UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                 ---------------
                                    FORM 10-Q
                                 ---------------
 (Mark One)
          [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended December 31, 2001

                                       OR

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

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

                        Commission file number: 000-28909

                       GreyStone Digital Technology, Inc.
                       ----------------------------------
             (Exact Name of Registrant as Specified in its Charter)
                                 ---------------

Delaware                                        84-1107140
--------                                        ----------
(State or other jurisdiction                    (IRS Employer
incorporated or organization)                   Identification No.)

            3954 Murphy Canyon Road, Suite 205, San Diego, CA 92123
            ---------------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

                                 (972) 458-3900
                                       --------
              (Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:

TITLE OF EACH CLASS                             OUTSTANDING AT March 31, 2002
-------------------                             -----------------------------

Common Stock, $.001 par value                              75,633,546
Series A Convertible Preferred Stock, $.001 par value               0

                                       1
<PAGE>




INDEX

                      GreyStone Digital Technology, Inc.
                                                                     Page No.


PART I.   FINANCIAL INFORMATION FOR GREYSTONE DIGITAL TECHNOLOGY
          AND SUBSIDIARY

 Item 1.  FINANCIAL STATEMENTS AND NOTES
          Condensed Consolidated Balance Sheets at December 31,
            2001 (unaudited) and March 31, 2001                            3

          Condensed Consolidated Statements of Operations
            (unaudited) for the three and nine months ended
            December 31, 2001 and 2000                                     4

          Condensed Consolidated Statements of Stockholders'
            Deficiency (unaudited) for the nine months ended
            December 31, 2001                                              5

          Condensed Consolidated Statements of Cash Flows
            (unaudited) for the nine months ended December 31,
            2001 and 2000                                                  6

          Notes to Condensed Consolidated Unaudited Financial Statements   8

 Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
            OF OPERATIONS                                                 16

 Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
            MARKET RISK                                                   21

PART II.   OTHER INFORMATION                                              21

 Item 1.   LEGAL PROCEEDINGS                                              21

 Item 2.   CHANGES IN SECURITIES                                          21

 Item 3.   DEFAULTS UPON SENIOR SECURITIES                                22

 Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS            22

 Item 5.   OTHER INFORMATION                                              22

 Item 6.   EXHIBITS AND REPORTS ON FORM 8-K                               23

EXHIBIT INDEX                                                             23

                                       2
<PAGE>


PART I. FINANCIAL INFORMATION FOR GREYSTONE DIGITAL TECHNOLOGY AND SUBSIDIARY

ITEM 1. FINANCIAL STATEMENTS AND NOTES

                GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY

                      CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>


                                         December 31,            March 31,
                                            2001                   2001
                                        (Unaudited)
                              ASSETS
Current assets:
<S>                                    <C>                  <C>
  Cash and cash equivalents            $     1,795            $   383,970
  Accounts receivable                       70,333                306,248
  Other current assets                      15,236                  9,755
                                       -----------            -----------
Equipment, furniture and leasehold
 improvements, net                         256,444                460,094
Deposits                                    28,438                 35,687
                                       -----------            -----------

    Total assets                       $   372,246            $ 1,195,754
                                       ===========            ===========

LIABILITIES AND STOCKHOLDERS'
 DEFICIENCY
Current Liabilities:
  Accounts payable and accrued
   expenses                            $ 2,521,863            $ 2,002,332
  Notes payable and other advances due   1,373,800              1,186,767
  Advances from Kiboga                     166,821
  Notes payable to stockholder and
   employee                                257,250                186,500
  Accrued expenses related to disposal
   of discontinued commercial segment                             418,000
                                       -----------            -----------
    Total current liabilities            4,319,734              3,793,599
                                       -----------            -----------

Commitments and contingencies
 (Notes 2, 5, 7, 9, 10, 11)

Stockholders'deficiency:
  Series A Preferred stock, $.001 par
   value; $1000 liquidation
   preference value per share:
   3,000,000 shares authorized;
   2,100 and 3,731 shares issued
   and outstanding                               2                      4
  Additional paid in capital -
   Preferred stock                       2,866,612              4,295,605
  Common stock, $.001 par value;
   100,000,000 shares authorized;
   65,947,441 and 17,301,785 shares
   issued                                   65,948                 17,302
  Additional paid in capital -
   Common stock                         49,438,784             45,723,009
  Accumulated deficit                  (56,240,533)           (52,555,464)
  Treasury stock, at cost, 278,652
   shares held                             (78,301)               (78,301)
                                       -----------            -----------
    Total stockholders' deficiency      (3,947,488)            (2,597,845)
                                       -----------            -----------
    Total liabilities and stockholders'
     deficiency                        $   372,246            $ 1,195,754
                                       ===========            ===========

See Notes to Unaudited Condensed Consolidated Financial Statements

</TABLE>


                                       3
<PAGE>



                GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                              Three months ended                       Nine months ended
                                                 December 31,                             December 31,
                                         2001                 2000                 2001                 2000
                                    -----------           -----------          -----------           -----------
<S>                                 <C>                   <C>                  <C>                   <C>
Revenues                            $   171,948           $   470,985          $ 1,260,874           $ 1,667,022

Expenses:
  Cost of revenues                       57,302               432,741              860,122              1,350,657
  Marketing and sales                   101,815               311,679              520,390                757,769
  Research and development               89,294               205,201              405,762                467,466
  Write off of license agreement      1,205,810                                  1,205,810
  General and administrative            533,890               696,171            1,772,752              2,623,808
                                    -----------           -----------          -----------           ------------
    Total expenses                    1,988,111             1,645,792            4,764,836              5,199,700
                                    -----------           -----------          -----------           ------------
Loss from operations                 (1,816,163)           (1,174,807)          (3,503,962)            (3,532,678)

Other income (expense):
  Interest income                         5,000                 6,521               22,646                 82,378
  Interest expense                      (41,712)                                  (124,590)
  Miscellaneous                          59,195                                     92,363
  Reserve for notes receivable,
   including  accrued interest of
   $56,762                                                   (643,151)                                   (643,151)
  Reserve for contract receivable                            (135,000)                                   (135,000)
  Reserve for subscriptions
   receivable, including accrued
   interest of $19,445                                     (1,202,737)                                 (1,202,737)
                                    -----------           -----------          -----------           ------------

    Total other income (expense)         22,483            (1,974,367)              (9,581)            (1,898,510)
                                    -----------           -----------          -----------           ------------

Loss from continuing operations      (1,793,680)           (3,149,174)          (3,513,543)            (5,431,188)
Loss from discontinued operations
 (see Note 2)                                                (611,622)                                 (1,271,355)
                                    -----------           -----------          -----------           ------------
Net loss                             (1,793,680)           (3,760,796)          (3,513,543)            (6,702,543)
Preferred stock dividends:
  Imputed stock dividends related
   to issuance of warrants                                                                             (3,645,250)
  Imputed stock dividends for
   beneficial conversion feature                                                                         (804,103)
  Imputed cumulative stock dividends
   at 8%                                (48,420)              (92,293)            (171,526)              (235,854)
                                    -----------           -----------          ------------          ------------
Net loss applicable to common
 stock                              $(1,842,100)        $  (3,853,089)        $ (3,685,069)          $(11,387,750)
                                    ===========           ===========          ============          =============

