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

                                   Form 10-KSB

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

                                       OR

|X|  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934 [NO FEE REQUIRED]

For the transition period from June 1, 1998 to September 30, 1998
                               ------------    ------------------

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                           (I.R.S.
   of incorporation or organization)             Employer Identification No.)

         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 |_| No |X|

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 transition period ended September 30, 1998 were
$5,034,809.

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 December
31, 1998 was $3,349,195.

As of December 31, 1998, 9,965,322 shares of Common Stock of issuer were
outstanding. The aggregate market value of the shares of Common Stock was
$4,048,412.

Transitional Small Business Disclosure Format (check one)  Yes |_| No |X|
<PAGE>

                                     PART 1

Item  1.  Description of Business

General

     GreenMan Technologies, Inc. (the "Company" or "GreenMan") currently
operates two business segments, the tire recycling operations (the "Recycling
operations") located in Jackson and Lawrenceville, Georgia; Batesburg, South
Carolina; Savage, Minnesota and Saltillo, Mississippi 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. In August 1998, the Company's St.
Francisville, Louisiana crumb rubber processing facility was severely damaged by
a fire which necessitated closure of the operation.

History

     GreenMan was incorporated under the laws of the State of Arkansas on
September 16, 1992 and reincorporated under the laws of the State of Delaware on
June 27, 1995. In June 1998, the Board of Directors of the Company adopted a
change of its fiscal year from May 31 to September 30. Accordingly, the
transition period information contained herein reflects a four-month transition
period (the "Transition Period").

      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").
GMTL ceased processing operations in August 1998 due to a fire and was
completely closed in December 1998.

     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.

     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 has been operating the
Mac's facility since June 1, 1998 under a management agreement (the "management
agreement") and anticipates completing a purchase and sale agreement during the
first quarter of calendar 1999. The management agreement provides for the
Company to earn a management fee equal to 90% of the net income of Mac's before
depreciation and income taxes.

     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 two recycling operations are located
in Lawrenceville, Georgia and Batesburg, South Carolina and currently process
over 5 million passenger tire equivalents annually. Lawrenceville operations are
currently operating as a division of GMTG but will eventually be consolidated
with ongoing Jackson, Georgia operations. The Batesburg operation has been
incorporated as GreenMan Technologies of South Carolina, Inc. ("GMTSC").

     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.
<PAGE>

Recent Developments

     By letter dated October 29, 1998, the Nasdaq Stock Market ("Nasdaq") 
brought to the Company's attention Nasdaq's concern regarding the continued
listing of the Company's common stock on the Nasdaq SmallCap Market, based on
the fact that the Company's common stock had failed to maintain a closing bid
price greater or equal to $1.00 over the previous thirty consecutive trade
dates. Nasdaq informed the Company that it has ninety calendar days (until the
close of business on January 29, 1999) in which to regain compliance with
Nasdaq's $1.00 minimum bid price requirement. Although the Company's common
stock may be subject to delisting on January 29, 1999, the Company may stay the
delisting by requesting a hearing before such time. If the Company has not
regained compliance with the minimum bid price requirement by January 29, 1999,
the Company intends to appeal a potential delisting to Nasdaq's Listing and
Hearing Review Committee and anticipates that delisting of the Company's common
stock may be stayed during the pendency of such appeal. There can be no
assurance, however, that the Company will be able to maintain Nasdaq listing for
the Company's common stock (whether as a result of failure to meet the minimum
bid price requirement, the market value requirement or other requirements
imposed by Nasdaq.) The Company's management anticipates that the absence of the
Nasdaq listing for the Company's common stock would have an adverse effect on
the market for, and potentially the market price of, the Company's common stock.
If the Company's common stock is delisted from Nasdaq, the Company expects that
brokers would continue to make a market in the Company's common stock on the OTC
Bulletin.

     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 is working with major
asphalt manufacturers and contractors to incorporate patented USDOT/FHWA binder
technology -- together with 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. In June 1998, the Company's research
and development efforts at the St. Francisville facility resulted in the Company
receiving FHWA certification of this licensed crumb rubber modification
technology for use in the asphalt industry. The first commercial application of
modified rubber for asphalt occurred in September 1998 in Connecticut utilizing
crumb rubber purchased from an independent manufacturer. The Company anticipates
additional lay-downs will be conducted in the spring/summer of 1999.

     In January and August 1998, the Company entered into two license agreements
with a privately-held R&D company under which it acquired the exclusive rights
and license to use a series of proprietary crumb rubber modification
technologies for use in the asphalt industry. The Company believes the licensed
technologies, when realized and perfected will enhance the Company's existing
development efforts in the area of crumb rubber modified asphalt.

      In August 1998, GMTL's facility was severely damaged by a fire, which
necessitated closure of the facility. The Company does not intend to rebuild in
St. Francisville, Louisiana and is still assessing alternatives for replacing
equipment and re-establishing crumb rubber capabilities either on its' own or
through alliances with existing crumb rubber producers and/or crumb rubber
users. Under the terms of GMTL's $3,000,000 property insurance policy, the
Company anticipates initially receiving approximately $2,050,000. The remaining
$950,000 may be paid if the Company can demonstrate, to the insurance company's
satisfaction, that the Company has invested $3,000,000 (replacement policy
limit) on alternative equipment that satisfies the replacement requirements of
the insurance policy and replace the damaged property. There can be no
assurance that this is the case. In January 1999, the Company submitted a
proposal to the insurance company, which would allow GMTL to receive the
remaining funds due under the policy. The Company will recognize the remaining
$950,000 of insurance proceeds when it has received approval from the insurance
company. Accordingly, the Company has recorded a $950,000 casualty loss at
September 30, 1998. As a result of the closure of GMTL, management has written
down all GMTL assets to their estimated net realizable value and accrued for all
remaining fire related costs at September 30, 1998 resulting in an additional
$500,000 casualty loss.

     The equipment that was located at GMTL's facility was subject to the terms
of a capital lease. Company has renegotiated GMTL's cryogenic equipment capital
lease obligation whereby the lessor has agreed to forgive $500,000 of capital
lease obligations in return for a $500,000 payment when the Company receives the
$2,050,000 initial payment from it's insurance company. The lessor has agreed to
execute a 10 year note payable with the Company for the remaining capital lease
balance of $1,600,000. The note will bear interest at 10% per annum and be
payable in monthly payments of $21,144 including interest starting in June 1999.
The Company has recorded this forgiveness of debt as other income for the period
ended September 30, 1998.

     In August 1997, the Company finalized the formation of the joint venture
between the Company and Crumb Rubber Technologies, Inc. ("CRT") to collect and
process tires in the State of New York and to market the crumb rubber derived
from the tires. The Company 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. As a result of the
joint venture's inability to generate significant revenues since inception, the
Company's minority ownership position in the joint venture and management's
belief that it is unlikely to generate any significant revenue from the joint
venture, management has decided to write-off its $400,000 investment in the
joint venture at September 30, 1998.

     Pursuant to the terms of the joint venture agreement, CRT agreed to return
$300,000 of equipment deposits previously made by the Company by March 1998. CRT
has repaid $115,000 as of September 30, 1998. Management has deemed the
remaining $185,000 of equipment deposits to be uncollectible due to CRT's
inability to maintain the agreed upon payment schedule and the uncollateralized
nature of the deposits.


                                       2
<PAGE>

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, GMTG, GMTSC and Mac's 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 Recycling operations processed over 10
million tires during fiscal 1998 and 18 million tires on an annualized basis
during the Transition Period.

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 January 1998, the Company ceased the production of its 34-gallon
GEM-Stock ("Greenman Environmental Material") trash containers and closed its
Arkansas plant.

     The Company conducted 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. 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. 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 first commercial application ("lay-down") of
modified rubber for asphalt occurred in September 1998 in Connecticut utilizing
crumb rubber purchased from an independent manufacturer. The Company anticipates
additional lay-downs will be conducted in the spring/summer of 1999.

     The acquisitions of tire collection and processing operations from BFI and
Republic in addition to the Mac's management agreement are expected to provide
the Company with access to approximately 20 million tires in fiscal 1999. The
Company's primary business is 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. Prior to the fire at GMTL, the Company utilized a small portion of the
rubber chip flow for the production of crumb rubber.

DuraWear

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


                                       3
<PAGE>

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 Operation

     Collectively, the Recycling operations have the capacity to process up to
30 million tires annually and processed approximately 10 million tires in fiscal
1998 and 18 million tires on an annualized basis during the Transition Period.
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 that would recycle the processing residual
into marketable components of rubber and steel.

     Prior to the August 1998 fire, the Recycling operation's plant in St.
Francisville, Louisiana utilized a two-inch rubber tire chip as feedstock to
cryogenically produce crumb rubber. The operation also developed the process to
chemically modify crumb rubber for application in the asphalt industry. In June
1998, the Company obtained Federal Highway Administration certification of this
crumb rubber modification technology for use in the asphalt industry. The
Company is confident that its crumb rubber needs for modified asphalt can be
satisfied through independent vendors while manufacturing alternatives are being
assessed. Therefore, the Company does not believe that it's ability to provide
CMCRA to the asphalt industry has been negatively impacted by the closure of
GMTL, although there can be no assurance that this is the case.

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 relationships. 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 Operation

     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. The Recycling operations 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. The Recycling operations
collectively, are capable of processing up to 30 million tires annually.
According to Scrap Tire News, nearly 270 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.


                                       4
<PAGE>

DuraWear

     DuraWear obtains on a purchase order basis (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
DuraWear.

