,
non-qualified  stock options to purchase  125,000 shares of the Company's Common
Stock  exercisable at $.29 per share in consideration  for services  rendered to
the Company which included advice on business and joint venture  strategies,  as
well as advice for integration of the operations of DuraWear and the Company. In
February 1996, Mr. Wadekar exercised these  non-qualified  stock options using a
net exercise feature, in exchange for 117,750 shares of Common Stock.


   
        On October 10, 1995, the Company acquired all of the outstanding  common
stock of DuraWear Corporation, a company owed solely by Mr. Wadekar, a principal
stockholder of the Company. The purchase price consisted of $400,000 in cash and
75,000 shares of the Company's Common Stock, valued in the aggregate at $375,000
or $5.00 per share. In connection with the acquisition, the Company entered into
a three-year non-competition agreement with Mr. Wadekar, under which the Company
issued 70,000  shares of the  Company's  Common Stock valued in the aggregate at
$350,000 or $5.00 per share. The Company also entered into a one-year consulting
agreement with Mr. Wadekar in consideration  for which the Company paid $20,000.
The  terms of the  acquisition  were  approved  by all of the  directors  of the
Company and they deemed the terms of the  acquisition to be no less favorable to
the Company than could be obtained from unaffiliated third parties.

        On May 30, 1997, the Company issued Mr.  Needham and Mr.  Levangie,  two
officers  of the  Company,  warrants to  purchase  111,000 and 17,000  shares of
common stock, respectively,  pursuant to the terms of loans made to the Company.
The warrants have an exercise price of $.88 per share.
    


                                                                              22


LOANS; PERSONAL GUARANTEES

        During the period from September to December 1992, Budra Management made
loans to the Company in the aggregate principal amount of $233,000. The original
terms of the loans  provided  for  payment  of  interest  at the rate of 10% per
annum, the repayment of the loans at the closing of the Company's Initial Public
Offering ("IPO") and the payment of an additional $250,000 in cash one year from
the IPO. In March 1995,  the Company and Budra modified the terms of the note to
provide for the issuance to Budra of 100,000  shares of Common Stock,  valued in
the  aggregate  at $500,000  (or $5.00 per share),  at the closing of the IPO in
lieu of the  $250,000  cash  payment.  The  100,000  shares of Common  Stock are
subject to a lock-up  agreement  limiting  the transfer of the shares to no more
than  15,000  shares per  quarter  commencing  90 days after the IPO. In October
1995,  the Company  repaid the $233,000 notes payable plus interest to Budra and
issued the 100,000 shares of Common Stock. Pursuant to the terms of the DuraWear
stock purchase  agreement,  the Company succeeded to the obligations of DuraWear
relating to the  repayment  of an amount  ($78,897 as of May 31,  1997) which is
evidenced by a promissory note representing amounts due for advances to DuraWear
by Mr. Wadekar who is also a principal  stockholder of the Company.  The note is
being repaid in 36 equal monthly installments of principal plus accrued interest
at prime plus 1.5% (10.0% at May 31, 1997), adjusted annually.

        Mr. Wadekar has guaranteed  payment of DuraWear's  remaining loan from a
bank, which has an outstanding principal balance of $450,654 at May 31, 1997 and
is secured by a mortgage on real estate owned by DuraWear,  as well as a lien on
substantially all of DuraWear's assets, bears interest at the rate of prime plus
1% ( 9.5% at May 31, 1997) per annum and is due in July 2000.

   
        During the period from February  1996 to June 1996 the Company  borrowed
$1,700,000 in aggregate from a company that owns a subsidiary  whose Chairman is
also a director of the Company.  These notes  payable  bear  interest at 10% per
annum with  principal and interest due at the earlier of: (1) the tenth business
day  following  the  consummation  by the  Company  of a minimum  $3,000,000  of
additional financing; or (2) $500,000 on September 30, 1996, $700,000 on January
1, 1997 and  $500,000  June 1, 1997,  respectively.  In  addition,  the  Company
granted  warrants to purchase 200,000 shares of the Company's common stock at an
exercise price of $3.88 per share and warrants to purchase 100,000 shares of the
Company's  common  stock at an exercise  price of $4.00 per share.  In September
1996,  the Company repaid  $500,000 of the amounts owed the lender.  On December
30,1996,  the Company renegotiated the remaining principal balance of $1,200,000
due  under  these 10% notes  payable.  The  outstanding  principal  balance  was
exchanged for a 10% secured  convertible note payable (the "Note"),  due July 1,
1997 and convertible into the Company's common stock, at the holder's option, at
a conversion price of $1.00 per share. The Note is secured by an interest in the
Company's  cryogenic  tire  recycling  equipment.  The Company  also reduced the
exercise price of the 300,000  warrants  granted in 1996 to $1.13 per share.  On
June 30, 1997, the Company  received a 90-day extension of the Note and a waiver
allowing it to contribute  it's  cryogenic  tire  recycling  equipment  into the
GreenMan/CRT  joint  venture  in  return  for  granting  the  holder  piggy-back
registration  rights for the shares of common stock underlying the Note, accrued
interest and the 300,000 warrants granted in 1996.
    

        In May 1996,  the  Company  borrowed  $325,000  from Mr.  Needham.  This
unsecured  note  payable  bears  interest at a rate of prime plus 1.5% per annum
with  principal  and interest due the earlier of 120 days after  issuance or the
tenth  business  day  following  the  consummation  of a minimum  $3,000,000  of
additional  financing.  The  proceeds  of the note were used  towards  equipment
deposits, licensing fees and the issuance of notes receivable.

        From  September  1996 to May 1997 the  Company  borrowed  an  additional
$624,300 from Mr. Needham and Mr.  Levangie,  collectively.  During January 1997
and May 1997 the Company repaid $345,000 of the amounts owed.

   
        On May 30, 1997,  the Company  refinanced  the  remaining  principal and
accrued  interest  ($18,000)  owed to Messrs.  Needham and Levangie plus accrued
business  expenses  ($17,000)  by issuing to Messrs.  Needham and  Levangie  10%
convertible  notes, due October 30, 1998 in the principal amount of $555,000 and
$85,000,  respectively and warrants to purchase 111,000 shares and 17,000 shares
of common stock, respectively, at an exercise price of $.88 per share. The notes
are  convertible  after a holding period of 120 days into shares of common stock
at a  conversion  price  equal to the lower of the  average of the  closing  bid
prices on the five trading days  preceding May 30, 1997 or 70% of the average of
the  closing  bid  prices on the five  trading  days  preceding  the date of the
conversion of such notes.



                                                                              23



        During June and July 1997, the Company  borrowed an additional  $386,000
from  Messrs.  Needham,  Levangie  and two other  officers of the Company  under
similar terms to the May 30, 1997 notes and issued  warrants to purchase  77,200
shares of common stock at exercise prices ranging from $.72 to $.97 per share.
    
        From time to time since its  inception,  the Company  has  entered  into
third party  equipment  leases  with  respect to certain  equipment  used by the
Company in its  operations.  Mr.  Barker  has  personally  guaranteed  the lease
payments on equipment leases totaling approximately $1,200,000.

        All transactions, including loans, between the Company and its officers,
directors,  principal  stockholders,  and their  affiliates  are  approved  by a
majority of the independent and disinterested  outside directors on the Board of
Directors,  and will be on terms no less  favorable to the Company than could be
obtained from unaffiliated third parties.


ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits

         The following exhibits required by Item 601 of Regulation S-B are filed
as  part  of  this  Annual  Report  on  Form  10-KSB.  Exhibit  numbers,  where
applicable, in the left column correspond to these of Item 601 of Regulation SB.


<TABLE>
<CAPTION>

EXHIBIT
  NO.                                                       DESCRIPTION
 ---                                                        -----------

<S>          <C>                                                        
  *3.1        --  Certificate of Incorporation of GreenMan Technologies, Inc.

  *3.2        --  Articles of  Incorporation  of J.W.  DuraWear,  Inc.  (Name  changed to DuraWear  Corporation  in
                  Certificate of Merger of DuraWear Corporation into J.W. DuraWear, Inc. dated November 29, 1990).

  *3.3        --  Certificate of Stock Designation of GreenMan Technologies, Inc. dated August 10, 1995.

  *3.4        --  By-laws of GreenMan Technologies, Inc.

***3.5        --  Certificate of Amendment to the Certificate of Incorporation  of GreenMan  Technologies, Inc.

  *4.1        --  Specimen certificate for Common Stock of the Company.

  *4.2        --  Specimen certificate for Class A Redeemable Common Stock Purchase Warrant.
 
  *4.3         --  Form of Warrant Agreement between the Company and OTC Corporate Transfer Services Co.

  *4.4        --  Form of  Warrant issued to Landmark International Equities, Inc.

  *10.5       --  1993 Stock Option Plan.

  *10.6       --  Stock Option Letter dated June 10, 1993 issued to James F. Barker.

  *10.7       --  Stock Option Letter dated June 10, 1993 issued to Maurice E. Needham.

  *10.8       --  Stock Option Letter dated June 10, 1993 issued to Joseph E. Levangie.

  *10.9       --  Stock Option Letter dated April 25, 1994 issued to Lew F. Boyd.

  *10.10      --  Intentionally Omitted.

  *10.11      --  Stock Option Letter dated April 26, 1995 issued to Joseph E. Levangie.

  *10.12      --  Stock Option Letter dated July 1, 1994 issued to Dhananjay G. Wadekar.

  *10.13      --  Form of confidentiality and non-disclosure agreement for executive employees.
 
  *10.14      --  Form of Employment Agreement with James F. Barker.

  *10.15      --  Form of Employment Agreement with Maurice E. Needham.

  *10.16      --  Form of Employment Agreement with Joseph E. Levangie.

  *10.17      --  Form of Consulting Agreement with Dhananjay G. Wadekar.



                                                                              24


  *10.18      --  Form of 10%  Convertible  Promissory  Note  issued  between  November  1993 and  April  1994
                  (the  "First  Bridge")  to 17  unaffiliated   lenders   of   GreenMan   Technologies,    Inc.
                  representing, in the aggregate, $575,000.

  *10.19      --  Form of 10%  Convertible  Promissory  Note  issued in  September  and October  1994 (the  "Second
                  Bridge") to unaffiliated lenders of GreenMan Technologies,  Inc. representing,  in the aggregate,
                  $300,000.

  *10.20      --  Promissory Notes of GreenMan  Technologies,  Inc. issued from September to December 1992 to Budra
                  Management  Corp.  representing,  in the  aggregate  principal  amount,  $233,000  and bearing an
                  effective rate of interest of 53% per annum.

  *10.21      --  Letter  Agreement  dated March 20, 1995  amending  the terms of the  Promissory  Notes  issued by
                  GreenMan Technologies, Inc. to Budra Management Corp.

  *10.22      --  Stock Purchase  agreement by and among GreenMan  Technologies,  Inc.,  DuraWear  Corporation  and
                  Dhananjay  G.  Wadekar  for  the  acquisition  by  GreenMan  Technologies,  Inc.  of  all  of the
                  outstanding capital stock of DuraWear Corporation.

  *10.23      --  Letter  Agreement dated March 10, 1995 amending the terms of the Stock Purchase  Agreement by and
                  among GreenMan Technologies, Inc., DuraWear Corporation and Dhananjay G. Wadekar.

  *10.24      --  Form of Non-Competition Agreement with Dhananjay G. Wadekar.

  *10.25      --  Agreement  dated  August  16,  1994  between  GreenMan   Technologies,   Inc.  and  Crumb  Rubber
                  Technology, Inc.

  *10.26      --  Exclusivity  Agreement dated  September 14, 1994 between  GreenMan  Technologies,  Inc. and Crumb
                  Rubber Technology, Inc.

  *10.27      --  Agreement  dated  September  20, 1994 whereby MC Machinery Systems, Inc. (Lessor) and MAC Funding Corporation
                 (Assignee) surrendered  default  rights under certain  capital  equipment leases of the Company.

  *10.28      --  Form of  Subscription  Agreement  executed by  investors  in  connection  with April 1995 Private
                  Placement of Class A Convertible Preferred Stock.

  *10.29      --  Form of  Registration  Rights  Agreement  executed by  investors  in  connection  with April 1995
                  Private Placement of Class A Convertible Preferred Stock.

