SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, DC  20549
                                 FORM 10-K

                                (Mark One)
   X               ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (D) OF THE
                                SECURITIES
                 EXCHANGE ACT OF 1934   [NO FEE REQUIRED]

                    For fiscal year ended June 30, 2001

         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
            SECURITIES EXCHANGE ACT OF 1934  [NO FEE REQUIRED]

         For the transition period from __________ to __________.

                      Commission File Number: 0-14712

                    FOUNTAIN POWERBOAT INDUSTRIES, INC.
          (Exact name of registrant as specified in its charter)

     NEVADA                                            88-0160250
     State or other jurisdiction                       (IRS Employer
     of incorporation)                                 Identification No.)

   Post Office Drawer 457, Whichard's Beach Road., Washington, NC  27889
 (Address of principal executive offices)                      (Zip Code)

    Registrant's telephone number, including area code:  (252) 975-2000

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

                  Common Stock, par value $ .01 per share

      Indicate  by  check mark whether the registrant  (1)  has  filed  all
reports  required  to be filed by Section 13 or 15 (d)  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 requirement for the past 90 day.
                                          [  X   ]Yes            [     ] No

      Indicate by check mark if disclosure of delinquent filers pursuant to
Item  405  of  Regulation  S-K is not contained herein,  and  will  not  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-K or any amendment to this Form 10-K.  [    ] Yes        [ X ] No

      The aggregate market value of the voting stock held by non-affiliates
of the registrant was $5,067,743 at September 17, 2001 based upon a closing
price of $2.10 per share on such date for the Company's Common Stock.

      As of September 17, 2001 there were 4,732,608 shares of the Company's
Common  Stock  issued  of which 15,000 shares are owned  by  the  Company's
subsidiary Fountain Powerboats, Inc. and are regarded as treasury shares.

          Documents incorporated by reference: None.




<PAGE>


                                  Part I

Item 1.  Business.

Background.

      Fountain  Powerboat  Industries, Inc. (the  "Company"),  through  its
wholly-owned  subsidiary,  Fountain Powerboats,  Inc.  (the  "Subsidiary"),
designs,  manufactures,  and sells offshore sport  boats,  sport  cruisers,
sport  fishing  boats and sport cruisers intended for that segment  of  the
recreational  power boat market where speed, performance, and  quality  are
the  main criteria for purchase.  In addition, the Company produces various
military  support craft for domestic and international government agencies,
including the United States Customs Service, the United States Navy and the
United  States  Coast  Guard.  The Company's strategy in  concentrating  on
these  segments of the market is to maximize its use of the  reputation  of
its   Chairman   and   President,  Reginald  M.  Fountain,   Jr.,   as   an
internationally recognized designer and builder of high speed power boats.

      The  Company's  products  are sold through a  network  of  authorized
dealers worldwide.  The Company has targeted that segment of the market  in
which  purchase decisions are generally predicated to a relatively  greater
degree  on  the  product's image, style, speed, performance,  quality,  and
safety.

Products.

      The majority of the company's recreational products are based upon  a
deep V-shaped fiberglass hull with a V-shaped pad, a notched transom, and a
positive  lift  step  hull.   This  design  enables  the  boat  to  achieve
performance and stability standards which the Company believes are  greater
than  those offered by any of its competitors worldwide.  As a result,  the
Company  maintains that its boats are among the fastest, smoothest, safest,
and best-handling boats of their kind.

       The  Company's  sport  boats,  ranging  from  27'  to  47'  are   of
inboard/outboard  design.  They are propelled by single,  twin,  or  triple
gasoline (or diesel) engines ranging from 200 HP to more than 900 HP  each.
The  Company  also  builds  custom racing boats designed  specifically  for
competition.   The Company also produces outboard powered  center  consoles
and  outboard  or  stern  drive cabin model offshore  sport  fishing  boats
ranging from 25' through 38'.  Furthermore, the Company builds 38' and  47'
sport  cruisers.  During  Fiscal 2001, the Company  completed  tooling  and
design  of a 38' wide-beam cruiser, and a 38' wide-beam fishing boat.   The
Company  also continued the development of a 48' wide-beam cruiser.   These
wide-beam models will form the start of a new product line aimed at the hot
middle market of family oriented cruiser sales.

      In  addition to Sportboats, Fishing boats, and the new Cruiser Lines,
the  Company  is producing an ever-increasing line of military/governmental
boats  of  various configurations.  These boats are commercial versions  of
the  large  sportboats and fishing boats, and along with the new models  of
rigid   inflatable  boats  (RIB),  form  the  beginning   of   a   separate
military/commercial  product line.  The Company has  also  entered  into  a
joint agreement with Marine Technologies Inc. (MTI) to produce the Fountain
Scism  42'  High  Performance Catamaran boat designed and tooled  by  Randy
Scism.   The  Company produces race boat hulls and decks  which  Mr.  Scism
completes and sells.  The Company builds a pleasure boat version that which
is sold to its dealer network.

     The  47'  Sport Cruiser was designed with both performance and maximum
amenities in mind.  Its hull design is based upon that of the Company's 47'
Lightning  which  currently holds the title of SBI Super-V World  Champion.
The model features a walk-in cabin, enclosed head with shower, and includes
a  complete galley with refrigerator and microwave among its very extensive
list  of  standard equipment.  With the amenities of a traditional cruising
yacht, the Fountain 47' Sport Cruiser is capable of speeds in excess of  70
mph  with  standard triple MerCruiser 500 EFI engines.  A high  performance
diesel  engine  version  is  also available.   This  boat  was  named  "The
Outstanding Offshore Performance Boat" by Powerboat Magazine and  "Best  of
the  Best"  by  Boating Magazine. Depending primarily upon  the  customer's
choice  of  engines,  the retail price of this boat  is  from  $411,000  to
$504,000.



-2-
<PAGE>



     The Company's 47' Lightning Sport Boat operates at speeds of 75 to 100
mph  and  is  very  stable and suited for long range cruising  in  offshore
waters.   Its  sleek  styling makes it particularly attractive.   Depending
primarily upon the type of engines and options selected, this boat  retails
at prices ranging from $436,000 to $664,000.  This boat's standard features
include   an  integrated  swim  platform,  flush  deck  hatches,   and   an
attractively  appointed cockpit and cabin.  This boat  has  been  cited  by
Powerboat Magazine as "The Outstanding Offshore Performance Boat".

      The  42' Lightning designed with the second-generation positive  lift
hull comes with a full wrap around windshield and canvas top, designed  for
use  in  all running conditions.  These features increase range  of  speed,
stability  and ride comfort.  This top selling model equipped with  special
engines  set  a  world speed record for V-hulled boats in October  2000  at
142.946 mph.

      The  38' Sport Cruiser offers most of the amenities found on the  47'
Sport  Cruiser.   This  model  has  successfully  incorporated  performance
features  without compromising the comforts found in a cruiser.   Depending
primarily  upon the customer's choice of engines, the retail price  of  the
boat is from $273,000 to $344,000.

      The  38' Lightning or Fever operates at speeds of between 70 and  100
mph.   The  retail  price  ranges  from  $250,000  to  $330,000,  depending
primarily  upon  the  type of engines selected.  This model  was  cited  by
Powerboat  Magazine as "Offshore Performance Boat of the Year".    It  also
captured  an award from The Hot Boat Magazine for "Boat of the Year".   For
Fiscal 2002, the 38' Lightning will incorporate a new superventilated  hull
that  is the most advanced superventilated hull produced to date and it  is
based  on  Fountain's successful design enhancing performance and  interior
space.

      The 35' Lightning Sport Boat was totally redesigned and introduced in
Fiscal  2000 to go with a higher freeboard, new twin-step design,  and  new
deck and interior.  It will operate at speeds between 70 and 100 mph.  This
boat  won the 2001 Offshore Boat of the Year and has proven itself  as  the
fastest boat in Factory II history, setting the kilo record at 94.187  mph.
This  boat's  retail  price  ranges from $219,000  to  $290,000,  depending
primarily upon the type of engines selected.

     The 29' Fever is one of the most popular boats.  It operates at speeds
of  55  to  75  mph and retails between $113,000 and $149,000 depending  on
engine  size.   It  has  great balance and speed for a  single  engine  and
operates  in  offshore  sea conditions with superior safety  and  handling.
This  boat  is  also  offered with twin small block engines.   The  Company
introduced a new 29' deck in Fiscal 2001.  This model has been awarded  the
2001 Outstanding Sport Boat Performance Award and has set the 2000 APBA F-1
record at 89.873 mph.

      Fountain's  27'  Fever and 27' Fever Classic  Sport  Boats  are  also
equipped  with  single engines.  These boats represent the most  affordable
access  to the Fountain line of safe, smooth, high performance boats.   The
27' Fever also captured the Powerboat Magazine award for "Outstanding full-
size Workmanship" in 1995.  The Company introduced a new 27' deck in Fiscal
2000.   Depending  primarily upon the type of engine selected,  the  retail
price of this boat is from $100,000 to $119,000.

      The  Company also builds and markets a sport fishing line.   The  31'
sport  fish  model  features  a  center  console  with  T-Top  design   and
incorporates  the same high performance, styling, and structural  integrity
as  its sport boat models.  It has a deck configuration engineered for  the
knowledgeable, experienced sport fisherman.  This boat has won the Southern
Kingfish  Association's World Championship for five of the last ten  years,
which is more than all other manufacturers combined.

     The additional models include the 29' twin engine center console model
and  25' single engine center console model.  The design, construction, and
performance of these models, together with the proven features of  the  31'
center  console model, makes a line that appeals to many experienced  sport
fishermen, in addition to the weekend warrior.

      To  further enhance its sport fishing line, the Company added  a  31'
walk  around  cabin  model based upon the proven 31'  center  console  hull
design.   This model features a deck design that incorporates a cabin  with
standup  headroom, an enclosed head with shower, and a full  galley.   With
twin  outboard  engine power, this model is produced either  as  a  fishing
machine or as a recreational cruiser.



-3-
<PAGE>



      The  Company  also  produces both a 25' and a 29' walk  around  cabin
fishing boat with outboard engine power and a single stern drive 29' and  a
32' walk around cabin fishing model with twin stern drive power.

      For  Fiscal  1999,  Fountain introduced a 38' Rigid  Inflatable  Boat
(RIB),  the  first  in  a  series of special purpose  boats  with  a  rigid
fiberglass  hull  surrounded  with  an  inflatable  collar,  surface  drive
technology  and diesel engine power.  This type of boat will  primarily  be
sold  to  Government  Agencies such as the U. S.  Coast  Guard  and  U.  S.
Customs.

     In Fiscal 2001, the Company launched its new wide beam craft.  The 38'
fish boat was introduced in the latter part of calendar 2000.  The 38' fish
boat features triple engines and speeds above 69 mph.  At cruise speed, the
boat  has  a 500 mile range.  The 38' Cruiser was introduced at  the  Miami
Boat  Show in February of 2001. The 38' Express Cruiser offers the customer
the  luxury  and space of a full Cruiser while maintaining the  performance
and handling of a Fountain sport boat.  Both boats have been extremely well
received by the market.