PRODUCT DEVELOPMENT

     In January 1998, the Company entered into a license agreement with a
privately-held R&D company under which it acquired the exclusive rights and
license to use a proprietary crumb rubber modification technology developed for
use in the asphalt industry. In connection with this license the Company has
paid $15,000 and is required to pay an additional $15,000 in January 1999 to the
licensor. The Company is also required to pay a royalty fee on the sale of crumb
rubber incorporating the licensed technology.

     In August 1998, the Company entered into a second license agreement with
the same R&D company under which it acquired the exclusive rights and license to
use a series of four proprietary crumb rubber modification technologies (the
"technologies") to be developed for use in the asphalt industry. In connection
with this license the Company is required to pay $150,000 over a twelve month
period. The Company is required to issue warrants to purchase 78,829 shares of
the Company's common stock at $1.11 per share that are exercisable for a
two-year period as each of the four technologies are conveyed to the Company.
The Company is required to pay a royalty fee on the sale of crumb rubber
incorporating the licensed technologies when the processes are commercialized.

     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 is working with major
asphalt manufacturers and contractors to incorporate patented USDOT/FHWA binder
technology -- together with 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. In June 1998, the Company's research
and development efforts at the St. Francisville facility resulted in FHWA
certification of this licensed crumb rubber modification technology for use in
the asphalt industry. The first commercial application of modified rubber for
asphalt occurred in September 1998 in Connecticut utilizing crumb rubber
purchased from an independent manufacturer. The Company anticipates additional
lay-downs to be conducted in the spring of 1999.

YEAR 2000 DATE CONVERSION

     Many computer software systems, as well as certain hardware and equipment
utilizing date-sensitive information, were configured to use a two-digit date
field, which will preclude them from properly recognizing dates in the year
2000. The inability to properly recognize date-sensitive information in the year
2000 could render systems inoperable or cause them to incorrectly process
operational or financial information.

     The Company has hired GraVoc Associates, Inc. to assess and replace its
office PC's which are not year 2000 compatible during calendar 1999. The Company
is in the process of obtaining written confirmation that software is year 2000
compatible. The amounts anticipated to be charged to expense related to the Year
2000 computer compliance modifications, have not been and are not expected to be
material to the Company's financial position, results of operations or cash
flows.

     In addition, machinery and equipment often use or are controlled or
monitored by electronic devices that contain embedded microchips. Such machinery
and equipment could be rendered partially or totally inoperable if embedded
microchips are date-sensitive and do not properly recognize the year 2000.

     The Company is taking steps to resolve Year 2000 compliance issues that may
be created by customers, suppliers and financial institutions with whom the
Company does business. However, there can be no guarantee that the systems of
other entities will be converted timely.

     The Company has initiated a process to (1) identify critical supplier and
customer related issues, (2) assess the year 2000 readiness of equipment located
at all of its operating facilities and (3) determine what contingency plans may
be required. At this time, the potential effects in the event that the Company
or third parties are unable to resolve year 2000 problems timely are not
determinable, however, the Company believes it will be able to resolve its own
year 2000 issues.

CUSTOMERS

Recycling Operation

     There were no customers that accounted for 10% or more of consolidated net
sales during the fiscal years ended May 31, 1997 and 1998 and the Transition
Period. The Recycling operations have a 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.

DuraWear

     DuraWear did not have any customers that accounted for 10% or more of
consolidated net sales during the fiscal years ended May 31, 1997 and 1998 and
the Transition Period. 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 and 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.


                                       5
<PAGE>

Sales and Marketing

     The Recycling operations utilize in-house sales staff 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 also be used by the Company in connection with the sale of its
Recycled 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 Operation

     Historically, companies in the tire collection and processing industry have
generated sufficient 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 certain 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 value-added opportunities.

     As a result of the Company's recent acquisitions and the Mac's management
agreement, the Company has positioned itself as a leader in tire recycling
operations and estimates that collectively its current operations process
approximately 8% of tires currently generated domestically making it the second
largest tire recycler in the United States.

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.

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.


                                       6
<PAGE>

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 September 30, 1998, the Company had approximately 163 employees.
Neither the Company nor its subsidiaries are a party to any collective
bargaining agreements, and each considers the relationship with their employees
to be satisfactory.

Item 2. Description of Properties

     The Company leases approximately 3,380 square feet of office space in
Lynnfield, Massachusetts at a monthly rental of $4,366 under a five year lease.

     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. GMTG also leases an industrial building and office building located
on approximately 8 acres of land zoned for industrial expansion in
Lawrenceville, Georgia at $12,000 per month under a one year lease. These
locations have adequate space to accommodate expansion if required to meet
ongoing growth.

     GMTSC leases approximately two acres of industrial space in Batesburg,
South Carolina at $5,000 per month under a one year lease.

     GMTL occupied approximately 145,000 square feet of combined
industrial/manufacturing space in St. Francisville, Louisiana until August 1998
at which time GMTL's facility was damaged by a fire. The Company no longer
operates a facility in Louisiana.

     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.


                                       7
<PAGE>

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

     There were no matters submitted to a vote of shareholders during the
Transition Period ended September 30, 1998.

                                     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. By letter dated October 29, 1998, the Nasdaq Stock
Market ("Nasdaq") brought to the Company's attention Nasdaq's concern regarding
the continued listing of the Company's common stock on the Nasdaq SmallCap
Market, based on the fact that the Company's common stock had failed to maintain
a closing bid price greater or equal to $1.00 over the previous thirty
consecutive trade dates. Nasdaq informed the Company that it has ninety calendar
days (until the close of business on January 29, 1999) in which to regain
compliance with Nasdaq's $1.00 minimum bid price requirement. Although the
Company's common stock may be subject to delisting on January 29, 1999, the
Company may stay the delisting by requesting a hearing before such time. If the
Company has not regained compliance with the minimum bid price requirement by
January 29, 1999, the Company intends to appeal a potential delisting to
Nasdaq's Listing and Hearing Review Committee and anticipates that delisting of
the Company's common stock may be stayed during the pendency of such appeal.
There can be no assurance, however, that the Company will be able to maintain
Nasdaq listing for the Company's common stock (whether as a result of failure to
meet the minimum bid price requirement, the market value requirement or other
requirements imposed by Nasdaq.) The Company's management anticipates that the
absence of the Nasdaq listing for the Company's common stock would have an
adverse effect on the market for, and potentially the market price of, the
Company's common stock. If the Company's common stock is delisted from Nasdaq,
the Company expects that brokers would continue to make a market in the
Company's common stock on the OTC Bulletin.

     The following table sets forth the high and low bid quotations for the
Common Stock and Class A Common Stock Purchase Warrants for the periods
indicated as quoted by NASDAQ. These quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.

                                                            Class A Common Stock
                                      Common Stock            Purchase Warrants
                                     ---------------        --------------------
                                     High        Low            High      Low
                                     ----        ---            ----      ---
Fiscal 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 28, 1997      8.15       5.00            1.55      .65
Quarter Ended May 31, 1997          10.00       3.45            1.40      .45

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

Transition Period
-----------------
Quarter Ended August 31, 1998       $2.44      $0.94           $0.38    $0.16
Month Ended  September 30, 1998      1.00       0.56            0.16     0.06

     On December 31, 1998, the closing bid price of the Common Stock was $.41
and the closing bid price for the Class A Common Stock Purchase Warrants was
$.03.

     As of December 31, 1998, the Company estimated that the approximate number
of stockholders of record of the Company's Common Stock was 2,500.


                                       8
<PAGE>

     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 13 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") currently
operates two business segments, the tire recycling operations (the "Recycling
operations") located in Jackson and Lawrenceville, Georgia; Batesburg, South
Carolina; Savage, Minnesota and Saltillo, Mississippi 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. In August 1998, the Company's St.
Francisville, Louisiana crumb rubber processing facility was severely damaged by
a fire, which necessitated the closure of the operation.

      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").
GMTL ceased processing operations in August 1998 due to a fire and was
completely closed in December 1998.

     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.

     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 has been operating the
Mac's facility since June 1, 1998 under a management agreement (the "management
agreement") and anticipates completing a purchase and sale agreement during the
first quarter of calendar 1999. The management agreement provides for the
Company to earn a management fee equal to 90% of the net income of Mac's before
depreciation and income taxes.

     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 two recycling operations are located
in Lawrenceville, Georgia and Batesburg, South Carolina and currently process
over 5 million passenger tire equivalents annually. Lawrenceville operations are
currently operating as a division of GMTG but will eventually be consolidated
with ongoing Jackson, Georgia operations. The Batesburg operation has been
incorporated as GreenMan Technologies of South Carolina, Inc. ("GMTSC"). The
Company has not completed the filing of Form 8-K for the United acquisition. As
a result, the Company is subject to a fine of up to $100 a day for the period
until it completes its filing. The Company also is ineligible to register
Securities using SEC Form S-3 for a period of twelve months from the date on
which it is current with respect to all of its SEC Filings.

     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.

     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.


                                       9
<PAGE>

Results of Operations

Four Months ended September 30, 1997 Compared to Four Months ended
September 30, 1998

     Net sales for the four months ended September 30, 1998 were $5,034,809 as
compared to $3,081,945 for the four months ended September 30, 1997. The
increase of $1,952,864 or 63% was primarily attributable to the inclusion of
revenues from GMTM and GMTG for the entire four months as they were acquired on
June 30, 1997, the impact of the United acquisition which closed September 4,
1998 and an average 37% internal growth in tires processed as compared to the
comparable period in 1997. The increase also includes $223,000 of income
associated with the Mac's management agreement.

     Gross profit for the four months ended September 30, 1998 remained
consistent at 33% of net sales or $1,641,756 as compared to $1,012,318 four
months ended September 30, 1997. This was attributable to the inclusion of the
United acquisition and the income from Mac's which offset GMTL's negative
$87,000 gross profit as it operated under limited operating conditions prior to
the August 1998 fire as the Company continued its crumb rubber research and
development efforts.