  *10.30      --  Promissory Note issued in April 1995 by GreenMan Technologies, Inc. to Maurice E. Needham.

  *10.31      --  Promissory  Notes issued by DuraWear  Corp. to GreenMan  Technologies,  Inc. in  connection  with
                  certain loans by the Company to DuraWear Corporation.

  *10.32      --  Form of Stock  Purchase  Agreement  between  Salvatore  Mazzeo,  Custodian  for Mathew J. Mazzeo,
                  UGMA, and Dhananjay G. Wadekar.

 **10.33      --   Tire Material Put-or-Pay/Take-or-Pay Agreement dated December 14, 1995 between GreenMan
                   Technologies, Inc. and BFI Tire Recyclers of Georgia, Inc.

 **10.34      --  Facility Lease dated December 14, 1995  between GreenMan Technologies,Inc. and BFI Tire Recyclers of Georgia, Inc.

 **10.35      --  Amended and Restated Term Note dated October 1, 1995 between DuraWearCorporation and SouthTrust Bank of Alabama,
                  National Association.

 **10.36      --  Loan Modification and Consent Agreement dated October 1, 1995 between DuraWear Corporation and SouthTrust Bank of
                  Alabama, National Association.

 **10.37      --  Commercial Lease dated October 13, 1995 between GreenMan Technologies, Inc. and Kimball
                  Realty Trust.

 **10.38      --  Amendment to Agreement described in Exhibit 10.33.

 **10.39      --  Promissory Note issued in May 1996 by GreenMan Technologies, Inc. to Maurice E. Needham.
 
 **10.40      --  Promissory  Note  issued in  February  1996 by GreenMan  Technologies,  Inc.  to Palomar  Medical
                  Technologies, Inc.


                                                                              25


 
  **10.41     --  Promissory  Note  issued  in  May  1996  by  GreenMan  Technologies,   Inc.  to  Palomar  Medical
                  Technologies, Inc.

(1) 10.42     --  Promissory  Note  issued  in  June  1996  by  GreenMan  Technologies,  Inc.  to  Palomar  Medical
                  Technologies, Inc

(1) 10.43     --  Common Stock Purchase Warrant issued in June 1996  to Palomar Medical Technologies, Inc

(1) 10.44     --  Form of Offshore Stock Subscription Agreement dated September 16, 1996 between GreenMan
                  Technologies, Inc. and certain foreign investors.

(2) 10.45     --  Promissory Note issued September 2,1996 by GreenMan Technologies, Inc. to Maurice E. Needham.

(2) 10.46     --  Promissory Note issued September 25, 1996 by GreenMan Technologies, Inc. to Maurice E. Needham.

(2) 10.47     --  Promissory Note issued October 25, 1996 by GreenMan Technologies, Inc  to Joseph E. Levangie.

(2) 10.48     --  Promissory Note issued November 27, 1996 by GreenMan Technologies, Inc. to Maurice E. Needham

(4) 10.49     --  10% Secured Convertible Promissory Note, issued December 31, 1996, by  GreenMan Technologies, Inc. to
                  Palomar Medical Technologies, Inc.

(4) 10.50     --  Security Interest, dated December 31, 1996, issued by GreenMan Technologies, Inc. to Palomar
                  Medical Technologies, Inc.

(3) 10.51     --  Form of Subscription Agreement, dated January 1997, issued by GreenMan Technologies, Inc. to
                  various investors.

(3) 10.52     --  Form of 7% Convertible Debenture, dated January 1997, issued by GreenMan Technologies, Inc.
                  to various investors.

(3) 10.53     --  Form of Common Stock Purchase Warrant, dated January 1997, issued by GreenMan Technologies, Inc.
                  to various investors.

   
*** 10.54     --  Employment Agreement between the Company and Robert D. Maust.
    

(5) 10.55     --  Form of Securities Purchase Agreement between the Company and various investors in connection  with
                  the April 1997 Offering of Convertible Notes due October 1998 and Warrants.

(5) 10.56     --  Form of Registration Rights Agreement between the Company and various investors in connection  with
                  the April 1997 Offering of Convertible Notes due October 1998 and Warrants.

(5) 10.57     --  Form of Convertible Note due October 1998.

(5) 10.58     --  Form of Common Stock Purchase Warrant.

*** 10.59     --  Letter from Palomar Medical Technologies, Inc. to the Company extending the maturity  date of
                  the December 1996  Note.

*** 10.60     --  Form of Securities Purchase Agreement between the Company and Messrs. Needham and
                  Levangie dated May 30, 1997.

*** 10.61     --  Form of  Convertible Note due October 1998 issued by the Company to Messrs. Needham and
                  Levangie on May 30, 1997.

*** 10.62     --  Form of Warrant issued by the Company to Messrs. Needham and Levangie on May 30, 1997.

*** 11.1      --  Statement Regarding Computation of Earnings Per Share.

*** 23.1      --  Consent of Wolf & Company, P.C. dated September 15, 1997.

*** 27.1      --  Financial Data Schedule

</TABLE>

--------

*       Filed as an Exhibit to the Company's Registration Statement on Form SB-2
        No. 33-86138 and incorporated herein by reference.

**      Filed as an Exhibit to the  Company's  Form 10-QSB for the Quarter Ended
        November 30, 1995 or the Form 10-KSB for the Year Ended May 31, 1996 and
        incorporated herein by reference.

   
***     Filed as an Exhibit to the  Company's  form 10-KSB on September 15, 1997
        and incorporated herein by reference.
    

(1)     Filed as an Exhibit to the  Company's  Form 10-QSB for the Quarter Ended
        August 31,1996 and incorporated herein by reference.

(2)     Filed as an Exhibit to the  Company's  Form 10-QSB for the Quarter Ended
        November 30, 1996, and incorporated herein by reference.

(3)     Filed as an Exhibit to the Company's Form 8-K dated January 29, 1997 and
        incorporated herein by reference.

(4)     Filed as an Exhibit to the  Company's  Form 10-QSB for the Quarter Ended
        February 28, 1997, and incorporated herein by reference.

(5)     Filed as an Exhibit  to the  Company's  Form 8-K  dated  May 5, 1997 and
        incorporated herein by reference.

(b)     Report on Form 8-K

        A report on Form 8-K was filed on May 5, 1997  describing  the execution
of a letter of intent between the Company and Browning Ferris  Industries,  Inc.
("BFI") to (1)  purchase all of the issued and  outstanding  common stock of BFI
Tire Recyclers of Minnesota, Inc. and BFI Tire Recyclers of Georgia, Inc. (2) to
purchase  certain  tire  processing  related  assets  located  at  BFI's  Asuza,
California  facility and (3) the granting to the Company of an exclusive  option
to purchase  certain assets and agreements of BFI's Ford Heights,  Illinois tire
recycling subsidiary.

        The  filing  also  described  the  sale  of  $1,500,000  of  Convertible
Subordinated Debentures in April 1997.


                                                                              26







                           GREENMAN TECHNOLOGIES, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                            Page
                                                                            ----
Independent Auditors' Report                                                 F-2

Consolidated Balance Sheets as of May 31, 1996 and 1997                      F-3

Consolidated Statements  of Loss for the Years Ended
May 31, 1995,  1996 and 1997                                                 F-4

Consolidated Statements of Changes in Stockholders'
Equity (Deficit) for the Years Ended May 31, 1995,
1996 and 1997                                                                F-5

Consolidated Statements of Cash Flows for the Years
Ended May 31, 1995, 1996 and 1997                                            F-6

Notes to Consolidated Financial Statements                                   F-8



                                                                             F-1


                          INDEPENDENT AUDITORS' REPORT



The Board of Directors and Stockholders
  GreenMan Technologies, Inc.
  Lynnfield, Massachusetts

        We have audited the accompanying consolidated balance sheets of GreenMan
Technologies,  Inc. and  subsidiary  as of May 31, 1996 and 1997 and the related
consolidated  statements of loss, changes in stockholders'  equity (deficit) and
cash flows for the years ended May 31, 1995, 1996 and 1997.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

        We conducted our audits in accordance with generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

        In our  opinion,  the  financial  statements  referred to above  present
fairly,  in  all  material   respects,   the  financial   position  of  GreenMan
Technologies,  Inc. and  subsidiary  at May 31, 1996 and 1997 and the results of
their  operations and cash flows for the years ended May 31, 1995, 1996 and 1997
in conformity with generally accepted accounting principles.

        The accompanying  financial  statements have been prepared assuming that
the Company  will  continue as a going  concern.  As  discussed in Note 3 to the
consolidated  financial  statements,   the  Company  has  suffered  losses  from
operations,  is in default on certain  capital leases and has a working  capital
deficiency that raise substantial doubt about its ability to continue as a going
concern.  Management's  plans in regard to these  matters are also  described in
Note 3. The  financial  statements  do not  include any  adjustments  that might
result from the outcome of this uncertainty.



                                                    WOLF & COMPANY, P.C.



Boston, Massachusetts
August 26, 1997



                                                                             F-2





                           GREENMAN TECHNOLOGIES, INC.
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                                     MAY 31,               MAY 31,
                                                                                                      1996                  1997  
                                                                                                      ----                  ----  
                                                          ASSETS
<S>                                                                                               <C>                 <C>
Current assets:
  Cash and cash equivalents ................................................................       $    153,172        $    104,193
  Accounts receivable, trade, less allowance for doubtful accounts
    of $31,751 and $23,772 as of May 31, 1996 and 1997 .....................................            605,255             550,644
  Inventory (Note 4) .......................................................................            525,279             553,688
  Loan receivable, related party (Note 5) ..................................................            500,000                --
  Other current assets .....................................................................            242,607             204,155
                                                                                                      ---------           ---------
        Total current assets ...............................................................          2,026,313           1,412,680
                                                                                                      ---------           ---------
Property and equipment, at cost (Notes 11 and 12):

   
     Land ..................................................................................            223,785             223,785
     Buildings .............................................................................            910,400             910,400
     Machinery and equipment ...............................................................          2,026,131           3,545,573
     Furniture and fixtures ................................................................             88,276              89,792
     Motor vehicles ........................................................................             33,932              64,822
     Leasehold improvements ................................................................            895,958             975,116
                                                                                                      ---------           ---------
                                                                                                      4,178,482           5,809,488
       Less accumulated depreciation and amortization ......................................           (507,991)           (888,445)
                                                                                                      ---------           ---------
                                                                                                      3,670,491           4,921,043
                                                                                                      ---------           ---------
Other assets:
  Equipment deposits (Notes 6 and 10) ......................................................          1,883,400             862,711
  Acquisition deposit (Note  20) ...........................................................               --               650,000
  Deferred financing costs (Notes 9 and 10) ................................................               --             1,198,899
  Goodwill, net (Note 2) ...................................................................            465,246             415,398
  Non-competition agreement, net (Note 2) ..................................................            272,222             155,557
  Note receivable (Note 7) .................................................................            150,000                --
  Licensing fee  (Note 8) ..................................................................            100,000              91,667
  Other ....................................................................................             71,311              77,575
                                                                                                      ---------           ---------
                                                                                                      2,942,179           3,451,807
                                                                                                      ---------           ---------
                                                                                                   $  8,638,983        $  9,785,530
                                                                                                   ============        ============

                 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Convertible notes payable, related party (Note 10) .......................................       $       --          $  1,200,000
  Notes payable, related parties (Note 10) .................................................          1,378,253              58,829
  Notes payable, bank, current portion (Note 11) ...........................................            140,289              37,910
  Accounts payable .........................................................................            718,770             815,631
  Accrued expenses, other ..................................................................            680,318           1,270,682
  Obligations under capital leases, current (Note  12) .....................................            311,679           1,045,726
                                                                                                      ---------           ---------
    Total current liabilities ..............................................................          3,229,309           4,428,778
Convertible notes payable (Note 9) .........................................................               --             2,200,000
Convertible notes payable, related parties, non-current portion (Note 10) ..................               --               640,000
Notes payable, related parties, non-current portion (Note 10) ..............................            578,897              24,371
Notes payable, bank, non-current portion (Note 11) .........................................            475,008             474,678
Obligations under capital leases (Note 12) .................................................            819,943             894,238
                                                                                                      ---------           ---------
    Total liabilities ......................................................................          5,103,157           8,662,065
                                                                                                      ---------           ---------
Commitments and  contingencies (Notes 6, 13 and 20)
Stockholders'  equity (Notes 9, 10 and 14):
   Preferred stock, $1.00 par value, 1,000,000 shares authorized, no shares issued
    and outstanding at May 31, 1996 and 1997 ...............................................               --                  --
  Common stock, $.01 par value, 10,000,000 shares authorized at May 31, 1996 and
     20,000,000 shares authorized at May 31, 1997; 5,076,083 and 6,873,296 shares
      issued and outstanding at May 31, 1996 and 1997 ......................................             50,761              68,733
  Additional paid-in capital ...............................................................          7,183,519          11,759,665
  Accumulated deficit ......................................................................         (3,698,454)        (10,704,933)
                                                                                                      ---------           ---------
        Total stockholders' equity .........................................................          3,535,826           1,123,465
                                                                                                      ---------           ---------
                                                                                                   $  8,638,983        $  9,785,530
                                                                                                   ============        ============
    

</TABLE>

          See accompanying notes to consolidated financial statements.