     Following is a table showing the number of boats completed and shipped
in each of the last three fiscal years by product line:

                               Fiscal           Fiscal               Fiscal
                                2001             2000                 1999
                               ------           ------               ------
      Sport boats                219              325                  318

      New Wide Beam Fish.         16                -                    -

      New Wide Beam Cruisers      10                -                    -

      Sport fishing boats         84              112                  130

      Defense                      1                9                    -
                               ------           ------               ------
      Total                      330              446                  448
                               ======           ======               ======

      The Company conducts research and development projects for the design
of  its  plugs  and molds for hull, deck, and small parts production.   The
design, engineering, and tooling departments currently employ approximately
27 full-time employees.  Amounts spent on design, research, and development
to build new plugs and molds in recent years were:

                                       Design               Construction
                                    Research &              of New Plugs
                                   Development               and  Molds
                                   -----------              ------------
        Fiscal 2001                  $813,710                $2,819,252

        Fiscal 2000                  $926,486                $1,154,908

        Fiscal 1999                  $876,965                $1,275,182



      For Fiscal 2002, planned design research and development expenses are
estimated  to  be $715,000 and plug and mold construction expenditures  are
estimated  to  be  $1,000,000.  These expenditures  will  be  primarily  to
complete the tooling for the new mid-size cruiser line, and the newest wide
beam fish boat.



-4-
<PAGE>



      Manufacturing capacity is sufficient to accommodate approximately  30
to   40   boats  in  various  stages  of  construction  at  any  one  time.
Construction   of  a  current  model  boat,  depending   on   size,   takes
approximately three to five weeks.  The Company, with additional personnel,
currently  has  the  capacity to manufacture approximately  450  sport  and
fishing boats, and 100 cruisers per year.

      The  manufacturing process for the hulls and decks consists primarily
of  the  hand "lay-up" of vinylester resins and high quality stitched,  bi-
directional and quad-directional fiberglass over a foam core in  the  molds
designed   and  constructed  by  the  Company's  engineering  and   tooling
department.  This creates a composite structure with strong outer and inner
skins with a thicker, light core in between.  The "lay-up" of fiberglass by
hand  rather than using chopped fiberglass and mechanical blowers,  results
in  superior strength and appearance.  The resin used to bind the composite
structure  together is vinylester, which is stronger, better  bonding,  and
more  flexible than the polyester resins used by most other fiberglass boat
manufacturers.  Decks are bonded to the hulls using bonding agents, rivets,
screws and fiberglass to achieve a strong, unitized construction.

      As  one  of  the most highly integrated manufacturers in  the  marine
industry,  the  Company manufactures many metal, plexiglass,  plastic,  and
small  parts (such as fuel tanks, seat frames, steering systems, instrument
panels,  bow rails, brackets, T-tops, and windscreens) to assure  that  its
quality standards are met.  In addition, the Company also manufactures  all
of  its upholstery to its own custom specifications and benefits from lower
costs  as it receives parts just in time for assembly.  All other component
parts  and  materials  used in the manufacture of the Company's  boats  are
readily  available  from  a  variety  of  suppliers  at  comparable  prices
exclusive  of  discounts.  However, the Company purchases certain  supplies
and  materials  from a limited number of suppliers in order to  obtain  the
benefit of volume discounts.

      Certain  materials used in boat manufacturing, including  the  resins
used  to  make  the  decks and hulls, are toxic, flammable,  corrosive,  or
reactive  and  are  classified  by the federal  and  state  governments  as
"hazardous  materials."  Control of these substances is  regulated  by  the
Environmental Protection Agency and state pollution control agencies  which
require  reports  and inspect facilities to monitor compliance  with  their
regulations.    The   Company's  cost  of  compliance  with   environmental
regulations has not been material.  The Company's manufacturing  facilities
are   regularly   inspected   by  the  Occupational   Safety   and   Health
Administration and by state and local inspection agencies and  departments.
The  Company  believes  that its facilities comply with  substantially  all
regulations.  The Company, however, has been informed that it may incur  or
may  have incurred liability for re-mediation of ground water contamination
at  two  hazardous waste disposal sites resulting from the  disposal  of  a
hazardous  substance  at  those sites by a third-party  contractor  of  the
Subsidiary. (See Legal Proceedings.)

     Recreational powerboats must be certified by the manufacturer to  meet
U.S.  Coast  Guard  specifications.  Their safety  is  subject  to  federal
regulation under the Boat Safety Act of 1971, as amended, pursuant to which
boat  manufacturers may be required to recall products for  replacement  of
parts  or components that have demonstrated defects affecting safety.   The
Company  has  never  had to conduct a product recall.  In  addition,  boats
manufactured  for sale in the European Community must meet CE Certification
Standards.


Sales and Marketing.

      Sales  are  made  through approximately 34 dealer shipping  locations
throughout  the  United  States.   The Company  also  has  3  international
dealers.  Most of these dealers are not exclusive to the Company and  carry
the  boats of other companies, including some boats that may be competitive
with the Company's products.  The territories served by any dealer are  not
exclusive to the dealer.  However, the Company uses discretion in  locating
new dealers in an effort to protect the interests of the existing dealers.




-5-
<PAGE>



Following is a table of sales by geographic area for the last three  fiscal
years:

                         Fiscal 2001      Fiscal 2000        Fiscal 1999
                         -----------      -----------        -----------
 United States........   $43,191,806      $55,777,049        $49,711,114

 Canada, Mexico, Central
 and South America....   $ 2,509,638      $ 1,485,615        $ 2,495,048

 Europe and
 the Middle East......   $   380,190      $   269,797        $ 1,222,325

 Asia.................   $         -      $         -        $         -
                         -----------      -----------        -----------
 Total................   $46,081,634      $57,532,461        $53,428,487
                         ===========      ===========        ===========


     The Company targets a portion of its advertising program into a number
of  foreign  countries through various advertising media.  It continues  to
seek  new dealers in many areas throughout Europe, South America,  the  Far
East and the Middle East.  In general, the Company requires payment in full
or an irrevocable letter of credit from a domestic bank before it will ship
a boat overseas.  Consequently, there is no credit risk associated with its
foreign  sales  nor  risk  related to foreign  currency  fluctuation.   The
Company believes that within several years, foreign sales could account for
up to 10% of its total sales.

     For Fiscal 2001 one dealer accounted for 11.5% of sales, one for 10.5%
of  sales  and one for 6.0% of sales.  For Fiscal 2000 one dealer accounted
for  7.4%  of sales, one for 6.1% of sales and one for 5.7% of sales.   For
Fiscal  1999 one dealer accounted for 6.8% of sales, and two other  dealers
for 6.7%. The Company believes that the loss of any particular dealer would
not  have a materially adverse effect on sales.  As sales continue to  grow
through more dealers, it is reasonable to assume the Company will grow less
dependent on any one dealer.

     Field sales representatives call upon existing dealers and develop new
dealers.  The field sales force is headed by the Fountain National Director
of  Sales who is responsible for developing a full dealer organization  for
sport boats, sport cruisers, sport fishing boats and express cruisers.  The
Company  is  seeking to establish separate sport boat,  fishing  boat,  and
cruiser  dealers in most marketing areas due to the specialization of  each
type of boat and the different sales programs required.

      Although  a sales order can be cancelled at any time, most boats  are
pre-sold  to  a  dealer  before  entering the  production  line.  To  date,
cancellations have not had any material effect on the Company.  The Company
normally does not manufacture boats for its own inventory.

      The  Company ships boats to some dealers on a cash-on-delivery basis.
However,  most  of the Company's shipments are made pursuant to  commercial
dealer "floor plan financing" programs in which the Company participates on
behalf  of  its  dealers.  Under these arrangements, a  dealer  establishes
lines  of  credit with one or more third-party lenders for the purchase  of
showroom  inventory.  When a dealer purchases a boat pursuant  to  a  floor
plan  arrangement, it draws against its line of credit and the lender  pays
the  invoice cost of the boat directly to the Company.  Generally,  payment
is  made to the Company within five business days.  When the dealer in turn
sells  the boat to a retail customer, the dealer repays the lender, thereby
restoring  its  available  credit line.  For the  2001  model  year  (which
commenced  July  1,  2000), the Company had made arrangements  to  pay  all
interest  charged to dealers by certain floor plan lenders for  up  to  six
months.  After six months, the free interest program ends and interest cost
reverts  to  the dealer at the rates set by the lender.  The  dealers  make
curtailment payments (principal payments) on the boats as required by their
particular  commercial lenders.  Similar sales promotion programs  were  in
effect during fiscal years 2000 and 1999.



-6-
<PAGE>



     Each dealer's floor plan credit facilities are secured by the dealer's
inventory, letters of credit, and perhaps other personal and real property.
In  connection  with  the  dealer's floor plan  arrangements,  the  Company
(together  with substantially all other major manufacturers) has agreed  to
repurchase  any of its boats which a lender repossesses from a  dealer  and
returns to the Company in a new or like new condition.  In the event that a
dealer  defaults  under  a  credit line, the lender  may  then  invoke  the
manufacturers' repurchase agreements with respect to that dealer.  In  that
event,   all  repurchase  agreements  of  all  manufacturers  supplying   a
defaulting  dealer are generally invoked regardless of the  boat  or  boats
with  respect  to  which  the dealer has defaulted (See  also  Management's
Discussion  and Analysis of Financial Condition and Results of Operations).
The  Company  participates in floor plan arrangements  with  several  major
third-party  lenders on behalf of its dealers, most of who  have  financing
arrangements  with  more than one lender.  Except as  described  above,  or
where  it  has a direct repurchase agreement with a dealer, the Company  is
under  no  material obligation to repurchase boats from its dealers.   From
time  to  time  the  Company will voluntarily repurchase  a  boat  for  the
convenience  of  the  dealer or for another dealer who needs  a  particular
model  not readily available from the factory.  The marketing of  boats  to
retail  customers  is  primarily the responsibility of  the  dealer,  whose
efforts  are  supplemented by the Company through  advertising  in  boating
magazines, and participation in regional, national, and international  boat
shows.

     Additionally, in order to further promote its products over the years,
the  Company  has  developed racing programs to participate  in  the  major
classes  of offshore powerboat races, many of which are regularly televised
on   networks  such  as  ESPN,  TNN,  Outdoor  Channel  and  Speed  Vision.
Additionally, Fountain single, twin and triple engine racing boats continue
to  hold their respective world speed records.  The result of these  racing
victories and world speed records has established the Company's products as
the  highest  performing and safest designed offshore boats.   The  Company
believes  that  the  favorable  publicity generated  by  these  performance
programs  contributes  to  its sales volume. In Fiscal  2001,  the  company
sponsored  one race boat.  The Company Founder and C.E.O., Reggie Fountain,
has  won numerous races in both factory and customer boats; he has also set
numerous  speed records in both factory and customer boats.  These Fountain
race boats were, in general, very successful in the various racing circuits
in which they competed.

        As  part  of  the marketing program for its line of  sport  fishing
boats,  the  Company  sponsors several outstanding  sport  fishermen.   One
Fountain  fisherman, Clayton Kirby, placed in the top ten in the  prominent
Southern  Kingfish Association, eight out of the last ten years.   He  also
won the coveted King Mackerel Tournament in 2000, and is a four-time winner
of  the Greater Jacksonville King Fish Tournament.  Fountain fishermen have
won  the coveted SKA `Angler of the Year' title 5 out of the last 10 years,
more  than  all  other  boat  manufacturer's  combined.   Another  Fountain
fisherman,  Chuck Arnold, won the brand new Division Four American  Striper
Association  (ASA).   The  ASA is held throughout the  northeast  in  areas
ranging from Virginia to Maine.  The Fountain fishing teams winning records
have  given  our  sport fishing boats favorable exposure to  serious  sport
fishermen,  in  particular  with respect to  the  superior  performance  of
Fountain's fishing boat line.

Product Warranty.

      The Company warrants its boat hull and deck structure against defects
in  material  and  workmanship  for a period  of  six  years.   Other  boat
components  are  covered  in  accordance with the  manufacturer's  warranty
through the Company.  The engine manufacturer warrants engines included  in
the boats.  Warranty expenses of $1,380,800 or 3.00% of sales were incurred
in Fiscal 2001 and were charged against net income.  A $590,000 reserve for
warranty  expenses  estimated  to be incurred  in  future  years  had  been
established  at June 30, 2001.  For 2000, warranty costs were  $869,979  or
1.51% of sales.