     Research and development expenditures were $150,132 for the four months
ended September 30, 1998 as compared to $97,176 for the same period in fiscal
1998. The increase is attributable to the Company's continued crumb rubber
research and development efforts which were being conducted at GMTL. This
facility had operated as the Company's technical proving ground 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.

     Selling, general and administrative expenses were $1,394,781 for the four
months ended September 30, 1998 , or 28% of sales as compared to $1,057,659 or
34% of sales, for the same period in fiscal 1998. The four months ended
September 30, 1998 include operating expenses of $75,498 associated with the
inclusion of GMTL which was acquired in November 1997 and expenses associated
with GMTM and GMTG for a full four month period.

     As a result of the foregoing, the Company had an operating profit of
$96,843 for the four months ended September 30, 1998 as compared to an operating
loss of $142,517 for the comparable period in 1997.

     Interest and financing costs decreased by $392,892 to $651,316 for the four
months ended September 30, 1998 due to decreased amortization of the financing
costs associated with the issuance of convertible debentures. Approximately
$418,000 of financing costs were expensed during the period ended September 30,
1998 as compared to $801,574, including $112,500 of penalties, for the
comparable period in 1997.

     Other expenses for the four months ended September 30, 1998, include
$550,000 relating to the Company's write-off of its investment in two joint
ventures, $185,000 of uncollectible equipment deposits and the $1,450,000
casualty loss associated with the August 21, 1998 fire at GMTL. These expenses
were partially offset by a $500,000 forgiveness of debt associated with GMTL's
capital lease.

     The Company reported a loss from discontinued operations of $244,115 for
the four months ended September 30, 1997.

     The Company experienced a net loss of $2,326,086, or $0.37 per share for
the four months ended September 30, 1998 as compared to a loss from continuing
operations of $1,184,900, or $0.67 per share for the four months ended September
30, 1997.

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

     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 that 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.

     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


                                       10
<PAGE>

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 62% 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 $2,886,366 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 $1,746,000 of
the fiscal 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

     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.

     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 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
inability 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.


                                       11
<PAGE>

     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. As a result of the joint venture's inability to generate
significant revenues since inception, the Company's minority ownership position
in the joint venture and management's belief that it is unlikely to generate any
significant revenue from the joint venture, management has decided to write-off
its $400,000 investment in the joint venture at September 30, 1998.

     Pursuant to the terms of the joint venture agreement, CRT agreed to return
$300,000 of equipment deposits previously made by the Company by March 1998. CRT
has repaid $115,000 as of September 30, 1998. Management has also deemed the
remaining $185,000 of equipment deposits to be uncollectible due to CRT's
inability to maintain the agreed upon payment schedule and the uncollateralized
nature of the deposits and accordingly has written off such amounts off.

Insurance Receivable

     In August 1998, GMTL's facility was severely damaged by a fire, which
necessitated closure of the facility. The Company does not intend to rebuild in
St. Francisville, Louisiana and is still assessing alternatives for replacing
equipment and re-establishing crumb rubber capabilities either on its' own or
through alliances with existing crumb rubber producers and/or crumb rubber
users. Under the terms of GMTL's $3,000,000 property insurance policy, the
Company anticipates initially receiving approximately $2,050,000. The remaining
$950,000 may be paid if the Company can demonstrate, to the insurance company's
satisfaction, that the Company's has invested $3,000,000 (replacement policy
limit) in alternative equipment that satisfies the replacement requirements of
the insurance policy. There can be no assurance that this is the case. In
January 1999, the Company submitted a proposal to the insurance company, which
would allow GMTL to receive the remaining funds due under the policy. The
Company will recognize the remaining $950,000 of insurance proceeds when it has
received approval from the insurance company and replaced the damaged property.
Accordingly, the Company has recorded a $950,000 casualty loss at September 30,
1998. As a result of the closure of GMTL, management has written down all GMTL
assets to their net realizable value and accounted for all remaining fire
related costs at September 30, 1998 resulting in an additional $500,000 casualty
loss.

     GMTL has also recorded an insurance receivable of $70,284 at September 30,
1998 associated with its business interruption policy. The Company has received
$500,000 from the insurance company as of December 31,1998 towards the total
insured loss.

     Effective October 1997, the Company entered into a fifteen-year cryogenic
equipment lease agreement in Louisiana. Under the terms of the agreement, GMTL
was paying $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 Company has renegotiated this capital
lease obligation whereby the lessor has agreed to forgive $500,000 of capital
lease obligations in return for a $500,000 payment when the Company receives the
$2,050,000 initial payment from it's insurance company. The lessor has agreed to
execute a 10 year note payable with the Company for the remaining capital lease
balance of $1,600,000. The note will bear interest at 10% per annum and be
payable in monthly payments of $21,144 including interest starting in June 1999.

Loans From Officers

     In May 1996, the Company borrowed $325,000 from an officer of the Company.
This unsecured note payable bears interest at prime plus 1.5% per annum. From
September 1996 to May 1997 the Company borrowed collectively, an additional
$624,300 from this officer and another officer 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
four officers 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


                                       12
<PAGE>

notes are convertible after a one hundred and twenty day holding period into
shares of common stock at a conversion price equal to the lower of the average
of the closing bid prices on the five trading days preceding 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

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

     As of September 30, 1998, $1,210,260 of the Initial Debentures and $53,995
of accrued interest have been converted into 1,121,211 shares of common stock.
During the period of October through December 1998, the remaining $389,740 of
Initial Debentures and $28,457 of accrued interest have been converted into
1,395,358 shares of common stock.

     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


                                       13
<PAGE>

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 $450,000 of Additional
Debentures during the period of June to August 1998 and immediately exercisable
two-year warrants to purchase 27,000 shares of Common Stock at an exercise
prices ranging from $1.17 to 2.41 per share. The Company also issued immediately
exercisable two year warrants to purchase 27,000 shares of common stock at an
exercise prices ranging from $1.17 to $2.41 per share to the placement agent.

Acquisition of  GMTM and GMTG

     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 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. This 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 September
30, 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 September 30, 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 September 30, 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 September 30, 1998.

Acquisition of GMTL

     On November 19, 1997, the Company acquired 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
a 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.

Acquisition of United Waste Services

     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 higher of the trailing 15 day average
closing bid (as reported by NASDAQ) prices prior to the conversion date or the
average of the closing bid prices during the period from September 3, 1998 to
February 3, 2001. Simultaneous with the acquisition, the Company entered into an
equipment financing agreement with Heller Financial Inc., which provided the
$850,000 for the transaction. The acquired assets are located in Lawrenceville,
Georgia (combined with GMTG) and Batesburg, South Carolina (renamed GMTSC) and
collectively, the two operations process over 5 million tires annually.

Working Capital

     At September 30, 1998, the Company had cash of $161,215, a working capital
deficit of $1,235,452, net capital of $5,279,717 and accumulated losses of
$19,356,005.


                                       14
<PAGE>

     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 of the Heller
Credit Facility, and the Company's continued progress towards profitability 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)
Company's ability to realize all amounts due under the GMTL property insurance
policy (including the remaining $950,000); (ii) the Company's ability to reach
satisfactory settlement with the remaining creditors of GMTL and the Company's
closed injection molding operation; (iii) the Company's ability to reestablish
or relocate the operations of GMTL or gain access to sufficient supplies of
crumb rubber necessary for its modified asphalt needs; (iv); the impact of the
Company's ongoing merger and acquisition activities; (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 the production or purchase 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.

     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

     SFAS No. 130, "Reporting Comprehensive Income" 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 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.

     Under SFAS No. 130 all items of comprehensive income are 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 adopted this new disclosure requirement in the four months
ended September 30, 1998. There were no other items of comprehensive income
during the years ended May 31, 1997 and 1998 and the four months ended September
30, 1997.

     SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" 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.


                                       15
<PAGE>

Item 7. Financial Statements

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

Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure

None

Item 9. Directors, Executive Officers and Key Employees

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

                     Name              Age         Position
                     ----              ---         --------
     Maurice E. Needham ............    58   Chairman of the Board of Directors

     Joseph E. Levangie ............    53   Vice Chairman; Director

     Robert H. Davis ...............    56   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 ...................    38   Director

     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. On November 23, 1998, Mr. Levangie
resigned as Vice Chairman and Director of the 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


                                       16
<PAGE>

Boston Pacific Medical, Inc., a manufacturer and distributor of disposable
medical products and Corporate Controller for Avatar Technologies, Inc., a
computer networking company.

     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 Transition Period and the Transition
Period and for the fiscal years ended May 31, 1998 and 1997 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 periods indicated.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                  Annual Compensation                    Long-Term
                                                  -------------------                  Compensation
                                                                             (1)        Securities
            Name and                                                    Other Annual    Underlying       All Other
        Principal Position       Fiscal Year     Salary       Bonus     Compensation    Options (3)   Compensation (2)
        ------------------       -----------     ------       -----     ------------    -----------   ----------------
<S>                                 <C>        <C>             <C>         <C>            <C>            <C>
Robert H. Davis ............        1998*      $ 61,539        $ --        $ 3,985             --        $    --
Chief Executive Officer             1998        188,000          --          7,740        415,000             --
                                    1997             --          --             --             --             --
Robert D. Maust ............        1998*      $ 38,464        $ --        $ 5,685             --        $    --
Vice President                      1998        125,000          --         11,940        140,000         19,000
                                    1997         57,089          --          3,600         30,000             --
</TABLE>


                                       17
<PAGE>

----------
* Note: Information for the 1998* period reflects the period from June 1, 1998
through September 30, 1998.
(1)   Represents payments made to or on behalf of Messrs. Davis and Maust 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.