                                                                             F-3




                           GREENMAN TECHNOLOGIES, INC.
                         CONSOLIDATED STATEMENTS OF LOSS


<TABLE>
<CAPTION>



                                                                                   Years  Ended  May 31,
                                                                             ------------------------------------
                                                                              1995           1996           1997
                                                                             ------         -----           ----

<S>                                                                     <C>           <C>              <C>         
Net sales (Note 16) .................................................    $ 2,127,745   $   4,338,538    $  4,020,670


Cost of sales .......................................................      1,815,682       3,229,998       3,399,310
                                                                          ----------      ----------      ----------
Gross profit ........................................................        312,063       1,108,540         621,360
                                                                          ----------      ----------      ----------
Operating expenses:
    Research and development  (Note 13) .............................        223,061          66,610         353,250
    Selling, general and administrative (Notes 7,13,14 and 17) ......        619,163       2,406,794       4,126,611
    Impairment loss (Note  6) .......................................           --              --         1,000,000
                                                                          ----------       ---------     -----------
        Total operating expenses ....................................        842,224       2,473,404       5,479,861
                                                                         -----------      ----------     -----------
Operating loss ......................................................       (530,161)     (1,364,864)     (4,858,501)
                                                                         -----------     -----------     -----------

Other income (expense):

    Interest and financing costs (Notes  9, 10, 11 and 12) ..........       (523,804)       (288,779)     (2,114,803)
    Other, net ......................................................        (38,041)         75,322         (33,175)
                                                                         -----------     -----------     -----------
        Other income (expense), net .................................       (561,845)       (213,457)     (2,147,978)
                                                                         -----------     -----------     -----------
Net loss ............................................................    $(1,092,006)    $(1,578,321)    $(7,006,479)
                                                                         ===========     ===========     ===========

Net loss per share (Note 1) .........................................    $      (.27)    $      (.34)    $     (1.25)
                                                                         ===========     ===========     ===========


Shares used in calculation of net loss per share ....................      4,097,333       4,684,260       5,613,942
                                                                         ===========     ===========     ===========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                                                             F-4




                           GREENMAN TECHNOLOGIES, INC.
      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                     YEARS ENDED MAY 31, 1995, 1996 AND 1997

                              (NOTES 2,9,10 AND 14)


<TABLE>
<CAPTION>

                                   Convertible                     
                                 Preferred Stock      Common Stock     Additional                    Stock        Notes    
                                 ---------------     --------------      Paid-in    Accumulated   Subscriptions Receivable 
                                 Shares   Amount   Shares      Amount    Capital      Deficit      Receivable  Common Stock   Total
                                 ------   ------   ------      ------   ----------  -----------  ------------- ------------  ------


<S>                             <C>       <C>     <C>         <C>        <C>         <C>          <C>        <C>        <C> 
Balance, May 31, 1994 .......     --    $    --   2,588,500    $ 25,885   $210,660   $(1,028,127)  $(87,545) $(125,000) $(1,004,127)
Stock subscription payments
 received ...................     --         --        --          --        --           --        75,000        --        75,000
Stock subscriptions forgiven
 for services................     --         --        --          --        --           --        12,545        --        12,545
Shares purchased and retired      --         --    (463,167)     (4,632)   (138,569)      --          --        87,317     (55,884)
Shares issued for services
    rendered and accrued
    expenses ................     --         --     178,000       1,780     176,220       --          --          --       178,000
Shares issued on conversion
    of note payable .........     --         --      40,000         400      39,600       --          --          --        40,000
Notes receivable, common
    stock payment received ..     --         --        --          --         --          --          --        37,683      37,683
Sale of preferred stock .....  500,000    500,000      --          --       (23,001)      --          --          --       476,999
Net loss for year ended May
    31, 1995 ................     --         --        --          --        --      (1,092,006)      --          --    (1,092,006)
                              --------    ------- ---------      ------     -------  ----------     --------    ------   ---------
  Balance, May 31, 1995 .....  500,000    500,000 2,343,333      23,433     264,910  (2,120,133)      --          --    (1,331,790)

Sale of preferred stock .....  300,000    600,000      --          --        --           --          --          --       600,000
Shares issued at initial
    public offering .........     --         --   1,265,000      12,650   4,570,087       --          --          --     4,582,737
Shares issued on
    conversion  of notes
    payable .................     --         --     259,000       2,590      32,410       --          --          --        35,000
Shares issued on
    conversion  of interest
    payable .................     --         --     100,000       1,000     499,000       --          --          --       500,000
Shares issued for purchase
    of  DuraWear Corporation      --         --      75,000         750     374,250       --          --          --       375,000
Shares issued for  non-
    competition  agreement ..     --         --      70,000         700     349,300       --          --          --       350,000
Conversion  of preferred
    stock ................... (800,000)(1,100,000)  800,000       8,000   1,092,000       --          --          --          --
Shares issued on exercise
    of  stock options .......     --         --     167,750       1,678      12,522       --          --          --        14,200
Shares purchased and retired      --         --      (4,000)        (40)    (10,960)      --          --          --       (11,000)
Net loss for year ended May
    31, 1996 ................     --         --        --          --          --    (1,578,321)      --          --    (1,578,321)
                              --------    ------- ---------      ------     -------  ----------     --------    ------   ---------
   Balance, May 31, 1996 ....     --         --   5,076,083      50,761   7,183,519  (3,698,454)      --          --     3,535,826

Compensation expense
    related to warrants
    issued to non-employees
    under SFAS 123 ..........     --         --        --          --       646,203       --          --          --       646,203
Sale of common  stock .......     --         --     545,000       5,450     701,010       --          --          --       706,460
Shares issued on exercise
    of  stock options .......     --         --       2,400          24         312       --          --          --           336
Compensation expense
    related to warrants
    issued  in January
    1997 convertible debt
    offering under SFAS 123 .     --         --        --          --       770,000       --          --          --       770,000
Fair value of conversion
    discount on convertible
    notes payable issued
    in January 1997 .........     --         --        --          --       654,000       --          --          --       654,000
Shares issued on
    conversion of  notes
    payable .................     --         --   1,249,813      12,498     811,521       --          --          --       824,019
Compensation expense
    related to warrants
    issued  in  April 1997
    convertivble  debt
    offering under SFAS 123 .     --         --        --          --       64,600       --          --          --        64,600
Fair value of conversion
    discount on
    convertible notes
    payable issued
    in  April 1997 ..........     --         --        --          --       643,000       --          --          --       643,000
Compensation expense
    related to warrants
    issued  in  May 1997
    to investors under SFAS
    123 .....................     --         --        --          --        11,500       --          --          --        11,500
Fair value of conversion
    discount on convertible
    notes payable issued
     in  May 1997 ...........     --         --        --          --       274,000       --          --          --       274,000
Net loss for  year  ended
    May 31, 1997 ............     --         --        --          --        --         (7,006,479)    --          --    (7,006,479)
                              --------    ------- ---------      ------     -------  -------------   ------      ------   ---------
   Balance, May 31, 1997 ....     --    $    --   6,873,296     $68,733  $11,759,665  $(10,704,933)  $ --       $  --   $ 1,123,465
                              ========    ======  =========     =======  ===========  ============   ======     ======= ===========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                                                             F-5






                           GREENMAN TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>


                                                                                                      YEARS ENDED  MAY 31, 
                                                                                                      --------------------- 
                                                                                               1995          1996            1997  
                                                                                               ----          ----            ----  

<S>                                                                                      <C>            <C>            <C>
Cash flows from operating activities:
    Net loss ..........................................................................   $(1,092,006)   $(1,578,321)   $(7,006,479)
    Adjustments to reconcile net loss to net cash used for operating activities:
        Impairment loss ...............................................................          --             --        1,000,000
        Amortization of deferred financing costs ......................................          --             --        1,685,201
        Allowance for uncollectible note receivable ...................................          --             --          150,000
        Depreciation and amortization .................................................       136,617        331,920        555,300
        Common stock warrants and options issued for services .........................          --             --          646,203
        Loss on disposal of property and equipment ....................................         3,557           --             --
        Issuance of common stock for services .........................................        46,045           --             --
        (Increase) decrease in assets:
           Accounts receivable ........................................................      (136,729)       (26,363)        54,611
           Inventory ..................................................................       (58,306)      (198,033)       (28,409)
           Loan receivable, related party .............................................          --         (500,000)       500,000
           Other current assets .......................................................       (60,710)      (161,747)        38,452
           Deferred offering costs ....................................................      (365,028)      (391,595)          --
        Increase (decrease) in liabilities:
           Accounts payable ...........................................................       220,192        (12,784)        96,861
           Accrued expenses ...........................................................       842,195       (151,911)       590,364
                                                                                          -----------    -----------    -----------
               Net cash used for operating activities .................................      (464,173)    (2,688,834)    (1,717,896)
                                                                                          -----------    -----------    -----------
Cash flows from investing activities:

   
    Acquisition deposit ...............................................................          --             --         (650,000)
    Increase in notes receivable ......................................................       (39,000)      (207,094)          --
    Purchase of property and equipment ................................................       (36,880)    (1,081,862)      (637,944)
    (Increase) decrease in equipment deposits .........................................          --       (1,883,400)        20,689
    Acquisition of  DuraWear, net of cash acquired ....................................          --         (370,027)          --
    (Increase)decrease in other assets ................................................           250       (163,147)        (6,264)
                                                                                          -----------    -----------    -----------
               Net cash used for investing activities .................................       (75,630)    (3,705,530)    (1,273,519)
                                                                                          -----------    -----------    -----------
Cash flows from financing activities:
    Net proceeds from convertible notes payable .......................................          --             --        2,557,019
    Proceeds from notes payable .......................................................       390,054         33,932         46,550
    Repayment of notes payable ........................................................       (39,537)    (1,176,453)      (149,259)
    Proceeds from notes payable, related parties ......................................          --        1,825,000        860,000
    Repayment of notes payable, related parties .......................................          --           (4,233)      (893,950)
    Principal payments on obligations under capital leases ............................      (279,921)      (233,048)      (184,720)
    Net proceeds on sale of preferred stock ...........................................       454,499        600,000           --
    Payments received on stock subscriptions ..........................................       112,683           --             --
    Common stock purchased and retired ................................................       (55,884)       (11,000)          --
    Net proceeds on exercise of common stock options ..................................          --           14,200            336
    Net proceeds from the sale of common stock ........................................          --             --          706,460
    Net proceeds from initial public offering .........................................          --        5,389,360           --
                                                                                          -----------    -----------    -----------
      Net cash provided by financing activities .......................................       581,894      6,437,758      2,942,436
                                                                                          -----------    -----------    -----------
Net increase (decrease) in cash .......................................................        42,091         43,394        (48,979)
Cash and cash equivalents at beginning of year ........................................        67,687        109,778        153,172
                                                                                          -----------    -----------    -----------
    
Cash and cash equivalents at end of year ..............................................   $   109,778    $   153,172    $   104,193
                                                                                          ===========    ===========    ===========

Supplemental cash flow information:
    Machinery and equipment acquired under capital leases .............................   $      --      $   453,643    $   993,062
    Common stock issued on conversion of accrued expenses .............................       144,500        500,000          --
    Class A preferred stock issued on conversion of accrued expenses ..................        22,500          --             --
    Common stock issued on conversion of notes payable ................................        40,000         35,000        825,000
    Cancellation of notes receivable, common stock ....................................        87,317          --             --
    Common stock issued for non-competition agreement .................................          --          350,000          --
    Common stock issued upon conversion of preferred stock ............................          --        1,100,000          --
    Value of conversion discounts and warrants issued in connection with convertible
        notes payable .................................................................          --            --         2,417,100
    Interest paid .....................................................................       145,470        314,973        232,987

</TABLE>

                                   (CONTINUED)
          See accompanying notes to consolidated financial statements.
 