-7-
<PAGE>



Competition.

      Competition within the powerboat manufacturing industry  is  intense.
While  the  high  performance sports boat market  comprises  only  a  small
segment  of  all boats manufactured, the higher prices commanded  by  these
boats  make  it a significant market in terms of total dollars spent.   The
manufacturers that compete directly with the Company in its market  segment
include:

               Wellcraft Division of Genmar Industries, Inc.
          Formula, a Division of Thunderbird Products Corporation
              Baja Boats, a Division of Brunswick Corporation
                        Cigarette Racing Team, Inc.
                      Donzi, American Marine Holdings

      The  Company believes that in its market segment, speed, performance,
quality,  image, and safety are the main competitive factors, with  styling
and price being somewhat lesser considerations.

      Market demographics and industry experience indicate that the cruiser
market  is  the  best potential growth market.  Next in line,  are  fishing
boats;  however, there are more fishing boat manufacturers than  there  are
sport boat manufacturers.

      The  Company believes the current product owners, many of  whom  have
purchased  multiple  and  increasingly  larger  boats  from  the   Company,
regenerate  a ready waiting market for its expansion into the  cruiser  and
yacht market.

Employees.

      As  of September 2001 the Company had 304 employees, of whom ten were
executive  and  management personnel.  Fifteen were  engaged  primarily  in
administrative  positions  including accounting, personnel,  marketing  and
sales  activities.   None  of  the  Company's  employees  are  party  to  a
collective  bargaining  agreement.   The  Company  considers  its  employee
relations  to be satisfactory. The Company is an affirmative action,  equal
opportunity employer.

Item 2.  Properties.

      The  Company's  executive  offices and manufacturing  facilities  are
located  on  66  acres  along the Pamlico River in Beaufort  County,  North
Carolina.   All of the land, buildings and improvements are  owned  by  the
Company and are held as collateral on notes and mortgages payable having  a
balance of  $6,696,405 at June 30, 2001.

     The operating facility contains buildings totaling 235,040 square feet
located on fifteen acres.  The buildings consist of the following:
                      Approximate
                    Square Footage         Principal Use
                    --------------         -------------
  Building 1 .....    13,200               Executive offices, shipping and
                                           receiving, and paint shop.

  Building 2 .....     7,200               Final prep.

  Building 3 .....    75,800               Lamination, upholstery,
                                           assembly, inventory,
                                           and cafeteria.

  Building 4 .....    14,250               Woodworking.

  Building 5 .....    26,800               Mating, small parts
                                           lamination.

  Building 6 .....    23,800               Metal fabrication.

  Building 7 .....    15,720               Racing,  service,  and
                                           warranty.

  Building 8 .....     8,750               Lamination  extension
                                           area.

  Building 9 .....     4,800               Mold storage.

  Building 10 ....    26,960               Fabrication, sportswear sales.

  Building 11 ....    12,000               Cruiser manufacturing.

  Building 12 ....     5,760               Maintenance and storage.
                    ----------
  Total ..........   235,040
                    ==========



-8-
<PAGE>


     Over  the  last three years, there have been significant  expenditures
for  property, plant and equipment, which include plant additions, a travel
lift  bay,  a  boat  ramp, and docking facilities along  a  600-foot  canal
leading  to  the Pamlico River.  In addition, the Company has approximately
200,000  square  feet  of  concrete paving surrounding  the  buildings  and
providing  guest  or  employee  parking.   The  present  plant   site   can
accommodate  an  addition  of up to 300,000 square  feet  of  manufacturing
space.

Item 3.  Legal Proceedings.

     As  of  June 30, 2001, the Company's chief operating subsidiary was  a
defendant  in 1 product liability suit, 2 breach of contract suits,  and  6
alleged  breach of warranty suits.  In the Company's opinion these lawsuits
are  without merit and, therefore, the Company intends to vigorously defend
its  interest in such suits.  The Company carries sufficient liability  and
product  liability insurance to cover attorney's fees and any  losses  that
may occur from such suits, over and above applicable insurance deductibles.
The   management  of  the  Company  believes  that  none  of  such  current
proceedings will have a material adverse effect.

     The   Company's   subsidiary  was  notified  by  the   United   States
Environmental Protection Agency (EPA) and the North Carolina Department  of
Environmental Health and Natural Resources that it had been identified as a
potentially  responsible party in the remediation of contamination  at  two
clean  up  sites.  The Group Administrator/Counsel estimated the  Company's
future share of remediation cost not to exceed approximately $25,800.

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

None applicable





-9-
<PAGE>



                                  Part II

Item  5.   Market  for  Registrant's Common Equity and Related  Stockholder
Matters.

      The  Company's  common stock, $.01 per value, was  listed  and  began
trading  on the NASDAQ National Market System (under the symbol "FPWR")  on
August  28,1996.  Prior to that time the Company's common stock was  traded
on the American Stock Exchange (under the symbol "FPI").

      The  following table contains certain historical high and  low  price
information  related  to the common stock for the past  quarter  indicated.
Amounts shown reflect high and low sales prices of the common stock on  the
NASDAQ National Market System:

          Quarter Ended                 High           Low
          -------------                 ----           ----

          September 1998                11.13          4.38
          December 1998                  6.72          3.88
          March 1999                     7.00          4.50
          June 1999                      5.00          3.97

          September 1999                 4.19          2.00
          December 1999                  2.94          2.50
          March 2000                     3.19          3.00
          June 2000                      3.25          2.94

          September 2000                 2.44          2.03
          December 2000                  1.66          1.00
          March 2001                     2.63          2.00
          June 2001                      2.25          1.64


      The  Company  has not declared or paid any cash dividends  since  its
inception.  Any decision as to the future payment of dividends will  depend
on the Company's earnings, financial position and such other factors as the
Board of Directors deems relevant.

     The number of shareholders of record for the Company's common stock as
of September 1, 2001 was approximately 200.




-10-
<PAGE>



Item 6.  Selected Financial Data

               Fountain Powerboat Industries, Inc. and Subsidiary
                             Selected Financial Data
                         Fiscal Years 1997 through 2001



Operations
Statement                          Year Ended June 30,
Data:          ---------------------------------------------------------------
 (Period Ended)   2001          2000         1999        1998         1997
               -----------  -----------  -----------  -----------  -----------
Sales          $46,081,634  $57,532,461  $53,428,487  $50,652,037  $50,514,325

Net Income
 (loss)        $  (899,526) $ 1,258,342  $(1,255,791) $ 2,740,487  $ 1,239,951

Income (loss)
  per share    $      (.19) $       .27  $      (.27) $       .58  $       .27

Weighted
  average
  shares
  outstanding    4,732,608    4,732,608    4,711,896    4,751,779    4,664,251

Diluted
  earnings
  per share    $      (.19)  $      .27  $      (.27) $       .54  $       .24

Diluted
  weighted
  average
  shares
  outstanding    4,732,608    4,732,651    4,711,896    5,110,090    5,093,289

Balance Sheet
  Data (At
  Period End)
--------------
Current Assets $ 8,934,936  $13,621,499  $14,084,888  $12,718,535  $10,997,133

Total Assets   $28,947,752  $33,431,084  $33,930,960  $32,497,393  $23,713,896

Current
  Liabilities  $10,567,159  $12,144,123  $12,183,630  $10,289,985  $ 6,305,212

Long-term debt $ 6,629,904  $ 8,215,486  $10,215,334  $ 9,499,895  $ 8,047,039

Stockholders'
  equity (1)   $10,991,132  $11,890,658  $10,632,316  $11,780,706  $ 9,361,645

                (1) The Company has not paid any cash dividends since
                    its inception.


-11-
<PAGE>


Item 7.  Management's Discussion and Analysis of Financial Condition
                and Results of Operations.

      As  described more fully below at "Business Environment",  more  than
half  of the Company's shipments to dealers were financed through so-called
"100%  floor plan arrangements" with third-party lenders pursuant to  which
the  Company may be required to repurchase boats repossessed by the lenders
if  the  dealer  defaults  under his credit arrangement.   The  balance  of
shipments was C.O.D. or payment prior to shipment.

      The Company has developed criteria for determining whether a shipment
should  be  recorded  as  a sale or as a deferred  sale  (a  balance  sheet
liability).  The criteria for recording a sale are that the boat  has  been
completed and shipped to a customer, that title and all other incidents  of
ownership  have  passed  to  the customer, and  that  there  is  no  direct
commitment to repurchase the boat or to pay floor plan interest beyond  the
normal  sales  program  terms.  This is the  method  of  sales  recognition
believed to be in use by most boat manufacturers.

     At June 30, 2001, 2000, and 1999, there were no commitments to dealers
to  pay  the  interest on floor plan financed boats in excess of  the  time
period  specified in the Company's written sales program and there were  no
direct  repurchase agreements.  There were no deferred  sales  or  cost  of
sales estimated at June 30, 2001, 2000, and 1999.

      The  Company has a contingent liability to repurchase boats where  it
participates in the floor plan financing made available to its  dealers  by
third-party finance companies.  Sales to participating dealers are approved
by  the  respective finance companies.  If a participating dealer does  not
satisfy  its  obligation  to  the  lender  and  the  boat  is  subsequently
repossessed  by the lender, then the Company may be required to  repurchase
the boat.

Business Environment.

      Fiscal  2001  presented  a  difficult economic  environment  for  the
company.   The weakening in the economy saw a reduction in demand  and  the
company responded by reducing expenses and balancing production levels.

      Sales  declined  approximately 20% from $57,532,461  to  $46,081,634.
Declines  in sport boat sales were partially offset by new sales  from  the
company's new wide beam fish boat and cruisers.

      In  Fiscal  2001, the Company maintained its new product  development
program  in  the face of a weakening economy.  The new wide beam  38'  fish
boat,  introduced November 2000, the new 38' wide beam Cruiser,  introduced
February  2001, and the new 38' Lightning late in June 2001, have  all  had
strong sales numbers, completing the sales cycle as retail sold craft.

      Typically, each dealer's floor plan credit facilities are secured  by
the dealer's inventory, and perhaps, other personal and real property.   In
connection with the dealers' floor plan arrangements, the Company (as  well
as  substantially  all  other  major  manufacturers)  has  agreed  in  most
instances  to  repurchase, under certain circumstances, any  of  its  boats
which  a  lender repossesses from a dealer and returns to the Company.   In
the  event  that  a dealer defaults under its credit line, the  lender  may
invoke  the  manufacturers'  repurchase agreements  with  respect  to  that
dealer.   In  that  event, all repurchase agreements of  all  manufacturers
supplying a defaulting dealer are generally invoked regardless of the  boat
or boats with respect to which the dealer has defaulted.

     Except where there is a direct repurchase agreement with the customer,
the  Company  is under no obligation to repurchase boats from its  dealers,
although it will on occasion voluntarily assist a dealer in selling a  boat
or it will repurchase a boat for the convenience of a dealer.




-12-
<PAGE>



     The  Company believes its current dealer inventories are some  of  the
best  managed, given the existing economic environment.  Dealer inventories
are  well  below prior year levels despite the new dealers  added  and  new
product available.

     No boats were repurchased in Fiscal 2001, 2000, and 1999 in connection
with  floor  plan  arrangements.  At June 30, 2001,  2000,  and  1999,  the
Company  had recorded a $200,000 reserve for losses which may be reasonably
expected to be incurred on boat repurchases in future years.