     The following table sets forth information concerning the value of
unexercised options as of September 30, 1998 held by the executives named in the
Summary Compensation Table above. No options were exercised by such executive
officers during the Transition Period ended September 30, 1998.

                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                      AND FISCAL YEAR END OPTION VALUES(1)

<TABLE>
<CAPTION>
                                                                   Value of Unexercised
                                 Number of Unexercised             In-the-Money Options
                          Options at September 30, 1998(1)       at September 30, 1998(2)
                          --------------------------------      --------------------------
         Name                Exercisable  Unexercisable         Exercisable  Unexercisable
         ----                 -----------  -------------        -----------  -------------
<S>                              <C>        <C>                    <C>          <C>
Robert H. Davis .......          8,000      407,000                $   --       $   --
Robert D. Maust .......          6,000      164,000                $   --       $   --
</TABLE>

----------
(1) There were no options exercised by any of the executive officers named in
the Summary Compensation Table during the four months ended September 30, 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 $.60 per share,
which was the closing bid price of the Company's Common Stock as listed by
NASDAQ on September 30, 1998.

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 incentive stock options to purchase shares of common stock 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.

     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 September 30, 1998, there were 1,274,500 options granted and
outstanding under the Plan of which 58,120 options were exercisable at prices
ranging from $0.45 to $5.65.


                                       18
<PAGE>

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 September 30, 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 September 30, 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 September 30, 1998, there were issued and
outstanding 6,910,247 shares of Common Stock.

                                                 Number of
                                                  Shares      Percentage
                                               Beneficially       of
Name (1)                                         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.
(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.


                                       19
<PAGE>

(7)   Includes 9,000 shares of Common Stock issuable pursuant to immediately
      exercisable 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 15 of
the financial statements). The warrants are exercisable at $1.75 per share.

     In October 1998, the Company commenced a private offering of common stock
in an effort to raise up to $500,000 in gross proceeds. As of December 31, 1998,
the Company sold 1,078,947 shares of unregistered common stock to investors
including officers and directors of the Company (the "Investors") for
approximately $365,000. The Company granted the Investors piggy-back
registration rights to register the common stock. The Investors have agreed not
to sell or transfer the shares for a period of at least twelve months after
issuance.

Loans; Personal Guarantees

     In May 1996, the Company borrowed $325,000 from an officer of the Company.
This unsecured note payable bears interest at prime plus 1.5% per annum. From
September 1996 to May 1997 the Company borrowed collectively, an additional
$624,300 from this officer and another officer 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
four officers 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.

     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.

     Three officers of the Company have personally guaranteed the $5.0 million
asset-based credit facility that was provided by Heller Financial Inc. in
February 1998.


                                       20
<PAGE>

     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 have already
been filed and are hereby incorporated by reference.

   Exhibit
     No.          Description
     ---          -----------

     *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    --  Intentionally Omitted.

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

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

    *10.13    --  Form of confidentiality and non-disclosure agreement for
                  executive employees.

    *10.14    --  Form of Employment Agreement with James F. Barker.

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

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

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

    *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.


                                       21
<PAGE>

    *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.

   **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.


                                       22
<PAGE>

 (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.

 (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 Palomar 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


                                       23
<PAGE>

 (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 January 13, 1999.

   ***27.1    --  Financial Data Schedule

----------
*     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 herein.

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

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

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

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

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

(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


                                       24
<PAGE>

                           GreenMan Technologies, Inc.
                   Index to Consolidated Financial Statements

                                                                           Page
                                                                           ----

Independent Auditors' Report                                                F-2

Consolidated Balance Sheets as of  May 31, 1998 and
September 30, 1998                                                          F-3

Consolidated Statements of Loss for the Years Ended May 31, 1997
and 1998 and for the Four Months Ended September 30, 1997 and 1998          F-4

Consolidated Statements of Changes in Stockholders'
Equity for the Years Ended May 31, 1997 and 1998 and for
the Four Months Ended September 30, 1998                                    F-5

Consolidated Statements of Cash Flows for the Years
Ended May 31, 1997 and 1998 and for the Four Months Ended
September 30, 1997 and 1998                                                 F-6

Notes to Consolidated Financial Statements                                  F-8


                                       F-1
<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, 1998 and September 30,1998 and
the related consolidated statements of loss, changes in stockholders' equity and
cash flows for the years ended May 31, 1997 and 1998 and the four months ended
September 30, 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, 1998 and September 30, 1998 and the results of their
operations and cash flows for the years ended May 31, 1997 and 1998 and the four
months ended September 30, 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 reccuring losses,
is in default on certain debt obligations 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
December 22, 1998, except for Note 5 as to which the date is January 6, 1999


                                       F-2
<PAGE>

                           GreenMan Technologies, Inc.
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                       May 31,     September 30,
                                                                                        1998           1998
                                                                                    ------------   ------------
<S>                                                                                   <C>            <C>
                                     ASSETS
Current assets:
  Cash and cash equivalents ........................................................  $    180,963   $    161,215
  Accounts receivable, trade, less allowance for doubtful accounts of $63,737 and
  $58,166 as of May 31, 1998 and September 30, 1998 ................................     1,475,064      1,685,885
  Inventory ........................................................................       328,578        229,037
  Insurance claim receivable .......................................................            --      2,120,284
  Other current assets .............................................................       392,119        740,859
                                                                                      ------------   ------------
        Total current assets .......................................................     2,376,724      4,937,280
                                                                                      ------------   ------------
Property, plant and equipment, net .................................................     9,874,079      9,126,573
                                                                                      ------------   ------------
Other assets:
  Equipment deposits ...............................................................       200,000             --
  Deferred financing costs .........................................................       441,465        306,304
  Deferred loan costs ..............................................................       286,218        250,436
  Goodwill, net ....................................................................       460,552      2,347,143
  Investment in joint venture ......................................................       400,000             --
  Other ............................................................................       468,504        439,023
                                                                                      ------------   ------------
                                                                                         2,256,739      3,342,906
                                                                                      ------------   ------------
                                                                                      $ 14,507,542   $ 17,406,759
                                                                                      ============   ============
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Convertible notes payable, current ...............................................  $         --   $    300,000
  Notes payable, related party .....................................................        24,371          4,956
  Notes payable, current portion ...................................................     1,053,676      1,678,399
  Accounts payable .................................................................     1,515,371      1,714,529
  Accrued expenses, other ..........................................................     1,717,599      1,932,789
  Obligations under capital leases, current ........................................       213,622        542,058
                                                                                      ------------   ------------
        Total current liabilities ..................................................     4,524,639      6,172,731
    Convertible notes payable ......................................................     1,359,567        839,740
    Notes payable,non-current portion ..............................................     3,062,283      3,546,207
    Obligations under capital leases ...............................................     2,424,825      1,568,364
                                                                                      ------------   ------------
        Total liabilities ..........................................................    11,371,314     12,127,042
                                                                                      ------------   ------------
Commitments and contingencies 
Stockholders' equity:
  Preferred stock, $1.00 par value, 1,000,000 shares authorized, 320,000 shares of
  Class  B convertible issued and outstanding at September 30, 1998 ................            --      3,200,000
  Common stock, $.01 par value, 20,000,000 shares authorized; 5,858,019 and
  6,910,247 shares issued and outstanding at May 31, 1998 and September 30, 1998 ...        58,580         69,103
  Additional paid-in capital .......................................................    20,107,567     21,366,619
  Accumulated deficit ..............................................................   (17,029,919)   (19,356,005)
                                                                                      ------------   ------------
        Total stockholders' equity .................................................     3,136,228      5,279,717
                                                                                      ------------   ------------
                                                                                      $ 14,507,542   $ 17,406,759
                                                                                      ============   ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       F-3
<PAGE>

                           GreenMan Technologies, Inc.
                         Consolidated Statements of Loss
<TABLE>
<CAPTION>
                                                                                                              Four Months Ended
                                                                               Year Ended May 31,               September 30,
                                                                              1997           1998            1997           1998
                                                                          -----------    ------------    -----------    -----------
                                                                                                    (unaudited)
<S>                                                                       <C>            <C>             <C>            <C>
Net sales .............................................................   $ 2,084,220    $ 11,011,519    $ 3,081,945    $ 5,034,809
Cost of sales .........................................................     1,439,249       7,494,762      2,069,627      3,393,053
                                                                          -----------    ------------    -----------    -----------
Gross profit ..........................................................       644,971       3,516,757      1,012,318      1,641,756
                                                                          -----------    ------------    -----------    -----------
Operating expenses:
    Research and development ..........................................       319,726         675,252         97,176        150,132
    Selling, general and administrative ...............................     3,721,223       4,524,488      1,057,659      1,394,781
    Impairment loss ...................................................     1,000,000              --             --             --
                                                                          -----------    ------------    -----------    -----------
        Total operating expenses ......................................     5,040,949       5,199,740      1,154,835      1,544,913
                                                                          -----------    ------------    -----------    -----------
Operating (loss) profit ...............................................    (4,395,978)     (1,682,983)      (142,517)        96,842
                                                                          -----------    ------------    -----------    -----------
Other income (expense):
    Interest and financing costs ......................................    (2,015,971)     (2,886,366     (1,044,208)      (651,316)
    Other, net ........................................................        (5,436)          5,317          1,825       (821,613)
    Casualty loss .....................................................            --              --             --     (1,450,000)
    Forgiveness of indebtedness .......................................            --              --             --        500,000
                                                                          -----------    ------------    -----------    -----------
        Other (expense), net ..........................................    (2,021,407)     (2,881,049)    (1,042,383)    (2,422,929)
                                                                          -----------    ------------    -----------    -----------
Loss from continuing operations .......................................    (6,417,385)     (4,564,032)    (1,184,900)    (2,326,086)
                                                                          -----------    ------------    -----------    -----------
Discontinued operations:
    Loss from discontinued operations .................................      (589,094)       (660,954)      (244,115)            --
    Loss on disposal of discontinued operations .......................            --      (1,100,000)            --             --
                                                                          -----------    ------------    -----------    -----------
                                                                             (589,094)     (1,760,954)      (244,115)            --
                                                                          -----------    ------------    -----------    -----------
Net loss ..............................................................   $(7,006,479)   $ (6,324,986)   $(1,429,015)   $(2,326,086)
                                                                          ===========    ============    ===========    ===========