Net loss applicable to common stock
 attributed to continuing
 operations                         $(1,842,100)          $(3,241,467)        $ (3,685,069)         $ (10,116,395)
Net loss applicable to common stock
 attributed to discontinued
 operations                                                  (611,622)                                 (1,271,355)
                                    -----------           -----------          ------------          -------------
Net loss applicable to common
 stock                              $(1,842,100)          $(3,853,089)        $ (3,685,069)         $ (11,387,750)
                                    ===========           ===========          ============          =============
Basic net loss per common share
 from continuing operations         $     (0.03)          $     (0.19)        $      (0.10)          $       (0.62)

Basic net loss per common share
 from discontinued operations                                   (0.04)                                       (0.08)
                                    -----------           -----------          ------------          -------------
Basic net loss per share            $     (0.03)          $     (0.23)        $       (0.10)         $       (0.70)
                                    ===========           ===========          ============          =============
Basic weighted average number of
 common shares outstanding           58,676,957            16,513,867            36,615,933             16,361,420
                                    ===========           ===========          ============          =============
</TABLE>

                                       4
<PAGE>


<TABLE>
<CAPTION>

                                 GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY

                              CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
                                                      (Unaudited)

                                          Nine months ended December 31, 2001


                              Preferred Stock  Additional      Common Stock      Additional
                              ---------------              --------------------- -----------
                                               Paid-In                            Paid-In      Accumulated    Treasury
                               Shares At Par   Capital      Shares      At Par    Capital        Deficit       Stock        Total
                              ------------------------------------------------- --------------------------------------------------
<S>                            <C>     <C>   <C>          <C>         <C>       <C>           <C>           <C>       <C>
Balance, April 1, 2001         3,731   $ 4   $ 4,295,605  17,301,785  $ 17,302  $ 45,723,009  $(52,555,464) $(78,301)$(2,597,845)

Common stock sold for cash,
 net of selling expense                                   7,235,000     7,235        578,665                             585,900
Common stock issued as payment
 for notes payable to
 principal stockholder                                      200,000       200         54,800                              55,000
Common stock issued as payment
 for services                                             1,373,991     1,374         77,441                              78,815
Common stock issued for
 Licensing Agreement                                     30,809,979    30,810      1,175,000                           1,205,810
Fair value of warrants issued
 for services                                                                        181,872                             181,872
Fair value of stock options
 granted to non-employees as
 compensation
Common stock granted to
 non-employees                                                                       56,503                              56,503
Imputed preferred stock
 dividend at 8%                                 171,526                                          (171,526)                    -
Preferred stock converted to
 common stock                 (1,631) (2)    (1,600,519)  9,026,686     9,027     1,591,494                                   -
Net loss                                                                                       (3,513,543)           (3,513,543)
                              ------------------------------------------------- --------------------------- -----------------------
Balance, December 31, 2001     2,100 $ 2    $ 2,866,612  65,947,441  $ 65,948  $ 49,438,784  $(56,240,533) $(78,301)$(3,947,498)
                              ================================================= =========================== =======================

See Notes to Unaudited Condensed Consolidated Financial Statements.

</TABLE>



                                       5
<PAGE>

                GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                      Nine months ended December 31,
                                                                                       2001                   2000
                                                                                 --------------         --------------

Operating activities:
<S>                                                                              <C>                    <C>
  Net loss                                                                       $   (3,513,543)        $   (6,702,543)
  Adjustments to reconcile net loss to net cash used in operating activities:
    Loss from discontinued operations                                                                        1,271,355
    Depreciation and amortization                                                       203,650                128,132
    Compensation expense recorded upon issuance of annual
     stock award to board of directors                                                                          45,000
    Compensation expense recorded upon issuance of warrants
     and compensatory stock options                                                     238,375                444,489
    Reserve for notes receivable, including accrued interest of $43,151                                        643,151
    Reserve for contract receivable                                                                            135,000
    Reserve for subscriptions receivable, including $19,445 accrued interest                                 1,202,737
    Miscellaneous expenses paid in stock                                                 13,715
    License expense                                                                   1,205,810
    Changes in operating assets and liabilities:
      Purchase deposit                                                                                         (45,250)
      Accounts receivable                                                               235,915                164,565
      Other assets                                                                       (2,530)                64,262
      Accounts payable and accrued expenses                                             519,531                109,385
                                                                                 --------------         --------------
        Net cash used in operating activities of continuing operations               (1,099,077)            (2,539,717)
                                                                                 --------------         --------------
        Net cash used relating to discontinued operations                              (418,000)            (1,271,355)
                                                                                 --------------         --------------
        Net cash used in operating activities                                        (1,517,077)            (3,811,072)
                                                                                 --------------         --------------
Investing activities:
  Purchase of forensic vehicle                                                                                (330,000)
  Purchase of contract receivable for forensic vehicle                                                        (135,000)
  Additions of leasehold improvements                                                                          (85,346)
  Purchases of software licenses and equipment                                                                (194,668)
      Notes receivable accrued interest                                                                        (30,934)
                                                                                 --------------         --------------
        Net cash used in investing activities                                                                 (775,948)
                                                                                 --------------         --------------
Financing activities:
  Proceeds from issuances of short term notes payable                                   483,902                112,500
  Sale of common stock                                                                  651,000
  Sale of preferred stock, net of selling expense                                                            4,449,353
                                                                                 --------------         --------------
        Net cash provided by financing activities                                     1,134,902              4,561,853
                                                                                 --------------         --------------

Net decrease in cash and cash equivalents                                              (382,175)               (25,167)
                                                                                 --------------         --------------

Cash and cash equivalents beginning of period                                           383,970                167,299
                                                                                 --------------         --------------

Cash and cash equivalents end of period                                          $        1,795         $      142,132
                                                                                 ==============         ==============

</TABLE>


                                       6
<PAGE>



                GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY

           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                      Nine months ended December 31,
                                                                                      2001                   2000
                                                                                 -------------          --------------

Supplemental disclosure of cash flow data:
  Interest paid                                                                  $       53,698
                                                                                 ==============
Supplemental disclosure of noncash investing and financing activities
  Common stock issued for License Agreement                                      $    1,205,810

                                                                                 ==============
  Common stock issued upon conversion of convertible preferred stock             $    1,591,494
                                                                                 ==============
  Common stock issued as payment for:
<S>                                                                              <C>                    <C>
    Notes payable to stockholder and employee                                    $       55,000         $       20,000
                                                                                 ==============         ==============
    Imputed preferred stock dividend                                             $      171,526         $    4,685,207
                                                                                 ==============         ==============

See Notes to Unaudited Condensed Consolidated Financial Statements.