      The Company is in the final phases of refinancing its long-term debt.
The  Company  expects  funding  to occur in  late  September  2001.   Total
borrowings will be $10,000,000 and will be used to retire long-term debt of
approximately $6,600,000 and to provide working capital.  During  the  past
12 months, the Company has put into place plans and actions to dramatically
reduce  overhead and enhance profitability in a less than certain  economic
environment.  The Company has reduced overall employment levels by 25%,  as
well as reducing direct labor and overhead costs.  Additional reductions of
almost  22%  in  selling, general, and administrative  expenses  have  been
implemented.   The  Company  believes it is prepared  to  weather  whatever
economic storms may appear on the horizon.

Results of Operations.

     For Fiscal 2001 the company had a net loss of ($899,526) or ($.19) per
share.   This compares to a net income of $1,258,342 or $.27 per  share  in
Fiscal 2000.  The decline in market demand primarily in sport boats and the
acceleration of new product development efforts account for the decline  in
earnings.

     Operating  income  declined to $(2,443,431) from  $745,107  in  Fiscal
2000.   The  reduction in income was driven by the market decline,  a  less
favorable  sales  mix as shipments of fish boats, which are  lower  margin,
remained  strong during the year, and initial start-up costs  for  the  new
wide beam boats.

     Overhead  expense increased, reflecting significantly higher insurance
premiums,  a fallout of the hurricanes of 1999 and the Company's commitment
to  continue  development  of its new product  lines.   These  factors  are
reflected in the decline in gross margins from 19.82% in 2000 to 13.46%  in
Fiscal 2001.

     Late in Fiscal 2000, the Company began efforts to enhance its position
in  what  it  believed  was  a weakening economic environment.   Production
levels  were  reduced,  expenses and personnel  trimmed,  and  new  product
activities  accelerated.   The  company's relative  strength  in  the  weak
economic environment has been due to its new product offerings.

      Depreciation  expense was $2,293,283 for Fiscal 2001, $2,397,085  for
Fiscal 2000, and $2,280,871 for Fiscal 1999.  Depreciation expense by asset
category was as follows:

                           Fiscal         Fiscal           Fiscal
                            2001           2000             1999
                           ------         -------           -------
  Land  improvements     $  121,857      $  116,350       $   57,065

  Buildings              $  294,354      $  290,825       $  256,205

  Molds  &  plugs        $1,184,807      $1,178,138       $1,236,027

  Machinery & Equipment  $  473,496      $  481,074       $  387,732

  Furniture & fixtures   $   57,663      $   57,677       $   30,842

  Transportation
    equipment            $  161,107      $  246,139       $  194,627

  Racing Equipment            -0-        $   26,882       $  118,373
                         ----------      ----------       ----------
  Total                  $2,293,283      $2,397,085       $2,280,871
                         ==========      ==========       ==========





-13-
<PAGE>


Following is a schedule of the net fixed asset additions (deletions) during
Fiscal 2001 and Fiscal 2000.

                              Fiscal 2001       Fiscal 2000
                              -----------       -----------

 Buildings                  $    201,207       $    543,707

 Land and Improvements      $      -0-         $      2,697

 Molds and plugs            $  2,661,242       $    404,360

 Construction in Progress   $    443,433       $    (81,276)

 Machinery & equipment      $     89,243       $  1,151,897

 Furniture & fixtures       $        508       $     11,036

 Transportation equipment   $ (1,729,438)      $    (73,159)

 Racing equipment           $      -0-         $   (482,806)
                            -------------      -------------
     Total                  $  1,666,195       $  1,476,456
                            =============      =============

     Overall selling and administrative expenses were reduced by $1,983,961
in  Fiscal  2001  from $10,630,890 in Fiscal 2000 to $8,646,929  in  Fiscal
2001.

     Selling expenses were $5,955,103 for Fiscal 2001, $7,370,319 for  2000
and  $7,934,683  for  Fiscal  1999.   The  Company  continued  its  product
promotions  in  Fiscal  2001.   The Company believes  it  is  important  to
maintain  visibility  in  the consumer's eye and  to  promote  new  product
offerings.   The Company also maintained a presence in the offshore  racing
circuit  and  tournament  fishing programs.  In Fiscal  2001,  the  Company
reduced  its  racing and fishing expense by almost 40%.  Based on  previous
product   performance,  more  customers  are  racing  Fountain  boats   and
maintaining the Company's leadership position.

      Major selling expenses compared for the past three fiscal years  were
as follows:

                      Fiscal 2001        Fiscal 2000         Fiscal 1999
                      -----------        -----------         -----------
 Fishing & racing    $  1,508,162        $ 2,424,918         $ 2,503,699

 Advertising         $  1,123,977        $ 1,456,592         $ 1,411,883

 Salaries &
   commissions       $    705,249        $   788,108         $ 1,054,467

 Boat shows          $    568,806        $   563,536         $   494,832

 Dealer incentives   $  1,171,067        $ 1,421,703         $ 1,612,415

 Other selling
   expenses          $    877,842        $   715,462         $   857,387
                     ------------        -----------         -----------
 Total               $  5,955,103        $ 7,370,319         $ 7,934,683
                     ============        ===========         ===========



-14-
<PAGE>


      General  and  administrative  expenses include  the  finance,  legal,
personnel, information technology, and administrative operating expenses of
the  Company.   These expenses were $2,691,826 for Fiscal 2001,  $3,260,571
for Fiscal 2000, and $3,127,029 for Fiscal 1999.

      Interest expense was $700,965 for Fiscal 2001, $1,065,514 for  Fiscal
2000, and $1,023,727 for Fiscal 1999.  The decrease in interest expense for
Fiscal  2001  was primarily attributable to the amortization of  long  term
debt,  which  resulted  in  larger portions of payments  being  applied  to
principal and lesser portions of payments being applied to interest  during
the fiscal year.

      For  Fiscal 2001, the Company received $118,503 in other  income  and
there  was a gain of $500,446 on the disposal of assets.  For Fiscal  2001,
the  Company recorded a gain of $1,107,819 on insurance claims  related  to
final settlement of hurricane damages.

Liquidity and Financial Resources.

     Net cash provided by operations in Fiscal 2001 amounted to $4,284,701.
Net loss  plus  adjustments to reconcile net loss  to net  cash provided by
operating activities including depreciation expense of $2,293,284 and  gain
on sale of assets contributed $500,446 provided net cash of $893,312 before
changes in asset and liability accounts.  However, relatively large amounts
were  needed  to  continue investment activities in constructing  property,
plant, equipment, and molds.  The ending cash balance was $796,606.

     Net cash provided by operations in Fiscal 2000 amounted to $3,989,220.
Net income plus adjustments to reconcile net income to net cash provided by
operating activities including depreciation expense of $2,397,085 and  loss
on sale of assets of $12,846 provided net cash of $3,668,273 before changes
in  asset  and liability accounts.  However, relatively large amounts  were
needed  to  complete investment activities in purchasing  property,  plant,
equipment, inventory and molds.  The ending cash balance was $1,983,439.

     Net cash provided by operations in Fiscal 1999 amounted to $2,738,206.
Net  loss  plus adjustments to reconcile net loss to net cash  provided  by
operating  activities  including depreciation expense  of  $2,280,871,  the
strategic charge of $2,440,000 and other net items of $20,900 provided  net
cash  of  $3,485,980 before changes in asset and liability  accounts.   The
ending cash balance was $2,217,301.

     Investing  activities  for Fiscal 2001 required $1,875,972,  including
$590,591  used  for  property,  plant and equipment,  $2,819,252  used  for
construction of molds and plugs, $216,849 used for payments increasing  the
cash  surrender value of life insurance policies and proceeds of $1,750,720
generated from the sale of property and equipment.

     Investing activities for Fiscal 2000 contributed $2,742,183, including
$1,678,236  for  property, plant and equipment, $1,154,908  for  additional
molds  and plugs, $122,637 for payments increasing the cash surrender value
of  life  insurance  policies and proceeds of $555,232  from  the  sale  of
property and equipment.

     Investing  activities  for Fiscal 1999 required $3,710,206,  including
$2,477,520  for  property, plant and equipment, $1,275,183  for  additional
molds  and  plugs and $131,696 for payments increasing the  cash  surrender
value  of life  insurance  policies, and proceeds  of $211,000 from sale of
property and equipment.




-15-
<PAGE>


     Financing  activities  for Fiscal 2001 used $3,595,562.   Included  in
this  amount  are proceeds from issuance of notes payable from Northwestern
Mutual  Life  for  $150,000 and debt repayment to General Electric  Capital
Corporation and others in the amount of $3,745,562.

     Financing  activities  for Fiscal 2000 used $1,822,534.   Included  in
this  amount are proceeds from issuance of notes payable and long-term debt
to   Northwestern  Mutual  Life  Insurance  and  General  Electric  Capital
Corporation for $760,212 and debt repayment in the amount of $2,582,746.

     Financing activities for Fiscal 1999 provided $1,812,317.  Included in
this  amount are proceeds from issuance of notes payable and long-term debt
to  Transamerica  Business Credit Corporation and General Electric  Capital
Corporation for $4,000,000 along with debt repayment of $2,574,637.

     The net decrease in cash for Fiscal 2001 was $1,186,833, primarily due
to  the  repayment of long-term debt, and the investment in  equipment  and
molds.   The  net decrease in cash for Fiscal 2000 was $233,862,  primarily
due  to  the  investment  in facilities, equipment,  and  molds.   The  net
increase  in  cash  for  Fiscal 1999 was $840,317,  primarily  from  a  new
$4,000,000  promissory note with Transamerica Business Credit  Corporation.
The  Company has implemented measures intended to reduce certain costs  and
limit capital expenditures during Fiscal 2002.

Effects of Inflation.

     The Company has not been materially affected by the moderate inflation
of  recent years.  Since most of the Company's plant and its equipment  are
relatively  new,  expenditures for replacements are not expected  to  be  a
factor in the near-term future.

      When  raw  material costs increase because of inflation, the  Company
attempts  to  minimize the effect of these increases by using  alternative,
less  costly materials, or by finding less costly sources for the materials
it  uses.  When the foregoing measures are not possible, its selling prices
are increased to recover the cost increases.

      The  Company's products are targeted at the segment of the  powerboat
market where retail purchasers are generally less significantly affected by
price or other economic conditions.  Consequently, management believes that
the impact of inflation on sales and the results of operations will not  be
material.

Cautionary  Statement  for  Purposes of "Safe  Harbor"  Under  the  Private
Securities Reform Act of 1995.

      The  Company  may from time to time make forward-looking  statements,
including  statements projecting, forecasting, or estimating the  Company's
performance  and  industry  trends.  The achievement  of  the  projections,
forecasts, or estimates contained in these statements is subject to certain
risks   and  uncertainties,  and  actual  results  and  events  may  differ
materially from those projected, forecast, or estimated.

      The  applicable risks and uncertainties include general economic  and
industry conditions that affect all businesses, as well as matters that are
specific  to  the  Company  and the markets it serves.   For  example,  the
achievement  of  projections,  forecasts, or  estimates  contained  in  the
Company's  forward-looking  statements may  be  impacted  by  national  and
international  economic conditions; compliance with governmental  laws  and
regulations;  accidents  and acts of God; and  all  of  the  general  risks
associated with doing business.



-16-
<PAGE>



     Risks that are specific to the Company and its markets include but are
not  limited  to compliance with increasingly stringent environmental  laws
and  regulations;  the  cyclical nature of  the  industry;  competition  in
pricing  and new product development from larger companies with substantial
resources;  the concentration of a substantial percentage of the  Company's
sales  with  a few major customers, the loss of, or change in  demand  from
dealers, any of which could have a material impact upon the Company;  labor
relations  at  the  Company and at its customers  and  suppliers;  and  the
Company's  single-source supply and just-in-time inventory  strategies  for
some  critical  boat components, including high performance engines,  which
could adversely affect production if a single-source supplier is unable for
any reason to meet the Company's requirements on a timely basis.