Loss from continuing operations per share - basic .....................   $     (5.72)   $      (1.76)   $     (0.67)   $     (0.37)

Loss from discontinued operations per share - basic ...................         (0.52)          (0.26)         (0.14)            --

Loss on disposal of discontinued operations - basic ...................            --           (0.42)            --             --
                                                                          -----------    ------------    -----------    -----------

Net loss per share - basic ............................................   $     (6.24)   $      (2.44)   $     (0.81)     $ (0 .37)
                                                                          ===========    ============    ===========    ===========

Weighted average shares outstanding ...................................     1,122,788       2,596,776      1,774,631      6,247,793
                                                                          ===========    ============    ===========    ===========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       F-4
<PAGE>

                          GreenMan Technologies, Inc.
           Consolidated Statements of Changes in Stockholders' Equity
 Years Ended May 31, 1997 and 1998 and the Four Months Ended September 30, 1998

<TABLE>
<CAPTION>
                                                     Preferred Stock       Common Stock      Additional
                                                   -------------------  ------------------    Paid-in    Accumulated
                                                    Shares    Amount      Shares    Amount    Capital       Deficit        Total
                                                   -------  ----------  ---------  -------  -----------  ------------   -----------
<S>                                                <C>      <C>         <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
Shares issued on conversion of notes
  payable and accrued interest ..................       --          --  1,022,228   10,223    1,010,432            --     1,020,655
Fair value of warrants issued in June
  and August 1998 convertible debt
    offering under SFAS No. 123 .................       --          --         --       --       54,000            --        54,000
Fair value of conversion discount on
  convertible notes payable issued
  in June and August 1998 .......................       --          --         --       --      150,000            --       150,000
Fair value of conversion discount on
  accrued interest associated with
  convertible notes payable .....................       --          --         --       --       14,920            --        14,920
Shares issued for services ......................       --          --     30,000      300       29,700            --        30,000
Shares issued for purchase of United
  Waste Services, Inc. ..........................  320,000   3,200,000         --       --           --            --     3,200,000
Net loss for the four months ended
  September 30, 1998 ............................       --          --         --       --           --    (2,326,086)   (2,326,086)
                                                   -------  ----------  ---------  -------  -----------  ------------   -----------
Balance, September 30, 1998 .....................  320,000  $3,200,000  6,910,247  $69,103  $21,366,619  $(19,356,005)  $ 5,279,717
                                                   =======  ==========  =========  =======  ===========  ============   ===========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       F-5
<PAGE>

                          GreenMan Technologies, Inc.
                     Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                        Year Ended May 31,           Four Months Ended September 30,
                                                                      1997              1998             1997             1998
                                                                  -----------       -----------      -----------       -----------
                                                                                                     (unaudited)
<S>                                                               <C>               <C>              <C>               <C>
Cash flows from operating activities:
    Net loss ...............................................      $(7,006,479)      $(6,324,986)     $(1,429,015)      $(2,326,086)
    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          688,380           468,470
    Write-off of notes receivable, joint venture and
    deposits ...............................................          150,000                --               --           735,000
    Depreciation and amortization ..........................          555,300         1,313,454          335,077           520,580
    Common stock, warrants and options issued for
    services ...............................................          646,203                --               --            30,000
    Loss on disposal of discontinued operations ............               --         1,100,000               --                --
    Write-down of equipment due to fire ....................               --                --               --         3,078,668
    Forgiveness of indebtedness ............................               --                --               --          (500,000)
    (Increase) decrease in assets:
        Accounts receivable ................................           54,611           486,914          159,695          (210,821)
        Inventory ..........................................          (28,409)          269,901          (49,479)           99,541
        Insurance claim receivable .........................               --                --               --        (2,120,284)
        Loan receivable, related party .....................          500,000                --               --                --
        Other current assets ...............................           38,452           172,279          (10,989)         (348,740)
    Increase (decrease) in liabilities:
        Accounts payable ...................................           96,861           202,468          520,776           199,158
        Accrued expenses ...................................          590,364           553,661          296,110           266,018
                                                                  -----------       -----------      -----------       -----------
           Net cash provided by (used for) operating 
           activities ......................................       (1,717,896)         (480,075)        (510,555)         (108,496)
                                                                  -----------       -----------      -----------       -----------
Cash flows from investing activities:
    Acquisition deposit ....................................         (650,000)               --               --                --
    Purchase of property and equipment .....................         (637,944)       (1,146,177)        (389,248)         (385,001)
    Proceeds on disposal of property and equipment .........               --           810,000               --                --
    Refund of equipment deposits ...........................               --           100,000          100,000            15,000
    Cash acquired upon purchase of GMTL ....................               --           172,064               --                --
    Deferred loan costs ....................................               --          (322,000)        (173,800)               --
    Decrease (increase) in other assets ....................           14,425          (246,547)         (76,535)         (123,851)
                                                                  -----------       -----------      -----------       -----------
         Net cash used for investing activities ............       (1,273,519)         (632,660)        (539,583)         (493,852)
                                                                  -----------       -----------      -----------       -----------
Cash flows from financing activities:
    Net proceeds from convertible note payable .............        2,557,019         1,350,000               --           371,393
    Proceeds from notes payable ............................           46,550         3,511,379               --            70,680
    Repayment of notes payable .............................         (149,259)       (4,989,869)         (33,597)         (249,541)
    Net advances under line of credit ......................               --           279,309               --           437,508
    Proceeds from notes payable - related parties ..........          860,000           386,000          386,000                --
    Repayment of notes payable - related parties ...........         (893,950)          (58,829)         (15,282)          (19,415)
    Principal payments on obligations under
    capital leases .........................................         (184,720)       (1,015,393)        (120,353)          (28,025)
    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          441,120           582,601
                                                                  -----------       -----------      -----------       -----------
Net (decrease) increase in cash ............................          (48,979)           76,770          412,992           (19,748)
                                                                  -----------       -----------      -----------       -----------
Cash and cash equivalents at beginning of period ...........          153,172           104,193          104,193           180,963
                                                                  -----------       -----------      -----------       -----------
Cash and cash equivalents at end of period .................      $   104,193       $   180,963      $   516,285       $   161,215
                                                                  ===========       ===========      ===========       ===========
</TABLE>

                                   (Continued)
          See accompanying notes to consolidated financial statements.


                                       F-6
<PAGE>

                           GreenMan Technologies, Inc.
                      Consolidated Statements of Cash Flows
                                   (Concluded)

<TABLE>
<CAPTION>
                                                                        Year Ended May 31,           Four Months Ended September 30,
                                                                      1997              1998             1997             1998
                                                                  -----------       -----------      -----------       -----------
                                                                                                     (unaudited)
<S>                                                               <C>               <C>              <C>               <C>
Supplemental cash flow information:
  Machinery and equipment acquired under capital leases .....     $  993,062        $2,771,876       $       --        $       --
  Convertible note payable issued in settlement of capital
  lease .....................................................             --                --               --           300,000
  Common stock issued upon conversion of notes payable and
  accrued interest ..........................................        825,000         4,997,041          700,000         1,020,655
  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          173,800           204,000
  Interest paid .............................................        232,987           672,996           55,200           186,240
</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
                                                                    ==========

On September 4, 1998, Company acquired all of the scrap tire collection and
processing assets of United Waste Service, Inc. as follows:

Fair value of assets acquired                                      $ 2,335,000
Fair value of liabilities assumed                                      300,000
                                                                   -----------
Fair value of net assets acquired                                    2,035,000
Preferred stock issued                                              (3,200,000)
Cash                                                                  (850,000)
                                                                   -----------
Excess of cost over fair value of net assets                       $ 2,015,000
                                                                   ===========

      During the year ended May 31, 1998, $100,00 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 at May 31, 1998.

      See accompanying notes to consolidated financial statements.


                                       F-7
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements
     (Information for the Four Months Ended September 30, 1997 is unaudited)

1.    Summary of Significant Accounting Policies

Business

      GreenMan Technologies, Inc. (the "Company" or "GreenMan") operates two
business segments, the recycling operations located in Jackson and
Lawrenceville, Georgia; Savage, Minnesota; Batesburg, South Carolina; 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. In August 1998, the Company's Louisiana crumb rubber processing
facility was severely damaged by a fire which necessitated the closure of the
operation.

      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").
GMTL ceased processing operations in August 1998 due to a fire and was
completely closed in December 1998.

      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 two recycling operations
are located in Lawrenceville, Georgia and Batesburg, South Carolina. The
Lawrenceville operation was assumed by GMTG. The Batesburg operation has been
incorporated as GreenMan Technologies of South Carolina, Inc. ("GMTSC").

      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.

Basis of Presentation

      The consolidated financial statements include the results of the Company
and DuraWear for all periods presented and the results of GMTM and GMTG since
July 1, 1997, GMTL since November 19, 1997 and GMTSC since September 4, 1998.
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 were 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-end from May 31 of each year to September 30.


                                       F-8
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements
     (Information for the Four Months Ended September 30, 1997 is unaudited)

1.    Summary of Significant Accounting Policies - (Continued)

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
September 30, 1998.

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, GMTG and United 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.


