U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   Form 10-KSB

(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, 1998

                                       OR

[  ]    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANG
        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)

<PAGE>
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, 1998 were $11,011,519.

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
10, 1998 was $5,136,228.

As of  September  10,  1998,  6,566,865  shares of Common  Stock of issuer  were
outstanding.  The  aggregate  market  value of the  shares of  Common  Stock was
$6,960,877.

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


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<PAGE>
                                     PART 1

Item  1. Description of Business

General

         GreenMan Technologies, Inc. (the "Company" or "GreenMan") was initially
formed to develop,  manufacture and sell "environmentally  friendly" plastic and
thermoplastic  rubber feedstocks,  rubber parts and products  manufactured using
recycled  materials  and/or  are  themselves  partially  or  wholly  recyclable.
Although  successful in the technical  development of commercial and proprietary
products  through May 31, 1997, the Company  determined  during fiscal 1998 that
concentration  on raw materials  management would be more profitable in the near
term.   Accordingly,    most   valued-added    initiatives   involving   product
development/manufacturing  were  curtailed in order to concentrate on operations
that would yield profits and enhance  shareholder  value. The Company  currently
operates two business  segments,  the recycling  operations  located in Jackson,
Georgia;  Savage,  Minnesota and St. Francisville,  Louisiana and the industrial
material  operation  located in  Birmingham,  Alabama.  Until closure in January
1998,  the Company also operated an injection  molding  operation  (the "Molding
operation") located in Malvern, Arkansas.

 History

         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's wholly-owned subsidiary, DuraWear Corporation ("DuraWear")
located in  Birmingham,  Alabama  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.

         On June 30, 1997,  the Company  acquired as wholly owned  subsidiaries,
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.  and are in the scrap  tire
collection  and  processing  business.  BTM and BTG have been  renamed  GreenMan
Technologies of Minnesota,  Inc. ("GMTM") and GreenMan  Technologies of Georgia,
Inc. ("GMTG"), respectively.

         On  November  19,  1997,  the  Company   acquired  as  a  wholly  owned
subsidiary, all of the capital stock of Cryopolymers,  Inc.,  ("Cryopolymers") a
processor  of scrap tire chips into crumb  rubber  located in St.  Francisville,
Louisiana.  Cryopolymers  has been renamed  GreenMan  Technologies of Louisiana,
Inc. ("GMTL") and together with GMTM and GMTG will constitute the Company's tire
recycling operations (the "Recycling operations").

Recent Developments

        In January 1998, the Company  closed its Molding  operations in order to
eliminate  continued  operating losses.  The Molding  operations were previously
engaged in  providing  injection  molding  manufacturing  services  to  customer
specifications 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.  Management believes that third
party contract manufacturers could provide the Company with equivalent injection
molding capability at equal or less cost on an as-needed basis should there be a
necessity to meet market demands in the future.

        On March 12, 1998, the stockholders of the Company approved an amendment
to the Company's  Certificate  of  Incorporation  to effect a reverse split (the
"Reverse  Split") of the  Company's  Common  Stock,  pursuant to which each five
shares of Common Stock then  outstanding were  automatically  converted into one
share,  effective  March 23,  1998.  All  share and per share  data in this Form
10-KSB have been adjusted to give  retroactive  effect of the Reverse Split .

         In June 1998,  the Company  signed a letter of intent to acquire all of
the  capital  stock of Mac's Tire  Recyclers  ("Mac's")  a  privately-held  tire
recycler located in Saltillo,  Mississippi. In addition to scrap tire processing
capacity  of  more  than 4  million  tires  per  year,  Mac's  also  operates  a
state-permitted  disposal  site on about 40 acres  of land.  The  Company  began
operating the Mac's facility effective,  June 1, 1998 and anticipates completing
a purchase and sale agreement that is effective on that date.

                                       3
<PAGE>

         In June 1998, the Board of Directors of the Company adopted a change of
its fisal year from May 31 to September 30. The Company's  next fiscal year will
end on September 30, 1998.

         In August  1998,  GMTL's  facility  was damaged by a fire.  The Company
believes  that the damage will be adquately  covered by  insurance  and is still
assessing  the full  extent of the damage  and  developing  plans for  replacing
equipment  and  re-establishing  its crumb rubber  capabilities.  The Company is
currently  purchasing crumb rubber to supplement its internal needs for modified
asphalt.

         In  September  1998,  the  Company  acquired  all  of  the  scrap  tire
collection and processing  assets of United Waste Service,  Inc.  ("United"),  a
wholly owned subsidiary of Republic Services,  Inc.. The Company paid $4,050,000
for the  acquired  assets  in the form of  $850,000  in cash and  $3,200,000  of
preferred  stock.  The preferred stock is convertible  into the Company's common
stock  beginning in February 2001 based upon the trailing 15 day average closing
bid (as reported by NASDAQ)  prices prior to the  conversion  date. The acquired
assets are located in Lawrenceville,  Georgia and Batesburg,  South Carolina and
collectively, the two operations process over 5 million tires annually.

Recycling Operations

        The Company's Recycling operations collect,  transport and process scrap
tires into feedstock for tire derived fuel ("TDF"),  civil engineering  projects
and/or for further processing into crumb rubber. GMTM and GMTG are paid a fee to
collect, transport and process scrap tires from two sources: (1) local, regional
and national tire stores (termed "current  generation  tires") and (2) abatement
sites where governmental entities intervene to clean up unwanted tire piles. The
tires are processed  (shredded)  into two-inch  chips for sale to consumers that
use the chips for TDF (alternative  fuel), civil engineering (e.g., septic field
or landfill cap drainage to replace  aggregate) or for further  processing  into
crumb rubber.  The acquisition of GMTL marked the Company's entry into fine mesh
crumb rubber  manufacturing.  The crumb  rubber is sold to consumers  for use in
manufacturing  and/or  for  polymer  modification  to be  used  in  the  asphalt
industry. The Recycling operations processed over 10 million tires during fiscal
1998.

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,  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

Recycling Operation

         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. The technically  successful  production of a 34
gallon GEM-Stock trash container in May 1997,  validated the Company's  position
that products made using  GEM-Stock have properties that are comparable to those
products made incorporating virgin rubber or plastic. The additional  investment
required to achieve commercialization of the product, however, was determined to
be excessive and, in January 1998,  production was discontinued and the Malvern,
Arkansas plant closed.

        The Company  conducted  extensive  market research over the past several
years and concluded that significant market  opportunities could exist for crumb
rubber to be used as chemical feedstocks or for incorporation in 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. There is also research being
conducted in the areas of rubber modified  asphalt and the  re-incorporation  of
crumb rubber into new automobile and truck tires.  The Company believes that the
largest areas of growth are in applications where fine mesh crumb rubber is used
to  enhance  the  characteristics  of  existing  product  formulations,  thereby
commanding  premium  pricing.  As a result, a decision was made to focus Company
resources on  addressing  these "high value  added" crumb rubber  opportunities.
This redirection in strategic market targeting,  along with certain  limitations
of the Company's  previous cryogenic  recycling  equipment to produce sufficient
quantities of fine mesh crumb rubber,  resulted in the Company  redeploying  the
cryogenic  recycling  equipment into a joint venture with the original equipment
manufacturer  in August 1997 and the subsequent  acquisition of GMTL in 

                                       4
<PAGE>
November 1997. The joint venture is addressing existing opportunities for larger
mesh crumb rubber such as in rubber mats and ground cover.  The  acquisition  of
GMTL  provided  the Company  with a cryogenic  capability  from which to produce
ultra fine crumb rubber and to perfect a modification process for application in
the asphalt industry. On June 3, 1998 the Company received  certification of its
crumb rubber modification technology by the Federal Highway Administration under
an  exclusive  commercialization   agreement.  The  certified  product  will  be
field-tested and is anticipated to be commercialized in fiscal 1999.

        The  acquisition of GMTM and GMTG provides the Company access to over 10
million tires  annually.  Both  companies are in the scrap tire  collection  and
processing  business whereby they charge a fee to collect and process customers'
scrap tires and then process the tires into two inch rubber chips which are then
sold as TDF to cement kilns, pulp and paper producers and electric utilities, or
utilized in civil  engineering  projects such as landfill  construction  or road
stabilization  projects.  The Company also utilizes a portion of the rubber chip
flow for the  production of ultra-fine  mesh crumb rubber at its GMTL  facility.

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  pulp  and  paper,  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).

        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.

MANUFACTURING/PROCESSING

Recycling Operations

         GMTM and GMTG  collectively have the capacity to process between 15 and
17 million tires annually and processed approximately 10 million tires in fiscal
1998.  The method used to process  tires is a series of  commercially  available
shredders  that  sequentially  reduce tires from  whole-size to two-inch  chips.
Bead-steel is removed magnetically  yielding a "95% wire-free chip". The process
recovers  about 65% of the  incoming  tire with  about  35%  being  disposed  as
processing  residual.  The Company is evaluating  technology which would recycle
the processing residual into saleable components.

        The Recycling operation's plant in St. Francisville,  Louisiana utilizes
a two-inch rubber tire chip as feedstock to cryogenically  produce crumb rubber.
The Company refined the production process of its cryogenic  recycling equipment
and evaluated the production  capabilities  of the facility in order to maximize
the  facility's  ultra fine mesh crumb rubber.  The operation also developed the
process to  chemically  modify  crumb  rubber  for  application  in the  asphalt
industry.  The raw  material  (two-inch  chip) is  supplied  from  internal  and
external sources thereby assuring continuous supply at competitive pricing.

                                       5
<PAGE>
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 two suppliers; 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. 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, if at all.

Raw Materials Recycling Operations

        The Company believes it will have access to a supply of tires sufficient
to meet the Company's  requirements for TDF, civil  engineering and crumb rubber
for the foreseeable  future. GMTM supplements its in-house tire collection fleet
with  subcontracted  haulers in order to collect scrap tires.  GMTG  exclusively
utilizes subcontracted haulers to collect scrap tires to be processed.  GMTG and
GMTM  collectively  own and  operate  key pieces of heavy  equipment  to provide
services to governmental  agencies  seeking  contractors to clean up tire piles.
Specialized equipment for unique contracts is rented on an as-needed basis. GMTM
and GMTG collectively, are capable of processing between 15 and 17 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,  there is more than
ample  supply of  non-recycled  tires to meet the  Company's  growth plan and to
utilize the collective processing capacities.

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 February  1998,  the Company  entered  into an  exclusive  technology
commercialization  agreement with the U.S. Department of Transportation/ Federal
Highway Administration ("USDOT/FHWA"),  whereby the Company will work with major
asphalt  manufacturers and contractors to incorporate patented USDOT/FHWA binder
technology -- together with the Company's ultra-fine crumb rubber -- to create a
high-performance,  cost-effective asphalt blend. Designated "Chemically Modified
Crumb Rubber Asphalt"  (CMCRA),  this advanced  material  formulation  addresses
on-going highway problems of: aging, rutting,  low-temperature cracking, fatigue
cracking,  moisture  sensitivity,  and adhesion  between  asphalt and  aggregate
material.  These six  performance  factors are among the most  common  causes of
pavement  failure.  The new technology that GreenMan is helping to commercialize
provides   improvements  to  all  these  factors.  The  Company's  research  and
development  efforts  at  the  St.   Francisville   facility  resulted  in  FHWA
certification on June 3, 1998.

CUSTOMERS 

Recycling Operations

         There were no customers which accounted for 10% or more of consolidated
net sales during the fiscal years ended 1997 and 1998. The Recycling  operations
have a very  diversified  collection  and product sales program which  minimizes
their  vulnerability  to the  loss  of any one  customer.  The  diverse  base of
customers includes Goodyear, Firestone,  Continental,  Michelin, Cooper Tire and
many local and regional tire outlets.

                                       6
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DuraWear

        DuraWear did not have any customers  which  accounted for 10% or more of
consolidated  net sales during the fiscal years ended 1997 and 1998.  DuraWear's
customers  include Georgia Pacific,  Boise Cascade,  Container Corp. of America,
Champion  International,  Longview Fiber Company,  Union Camp, and various power
utilities and pulp an paper producers throughout the U.S.

        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  individual
customer  would not have a  materially  adverse  effect on the  business  of the
Company as a whole.

Sales and Marketing

         The Recycling operations utilize in-house sales staffs for securing new
accounts and marketing processed materials.  This strategy maximizes revenue and
concentrates    sales/marketing   efforts   on   highly   focused   initiatives.
Sales/marketing  personnel  are  highly  trained  in the  tire  industry  and in
industries  where  processed  materials  are  consumed.  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.

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

COMPETITION 

Recycling Operations

         Historically,  companies in the tire collection and processing industry
have generated significant  quantities of tires to satisfy the growing needs for
TDF to be sold as alternative fuel to cement kilns,  pulp and paper producers or
electric  utilities or utilized in civil  engineering  projects such as landfill
construction or road  stabilization  projects.  There are also several companies
that break down the tire material into its  elemental  components  ("Pyrolysis")
and sell the  components  individually.  Few, if any  companies  are  completely
vertically integrated with operations that encompass 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 limited  success in identifying and producing a
strategy for recycling tires. Consequently, the Company firmly believes there is
an opportunity for industry  consolidation  and strategic  value-added  vertical
integration.  Research being conducted in the areas of rubber  modified  asphalt
and the  re-incorporation  of crumb  rubber  into  automobile  and  truck  tires
exemplifies the opportunities.

         As a result of the Company's  acquisition of GMTM and GMTG in June 1997
and GMTL in November 1997, the Company has positioned itself as a leader in tire
recycling  operations.  Collectively,  the Company's current  operations process
approximately 5% of tires currently generated in the U.S.

DuraWear

         DuraWear has several  competitors  for its products,  many of whom have
greater  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.

                                       7
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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.  The process of obtaining
required  regulatory  approvals  can be  lengthy  and  expensive.  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
Company   keeps   abreast   of  changed  or  new   regulations   for   immediate
implementation.

PROTECTION OF INTELLECTUAL PROPERTY RIGHTS AND PROPRIETARY RIGHTS

        None of the equipment or machinery  that the Company  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.  The Company has  acquired
exclusive perpetual world-wide rights to a proprietary additive technology which
in the future  could  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  has  exclusively  licensed  several  proprietary
modification  technologies  for  modifying  crumb  rubber for use in the asphalt
industry. 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 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.

         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,  1998,  the  Company  had  approximately  104  employees.
Neither  the  Company  nor  its  subsidiaries  are a  party  to  any  collective
bargaining  agreements,  and each consider the relationship with their employees
to be satisfactory.

                                       8
<PAGE>
Item 2.  Description of Properties

        The  Company  leases   approximately  2,700  square  feet  of  corporate
administrative  office space in Lynnfield,  Massachusetts at a monthly rental of
$3,238  under a three year lease.  In June 1998,  the Company  renegotiated  the
lease to include an  additional  680 square feet and extended the lease term for
five years at $4,366 per month.