-17-
<PAGE>


Item 8.  Financial Statements and Supplementary Data.



                       INDEPENDENT AUDITORS' REPORT



To the Board of Directors
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
Washington, North Carolina


We  have  audited the accompanying consolidated balance sheets of  Fountain
Powerboat Industries, Inc. and Subsidiary as of June 30, 2001 and 2000, and
the related consolidated statements of operations, stockholders' equity and
cash  flows  for  the  years  ended June 30, 2001,  2000  and  1999.  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 consolidated financial statements audited by us present
fairly,  in  all material respects, the consolidated financial position  of
Fountain Powerboat Industries, Inc. and Subsidiary as of June 30, 2001  and
2000, and the consolidated results of their operations and their cash flows
for  the  years  ended  June 30, 2001, 2000 and  1999  in  conformity  with
generally accepted accounting principles.





PRITCHETT, SILER & HARDY, P.C.

July 27, 2001
Salt Lake City, Utah




-18-
<PAGE>


             FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                        CONSOLIDATED BALANCE SHEETS

                                  ASSETS

                                                    June 30,
                                           __________________________
                                                2001       2000
                                           ____________  ____________
CURRENT ASSETS:
  Cash & cash equivalents                  $    796,606  $  1,983,439
  Accounts receivable, less
    allowance for doubtful
    accounts of $27,841
    for 2001 and 2000                         1,939,886     1,701,643
  Inventories                                 4,555,969     7,880,136
  Prepaid expenses                              172,538       574,615
  Current tax assets                          1,469,937     1,481,666
                                           ____________  ____________
        Total Current Assets                  8,934,936    13,621,499

PROPERTY, PLANT AND EQUIPMENT, net           18,919,634    18,933,251

CASH SURRENDER VALUE OF LIFE INSURANCE          959,687       742,839

OTHER ASSETS                                    133,495       133,495
                                           ____________  ____________
                                           $ 28,947,752  $ 33,431,084
                                           ____________  ____________

                   LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current maturities of long-term debt     $    722,661  $  2,613,534
  Current maturities of capital lease            13,989        12,999
  Accounts payable                            5,682,729     4,993,717
  Accrued expenses                            1,006,459     1,267,772
  Dealer incentives                           2,030,126     2,144,061
  Customer deposits                             321,175       322,040
  Allowance for boat repurchases                200,000       200,000
  Warranty reserve                              590,000       590,000
                                           ____________  ____________
        Total Current Liabilities            10,567,139    12,144,123

LONG-TERM DEBT, less current maturities       6,580,299     8,151,546
CAPITAL LEASE, less current maturities           49,605        63,940
DEFERRED TAX LIABILITY                          759,577     1,180,817

COMMITMENTS AND CONTINGENCIES (See Note 9)            -             -
                                           ____________  ____________
        Total Liabilities                    17,956,620    21,540,426
                                           ____________  ____________
STOCKHOLDERS' EQUITY
  Common stock, $.01 par value,
   200,000,000 shares authorized,
   4,732,608 shares issued
   and outstanding                               47,326        47,326
  Additional paid-in capital                 10,303,640     0,303,640
  Accumulated earnings                          750,914     1,650,440
                                           ____________  ____________
                                             11,101,880    12,001,406
Less: Treasury Stock,
  at cost, 15,000 shares                       (110,748)     (110,748)
                                           ____________  ____________
                                             10,991,132    11,890,658
                                           ____________  ____________
                                           $ 28,947,752  $ 33,431,084
                                           ____________  ____________

The accompanying notes are an integral part of these financial statements.





-19-
<PAGE>


            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                   CONSOLIDATED STATEMENTS OF OPERATIONS

                                       Year Ended June 30,
                            ________________________________________
                                  2001        2000         1999
                            ____________  ____________  ____________
NET SALES                   $ 46,081,634  $ 57,532,461  $ 53,428,487
COST OF SALES                 39,878,136    46,156,464    41,547,716
                            ____________  ____________  ____________
  Gross Profit                 6,203,498    11,375,997    11,880,771
                            ____________  ____________  ____________
EXPENSES:
  Selling expense              5,955,103     7,370,319     7,934,683
  General and
    administrative             2,691,826     3,260,571     2,628,722
  General and
    administrative -
    related parties                    -             -       498,307
  Strategic Charge                     -             -     2,440,000
                            ____________  ____________  ____________
      Total expenses           8,646,929    10,630,890    13,501,712
                            ____________  ____________  ____________
OPERATING INCOME (LOSS)       (2,443,431)      745,107    (1,620,941)
                            ____________  ____________  ____________
NON-OPERATING INCOME
   (EXPENSE):
  Other income                   118,503       106,239       130,118
  Interest expense              (700,965)   (1,065,514)   (1,003,280)
  Interest expense -
    related parties                    -             -       (20,447)
  Gain (loss) on disposal
    of assets                    500,446       (12,846)       69,100
  Gain on insurance claims
    from hurricane             1,107,819     1,065,725             -
                            ____________  ____________  ____________
                               1,025,803        93,604      (824,509)
                            ____________  ____________  ____________
INCOME (LOSS) BEFORE
  INCOME TAXES                (1,417,628)      838,711    (2,445,450)

CURRENT TAX EXPENSE             (108,590)             -             -
  (BENEFIT)
DEFERRED TAX EXPENSE
  (BENEFIT)                     (409,512)       370,410    (1,189,659)
                            ____________  ____________  ____________
INCOME (LOSS) FROM
  CONTINUING OPERATIONS
  BEFORE EXTRAORDINARY
  ITEMS                         (899,526)      468,301    (1,255,791)
                            ____________  ____________  ____________

GAIN ON SETTLEMENT OF
  LAWSUIT (net of $523,183
  in income taxes)                     -       790,041             -
                            ____________  ____________  ____________

NET INCOME (LOSS)           $   (899,526) $  1,258,342  $ (1,255,791)
                            ____________  ____________  ____________

                                [Continued]


-20-
<PAGE>



                  FOUNTAIN POWERBOAT, INC. AND SUBSIDIARY

                   CONSOLIDATED STATEMENTS OF OPERATIONS

                                [CONTINUED]


                                       Year Ended June 30,
                            _______________________________________
                                2001          2000         1999
                            ____________  ___________  ____________
BASIC EARNINGS (LOSS)
  PER SHARE:

  Continuing operations     $       (.19) $       .10  $       (.27)
  Gain from lawsuit                    -          .17             -
                            ____________  ___________  ____________
BASIC EARNINGS PER SHARE    $       (.19) $       .27  $       (.27)
                            ____________  ___________  ____________
WEIGHTED AVERAGE SHARES
  OUTSTANDING                  4,732,608    4,732,608     4,711,896
                            ____________  ___________  ____________

DILUTED EARNINGS PER SHARE:

  Continuing operations             (.19) $       .10  $       (.27)
  Gain from lawsuit                    -          .17             -
                            ____________  ___________  ____________
DILUTED EARNINGS PER SHARE  $       (.19) $       .27  $       (.27)
                            ____________  ___________  ____________
DILUTED WEIGHTED AVERAGE
  SHARES OUTSTANDING           4,732,608    4,732,651     4,711,896
                            ____________  ___________  ____________






The accompanying notes are an integral part of these financial statements.





-21-
<PAGE>


               FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                    FROM JUNE 30, 1998 THROUGH JUNE 30, 2001



                Common Stock  Additional            Treasury Stock    Total
           _________________   Paid-in  Accumulated _______________Stockholders'
              Shares  Amount   Capital    Earnings  Shares  Amount    Equity
           _________ _______ ___________ __________ ______ ________ ___________
BALANCE,
 June 30,
 1998      4,702,608 $47,026 $10,196,540 $1,647,889 15,000 $110,748 $11,780,707

Issuance of
 common
 stock upon
 exercise
 of options
 at
 approximately
 $3.58 per
 share by a
 director of
 the Company   30,000    300     107,100          -      -        -     107,400

Net loss
 for the year
 ended June
 30, 1999           -      -           - (1,255,791)     -        -  (1,255,791)
           _________ _______ ___________ __________ ______ ________ ___________
BALANCE,
 June 30,
 1999      4,732,608 $47,326 $10,303,640 $  392,098 15,000 $110,748 $10,632,316

Net income
 for the
 year ended
 June
 30, 2000          -       -           -  1,258,342      -        -   1,258,342
           _________ _______ ___________ __________ ______ ________ ___________
BALANCE,
 June 30,
 2000      4,732,608 $47,326 $10,303,640 $1,650,440 15,000 $110,748 $11,890,658

Net loss
 for the
 year ended
 June 30,
 2001              -       -           -   (899,526)     -        -    (899,526)
           _________ _______ ___________ __________ ______ ________ ___________
BALANCE,
 June 30,
 2001      4,732,608 $47,326 $10,303,640 $  750,914 15,000 $110,748 $10,991,132
           _________ _______ ___________ __________ ______ ________ ___________



   The accompanying notes are an integral part of these financial statements.



-22-
<PAGE>




            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                            Year Ended June 30,
                              ____________________________________________
                                    2001         2000          1999
                              _____________  ____________  _______________
CASH FLOWS FROM OPERATING
ACTIVITIES:
  Net income (loss)           $    (899,526) $  1,258,342  $    (1,255,791)
  Adjustments to reconcile
   net income (loss)
   to net cash provided
   by operating activities:
     Strategic charge                     -             -       2,440,000
     Depreciation expense         2,293,284     2,397,085       2,280,871
     (Gain) loss on disposal
     of and equipment              (500,446)       12,846         (69,100)
     Warranty reserve                     -             -          90,000
     (Increase) decrease in
     net tax asset                 (409,511)    1,020,970      (1,293,271)
     Change in assets and
     liabilities:
       (Increase) decrease
       in accounts receivable      (238,243)     (124,931)      1,148,745
       (Increase) decrease
       in inventories             3,324,167      (572,246)       (959,172)
       (Increase) decrease
       in prepaid expenses          402,077       186,871        (281,492)
       Increase in accounts
       payable                      689,012     1,032,201         370,027
       Increase (decrease)
       in accrued expenses         (261,314)      273,542         292,316
       Increase (decrease)
       in dealer incentives        (113,935)   (1,129,940)         (1,520)
       Increase (decrease)
       in customer deposits            (864)     (365,520)        (23,407)
                               ____________  ____________  ______________
          Net Cash Provided
            by Operating
            Activities         $  4,284,701  $  3,989,220  $    2,738,206
                                ___________  ____________  ______________
CASH FLOWS FROM INVESTING
ACTIVITIES:
  Increase in notes receivable
  - related party                         -             -         (36,807)
  Proceeds from sale of
  equipment                       1,750,720       555,232         211,000
  Investment in molds and
  related plugs                  (2,819,252)   (1,154,908)     (1,275,183)
  Purchase of property,
  plant and equipment              (590,591)   (1,678,236)     (2,477,520)
  Increase in cash surrender
  value of life Insurance          (216,849)     (122,637)       (131,696)
                                ___________  ____________  ______________
     Net Cash (Used) by
       Investing Activities     $(1,875,972) $ (2,400,549)  $  (3,710,206)
                                ___________  ____________  ______________
CASH FLOWS FROM FINANCING
ACTIVITIES:
  Proceeds from issuance of
  common stock                  $         -  $          -  $      107,400
  Proceeds from notes payable
  and long-term debt                150,000       760,212       4,279,554
  Payments of long-term debt     (3,732,563)   (2,570,958)     (2,157,885)
  Payments on capital lease         (12,999)      (11,788)           (931)
  Payments on related party
  payable                                 -             -        (415,821)
                                ___________  ____________  ______________
     Net Cash Provided by
       Financing ActivitieS     $(3,595,562) $ (1,822,534) $    1,812,317
                                ___________  ____________  ______________
Net increase (decrease) in
  cash & cash equivalents       $(1,186,833) $   (233,862) $      840,317
Beginning cash & cash
  equivalents balance             1,983,439     2,217,301       1,376,984
                                ___________  ____________  ______________
Ending cash & cash
  equivalents balance           $   796,606  $  1,983,439  $    2,217,301
                                ___________  ____________  ______________



                                [Continued]



-23-
<PAGE>


            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                   CONSOLIDATED STATEMENTS OF CASH FLOWS

                                [CONTINUED]
                                            Year Ended June 30,
                                 ___________  ____________  ____________
                                     2001         2000          1999
                                 ___________  ____________  ____________
Supplemental Disclosures
   of Cash Flow Information:
  Cash paid during the period for:
    Interest:
     Unrelated parties, net of
     amount capitalized          $   709,585  $  1,088,857  $    996,640
     Related parties                       -             -        20,447
                                 ___________  ____________  ____________
                                 $   709,585  $  1,088,857  $  1,017,087
                                 ___________  ____________  ____________
    Income taxes                 $     9,785  $          -  $    263,345
                                 ___________  ____________  ____________

Supplemental Schedule of Non-cash Investing and Financing Activities:
     For the year ended June 30, 2001:
       None

     For the year ended June 30, 2000:
       None

     For the year ended June 30, 1999:
       None










The accompanying notes are an integral part on these financial statements.