                                       F-9
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements
     (Information for the Four Months Ended September 30, 1997 is unaudited)

1.    Summary of Significant Accounting Policies - (Continued)

Stock-Based Compensation

      Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation", 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 accounting had
been applied. The pro forma disclosures include the effects of all awards
granted after May 31, 1995. (See Note 15)

Net Loss Per Share

      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. For all periods presented,
options, warrants and convertible debt were anti-dilutive and excluded from the
net loss per share computation.

New Accounting Pronouncements

      SFAS No. 130, "Reporting Comprehensive Income" 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 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.

      Under SFAS No. 130 all items of comprehensive income are 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 adopted this new disclosure requirement for the four months
ended September 30, 1998. There were no other items of comprehensive income
during the years ended May 31, 1997 and 1998 and the four months ended September
30, 1998.


                                      F-10
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements
     (Information for the Four Months Ended September 30, 1997 is unaudited)

1.    Summary of Significant Accounting Policies - (Continued)

      SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", 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.

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 were 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 that 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 11) 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.

      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 a 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. In August 1998, GMTL's facility was
severely damaged by a fire which necessitated the closure of the operation. As a
result, the remaining goodwill balance was expensed.

      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 lower of the trailing 15 day
average closing bid (as defined) prices prior to the conversion date or the
average of the closing bid prices during the period from September 3, 1998 to
February 3, 2001. The 320,000 shares of Class B convertible preferred stock have
a liquidation value of $10 per share and no voting rights. Simultaneous with the
acquisition, the Company entered into an equipment financing agreement with
Heller Financial Inc. which provided the $850,000 for the transaction. The
acquired assets are located in Lawrenceville, Georgia (reported


                                      F-11
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements
     (Information for the Four Months Ended September 30, 1997 is unaudited)

2.    Acquisition of Subsidiaries - (Continued)

as an operating division of GMTG) and Batesburg, South Carolina (incorporated as
GreenMan Technologies, of South Carolina, Inc. "GMTSC") .The acquisition has
been accounted for as a purchase and accordingly, the operations are included in
the consolidated financial statements since September 4, 1998. Goodwill was
recorded as the total consideration paid by the Company exceeded the fair value
of the net assets acquired by $2,015,000.

      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.

<TABLE>
<CAPTION>
                                              Years Ended May 31       Four Months Ended September 30,
                                             1997            1998            1997            1998
                                        -------------   -------------   -------------   -------------
<S>                                     <C>             <C>             <C>             <C>         
Revenue                                 $ 16,366,122    $ 16,927,241    $  5,534,037    $  6,784,777
Net (Loss) From Continuing Operations     (7,021,351)     (4,156,586)       (115,063)        358,467
Net Loss                                  (7,610,445)     (5,917,540)     (1,401,561)     (2,064,462)
Net Loss per Weighted Average Share            (6.78)          (2.28)          (0.79)          (0.33)
</TABLE>

      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. Amortization expense for the periods ended
September 30, 1997 and 1998 was $16,616 and $128,409, respectively.

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. During the years ended May
31, 1997 and 1998, the Facility's revenues totaled $1,936,450 and $1,126,627
respectively. During the four months ended September 30, 1997, the Facility's
revenues totaled $713,174.

      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 were 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 and the period
ended September 30, 1997 of $589,094, $660,954 and $244,115 respectively. In
July 1998, the Company disposed of the remaining assets and converted $300,000
of the capital lease obligation (see Note 13) 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. During
the period ended September 30, 1998, the Company did not make any payments on
the convertible note payable and is currently in default. The Company has
classified the note as a current liability. At May 31, 1998 and September 30,
1998, the Company has approximately $598,000 and $246,000, respectively of the
facility's net obligations remaining which are included in accrued expenses. The
Company is currently negotiating payment terms with the remaining creditors.


                                      F-12
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements
     (Information for the Four Months Ended September 30, 1997 is unaudited)

4.    Need for Additional Capital

      The Company has incurred losses since its inception aggregating
$19,356,005, and has a working capital deficiency of $1,235,451 at September 30,
1998 and is in default on certain debt obligations. 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 status 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
profitability. Management does not believe that adjustments or reclassifications
of recorded assets and liabilities are necessary at this time.

5.    Insurance Claim Receivable on Casualty Loss

      In August 1998, GMTL's facility was damaged by a fire which necessitated
the closure of the operation. The Company does not intend to rebuild in St.
Francisville, Louisiana and is still assessing alternatives for replacing
equipment and re-establishing crumb rubber capabilities either on its own or
through alliances with existing crumb rubber producers and/or crumb rubber
users.

      Under the terms of GMTL's $3,000,000 property insurance policy, the
Company anticipates initially receiving $2,050,000. The remaining $950,000 may
be paid if the Company can demonstrate, to the insurance company's satisfaction,
that the Company's has invested $3,000,000 (replacement policy limit) on
alternative equipment that satisfies the replacement requirements of the
insurance policy. There can be no assurance that this is the case. In January
1999, the Company submitted a proposal to the insurance company, which would
allow GMTL to receive the remaining funds due under the policy. The Company will
recognize the remaining $950,000 of insurance proceeds when it has received
approval from the insurance company and replaces the damaged property. As a
result of the closure of GMTL, management has written down all GMTL assets to
their estimated net realizable value and accrued for all remaining estimated
fire related costs at September 30, 1998 resulting in a casualty loss of
$1,450,000.

      The Company also recorded an insurance receivable of $70,284 at September
30, 1998 associated with its business interruption policy. Subsequent to
September 30, 1998, the Company received $500,000 of advance payments from the
insurance company against the total insured loss.

      The Company renegotiated GMTL's cryogenic equipment capital lease
obligation whereby the lessor has agreed to forgive $500,000 of capital lease
obligations in return for a $500,000 payment when the Company receives the
additional payment from the insurance company. The lessor has agreed to execute
a 10 year note payable with the Company for the remaining capital lease balance
of $1,600,000. The note will bear interest at 10% per annum and be payable in
monthly payments of $21,144 including interest and principal starting in June
1999. The Company has recorded this forgiveness of debt as other income for the
period ended September 30, 1998.

6.    Inventory

Inventory consists of the following at:

                                           May 31,1998       September 30,1998
                                         ---------------   ---------------------
Raw materials .......................        $ 29,000            $  8,517
Work in process .....................          12,805              19,552
Finished goods ......................         286,773             200,968
                                             --------            --------
                                             $328,578            $229,037
                                             ========            ========


                                      F-13
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements
     (Information for the Four Months Ended September 30, 1997 is unaudited)

7.    Property, Plant and Equipment

      Property, plant and equipment consists of the following:

                                         May 31,      September 30,   Estimated
                                          1998            1998      Useful Lives
                                      ------------    ------------    ----------
Land ..............................   $    879,162    $    879,162        
Buildings .........................      2,490,980       2,561,924    5-25 years
Machinery and equipment ...........      5,552,609       4,007,240    3-20 years
Furniture and fixtures ............         79,184          91,564     3-7 years
Motor vehicles ....................      1,779,541       2,699,498    3-10 years
Leasehold improvements ............         52,626              --       5 years
                                      ------------    ------------    
                                        10,834,102      10,239,388
Less accumulated depreciation
  and amortization                        (960,023)     (1,112,815)
                                      ------------    ------------
Property, plant and equipment,net     $  9,874,079    $  9,126,573
                                      ============    ============

      Depreciation and amortization expense for the years ended May 31, 1997 and
1998 was $380,454 and $1,057,273 respectively. Depreciation and amortization
expense for the periods ended September 30, 1997 and 1998 was $276,240 and
$388,839 respectively.

8.    Other Assets

Other assets consists of the following:
                                                         May 31,   September 30,
                                                          1998         1998
                                                       ----------  -------------
Licensing fee, net .................................   $   81,671   $   78,339
Note receivable and accrued interest ...............      107,787      110,735
Joint venture deposit ..............................      150,000           --
Deposits and miscellaneous .........................      129,046      249,949
                                                       ----------   ----------
                                                       $  468,504   $  439,023
                                                       ==========   ==========

      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. This agreement was fully amortized at May 31,1998.
Amortization expense for the years ended May 31, 1997 and 1998 were $116,667 and
$155,557, respectively. Amortization expense for the period ended September 30,
1997 was $38,889.

      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. Amortization expense for both the periods
ended September 30, 1997 and 1998 was $3,332.

      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-14
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements
     (Information for the Four Months Ended September 30, 1997 is unaudited)

8.    Other Assets - (Continued)

      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. As a result of the inability of the
Company's joint venture partner to secure the necessary project financing and
the limited operating history of the joint venture partner, management has
determined the deposit to be uncollectible. This amount is included in other
expenses for the period ended September 30, 1998.

      In August 1998, the Company entered into a license agreement with a
privately-held R&D company under which it acquired the exclusive rights and
license to use a series of four proprietary crumb rubber modification
technologies (the "technologies") to be developed for use in the asphalt
industry. In connection with this license the Company is required to pay
$150,000 over a twelve month period and issue 78,829 immediately exercisable two
year warrants to purchase shares of common stock of the company at $1.11 per
share as each of the four technologies are conveyed to the Company. The Company
is required to pay a royalty fee on the sale of crumb rubber incorporating the
licensed technologies when the processes are commercialized.

9.    Investment in 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. In 1997, the
Company evaluated the production capacity of the line and decided to redeploy
the equipment in a joint venture with Crumb Rubber Technologies, Inc. ("CRT").
As a result of the Company's decision to refocus its resources, 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 at May 31, 1997.
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".