         GMTM owns two  industrial  buildings and an office  building in Savage,
Minnesota,  located  on  approximately  8 acres  of land  zoned  for  industrial
expansion.  GMTG owns an industrial  building and an office building in Jackson,
Georgia,  located  on  approximately  21  acres  of land  zoned  for  industrial
expansion.  Both  locations  have  adequate  space to  accommodate  expansion if
required to meet ongoing growth.

         GMTL   occupies   approximately   145,000   square   feet  of  combined
industrial/manufacturing space in St. Francisville, Louisiana and is currently a
tenant at will. There is adequate space available to expand capacity.  In August
1998,  GMTL's  facility  was damaged by a fire.  The Company  believes  that the
damage will be adquately  covered by insurance  and is still  assessing the full
extent  of  the  damage  and  developing  plans  for  replacing   equipment  and
reestablishing its crumb rubber capabilities.

         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.  In June 1998,  the court ruled in favor of the Company and dismissed
the case.

Item 4. Submission of Matters to a Vote of Security Holders

         The Company conducted a Special Meeting in lieu of an Annual Meeting of
Stockholders  on March 12, 1998. The matters  considered at the meeting were (1)
election of six members of the Board of Directors; (2) approval of amendments to
the Company's  Certificate of Incorporation  and By-Laws to create three classes
of directors to serve for staggered  terms;  (3) approval of an amendment to the
Company's  Certificate  of  Incorporation  to  effect  a  reverse  split  of the
Company's Common Stock, $.01 par value per share (the "Common Stock"),  pursuant
to which each five shares of Common  Stock then  outstanding  will be  converted
into one share;  (4) approval of an amendment to the  Company's  Certificate  of
Incorporation  to  increase  the  authorized  number of shares of the  Company's
Common Stock from  20,000,000  to  50,000,000;  and (5) a proposal to ratify the
selection of the firm of Wolf & Company,  P.C. as  independent  auditors for the
fiscal year ending May 31, 1998. The results of each vote were as follows:
<TABLE>
<CAPTION>
                                                                                                            Broker
                                                                     For         Against     Abstain       Non Votes
                                                                     ---         -------     -------       ---------
<S>       <C>                                                     <C>           <C>         <C>          <C>
Vote 1 -   Election of six (6) members of the Board of
           Directors                                               1,863,341        --         7,637             --
Vote 2 -   Amendment to the Certificate of Incorporation
           and By-Laws to create three classes of directors
           to serve for staggered terms                              830,073    22,333        11,463      1,007,110


                                       9
<PAGE>
<CAPTION>
                                                                                                            Broker
                                                                     For         Against     Abstain       Non Votes
                                                                     ---         -------     -------       ---------
<S>       <C>                                                     <C>           <C>         <C>          <C>
                                                                                                            
Vote 3 - Amendment to the Certificate of Incorporation to 
         effect a reverse split of Common Stock pursuant  
         to which each five shares of Common Stock then
         outstanding will be converted into one share              1,619,412    89,062        18,740        143,764

Vote 4 - Amendment to the Certificate of Incorporation
         to increase the authorized number of shares of
         Common Stock to 50,000,000                                1,750,946   104,418        15,614             --

Vote 5 - Proposal to ratify the selection of the firm of
         Wolf & Company, P.C. as independent auditors
         for the fiscal year ending May 31, 1998                   1,821,220    11,292        38,466             --
</TABLE>

                                     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.  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.
<TABLE>
<CAPTION>
                                                                                             Class A Common Stock 
                                                              Common Stock                     Purchase Warrants
                                                              ------------                     -----------------
                                                           High          Low                  High             Low
                                                           ----          ---                  ----             ---                 
<S>                                                     <C>            <C>                  <C>              <C>
Fiscal 1997                                                                            
                                                                                       
Quarter Ended August 31, 1996                            $20.65         $11.25               $6.90            $.65
Quarter Ended November 30, 1996                           16.10           6.70                3.90            1.25
Quarter Ended February 29, 1997                            8.15           5.00                1.55             .65
Quarter Ended May 31, 1997                                10.00           3.45                1.40             .45
 <CAPTION>
                                                                                             Class A Common Stock 
                                                              Common Stock                     Purchase Warrants
                                                              ------------                     -----------------
                                                           High          Low                  High             Low
                                                           ----          ---                  ----             ---                
<S>                                                     <C>            <C>                  <C>              <C>
Fiscal 1998

Quarter Ended August 31, 1997                             $8.91         $2.81                $1.72            $0.65
Quarter Ended November 30, 1997                            8.28          4.53                 1.72             0.63
Quarter Ended February 28, 1998                            4.22          1.41                 0.94             0.31
Quarter Ended May 31, 1998                                 4.44          0.94                 0.59             0.16

Fiscal 1999

Quarter Ended August 31, 1998                             $2.44         $0.94                $0.38            $0.16
</TABLE>
                                       10
<PAGE>
         On September  10,  1998,  the closing bid price of the Common Stock was
$1.06 and the closing bid price for the Class A Common Stock  Purchase  Warrants
was $.31.

         As of September 10, 1998, the Company  estimated  that the  approximate
number of stock holders of record of the Company's Common Stock were 2,500.

         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.

         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. (the "Company" or "GreenMan") was initially
formed to develop,  manufacture and sell "environmentally  friendly" plastic and
thermoplastic  rubber feedstocks,  rubber parts and products  manufactured using
recycled  materials  and/or  are  themselves  partially  or  wholly  recyclable.
Although  successful in the technical  development of commercial and proprietary
products  through  May 31,  1997,  the  Company  determined  in fiscal 1998 that
concentration  on raw materials  management would be more profitable in the near
term.   Accordingly,    most   valued-added    initiatives   involving   product
development/manufacturing  were  curtailed in order to concentrate on operations
that would yield profits and enhance  shareholder  value. The Company  currently
operates two business  segments,  the recycling  operations  located in Jackson,
Georgia;  Savage,  Minnesota and St. Francisville,  Louisiana and the industrial
material  operation  located in  Birmingham,  Alabama.  Until closure in January
1998,  the Company also operated an injection  molding  operation  (the "Molding
operation") located in Malvern,  Arkansas.  The consolidated financial schedules
of the Company have been  restated to reflect the net  operating  results of the
molding operation as a separate line item for all periods presented.

        The Company's wholly-owned subsidiary, DuraWear Corporation ("DuraWear")
located in  Birmingham,  Alabama  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.

         On June 30, 1997,  the Company  acquired as wholly owned  subsidiaries,
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.  and are in the scrap  tire
collection  and  processing  business.  BTM and BTG have been  renamed  GreenMan
Technologies of Minnesota,  Inc. ("GMTM") and GreenMan  Technologies of Georgia,
Inc. ("GMTG"), respectively.

         On  November  19,  1997,  the  Company   acquired  as  a  wholly  owned
subsidiary, all of the capital stock of Cryopolymers,  Inc.,  ("Cryopolymers") a
processor  of scrap tire chips into crumb  rubber  located in St.  Francisville,
Louisiana.  Cryopolymers  has been renamed  GreenMan  Technologies of Louisiana,
Inc. ("GMTL") and together with GMTM and GMTG will constitute the Company's tire
recycling operations ( the "Recycling operations").

         Information  contained or  incorporated  by reference in this  document
contains  "forward-looking   statements"  within  the  meaning  of  the  Private
Securities  Litigation Reform Act of 1995, which statements can be identified by
the use of  forward-looking  terminology  such as "may," "will," "would," "can,"
"could," "intend," "plan," "expect,"  "anticipate,"  "estimate" or "continue" or
the negative thereof or other variations thereon or comparable terminology.  The
following matters constitute cautionary statements identifying important factors
with respect to such  forward-looking  statements,  including  certain risks and
uncertainties,  that could cause actual results to differ  materially from those
in such forward-looking statements.

Results of Operations

Year ended May 31, 1998 Compared to Year ended May 31, 1997

         Net sales for the year ended May 31, 1998 were  $11,011,519 as compared
to  $2,084,220  for the year ended May 31, 1997.  The increase of  $8,927,299 is
primarily due to the inclusion of revenues  from the  Company's  tire  recycling
operations  which were  acquired in June 1997 from  Browning-Ferris  Industries,
Inc..  The tire recycling  operations  experienced  over 10% internal  growth in
business as compared to same period in 1997.

         Gross profit for the year ended May 31, 1998 was  $3,516,757  or 32% of
net sales as compared to $644,971 or 31% of net sales for the year ended May 31,
1997. The slight  improvement in gross profit was primarily due to the inclusion
of GMTM and GMTG operations.

                                       11
<PAGE>
         Research and development  expenditures were $675,252 for the year ended
May 31, 1998 as compared  to $319,726  for the same period in 1997.  The Company
accelerated its crumb rubber research and development efforts during fiscal 1998
through the acquisition of Cryopolymers in November 1997. This facility operated
during the year as the Company's  research and development  operations for crumb
rubber  production and  applications  research and was instrumental in obtaining
Federal Highway Administration certification in June 1998 of the Company's crumb
rubber  modification  technology for use in the asphalt industry.  Approximately
$428,000  of the current  year's  research  and  development  expenditures  were
attributable to these efforts.
       
         Selling,  general and  administrative  expenses were $4,524,488 for the
year ended May 31, 1998 as compared to $3,721,223 for the same 1997 period.  The
results reflect increased headcount and operations,  acquisition and integration
costs including  approximately  $90,000 of costs  associated with the Company's
former Georgia rubber recycling  operation which was integrated into the Georgia
tire recycling operations during fiscal 1998.
       
         As a result of the foregoing, the operating loss for the year ended May
31, 1998  decreased by 63% or $2,712,995 to $1,682,983  compared to an operating
loss of $4,395,978 for the comparable  period in 1997. The decrease reflects the
elimination  of  non-recurring  fiscal 1997 charges and a five-fold  increase in
gross profit for the year ended May 31, 1998. Approximately 40% of the operating
loss is  attributable  to the Company's  crumb rubber  research and  development
efforts.
        
         Interest and financing costs increased by $870,395 to $2,886,386 due to
costs associated with the issuance of convertible  debentures during fiscal 1997
and  fiscal  1998  and the  inclusion  of  approximately  $435,000  of  interest
associated  with the acquisition of GMTM and GMTG.  Approximately  $1,782,000 of
the 1998 expense is associated  with the impact of amortizing  the discount from
market to be realized upon  conversion of the debentures  and financing  expense
amortization  associated  with  the  borrowings.  The  Company  also  recognized
$210,500  of  additional  financing  costs  pursuant to the terms of the certain
debentures as result of the delay in  registering  under the  Securities  Act of
1933 the common stock issuable upon conversion of the debentures.

         The Company experienced a loss from continuing operations of $4,564,032
for the year ended May 31, 1998 as compared to $6,417,385 for the year ended May
31, 1997.
        
         The Company reported a $660,954 loss from  discontinued  operations for
the year ended May 31,  1998 as compared  to a $589,094  loss from  discontinued
operations  for the same 1997  period.  The Company  also  reported a $1,100,000
estimated loss on the disposal of the discontinued operations.

         The Company  experienced a net loss of  $6,324,986,  or $2.44 per share
for the year ended May 31,  1998 as  compared  to a net loss of  $7,006,479,  or
$6.24 per share for the year ended May 31, 1997.

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  and  common  stock  options  and  warrants  in lieu of cash for  services
rendered. 

Loans from Related Company

        During the period of  February  1996 to June 1996 the  Company  borrowed
$1,700,000 in aggregate from Palomar Medical  Technologies,  Inc.  ("Palomar") a
company that was related to a director of the Company.  These notes payable bore
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  40,000  shares  of the
Company's  common stock at an exercise price of $19.40 per share and warrants to
purchase  20,000  shares of the Company's  common stock at an exercise  price of
$20.00 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 Palomar,  under the 10% notes payable. The outstanding
principal balance was converted into 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 $5.00 per share.  The Note was
secured by an interest in the Company's cryogenic tire recycling equipment.  The
Company  also  reduced  the  exercise  price of the 60,000  warrants  granted in
connection  with this borrowing

                                       12
<PAGE>
to $5.65 per  share.  The  Company  recorded  a non cash  expense  of $36,000 in
connection  with the reduction in the exercise price in accordance with SFAS No.
123.

         As of May 31, 1998,  Palomar had converted its entire  $1,200,000  note
payable and $164,741 of accrued  interest  into  297,257  shares of common stock
pursuant  to the  terms  of the  convertible  note  payable.  A  portion  of the
conversion  included a one time 15%  reduction in the  conversion  price as a an
inducement to convert the balance due under the Note.

Crumb Rubber Equipment

        During the year ended May 31,  1996,  the Company  purchased a cryogenic
recycling line for $1,500,000 and placed an additional  $300,000 deposit towards
the purchase of an additional cryogenic recycling equipment line.

        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 in the amounts  required,  the
Company  decided to redeploy  the  cryogenic  recycling  equipment  into a joint
venture with Crumb Rubber  Technologies,  Inc. ("CRT"),  the original  equipment
manufacturer.

         In August  1997,  the  Company  finalized  the  formation  of the joint
venture between the Company and 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 addresses existing opportunities for larger mesh crumb rubber such as in
rubber mats, ground cover and as a filler in asphalt  applications.  The Company
has  contributed  a portion of its  investment  in the  cryogenic  crumb  rubber
equipment  ($400,000)  which was formerly  located in Jackson,  Georgia into the
venture as its capital  contribution while CRT contributed  certain  facilities,
equipment, customer contracts, licenses and permits and will provide operational
and technical  expertise.  Pursuant to the terms of the joint venture agreement,
CRT has returned $100,000 of equipment  deposits  previously made by the Company
and is currently determining a payment schedule for the remaining $200,000.  The
joint venture  began  operating on a limited basis in April 1998 and has not yet
generated significant revenues.

         Effective  October  1997,  the  Company  entered  into  a  fifteen-year
cryogenic equipment lease agreement. Under the terms of the agreement, GMTL will
pay $25,500 per month  rental plus an  additional  rent of $100,000 per year for
the first six years of the agreement to be payable in the Company's common stock
with the number of shares  determined  using the closing bid price of the common
stock on each  December 31. The lease has been  classified as a capital lease at
May 31, 1998 with an equipment value of $2,771,876.

Loans From Officers

         In May 1996, the Company borrowed  $325,000 from Maurice  Needham,  the
Company's  Chairman.  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  collectively,  an additional $624,300 from Mr.
Needham and Joseph Levangie,  the Company's Vice Chairman and repaid $345,000 in
aggregate during January 1997 and May 1997.