-24-
<PAGE>


            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.  Nature of the Business and Significant Accounting Policies.

  Nature  of  the  Business:   Fountain  Powerboat  Industries,  Inc.   and
  Subsidiary  (the Company) manufactures high-performance deep water  sport
  boats, sport cruisers, sport fishing boats, custom offshore racing  boats
  and  super  cruiser  yachts.   These boats  are  sold  to  the  Company's
  worldwide  network  of approximately 34 dealers.  The  Company's  offices
  and  manufacturing facilities are located in Washington,  North  Carolina
  and  the  Company  has been in business since 1979.  The Company  employs
  approximately 340 people and is an equal opportunity, affirmative  action
  employer.

  Principles   of  Consolidation:  The  consolidated  financial  statements
  include  the  accounts  of the Company and its wholly  owned  subsidiary,
  Fountain  Powerboats,  Inc.  All significant inter-company  accounts  and
  transactions  have  been  eliminated in consolidation.   Fountain  Power,
  Inc.  was not active during Fiscal 1999 and was dissolved effective  June
  30, 1999.

  Fiscal  Year:  The Company's fiscal year-end is June 30th, which  is  its
  natural business year-end.

  Accounting   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, the disclosures of contingent  assets
  and  liabilities  at  the  date  of the  financial  statements,  and  the
  reported  amounts  of revenues and expenses during the reporting  period.
  Actual results could differ from those estimated by management.

  Cash  and Cash Equivalents: For purposes of the statement of cash  flows,
  the  Company considers all highly liquid debt instruments with a maturity
  of  three  months or less to be cash equivalents.  At June 30,  2001  and
  2000,  the  Company had $794,606 and $1,843,964, respectively, in  excess
  of federally insured amounts held in cash.

  Inventories: Inventories are stated at the lower of cost or market.  Cost
  is determined by the first-in, first-out method (See Note 2).

  Property,  Plant,  and Equipment and Depreciation: Property,  plant,  and
  equipment  are  carried at cost.  Depreciation on  property,  plant,  and
  equipment is calculated using the straight-line method and is based  upon
  the estimated useful lives of the assets (See Note 3).

  Fair  Value of Financial Instruments:  Management estimates the  carrying
  value  of  financial instruments on the consolidated financial statements
  approximates their fair values.

  Dealer  Territory Service Accrual:  The Company has established a program
  to  pay  a service award to dealers for boat deliveries into their market
  territory  for which they will perform service. The service  award  is  a
  percentage of the purchase price of the boat ranging from 0% to 7%  based
  on  the  dealer's  service performance rating.  The Company  has  accrued
  estimated  dealer territory service awards at June 30, 2001 and  2000  of
  $958,581 and $907,230, respectively.

  Allowance  for  Boat Repurchases: The Company provides an  allowance  for
  boats,  financed  by dealers under floor plan finance arrangements,  that
  may  be  repurchased  from finance companies under certain  circumstances
  where  the  Company  has a repurchase agreement  with  the  lender.   The
  amount  of  the allowance is based upon probable future events which  can
  be reasonably estimated (See Note 9).

  Internal  Use  Software: The Company accounts for internal  use  software
  and  development cost in accordance with the Statement of Position  (SOP)
  98-1,  "Accounting for Computer Software Developed for  or  Obtained  for
  Internal  Use".   The  SOP requires the capitalization  of  certain  cost
  incurred  in  connection  with  developing  or  obtaining  software   for
  internal use.




-25-
<PAGE>



            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.  Nature  of  the  Business  and  Significant  Accounting  Policies.
          [Continued]

  Revenue   Recognition:  The  Company  generally  sells  boats   only   to
  authorized  dealers and to the U.S. Government.  A sale is recorded  when
  a  boat is shipped to a dealer or to the Government, legal title and  all
  other  incidents of ownership have passed from the Company to the  dealer
  or  to  the Government, and an account receivable is recorded or  payment
  is  received  from the dealer, from the Government, or from the  dealer's
  third-party  commercial lender.  This is the method of sales  recognition
  in use by most boat manufacturers.

  The  Company  has developed criteria for determining whether  a  shipment
  should  be  recorded  as a sale or as a deferred sale  (a  balance  sheet
  liability).   The  criteria for recording a sale are that  the  boat  has
  been  completed and shipped to a dealer or to the Government, that  title
  and  all other incidents of ownership have passed to the dealer or to the
  Government,  and  that there is no direct or indirect commitment  to  the
  dealer  or to the Government to repurchase the boat or to pay floor  plan
  interest  for  the  dealer  beyond the normal,  published  sales  program
  terms.

  The  sales incentive floor plan interest expense for each individual boat
  sale  is  accrued for the maximum six months (180 days) interest  payment
  period  in  the same fiscal accounting period that the related boat  sale
  is  recorded.  The entire six months' interest expense is accrued at  the
  time  of the sale because the Company considers it a selling expense (See
  Note  9).   The  amount of interest accrued is subsequently  adjusted  to
  reflect  the actual number of days of remaining liability for floor  plan
  interest  for  each  individual boat remaining in the dealer's  inventory
  and  on  floor plan.

  Income  Taxes:  The Company accounts for income taxes in accordance  with
  issued  Statement  of  Financial Accounting  Standards  (SFAS)  No.  109,
  "Accounting for Income Taxes "(See Note 7).

  Advertising  Cost:  Cost  incurred  in connection  with  advertising  and
  promotions  of  the  Company's products are expensed as  incurred.   Such
  costs  amounted to $1,123,976, $1,456,592 and $1,411,883  for  the  years
  ended 2001, 2000 and 1999.

  Earnings  Per  Share:  The Company accounts for  earnings  per  share  in
  accordance  with  the Statement of Financial Accounting Standards  (SFAS)
  No.  128  "Earnings  Per Share," which requires the  Company  to  present
  basic  and diluted earnings per share.  The computation of basic  earning
  per  share  is based on the weighted average number of shares outstanding
  during  the  periods presented.  The computation of diluted earnings  per
  shares  is  based  on  the weighted average number of outstanding  common
  shares  during  the year plus, when their effect is dilutive,  additional
  shares  assuming  the  exercise of certain vested  and  non-vested  stock
  options  and  warrants, reduced by the number of shares  which  could  be
  purchased from the proceeds.

  Warranties: The Company warrants the entire deck and hull, including  its
  supporting  bulkhead  and stringer system, against defects  in  materials
  and  workmanship for a period of three years.  The Company has an accrued
  reserve for these anticipated future warranty costs.

  Stock  Based  Compensation: The Company has adopted the  disclosure  only
  provisions  of SFAS No. 123 "Accounting for Stock-Based Compensation"  to
  account  for  stock  based  compensation  accordingly,  the  Company  has
  elected  to  determine  net income using previous  accounting  standards.
  This  statement establishes an accounting method based on the fair  value
  of  equity  instruments  awarded to employees as compensation.   However,
  companies   are  permitted  to  continue  applying  previous   accounting
  standards  in  the  determination of net income with  disclosure  in  the
  notes  to  the  financial statements of the differences between  previous
  accounting  measurements  and  those formulated  by  the  new  accounting
  standard.




-26-
<PAGE>




            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.  Nature  of  the  Business  and  Significant  Accounting  Policies.
          [Continued]

  Reclassifications:  The financial statements for years prior to June  30,
  2001  have been reclassified to conform with headings and classifications
  used in the June 30, 2001 financial statements.

Note 2.  Inventories.

  Inventories consist of the following:
                                              June 30,
                                      __________________________
                                           2001         2000
                                      ____________  ____________
               Parts and supplies     $  2,829,705  $  3,402,176
               Work-in-process           1,308,998     3,743,713
               Finished goods              567,266       884,247
                                      ____________  ____________
                                         4,705,969     8,030,136
               Reserve for
                 obsolescence             (150,000)     (150,000)
                                      ____________  ____________
                                      $  4,555,969  $  7,880,136
                                      ____________  ____________

Note 3.  Property, Plant, and Equipment.

  Property, plant, and equipment consists of the following:

                               Estimated          June 30,
                              Useful Lives  ________________________
                                in Years       2001          2000
                              ___________   ___________  ___________
       Land and related
        improvements             10-30      $ 4,508,064  $ 4,336,851
       Buildings and related
       improvements              10-30        8,748,746    8,718,751
       Construction-in-
        progress                  N/A           165,327      446,523
       Production molds and
        related plugs              8         18,549,691   15,163,821
       Machinery and equipment    3-5         5,803,875    5,714,631
       Furniture and fixtures      5            766,043      765,533
       Transportation equipment    5            502,436    2,231,874
       Racing boats               N/A           308,054      308,054
                                            ___________  ___________
                                            $39,352,236  $37,686,040
          Accumulated depreciation          (20,432,602) (18,752,789)
                                            ___________  ___________
                                            $18,919,634  $18,933,251
                                            ___________  ___________

  Depreciation  expense amounted to $2,293,283, $2,397,085 and  $2,280,871,
  for  the  years ended June 30, 2001, 2000 and 1999, respectively.  During
  1999,  as part of a strategic restructuring the Company wrote off  assets
  totaling $2,440,000 (See Note 15).

  Construction  costs  of  production molds for new  and  existing  product
  lines  are capitalized and depreciated over an estimated useful  life  of
  eight  years.  Depreciation starts when the production mold is placed  in
  service  to  manufacture  the  product.  The  costs  include  the  direct
  materials,  direct  labor,  and  an  overhead  allocation  based   on   a
  percentage   of  direct  labor.   Production  molds  under   construction
  amounted to $956,881and $223,144 at June 30, 2001 and 2000.



-27-
<PAGE>


            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 3.  Property, Plant, and Equipment. [Continued]

  The  Company's airplane is collateral for loans with an aggregate balance
  $1,017,257 at June 30, 2000.  During 2001, the Company sold the  airplane
  for $1,735,000 and paid off the related $908,325 in loans.


Note 4.   Capital Lease.