      The Company's joint venture with CRT will attempt 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 contributed the cryogenic crumb rubber equipment that
was valued at $400,000 after recording the impairment loss, 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. As a result of the joint venture's inability to generate
significant revenues since inception, the Company's minority ownership position
in the joint venture and management's belief that it is unlikely to generate any
significant revenue from the joint venture, management has decided to write-off
its $400,000 investment in the joint venture at September 30, 1998. This amount
is also included in other expenses for the period ended September 30, 1998.

      Pursuant to the terms of the joint venture agreement, CRT agreed to return
$300,000 of equipment deposits previously made by the Company by March 1998. CRT
repaid $115,000 as of September 30, 1998. Management has deemed the remaining
$185,000 of equipment deposits to be uncollectible due to CRT's inability to
maintain the agreed upon payment schedule and the un-collateralized nature of
the deposits. This amount is also included in other expenses for the period
ended September 30, 1998.


                                      F-15
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements
     (Information for the Four Months Ended September 30, 1997 is unaudited)

10.   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
from $.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. Amortization and interest expense on the
Debentures for the period ended September 30, 1997 was $271,484.

      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 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 at exercise prices ranging from $4.85 to $5.25
(the "April Offering"). 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.
Amortization and interest expense on the Debentures for the period ended
September 30, 1997 was $298,560. During the year ended May 31, 1998, all Notes
were 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 for the year ended May 31, 1998 and $112,500 for the period ended
September 30, 1997.


                                      F-16
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements
     (Information for the Four Months Ended September 30, 1997 is unaudited)

10.   Convertible Notes Payable

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.

      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
approximately $533,000 associated with the 25% discount from market to be
realized upon conversion 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.

      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. During the year ended May 31, 1998, $240,433 of the Initial
Debentures and $7,127 of accrued interest were converted into 98,984 shares of
common stock. During the period ended September 30, 1998, $969,827 of the
Initial Debentures and $50,828 of accrued interest have been converted into
1,022,228 shares of common stock. During the period of October to December 1998,
the remaining $389,740 of Initial Debentures and $28,457 of accrued interest
have been converted into 1,395,358 shares of common stock.

      The Company issued $450,000 of Additional Debentures during the period
ended September 30, 1998 and immediately exercisable two-year warrants to
purchase 27,000 shares of Common Stock at an exercise prices ranging from $1.17
to $2.41 per share. The Company also issued immediately exercisable two year
warrants to purchase 27,000 shares of common stock at an exercise prices ranging
from $1.17 to $2.41 per share to the placement agent. The Company recorded a
deferred charge of approximately $150,000 associated with the 25% discount from
market to be realized upon conversion of the Additional Debentures. The Company
also recorded deferred financing costs of $54,000 in connection with the
issuance of warrants to purchase 54,000 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
Initial and Additional Debentures. Amortization and interest expense for the
year ended May 31, 1998 was $478,235. Amortization and interest expense for the
period ending September 30, 1998 was $462,921


                                      F-17
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements
     (Information for the Four Months Ended September 30, 1997 is unaudited)

11.   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% 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% 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%.

      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 September 30, 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 both the year ended May 31, 1998 and the
period ended September 30, 1998 was $35,782 and $35,782.

      On September 4, 1998, Heller provided GMTG an additional $850,000 term
note secured by the machinery and equipment of GMTG and payable in monthly
principal installments of $14,667, with interest at prime plus 1.75% and a
balloon payment of $439,324 due in February 2001. GMTG used the proceeds for the
United acquisition. In connection with the loan, Heller reduced the working
capital line of credit from $1,700,000 to $1,079,000.

<TABLE>
<CAPTION>
Notes payable consists of the following at:                                              May 31,     September 30,
                                                                                          1998           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 September 30,1998)  and a final installment of the remaining
  unpaid principal balance due July 2000 ...........................................   $   432,300    $   425,885

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 September
  30, 1998) and a final installment of the remaining unpaid principal balance
  due February 2001 ................................................................     1,330,000      1,236,667

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
  September 30, 1998) and a final installment of the remaining unpaid principal
  balance due February 2001 ........................................................     1,805,000      1,678,334

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
  $14,667 including interest at prime plus 1.75% (10.25% at September 30, 1998)
  and a final installment of the remaining unpaid principal balance due
  February 2001 ....................................................................            --        850,000

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 31, 1998 and September 30, 1998) ...........................       279,309        716,817

Other term notes payable and assessments, secured by equipment and requiring
  monthly installments .............................................................       269,350        316,903
                                                                                       -----------    -----------
                                                                                         4,115,959      5,224,606
Less current portion ...............................................................    (1,053,676)    (1,678,399)
                                                                                       -----------    -----------
  Notes payable, non-current portion ...............................................   $ 3,062,283    $ 3,546,207
                                                                                       ===========    ===========
</TABLE>


                                      F-18
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements
     (Information for the Four Months Ended September 30, 1997 is unaudited)

11.   Notes Payable

      The following is a summary of maturities of notes payable at September 30,
1998:

            Years Ending
            September 30,
            -------------
            1999 ...................................... $ 1,678,399
            2000 ......................................     927,900
            2001 ......................................   2,553,723
            2002 ......................................      42,072
            2003.......................................      22,512
                                                        -----------
                                                        $ 5,224,606
                                                        ===========

      Interest expense for the years ended May 31, 1997 and 1998 was $ 56,195
and $478,497. Interest expense for the periods ended September 30, 1997 and 1998
was $137,803 and $158,963, respectively.

12.   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.
Interest expense for the period ended September 30, 1997 amounted to $55,234.

      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 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. From
September 1996 to May 1997 the Company borrowed an additional $624,300 from this
officer and another officer of the Company. During January 1997 and May 1997 the
Company repaid $345,000 to these officers.

      On May 30, 1997, the Company refinanced the remaining principal balance
and accrued interest plus accrued business expenses owed to these officers and
issued 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.


                                      F-19
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements
     (Information for the Four Months Ended September 30, 1997 is unaudited)

12.   Related Party Debt Agreements - (Continued)

      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. Interest expense for the period ended September 30, 1997 was
$31,129. Amortization of deferred financing costs for the year ended May 31,
1998 was $459,300. Amortization of deferred financing costs for the period ended
September 30, 1997 was $137,160.

Notes Payable, Related Party

      Pursuant to the terms of the DuraWear stock purchase agreement, the
Company assumed 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, 1998 and September 30, 1998, the note had a balance of $24,371
and $4,956, respectively. The note was paid off in October 1998. Interest
expense for the years ended May 31, 1997 and 1998 was $11,012 and $5,435.
Interest expense for the periods ended September 30, 1997 and 1998 was $2,412
and $571.

13.   Capital Leases

      The Company leases machinery and equipment with a cost of $2,831,477 and
$59,601 under capital lease agreements at May 31, 1998 and September 30, 1998,
respectively. Accumulated amortization amounted to $128,163 and $31,433, at May
31, 1998 and September 30, 1998, respectively. Amortization expense on assets
under capital leases for the years ended May 31, 1997 and 1998 was $201,272 and
$299,857 respectively. Amortization expense for the period ended September 30,
1998 amounted to $3,974.

      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.

      Effective October 1997, the Company entered into a fifteen-year cryogenic
equipment lease agreement. Under the terms of the agreement, GMTL was paying
$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 were 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 was classified as a capital
lease at May 31, 1998 with an equipment value of $2,771,876. As a result of the
August 21, 1998 fire at GMTL, the leased cryogenic equipment was destroyed. The
Company has renegotiated the capital lease obligation whereby the lessor has
agreed to forgive $500,000 of capital lease obligations in return for a $500,000
payment when the Company receives the additional payments from the insurance
company. The lessor has agreed to execute a 10 year note payable with the
Company for the remaining capital lease balance of $1,600,000. The note will
bear interest at 10% per annum and be payable in monthly payments of $21,144
including interest starting in June 1999.


                                      F-20
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements
     (Information for the Four Months Ended September 30, 1997 is unaudited)

13.   Capital Leases - (Continued)

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
September 30, 1998:

            Years Ending
            September 30,
            -------------
                1999 ...................................  $    594,998
                2000 ...................................       253,728
                2001 ...................................       253,728
                2002 ...................................       253,728
                2003 ...................................       253,728
                Thereafter .............................     1,437,804
                                                          ------------
            Total minimum lease payments ...............     3,047,714
            Less amount representing interest ..........      (937,292)
                                                          ------------

                Present value of minimum lease payments   $  2,110,422
                                                          ============

      Interest expense for the years ended May 31, 1997 and 1998 was $99,103 and
$200,681 respectively. Interest expense for the periods ended September 30, 1997
and 1998 was $66,894 and $29,432, respectively.

14.   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 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. Rent expense was $12,952 and $17,464,
respectively, for the periods ended September 30, 1997 and 1998.

15.   Stockholders' Equity

Reverse Split of Common Stock

      All share and per share data in this Form 10-KSB 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.

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.


                                      F-21
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements
     (Information for the Four Months Ended September 30, 1997 is unaudited)

15.   Stockholders' Equity -(Continued)

      During the year ended May 31, 1998, the following shares of common stock
were issued pursuant to convertible notes and debentures:

                                                                         Total
                                       Principal        Interest        Shares
Offering                               Converted       Converted        Issued
--------                               ---------       ---------        ------
January 1997 (Note 10) .........      $  675,000      $       --         252,218
April 1997 (Note 10) ...........       1,500,000         107,029       1,089,449
Related Party (Note 12) ........       1,200,000         165,741         297,257
Officers (Note 12) .............       1,026,000          75,711       1,260,193
December 1997 (Note 10) ........         240,433           7,127          98,984
                                      ----------      ----------      ----------
                                      $4,641,433      $  355,608       2,998,101
                                      ==========      ==========      ==========

      Investors from the January Offering exercised 36,000 warrants during the
year ended May 31, 1998, resulting in net proceeds to the Company of $225,000.