</TABLE>


                                       7
<PAGE>



                GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Note 1 - Unaudited interim financial statements:

                  The accompanying unaudited condensed consolidated financial
                  statements have been prepared in accordance with accounting
                  principles generally accepted in the United States of
                  America for interim financial information and with the
                  instructions to Form 10-Q and Article 10 of Regulation S-X
                  and reflect any necessary adjustments. Operating results for
                  the nine-month period ended December 31, 2001 are not
                  necessarily indicative of the results that may be expected
                  for the year ending March 31, 2002. The unaudited condensed
                  consolidated financial statements should be read in
                  conjunction with the consolidated financial statements and
                  footnotes thereto included in the Company's annual report on
                  Form 10-K for the year ended March 31, 2001.

Note 2 - Basis of presentation and other matters:

                  The unaudited condensed consolidated financial statements
                  include the accounts of GreyStone Digital Technology, Inc,
                  formerly Express Capital Concepts, Inc. and GreyStone
                  Technology, Inc. (the "Company"). All significant
                  inter-company accounts and transactions are eliminated in
                  consolidation.

                  On April 5, 2002 Company shareholders holding not less than a
                  two-thirds majority of the voting power approved the spin-off
                  or sale of the Company's wholly owned subsidiary, GreyStone
                  Technology, Inc. This subsidiary provides services to
                  customers and has conducted all of the business operations of
                  the Company since the Company's founding. Independent business
                  consultants retained by the Board of Directors recommended
                  that the Company dispose of or close this subsidiary since it
                  appeared that it will continue to lose money and create more
                  liabilities for the Company if it performs the work on the
                  terms of its current backlog of government contracts. The
                  Company is currently attempting to dispose of this subsidiary,
                  in whole or parts, in order to recover as much value as
                  possible to apply against repayment of the various liabilities
                  the subsidiary has incurred. The Board of Directors considered
                  the disposition of the existing business to be necessary if
                  the merger of Provo into the Company, as approved above,
                  occurred; since certain government contract work can not be
                  performed by businesses which have sufficient foreign
                  ownership to direct or influence the business and wind down of
                  operations. As a result of the proposed disposition, at March
                  31, 2002 the Company ceased to have any revenue generating
                  operations.

                  The Company has estimated the total loss from discontinued
                  operations and the related marketing and research and
                  development costs making up this loss, applicable to the
                  three month period ended December 31, 2000, based on the
                  total loss from discontinued operations and the related
                  marketing and research and development costs making up this
                  loss for the 12 month period ended March 31, 2001, and based
                  on the proportion of total marketing and research and
                  development cost the Company incurred in this three month
                  period. These estimates have also applied to the aggregate
                  loss from discontinued operations and marketing and research
                  and development costs making up this loss for the nine month
                  period ending December 31, 2000.

                  As shown in the accompanying condensed consolidated financial
                  statements at December 31, 2001, the Company had a working
                  capital deficiency of $4,232,370 and a stockholders'
                  deficiency of $3,947,488, incurred a net loss of $3,513,543,
                  for the nine months ended December 31, 2001, and an
                  accumulated deficit from losses since its inception of
                  $56,240,533. Currently the Company has no operations and all
                  of its revenue producing activities have ceased. These
                  matters raise substantial doubt about the ability of the
                  Company to continue as a going concern.


                                       8
<PAGE>



                GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Note 2 - Basis of presentation and other matters (continued):

                  Historically, the Company has funded deficits from its
                  business operations primarily through sales of common stock
                  to and borrowings from its principal stockholder and sales of
                  common stock and convertible notes payable to private
                  investors pursuant to private placement memorandums and
                  exemptions from registration under the Securities Act of
                  1933. The Company plans to continue to operate by
                  consummating the transaction noted in Note 7 and generate
                  substantial revenues from such activities. However, no
                  assurance can be made that the Company will be successful in
                  consummating these transactions.

                  The accompanying condensed consolidated financial statements
                  have been prepared in conformity with accounting principles
                  generally accepted in the United States of America which
                  contemplate that the Company will continue as a going concern
                  and continue operations, realization of assets and
                  satisfaction of liabilities in the ordinary course of
                  business.

                  If the Company is unable to consummate the transactions
                  contemplated in Note 7 below, and complete the necessary
                  funding to support its planned activities, it may be required
                  to liquidate assets or take other actions necessary for the
                  Company to continue to function, or it may be unable to
                  continue as a going concern. The consolidated condensed
                  financial statements do not include any adjustments that might
                  result from the outcome of these uncertainties. The Company
                  has been unable to comply with all provisions of the Marketing
                  and Licensing Agreement described in Note 7 and Kiboga
                  Systems, Inc., at any time, could declare the Company in
                  default and cancel the Agreement.

Note 3 - Earnings (loss) per share:

                  The Company follows the provisions of Statement of Financial
                  Accounting Standards No. 128, Earnings per Share, which
                  requires the presentation of "basic" and "diluted" earnings
                  (loss) per common share, as further explained in Note 1 of the
                  notes to the audited financial statements of the Company,
                  included in Form 10-K for the fiscal year ended March 31,
                  2001.

                  Since the Company had losses applicable to common stock in the
                  three and nine month periods ended December 31, 2001 and 2000,
                  the assumed effects of the exercise of outstanding stock
                  options, warrants and convertible preferred stock were
                  anti-dilutive and, accordingly, diluted per share amounts have
                  not been presented in the accompanying condensed consolidated
                  unaudited statements of operations. Such options, warrants and
                  convertible preferred stock could potentially dilute basic
                  earnings per share in the future.


                                       9
<PAGE>


                GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Note 4 - Discontinued operations:

                  Previously, the Company identified and reported on two
                  industry segments based on strategic business units that were
                  in turn based along market lines. The Government Business Unit
                  which works primarily as a contractor for U.S. defense
                  contractors and the U.S. Government, and the Commercial
                  Business Unit which developed products to be sold for
                  entertainment centers and home entertainment. In June 2001,
                  the Company discontinued its Commercial Business Unit and
                  eliminated that business segment. Accordingly, the condensed
                  consolidated financial statements have been restated to
                  reflect the losses associated with this segment as losses from
                  discontinued operations. In addition, the Company estimated
                  the additional losses to be incurred from discontinued
                  operations until the Unit's operations totally cease, and
                  accrued an additional loss for disposing of the Commercial
                  Business Unit as of March 31, 2001.