        On May 30, 1997, the Company refinanced the remaining  principal balance
and accrued interest plus accrued  business  expenses owed to these officers and
issued each officer 10% convertible notes, due October 30, 1998 in the amount of
$640,000 and warrants to purchase  25,600  shares of common stock at an exercise
price of $4.40 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 prices on the five trading days preceding May 30, 1997 or 70% of the average
closing bid prices on the five trading days preceding the date of the conversion
of such notes.

        During June and July 1997, the Company  borrowed an additional  $386,000
from Messrs.  Needham,  Levangie,  Robert Maust, the Company's Vice President of
Operations  and another  officer of the Company and issued  warrants to purchase
15,440 shares of common stock at exercise prices ranging from $3.60 to $4.85 per
share.  The notes are  convertible  after a one  hundred  and twenty day holding
period into shares of common stock at a conversion  prices equal to the lower of
the average of the closing bid prices on the five  trading  days  preceding  the
closing or 70% of the average of the closing bid prices on the five trading days
preceding  the date of the  conversion  of such notes.  On March 24,  1998,  the
officers converted  $1,026,000 of principal and $75,711 of accrued interest into
1,260,193 shares of unregistered  common stock.  

Debenture Offerings 

January 31, 1997 Debentures

                                       13
<PAGE>
         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  152,500  shares of common  stock (the  "January
Offering")  at an  exercise  price  of  $6.25  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 net proceeds from the January  Offering
were  approximately  $1,310,000  after  deducting  commissions  and  expenses of
approximately $214,000.
        
         As of May 31, 1998,  all  Debentures  had been  converted  into 502,181
shares of the Company's common stock and all deferred charges had been amortized
to expense.  Investors from the January  Offering have exercised 36,000 warrants
during the year ended May 31, 1998  resulting  in net proceeds to the Company of
$225,000. 

April 1997 Notes
        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  60,000  shares of common stock (the "April  Offering")  at exercise
prices ranging from $4.85 to $5.25. 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  closing bid prices on the five trading days  preceding the
date of the April Offering  closing or 70% of the average  closing bid prices on
the five trading days  preceding the date of the  conversion  of the Notes.  The
Note  holders  receive  800  shares  of the  Company's  common  stock 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 towards
the  acquisition  of  GMTM  and  GMTG.  The  Company  also  issued   immediately
exercisable  two year  warrants to purchase  30,968 shares of common stock at an
exercise price of $4.85 per share to the placement agents. During the year ended
May 31, 1998, all Notes had been converted into 1,089,449 shares of common stock
including  49,813  shares  associated  with  accrued  interest.

December 1997 Debentures

        In  December  1997,  the  Company  entered  into   securities   purchase
agreements  (the  "Debenture  Agreements")  with two investors  (the  "Debenture
Holders") and pursuant  thereto,  the Company issued debentures in the aggregate
principal  amount of  $1,600,000  (the  "Initial  Debentures")  and  immediately
exercisable  two-year  warrants to purchase  32,000 shares of Common Stock at an
exercise price of $3.13 per share.  Each Initial  Debenture bears interest at 8%
and is due December 15, 2000.  The Initial  Debentures  are  convertible  at the
election of the holder at any time  commencing  upon the earlier to occur of (i)
the effective date of the  registration  statement  covering the shares issuable
upon conversion of the Initial Debentures, or (ii) 60 days following the date of
issuance at a  conversion  price  equal to the lower of the average  closing bid
prices  on the  five  trading  days  preceding  the date of the  closing  of the
December  Offering or 75% of the average  closing bid prices on the five trading
days  preceding  the  date of the  conversion  of the  Debentures.  The  Initial
Debentures  automatically convert into shares of common stock upon maturity. The
Company also issued immediately exercisable two year warrants to purchase 32,000
shares of common stock at an exercise  price of $3.13 per share to the placement
agent.  As of May 31,  1998,  $240,433 of the Initial  Debentures  and $7,127 of
accrued interest have been converted into 98,984 shares of common stock.  During
the period of June to July 1998,  an additional  $594,664 of Initial  Debentures
and $25,867 of accrued  interest were  converted  into 466,454  shares of common
stock.

         The  net  proceeds  from  the  December  Offering  were   approximately
$1,350,000 after deducting  commissions and expenses of approximately  $250,000.
The Company  used  $750,000 of the  proceeds  to paydown  the  outstanding  loan
payable to BFI for the purchase of GMTM and GMTG.

       Pursuant to the Debenture Agreements,  the Debenture Holders have agreed
to  purchase up to an  additional  $2,000,000  in the  aggregate  of  debentures
("Additional  Debentures") in multiple  tranches during 12 months  following the
effective date of the registration  statement  covering the shares issuable upon
conversion of the Initial Debentures.  Each tranche shall be for the purchase of
between  $75,000 and $175,000 in Additional  Debentures  and may be completed at
the  election  of the Company  subject to certain  conditions.  Each  Additional
Debenture  shall bear  similar  terms to the Initial  Debentures  including  the
issuance of warrants per Additional  Debenture to both the Debenture Holders and
the placement  agent.  The Additional  Debentures are convertible at the holders
option,  within two days of  issuance.  Pursuant  to the terms of the  Debenture
Agreements, the Company is obligated to borrow at least $1,000,000 in Additional
Debentures  or the Company  must  provide the  Debenture  Holders and  placement
agents  warrants to purchase an additional  40,000 shares of Common Stock in the
aggregate.  The Company has issued $250,000 of Additional  Debentures during the
period of June to July 1998. 

Acquisition of GMTM and GMTG

                                       14
<PAGE>
         On June 30, 1997,  the Company  acquired as wholly owned  subsidiaries,
all of the  capital  stock  of  BTM  and of  BTG,  (renamed  "GMTM"  and  "GMTG"
respectively),  both of which were wholly-owned  subsidiaries of Browning-Ferris
Industries,  Inc.  ("BFI")  and whose  business  is scrap  tire  collection  and
processing.  The Company agreed to a pay  $5,331,516 for all of the  outstanding
capital stock of BTM and BTG of which $650,000 had been  previously  paid to BFI
as a deposit and the balance of $4,681,516 was financed by a short-term note, at
an interest  rate of 10% from BFI.  The note was  originally  due and payable on
September  30, 1997.  In return for  payments in November and December  1997 the
Company  obtained an extension of the due date until  February 1998. In February
1998, the Company  secured a $5.0 million  asset-based  credit facility and used
approximately $3.9 million to repay the balance due on the notes plus interest.

        On February 5, 1998, GMTM and GMTG  collectively  secured a $5.0 million
asset-based  credit facility (the "Credit  Facility") from Heller Financial Inc.
("Heller"). The Credit Facility consisted of : (i) $1,400,000 of three year term
notes secured by the real estate of GMTM and GMTG,  payable in monthly principal
installments  of $23,333  plus  interest at prime plus 1.75%  (10.25% at May 31,
1998) with a balloon  payment of $583,380 due in February 2001;  (ii) $1,900,000
of three year term notes  secured by the  machinery  and  equipment  of GMTM and
GMTG,  payable in monthly  principal  installments of $31,667,  plus interest at
prime plus 1.75% (10.25% at May 31, 1998) with a balloon payment of $791,620 due
in February 2001 and (iii) a working  capital line of credit of up to $1,700,000
secured by the eligible accounts  receivable,  as defined, of GMTM and GMTG. The
line of credit bears  interest at prime plus 1.5% (10% at May 31, 1998). 

         The Company has granted Heller a security interest in the capital stock
of GMTM and GMTG in addition to providing a Company  guarantee  and the personal
guarantee of three officers of the Company. The Credit Facility contains certain
covenants  including minimum net worth and certain  restrictions on intercompany
cash  transactions.  The Company is either in  compliance  with the terms of the
Credit Facility or has received a waiver of compliance at May 31, 1998.

Acquisition of GMTL Inc.

         On November  19,  1997,  the Company  acquired  all of the  outstanding
common stock of Crypolymers, Inc. (renamed "GMTL") a privately-held crumb rubber
producer located in St. Francisville, Louisiana. The purchase price consisted of
(1)  $774,000  in shares of common  stock  (153,402  shares);  (2)  warrants  to
purchase 240,000 shares of common stock exercisable commencing April 1, 1998 for
period of five years at prices ranging from $15.00 to $35.00 per share;  and (3)
additional  warrants to purchase  20,000 shares of common stock  exercisable  at
$4.85 per share for a period of five years and vesting  over a two-year  period.
The Company has  determined  the total  purchase price to be $775,000 based upon
the value of the common  stock and a $31,000  value  ascribed to the warrants to
purchase 260,000 shares of common stock.

Working Capital

         At May 31, 1998,  the Company had cash of $180,963,  a working  capital
deficit of  $2,147,915,  net capital of  $3,136,228  and  accumulated  losses of
$17,029,919.

         Based on the Company's  operating  plans  management  believes that the
available  working capital  together with revenues from  operations,  the equity
financing commitment secured in December 1997, the purchase of equipment through
lease financing  arrangements  and the remaining  availability  under the Heller
Credit  Facility,  will be sufficient to meet the  Company's  cash  requirements
through  fiscal 1999.  The Company  expects  that  additional  financing  may be
required  after this time in order to fund continued  growth.  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)
the production of crumb rubber in commercial  quantities at a price that will be
competitive in the market;  (ii) the impact of the Company's  ongoing merger and
acquisition  activities;  (iii) the Company's ability to reestablish or relocate
the  operations of GMTL  subsequent to the August 1998 fire;  (iv) the Company's
ability to reach  satisfactory  settlement  with the remaining  creditors of its
closed  injection  molding  operation;  (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 it
will be  successful  in  production  of 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.

                                       15
<PAGE>
         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

        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 with the next fiscal year.

         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 fiscal years  beginning  after December 15, 1997.
SFAS No. 131  establishes  standards  for the way that public  companies  report
information about operating segments in annual and interim 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 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

                                       16
<PAGE>
Item 9. Directors, Executive Officers and Key Employees
<TABLE>
<CAPTION>
The Directors and executive officers of the Company are as follows:

                         Name                           Age                  Position
                         ----                           ---                  --------
<S>                                                     <C>     <C>
Maurice E. Needham ...............................       58      Chairman of the Board of Directors
Joseph E. Levangie ...............................       53      Vice Chairman; Director
Robert H. Davis ..................................       55      Chief Executive Officer; President; Director
Charles E. Coppa .................................       35      Acting Chief Financial Officer; Treasurer; Assistant Secretary
Robert D. Maust ..................................       60      Vice President of Operations; Director
Lew F. Boyd ......................................       53      Director
Jagruti Oza ......................................       37      Director
</TABLE>

         Each  director  is  elected  for a period of one year at the  Company's
annual  meeting of  stockholders  and serves until his or her  successor is duly
elected by the stockholders.  The Company's  officers are appointed by the Board
of Directors and serve at the  discretion  of the Board of Directors.  In fiscal
1998, the Board of Directors  approved a $2,500 per board meeting fee to be paid
to each  outside  director  commencing  with the March 12,  1998  meeting.  Each
outside  director also  participates in the  Non-Employee  Director Stock Option
Plan.

         The Company has established an Audit  Committee  consisting of Ms. Oza,
Mr. Boyd and Mr.  Levangie and a  Compensation  Committee  consisting of Messrs.
Needham, Levangie 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  Electronic  Packaging
Interconnect  Corporation  ("EPIC"),  an electronics contract manufacturer since
October  1997.  He  previously  served  as  Chairman  of Dynaco  Corporation,  a
manufacturer of flexible  printed circuit boards which he founded in 1987. 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.

         JOSEPH E.  LEVANGIE has been Vice  Chairman of the Company  since March
1998 and a Director of the  Company  since its  inception.  From June 1993 until
March 1998 he served as Chief Financial Officer,  Treasurer and Secretary of the
Company.  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 and development. Mr. Levangie serves as a Director
of Nexar, Inc., publicly traded company.

         ROBERT H. DAVIS has been Chief Executive  Officer and a Director of the
Company since July 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.

         CHARLES E. COPPA has served as the  Company's  Acting  Chief  Financial
Officer,  Treasurer and Assistant  Secretary since March 1998. From October 1995
to March  1998,  he  served  as  Corporate  Controller.  Mr.  Coppa  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.

                                       17
<PAGE>
         ROBERT D. MAUST has been Vice  President of  Operations  and a Director
since July 1997 and was  President of the  Company's  Recycling  Operation  from
December  1996 to July 1997 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.

         LEW F. BOYD has been a Director of the Company  since August 1994.  Mr.
Boyd is the  founder  and since  1985 has been the Chief  Executive  Officer  of
Coastal International, Inc., an international business development and executive
search firm,  specializing in the energy and environmental sectors.  Previously,
Mr.  Boyd  had been  Vice  President/General  Manager  of the  Renewable  Energy
Division  of  Butler  Manufacturing  Corporation  and  had  served  in  academic
administration at Harvard and Massachusetts Institute of Technology.

         JAGRUTI OZA has been a Director of the  Company  since March 12,  1998.
Ms.  Oza is Vice  President  -  Strategy  and  Acquisitions  for  VNU  Marketing
Information Services, a subsidiary of VNU, a $3 billion international publishing
and  marketing  information  service  company.  Previously,  Ms.  Oza  was  Vice
President - Corporate Planning for Public Service Enterprise Group ("PSEG") from
March 1995 to March 1998, a holding  company with $6 billion in annual  revenues
whose  businesses  include  electric  and  gas  utility,   international   power
development and retail energy services.  From 1991 to 1995, Ms. Oza held various
managerial  positions at PSEG including  Regional  Manager - Fossil  Generation,
overseeing  the operation of three power plants.  Prior to joining PSEG, Ms. Oza
was a management  consultant with Bain and Company (from 1987 to 1990) providing
strategic  management  services  to  multinational  companies  in  the  chemical
consumer products and retail service industries.

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.