                                                                             F-6


                           GREENMAN TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                   (CONCLUDED)



SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES

        On October 10,  1995,  Company  purchased  all of the  capital  stock of
DuraWear Corporation as follows:

Fair value of assets  acquired                       $  1,704,603     
Fair value of  liabilities assumed                      1,428,081
                                                        ---------
Fair value of net assets acquired                         276,522 
Common stock issued                                     (375,000)
Cash paid                                               (400,000)
                                                        -------- 
Excess of cost over fair value of net assets         $   498,478
                                                     ===========
                                             






          See accompanying notes to consolidated financial statements.


                                                                             F-7





                           GREENMAN TECHNOLOGIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

        The Company  develops,  manufactures  and markets  custom molded plastic
parts. The Company is also developing low-cost sources of crumb rubber recovered
from  discarded  automobile  and truck  tires and the  consumer  products  to be
manufactured from these recycled materials.

        On October 10, 1995, the Company acquired all of the outstanding  common
stock of DuraWear Corporation ("DuraWear").  DuraWear manufactures, installs and
markets a diverse range of high quality ceramic,  polymer  composite,  and alloy
steel materials  engineered to resist severe  abrasive and corrosive  conditions
typically encountered in bulk material handling systems. (See Note 2).

Basis of Presentation


        The consolidated financial statements include the results of the Company
and its wholly-owned subsidiary, DuraWear. All significant intercompany accounts
and transactions are eliminated in consolidation.


Management Estimates


        The  preparation  of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  amounts  of  revenues  and  expenses  recorded  during  the
reporting  period.  Actual  results  could  differ  from those  estimates.  Such
estimates relate primarily to the estimated lives of property and equipment, the
value  of  goodwill  and  other  intangible  assets  and  the  value  of  equity
instruments  issued.  The amount that the Company may  ultimately  realize  from
equipment  deposits and notes receivable could differ  materially from the value
of these investments recorded in the accompanying financial statements as of May
31, 1997.


Cash Equivalents

        Cash equivalents include short-term investments with original maturities
of three months or less.

Inventory

        Inventory  is  valued  at the  lower  of cost or  market  on a  first-in
first-out (FIFO) method.

Property and Equipment


        Property and equipment are stated at cost. Depreciation and amortization
expense is provided on the straight-line  method.  Depreciation and amortization
expense for the years ended May 31, 1995,  1996 and 1997 was $136,617,  $220,053
and $380,454 respectively. A summary of the estimated useful lives follows:


          Buildings...................................          25 years
          Machinery and equipment.....................        5-15 years
          Furniture and fixtures......................        3-10 years
          Motor vehicles..............................           5 years
          Leasehold improvements......................       10-20 years

        Expenditures for maintenance,  repairs and minor renewals are charged to
expense  as  incurred.   Significant   improvements   and  major   renewals  are
capitalized.

Deferred Financing Costs


        Deferred  financing  costs  represent  costs incurred in connection with
raising  capital through the issuance of convertible  debentures.  The amount is
amortized to expense over the estimated life of the debenture.



                                                                             F-8




                           GREENMAN TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)


Deferred Offering Costs

        Deferred  offering costs  represent  costs  incurred in connection  with
raising capital. Upon completion of an offering, the amount of proceeds credited
to additional paid-in capital is reduced by the deferred offering costs.

Revenue Recognition

        Revenues  from  product  sales  are  recognized  when the  products  are
shipped.


Income Taxes

   
        Deferred  tax  assets  and   liabilities   are  recorded  for  temporary
differences  between  the  financial  statement  and tax  basis  of  assets  and
liabilities  using the  currently  enacted  income tax rates  expected  to be in
effect when the taxes are actually  paid or  recovered.  A deferred tax asset is
also recorded for net operating loss and tax credit  carryforwards to the extent
their  realization  is more likely than not.  The  deferred  tax expense for the
period  represents  the change in the deferred  tax asset or liability  from the
beginning to the end of the period.
    

Stock-Based Compensation


   
        In October  1995,  the Financial  Accounting  Standards  Board  ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation". This statement encourages all entities to adopt a
fair value based method of accounting  for employee  stock  compensation  plans,
whereby  compensation  cost is  measured at the grant date based on the value of
the award and is  recognized  over the  service  period,  which is  usually  the
vesting  period.  However,  it also  allows  an entity to  continue  to  measure
compensation  cost of those plans  using the  intrinsic  value  based  method of
accounting  prescribed by Accounting  Principles  Board ("APB")  Opinion No. 25,
"Accounting  for Stock Issued to Employees",  whereby  compensation  cost is the
excess,  if any, of the quoted  market  price of the stock at the grant date (or
other  measurement  date) over the amount an  employee  must pay to acquire  the
stock.  Stock options  issued under the Company's  stock option plans  generally
have no  intrinsic  value at the grant  date,  and under APB  Opinion No. 25, no
compensation cost is recognized for them. The Company has elected to continue to
apply the  accounting  in APB  Opinion  No. 25 and,  as a result , must make pro
forma disclosures of net income and earnings per share and other disclosures, as
if the fair,  value-based method of accounting had been applied.  The disclosure
requirements  of this  statement are  effective  for the Company's  consolidated
financial  statements for the year ended May 31, 1997. The pro forma disclosures
include the effects of all awards granted after May 31, 1995. (See Note 14).
    

Net Loss Per Share

        Net loss per  share is based on the  weighted  average  number of common
shares outstanding during the period.

        A staff  accounting  bulletin  issued  by the  Securities  and  Exchange
Commission requires that common stock,  options,  warrants and other potentially
dilutive  instruments  issued  within one year prior to the initial  filing of a
registration  statement for an initial public offering be treated as outstanding
for all periods prior to the effective date of the  registration for purposes of
the net loss per share computation.

New Accounting Pronouncements

        The FASB  issued SFAS No. 128,  "Earnings  per Share" in February  1997.
SFAS   No.   128   establishes    standards   for   computing   and   presenting
earnings-per-share, and is effective for financial statements issued for periods
ending after December 15, 1997, earlier  application is not permitted . SFAS No.
128  requires  the  restatement  of all  prior  period  earnings-per-share  data
presented.



                                                                             F-9



                           GREENMAN TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

   
        In June 1997,  the FASB issued SFAS No.  130,  "Reporting  Comprehensive
Income". SFAS No. 130 is effective for fiscal years beginning after December 15,
1997. Accounting  principles generally require all recognized revenue, expenses,
gains  and  losses to be  included  in  net  income.  Various  FASB  statements,
however,  require  companies to report certain changes in assets and liabilities
as a separate  component  of the equity  section  of the  balance sheet, such as
unrealized gains and losses on available for sale  securities,  foreign currency
items and  minimum  pension  liability  adjustments.  These items along with net
income, are components of comprehensive income.

        It is required under SFAS No. 130 that all items of comprehensive income
are to be reported in a "financial  statement"  that is displayed  with the same
prominence as other financial  statements.  Additionally,  SFAS No. 130 requires
the  classification  of items  comprising  other  comprehensive  income by their
nature,  and  the  accumulated  balance of other  comprehensive  income  must be
displayed  separately  from retained  earnings and additional paid in capital in
the  equity  section  of the  balance  sheet.  Management  will  adopt  this new
disclosure requirement beginning in the fiscal year ending May 31, 1999.

        Also in June 1997,  the FASB  issued  SFAS No. 131,  "Disclosures  about
Segments of an Enterprise  and Related  Information".  SFAS No. 131 is effective
for financial statements for periods beginning after December 15, 1997. SFAS No.
131 establishes  standards for the way that public companies report  information
about operating segments in annual financial statements and selected information
about operating segments in interim financial reports issued to shareholders. It
also establishes  standards for related disclosures about products and services,
geographic  areas and  major  customers.  Generally,  financial  information  is
required to be reported on the basis that it is used  internally  for evaluating
segment performance and deciding how to allocate resources to segments.
    

        SFAS No. 131 also requires companies to report information about the way
that the operating  segments were determined,  the product and services provided
by  the  operating  segments,  differences  between  the  measurements  used  in
reporting  segment  information  and those used by the  Company  in its  general
purpose financial statements,  and changes in the measurement of segment amounts
from  period to  period.  Management  has not yet  determined  the  impact  that
adoption of SFAS No. 131 will have on its financial statement presentation.


2.      ACQUISITION OF SUBSIDIARY

   
        On October 10, 1995, the Company acquired all of the outstanding  common
stock of DuraWear Corporation.  The purchase price consisted of $400,000 in cash
from the proceeds of the Company's  initial  public  offering ("IPO") and 75,000
shares of the  Company's  common  stock,  valued in the aggregate at $375,000 or
$5.00 per share.  The  acquisition  has been  accounted  for as a  purchase  and
accordingly,  the  results  of  operations  of  DuraWear  are  included  in  the
consolidated  financial  statements since the date of acquisition.  Goodwill was
recorded as the total  consideration paid by the Company exceeded the fair value
of the net assets of  DuraWear  by  approximately  $498,000.  Goodwill  is being
amortized over 10 years on a straight line basis.  Amortization  expense for the
years ended May 31, 1996 and 1997 was $33,232 and $49,848, respectively.
    




                                                                            F-10



                           GREENMAN TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)



2.      ACQUISITION OF SUBSIDIARY - (CONTINUED)

   
        In  connection  with the  acquisition,  the Company  also entered into a
three-year  non-competition  agreement  with  the  former  sole  stockholder  of
DuraWear,  under which the Company issued 70,000 shares of the Company's  common
stock  valued in the  aggregate  at $350,000  or $5.00 per share.  The amount is
being  amortized  over the  term of the  agreement  on a  straight  line  basis.
Amortization  expense  for the years ended May 31, 1996 and 1997 was $77,778 and
$116,667,  respectively. The Company  also  entered  into a one-year  consulting
agreement  with the former sole  stockholder  of DuraWear in  consideration  for
which the Company has paid a total of $20,000.
    


        The following  unaudited proforma financial  information  summarizes the
consolidated  results  of  operations  of the  Company  and  DuraWear  as if the
acquisition  had occurred at the  beginning of the year ended May 31, 1995.  The
unaudited  proforma  information  is not  necessarily  indicative  either of the
results of operations that would have occurred had the purchase been made at the
beginning of the fiscal year or of future  results of operations of the combined
companies.


                                                      Years Ended
                                             ----------------------------
                                           May 31, 1995         May 31, 1996
                                           ------------         ------------
Revenue                                     $ 3,869,984          $ 5,068,247
Net loss                                     (1,221,333)          (1,774,410)
Net loss per weighted average share         $      (.30)         $      (.38)


3.      NEED FOR ADDITIONAL CAPITAL


   
        The  Company  has  incurred  losses  since  its  inception   aggregating
$10,704,933, and has a working capital deficiency of $3,016,098 at May 31, 1997.
The working capital deficit  includes  $1,200,000 of convertible  debentures and
approximately  $434,000  relating to the  reclassification  of certain long term
capital  lease  obligations  to current as several  leases are in  default.  The
Company is currently  working with the lessor to bring its  obligations  current
and has not  received any written or verbal  notice of the lessor's intention to
enforce the default  provisons.  These conditions raise  substantial doubt about
the Company's  ability to continue as a going concern.  The Company's  continued
existence is dependent on its ability to achieve profitable operations and raise
additional  financing.  Management plans to resolve the doubt by raising capital
through additional equity financing. The Company is currently evaluating several
equity financing  alternatives that may provide  sufficient capital resources to
sustain operations. As a result, management believes that no further adjustments
or  reclassifications  of recorded  assets and  liabilities is necessary at this
time.
    