Note 5 - Significant changes in status of litigation:

                  On June 29, 2001 a lawsuit was filed against GreyStone and
                  Richard A. Smith by Capital Solutions Fund LLC, the lender of
                  the Company's February 2001 line of credit, in the Superior
                  Court of the State of California, County of San Diego for
                  breach of contract and fraud. A total of $1,050,000 (including
                  $205,000 in loan fees) was drawn on the line of credit before
                  the lender called the line. The lender called the line of
                  credit as a result of the distributor's parent corporation's
                  dissolution in March 2001of the exclusive distributor of the
                  Company's MercRacer entertainment system. The Superior Court
                  of the State of California for the County of San Diego set a
                  Mandatory Settlement Conference for January 23, 2002. See Note
                  11, which discusses the subsequent settlement of the suit.

                  Additionally, the Company has entered into settlements in five
                  other legal actions ranging between $1,441 to $138,380, and
                  include: one vendor, one previous employee, one temporary
                  employment agent, two employee placement firms, and two public
                  relations or advertising firms.

Note 6 - Equity transactions:

                  From April 1, 2001 through December 31, 2001, 1,631 shares of
                  Series A Preferred Stock were issued at a value of
                  approximately $1,665,300 and were converted into 9,026,686
                  shares of common stock.

                  On May 18, 2001 the Board of Directors authorized the issuance
                  of warrants to purchase an aggregate of 1,100,000 shares of
                  common stock, with exercise prices ranging from $1.00 to $2.50
                  per share. The warrants were issued to short-term lenders of
                  cash. On May 18, 2001 the Board also authorized the issuance
                  of options to purchase 1,830,000 shares of common stock to
                  employees under the 2000 Stock Option Plan at an exercise
                  price of $0.20 per share. On September 18, 2001, the Company
                  issued 1,130,000 of the options under the 2000 Stock Option
                  Plan that had been approved by the Board of Directors on May
                  18, 2001. On December 19, 2001, the Company issued a further
                  700,000 options under the 2000 Stock Option. On December 19,
                  2001 Mr. Al Stone resigned from the board. For Mr. Stone's
                  service on the board, the Company awarded Mr. Stone options to
                  purchase 300,000 shares at an exercise price of $0.66 per
                  share. Mr. Stone's options expire December 19, 2006.


                                       10
<PAGE>


                GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 6 - Equity transactions (continued):

                  In June and July 2001, the Company raised $651,000 through the
                  sale of common stock to 11 accredited investors at prices
                  ranging from $0.05 to $0.10 per share. The Company issued
                  8,537,000 shares of common stock, which included 1,302,000
                  shares issued to 2 parties who introduced the investors to the
                  Company's private placement. The proceeds were used for
                  general corporate purposes.

                  In addition, in the nine months ended December 31, 2001,
                  200,000 shares were issued to an officer and shareholder of
                  the Company at $0.274 per share as consideration for the
                  extinguishment of a note payable by the Company. On October 8,
                  2001 the Company issued 29,614,274 shares and on January 8, a
                  further 1,195,705 shares in connection with a licensing
                  agreement, as further described in Note 7.

Note 7   - License Agreement:

                  On July 16, 2001, the Company entered into an exclusive 99
                  year Marketing and Licensing Agreement with Kiboga Systems,
                  Inc., ("Kiboga") a privately-held Texas corporation engaged in
                  the business of development and sale of technology products
                  for law enforcement, defense and intelligence applications.
                  The Company shall serve as marketing agent and advisor and
                  will assume financial responsibility for all attendant
                  expenses necessary to realize value from the License
                  Agreement.

                  Under the Agreement, the Company will pay Kiboga a 20%
                  royalty, and receive the remaining 80% of the revenue
                  generated by those applications of Kiboga's network data
                  mining, acquisition and distribution software. The Company
                  will be entitled to 100% of any profits generated by this
                  activity in return for a payment by the Company of 29,614,274
                  shares of common stock (subsequently adjusted as described
                  below) and $700,000 in cash. The agreement provides that the
                  Company will issue an additional 1,000,000 to 15,000,000
                  common shares if the earnings contributed to the Company from
                  the Kiboga software are between $8,572,727 and $29,572,727
                  over the next 24 months beginning July 16, 2001. If revenues
                  are less than $6,000,000 through the next 12 months beginning
                  July 16, 2001 then Kiboga will return 5,000,000 shares to the
                  Company. In addition, the agreement provides for an
                  anti-dilution formula, which effectively ensures that Kiboga's
                  percentage of ownership cannot be diluted by future
                  transactions. The Agreement anticipates changes in management
                  and directors of the Company. The shareholders must approve
                  the transaction. See subsequent events of January 12, 2002
                  below regarding additional shares issued under the
                  anti-dilution formula of the Agreement. Should Kiboga be
                  required to return the 5,000,000 common shares to the Company
                  under the terms of the Agreement, the Company would retire
                  these returned shares to the Treasury.

                  On October 8, 2001, a voting majority of the holders of the
                  common stock of the Company, holding not less than a sixty
                  percent majority did adopt and approve, by their written
                  consent, the Kiboga transaction that was announced on
                  September 27, 2001, and did ratify and confirm the issuance of
                  29,614,274 restricted shares to Kiboga under the Agreement.
                  Accordingly, October 8, 2001 is the effective date of the
                  transaction. On October 15, 2001, the Company issued to Kiboga
                  29,614,274 shares of restricted stock. Also see Note 10,
                  Subsequent Events.


                                       11
<PAGE>



                GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Note 7 - License Agreement (continued):

                  The Company has agreed with Kiboga to deliver a $700,000 note,
                  previously written-off as full and final settlement of the
                  $700,000 cash obligation payable to Kiboga under the
                  Agreement. (See Note 10, Subsequent events regarding extension
                  of revenue target to be met for reversion of shares issued for
                  License Agreement.)

                  The Company valued the License based on the trading value of
                  the stock at the time it was acquired. On this basis, an
                  intangible asset was recorded totaling $1,205,810. The trading
                  value used was the average share value received in the equity
                  issued for cash during June and July 2001,and the value of the
                  shares received was adjusted downward by 50% for the
                  restrictions placed upon the shares issued for the License.
                  See Note 6, which discusses the equity raised at that time.
                  Subsequently, the Company has written off this asset due to
                  the uncertainty of future revenue and profit streams that may
                  be generated by the License Agreement. Accordingly, an expense
                  in the amount of $1,205,810 has been recorded in the quarter
                  ended December 31, 2001 related to this write off.