  The Company is the lessee of equipment under a capital lease expiring  in
  May  2004.   The  assets and liabilities under the  capital  leases  were
  recorded  at the lower of the present value of the minimum lease payments
  or  the  fair  value  of the assets at the time of  purchase.   Equipment
  under capital lease obligations is as follows:

                                              June 30,
                                      ________________________
                                        2001          2000
                                      __________  ____________
     Equipment                        $   83,067  $     83,067
     Less: Accumulated amortization      (30,458)      (13,844)
                                      __________  ____________
                                      $   52,609  $     69,223
                                      __________  ____________



  Total  future minimum lease payments, executory costs and current portion
  of capital lease obligations are as follows:

      Year ending June 30,                  Lease Payments
              2002                               39,552
              2003                               39,552
              2004                               39,552
              2005                               14,588
                                              __________
      Total future minimum lease payments      $133,244
      Less: amounts representing
        maintenance and usage fee,
        interest and executory costs            (63,304)
                                              __________
      Present value of the future minimum
        lease payments                           69,650
      Less: Lease current portion               (13,989)
                                              __________
      Capital lease obligations - long term   $  49,605
                                              __________





-28-
<PAGE>



            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5.  Long-term Debt and Pledged Assets.
  The following is a summary of long-term debt:
                                                         June 30,
                                                 _________________________
                                                     2001       2000
                                                 ___________  ____________
     7.26% Loan payable to a financing
     corporation assumed in purchasing
     an airplane from an officer and director.
     Monthly payments of $15,181. Matures
     August 1, 2004.                             $         -  $    622,581

     9.50% loan payable to a financial
     institution for the purchase of
     a vehicle, monthly payment of $1,765
     through October 2003, secured by
     the vehicle purchased.                           44,056             -

     9.99% loans payable to a financial
     institution for the purchase of
     vehicles, monthly payments totaling
     $1,383 through August 2002,
     secured by the vehicles purchased.               56,365             -

     Loan payable to a financing
     corporation for the rebuilding
     of engines for the Company's plane.
     The loan has a fixed interest rate
     of 8.12%.  Monthly payments of $9,296.
     Matures August 1, 2004.                               -       394,676

     6.30% loan payable to a financial
     institution for the purchase of a
     vehicle, monthly payment of $771
     through December 2002,
     secured by the vehicle purchased.                13,203        21,346

     7.15% loan payable to a financial
     institution for the purchase
     of a vehicle, monthly payments
     of $1,055 through October 2002,
     secured by the vehicle purchased.                16,083        26,664

     7.93% to 8% loans payable borrowed
     against the cash surrender value
     of key-man life insurance policies
     during June 1998, and 2001, monthly
     payments of $22,400.                            476,848       512,654

     $14,000,000 credit agreement with
     a financial Corporation
     (Subsequently refinanced) (See Below).        6,696,405     9,187,159
                                                ____________  ____________
                                                   7,302,960    10,765,080
 Less: Current maturities included
   in current liabilities:                          (722,661)   (2,613,534)
                                                ____________  ____________
                                                $  6,580,299  $  8,151,546
                                                ____________  ____________

  On  December  31,  1996,  the  Company  concluded  a  $10,000,000  credit
  agreement with General Electric Capital Corporation.  Under the terms  of
  the  new  credit agreement, the Company refinanced substantially  all  of
  its  interest bearing debts and borrowed additional funds for  plant  and
  equipment  additions.  The  credit agreement has a fixed interest rate of
  7.02%.  The  agreement  calls for monthly  payments of $123,103 and has a
  ten-year  amortization  with  a five-year call.   The credit agreement is
  secured  by  all of  the Company's real and personal property and by  the
  Company's assignment of a $1,000,000 key man life insurance policy.   The
  credit agreement  was  subsequently  amended and restated during 1999  to
  include an additional $4,000,000 credit loan, with a fixed interest  rate
  of 7.02%,  maturing  January 2, 2002, monthly payments of  $100,000,  and
  a prepayment penalty of $80,000 if paid prior to September 1, 2000 or
  $40,000 if paid prior to September 1, 2001.  These agreements were
  subsequently refinanced (See Note 17).





-29-
<PAGE>



            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5.  Long-term Debt and Pledged Assets. [Continued]

  The  estimated aggregate maturities required on long-term  debt  at  June
  30, 2001 are as follows:

               2001                       $    722,661
               2002                            734,132
               2003                            620,307
               2004                            611,197
               2005                            636,591
            Thereafter                       3,978,072
                                           $ 7,302,960

Note 6.  Common Stock, Stock Options, and Treasury Stock.

  Common  Stock:   During the year ended 1999, a former director  exercised
  30,000 stock options for $ 107,400.

  Stock  Options:  During March 1999, the shareholders voted to  adopt  the
  1999  Employee  Stock Option Plan (the Plan), which expires  January  11,
  2009.   Under  the Plan, the board is empowered to grant  up  to  120,000
  stock  options to employees, officers, directors and consultants  of  the
  Company.   Additionally, the Board will determine at the time of granting
  the  vesting provisions and whether the options will qualify as Incentive
  Stock  Options  under Section 422 of the Internal Revenue  Code  (Section
  422  provides  certain tax advantages to the employee  recipients).   The
  Plan  was  approved  by  the shareholders of the Company  during  January
  1999.   During 1999, the Company granted an officer of the Company 30,000
  options under the Plan.  The options are exercisable at $5 per share  and
  5000  options vest quarterly beginning June 30, 1999.  The Options expire
  on  January  11,  2004. During 2000, the Company granted  10,000  options
  under  the Plan.  The options are exercisable at $3.18 to $6.00 per share
  and  vested on issuance.  The options expire on May 8, 2005.  As of  June
  30, 2001 none of the options have been exercised.

  During  2001, the Company granted 35,000 stock options.  The options  are
  exercisable  at  $1.34 per share and vested through  December  31,  2002.
  The  options expire December 12, 2007.  As of June 30, 2001 none  of  the
  options have been exercised.

  On  June 21, 1995, the shareholders voted to adopt the 1995 stock  option
  plan.   The plan allowed up to 450,000 common stock options to be granted
  by  the  Board of Directors to employees or directors of the Company.  On
  August  4, 1995, the Board of Directors voted to grant the 450,000  stock
  options  to Mr. Reginald M. Fountain, Jr. at $4.67 per share, exercisable
  for  10  years  from the date granted, on a non-qualified basis.   As  of
  June 30, 2001, none of these options have been exercised.

  Effective March 23, 1995, the Board of Directors authorized the  issuance
  of  30,000  stock options to each of the Company's four outside directors
  at  $3.58  per share on a non-qualified basis, exercisable for 10  years.
  Through  June  30,  2001, 84,000 of the options had  been  exercised  and
  36,000 options remain outstanding.


-30-
<PAGE>



            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6.  Common Stock, Stock Options, and Treasury Stock. [Continued]

  A  summary of the status of the options granted under the Company's stock
  option  plans and other agreements at June 30, 2001, 2000 and  1999,  and
  changes during the periods then ended is presented in the table below:


                      2001                2000               1999
               __________________  __________________  ____________________
                         Weighted            Weighted            Weighted
                          Average             Average             Average
                         Exercise            Exercise            Exercise
                Shares    Price     Shares     Price    Shares     Price
               ________  ________  ________  ________  ________  __________
Outstanding at
  beginning of
  period        526,000  $   4.61   546,000  $   4.57   546,000  $   4.50
Granted          35,000      1.34    10,000      4.59    30,000      5.00
Exercised             -         -         -         -   (30,000)     3.58
Forfeited       (10,000)     4.59         -         -         -         -
Canceled              -         -   (30,000)     3.94         -         -
               ________  ________  ________  ________  ________  __________
Outstanding at
  end of period 551,000  $   4.40   526,000  $   4.61   546,000  $   4.57
               ________  ________  ________  ________  ________  __________
Exercisable at
  end of period 516,000  $   4.61   521,000  $   4.61   522,000  $   4.55
               ________  ________  ________  ________  ________  __________
Weighted
  average fair
  value of
  options
  granted        35,000  $    .10    10,000  $    .28    30,000  $    .14
               ________  ________  ________  ________  ________  __________

  The  fair  value of each option granted is estimated on the date  granted
  using the Black-Scholes option pricing model with the following weighted-
  average assumptions used for grants during the year ended June 30,  2001,
  2000,  and  1999;  risk-free interest rates  of  5.3%,  6.7%,  and  4.5%,
  respectively, expected dividend yields of zero for all periods,  expected
  lives  of  7.5, 5, and 5 years, respectively, and expected volatility  of
  132%, 128%, and 60%, respectively.

  A  summary  of the status of the options outstanding under the  Company's
  stock  option  plans and other agreements at June 30, 2001  is  presented
  below:

                      Options Outstanding             Options Exercisable
           _______________________________________ ________________________
                       Weighted Average  Weighted                Weighted
  Range of                Remaining       Average                 Average
  Exercise     Number    Contractual     Exercise    Number      Exercise
   Prices   Outstanding     Life          Price    Exercisable     Price
  ________ _________ ________________ ____________ ___________ ____________
    $1.34     35,000     7 years            1.34            -          -
    $3.58     36,000     4 years            3.58       36,000       3.58
    $4.67    450,000     4 years            4.67      450,000       4.67
    $5.00     30,000     2.5 years          5.00       30,000       5.00




-31-
<PAGE>


            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6.  Common Stock, Stock Options, and Treasury Stock. [Continued]

  The  Company  accounts for its option plans and other  option  agreements
  under  Accounting Principles Board Opinion No. 25, "Accounting for  Stock
  Issued  to  Employees", and related interpretations.  Accordingly,  since
  all options granted were granted with exercise prices at market value  or
  above,  no  compensation  cost has been recognized  in  the  accompanying
  financial  statements.   Had compensation cost  for  these  options  been
  determined  based on the fair value at the grant dates for  awards  under
  these  plans  and  other  option agreements consistent  with  the  method
  prescribed  by  Statement  of  Financial Accounting  Standards  No.  123,
  "Accounting for Stock-Based Compensation", the Company's net  income  and
  earnings  per  common  share would have been the  pro  forma  amounts  as
  indicated below:

                                               Year Ended June 30,
                                        _________________________________
                                           2001       2000       1999
                                        __________ __________ ___________

     Net Income (loss)   As reported    $(899,526) $1,258,342 $(1,225,791)
                         Pro forma      $(900,426) $1,261,147 $(1,256,233)
     Earnings (loss)
     per share           As reported    $    (.19) $      .27 $      (.27)
                         Pro forma      $    (.19) $      .27 $      (.27)

  Treasury  Stock:  The Company holds 15,000 shares of  its  common  stock.
  This  common  stock is accounted for as treasury stock at its acquisition
  cost  of  $110,748  ($7.38  per  share)  in  the  accompanying  financial
  statements.


Note 7.  Income Taxes.

  The  Company  accounts for income taxes in accordance with  Statement  of
  Financial  Accounting Standards (SFAS) No. 109.  SFAS  109  requires  the
  Company  to  provide a net deferred tax asset or liability equal  to  the
  expected   future   tax   benefit  or  expense  of  temporary   reporting
  differences  between book and tax accounting and any available  operating
  loss or tax credit carryforwards.

  At  June  30,  2001 and 2000, the totals of all deferred tax assets  were
  $1,469,937 and $1,481,666, respectively.  The totals of all deferred  tax
  liabilities  were $759,577 and $1,180,817, respectively.  The  amount  of
  and  ultimate  realization of the benefits from the deferred  tax  assets
  for  income  tax  purposes is dependent, in part, upon the  tax  laws  in
  effect,  the  Company's  future earnings, and other  future  events,  the
  effects of which cannot be determined.

  The  Company has an unused federal and state operating loss carryforwards
  at  June  30, 2001 of approximately $31,441 and $1,647,330, which expires
  in 2020.