4.      INVENTORY

Inventory consists of the following at May 31:
                                                      1996              1997
                                                  --------------     ---------

Raw materials...............................       $   181,157        $ 164,589
Work in process.............................             5,847           15,670
Finished goods..............................           338,275          373,429
                                                   -----------        ---------
                                                   $   525,279        $ 553,688
                                                   ===========        =========

5.      LOAN RECEIVABLE, RELATED PARTY


        In  January  1996,   the  Company  made  a  $500,000   advance  under  a
non-interest  bearing  loan  agreement  to a company  owned by one of its former
directors.  On June 26,  1996,  this  advance was returned to the Company in its
entirety.




                                                                            F-11


                           GREENMAN TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)




6.      EQUIPMENT DEPOSITS

   
        In October  1995,  the  Company  placed a purchase  order for  cryogenic
recycling  equipment  and placed a 50% or $700,000  deposit  with the  equipment
manufacturer for the first cryogenic  recycling  equipment line. From March 1996
to May 1996,  the first  cryogenic  recycling  equipment  line was delivered and
installed and the Company paid an additional  $1,100,000 towards the purchase of
the first line and additional cryogenic recycling equipment lines.
    


        During the first half of fiscal 1997, the company refined the production
process of the  cryogenic  recycling  equipment  and  evaluated  the  production
capabilities  of the facility.  Based upon the cryogenic  recycling  equipment's
capacity  to  produce  ultra-fine  mesh crumb  rubber,  the  Company  decided to
redeploy  the  equipment  into a  joint  venture  with  the  original  equipment
manufacturer.

   
        As a result of the  Company's  decision to refocus its  resources on the
opportunities  for  "high-value-added"  crumb  rubber,  the  limitations  of the
Company's   existing  cryogenic   recycling   equipment  to  produce  sufficient
quantities of fine mesh crumb rubber,  the risks associated with a startup joint
venture,  and the Company's minority interest in the joint venture,  the Company
wrote down the  carrying  value of the  equipment to the  equipment's  estimated
liquidation  value.  Accordingly,  the Company recorded a $1,000,000  impairment
loss in fiscal 1997 against the  Company's  deposit on the  cryogenic  recycling
equipment  pursuant to SFAS No. 121 "Accounting for the Impairment of Long-Lived
Assets  and for  Long-Lived  Assets to be  Disposed  Of".  This  write-down  was
made at May 31, 1997 even though the Company  subsequently  contributed  the
equipment  as its capital  contribution  to a joint  venture  with the  original
equipment  manufacturer.  The  manufacturer  has  agreed to  contribute  certain
facilities,  equipment,  customer  contracts,  licenses  and permits and provide
operational and technical expertise to the joint venture. The original equipment
manufacturer has also agreed to refund $300,000 of the equipment deposits during
the fiscal year ending May 31, 1998.
    


        The  Company  also has  $62,711 on deposit  towards  the  purchase  of a
material handling system which has a total cost of $72,711.

7.      NOTE RECEIVABLE


   
        In May 1996,  the  Company  loaned  $150,000 to Air  Fenders,  LTD ("Air
Fenders")  in the form of a three-year  loan bearing  interest at prime (8.5% at
May 31, 1997). Based upon a significant delay in Air Fenders securing sufficient
capital and customer orders and the costs associated with Air Fender's  decision
to transition from in-house  manufacturing  capabilities  to utilizing  contract
molding vendors, the Company has provided a $150,000 allowance for the potential
future uncollectibility of the Air Fenders loan.
    


8.      LICENSING FEE


   
        In April 1996, the Company signed a perpetual  license  agreement with a
privately-held  R&D company  under which it acquired  the  exclusive  world-wide
rights and license to use a  proprietary  additive  technology  for  co-mingling
(mixing or  blending)  of  dissimilar  plastics  and rubber.  The Company paid a
one-time,  $100,000  licensing fee at signing of the agreement and no additional
fees are due for the manufacture of the Company's own products.  The Company may
be required to pay a 3% royalty fee on the sale of blended material for use as a
raw  material.  The Company is  amortizing  the  license  fee over an  estimated
ten-year useful life of the technology.  Amortization expense for the year ended
May 31, 1997 was $8,333.
    


9.    NOTES PAYABLE


 Bridge Financing

   
        The  Company  borrowed  $233,000  during  the period  September  1992 to
December 1992 from Budra Management Corp. ("Budra"). The unsecured notes payable
required interest at a stated annual rate of 10% with principal and interest due
on the closing of the Company's IPO and in addition granted Budra 100,000 shares
of common  stock on the closing of the IPO. The 100,000  shares  issued upon the
closing of the IPO were valued in the  aggregate at $500,000 or $5.00 per share,
which was the IPO price of the  common  stock.  Interest  expense  for the years
ended May 31, 1995 and 1996 amounted to $295,445 and $94,419 respectively.
    


                                                                            F-12




                           GREENMAN TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


9.      NOTES PAYABLE - (CONTINUED)

        The Company borrowed  $875,000 in two  transactions  through a placement
agent (the  "Placement  Agent") during the period  November 1993 to October 1994
from certain  investors.  These unsecured notes payable bear interest at 10% per
annum with  principal and interest due on the closing of the  Company's  IPO. In
addition,  on completion of the IPO, $35,000 of the notes payable were converted
into 259,000  shares of common stock.  Interest  expense for the years ended May
31, 1995 and 1996  amounted to $76,960 and $31,644  respectively.  In connection
with these notes,  the Company paid fees to the Placement  Agent of $112,250 and
legal fees of $35,000.

Convertible Notes Payable

   
        In January  1997,  the  Company  concluded a  $1,525,000  offering of 7%
convertible  subordinated debentures  ("Debentures") and immediately exercisable
one year  warrants  to purchase  762,500  shares of common  stock (the  "January
Offering")  at an  exercise  price  of  $1.25  per  share.  The  Debentures  are
convertible  after a sixty day holding  period into shares of common  stock at a
conversion  price equal to the lower of the closing bid price on the date of the
January  Offering  closing or 70% of the  closing bid price on the date prior to
the conversion of such  Debentures.  The Debentures  automatically  convert into
shares of common  stock  one year  after  issuance.  The net  proceeds  from the
January Offering were approximately  $1,310,000 after deducting  commissions and
expenses of approximately  $214,000.  The Company has recorded a deferred charge
of  approximately  $654,000  associated  with the 30% discount from market to be
realized  upon  conversion  of the  Debentures.  The Company  recorded  non-cash
deferred  financing  costs of $75,000 in  connection  with the  issuance  of the
warrants to purchase 762,500 shares. The Company also recorded non-cash deferred
financing  costs of  $695,000  in  connection  with the  issuance of warrants to
purchase  1,050,000 shares of common stock to the placement agents in accordance
with SFAS No. 123. These warrants are immediately  exercisable at prices ranging
from $.05 to $1.25 per share with 600,000 warrants expiring in December 1999 and
450,000  warrants  expiring  in January  1998.  The  deferred  charges are being
amortized to expense over the estimated life of the Debentures. Amortization and
interest  expense  on the  Debentures  for  the  year  ended  May 31,  1997  was
$1,396,953.

        As of May 31, 1997,  $825,000 of the  Debentures  had been converted for
1,249,813  shares of the  Company's  common  stock.  During  the  period of June
through July 1997, the remaining  $700,000 of the Debentures  were converted for
1,243,384 shares of the Company's common stock.  These shares were registered on
Form S-3 which was declared effective in March 1997.

        In  April  1997,  the  Company   concluded  a  $1,500,000   offering  of
convertible   notes  (the  "Notes")  due  eighteen   months  after  closing  and
immediately  exercisable two year warrants to purchase  300,000 shares of common
stock (the "April  Offering") at exercise prices ranging from $.97 to $1.05. The
Notes are  convertible  after a sixty day  holding  period into shares of common
stock at a  conversion  price  equal to the lower of the  closing of the average
closing  bid prices on the five  trading  days  preceding  the date of the April
Offering  or 70% of the  average  closing  bid prices on the five  trading  days
preceding  the date of the  conversion  of such  Notes.  The Note  holders  will
receive  4,000 shares of the Company's  common stock upon  conversion in lieu of
interest for each $100,000  invested.  The net proceeds from the April  Offering
were  approximately  $1,247,000  after  deducting  commissions  and  expenses of
approximately $253,000. The Company also issued immediately exercisable two year
warrants to purchase 154,839 shares of common stock at an exercise price of $.97
per share to the placement agents. The Company has recorded a deferred charge of
approximately  $643,000  associated  with the 30%  discount  from  market  to be
realized upon conversion.  The Company also recorded non-cash deferred financing
costs of $64,600 in connection with the issuance of warrants to purchase 454,839
shares of common stock to the investors and placement  agents in accordance with
SFAS No. 123.  These  deferred  charges are being  amortized to expense over the
estimated  life of the Notes.  As of May 31, 1997, no Notes had been  converted.
Amortization  expense and  interest  expense on the Notes for the year ended May
31, 1997 was $323,742.  Pursuant to the terms of the Notes,  the Company filed a
Registration  Statement on Form S-3 in May 1997 to register the shares of common
stock issuable upon  conversion of the Notes,  the shares issuable in payment of
interest  on the Notes and shares  issuable  upon  exercise  of the  warrants to
purchase  454,839  shares  of  common  stock.  If the Form  S-3 is not  declared
effective by the  Securities and Exchange  Commission  ("SEC") within sixty days
after the April  Offering  closing the Company is required to pay the  investors
 .25% of their  principal  investment  per month as a penalty  for each  month or
portion thereof prior to the date the Form S-3 is declared  effective.  The Form
S-3 has not yet been declared effective by the SEC.
    



                                                                            F-13


                           GREENMAN TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


 10.   RELATED PARTY DEBT AGREEMENTS

Convertible Notes Payable, Related Parties

   
        During the period from February  1996 to June 1996 the Company  borrowed
$1,700,000 in aggregate from a company that owns a subsidiary  whose Chairman is
also a director of the Company.  These notes  payable  bear  interest at 10% per
annum with  principal and interest due at the earlier of: (1) the tenth business
day  following  the  consummation  by the  Company  of a minimum  $3,000,000  of
additional financing; or (2) $500,000 on September 30, 1996, $700,000 on January
1, 1997 and $500,000 on June 1, 1997,  respectively.  In  addition,  the Company
granted  warrants to purchase 200,000 shares of the Company's common stock at an
exercise price of $3.88 per share and warrants to purchase 100,000 shares of the
Company's  common  stock at an exercise  price of $4.00 per share.  In September
1996,  the Company  repaid  $500,000 of the  amounts  owed the lender.  Interest
expense  for the years ended May 31,  1996 and 1997 were  $32,050 and  $135,890,
respectively.
    

        On December 30, 1996, the Company  renegotiated the remaining  principal
balance  of  $1,200,000  due  under  these 10% notes  payable.  The  outstanding
principal  balance was exchanged for a 10% secured  convertible note payable due
July 1, 1997 and  convertible  into the Company's  common stock, at the holder's
option,  at a  conversion  price of $1.00 per  share.  The Note is secured by an
interest in the Company's cryogenic tire recycling  equipment.  The Company also
reduced the exercise price of the 300,000  warrants granted in 1996 to $1.13 per
share. The Company recorded a non cash expense of $36,000 in connection with the
reduction in exercise price in accordance with SFAS No. 123.

   
        On June 30, 1997,  the Company  received a 90 day  extension of the note
and a waiver allowing it to contribute  its  cryogenic tire recycling  equipment
into  the  joint  venture  (See  Note  6) in  return  for  granting  the  holder
registration  rights for the shares of common stock underlying the note, accrued
interest and the 300,000 warrants granted in 1996.

Convertible Notes Payable, Related Parties, Non-current
    

        In May 1996,  the  Company  borrowed  $325,000  from an  officer  of the
Company. This unsecured note payable bears interest at prime plus 1.5% per annum
with  principal  and  interest  due on the earlier of 120 days after the date of
issuance or the tenth  business  day  following  the  consummation  of a minimum
$3,000,000 of additional  financing by the Company.  From  September 1996 to May
1997 the Company  borrowed an additional  $624,300 from this officer and another
officer of the  Company.  During  January  1997 and May 1997 the Company  repaid
$345,000 to these officers.