Note 8 - Series A Convertible Preferred Stock:

                  On May 22, 2000, the Company completed the sale of $5,000,000
                  in convertible preferred stock to a group of private
                  investors. The Company issued 5,000 shares of Series A
                  Preferred Stock, convertible immediately at the holders'
                  discretion, into common stock at a rate of the lower of (1)
                  250 shares of common stock per share of preferred stock
                  (equivalent to an investment of $4.00 per share of common
                  stock issued) or (2) 80% of the volume weighted average price
                  for the previous 250,000 shares traded prior to submission by
                  the preferred stockholder of a conversion notice to the
                  Company. Embedded in the preferred stock is a mandatory
                  conversion requirement effective three years after the date of
                  issuance. The Series A investors also received warrants to
                  purchase 1,250,000 shares of common stock at an exercise price
                  of $5.38 per share, and registration rights on the conversion
                  shares and the shares issuable upon the exercise of the
                  warrants. The preferred stock provides for a cumulative
                  dividend of 8% per year, payable in common stock or cash.
                  After payment of a 10% commission for introducing the
                  investors to the Company, and legal fees totaling
                  approximately $50,000, the Company received net proceeds of
                  approximately $4,449,000 which it used for general corporate
                  purposes. In accordance with the Emerging Issues Task Force
                  (EITF) Issue No 98-5, the Company recognized a beneficial
                  conversion feature in the amount of $804,103 as a one-time
                  non-cash preferred stock dividend. The amount represented the
                  difference between the initial conversion price at the date of
                  issuance of the preferred shares and the market price of the
                  common stock at that date. In addition, the Company recorded a
                  one time, imputed (non-cash) preferred stock dividend of
                  $3,437,500 as a result of allocating a portion of the proceeds
                  received to the fair value of the warrants issued, as
                  determined by the Black-Scholes model.

                  In connection with the above sale of convertible preferred
                  stock, the Company issued warrants to purchase 75,000 shares
                  of common stock at an exercise price of $5.38 per share to the
                  party who introduced the Company to the Series A private
                  placement group. As a result, the Company recorded a one-time
                  imputed (non cash) preferred stock dividend of $207,750. The
                  aforementioned imputed preferred stock dividends associated
                  with issuing the stock resulted in a one-time loss applicable
                  to common stockholders of $0.27 per share. The Company also
                  recorded a non-cash preferred stock dividend of $171,526 for
                  the nine-month period ended December 31, 2001 due to the 8%
                  cumulative preferred stock dividend feature. (See Note 10,
                  subsequent events, regarding conversion of all remaining
                  preferred shares to common stock.)


                                       12
<PAGE>


                GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Note 9 - Related Party Transactions:

                  As discussed in Note 7, during the year the Company entered
                  into a Licensing Agreement with Kiboga. In connection with
                  this agreement, Kiboga loaned to the Company $166,821 during
                  the nine months ended December 31, 2001. This amount bears no
                  interest and is due and payable to Kiboga on demand (see
                  Subsequent events Note 11.)

Note 10 - Other Transactions:

                  In November 2001, the Company signed a Letter of Intent by and
                  among Kiboga Systems, Inc. and Proyecciones Y Ventas
                  Organizadas, S.A. DE C.V., a private company incorporated in
                  the United Mexican States, together with its affiliates
                  (collectively PROVO), wherein, the parties expressed their
                  intent to further enter into a series of transaction
                  agreements (the Agreements) involving revenue, profit and
                  equity transfers, and investment capital, and furthermore,
                  expressed their intent to jointly develop reciprocal
                  relationships in business developing a PROVO offering of new
                  products and services. The Company filed FORM 8-K on November
                  13, 2001 announcing that, in conjunction with Kiboga Systems,
                  Inc., it entered into merger discussions with PROVO.

                  On December 12, 2001, a voting majority of the holders of the
                  common stock of the Company, holding not less than a
                  two-thirds majority did adopt by their written consent the
                  approval of the PROVO/Kiboga agreement and directed the Board
                  of Directors to take all actions appropriate and necessary to
                  implement the agreement; additionally to dispose of all
                  Company government and law enforcement operations; to relocate
                  the Company corporate offices from San Diego, California to
                  Dallas, Texas; and name a board who will advise the Company.
                  The shareholders nominated and voted for the addition of four
                  new Board members as disclosed in the Company's Form 8-K
                  report of January 18, 2002.

                  As at May 1, 2002 Provo is awaiting the conclusion of the
                  PROVO/Kiboga transactions cited below and the satisfactory
                  completion of all Company actions necessary to implement the
                  Agreements before PROVO concludes the transaction contemplated
                  in the Letter of Intent that the Company signed in November.
                  Although the discussions continue with PROVO about the mutual
                  business relationships and possible merger, no assurances can
                  be made that the transactions will be consummated.

                  The Board of Directors of the Company resolved to adopt these
                  actions on December 20, 2001. The proposed new Board members
                  will not join the Board until the Company has consummated the
                  transaction described in Note 7 and achieved conditions
                  acceptable to the individual nominees.

                                       13
<PAGE>



                GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Note 11 - Subsequent events:

                  As of May 1, 2002 all officers and directors of the Company
                  have resigned excepting one vice president and one director
                  who have been serving and currently serve the Company without
                  compensation.

                  As discussed in Note 5, on June 29, 2001 a lawsuit was filed
                  against GreyStone and Richard A. Smith by Capital Solutions
                  Fund LLC, the lender of the Company's February 2001 line of
                  credit, in the Superior Court of the State of California,
                  County of San Diego for breach of contract and fraud. The
                  court set a Mandatory Settlement Conference for January 23,
                  2002, at which time the parties agreed and stipulated to
                  settlement, which was recited on the record pursuant to
                  California Code of Civil Procedure. The Company agreed to
                  repay the sum of $1,220,000 according to a repayment schedule,
                  which provides for payments through September 15, 2002,
                  commencing with a $72,000 payment in February 2002.
                  Furthermore, the parties agreed to enter into a Stipulation
                  for Entry of Judgment. The Company has not made any payment to
                  date and accordingly, Capital Solutions Fund LLC may make an
                  ex parte application to the San Diego Superior Court for Entry
                  of Judgment. Upon receipt of all payments Capital Solutions
                  shall dismiss the Action against the Company. Pursuant to the
                  settlement entered into on the record on January 23, 2002
                  Capital Solutions complaint against Richard A. Smith is
                  dismissed with prejudice, and GreyStone's cross-complaint
                  against Capital Solutions is dismissed with prejudice. As of
                  March 31, 2002 the Company has been unable to make payment in
                  the manner agreed. Capital Solutions has taken no further
                  actions to date.

                  In the event that revenue targets are not met, the Company may
                  require the return of 5,000,000 common shares previously
                  issued to Kiboga under the Agreement. Management of the
                  Company has agreed to extend the period during which revenue
                  targets should be met under the Kiboga License Agreement, and
                  Kiboga, in return, has agreed to accept a note receivable due
                  the Company in the amount of $700,000 in lieu of the $700,000
                  cash payment due Kiboga under the License Agreement.. (See
                  Note 7)

                  On January 12, 2002, the Company issued an additional
                  1,195,705 restricted shares to Kiboga under the anti-dilution
                  provisions of the Marketing and Licensing Agreement. Under the
                  anti-dilution provisions of the Agreement the Company may need
                  to issue additional shares to Kiboga to remain in compliance
                  with the terms of the Agreement.