        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 Chief
Executive  Officer and its Vice  President  of  Operations.  The Company did not
grant  any  restricted  stock  awards or stock  appreciation  rights or make any
long-term plan payouts during the years indicated.
<TABLE>
<CAPTION>
                                             SUMMARY COMPENSATION TABLE
                                                                                                     Long-Term
                                                        Annual Compensation                          Compensation
                                  Fiscal Year                                              (1)       Securities
           Name and                  Ended                                         Other Annual       Underlying       All Other
      Principal Position             May 31         Salary         Bonus           Compensation      Options (3)   Compensation (2)
      ------------------             ------        -------         ------          -------------     -----------   ----------------
<S>                                  <C>          <C>             <C>                <C>               <C>            <C>   
Robert H. Davis ............          1998         $ 188,000       $   --             $ 7,740           415,000        $   --
Chief Executive Officer               1997             --              --               --                --               --
                                      1996             --              --               --                --               --

Robert D. Maust ............          1998         $ 125,000         $ --            $ 11,940           170,000        $ 19,000
Vice President                        1997           57,089            --               --                --               --
                                      1996             --              --               --                --               --

                                       18
<PAGE>
----------
<FN>
(1)  Represents  payments  made to or on behalf of Messrs.  Davis and Maust in fiscal  1997 and 1998 for health  insurance  and auto
     allowances.
(2)  Represents payments made to Mr. Maust for relocation expenses.
(3)  Represents options granted in July 1997 and March 1998 for Mr. Davis and options granted in December 1996 and March 1998 to Mr.
     Maust.  Does not include 20,000  warrants to purchase  shares of common stock granted to Mr. Davis pursuant to a stock purchase
     agreement and 6,400 warrants to purchase shares of common stock granted to Mr. Maust pursuant to the terms of loans made to the
     Company by Mr. Maust.
</FN>
</TABLE>
        The  following  table sets  forth  information  concerning  the value of
unexercised  options  as of May 31,  1998  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, 1998.
<TABLE>
<CAPTION>
                                  AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                                        AND FISCAL YEAR END OPTION VALUES(1)
                                                                                      Value of Unexercised
                                             Number of Unexercised                    In-the-Money Options
                                          Options at May 31, 1998 (1)                 at May 31, 1998 (2)
                                          ---------------------------                 -------------------
               Name                     Exercisable         Unexercisable               Exercisable     Unexercisable
<S>                                       <C>                 <C>                         <C>            <C>      
Robert H. Davis ............                 --                415,000                     $ --           $ 588,750
Robert D. Maust ............               6,000               164,000                     $ --           $219,800
----------
<FN>
(1)  There were no options  exercised by any of the executive  officers  named in the Summary  Compensation  Table during the twelve
     months ended May 31, 1998. The options  granted to the executive  officers became  exercisable  commencing July 17, 1998 in the
     case of Mr. Davis and December  30, 1997 in the case of Mr. Maust at an annual rate of 20% of the  underlying  shares of Common
     Stock.
(2)  Assumes that the value of shares of Common Stock is equal to $2.66 per share,  which was the closing bid price of the Company's
     Common Stock as listed by NASDAQ on May 31, 1998.
</FN>
</TABLE>

Employment Agreements

         The Company has employment  agreements with five officers which provide
for base  salaries,  participation  in  employee  benefit  plans  and  severance
payments for termination without cause.

Stock Option Plan

         The Company's  1993 Stock Option Plan, the "Plan",  was  established to
provide stock options to employees, officers, directors and consultants.

        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.  In June 1996,
the  Company's  stockholders  approved  an  increase  to the  number  of  shares
authorized  under the Plan to 200,000  shares.  On June 24,  1998,  the Board of
Directors approved an increase to the number of shares authorized under the Plan
to 2,000,000 shares, subject to shareholder approval.

                                       19
<PAGE>
        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,  1998,  there  were  1,274,500   options  granted  and
outstanding  under the Plan of which 41,940  options were  exercisable at prices
ranging from $0.45 to $5.65.

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 60,000 shares of Common Stock for
issuance  and as of May 31,  1998,  options to purchase  8,000  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  2,000 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  2,000 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, 1998:  (i) by each person
who is known by the Company to own  beneficially  5% or 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, 1998, there were issued and outstanding  5,858,019
shares of Common Stock.

Name (1)                                   Number of Shares        Percentage of
                                         Beneficially Owned (2)        Class
                                         ----------------------    -------------

Maurice E. Needham  (3).................        969,880                16.42%
Joseph E. Levangie (4) .................        477,893                8.09%
Robert D. Maust (5).....................        207,556                3.54%
Robert H. Davis (6).....................        139,111                2.36%
Charles E. Coppa (7)....................        59,000                 1.01%
Lew F. Boyd (8).........................        27,667                   *
Jagruti Oza (9).........................         4,000                   *
All officers and directors as a group          1,885,107               31.30%

      (7 persons) ......................

-----------------------------------------
* Less than 1%  of the outstanding Common Stock.
(1)  Each  person's  address is care of GreenMan  Technologies,  Inc., 7 Kimball
     Lane, Building A, Lynnfield, MA 01940.
(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.

                                       20
<PAGE>
(3)  Includes  48,040 shares of Common Stock  issuable  pursuant to  immediately
     exercisable  stock  options and warrants.  Also  includes  59,556 shares of
     Common  Stock and  10,000  shares  of Common  Stock  issuable  pursuant  to
     immediately  exercisable  outstanding warrants owned by Mr. Needham's wife.
     Does not  include  650,500  shares of Common  Stock  issuable  pursuant  to
     outstanding stock options that are not currently exercisable.
(4)  Includes  51,300 shares of Common Stock  issuable  pursuant to  immediately
     exercisable stock options and warrants.  Does not include 575,200 shares of
     Common Stock issuable  pursuant to  outstanding  stock options that are not
     currently exercisable.
(5)  Includes  12,400 shares of Common Stock  issuable  pursuant to  immediately
     exercisable stock options and warrants.  Does not include 164,000 shares of
     Common Stock issuable  pursuant to  outstanding  stock options that are not
     currently exercisable.
(6)  Includes  28,000 shares of Common Stock  issuable  pursuant to  immediately
     exercisable stock options and warrants.  Does not include 407,000 shares of
     Common Stock issuable  pursuant to  outstanding  stock options that are not
     currently exercisable.
(7)  Includes  9,000 shares of Common  Stock  issuable  pursuant to  immediately
     exercisable stock options and warrants.  Does not include 130,000 shares of
     Common Stock issuable  pursuant to  outstanding  stock options that are not
     currently exercisable.
(8)  Includes  11,000 shares of Common Stock  issuable  pursuant to  immediately
     exercisable stock options and warrants.  Does not include 121,000 shares of
     Common Stock issuable  pursuant to  outstanding  stock options that are not
     currently exercisable.
(9)  Includes  4,000 shares of Common  Stock  issuable  pursuant to  immediately
     exercisable  stock  options.  Does not include 3,000 shares of Common Stock
     issuable  pursuant to  outstanding  stock  options  that are not  currently
     exercisable.

Item 12. Certain Relationships and Related Transactions

Stock Issuances; Stock Options; Warrants

        On May 30, 1997, the Company granted Mr. Needham and Mr.  Levangie,  two
officers of the Company,  warrants to purchase 22,200 and 3,400 shares of common
stock,  respectively,  pursuant to the terms of loans made to the  Company.  The
warrants have an exercise price of $4.40 per share.

     During June and July 1997, the Company granted Messrs.  Needham,  Levangie,
Robert Maust,  the Company's Vice President of Operations and another officer of
the Company,  warrants to purchase  15,440 shares,  in aggregate of common stock
pursuant to the terms of loans made to the Company.  The warrants  have exercise
prices ranging from $3.60 to $4.85 per share.

     In March 1998,  Messrs.  Davis,  Levangie,  Coppa,  and Boyd  purchased  an
aggregate  of  334,334  unregistered  shares  of Common  Stock and were  granted
immediately  exercisable,  two-year warrants to purchase 74,000 shares of Common
Stock  pursuant to the terms of the March 1998 Private  Offering  (See Note 14).
The warrants are exercisable at $1.75 per share.

Loans; Personal Guarantees

     In May 1996,  the Company  borrowed  $325,000  from  Maurice  Needham,  the
Company's  Chairman.  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  collectively,  an additional $624,300 from Mr.
Needham and Joseph Levangie,  the Company's Vice Chairman and repaid $345,000 in
aggregate during January 1997 and May 1997.

        On May 30, 1997, the Company refinanced the remaining  principal balance
and accrued interest plus accrued  business  expenses owed to these officers and
issued each officer 10% convertible notes, due October 30, 1998 in the amount of
$640,000 and warrants to purchase  25,600  shares of common stock at an exercise
price of $4.40 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 prices on the five trading days preceding May 30, 1997 or 70% of the average
closing bid prices on the five trading days preceding the date of the conversion
of such notes.

     During June and July 1997, the Company borrowed an additional $386,000 from
Messrs.  Needham,  Levangie,  Robert  Maust,  the  Company's  Vice  President of
Operations  and another  officer of the Company and issued  warrants to purchase
15,440 shares of common stock at exercise prices ranging from $3.60 to $4.85 per
share.  The notes are  convertible  after a one  hundred  and twenty day holding
period into shares of common stock at a conversion  prices equal to the lower of
the average of the closing bid prices on the five  trading  days  preceding  the
closing or 70% of the average of

                                       21
<PAGE>

the  closing  bid  prices on the five  trading  days  preceding  the date of the
conversion of such notes. On March 24, 1998, the officers  converted  $1,026,000
of  principal  and  $75,711  of  accrued   interest  into  1,260,193  shares  of
unregistered common stock.

         In January  1998,  the Company  advanced  $104,000 to an officer of the
Company under an 8.5% secured loan  agreement  with both  principal and interest
due January 2001. The loan is secured by 111,111 shares of the Company's  common
stock owned by the officer.

     Messrs.  Needham,  Levangie and Davis have  personally  guaranteed the $5.0
million  asset-based  credit facility that was provided by Heller Financial Inc.
in February 1998.

        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 Forms 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.

   (6) 3.5      --  Certificate of Amendment to the Certificate of Incorporation of GreenMan Technologies, Inc.

   (8) 3.6      --  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      --  Intentially 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.

                                       22
<PAGE>
    *10.16      --  Form of Employment Agreement with Joseph E. Levangie.

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

    *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 DuraWear Corporation 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.

                                       23
<PAGE>
    **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.

    **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.

   (6) 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 Notes due October 1998.

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

   (6) 10.59    --  Letter from Palomar Medical Technologies, Inc. to the Company extending the maturity date
                    of the December 1996 Note.

   (6) 10.60    --  Form of Securities Purchase Agreement between the Company and Messrs. Needham and Levangie 
                    dated May 30, 1997.

   (6) 10.61    --  Form of Convertible Note due October 1998 issued by the Company and Messrs. Needham and 
                    Levangie on May 30, 1997.

                                       24
<PAGE>
   (6) 10.62    --  Form of Warrant issued by the Company to Messrs. Needham and Levangie on May 30, 1997.

   (7) 10.63    --  Forebearance Agreement between the Comapny, GAC and BFI

   (8) 10.64    --  Act of sale of Common Stock of Cryopoymers, Inc. between Messer Griesheim Inductries, 
                    Inc. and GreenMan Technologies, Inc.

   (8) 10.65    --  Agreement of Settlement and Release between Messer Griesheim Inductries, Inc. and 
                    GreenMan Technologies, Inc.

   (8) 10.66    --  Act of sale of Common Stock of Cryopoymers, Inc. between Cryopolymers Leasing,
                   Inc. and GreenMan Technologies, Inc.

   (8) 10.67    --  Act of sale of Common Stock of Cryopoymers, Inc. between Cryopolymers Management 
                    Inc. and GreenMan Technologies, Inc.

   (8) 10.68    --  Equipment Lease between Cryopolymers Leasing, Inc. and GreenMan Technologies, Inc.

   (8) 10.69    --  Letter from Palomare Medical Technologies, Inc. to the Company extending the 
                    maturity date of the December 1996 Note

   (8) 10.70    --  Form of Securities Purchase Agreement between the Company and various investors 
                    in connection with the December 1997 Offering of Convertible Notes due December 
                    2000 and Warrants.

   (8) 10.71    --  Form of Registration Rights Agreement between the Company and various investors 
                    in connection with the December 1997 Offering of Convertible Notes due December
                    2000 and Warrants.

   (8) 10.72    --  Form of Convertible Notes due December 2000

   (8) 10.73    --  Form of Common Stock Purchase Warrant

   (9) 10.74    --  Loan and Security Agreement by and among GreenMan Technologies of Minnesota, Inc.
                    ("GMTM"), GreenMan Technologies of Georgia, Inc. ("GMTG") and Heller Financial Inc. ("Heller").

   (9) 10.75    --  Promissory Note - Real Estate issued by GMTM and GMTG in favor of Heller.

   (9) 10.76    --  Promissory Note - Equipment issued by GMTM and GMTG in favor of  Heller.

   (9) 10.77    --  Form of Stock Pledge and Security Agreement delivered by the Company and GreenMan 
                    Acquisition Corp. to Heller.

   (9) 10.78    --  Form of Guaranty delivered by the Company and certain officers of the Company in favor of Heller.

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

    ***23.1     --  Consent of Wolf & Company, P.C. dated September 14, 1998.

    ***27.1     --  Financial Data Schedule

--------
<FN>
*    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, 1998 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.

                                       25
<PAGE>
(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.
(6)  Filed as an Exhibit to the Company's From 10-KSB for the year ended May 31, 1998, as amended.
(7)  Filed as an Exhibit to the Company's Form 10-QSB for the Quarter Ended August 31,1997, and incorporated herein by reference
(8)  Filed as an Exhibit to the Company's Form 10-QSB for the Quarter Ended November 30, 1997 and incorporated herein by reference
(9)  Filed as an Exhibit to the Company's Form 10-QSB for the Quarter Ended February 28, 1998 and incorporated herein by reference

</FN>
</TABLE>


                                       26
<PAGE>
<TABLE>
<CAPTION>
                          GreenMan Technologies, Inc.
                   Index to Consolidated Financial Statements



                                                                                                    Page
<S>                                                                                                <C>

Independent Auditors' Report                                                                         F-2

Consolidated Balance Sheets as of  May 31, 1997 and 1998                                             F-3

Consolidated Statements of Loss for the Years Ended May 31, 1997 and 1998                            F-4

Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
May 31, 1997 and 1998                                                                                F-5

Consolidated Statements of Cash Flows for the Years Ended May 31, 1997 and 1998                      F-6

Notes to Consolidated Financial Statements                                                           F-8
</TABLE>



<PAGE>



                          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 subsidiaries as of May 31, 1997 and 1998 and the
related  consolidated  statements of loss,  changes in stockholders'  equity and
cash  flows  for the  years  ended May 31,  1997 and  1998.  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 subsidiaries at May 31, 1997 and 1998 and the results of
their  operations  and cash flows for the years  ended May 31,  1997 and 1998 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 4 to the
consolidated  financial  statements,   the  Company  has  suffered  losses  from
operations 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 4. The financial  statements do not
include any adjustments that might result from the outcome of this uncertainty.


                                                  WOLF & COMPANY, P.C.
Boston, Massachusetts
August 7, 1998, except for Note 19 as to which the date is September 4, 1998.