   
        On May 30, 1997, the Company refinanced the remaining  principal balance
and accrued interest plus accrued  business  expenses owed to these officers and
issued the officers 10% convertible notes, due October 30, 1998 in the aggregate
principal  amount of $640,000 and warrants to purchase  128,000 shares of common
stock at an exercise price of $.88 per share.  The notes are  convertible  after
120 days into shares of common stock at a conversion price equal to the lower of
the average closing bid price on the five trading days preceding May 30, 1997 or
70% of the average closing bid price on the five trading days preceding the date
of the conversion of such notes.  The Company has recorded a deferred  charge of
approximately  $274,000  associated  with the 30%  discount  from  market  to be
realized upon conversion.  The Company also recorded non-cash deferred financing
costs of $11,500 in  connection  with the  issuance of the  warrants to purchase
128,000  shares of common stock in accordance  with SFAS No. 123. These deferred
charges are being  amortized  to expense over the  estimated  life of the notes.
Interest  expense  for the years  ended  May 31,  1996 and 1997 was  $1,600  and
$54,304, respectively.
    

        During June and July 1997, the Company  borrowed an additional  $386,000
from four  officers  of the  Company  under  similar  terms to the May 30,  1997
convertible  notes and issued warrants to purchase 77,200 shares of common stock
at exercise prices ranging from $.72 to $.97 per share. The Company recognized a
deferred charge of approximately  $166,000 associated with the 30% discount from
market to be realized upon conversion and $7,800 of non-cash deferred  financing
costs in connection  with the issuance of the warrants to purchase 77,200 shares
of common stock to the officers in accordance with SFAS No. 123.



                                                                            F-14



                           GREENMAN TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


10.     RELATED PARTY DEBT AGREEMENTS - (CONTINUED)

Notes Payable, Related Parties


        Pursuant to the terms of the  DuraWear  stock  purchase  agreement,  the
Company  succeeded to the obligations of DuraWear relating to the repayment of a
promissory  note payable to  DuraWear's  former sole  stockholder  who is also a
stockholder  of the  Company.  The  note is to be  repaid  in 36  equal  monthly
installments of principal plus accrued interest at prime plus 1.5% (10.0% at May
31, 1997), adjusted annually.


         At May 31,  1996 and  1997,  the note had a  balance  of  $132,150  and
$83,200, respectively. The maturities of the note during the years ended May 31,
1998 and 1999 amount to $58,829 and $24,371, respectively.  Interest expense for
the years ended May 31, 1996 and 1997 was $8,777 and $11,012 respectively.


11.     NOTES PAYABLE, BANK
<TABLE>
<CAPTION>

        Notes payable, bank consists of the following:                                    May 31,      May 31,
                                                                                           1996         1997  
                                                                                          ------       ------
<S>                                                                                  <C>           <C>
        Term note payable, secured by a mortgage on real estate and a lien on
            substantially all other assets of DuraWear, guaranteed by the Company,
            due in  monthly installments of  $5,098 including interest at prime plus
            1%  (9.5% at  May 31, 1997) and a final installment of the remaining
            unpaid principal balance due July 2000                                     $ 468,412     $ 450,654


        $700,000 SBA note payable,  due March 1997,  secured by a second lien on
         substantially all assets of DuraWear, guaranteed by the Company, due in
         monthly installments of $12,171 including interest at prime plus 1%             110,731            --

        Term notes payable, secured by equipment and requiring monthly
           installments                                                                   36,154        61,934
                                                                                       ---------     ---------
                                                                                         615,297       512,588
        Less current portion of notes payable,banks                                     (140,289)      (37,910)
                                                                                        --------       ------- 
                      Notes payable, banks, non-current portion                       $  475,008    $  474,678
                                                                                      ==========    ==========
</TABLE>

         The following is a summary of maturities of notes payable,  bank at May
31, 1997:

          YEARS ENDING
             MAY 31,
             1998...........................................   $  37,910
             1999...........................................      41,772
             2000...........................................      36,586
             2001...........................................     396,320
                                                               ---------
                                                               $ 512,588
                                                               =========

        Interest  expense  for the years ended May 31,  1995,  1996 and 1997 was
$1,033, $40,416 and $56,195, respectively.




                                                                            F-15










                           GREENMAN TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)



12.     CAPITAL LEASES


        The Company leases machinery and equipment with a cost of $1,705,234 and
$2,698,336   under  capital   lease   agreements  at  May  31,  1996  and  1997,
respectively. Accumulated amortization amounted to $414,232 and $615,504, at May
31, 1996 and 1997,  respectively.  Amortization  expense on assets under capital
leases for the years ended May 31, 1995,  1996 and 1997 was  $123,288,  $143,048
and $201,272 respectively.

   
        At May 31,  1997,  the  Company  was five  months  past  due on  several
injection molding equipment leases and pursuant to the terms of the leases is in
default.  Past due  principal  payments  at May 31, 1997  amounted to  $138,740.
Accordingly,  the lessor has the right to demand the  payment of all amounts due
under the past due lease  agreements.  The Company is currently working with the
lessor to pay the past due  amounts  and has not  received  notification  of the
lessor's intent to exercise any of the default remedies  available.  As a result
of the default,  the Company has  classified all payments due under the affected
leases as current liabilities at May 31, 1997.
    


        The following is a schedule of the future  minimum lease  payments under
the capital leases together with the present value of net minimum lease payments
at May 31, 1997:

<TABLE>
<CAPTION>
            YEARS ENDING
               MAY 31,
               -------

<S>                                                                                <C>          
               1998.............................................................    $   1,235,961
               1999.............................................................          290,983
               2000.............................................................          263,311
               2001.............................................................          254,832
               2002.............................................................          266,164
                                                                                   --------------
             Total minimum lease payments.......................................        2,311,251
             Less amount representing interest..................................        (371,287)
                                                                                     ------------

                             Present value of minimum lease payments                  $ 1,939,964
                                                                                      ===========
</TABLE>


        Interest  expense  for the years ended May 31,  1995,  1996 and 1997 was
$73,246,   $79,873  and  $99,103  respectively.   The  Company's  President  has
personally  guaranteed  the payments due under capital  leases for assets with a
cost of $1,234,777.

13.     COMMITMENTS AND CONTINGENCIES

Crumb Rubber Recycling Facility


        On December  14,  1995,  the  Company  entered  into a  five-year  lease
agreement with BFI Tire Recyclers of Georgia,  Inc.  ("BTG") whereby the Company
leased for $1 per year,  approximately  15,000 square feet of land.  The Company
has built a tire recycling  facility on the leased land at a cost of $902,000 as
of May 31, 1997. The Company is responsible for all  improvements  and operating
costs relating to the leased premises. This agreement was terminated as a result
of the Company's acquisition of BTG. (See Note 20).


Shredded Tire Supply Agreement


   
        On December 14, 1995,  the Company also entered into a five-year  supply
agreement  with  BTG  whereby  the  Company  was  obligated  to  accept,   on  a
"take-or-pay"  basis, a minimum of  approximately  32,000 tons of shredded waste
tire  material per year  starting  October 1, 1996 at a base price of $37.50 per
ton. Due to the delay in crumb rubber  production at the Company's  Georgia tire
recycling  facility,  BTG agreed to:  (1)  reduce  the  Company's  "take or pay"
obligation  to 7,050  tons of tire  material  for the period of March 1, 1996 to
September  30,  1996;  and (2) reduce the per ton charge by 50% from  October 1,
1996 through June 30, 1997.  The Company is obligated to pay for the higher of :
(1) the  number of tons of crumb  rubber  produced  at the  Company's  recycling
facility;  or (2) 75% of the amount of material  accepted,  as  determined  on a
monthly  basis.  This  agreement  was  terminated  as a result of the  Company's
acquisition of BTG. (See Note 20).
    




                                                                            F-16





                           GREENMAN TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

13.     COMMITMENTS AND CONTINGENCIES - (CONTINUED)


Product Development Agreement

        In July 1994,  the Company  entered into an agreement  with an unrelated
corporation  to jointly  test,  research and develop a product.  During the year
ended May 31, 1995,  research and development  expense related to this agreement
amounted to $180,000.  The Company has  terminated  the  agreement  and made the
final payment of $110,000 in January 1996.


Employment Agreements

        On September 29, 1995, the Company  entered into  three-year  employment
agreements   with  its  Chairman,   President  and  Chief   Financial   Officer,
respectively.  Any  increases or bonuses will be made at the  discretion  of the
Board of Directors upon the recommendation of the Compensation Committee.

   
        In December  1996,  the Company  entered  into a  three-year  employment
agreement with its President of Recycling  Operations at $125,000 per annum. Any
increases  or bonuses will be made at the  discretion  of the Board of Directors
upon the  recommendation of the Compensation  Committee.  The agreement provides
for the payment of twelve months salary as a severance  payment for  termination
without cause.
    

Rental Agreements

   
        On September 30, 1994,  the Company  extended its lease for its Arkansas
manufacturing  and office  space to May 31, 1997 at a monthly  rental of $5,325.
Rent  expense was  approximately  $64,000 for each the years ended May 31, 1995,
1996 and 1997,  respectively.  The lease expired on May 31, 1997 and the Company
is in the process of re-negotiating the lease and is currently a tenant-at-will.
    

        In  October  1995,  the  Company  entered  into a three  year  lease for
approximately  2,700 square feet of corporate  administrative  office space at a
monthly  rental of $3,238.  Rent  expense  was $16,190 and $38,856 for the years
ended May 31, 1996 and 1997, respectively.

Contingencies

        On October 27,  1994,  the Company was served with a lawsuit by a former
consultant seeking,  among other things,  additional consulting fees, as well as
royalties  relating to the  Company's  alleged  use of a  cryogenic  process for
recovering crumb rubber that the consultant alleges he developed. The Company is
contesting  the  lawsuit  vigorously.  Management  believes  that  even  if  the
consultant  were to prevail in this suit, it would not have a material effect on
the Company's financial statements or its business.

14.     STOCKHOLDERS' EQUITY

Increase in Authorized Shares of Common Stock

        On June 7, 1996, the  stockholders of the Company  approved an amendment
to the  Company's  Certificate  of  Incorporation  to  increase  the  number  of
authorized shares of Common Stock from 10,000,000 to 20,000,000.

Preferred Stock

        In April and May 1995,  the  Company  completed a private  placement  of
500,000 shares of non-voting  Class A convertible  preferred  stock at $1.00 per
share.  Each  share is  convertible  into  one  share of  common  stock  and two
redeemable  common stock purchase  warrants and has a liquidation  preference of
$1.00 per share.

        In August  1995,  the Company  concluded a private  placement of 300,000
shares of  non-voting  Class B convertible  preferred  stock at $2.00 per share.
Each  share is  convertible  into one share of common  stock and one  redeemable
common stock  purchase  warrant and has a  liquidation  preference  of $2.00 per
share.


        In  October  1995  with the  consent  of the  Company,  all  outstanding
preferred stock  including,  500,000 shares of the Company's  non-voting Class A
convertible preferred stock and 300,000 shares of the Company's non-voting Class
B convertible preferred stock were converted into an aggregate of 800,000 shares
of common stock and 1,300,000  redeemable  common stock purchase  warrants.  The
terms of the warrants are the same as the IPO warrants.  The Company  registered
the common stock and warrants  issued on conversion  of the preferred  stock and
the common stock issuable upon exercise of the warrants in its IPO.



                                                                            F-17





                           GREENMAN TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


14.     STOCKHOLDERS' EQUITY - (CONTINUED)

Common Stock Transactions

        On September 16, 1992,  the Company  issued  1,254,500  shares of common
stock to six  individuals  for a purchase  price of $.01 per  share.  At May 31,
1994, the balance due from the stockholders,  amounting to $12,545, was included
in stock  subscriptions  receivable.  In August  1994,  the  Company's  Board of
Directors  voted to forgive these stock  subscriptions  receivable  for services
rendered to the Company.