                  The Company has been unable to comply with all provisions of
                  the Marketing and Licensing Agreement and Kiboga, at any time,
                  could declare the Company in default and cancel the Agreement.
                  Specifically, the Company has not directed its efforts to
                  developing and marketing the Kiboga product, as envisaged in
                  the Agreement.

                  The Company accepted the resignation of Mr. Richard A. Smith
                  as President, CEO and Chairman of the Board effective March
                  25, 2002. Upon his resignation the Company issued a warrant to
                  Mr. Smith for his past services in lieu of his vested options
                  to purchase 750,000 shares that the Company had awarded to Mr.
                  Smith during 1997. The warrant issued to Mr. Smith awards him
                  the right to purchase 750,000 shares of common stock at $1.00
                  per share and expires March 25, 2005.


                                       14
<PAGE>


                GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Note 11 - Subsequent events (continued):

                  Subsequent to December 31, 2001, all remaining shares of
                  Series A Preferred Stock issued with a recorded value of
                  approximately $2,100,000 were converted into 8,308,287 shares
                  of common stock.

                  Subsequent to December 31, 2001, Kiboga has made additional
                  loans to the Company in the amount of $127,922. As at May 15,
                  2002 $ 341,901 of the Kiboga loans remain due and outstanding.


                                       15
<PAGE>


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2001 AND 2000

Revenues for the three-months ended December 31, 2001 were $171,948 as compared
to $470,985 for the three-months ended December 31, 2000, reflecting a decline
in revenue of $299,037 or approximately 63%. The reduction was primarily the
result of a narrowing in scope and early conclusion of two previously awarded
delivery orders by two Navy customers. During the current reporting period, the
Government SBU completed support to a major Joint Forces experiment and on
additional delivery orders, provided engineering services work to BMH Associates
and the Office of Naval Research, General Atomics Aeronautical Systems, Titan,
Veridian Engineering, the Joint Strike Fighter Program Office and the San Diego
Space and Naval Warfare Systems Center.

Cost of revenues decreased to $57,302 during the current three-month period, as
compared to $432,741 for the same three-month period in the previous year. As a
percentage of revenues, costs of revenues were approximately 33% in the current
period, compared to 91% in the previous period. Cost of revenues decreased in
the current period due to a decline in contractual work as a result of the loss
of two major programs, an increase in purchased engineering services, an
increase in the Government SBU overhead rate and fringe rate, from the rates in
the prior period. The Government SBU overhead rate increase was the result of a
greater level of support of Government SBU overhead activities during the
current three-month period, as well as a decline in the direct charging work
during the current quarter. The fringe rate applied to the cost of revenues for
the current three-month period was greater than the fringe rate for the previous
period due to an overall reduction in company personnel in the current period,
while medical claims did not vary significantly.

The components that make up the cost of revenues include burdened labor, direct
travel, other direct costs, direct material, subcontracts and applicable SBU
burden. These cost components can vary in amount from period to period and are
highly dependent on such factors as the nature of the work performed, location
and duration of the work (company vs. contractor site), who performed the work
(company personnel vs. subcontractors) and who provided any required equipment
(company vs. customer).

Marketing and sales expenses were $101,815 or 59% of revenues in the current
period compared to $311,679 or 66% of revenues for the previous period, a
decrease of $209,864 in the current period. The decrease in marketing and sales
expenses was primarily the result of a lower level of bid and proposal activity
in the current period. In general, marketing and sales expenses result from bid
and proposal activity as well as attendance at trade shows, Company product
demonstrations and in-house marketing related activities such as product
brochures and marketing software development. These types of expenses vary from
period to period and are highly dependent upon the extent and manner in which
the company focuses its efforts regarding potential future opportunities during
the reporting period.

Research and development expenses decreased to $89,294 for the current period,
compared to $205,201 for the previous period, a decrease of $115,907. The
decrease was the result of reduced development expenses for RAGE(TM).


                                       16
<PAGE>


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2001 AND 2000 (continued)

General and administrative expenses were $533,890 in the current period,
compared to $696,171 for the previous period, a decrease of $162,281. The
reductions were the result of the Company downsizing its operations, reducing
the number of employees and curtailing expenses for public relations and outside
consulting and professional services.

Other income of $22,483 consisted of interest income of $5,000, interest expense
of $41,712, primarily for a line of credit, and miscellaneous income of $59,195,
which included a sale of entertainment equipment for $31,000. In the previous
period, other income (expense) consisted of interest income of $6,521, and the
write down of various notes, receivables and subscriptions related to the
company's RAGE products.

Effective on October 8, 2001, pursuant to an agreement entered into on July 16,
2001, the Company issued 29,614,274 common shares to Kiboga Systems, Inc. in
connection with a Marketing and Licensing Agreement. Under the agreement, the
Company acquired the rights to certain software developed by Kiboga for which
they will pay a 20% royalty. In addition to the shares issued, above, the
Company agreed to pay $700,000 in cash and to issue additional shares of common
stock, as necessary, in order to preserve Kiboga's shareholding percentage in
the Company. If revenues from the Kiboga software reach certain prescribed
targets, up to 15,000,000 additional shares may be issued to Kiboga. If revenues
fail to reach certain minimum targets, 5,000,000 shares of common stock issued
to Kiboga shall be returned to the Company. This agreement has resulted in a
change in control of the Company and anticipates changes in management and
directors in the Company.

The Company valued the license based on the trading value of stock at the time
it was acquired. On this basis, an intangible asset was recorded totaling
$1,205,810. Subsequently, the Company has written off this asset due to
uncertainty of future revenue and profit streams that may be generated by the
license agreement. Accordingly, an expense in the amount of $1,205,810 has been
recorded in the quarter ended December 31, 2001 relating to this write off.

The loss from continuing operations was $1,793,680 for the current period
compared with $3,149,174 for the previous period. The loss from operations
declined by $1,355,494 in the current period, while other losses declined by
$611,622. The net loss of $1,793,680 decreased by $1,967,116 from the $3,760,796
net loss reported in the previous reporting period. The write off of the license
contributed $1,205,810 to the net loss incurred during the quarter. In summary,
during the current period, revenues were down by $299,037 during the current
period, while the loss from continuing operations decreased by $1,355,494.

The Company recorded a non-cash preferred stock dividend of $48,420 for the
three month period ended December 31, 2001, as compared to $92,293 for the three
month period ended December 31, 2000, for the 8% preferred stock dividend
feature provided for in the Series A Convertible Preferred Stock.

The net loss applicable to common stock was $1,842,100 for the current period.
This compares to $3,853,089 in the previous period.


                                       17
<PAGE>


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE NINE MONTHS ENDED DECEMBER 31, 2001 AND 2000

Revenues for the nine-months ended December 31, 2001 were $1,260,874 as compared
to $1,667,022 for the nine-months ended December 31, 2000, reflecting a decrease
in revenue of $406,148 or approximately 24%. The reduction was primarily the
result of a narrowing in scope and early conclusion of two previously awarded
delivery orders by two Navy customers, during the second quarter of the year.
The company anticipates that the decline in quarterly revenue will continue into
the next quarter.