                                      F-2

<PAGE>

<TABLE>
<CAPTION>

                                       GreenMan Technologies, Inc.
                                        Consolidated Balance Sheet

                                                                                           May 31,        May 31,
                                                                                            1997           1998
                                                                                       ------------    ------------
<S>                                                                                   <C>             <C>
ASSETS

Current assets:

     Cash and cash equivalents .....................................................   $    104,193    $    180,963
     Accounts receivable, trade, less allowance for doubtful accounts of $23,772 and
     $63,737 as of May 31, 1997 and May 31, 1998 ...................................        550,644       1,475,064
     Inventory (Note 5) ............................................................        553,688         328,578
     Other current assets ..........................................................        204,155         392,119
                                                                                       ------------    ------------
          Total current assets .....................................................      1,412,680       2,376,724
                                                                                       ------------    ------------
Property and equipment, net (Notes 10 and 12) ......................................      4,921,043       9,874,079
                                                                                       ------------    ------------
Other assets:
     Equipment deposits (Note 8) ...................................................        800,000         200,000
     Acquisition deposit (Note 2) ..................................................        650,000            --
     Deferred financing costs (Note  9) ............................................      1,198,899         441,465
     Deferred loan costs (Note 10) .................................................           --           286,218
     Goodwill, net (Note 2) ........................................................        415,398         460,552
     Investment in joint venture  (Note 8) .........................................           --           400,000
     Other (Note 7) ................................................................        387,510         468,504
                                                                                       ------------    ------------
                                                                                          3,451,807       2,256,739
                                                                                       ------------    ------------
                                                                                       $  9,785,530    $ 14,507,542
                                                                                       ============    ============
                         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Convertible notes payable,related party (Note 11) .............................   $  1,200,000    $       --
     Notes payable, related party (Note 11) ........................................         58,829          24,371
     Notes payable, current portion  (Note 10) .....................................         37,910       1,053,676
     Accounts payable (Note 3) .....................................................        815,631       1,515,371
     Accrued expenses, other (Note 3) ..............................................      1,270,682       1,717,599
     Obligations under capital leases, current (Note 12) ...........................      1,045,726         213,622
                                                                                       ------------    ------------
          Total current liabilities ................................................      4,428,778       4,524,639
     Convertible notes payable (Note 9) ............................................      2,200,000       1,359,567
     Convertible notes payable, related parties (Note 11) ..........................        640,000            --
     Notes payable, related party, non-current portion  (Note 11) ..................         24,371            --
     Notes payable,non-current portion  (Note 10) ..................................        474,678       3,062,283
     Obligations under capital leases (Note 12) ....................................        894,238       2,424,825
                                                                                       ------------    ------------
          Total liabilities ........................................................      8,662,065      11,371,314
                                                                                       ------------    ------------
Commitments and contingencies (Notes 13 and 19)
Stockholders' equity (Notes 2, 9, 11, 12 and 14):
     Preferred stock, $1.00 par value, 1,000,000 shares authorized, none issued ....           --              --
     Common stock, $.01 par value, 20,000,000 shares authorized; 1,374,659
     and 5,858,019 shares issued and outstanding at May 31, 1997 and May 31, 1998 ..         13,747          58,580
     Additional paid-in capital ....................................................     11,814,651      20,107,567
     Accumulated deficit ...........................................................    (10,704,933)    (17,029,919)
                                                                                       ------------    ------------
          Total stockholders' equity ...............................................      1,123,465       3,136,228
                                                                                       ------------    ------------
                                                                                       $  9,785,530    $ 14,507,542
                                                                                       ============    ============
          See accompanying notes to consolidated financial statements.

                                      F-3
</TABLE>
             
<PAGE>
<TABLE>
<CAPTION>
                                    GreenMan Technologies, Inc.
                                   Consolidated Statements of Loss


                                                                      Years Ended May 31,
                                                                    1997            1998
                                                               ------------    ------------

<S>                                                           <C>             <C>         
Net sales ..................................................   $  2,084,220    $ 11,011,519
Cost of sales ..............................................      1,439,249       7,494,762
                                                               ------------    ------------
Gross profit ...............................................        644,971       3,516,757
                                                               ------------    ------------
Operating expenses:

     Research and development ..............................        319,726         675,252
     Selling, general and administrative ...................      3,721,223       4,524,488
     Impairment loss (Note 8) ..............................      1,000,000            --
                                                               ------------    ------------
          Total operating expenses .........................      5,040,949       5,199,740
                                                               ------------    ------------
Operating loss .............................................     (4,395,978)     (1,682,983)
                                                               ------------    ------------
Other income (expense):
     Interest and financing costs (Notes 9, 10, 11 and 12) .     (2,015,971)     (2,886,366)
     Other, net ............................................         (5,436)          5,317
                                                               ------------    ------------
          Other (expense), net .............................     (2,021,407)     (2,881,049)
                                                               ------------    ------------
Loss from continuing operations ............................     (6,417,385)     (4,564,032)
                                                               ------------    ------------
Discontinued operations (Note 3):
     Loss from discontinued operations .....................       (589,094)       (660,954)
     Loss on disposal of discontinued operations ...........           --        (1,100,000)
                                                               ------------    ------------
                                                                   (589,094)     (1,760,954)
                                                               ------------    ------------
Net loss ...................................................   $ (7,006,479)   $ (6,324,986)
                                                               ============    ============

Loss from continuing operations per share - basic (Note 1) .   $      (5.72)   $      (1.76)

Loss from discontinued operations per share - basic (Note 1)          (0.52)          (0.26)

Loss on disposal of discontinued operations - basic (Note 1)           --             (0.42)
                                                               ------------    ------------
Net loss per share - basic (Note 1) ........................   $      (6.24)   $      (2.44)
                                                               ============    ============
Weighted average shares outstanding ........................      1,122,788       2,596,776
                                                               ============    ============



          See accompanying notes to consolidated financial statements.

                                      F-4
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                                     GreenMan Technologies, Inc.
                                     Consolidated Statements of Changes In Stockholders' Equity
                                                  Years Ended May 31, 1997 and 1998
                                                     (Notes 2, 9, 11, 12 and 14)

                                                                                            Additional
                                                                         Common Stock        Paid-in       Accumulated
                                                                     Shares     Amount       Capital         Deficit        Total
                                                                     ------     ------       -------         -------        -----
<S>                                                               <C>         <C>        <C>            <C>            <C>        
Balance May 31, 1996 ...........................................   1,015,216   $ 10,152   $  7,224,128   $ (3,698,454)  $ 3,535,826
Compensation expense related to warrants issued to non-
  employees under SFAS No. 123 .................................        --         --          646,203           --         646,203
Sale of common stock ...........................................     109,000      1,090        705,370           --         706,460
Shares issued on exercise of stock options .....................         480          5            331           --             336
Compensation expense related to warrants issued in January
  1997 convertible debt offering under SFAS No. 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 ...................     249,963      2,500        821,519           --         824,019
Compensation  expense related to warrants issued in April 1997
  convertible debt offering under SFAS No. 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 No. 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 ..........................................   1,374,659     13,747     11,814,651    (10,704,933)    1,123,465
Shares issued upon conversion of notes payable and accrued
  interest .....................................................   2,998,101     29,981      4,967,060           --       4,997,041
Fair value of warrants  issued in June and July 1997 convertible
  debt offering under SFAS No. 123 .............................        --         --            7,800           --           7,800
Fair value of conversion discount on convertible notes payable
  issued in June and July 1997 .................................        --         --          166,000           --         166,000
Shares issued on exercise of stock warrants ....................      36,000        360        224,640           --         225,000
Shares issued for purchase of GMTL..............................     153,402      1,534        742,466           --         744,000
Fair value of warrants issued for the purchase of GMTL
  under SFAS No. 123 ...........................................        --         --           31,000           --          31,000
Fair value of warrants issued in December 1997 convertible
  debt offering under SFAS No. 123 .............................        --         --           32,000           --          32,000
Fair value of conversion discount on convertible notes payable
  issued in December 1997 ......................................        --         --          533,000           --         533,000
Shares issued pursuant to capital lease agreement ..............      33,333        333         99,667           --         100,000
Sale of common stock ...........................................   1,257,734     12,577      1,487,423           --       1,500,000
Shares issued on exercise of stock options .....................       4,790         48          1,860           --           1,908
Net loss for year ended May 31, 1998 ...........................        --         --             --       (6,324,986)   (6,324,986)
                                                                 -----------   --------   ------------   ------------   -----------
Balance, May 31, 1998 ..........................................   5,858,019   $ 58,580   $ 20,107,567   $(17,029,919)  $ 3,136,228 
                                                                 ===========   ========   ============   ============   ===========


          See accompanying notes to consolidated financial statements.
</TABLE>

                                      F-5
     
<PAGE>
<TABLE>
<CAPTION>

                                         GreenMan Technologies, Inc.
                                    Consolidated Statements of Cash Flows

                                                                                             Years Ended May 31,
                                                                                             -------------------
                                                                                            1997          1998
                                                                                        -----------    -----------

<S>                                                                                    <C>            <C>
Cash flows from operating activities:
     Net loss .......................................................................   $(7,006,479)   $(6,324,986)
     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      1,746,234
     Allowance for uncollectible note receivable ....................................       150,000           --
     Depreciation and amortization ..................................................       555,300      1,313,454
     Common stock warrants and options issued for services ..........................       646,203           --
     Loss on disposal of discontinued operations ....................................          --        1,100,000
     (Increase) decrease in assets:
          Accounts receivable .......................................................        54,611        486,914
          Inventory .................................................................       (28,409)       269,901
          Loan receivable, related party ............................................       500,000           --
          Other current assets ......................................................        38,452        172,279
     Increase (decrease) in liabilities:
          Accounts payable ..........................................................        96,861        202,468
          Accrued expenses ..........................................................       590,364        553,661
                                                                                        -----------     ----------
               Net cash used for operating activities ...............................    (1,717,896)      (480,075)
                                                                                        -----------     ----------
Cash flows from investing activities:
     Acquisition deposit ............................................................      (650,000)          --
     Purchase of property and equipment .............................................      (637,944)    (1,146,177)
     Proceeds on disposal of property and equipment..................................          --          810,000
     Refund of equipment deposits....................................................          --          100,000
     Cash acquired upon purchase of GMTL.............................................          --          172,064
     Deferred loan costs.............................................................          --         (322,000)
     Decrease (increase) in other assets ............................................        14,425       (246,547)
                                                                                        -----------     ----------
          Net cash used for investing activities ....................................    (1,273,519)      (632,660)
                                                                                        -----------     ----------
Cash flows from financing activities:
     Net proceeds from convertible note payable .....................................     2,557,019      1,350,000
     Proceeds from notes payable ....................................................        46,550      3,511,379
     Repayment of notes payable .....................................................      (149,259)    (4,989,869)
     Net advances under line of credit...............................................          --          279,309
     Proceeds from notes payable - related parties ..................................       860,000        386,000
     Repayment of notes payable -  related parties ..................................      (893,950)       (58,829)
     Principal payments on obligations under capital leases .........................      (184,720)    (1,015,393)
     Net proceeds on exercise of common stock options and warrants...................           336        226,908
     Net proceeds on the sale of common stock .......................................       706,460      1,500,000
                                                                                        -----------    -----------
          Net cash provided by financing activities .................................     2,942,436      1,189,505
                                                                                        -----------    -----------
Net (decrease) increase in cash .....................................................       (48,979)        76,770
Cash and cash equivalents at beginning of year ......................................       153,172        104,193
                                                                                        -----------    -----------
Cash and cash equivalents at end of year ............................................   $   104,193    $   180,963
                                                                                        ===========    ===========
                                   (Continued)

                                      F-6
<PAGE>
<CAPTION>

                                         GreenMan Technologies, Inc.
                                    Consolidated Statements of Cash Flows
                                                (Concluded)
                                                                                             Years Ended May 31,
                                                                                             -------------------
                                                                                            1997          1998
                                                                                        -----------    -----------

<S>                                                                                    <C>            <C>

Supplemental cash flow information:
     Machinery and equipment acquired under capital leases ..........................   $   993,062    $ 2,771,876
     Common stock issued upon conversion of notes payable and accrued interest ......       825,000      4,997,041
     Common stock issued pursuant to capital lease agreement.........................          --          100,000
     Value of conversion discounts and warrants issued in connection with convertible
     notes payable ..................................................................     2,417,100        738,800
     Interest paid ..................................................................       232,987        672,996


</TABLE>

Supplemental Schedule of Noncash Investing and Financing Activities:

On June 30, 1997,  the Company  purchased  all of the capital  stock of BFI Tire
Recyclers of Minnesota, Inc. and BFI Tire Recyclers of Georgia, Inc. as follows:

Fair value of assets acquired                           $ 5,472,910
Fair value of liabilities assumed                           141,394
                                                        -----------
Fair value of net assets acquired                         5,331,516
Acquisition deposit                                       (650,000)
                                                        -----------
Note payable issued                                     $ 4,681,516
                                                        ===========

On  November  19,  1997,   Company   purchased  all  of  the  capital  stock  of
Cryopolymers, Inc. as follows:

Fair value of assets acquired                           $ 1,016,597
Fair value of liabilities assumed                           341,597
                                                        -----------
Fair value of net assets acquired                           675,000
Common stock issued                                        (744,000)
Value ascribed to warrants issued under SFAS No. 123        (31,000)
                                                        -----------
Excess of cost over fair value of net assets            $   100,000
                                                        ===========

         During the year ended May 31, 1998,  $100,000 of equipment deposits was
reclassified to property,  plant and equipment and $400,000 was  reclassified to
investment in joint venture.

         In connection with the discontinued operations, the Company transferred
equipment  with  a  net  book  value  of  $477,000  and  related  capital  lease
obligations of $777,000 to accounts payable.

          See accompanying notes to consolidated financial statements.

                                      F-7
<PAGE>
   
                                   

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements

1.       Summary of Significant Accounting Policies

Business

         GreenMan Technologies, Inc. (the "Company" or "GreenMan") was initially
formed to develop,  manufacture and sell "environmentally  friendly" plastic and
thermoplastic  rubber feedstocks,  rubber parts and products  manufactured using
recycled  materials  and/or  are  themselves  partially  or  wholly  recyclable.
Although  successful in the technical  development of commercial and proprietary
products  through  May 31,  1997,  the  Company  determined  in fiscal 1998 that
concentration  on raw materials  management would be more profitable in the near
term.  The Company  currently  operates two  business  segments,  the  recycling
operations located in Jackson,  Georgia; Savage, Minnesota and St. Francisville,
Louisiana and the industrial material operation located in Birmingham,  Alabama.
Until  closure in January 1998,  the Company also operated an injection  molding
operation (the "Molding operation") located in Malvern, Arkansas.

        The Company's wholly-owned subsidiary, DuraWear Corporation ("DuraWear")
located in  Birmingham,  Alabama  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.

         On June 30, 1997,  the Company  acquired as wholly owned  subsidiaries,
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.  and are in the scrap  tire
collection  and  processing  business.  BTM and BTG have been  renamed  GreenMan
Technologies of Minnesota,  Inc. ("GMTM") and GreenMan  Technologies of Georgia,
Inc. ("GMTG"), respectively.