      During the period ended September 30, 1998, 1,022,228 shares of common
stock were issued on conversion of the December 1997 Debentures.

      On August 24, 1998, the Company issued 30,000 shares of common stock for
services rendered to the Company.

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.

      In October 1998, the Company commenced a private offering of common stock
in an effort to raise up to $500,000 in gross proceeds. As of December 1, 1998,
the Company sold 1,078,947 shares of unregistered common stock to investors
including officers and directors of the Company (the "Investors") for
approximately $365,000. The Company granted the Investors piggy-back
registration rights to register the common stock. The Investors have agreed not
to sell or transfer the shares for a period of at least twelve months after
issuance.

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-22
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements
     (Information for the Four Months Ended September 30, 1997 is unaudited)

15.   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>
                                                                                                        Four Months Ended
                                                         Years Ended May 31,                              September 30,
                                       ---------------------------------------------------------    ---------------------------
                                                 1997                           1998                           1998
                                       --------------------------    ---------------------------    ---------------------------
                                                      Weighted                        Weighted                       Weighted
                                                      Average                         Average                        Average
                                                      Exercise                        Exercise                       Exercise
                                        Shares         Price           Shares          Price          Shares          Price
                                       ---------    -------------    ------------    -----------    -----------     -----------
<S>                                     <C>              <C>           <C>              <C>          <C>               <C>    
Outstanding at beginning of period       75,500          $  6.45         143,340        $  4.05      1,274,500         $  1.37
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 period            143,340             4.05       1,274,500           1.37      1,274,500            1.37
                                        =======                        =========                     =========
Exercisable at end of period             27,500              .85          41,940           1.91         58,120            2.20
                                        =======                        =========                     =========
Reserved for future grants at
end of period                            51,180                          714,780                       714,780
                                        =======                        =========                     =========
Weighted average fair value of
options granted during the period                          $1.35                         $ 0.31                            N/A
</TABLE>

Information pertaining to options outstanding under the Plan at September 30,
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             29,000      $ .45
$ 1.09                                  1,142,600      9.8          1.09                 --         --
$ 1.35 - $ 1.45                            12,400      6.0          1.41              9,920       1.40
$ 4.70 - $ 5.00                            40,500      9.0          4.70              8,400       4.71
$ 5.65                                     50,000      8.6          5.65             10,800       5.65
                                      -----------                                ----------
                                        1,274,500      9.6         $1.37             58,120      $2.20
                                      ===========                                ==========
</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 September 30, 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-23
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements
     (Information for the Four Months Ended September 30, 1997 is unaudited)

15.   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
granted 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 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.

      On September 23, 1998, the Company granted 78,829 two year warrants
pursuant to a technology license agreement at an exercise price of $1.11 per
share (See Note 8).

Stock-Based Compensation

      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:

<TABLE>
<CAPTION>
                                                                                      Four Months Ended
                                               Year Ended May 31,                       September 30,
                                          ------------------------------        ------------------------------
                                             1997               1998               1997             1998
                                          ------------       -----------        -----------    ---------------
                                                                               (unaudited)
<S>                                        <C>               <C>                <C>              <C>       
Net loss:
      As reported                          $7,006,479        $6,324,986         $1,429,015       $2,326,086
      Pro forma                             7,091,400         6,457,825          1,463,295        2,360,366
Net loss per share - basic:
      As reported                          $    (6.24)       $    (2.44)        $    (0.81)      $    (0.37)
      Pro forma                                 (6.32)            (2.49)             (0.82)           (0.38)
</TABLE>


                                      F-24
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements
     (Information for the Four Months Ended September 30, 1997 is unaudited)

15.   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 years ended May 31, 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 2 years.
There were not options granted under the Plan during the period ended September
30, 1998.

      Weighted average assumptions used in valuing stock options issued outside
of the plans during the years 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 2 years.

Common Stock Reserved

The Company has reserved common stock at September 30, 1998 as follows:
       Initial public offering warrants .........................        253,000
       Warrants issued on conversion of preferred stock .........        260,000
       Convertible debentures and notes .........................      2,927,391
       Stock option plans .......................................      2,049,280
       Other stock options ......................................      1,590,500
       Other warrants ...........................................      1,416,816
                                                                       ---------
                                                                       8,496,987
                                                                       =========

      The number of shares of common stock reserved in connection with the
convertible debentures and notes are subject to adjustment. (See Notes 3 and
11).

16.   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 is as follows:

                                At or For the Period Ended September 30, 1998
                             ---------------------------------------------------
                             Rubber Recycling  Industrial Materials
                                   Group              Group             Total
                             ----------------  --------------------  -----------
Operating Revenues             $ 4,605,612         $   429,197       $ 5,034,809
Operating Profit                   399,542               7,897           407,439
Identifiable Assets             14,370,315           1,979,493        16,349,808
Depreciation/Amortization          296,613              42,935           339,548
Capital Expenditures             2,714,652                  --         2,714,652


                                      F-25
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements
     (Information for the Four Months Ended September 30, 1997 is unaudited)

16.   Segment Information - (Continued)

                                   At or For the Year Ended May 31, 1998
                             ---------------------------------------------------
                             Rubber Recycling  Industrial Materials
                                   Group              Group             Total
                             ----------------  --------------------  -----------
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

                                   At or For the Year Ended May 31, 1997
                             --------------------------------------------------
                             Rubber Recycling  Industrial Materials
                                   Group              Group            Total
                             ----------------  -------------------- -----------
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

      At May 31, 1998, 11% and 11% of consolidated accounts receivable were from
two customers and at September 30, 1998, no customer accounted for greater than
10% of consolidated accounts receivables.

      During the year ended May 31, 1997 and 1998 and the four months ended
September 30, 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 and the periods ended September 30, 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:

                                              May 31,         September 30,
                                               1998               1998
                                           -----------        -----------
Deferred tax asset:                                        
  Federal ..........................       $ 4,380,000        $ 5,106,000
  State ............................           870,000          1,012,000
                                           -----------        -----------
                                             5,250,000          6,118,000
Valuation reserve ..................        (5,250,000)        (6,118,000)
                                           -----------        -----------
Net deferred tax asset .............       $        --        $        --
                                           ===========        ===========


                                      F-26
<PAGE>

                           GreenMan Technologies, Inc.
                   Notes To Consolidated Financial Statements
     (Information for the Four Months Ended September 30, 1997 is unaudited)

17.   Income Taxes - (Continued)

The following differences give rise to deferred income taxes:

                                           May 31,         September 30,
                                            1998               1998
                                        -----------        ------------
Net operating loss carryforward ....    $ 4,583,000        $  5,012,000
Research tax credit carryforward ...         17,000              17,000
Non-deductible write-down of assets         390,000             546,000
Other ..............................        260,000             543,000
                                        -----------        ------------
                                          5,250,000           6,118,000
Valuation reserve ..................     (5,250,000)         (6,118,000)
                                        -----------        ------------
Net deferred tax asset .............    $        --        $         --
                                        ===========        ============
                                                     
The change in the valuation reserve is as follows:

<TABLE>
<CAPTION>
                                                                  Four Months Ended
                                        Years Ended May 31,         September 30,
                                      -----------------------   -----------------------
                                         1997         1998         1997         1998
                                      ----------   ----------   ----------   ----------
<S>                                   <C>          <C>          <C>          <C>       
Balance at beginning of period ....   $1,383,000   $3,184,000   $3,184,000   $5,250,000
Increase due to current year net
operating loss ....................    1,801,000    2,066,000      243,000      868,000
                                      ----------   ----------   ----------   ----------
Balance at end of period ..........   $3,184,000   $5,250,000   $3,427,000   $6,118,000
                                      ==========   ==========   ==========   ==========
</TABLE>

      As of September 30, 1998, the Company has net operating loss carryforwards
of approximately $12,850,000. 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.   Letter of Intent

      On June 1, 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-sanctioned disposal site on about 40 acres of permitted land. The Company
has been operating the Mac's facility since June 1, 1998 under a management
agreement (the "management agreement") and anticipates completing a purchase and
sale agreement during the first quarter of calendar 1999. The management
agreement provides for the Company to earn a management fee equal to 90% of the
net income of Mac's before depreciation and income taxes. The Company has
recognized $223,000 of income under this agreement for the period ended
September 30, 1998 and accounts receivable from Mac's amounted to $183,000 at
September 30,1998.

19.   Fair Value of Financial Instruments

      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.

      At September 30, 1998, the Company's financial instruments consist of note
payable to related parties and banks and convertible notes payable. Notes
payable to related parties and banks approximate their fair values as these
instruments bear interest at market rates. The fair value of the $300,000
convertible note payable is $300,000 at September 30, 1998 as the conversion
price per share is in excess of the fair value of the common stock. The fair
value of the $839,740 in convertible notes payable outstanding is approximately
$1,120,000 based on the fair value of the common stock issuable on conversion of
the notes.


                                      F-27
<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                      January 13, 1999
    ----------------------
      Maurice E. Needham


      /s/ Robert H. Davis              Chief Executive Officer, President               January 13, 1999
      -------------------                         and Director
        Robert H. Davis                


     /s/ Charles E. Coppa                Acting Chief Financial Officer,                January 13, 1999
     --------------------               Treasurer and Assistant Secretary
       Charles E. Coppa            (Principal Financial Officer and Principal
                                              Accounting Officer)


      /s/ Robert D. Maust               Vice President of Operations and                January 13, 1999
      -------------------                           Director
        Robert D. Maust  


        /s/ Lew F. Boyd                             Director                            January 13, 1999
        ---------------
          Lew F. Boyd


        /s/ Jagruti Oza                             Director                            January 13, 1999
        ---------------
          Jagruti Oza
</TABLE>