Cost of revenues decreased to $860,122 during the current nine-month period, as
compared to $1,350,657 for the same nine-month period in the previous year. As a
percentage of revenues, costs of revenues were approximately 68% in the current
period, compared to 81% in the previous period. For the three-months ended June
30, 2001, the cost of revenue to sales percentage was approximately 51%, while
the corresponding period a year earlier was 78%, and for the three-month period
ended September 30, 2001; the cost of revenue to sales percentage was
approximately 118%, compared to 75% for the same three-month period in 2000.
However, the three-month period ended December 31, 2001 cost of revenues was
33%, compared to a 91% cost of revenues for the corresponding period in 2000.
Because of the decline in the current business base and other reasons cited in
the management discussion and analysis of financial condition and results of
operations for the three months ended December 31, 2001, this trend is likely to
continue into at least the next quarter and perhaps longer.

The components that make up the cost of revenues include burdened labor, direct
travel, other direct costs, direct material, subcontracts and applicable SBU
burden. These cost components can vary in amount from period to period and are
highly dependent on such factors as the nature of the work performed, location
and duration of the work (company vs. contractor site), who performed the work
(company personnel vs. subcontractors) and who provided any required equipment
(company vs. customer).

Marketing and sales expenses were $520,390 or 41% of revenues in the current
period compared to $757,769 or 45% of revenues for the previous period, a
decrease of $237,379 in the current period. The decrease in marketing and sales
expenses was primarily the result of a lower level of bid and proposal activity
in the current period. In general, marketing and sales expenses result from bid
and proposal activity as well as attendance at trade shows, company product
demonstrations and in-house marketing related activities such as product
brochures and marketing software development. These types of expenses vary from
period to period and are highly dependent upon the extent and manner in which
the company focuses its efforts regarding potential future opportunities during
the reporting period.

Research and development expenses decreased to $405,762 for the current period,
compared to $467,466 for the previous period, a decrease of $61,704. The
decrease was the result of reduced development expenses for RAGE TM.

General and administrative expenses were $1,772,752 in the current period,
compared to $2,623,808 for the previous period, a decrease of $851,056. The
decrease was the result of the company downsizing its operations, reducing the
number of employees and curtailing expenses for public relations and outside
consulting and professional services fees.


                                       18
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE NINE MONTHS ENDED DECEMBER 31, 2001 AND 2000 (continued)

Effective on October 8, 2001, pursuant to an agreement entered into on July 16,
2001, the Company issued 29,614,274 common shares to Kiboga Systems, Inc. in
connection with a Marketing and Licensing Agreement. Under the agreement, the
Company acquired the rights to certain software developed by Kiboga for which
they will pay a 20% royalty. In addition to the shares issued, above, the
Company agreed to pay $700,000 in cash and to issue additional shares of common
stock, as necessary, in order to preserve Kiboga's shareholding percentage in
the Company. If revenues from the Kiboga software reach certain prescribed
targets, up to 15,000,000 additional shares may be issued to Kiboga. If revenues
fail to reach certain minimum targets, 5,000,000 shares of common stock issued
to Kiboga shall be returned to the Company. This agreement has resulted in a
change in control of the Company and anticipates changes in management and
directors in the Company.

The Company valued the license based on the trading value of stock at the time
it was acquired. On this basis, an intangible asset was recorded totaling
$1,205,810. Subsequently, the Company has written off this asset due to
uncertainty of future revenue and profit streams that may be generated by the
license agreement. Accordingly, an expense in the amount of $1,205,810 has been
recorded in the nine month period ended December 31, 2001 relating to this write
off.

Other expense of $9,581 consisted of interest income of $22,646, interest
expense of $124,590, primarily for a line of credit and miscellaneous income of
$92,363, which included a sale of entertainment equipment for $31,000 during the
previous period.

The loss from continuing operations was $3,513,543 for the current period
compared with $5,431,188 for the previous period. The loss from continuing
operations declined by $1,917,645 in the current period, while other expense
declined by $1,888,929. The loss from discontinued operations for the current
period was $0, as compared to $1,271,355 for the previous period.

The net loss of $3,513,543 decreased by $3,189,000 from the $6,702,543 net loss
reported in the previous reporting period. The write off expense related to the
Kiboga License contributed $1,205,810 to the net loss incurred during the
current period. In summary, during the current period, revenues were down by
$406,148 during the current period, while the loss from continuing operations
declined by $1,917,645.

The Company recorded a non-cash preferred stock dividend of $171,526 for the
nine-month period ended December 31, 2001, as compared to $235,854 for the
nine-month period ended December 31, 2000, for the 8% preferred stock dividend
feature provided for in the Series A Convertible Preferred Stock.

The net loss applicable to common stock was $3,685,069 for the current period.
This compares to $11,387,750 in the previous period. During the previous period,
the company recorded imputed stock dividends of $3,645,250 related to the
issuance of warrants in connection with the sale of preferred stock and $804,103
for the beneficial conversion feature associated with the preferred stock issued
in May 2000.


                                       19
<PAGE>


MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF
OPERATIONS  FOR THE NINE MONTHS ENDED DECEMBER 31,2001 AND 2000 (continued)

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities of continuing operations for the
nine-months ended December 31, 2001 was $1,099,077 whereas cash used for
operating activities of continuing operations in the nine-months ended December
31, 2000 was $2,539,717. The net loss for the current nine-month period was
$3,513,543, a decrease of $3,189,000 from the previous reporting period net loss
amount of $6,702,543. Non-cash expenses for depreciation and compensation
expense in the current period were $442,025 as compared to $617,621 in the
previous reporting period, a decrease of $175,596. Other non cash items during
the current nine-month period was $1,205,810 for the write off of the Kiboga
license. Additionally, during the current nine-month reporting period, other
assets increased by $2,530, accounts receivable decreased by $235,915, accounts
payable and accrued expenses increased by $519,531 and miscellaneous expenses
paid in stock were $13,715. The net cash used relating to discontinued
operations was $418,000 compared to $1,271,355 in the previous reporting period.
The net cash used in operating activities was $1,517,077 in the current period,
as compared to $3,811,072 in the previous reporting period.

There was no cash used in investing activities during the current nine-month
reporting period. In the previous reporting period, net cash used for investing
activities was $775,948. Previous period investing activities included purchases
of software licenses and equipment of $194,668, additions to leasehold
improvements of $85,346 and the June 2000 purchase of finished goods inventory
in the amount of $330,000 from a target company which GreyStone entered into a
letter of intent to acquire. Additionally, in June 2000 the Company gave the
target Company $135,000 for the right to receive future payments on invoices to
be generated by the target company upon the completion of work in progress.
GreyStone has solicited the help of an agent to assist in the sale of the
finished goods inventory. Due to the uncertainty of collection on the contract
receivable and the sale of the finished goods inventory, reserves of $135,000
and $330,000 have previously been established for the contract receivable and
finished goods inventory.