        On November 19, 1997, the Company acquired as a wholly owned subsidiary,
all of the capital stock of Cryopolymers,  Inc., ("Cryopolymers") a processor of
scrap  tire  chips into crumb  rubber  located in St.  Francisville,  Louisiana.
Cryopolymers has been renamed GreenMan Technologies of Louisiana,  Inc. ("GMTL")
and together with GMTM and GMTG will  constitute  the Company's  tire  recycling
operations (the "Recycling operations").

Basis of Presentation

        The consolidated financial statements include the results of the Company
and DuraWear  for the year ended May 31, 1998,  GMTM and GMTG since July 1, 1997
and GMTL since  November 19, 1997.  All  significant  intercompany  accounts and
transactions are eliminated in consolidation.

         The Company  discontinued  operations at the Malvern,  Arkansas molding
operation effective January 1998. Management adopted a formal plan to dispose of
the  facility on January 31, 1998 and as a result,  the  consolidated  financial
statements of the Company have been restated to reflect the operating results of
the facility as a separate line item for all periods presented.

Change in Fiscal Year

         On June 24,1998, the Board of Directors of the Company adopted a change
of its fiscal year from May 31 to September 30. The change will become effective
immediately. The Company's next fiscal year will end on September 30, 1998.

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
joint ventures and notes  receivable  could differ  materially from the value of
these investments  recorded in the accompanying  financial  statements as of May
31, 1998.
                                      F-8
<PAGE>
                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements

1.      Summary of Significant Accounting Policies - (Continued)

Cash Equivalents

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

Reverse Stock Split

         All share  and per share  data in the  financial  statements  have been
adjusted to give  retroactive  effect to a reverse split of the Company's Common
Stock pursuant to which each five shares of Common Stock then  outstanding  were
converted into one share. The reverse split became effective on March 23, 1998.

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.  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.

Deferred Loan Costs

        Deferred loan costs represent costs incurred in connection with securing
financing for the GMTM and GMTG acquisitions. The amount is amortized to expense
over the life of the notes payable.

Revenue Recognition

        Revenues  from  product  sales  are  recognized  when the  products  are
shipped.  Revenues from tire  processing are recognized  when  processing of the
tires has occurred.

Income Taxes

        Deferred  tax  assets  and   liabilities   are  recorded  for  temporary
differences  between  the  financial  statement  and tax  bases  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 Opinion  ("APB") 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  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  


                                      F-9
<PAGE>
                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements

1.      Summary of Significant Accounting Policies - (Continued)

accounting had been applied.  The pro forma  disclosures  include the effects of
all awards granted after May 31, 1995. (See Note 14)

Net Loss Per Share

         In February 1997, FASB issued SFAS No. 128,  "Earnings per Share" which
requires that  earnings per share be  calculated on a basic and dilutive  basis.
Basic earnings per share represents  income available to common stock divided by
the weighted  average  number of common  shares  outstanding  during the period.
Diluted  earnings per share  reflects  additional  common shares that would have
been outstanding if potential dilutive common shares had been issued, as well as
any  adjustment  to  income  that  would  result  from the  assumed  conversion.
Potential  common shares that may be issued by the Company relate to outstanding
stock options and  warrants,  (determined  using the treasury  stock method) and
convertible debt. The assumed  conversion of outstanding  dilutive stock options
and  warrants  would  increase the shares  outstanding  but would not require an
adjustment to income as a result of the  conversion.  The statement is effective
for interim and annual  periods ending after December 15, 1997, and requires the
restatement of all prior period earnings per share data presented.  Accordingly,
the Company has restated all earnings per share date presented  herein.  For the
years ended May 31, 1997 and 1998,  options,  warrants and convertible debt were
anti-dilutive and excluded from the net loss per share computation.

New Accounting Pronouncements

        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  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 with the next fiscal year.

        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 fiscal years  beginning  after December 15, 1997.
SFAS No. 131  establishes  standards  for the way that public  companies  report
information about operating segments in annual and interim 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 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.

                                      F-10
<PAGE>
                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements

2.      Acquisition of Subsidiaries

         On June 30, 1997, the Company acquired,  as wholly owned  subsidiaries,
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.  and are in the scrap  tire
collection  and  processing  business.  BTM and BTG have been  renamed  GreenMan
Technologies of Minnesota,  Inc. ("GMTM") and GreenMan  Technologies of Georgia,
Inc. ("GMTG"), respectively.

         The Company agreed to pay $5,331,516 for all of the outstanding capital
stock of GMTM and GMTG of which  $650,000  was paid as a deposit and the balance
of $4,681,516 was financed by a short-term note, at an interest rate of 10% from
BFI. The note was  originally  due and payable on September  30, 1997. In return
for payments in November and December 1997 the Company  obtained an extension of
the due date until February  1998. In February 1998, the Company  secured a $5.0
million  asset-based credit facility and used approximately  $3,900,000 to repay
the balance due on the note plus interest. (See Note 10)

        The  acquisition  has  been  accounted  for by the  purchase  method  of
accounting,  and  accordingly,  the net assets and results of operations of GMTM
and GMTG are included in the consolidated financial statements since the date of
acquisition.  The  Company  was also  granted an  exclusive  option to  purchase
certain  assets and  agreements of BFI's Ford Heights,  Illinois tire  recycling
operation  which has the  capacity  to process  between 12 and 15 million  tires
annually.

         On November 19, 1997, the Company acquired as a wholly owned subsidiary
all of the outstanding  common stock of Cryopolymers  Inc.,  (renamed  "GMTL") a
privately-held crumb rubber producer located in St. Francisville, Louisiana. The
purchase  price  consisted of (1)  $744,000 in shares of common  stock  (153,402
shares);  (2) warrants to purchase  240,000  shares of common stock  exercisable
commencing  April 1, 1998 for period of five years at prices ranging from $15.00
to $35.00 per share;  and (3) additional  warrants to purchase  20,000 shares of
common  stock  exercisable  at $4.85 per  share  for a period of five  years and
vesting over a two-year  period.  The Company has  determined the total purchase
price to be  $775,000  based  upon the value of the  common  stock and a $31,000
value ascribed to the 260,000 warrants.

        The  acquisition  has been accounted for as a purchase and  accordingly,
the  operations of GMTL are included in the  consolidated  financial  statements
since November 19, 1997.  Goodwill was recorded as the total  consideration paid
by the Company exceeded the fair value of the net assets acquired by $100,000.

        The following  unaudited proforma financial  information  summarizes the
consolidated results of operations of the Company and the subsidiaries as if the
acquisitions  had  occurred  at the  beginning  of fiscal  1997.  The  unaudited
proforma information is not necessarily  indicative 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,
                                                      1997            1998
                                                      ----            ----
Revenue                                           $11,261,442      $11,762,051
Net loss from continuing operations                (7,233,199)      (4,607,194)
Net loss                                           (7,822,293)      (6,368,148)
Net loss per weighted average share                     (6.97)           (2.45)

        The Company  also  recorded  $498,000 of  Goodwill  associated  with the
October 1995 acquisition of DuraWear.  Goodwill  recorded in connection with the
acquisition of  subsidiaries is being amortized over 10 years on a straight line
basis.  Amortization  expense  for the  years  ended  May 31,  1997 and 1998 was
$49,848 and $54,846, respectively.

                                      F-11
<PAGE>
                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements

3.      Discontinued Operations

         In January 1998,  the Company  discontinued  operations at its Malvern,
Arkansas  facility  (the  "Facility").  The Facility was  previously  engaged in
providing injection molding manufacturing services to customer specifications 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.  During  the  years  ended May 31,  1997 and 1998,  the
Facility's revenues totaled $1,936,450 and $1,126,627 respectively.

         Management  adopted a formal plan to dispose of the Facility on January
31, 1998. As a result, the Company recorded an estimated loss on disposal of the
Facility  of  $1,100,000  and  wrote  down the  Facility's  net  assets to their
estimated  fair market  value.  The  consolidated  financial  statements  of the
Company have been restated to reflect the net operating  results of the Facility
as a separate line item for all periods  presented.  The Company reported a loss
from  discontinued  operations  for the  years  ended  May 31,  1997 and 1998 of
$589,094  and  $660,954,  respectively.  As of May 31,  1998,  the  Company  has
disposed of a majority of the Facility's assets and has  approximately  $598,000
of net obligations  remaining which are included in accounts payable and accrued
expenses.  In July  1998,  the  Company  disposed  of the  remaining  assets and
converted $300,000 of the net obligations into a $300,000,  10% convertible note
payable. The note is payable in 36 monthly payments of $9,680 and is convertible
into common stock at the  holder's  option,  at $1.38 per share.  The Company is
currently negotiating payment terms with the remaining creditors.

4.      Need for Additional Capital

        The  Company  has  incurred  losses  since  its  inception   aggregating
$17,029,919, and has a working capital deficiency of $2,147,915 at May 31, 1998.
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  or  raise  additional  financing.
Management  plans  to  resolve  the  doubt  by  evaluating   existing  financing
alternatives,   negotiating  with  existing  secured  creditors,  attempting  to
refinance  existing long term debt and  achieving  profitable  operations.  As a
result, management believes that no adjustments or reclassifications of recorded
assets and liabilities is necessary at this time.

5.      Inventory

Inventory consists of the following at May 31:
                                                           1997         1998
                                                           ----         ----
Raw materials ................................         $ 164,589      $ 29,000
Work in process ..............................            15,670        12,805
Finished goods ...............................           373,429       286,773
                                                       ---------      --------
                                                       $ 553,688      $328,578
                                                       =========      ========


                                      F-12
<PAGE>
                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements

6.      Property, Plant and Equipment

Property, plant and equipment consists of the following at May 31:



                                                                  Estimated
                                         1997          1998      Useful Lives
                                      ---------     ----------   ------------
  Land ...........................     $223,785     $  879,162
  Buildings ......................      910,400      2,490,980     5-25 years
  Machinery and equipment ........    3,545,573      5,552,609     3-20 years
  Furniture and fixtures .........       89,792         79,184      3-7 years
  Motor vehicles .................       64,822      1,779,541     3-10 years
  Leasehold improvements .........      975,116         52,626        5 years
                                      ---------     ----------
                                      5,809,488     10,834,102
Less accumulated depreciation        
and amortization                       (888,445)      (960,023)
                                      ---------     ----------
Property, plant and equipment (net)  $4,921,043    $ 9,874,079
                                     ==========    ===========
                                                                   
Depreciation and amortization  expense for the years ended May 31, 1997 and 1998
was $380,454 and $1,057,273 respectively.

7.      Other Assets

Other assets consists of the following at May 31:
                                                          1997          1998
                                                       ---------     ---------
Non-competition agreement, net ...............         $ 155,557     $      --
Licensing fee, net............................            91,667        81,671
Note receivable and accrued interest..........                --       107,787
Joint venture deposit.........................                --       150,000
Deposits and miscellaneous....................           140,286       129,046
                                                         -------       -------
                                                       $ 387,510      $468,504
                                                       =========      ========

        In  conjunction  with the 1995  acquisition  of  Durawear,  the  Company
entered  into a three  year  non-competition  agreement  with  the  former  sole
shareholder of Durawear valued at $350,000.  Amortization  expense for the years
ended May 31, 1997 and 1998 were $116,667 and $155,557, respectively.

        In April 1996,  the Company paid a one-time  $100,000  license fee for 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. In connection with this license 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 years ended May 31, 1997 and 1998
was $8,333 and $9,996, respectively.

        In January  1998,  the  Company  advanced  $104,100 to an officer of the
Company under an 8.5% secured loan  agreement  with both  principal and interest
due January 2001. The loan is secured by 111,111 shares of the Company's  common
stock owned by the officer.

                                      F-13
<PAGE>
                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements

        In April 1998, the Company paid a $150,000 deposit towards the formation
of a joint  venture  intended to address the  process of  extracting  high value
chemical  commodities  from scrap  tires.  The joint  venture had not  commenced
operations as of May 31, 1998.

8.      Equipment Deposits/Joint Venture

        During the year ended May 31,  1996,  the Company  purchased a cryogenic
recycling line for $1,500,000 and placed an additional  $300,000 deposit towards
the purchase of an additional cryogenic recycling equipment line.

        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  cryogenic  recycling  equipment  into a joint  venture with Crumb
Rubber Technologies, Inc. ("CRT"), the original equipment manufacturer.

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

         In August  1997,  the  Company  finalized  the  formation  of the joint
venture between the Company and 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 address existing opportunities for larger mesh crumb rubber such as
in  rubber  mats,  ground  cover and as a filler in  asphalt  applications.  The
Company has  contributed  a portion of its  investment  in the  cryogenic  crumb
rubber equipment ($400,000) which was formerly located in Jackson,  Georgia into
the  venture  as  its  capital   contribution  while  CRT  contributed   certain
facilities, equipment, customer contracts, licenses and permits and will provide
operational and technical expertise.  Pursuant to the terms of the joint venture
agreement,  CRT has returned $100,000 of equipment  deposits  previously made by
the Company and is currently  determining  a payment  schedule for the remaining
$200,000. The joint venture began operating on a limited basis in April 1998 and
has not yet generated significant revenues.

9.      Convertible Notes Payable

January 1997 Debentures

        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  152,500  shares of common  stock (the  "January
Offering")  at an  exercise  price  of  $6.25  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 net proceeds from the January  Offering
were  approximately  $1,310,000  after  deducting  commissions  and  expenses of
approximately  $214,000.  The Company has recorded non-cash  deferred  financing
costs of $75,000 in  connection  with the  issuance of the  warrants to purchase
152,500  shares.  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  also  recorded  non-cash  deferred
financing  costs of  $695,000  in  connection  with the  issuance of warrants to
purchase  210,000  shares of common stock to the placement  agents in accordance
with SFAS No. 123. These warrants are immediately  exercisable at prices ranging
form $.25 to $6.25 per share with 120,000 warrants expiring in December 1999 and
90,000  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  and  1998  was
$1,396,953 and $271,484, respectively.

                                      F-14
<PAGE>
                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements

        As of May 31,  1998,  all  Debentures  had been  converted  into 502,181
shares of the Company's common stock and all deferred charges had been amortized
to expense.  Investors from the January  Offering have exercised 36,000 warrants
during the year ended May 31, 1998  resulting  in net proceeds to the Company of
$225,000. 

April 1997 Notes

         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  60,000  shares of common stock (the "April  Offering")  at exercise
prices ranging from $4.85 to $5.25. 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  closing bid prices on the five trading days  preceding the
date of the April Offering  closing or 70% of the average  closing bid prices on
the five trading days  preceding the date of the  conversion  of the Notes.  The
note  holders  receive  800  shares  of the  Company's  common  stock 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 30,968 shares of common stock at an exercise price of $4.85
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 90,968
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.  Amortization  expense and interest  expense on the
Notes  for the year  ended  May 31,  1997  and May 31,  1998  was  $323,742  and
$696,633.  During the year ended May 31, 1998, all Notes had been converted into
1,089,449 shares of common stock including 49,813 shares associated with accrued
interest and all deferred charges had been amortized to expense.