        In October 1993, the Company sold 774,000 shares of common stock to nine
investors for a total purchase price of $200,000.  The investors were affiliates
or principals of the Placement  Agent.  (See Note 9) The purchase price required
$75,000 in cash and notes receivable in the amount of $125,000. At May 31, 1994,
the $75,000 was included in stock subscriptions  receivable and was paid in cash
on June 29, 1994. The notes  receivable bear interest at 8% per annum commencing
on May 31, 1994 and both principal and accrued  interest were due on October 31,
1995. In January 1995, the Company  purchased and retired  463,167 shares of the
common stock in exchange for $55,884 in cash and the  cancellation of $87,317 of
the notes  receivable.  In April 1995, the Company received payment on the notes
receivable in the amount of $37,683. Interest income on the notes receivable for
the year ended May 31, 1995 amounted to $5,754.


   
        In April 1995,  the Company  issued  46,000  shares of common stock at a
value of $1.00 per share in consideration for employee services rendered,  legal
and consulting fees and as payment for accrued expenses. The Company also issued
132,000 shares of common stock in  satisfaction  of $132,000 in consulting  fees
due through May 31, 1995,  payable to its non-salaried  Chief Financial  Officer
and non-salaried Chief Executive Officer. (See Note 17). Also in April 1995, the
non-salaried  Chief  Executive  Officer  loaned the Company  $75,000 for working
capital  purposes and  subsequently  agreed to convert $40,000 in loan principal
into 40,000 shares of common stock.
    


        In  October  1995,  the  Company  sold in its  initial  public  offering
("IPO"),  1,265,000  shares  of common  stock at $5.00  per share and  1,265,000
redeemable  Class A common stock purchase  warrants ("the Warrants") at $.10 per
warrant  and  received  net  proceeds,   after  underwriter's   commissions  and
discounts,  of approximately  $5,390,000.  Each Warrant expires on September 28,
2000 and entitles the holder,  commencing  on September 29, 1996 to purchase one
share of common stock at a price of $5.00 per share, subject to adjustment.  The
Company  also  issued  to the  underwriter  of its IPO,  warrants  ("Underwriter
Warrants") to purchase 110,000 shares of common stock and 110,000 warrants, each
Underwriter warrant is exercisable at a price of $8.25 per share of common stock
and $.165 per Warrant for a period of four years, commencing September 29, 1996.
The Warrants issuable upon exercise of the Underwriter Warrants have an exercise
price of $8.25 per share of common stock.

        In October  1995,  the Company  completed  the  acquisition  of DuraWear
Corporation  (See Note 2). In addition,  the Company  issued  259,000  shares of
common stock upon the  conversion  of $35,000 of  convertible  notes payable and
100,000  shares of common  stock in lieu of $500,000  of  interest  payable on a
bridge financing. (See Note 9).


        On September 26, 1996,  the Company sold 545,000  shares of common stock
to three foreign  investors at $1.51 per share. Net proceeds were $706,460 after
deducting commissions and expenses of $116,490.

        As of May 31, 1997,  $825,000 of the January  Offering  debentures  were
converted for approximately 1,249,813 shares of the Company's common stock. (See
Note 10).



                                                                            F-18






                           GREENMAN TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


14.     STOCKHOLDERS' EQUITY - (CONTINUED)


Stock Option Plan

        The Board of  Directors  adopted the 1993 Stock Option Plan (the "Plan")
and the Company's  stockholders approved the Plan on June 10, 1993. The Board of
Directors  initially  reserved  410,000  shares of common  stock for issuance to
employees,  officers,  directors and consultants. On June 7, 1996, the Company's
stockholders voted to increase the number of shares authorized under the Plan to
1,000,000 shares.


        Under the Plan,  the Board of Directors will grant options and establish
the terms of the grant in  accordance  with the  provisions  of the Plan.  Stock
options under the Plan are summarized as follows:

<TABLE>
<CAPTION>

                                                                        YEARS ENDED MAY 31,    
                                                ---------------------------------------------------------------                     
                                                     1995                 1996                    1997       
                                                -----------------    -----------------        -----------------  
                                                         WEIGHTED             WEIGHTED                 WEIGHTED
                                                          AVERAGE              AVERAGE                  AVERAGE
                                                         EXERCISE             EXERCISE                 EXERCISE
                                                SHARES      PRICE    SHARES      PRICE        SHARES      PRICE
                                                ------      -----    ------      -----        ------      -----
<S>                                            <C>          <C>     <C>        <C>           <C>          <C>  
  Outstanding at beginning of year             224,000      $ .14   279,000    $   .19       377,500      $1.29
  Granted                                       60,000        .41   170,000       3.38       669,800       1.60
  Canceled                                      (5,000)       .27   (46,500)      2.65      (328,200)      2.98
  Exercised                                         --         --   (25,000)       .28        (2,400)       .14
                                              --------              -------                  -------
  Outstanding at end of year                   279,000        .19   377,500       1.29       716,700        .81    
                                               =======              =======                  =======              
  Exercisable at end of year                    58,300        .14    91,500        .16       137,500        .17
                                               =======              =======                  =======              
  Reserved for future grants at end of year    131,000              597,500                  255,900
                                               =======              =======                  =======              

Weighted average fair value of options                       N/A               $.83                   $.27
   granted during the period

</TABLE>


        Information  pertaining to options outstanding under the Plan at May 31,
1997 is as follows:

<TABLE>
<CAPTION>

                                                   Options Outstanding                     Options Exercisable
                                                   -------------------                     -------------------
                                                         Weighted
                                                         Average            Weighted                      Weighted
                                                         Remaining          Average                        Average
    Exercise                                Number       Contractual        Exercise      Number          Exercise
     Prices                                Outstanding      Life              Price     Exercisable         Price  
     ------                                -----------      ----              -----     -----------         -----  
<S>                                      <C>             <C>             <C>           <C>               <C>  
   
     $ .09                                  166,200         4.0             $   .09       99,000            $ .09
     $ .27 - $.29                            64,000         7.0                 .28       34,000              .28
     $ 1.00                                   7,500         7.6                1.00        4,500             1.00
     $ 1.13                                 479,000         9.6                1.13           --               --
                                            -------                                      -------               
                                            716,700         8.0                 .81      137,500              .17
                                            =======                                      =======
</TABLE>
    

Non -Employee Director Stock Option Plan

   
        On January 24, 1996,  the Board of Directors of the Company  adopted the
1996 Non-Employee Director Stock Option Plan ("Director Plan") and the Company's
stockholders  approved the Director Plan on June 7, 1996. The Board of Directors
has reserved 300,000 shares of common stock for issuance and as of May 31, 1997,
options to purchase  30,000 shares of common stock, at prices ranging from $3.38
to $4.50 per share, have been granted under the Director Plan.
    



                                                                            F-19






                           GREENMAN TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)



14.     STOCKHOLDERS' EQUITY - (CONTINUED)


        Each  non-employee  director  on January  24,  1996,  was  automatically
granted an option to purchase 10,000 shares of common stock.  In addition,  on a
non-employee  director's  initial  election to the Board of Directors,  they are
automatically  granted an option to purchase  10,000 shares of the common stock.
Each  non-employee  director  will  automatically  be granted on the date of the
Annual Meeting of Stockholders an additional option to purchase 10,000 shares of
common stock. The exercise price per share of options granted under the Director
Plan is 100% of the  fair-market  value of the common  stock on the business day
immediately  prior to the date of the  grant.  Each  option  granted  under  the
Director Plan is immediately exercisable for a period of ten years from the date
of the grant.

Other Stock Options


        In July  1994,  the  Company  granted  non-qualified  stock  options  to
purchase  240,000  shares of common stock at an exercise price of $.29 per share
through July 1999.  Subsequently 35,000 options were canceled.  In October 1995,
an individual exercised non-qualified stock options to purchase 25,000 shares of
common stock at an exercise price of $.29 per share. In January 1996, the former
sole stockholder of DuraWear exercised 125,000 non-qualified stock options using
a net exercise  feature,  in exchange for 117,750 shares of Common Stock.  As of
May 31 ,1997, 55,000 of these options were outstanding and exercisable.

        In February 1995,  the Company  granted  non-qualified  stock options to
purchase  15,000 shares of common stock at an exercise  price of $1.00 per share
through  February 2000. In April 1995, the Company granted  non-qualified  stock
options to purchase  56,000 shares of common stock at an exercise price of $1.00
per share through April 2005.  Subsequently 36,000 options were canceled.  As of
May 31, 1997, 35,000 of these options were outstanding and exercisable.


   
        In January  1996,  the Company  granted  non-qualified  stock options to
purchase  250,000 shares of common stock which are exercisable at prices ranging
from $3.75 to $6.75.  As of May 31,  1997,  150,000  have expired and 100,000 of
these options were  exercisable  through April 1998 at prices ranging from $3.75
to $4.75 per share.
    


        On July 11,1996,  the Company granted options to purchase 600,000 shares
of common  stock at an exercise  price of $2.75 per share  through  July 2006 to
certain officers and directors.  These options vest over a five year period.  On
December 30, 1996, the Company cancelled 75,000 of the options, repriced 525,000
options to $1.13 and  granted  options to  purchase  1,012,500  shares of common
stock at an exercise price of $1.13 to certain  officers,  directors and outside
individuals.  The weighted average fair value of the repriced options under SFAS
No. 123 on the date of grant was $.28 per share.


Other Warrants


   
        In April 1995, the Company granted  warrants to purchase  175,000 shares
of common  stock at an  exercise  price of $1.00 per share  through  April 2005.
Subsequently  50,000 of the warrants were canceled and at May 31, 1997,  125,000
of these  warrants  were  exercisable.  In January  1996,  the  Company  granted
warrants to purchase  67,000 shares of common stock for services  rendered.  The
exercise  price is $3.38 per share  through  January 2006. On December 30, 1996,
these  warrants  were  repriced  to $1.13 which was the closing bid price of the
Company's common stock on December  30,1996.  The weighted average fair value of
the  repriced  warrants  under  SFAS No.  123 on the date of grant  was $.28 per
share.

        During the period of February  1996 to June 1996,  the  Company  granted
300,000  warrants in connection  with certain  borrowings  (See Note 10). During
June 1996,  the Company  granted  warrants to purchase  981,233 shares of common
stock at exercise  prices  ranging  from $3.00 to $3.88 per share  through  June
2001.  On December  30,  1996,  681,233 of the original  981,233  warrants  were
repriced to $1.13 per share.  The  weighted  average  fair value of the repriced
warrants under SFAS No. 123 on the date of grant was $.28 per share.
    

        On December 30, 1996, the Company granted 400,000 three year warrants to
one of its  investment  bankers  at an  exercise  price of $.05 per  share.  The
Company recorded a non-cash expense of $400,000 in accordance with SFAS No. 123.

                                                                            F-20






                           GREENMAN TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

14. STOCKHOLDERS' EQUITY - (CONTINUED)


Stock-Based Compensation


        At May 31, 1997, the Company has two stock-based  compensation plans and
stock  options  issued  outside of the plans,  which are  described  above.  The
Company applies APB Opinion No. 25 and related interpretations in accounting for
stock options issued to employees and directors.  Had the compensation  cost for
the Company's  stock options issued to employees and directors  been  determined
based on the fair value at the grant dates  consistent  with SFAS No.  123,  the
Company's  net loss and net loss per share  would have been  adjusted to the pro
forma amounts indicated below:

                                           Years Ended May 31,
                                           -------------------

                                           1996          1997
                                           ----          ----

Net Loss:
        As reported                     $1,578,321    7,006,479
        Pro forma                       $1,589,321    7,091,400
Net Loss per share:
        As reported                     $     (.34)       (1.25)
        Pro forma                       $     (.34)       (1.26)

        Common stock equivalents have been excluded form all calculations of net
loss per share because the effect of including them would be anti-dilutive.


        The fair value of each option  grant under the Plan is  estimated on the
date of grant using the  Black-Scholes  option-pricing  model with the following
weighted average assumptions used for grants during the years ended May 31, 1996
and 1997,respectively; dividend yield of 0%; risk-free interest rate of 5.5% and
5.5%; expected volatility of 20% and expected lives of 1 year.

        Weighted  average  assumptions  used in  valuing  stock  options  issued
outside of the plans  during the year ended May 31,  1996 and  1997,respectively
were dividend  yield of 0%; risk-free  interest rate of 5.5% and 5.5%;  expected
volatility of 20% and 20%; expected lives of 1 year.