Net cash provided by financing activities was $1,134,902 in the current period,
as compared to $4,561,853 for the previous period. Of the $1,134,902 of net cash
provided in the current period, $483,902 was from issuances of short-term notes
payable and $651,000 was provided by the sale of common stock from a private
placement. The $4,561,853 of the cash provided for financing activities in the
previous period was the net result of the sale on May 22, 2000 of $5,000,000 in
convertible preferred stock to a group of private investors net of a 10%
commission and legal fees. The Company used the net proceeds for product
development and general corporate purposes.

At December 31, 2001, the Company had $1,795 of cash, as compared to $383,970
for the fiscal year ended March 31, 2001. The Company currently has minimal cash
to continue operations and to repay its outstanding obligations. The Company is
currently entirely dependent on advances from Kiboga Systems, and other sources,
to continue its operating activities. As of the filing of this report, the
Company has essentially discontinued all of its operating activities. The
Company's ability to execute under the Kiboga transaction and the Provo
transaction discussed in Note 10 is dependent on funding from the entities
involved in these transactions or other sources. The Company currently has no
committed funding amounts and there is no assurance that any funding will be
received.

                                       20
<PAGE>


MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF
OPERATIONS FOR THE NINE MONTHS ENDED DECEMBER 31, 2001 AND 2000 (continued)

STRATEGIC BUSINESS ACQUISITIONS AND JOINT VENTURES
On or about October 15, 2001 the Company ratified the Agreement with KIBOGA
Systems, Inc., ("Kiboga") a Texas Corporation, whereby GreyStone issued shares
of its common under the terms of a Marketing and License Agreement. (See Note 7
to the financial statements.)

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable


PART II.  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

                  On June 29, 2001 Capital Solutions Fund LLC, the lender of the
                  Company's February 2001 line of credit, filed a lawsuit
                  against GreyStone and Richard A. Smith for breach of contract
                  and fraud. The Company had drawn a total of $1,050,000 on the
                  line of credit. In August 2001 GreyStone filed a cross
                  complaint against Capital Solutions Fund LLC for breach of
                  contract and fraud. The parties reached a Settlement on
                  January 23, 2002 wherein the Company agreed to repay the sum
                  of $1,220,000 according to a repayment schedule culminating
                  September 15, 2002. Upon receipt of all payments Capital
                  Solutions shall dismiss the Action against the Company.
                  Pursuant to the settlement GreyStone's cross-complaint against
                  Capital Solutions is dismissed with prejudice. As of March 31,
                  2002 the Company has not made payment in the manner agreed.
                  Capital Solutions has taken no further actions to date.

 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

                  From April 1, 2001 through December 31, 2001, 1,631 shares of
                  Series A Preferred Stock were issued at a value of
                  approximately $1,665,300 were converted into 9,026,686 shares
                  of common stock. Proceeds were used for general corporate
                  purposes.

                  In June and July 2001, the Company raised $651,000 through the
                  sale of common stock to 11 accredited investors at prices
                  ranging from $0.05 to $0.10 per share. The Company issued
                  8,537,000 shares of common stock, which included 1,302,000
                  shares issued to 2 parties who introduced the investors to the
                  Company's private placement. The proceeds were used for
                  general corporate purposes.

                  In addition, 200,000 shares were issued to an officer and
                  shareholder of the Company at $0.274 per share as
                  consideration for the extinguishment of a note payable by the
                  Company.

                  On October 15, 2001, the Company issued to Kiboga 29,614,274
                  shares of restricted stock to be applied toward the Marketing
                  and Licensing Agreement.


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                  On January 12, 2002, the Company issued an additional
                  1,195,705 restricted shares to Kiboga under the anti-dilution
                  provisions of the Marketing and Licensing Agreement.

                  Subsequent to December 31, 2001, all remaining shares of
                  Series A Preferred Stock issued at a value of approximately
                  $2,100,000 were converted into 8,308,287 shares of common
                  stock.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

                  As discussed in Note 5, on June 29, 2001 a lawsuit was filed
                  against GreyStone and Richard A. Smith by Capital Solutions
                  Fund LLC, the lender of the Company's February 2001 line of
                  credit, in the Superior Court of the State of California,
                  County of San Diego for breach of contract and fraud. See Item
                  1 above.


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

                  On October 8, 2001, a voting majority of the holders of the
                  common stock of the Company, holding not less than a sixty
                  percent majority did adopt and approve, by their written
                  consent, the Kiboga transaction that was announced on
                  September 27, 2001, and did ratify and confirm the issuance of
                  29,614,274 restricted shares to Kiboga under the Agreement.
                  Accordingly, October 8, 2001 is the effective date of the
                  transaction. On October 15, 2001, the Company issued to Kiboga
                  29,614,274 shares of restricted stock. Also see Note 10,
                  Subsequent Events.

                  On December 12, 2001, a voting majority of the holders of the
                  common stock of the Company, holding not less than a
                  two-thirds majority did adopt by their written consent the
                  approval of the PROVO/Kiboga agreement and directed the Board
                  of Directors to take all actions appropriate and necessary to
                  implement the agreement; additionally to dispose of all
                  Company government and law enforcement operations; to relocate
                  the Company corporate offices from San Diego, California to
                  Dallas, Texas; and name a board who will advise the Company.
                  The shareholders nominated and voted for the addition of four
                  new Board members as disclosed in the Company's Form 8-K
                  report of January 18, 2002.

                  On April 5, 2002 Company shareholders holding not less than a
                  two-thirds majority of the voting power approved the spin-off
                  or sale of the Company's wholly owned subsidiary, GreyStone
                  Technology, Inc.


ITEM 5.  OTHER INFORMATION

                  The Company has been unable to comply with all provisions of
                  the Marketing and Leasing Agreement and Kiboga, at any time,
                  could declare the Company in default and cancel the Agreement.
                  Specifically, the Company has not directed its efforts to
                  developing and marketing the Kiboga product, as envisaged in
                  the Agreement.

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ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)        Exhibits

NONE

(b)        Reports on Form 8-K

           During the three months ended December 31, 2001, the Company filed
           one report on FORM 8K dated November 13, 2001 and in that filing
           reported that the company had entered into an Agreement with KIBOGA
           Systems, Inc., ("Kiboga") a Texas Corporation, whereby GreyStone will
           issue shares of its common stock and will be issuing additional
           shares owing to the antidilution provision in that Agreement. The two
           exhibits attached included the Lease Agreement with Kiboga and the
           press release concerning the event.

SIGNATURE

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



                                      GreyStone Digital Technology, Inc.

                                      /s/ Jon M. Reynolds
                                      ----------------------------------
                                      Jon M. Reynolds
                                      Director

Dated:   May 17, 2002


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