        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,  payment of interest and upon exercise of
the warrants to purchase  90,968 shares of common stock.  Commencing  July 1997,
the Company was required to pay the investors 2.5% of their principal investment
per month as a penalty for each month or portion  thereof  prior to the date the
Form S-3 was  declared  effective.  The Form S-3 was  declared  effective by the
Securities  and Exchange  Commission on November 12, 1997. At May 31, 1998,  the
Company has recorded  $162,500 of additional  financing  costs pursuant to these
terms.

December 1997 Debentures

        In  December  1997,  the  Company  entered  into   securities   purchase
agreements  (the  "Debenture  Agreements")  with two investors  (the  "Debenture
Holders") and pursuant  thereto,  the Company issued debentures in the aggregate
principal  amount of  $1,600,000  (the  "Initial  Debentures")  and  immediately
exercisable  two-year  warrants to purchase  32,000 shares of Common Stock at an
exercise price of $3.13 per share.  Each Initial  Debenture bears interest at 8%
and is due December 15, 2000.  The Initial  Debentures  are  convertible  at the
election of the holder at any time  commencing  upon the earlier to occur of (i)
the effective date of the  registration  statement  covering the shares issuable
upon  conversion  of the  Debentures,  or  (ii) 60 days  following  the  date of
issuance at a  conversion  price  equal to the lower of the average  closing bid
prices  on the  five  trading  days  preceding  the date of the  closing  of the
December  Offering or 75% of the average  closing bid prices on the five trading
days  preceding the date of the  conversion of the  Debentures.  The  Debentures
automatically  convert  into shares of common stock upon  maturity.  The Company
also issued immediately  exercisable two year warrants to purchase 32,000 shares
of common stock at an exercise price of $3.13 per share to the placement  agent.
As of May 31,  1998,  $240,433 of the Initial  Debentures  and $7,127 of accrued
interest have been  converted  into 98,984  shares of common  stock.  During the
period of June through July 1998, an additional  $594,664 of Initial  Debentures
and $25,867 of accrued  interest were  converted  into 466,454  shares of common
stock.

         The  net  proceeds  from  the  December  Offering  were   approximately
$1,350,000 after deducting  commissions and expenses of approximately  $250,000.
The Company  used  $750,000 of the  proceeds  to paydown  the  outstanding  loan
payable  to BFI for the  purchase  of GMTM and  GMTG.  The  Company  recorded  a
deferred  charge of $533,000  associated with the 25% discount from market to be
realized upon conversion

                                      F-15
<PAGE>
                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements

9.      Convertible Notes Payable - (continued)

of the Debentures. The Company also recorded deferred financing costs of $32,000
in connection  with the issuance of warrants to purchase 64,000 shares of common
stock to the investors and placement agents in accordance with SFAS No. 123. The
deferred  charges are being amortized over the estimated life of the Debentures.
Amortization  expense  for the year ended May 31,  1998 was  $373,535.  Interest
expense for the year ended May 31, 1998 was $104,700.

        Pursuant to the Debenture Agreements,  the Debenture Holders have agreed
to  purchase up to an  additional  $2,000,000  in the  aggregate  of  debentures
("Additional  Debentures") in multiple  tranches during 12 months  following the
effective date of the registration  statement  covering the shares issuable upon
conversion of the Debentures.  Each tranche shall be for the purchase of between
$75,000 and  $175,000  in  Additional  Debentures  and may be  completed  at the
election of the Company subject to certain conditions. Each Additional Debenture
shall bear similar  terms to the Initial  Debentures  including  the issuance of
warrants  per  Additional  Debenture  to  both  the  Debenture  Holders  and the
placement  agent.  The  Additional  Debentures  are  convertible  at the holders
option,  within two days of  issuance.  Pursuant  to the terms of the  Debenture
Agreements, the Company is obligated to borrow at least $1,000,000 in Additional
Debentures  or the Company  must  provide the  Debenture  Holders and  placement
agents  warrants to purchase an additional  40,000 shares of Common Stock in the
aggregate.  The Company has issued $250,000 of Additional  Debentures during the
period of June to July 1998.

10.     Notes Payable

         On February 5, 1998, GMTM and GMTG collectively  secured a $5.0 million
asset-based  credit facility (the "Credit  Facility") from Heller Financial Inc.
("Heller"). The Credit Facility consisted of : (i) $1,400,000 of three year term
notes secured by the real estate of GMTM and GMTG,  payable in monthly principal
installments  of $23,333  plus  interest at prime plus 1.75%  (10.25% at May 31,
1998) and a balloon payment of $583,380 due in February 2001; (ii) $1,900,000 of
three year term notes  secured by the  machinery and equipment of GMTM and GMTG,
payable in monthly  principal  installments  of $31,667,  with interest at prime
plus 1.75%  (10.25% at May 31,  1998) and a balloon  payment of $791,620  due in
February  2001 and (iii) a working  capital  line of credit of up to  $1,700,000
secured by the eligible accounts  receivable,  as defined, of GMTM and GMTG. The
line of credit bears interest at prime plus 1.5% (10% at May 31, 1998).

         The Company granted Heller a security  interest in the capital stock of
GMTM and GMTG in addition  to  providing a Company  guarantee  and the  personal
guarantee of three officers of the Company. The Credit Facility contains certain
covenants  including minimum net worth and certain  restrictions on intercompany
cash  transactions.  The Company is either in  compliance  with the terms of the
Credit Facility or received a waiver of compliance at May 31, 1998.

        The Company used the  proceeds  from the Credit  Facility,  to repay the
balance of $3,906,071, including interest, due under the short-term note payable
to BFI for the purchase of GMTM and GMTG (See Note 2). The Company also incurred
approximately  $322,000 of deferred  loan costs  associated  with  securing  the
Credit Facility. These deferred charges are being amortized over the life of the
term notes. Amortization expense for the year ended May 31, 1998 was $35,782.
<TABLE>
<CAPTION>
        Notes payable consists of the following at:
                                                                                                   May 31,          May 31,
                                                                                                    1997             1998
                                                                                                    ----             ----
<S>                                                                                            <C>                <C>

Term note payable to a bank,  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, 1998) and a final installment of the remaining unpaid principal 
  balance due July 2000 ........................................................                 $ 450,654         $ 432,300
Term note payable, secured by all real estate of GMTM and GMTG, guaranteed by 
 the Company and three officers,  due in monthly installments of $23,333
 including interest at prime plus 1.75% (10.25% at May 31, 1998) and a final
  installment of the remaining unpaid principal balance due February 2001.......                        --         1,330,000

                                      F-16
<PAGE>


                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements

10.     Notes Payable - (continued)

Term note payable, secured by all machinery and equipment of GMTM and GMTG, 
  guaranteed by the  Company  and three  officers,  due in  monthly installments
  of  $31,667 including  interest at prime plus 1.75%  (10.25% at May 31,  1998)
  and a finalinstallment of the remaining unpaid principal balance due 
  February 2001.................................................................                        --         1,805,000
Line of credit, secured by eligible accounts receivable of GMTM and GMTG, 
  guaranteed by the Company and three officers, and bearing interest at prime 
  plus 1.5% (10% at May 1, 1998). .......................... ..................                         --           279,309
Other term notes payable and assessments, secured by equipment and requiring 
  monthly installments..........................................................                    61,934           269,350
                                                                                                 ---------         ---------
                                                                                                   512,588         4,115,959
Less current portion ...........................................................                   (37,910)       (1,053,676)
                                                                                                 ---------        -----------
  Notes payable, non-current portion                                                             $ 474,678        $ 3,062,283
                                                                                                 =========        ===========
</TABLE>
         The following is a summary of maturities  of notes  payable,at  May 31,
1998:

Years Ending
May 31,
1999 .......................................                   $ 1,053,676
2000 .......................................                       745,394
2001 .......................................                     2,267,828
2002 .......................................                        38,860
2003........................................                        10,201
                                                               -----------
                                                               $ 4,115,959
                                                               ===========

        Interest  expense for the years ended May 31, 1997 and 1998 was $ 56,195
and $478,497.

11.     Related Party Debt Agreements

Convertible Notes Payable, Related Parties

        On December 30, 1996, the Company  renegotiated the remaining  principal
balance of $1,200,000 due to Palomar Medical  Technologies,  Inc.  ("Palomar") a
company that was related to a director of the Company,  under 10% notes payable.
The outstanding  principal balance was converted into 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 $5.00 per share.
The Note was secured by an interest in the Company's  cryogenic  tire  recycling
equipment.  The Company also reduced the exercise  price of the 60,000  warrants
granted  in  connection  with this  borrowing  to $5.65 per share.  The  Company
recorded a non cash expense of $36,000 in  connection  with the reduction in the
exercise price in accordance with SFAS No. 123.  Interest  expense for the years
ended May 31, 1997 and 1998 amounted to $135,890 and $115,658, respectively.

        As of May 31, 1998,  Palomar had  converted its entire  $1,200,000  note
payable and $165,741 of accrued  interest  into  297,257  shares of common stock
pursuant  to the  terms  of the  convertible  note  payable.  A  portion  of the
conversion  included a one time 15%  reduction in the  conversion  price as a an
inducement to convert the balance due under the note.

Convertible Notes Payable, Officers

        In May 1996,  the  Company  borrowed  $325,000  from an  officer  of the
Company.  This unsecured note payable bore 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 

                                      F-17
<PAGE>
                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements

11.     Related Party Debt Agreements - (Continued)

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 each officer 10% convertible notes, due October 30, 1998 in the amount of
$640,000 and warrants to purchase  25,600  shares of common stock at an exercise
price of $4.40 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 prices on the five trading days preceding May 30, 1997 or 70% of the average
closing bid prices 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  25,600
shares of common stock in accordance with SFAS No. 123.

        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 15,440 shares of common stock
at exercise prices ranging from $3.60 to $4.85 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
15,440 shares of common stock to the officers in  accordance  with SFAS No. 123.
In March 1998, the four officers  converted  $1,026,000 of principal and $75,711
of accrued interest into 1,260,193 shares of unregistered common stock. Interest
expense  for the years  ended May 31,  1997 and 1998 was  $54,304  and  $76,045,
respectively.  Amortization  of deferred  financing costs for the year ended May
31, 1998 was $459,300.

Notes Payable, Related Party

        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, 1998), adjusted annually.

        At May 31,  1997  and  1998,  the  note had a  balance  of $ 83,200  and
$24,371,  respectively. The note matures in September 1998. Interest expense for
the years ended May 31, 1997 and 1998 was $11,012 and $5,435.

12.     Capital Leases

        The Company leases machinery and equipment with a cost of $2,698,336 and
$2,831,477   under  capital   lease   agreements  at  May  31,  1997  and  1998,
respectively. Accumulated amortization amounted to $615,504 and $128,163, at May
31, 1997 and 1998,  respectively.  Amortization  expense on assets under capital
leases for the periods  ended May 31, 1997 and 1998 was  $201,272  and  $299,857
respectively.

        As a result  of the  January  1998  shutdown  of the  injection  molding
operations  (See Note 3),  the  Company  sold  miscellaneous  assets  and leased
machinery  and  equipment  for  $810,000 in May 1998.  The Company  remitted the
proceeds plus an additional $100,000 to the equipment lessors in full settlement
of all amounts due under the corresponding lease obligations.  In June 1998, the
Company sold the remaining  injection  molding assets for $477,000.  The Company
paid $450,000 of the proceeds and issued a $300,000  convertible note payable to
the lessor in full settlement of all amounts owed under the leases.

                                      F-18
<PAGE>
                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements

12.     Capital Leases - (Continued)

        Effective   October  1997,  the  Company  entered  into  a  fifteen-year
cryogenic equipment lease agreement. Under the terms of the agreement, GMTL will
pay $25,500 per month plus an additional $100,000 of bonus rent per year for the
first six years of the  agreement.  The bonus rents are payable in the Company's
common stock with the number of shares determined using the closing bid price of
the common stock on each December 31. The lease has been classified as a capital
lease at May 31, 1998 with an equipment value of $2,771,876.

        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, 1998:

Years Ending
May 31,
    1999 ...................................                   $   425,781
    2000 ...................................                       406,000
    2001 ...................................                       406,000
    2002 ...................................                       406,000
    2003 and thereafter ....................                     2,369,500
                                                               -----------
Total minimum lease payments ...............                     4,013,281
Less amount representing interest ..........                    (1,374,834)
                                                               -----------
        Present value of minimum lease payments                $ 2,638,447
                                                               ===========

        Interest  expense  for the years ended May 31, 1997 and 1998 was $99,103
and $200,681 respectively.

13.     Commitments and Contingencies

Employment Agreements

        The Company has employment  agreements  with five officers which provide
for base  salaries,  participation  in employee  benefit  programs and severance
payments for termination without cause.

Rental Agreements

        The  Company  leases   approximately  2,700  square  feet  of  corporate
administrative  office  space at a monthly  rental of $3,238  under a three year
lease. In June 1998, the Company renegotiated the lease to include an additional
680 square feet and  extended the lease term for five years at $4,366 per month.
Rent expense was $38,856 for the years ended May 31, 1997 and 1998.

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.  In June 1998,
the court ruled in favor of the Company and dismissed the case.

                                      F-19
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements

14.     Stockholders' Equity

Reverse Split of Common Stock

         On March  12,  1998,  the  stockholders  of the  Company  approved  two
amendments to the Company's Certificate of Incorporation; 1) to effect a reverse
split (the  "Reverse  Split") of the Company's  Common Stock,  pursuant to which
each five shares of Common Stock then outstanding were  automatically  converted
into one  share,  effective  March 23,  1998 and 2) to  increase  the  number of
authorized  shares of Common Stock from  20,000,000 to 50,000,000.  The Board of
Directors of the Company chose to implement the Reverse Split and decided not to
increase the  authorized  shares.  All share and per share data in the financial
statements have been adjusted to give retroactive effect to the Reverse Split of
the Company's Common Stock.

Common Stock Transactions

        On September 26, 1996,  the Company sold 109,000  shares of common stock
to three foreign  investors at $7.55 per share. Net proceeds were $706,460 after
deducting commissions and expenses of $116,490.

         During  the year  ended May 31,  1997,  $825,000  of the  January  1997
debentures were converted for 249,963 shares of common stock.