    Common Stock Reserved

        The Company has  20,000,000  authorized  shares of common stock of which
6,873,296 shares are outstanding and 13,126,704 are available for issuance.

   
        The Company has reserved common stock at May 31, 1997 as follows:


          Initial public offering warrants....................... 1,265,000
          Underwriters initial public offering warrants..........   220,000
          Warrants issued on conversion of preferred stock....... 1,300,000
          Convertible debentures and notes....................... 5,832,000
          Stock option plans..................................... 1,272,600
          Other stock options.................................... 1,727,500
          Other warrants......................................... 4,268,572
                                                                  ---------
                                                                 15,885,672
                                                                 ==========

        The number of shares of common  stock  reserved in  connection  with the
convertible  debentures  and notes are subject to  adjustment.  (See Notes 9 and
10).

        Approximately 3,765,000 of the shares of common stock reserved above are
not issuable at May 31, 1997 pursuant to the terms of certain of the convertible
notes, warrants and options referred to in the above table.
    


                                                                            F-21






                           GREENMAN TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)




15.     SEGMENT INFORMATION


   
        The Company has three principal  operating groups: the injection molding
group,  the rubber  recycling  group and the  industrial  materials  group.  The
injection  molding  group  provides  injection  molding  services to  customers'
specifications  in the  production  of plastic and  thermoplastic  rubber parts.
These  customers  are  primarily  located in the State of  Arkansas.  The rubber
recycling   group  was  established  to  identify   processing   techniques  and
alternative  lower-cost  sources of supply of crumb rubber and plastic waste for
recycling and to develop rubber and plastic based  end-products.  The industrial
materials group  manufactures and markets ceramic,  polymer  composite and alloy
steel materials  engineered to resist highly abrasive conditions  experienced in
material  handling  systems.  During the year ended May 31,  1995,  the  Company
operated solely in the injection molding  industry.  Information with respect to
industry segments is as follows:

<TABLE>
<CAPTION>

                                              As of or for the Year Ended May 31, 1997
                            -----------------------------------------------------------------------------

    

                            Injection Molding    Rubber Recycling     Industrial Materials
                                 Group                Group                  Group               Total
                            -----------------    ----------------     --------------------   -------------
<S>                          <C>                  <C>                     <C>               <C>          
Operating Revenues           $ 1,936,450          $    38,201             $ 2,046,019       $   4,020,670
Operating Loss                  (462,522)          (1,995,047)                (20,481)         (2,478,050)
Identifiable Assets            3,411,979            1,825,595               2,325,785           7,563,359
Depreciation/Amortization        216,235               69,176                 253,684             539,095
Capital Expenditures           1,513,015               53,067                  10,765           1,576,847

       

   
                                              As of or for the Year Ended May 31, 1996
                            -----------------------------------------------------------------------------
    


                            Injection Molding    Rubber Recycling     Industrial Materials
                                 Group                Group                  Group               Total
                            -----------------    ----------------     --------------------   -------------

Operating Revenues           $ 3,199,641          $      -             $ 1,138,897          $ 4,338,538
Operating Loss                  (227,927)             (172,080)           (198,538)            (598,545)
Identifiable Assets            2,122,786             2,830,832           2,514,181            7,467,799
Depreciation/Amortization        157,702                 7,760             163,178              328,640
Capital Expenditures             499,653               909,114           2,723,082            4,131,849

</TABLE>

        Operating loss  represents  net sales less  operating  expenses for each
segment,  and excludes general corporate  expenses and other income and expenses
of a general corporate nature.  Identifiable  assets by segment are those assets
that  are  used  in the  Company's  operations  within  that  industry.  General
corporate  assets consist  principally of cash,  deposits,  office furniture and
equipment and license fees.


16.     MAJOR CUSTOMERS


         At May  31,  1996,  24%,  16%,  15% and  11% of  consolidated  accounts
receivable  were from four  customers  and at May 31, 1997,  29%, 16% and 12% of
consolidated accounts receivable were from three customers.

        During the year ended May 31,  1995,  approximately  62% ,14% and 10% of
net sales were from three major  customers;  during the year ended May 31, 1996,
approximately  38% and  14% of  consolidated  net  sales  were  from  two  major
customers  and  during  the  year  ended  May  31,  1997,  approximately  29% of
consolidated net sales were from one customer.



                                                                            F-22






                           GREENMAN TECHNOLOGIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)



17.     RELATED PARTY TRANSACTIONS

        During  the years  ended  May 31,  1994 and 1995,  the  Company  accrued
consulting fees relating to consulting  agreements with its  non-salaried  chief
financial officer and non-salaried  chief executive officer amounting to $60,000
and $72,000,  respectively.  In April 1995,  the Company  issued common stock in
payment of the accrued consulting fees.


        During the year ended May 31,  1996,  the Company paid  consulting  fees
relating to consulting  agreements with its non-salaried chief financial officer
and non-salaried  chief executive officer  amounting to $18,000 each.  Effective
with the Company's IPO, the Company executed  three-year  employment  agreements
with its Chairman, President and Chief Financial Officer.


18.     INCOME TAXES

        There was no  provision  for  income  taxes for the years  ended May 31,
1995, 1996 and 1997 due to the Company's net operating  losses and its valuation
reserve  against  deferred  tax assets.  The  difference  between the  statutory
federal  income  tax  rate of 34% and  the  Company's  effective  tax  rates  is
primarily due to net operating  losses incurred by the Company and the valuation
reserve against the Company's deferred tax assets.


<TABLE>
<CAPTION>
         The components of the net deferred tax asset are as follows at May 31:
                                                               1996                1997
                                                               ----                ----
             Deferred tax asset:
<S>                                                       <C>                    <C>       
                Federal...................................$   1,151,000         $ 2,646,000
                State.....................................      232,000             538,000
                                                          -------------          ----------
                                                              1,383,000           3,184,000
             Valuation reserve............................   (1,383,000)         (3,184,000)
                                                          --------------        -----------
             Net deferred tax asset.......................$          --          $       --
                                                          ==============        ===========

        The following differences give rise to deferred income taxes:

                                                                    YEARS ENDED MAY 31,
                                                                    -------------------
                                                                1996                  1997
                                                                ----                  ----

             Net operating loss carryforward..............  $  1,326,000           $2,666,000
             Research tax credit carryforward.............        17,000               17,000
             Other........................................        40,000              501,000
                                                           -------------           ----------
                                                               1,383,000            3,184,000
             Valuation reserve............................    (1,383,000)          (3,184,000)
                                                           -------------           ----------
             Net deferred tax asset....................... $          --          $        --
                                                          ==============         ============

</TABLE>

The change in the valuation reserve is as follows:
<TABLE>
<CAPTION>
                                                                       YEARS ENDED MAY 31,
                                                                       -------------------
                                                                 1995           1996       1997
                                                                 -----          ----       ----
<S>                                                           <C>          <C>          <C>     
             Balance at beginning of year.................    $  379,000   $   801,000  $1,383,000
             Increase due to current year
                net operating loss........................       422,000       582,000   1,801,000
                                                               ---------   -----------  ----------
             Balance at end of year.......................     $ 801,000   $ 1,383,000  $3,184,000
                                                               =========   ===========  ==========
</TABLE>

        As of May 31, 1997, the Company has net operating loss  carryforwards of
approximately $6,960,000. The Federal and state net operating loss carryforwards
expire in varying amounts beginning in 2008 and 1998, respectively. In addition,
the  Company  has  Federal tax credit  carryforwards  of  approximately  $17,000
available to reduce future tax liabilities. The Federal tax credit carryforwards
expire beginning in 2008.

        Use of net  operating  loss and tax credit  carryforwards  is subject to
annual  limitations  based on ownership changes in the Company's common stock as
defined by the Internal Revenue Code.



                                                                            F-23







                           GREENMAN TECHNOLOGIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


19.     FAIR VALUE OF FINANCIAL INSTRUMENTS.


        At May 31, 1996, the Company's financial  instruments  included the loan
receivable, related party (see Note 5), a note receivable (see Note 7) and notes
payable  (see Notes 10 and 11).  The  carrying  amounts of the loan  receivable,
related  party  approximates  its fair value based on its  collection in full on
June 26, 1996. The carrying  amount of the note receivable and the notes payable
approximate  their fair  values as these  instruments  bear  interest  at market
rates.

        At May 31, 1997, the Company's  financial  instruments  consist of notes
payable to related  parties and banks and  convertible  notes payable to related
parties  and  other  investors.  Notes  payable  to banks  and  related  parties
approximate  their fair  values as these  instruments  bear  interest  at market
rates. The fair value of the $4,040,000 in convertible notes payable outstanding
is approximately $5,103,000 based on the fair value of the common stock issuable
on conversion of the notes.

20.     SUBSEQUENT EVENTS

        On  June  30,  1997,  GreenMan   Acquisition   Corporation   ("GAC"),  a
wholly-owned subsidiary of the Company acquired all of the capital stock of each
of BFI Tire Recyclers of Minnesota,  Inc. ("BTM"), a wholly-owned  subsidiary of
Browning-Ferris Industries of Minnesota, Inc. ("BFIM") and BFI Tire Recyclers of
Georgia, Inc. ("BTG"), a wholly-owned  subsidiary of Browning -Ferris Industries
of Georgia,  Inc. ("BFIG") (the "Acquisition").  The Company was also granted an
exclusive option to purchase certain assets (including  certain contract rights)
of BFI's Ford Heights, Illinois tire recycling operation. BFIG and BFIM are both
wholly-owned  subsidiaries of Browning Ferris Industries,  Inc. BTM and BTG have
been renamed GreenMan Technologies of Minnesota,  Inc. and GreenMan Technologies
of Georgia, Inc.,  respectively and, together with the Company's existing rubber
recycling group will constitute the Company's Recycling division. As a result of
the  Acquisition,  the  Company's  obligations  under the  Shredded  Tire Supply
agreement and facility lease were eliminated. (See Note 13).

   
        The Company paid  approximately  $5,331,000 for the Acquisition of which
$650,000  has been paid to BFI at May 31,  1997 as a deposit and the balance was
financed by a short-term  note,  at an interest  rate of prime plus 2% (10.5% at
June 30, 1997) from BFI to GAC, which loan must be repaid by September 30, 1997.
The repayment of such note is guaranteed by the Company and is secured by all of
the assets  acquired  and by a pledge by GAC of all of the capital  stock of BTG
and BTM. The Company  anticipates  refinancing  such loans prior to maturity but
has not yet  received  any  commitments.  No  assurances  can be given that such
financing will be concluded prior to the maturity, if at all.
    




                                                                            F-24








                                   SIGNATURES




        Pursuant  to the  requirements  of  the  Securities  Act  of  1934 , the
Registrant  certifies  that it has duly  caused  this report to be signed on its
behalf by the undersigned thereunto duly authorized.

                                         By:       GreenMan Technologies, Inc.


                                                    /s/ Maurice E. Needham
                                                   ----------------------------
                                                      Maurice E. Needham
                                                    Chairman of the Board




                  Pursuant to the  requirements  of the Securities Act of 1934 ,
         this report has been signed by the  following  persons on behalf of the
         Registrant in the capacities and on the dates indicated.



<TABLE>
<CAPTION>
   
              SIGNATURE                                TITLE(S)                              DATE
              ---------                                --------                              ----
<S>                                        <C>                                         <C> 
       /s/ Maurice E. Needham               Chairman of the Board                       October 17, 1997
       ----------------------
         Maurice E. Needham

         /s/ Robert H. Davis                Chief Executive Officer and Director        October 17, 1997
         -------------------
           Robert H. Davis

         /s/ James F. Barker                President and Director                      October 17, 1997
         -------------------
           James F. Barker

       /s/ Joseph E. Levangie               Chief Financial Officer and Director        October 17, 1997
       ----------------------                 (Principal Financial Officer and  
         Joseph E. Levangie                       Principal Accounting Officer)
                                               

        /s/ Robert D. Maust                 Vice President of Operations and Director   October 17, 1997
        --------------------
           Robert D. Maust


          /s/ Lew F. Boyd                   Director                                    October 17, 1997
          ----------------
             Lew F. Boyd


    
</TABLE>