         During  the year ended May 31,  1998,  the  following  shares of common
stock were issued pursuant to convertible notes and debentures:
<TABLE>
<CAPTION>
                                                 Principal        Interest        Total
      Offering                                   Converted        Converted     Share Issued
      --------                                   ---------        ---------     ------------
<S>                                            <C>              <C>               <C>         <C>
  January 1997..............................    $   675,000      $       --        252,218     See Note 9
  April 1997 ...............................      1,500,000         107,029      1,089,449     See Note 9
  Related Party.............................      1,200,000         165,741        297,257     See Note 11
  Officers..................................      1,026,000          75,711      1,260,193     See Note 11
  December 1997.............................        240,433           7,127         98,984     See Note 9
                                                -----------      ----------      ---------     
                                                $ 4,641,433      $  355,608      2,998,101     
                                                ===========      ==========      =========     
</TABLE>
        Investors from the January Offering  exercised 36,000 warrants resulting
in net proceeds to the Company of $225,000.

Private Offering of Common Stock and Warrants

        During the period of March 1998 to May 1998,  the Company sold 1,257,734
shares of unregistered  common stock and warrants to purchase  325,000 shares of
common  stock at  exercise  prices  ranging  from  $1.75 to $3.88  per  share to
investors  including officers and directors of the Company (the "Investors") for
approximately   $1,500,000.   The  Company  granted  the  Investors   piggy-back
registration  rights to register the common stock and the common stock  issuable
upon exercise of the warrants. The Investors have agreed not to sell or transfer
the shares for a period of at least twelve  months after  issuance.  The Company
also  granted  warrants to purchase  8,332 shares of common stock at an exercise
price of $3.88 per share to a third party in conjunction with the offering.  The
weighted  average fair value of the  warrants  under SFAS No. 123 on the date of
grant was $ 0.50 per share

Stock Option Plan

        The 1993 Stock Option Plan (the "Plan") was established to provide stock
options to employees,  officers,  directors and  consultants.  In June 1996, the
Company's  stockholders  approved an increase to the number of shares authorized
under the Plan to  200,000  shares.  On June 24,  1998,  the Board of  Directors
approved  an  increase  to the  number  of shares  authorized  under the Plan to
2,000,000 shares, subject to shareholder approval.

                                      F-20
<PAGE>
                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements

14.     Stockholders' Equity - (Continued)

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  (assuming  the June 24, 1998  increase in  authorized  shares is
approved) are summarized as follows:
<TABLE>
<CAPTION>
                                                                          Years Ended May 31,
                                                                    1997                      1998
                                                         --------------------------------------------------
                                                                      Weighted                     Weighted
                                                                       Average                      Average
                                                                      Exercise                     Exercise
                                                            Shares       Price         Shares         Price
                                                         ---------    ---------     ----------     --------
<S>                                                      <C>          <C>           <C>           <C>    
Outstanding at beginning of year                            75,500     $  6.45         143,340      $  4.05
Granted                                                    133,960        8.00       1,182,600         1.21
Canceled                                                  (65,640)       14.90        (46,200)         5.53
Exercised                                                    (480)         .70         (5,240)          .62
                                                         ---------                     -------
Outstanding at end of year                                 143,340        4.05       1,274,500         1.37
                                                         =========                   =========
Exercisable at end of year                                  27,500         .85          41,940         1.91
                                                         =========                   =========                                    

Reserved for future grants at end of year                   51,180                     714,780
                                                         =========                   =========
Weighted average fair value of options granted                           $1.35                       $ 0.31
during the period
</TABLE>
        Information  pertaining to options outstanding under the Plan at May 31,
1998 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>   
$   .45                                                     29,000     5.0        $  .45           23,200    $  .45
$ 1.09                                                   1,142,600     9.8          1.09               --        --
$ 1.35 - $ 1.45                                             12,400     6.0          1.41            8,440      1.40
$ 4.70 - $ 5.00                                             40,500     9.0          4.70              300      5.00
$ 5.65                                                      50,000     8.6          5.65           10,000      5.65
                                                         ---------                             ----------
                                                         1,274,500     9.6        $ 1.37           41,940    $ 1.91
                                                         =========                             ==========
</TABLE>
Non -Employee Director Stock Option Plan

        Under the terms of the 1996  Non-Employee  Director  Stock  Option  Plan
("Director Plan") on a non-employee  director's initial election to the Board of
Directors,  they are automatically granted an option to purchase 2,000 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
2,000 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.

        The Board of Directors  has reserved  60,000  shares of common stock for
issuance  and as of May 31,  1998,  options to purchase  8,000  shares of common
stock, at prices ranging from $1.09 to $16.90 per share, have been granted under
the Director Plan.

                                      F-21
<PAGE>
                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements

14.     Stockholders' Equity - (Continued)

Other Stock Options

         The Company  granted  options to purchase 11,000 shares of common stock
at $1.45 per share through July 1999,  3,000 shares of common stock at $5.00 per
share through  February 2000 and 4,000 shares of common stock at $5.00 per share
through April 2005 in the year ended May 31, 1995.

        On July 11,1996,  the Company granted options to purchase 120,000 shares
of common  stock at an exercise  price of $13.75 per share  through July 2006 to
certain officers and directors.  These options vest over a five year period.  On
December  30,  1996,  the Company  canceled  15,000 of these  options,  repriced
105,000  options to $5.65 and  granted  options to  purchase  202,500  shares of
common stock at an exercise  price of $5.65 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 $1.40 per share.

        On March 23, 1998, the Company cancelled 242,500 options  previously and
granted  options to  purchase  1,487,500  shares of common  stock at an exercise
price of $1.09 per share through March 2008 to certain  officers,  directors and
outside individuals. These options vest over a five year period.

Other Warrants

        In January 1996, the Company granted  warrants to purchase 13,400 shares
of common stock for services  rendered.  The  exercise  price is $16.90  through
January 2006. On December 30, 1996,  these warrants were repriced to $5.65 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 $1.40 per share.

        During June 1996,  the  Company  granted  warrants  to purchase  196,247
shares of common stock at an exercise  prices  ranging from $15.00 to $19.40 per
share through June 2001. On December 30, 1996,  136,247 of the original  196,247
warrants  were repriced to $5.65 per share.  The weighted  average fair value of
the  repriced  warrants  under  SFAS No.  123 on the date of grant was $1.40 per
share.

        On December 30, 1996, the Company  granted 80,000 three year warrants to
one of its  investment  bankers  at an  exercise  price of $.25 per  share.  The
Company recorded a non-cash expense of $400,000 in accordance with SFAS No. 123
for the year ended May 31, 1997.

Stock-Based Compensation

        At May 31, 1998, 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:
                                                Year Ended May 31,
                                        ---------------------------------
                                           1997                    1998
                                           ----                    ----
Net loss:
      As reported                       $7,006,479             $6,324,986
      Pro forma                          7,091,400              6,457,825
Net loss per share - basic:
      As reported                          $ (6.24)               $ (2.44)
      Pro forma                              (6.32)               $ (2.49)

                                      F-22
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements


14.     Stockholders' Equity - (Continued)

Common stock  equivalents  have been excluded from 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 year ended May31,  1997
and 1998,  respectively;  dividend yield of 0%; risk-free interest rate of 5.5%;
expected volatility of 20% and 40%, respectively, and expected lives of 5 years.

        Weighted  average  assumptions  used in  valuing  stock  options  issued
outside of the plans during the year ended May 31, 1997 and 1998,  respectively,
were dividend yield of 0%; risk-free interest rate of 5.5%;  expected volatility
of 20% and 40% respectively, and expected lives of 5 years.

    Common Stock Reserved

         The Company has reserved common stock at May 31, 1998 as follows:


          Initial public offering warrants ....................       253,000
          Warrants issued on conversion of preferred stock ....       260,000
          Convertible debentures and notes ....................       741,600
          Stock option plans ..................................     2,049,280
          Other stock options .................................     1,590,500
          Other warrants ......................................     1,283,987
                                                                    ---------
                                                                    6,178,367

        The number of shares of common  stock  reserved in  connection  with the
convertible  debentures  and notes are subject to  adjustment.  (See Notes 9 and
11).

15.     Segment Information

         The Company has two principal  operating  groups:  the rubber recycling
group and the industrial  materials  group. The rubber recycling group collects,
transports  and  processes  scrap tires into  feedstock  for tire  derived  fuel
("TDF"),  civil  engineering  projects and/or for further  processing into crumb
rubber. 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. Information with respect to
industry segments as of and for the years ended is as follows:
<TABLE>
<CAPTION>
                                             For the Year Ended May 31, 1998
                                 ---------------------------------------------------------
                                 Rubber Recycling     Industrial Materials                                                     
                                      Group                  Group               Total
                                      -----                  -----               -----
<S>                             <C>                    <C>                 <C>         
Operating Revenues               $  9,135,487           $  1,876,032        $ 11,011,519
Operating Profit (Loss)               652,955               (139,688)           (513,267)
Identifiable Assets                10,513,681              1,991,649          12,505,330
Depreciation/Amortization             741,023                284,922           1,025,945
Capital Expenditures                1,095,721                 22,501           1,118,222
                                 

                                      F-23
<PAGE>
                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements

15.     Segment Information - (Continued)

<CAPTION>
                                             For the Year Ended May 31, 1998
                                 ---------------------------------------------------------
                                 Rubber Recycling     Industrial Materials                                                        
                                      Group                  Group               Total
                                      -----                  -----               -----
<S>                             <C>                    <C>                 <C>         
Operating Revenues                   $ 38,201            $ 2,046,019         $ 2,084,220
Operating Loss                     (1,995,047)               (20,481)         (2,015,528)
Identifiable Assets                 1,825,595              2,325,785           4,151,380
Depreciation/Amortization              69,176                253,684             322,860
Capital Expenditures                   53,067                 10,765              63,832
</TABLE>

16.     Major Customers

        At May 31, 1997,  29%, 16% and 12% of consolidated  accounts  receivable
were from  three  customers  and at May 31,  1998,  11% and 11% of  consolidated
accounts receivable were from two customers

         During the year ended May 31, 1997 and 1998, no customer  accounted for
10% or more of consolidated net sales.

17.     Income Taxes

        There was no provision for income taxes for the years ended May 31, 1997
and 1998 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.

The components of the net deferred tax asset are as follows at May 31:

                                          1997            1998
                                          ----            ----
Deferred tax asset:
  Federal .........................   $ 2,646,000    $ 4,380,000
  State ...........................       538,000        870,000
                                      -----------    -----------
                                        3,184,000      5,250,000
Valuation reserve .................    (3,184,000)    (5,250,000)
                                      -----------    -----------
Net deferred tax asset ............   $      --      $      --
                                      ===========    ===========
                                                            
The following differences give rise to deferred income taxes at May 31:

                                          1997           1998
                                          ----           ----
Net operating loss carryforward ...   $ 2,666,000    $ 4,583,000
Research tax credit carryforward ..        17,000         17,000
Non-deductible write-down of assets       390,000        390,000
Other .............................       111,000        260,000
                                      -----------    -----------
                                        3,184,000      5,250,000
Valuation reserve .................    (3,184,000)    (5,250,000)
                                      -----------    -----------
Net deferred tax asset ............   $        --    $        --
                                      ===========    ===========
                                       
The change in the valuation reserve is as follows:

                                         Years Ended May 31,
                                          1997          1998
                                          ----          ----
Balance at beginning of year ......   $ 1,383,000    $ 3,184,000
Increase due to current year net
operating loss ....................     1,801,000      2,066,000
                                      -----------    -----------
Balance at end of year ............   $ 3,184,000    $ 5,250,000
                                      ===========    ===========


                                      F-24
<PAGE>
                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements


17.     Income Taxes - (Continued)

        As of May 31, 1998, the Company has net operating loss  carryforwards of
approximately   $11,750,000.   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.

18.     Fair Value of Financial Instruments

         At May 31, 1997, the Company's  financial  instruments  consist of note
payable to related  parties and banks and  convertible  notes payable to related
parties  and  other  investors.  Notes  payable  to  related  parties  and banks
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.

         At May 31, 1998, the Company's  financial  instruments consist of notes
payable to banks and to related parties,  and convertible  notes payable.  Notes
payable  approximate  their fair values as these  instruments  bear  interest at
market  rates.  The fair value of the  $1,359,567 in  convertible  notes payable
outstanding is  approximately  $1,813,000  based on the fair value of the common
stock issuable on conversion of the notes.

19.     Subsequent Events

         In June 1998,  the Company  signed a letter of intent to acquire all of
the  capital  stock of Mac's Tire  Recyclers  ("Mac's")  a  privately-held  tire
recycler located in Saltillo,  Mississippi. In addition to scrap tire processing
capacity  of  more  than 4  million  tires  per  year,  Mac's  also  operates  a
state-permitted  disposal  site on about 40 acres  of land.  The  Company  began
operating the Mac's facility effective June 1, 1998 and anticipates completing a
purchase and sale agreement that is effective on that date.

         On  September  4,  1998,  the  Company  acquired  all of the scrap tire
collection and processing  assets of United Waste Service,  Inc.  ("United"),  a
wholly owned subsidiary of Republic Services,  Inc.. The Company paid $4,050,000
for the  acquired  assets  in the form of  $850,000  in cash and  $3,200,000  of
preferred  stock.  The preferred stock is convertible  into the Company's common
stock  beginning in February 2001 based upon the trailing 15 day average closing
bid (as reported by NASDAQ)  prices prior to the  conversion  date. The acquired
assets are located in Lawrenceville,  Georgia and Batesburg,  South Carolina and
collectively, the two operations process over 5 million tires annually.

         On August 21, 1998,  GMTL's facility was damaged by a fire. The Company
believes  that the damage will be adquately  covered by  insurance  and is still
assessing  the full  extent of the damage  and  developing  plans for  replacing
equipment  and  re-establishing  its crumb rubber  capabilities.  The Company is
currently  purchasing crumb rubber to supplement its internal needs for modified
asphalt.



                                      F-25
<PAGE>

                                   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/ Robert H. Davis
                                                     Robert H. Davis
                                                     Chief Executive Officer

        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                    September 15, 1998
       Maurice E. Needham

 
     /s/ Joseph E. Levangie                  Vice Chairman and Director                  September 15, 1998
       Joseph E. Levangie


       /s/ Robert H. Davis               Chief Executive Officer, President              September 15, 1998
         Robert H. Davis                            and Director


      /s/ Charles E. Coppa                 Acting Chief Financial Officer,               September 15, 1998
        Charles E. Coppa                  Treasurer and Assistant Secretary
                                     (Principal Financial Officer and Principal
                                                 Accounting Officer)


       /s/ Robert D. Maust                Vice President of Operations and               September 15, 1998
         Robert D. Maust                              Director


         /s/ Lew F. Boyd                              Director                           September 15, 1998
           Lew F. Boyd


         /s/ Jagruti Oza                              Director                           September 15, 1998
           Jagruti Oza


</TABLE>