-32-
<PAGE>


            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7. Income Taxes. [Continued]

  The  components of federal income tax expense from continuing  operations
  consist of the following:

                                        Year Ended June 30,
                                  _____________________________________
                                      2001        2000         1999
                                  ___________  __________  ____________
     Current income tax expense:
          Federal                 $ (108,590)  $       -   $         -
          State                            -           -             -
                                  ___________  __________  ____________
     Net current tax expense      $ (108,590)  $       -   $         -
                                  ___________  __________  ____________
     Deferred tax expense
      (benefit) resulted from:
          Excess of tax over
            financial accounting
            depreciation          $  (81,110)  $ 197,521   $  (129,720)
          Warranty reserves                -           -       (15,600)
          Accrued vacations           (2,184)     (8,652)       (2,317)
          Dealer incentive
            reserves                  (9,410)     46,534       (13,537)
          Bad debt reserves                -           -        12,491
          Accrued Dealer
            incentive interest        66,312     (34,000)      (99,190)
          Excess contributions
            carryforwards             (1,008)      1,059        (1,059)
          Inventory adjustment
            -Sec.263A                123,579      61,057       (13,170)
          Decrease in NOL
            carryforwards            (72,461)    453,148      (805,261)
          Allowance for obsolete
            inventory                      -     (11,700)            -
          Alternative minimum
            tax credits             (253,837)   (153,882)      102,592
          Investment tax credits     (86,294)    (81,545)            -
          Allowance for boat
            repurchases                    -           -        18,972
          Accrued executive
            compensation              39,777     (31,069)       (8,472)
          Accrued dealer
            incentives              (120,708)    (17,751)     (235,388)
          Health insurance
            reserve                  (12,168)    (50,310)            -
                                  ___________  __________  ____________
     Net deferred tax expense       (409,512)  $ 370,410   $(1,189,659)
                                  ___________  __________  ____________

  Deferred  income  tax  expense results primarily  from  the  reversal  of
  temporary timing differences between tax and financial statement income.

          The  reconciliation  of  income  tax  from  continuing operations
  computed  at  the  U.S.  federal   statutory  tax  rate to  the Company's
  effective  rate  is as follows:

                                           Year Ended June 30,
                                   ____________________________________
                                       2001        2000         1999
                                   ___________  __________  ___________
     Computed tax at the expected
       federal statutory rate          34.00%      34.00%       34.00%
     State income taxes, net of
       federal benefit                  5.00        5.00         5.00
     Compensation from stock options       -           -          .87
     (Increase) decrease in NOL
       carryforwards                   (1.45)       3.78            -
     Officer's life insurance            .11        1.03         (.38)
     Net effect of alternative
       minimum taxes                       -           -        (4.23)
     Other                             (1.11)       1.04        13.84
                                   ___________  __________  ___________
     Effective income tax rates        36.55%      44.85%       49.10%
                                   ___________  __________  ___________

-33-
<PAGE>


            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7. Income Taxes. [Continued]

     The  temporary  differences gave rise to the  following  deferred  tax
  asset (liability):

                                                    June 30,
                                           __________________________
                                                2001       2000
                                           ____________  ____________
     Excess of tax over financial
          accounting depreciation           $(1,183,152) $(1,264,261)
     Warranty reserve                           230,100      230,100
     Obsolete inventory reserve                  58,500       58,500
     Accrued vacations                           65,067       62,883
     Allowance for boat repurchases              78,000       78,000
     Dealer incentive reserves                  328,575      319,165
     Bad debt reserve                            10,858       10,858
     Accrued Dealer incentive interest           66,878      133,190
     Inventory adjustments - Sec. 253A           85,468      209,047
     State NOL carryforwards                     82,366       20,596
     Federal NOL carryforwards                   10,690            -
     Alternative minimum tax credits            337,281       83,444
     Accrued executive compensation              16,102       55,879
     Donations carryforwards                      1,008            -
     Accrued dealer service incentives          373,846      253,138
     Health insurance reserve                    62,478       50,310
     Investment tax credits                      86,294            -

Note 8. Research and Development.

  The  Company  expenses  the costs of research  and  development  for  new
  products  and  components  as  the  costs  are  incurred.   Research  and
  development  costs  are  included in the cost of sales  and  amounted  to
  $813,710  for  Fiscal  2001, $926,486 for Fiscal 2000, and  $876,965  for
  Fiscal 1999.

Note 9. Commitments and Contingencies.

  Employment  Agreement:  The Company entered into  a  one-year  employment
  agreement in 1989 with its Chairman, Mr. Reginald M. Fountain,  Jr.   The
  agreement  provides for automatic one-year renewals at the  end  of  each
  year  subject to Mr. Fountain's continued employment.  During  1998,  the
  Company  entered  into  a  three  year  employment  agreement  with   the
  Company's Chief Operating Officer and Executive Vice President.

  Dealer  Interest:  The  Company regularly  pays  a  portion  of  dealers'
  interest  charges  for floor plan financing for up to six  months.  These
  interest  charges  amounted to $953,600 for Fiscal 2001,  $1,164,561  for
  Fiscal  2000  and $1,353,848 for Fiscal 1999.  They are included  in  the
  accompanying  consolidated statements of operations as  part  of  selling
  expense.   At  June  30,  2000  and  1999  the  estimated  unpaid  dealer
  incentive  interest  included in accrued dealer  incentives  amounted  to
  $224,098 and $418,458, respectively.

  Product  Liability  and  Other Litigation:  There  were  various  product
  liability and warranty lawsuits brought against the Company at June   30,
  2001.   The  Company  intends  to  vigorously  defend  its  interests  in
  these   matters.  The  Company   carries   sufficient  product  liability
  insurance  to  cover attorney's fees and any losses, which may occur from
  these lawsuits  over and above the insurance deductibles.  The Company is
  also involved from time to time in  other  litigation through the  normal
  course  of  its   business.   Management   believes  there  are  no  such
  undisclosed claims, which would  have  a material effect on the financial
  position  of  the Company.



-34-
<PAGE>


            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

  Manufacturer  Repurchase Agreements: The Company makes available  through
  third-party  finance  companies floor plan  financing  for  many  of  its
  dealers.   Sales to participating dealers are approved by the  respective
  finance  companies.   If  a participating dealer  does  not  satisfy  its
  obligations under the floor plan financing agreement, in effect with  its
  commercial  lender(s)  and  boats  are subsequently  repossessed  by  the
  lender(s),  then under certain circumstances the Company may be  required
  to  repurchase  the  repossessed boats if it has  executed  a  repurchase
  agreement  with  the lender(s).  At June 30, 2001 and 2000,  the  Company
  had  a  contingent liability to repurchase boats in the event  of  dealer
  defaults  and  if  repossessed  by the commercial  lenders  amounting  to
  approximately $23,747,900 and $23,673,000.  The Company has reserved  for
  the future losses it might incur upon the repossession and repurchase  of
  boats  from commercial lenders.  The amount of the reserve is based  upon
  probable  future events, which can be reasonably estimated. At  June  30,
  2001 and 2000, the allowance for boat repurchases was $200,000.

  401  (k)  Payroll Savings Plan: During Fiscal 1991, the Company initiated
  a  401  (k)  Payroll Savings Plan (the 401 (k) Plan) for  all  employees.
  Eligible  employees  may elect to defer up to fifteen  percent  of  their
  salaries.  The amounts deferred by the employees are fully vested at  all
  times.   The  Company currently matches fifty percent of  the  employee's
  deferred  salary  amounts limited to a maximum of six  percent  of  their
  salaried  amounts,  or  a  maximum of three percent  of  their  salaries.
  Amounts  contributed by the Company vest at a rate of twenty percent  per
  year   of  service.   Mr.  Fountain,  by  his  own  election,  does   not
  participate  in the 401 (k) Plan.  There are no post-retirement  benefits
  plans in effect.

  Environmental:  The  Company  has been  notified  by  the  United  States
  Environmental  Protection  Agency  (the  EPA)  and  the  North   Carolina
  Department  of  Environment, Health and Natural Resources (NCDEHNR)  that
  it  has  been identified as a potentially responsible party (a  PRP)  and
  may  incur, or may have incurred, liability for the remediation of ground
  water  contamination at the Spectron/Galaxy Waste Disposal  Site  located
  in  Elkton,  Maryland  and the Seaboard Disposal Site,  located  in  High
  Point,  North Carolina, also referred to as the Jamestown, North Carolina
  site,  resulting from the disposal of hazardous substances at those sites
  by  a  third  party  contractor of the Company.   The  Company  has  been
  informed  that  the EPA and NCDEHNR ultimately may identify  a  total  of
  between  1,000 and 2,000, or more, PRP's with respect to each site.   The
  amounts  of  hazardous substances generated by the  Company,  which  were
  disposed of at both sites, are believed to be minimal in relation to  the
  total  amount  of hazardous substances disposed of by all  PRP's  at  the
  sites.   At  present, the environmental conditions at the sites,  to  the
  Company's  knowledge,  have  not been fully determined  by  the  EPA  and
  NCDEHNR, respectively, and the Company is not able to determine  at  this
  time  the  amount  of any potential liability it may have  in  connection
  with   remediation  at  either  site.   Without  any  acknowledgment   or
  admission  of  liability,  the  Company  has  made  payments  as  a  non-
  performing  cash-out  participant  in  an  EPA-supervised  response   and
  removal  program  at  the  Elkton,  Maryland  site,  and  in  a  NCDEHNR-
  supervised  removal and preliminary assessment program at the  Jamestown,
  North  Carolina  site.  A cash-out proposal for the  next  phase  of  the
  project  is expected to be forthcoming from the PRP Group for the Elkton,
  Maryland  site.  According to the PRP Group, the Company's full  cash-out
  amount  is estimated to be approximately $5,800 for the Elkton,  Maryland
  site, based upon an estimated 3,304 gallons of waste disposed of at  that
  site  by  the Company.  A cash-out proposal in the approximate amount  of
  $20,000  based  on  an estimated 19,245 gallons of waste  is  anticipated
  from  the PRP Group for the Jamestown, North Carolina site, according  to
  the  PRP  Group  administrator.   Any such  cash-out  agreement  will  be
  subject  to  approval by EPA and NCDEHNR, respectively.  The Company  has
  accrued  the  estimated  liability  related  to  these  matters  in   the
  accompanying financial statements.



-35-
<PAGE>


            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 10.  Export Sales.

  The  Company  had export sales of $2,889,828 for Fiscal 2001,  $1,755,412
  for  Fiscal  2000 and $3,717,373 for Fiscal 1999.  Export sales  were  to
  customers in the following geographic areas:

                                       Year Ended June 30,
                              __________________________________
                                 2001        2000        1999
                              __________  __________  __________
     Canada, Central and
       South America          $2,509,638  $1,485,615  $2,495,048
     Asia                              -           -           -
     Middle East, and Europe.    380,190     269,797   1,222,325
                              __________  __________  __________
                              $2,889,828  $1,755,412  $3,717,373
                              __________  __________  __________
Note 11.  Transactions with Related Parties.

  The  Company paid or accrued the following amounts for services  rendered
  or  for  interest on indebtedness to Mr. Reginald M. Fountain,  Jr.,  the
  Company's  Chairman,  President,  and  Chief  Executive  Officer,  or  to
  entities owned or controlled by him:
                                        Year Ended June 30,
                              __________________________________
                                 2001        2000        1999
                              __________  __________  __________
     Apartment rentals        $   22,734  $    9,880  $   19,731
     R.M. Fountain, Jr.
      - interest on loans              -           -      20,447
                              __________  __________  __________
                              $   22,734  $    9,880  $   40,178
                              __________  __________  __________

  As  of  June  30, 2001 and 2000 the Company had receivables and  advances
  from   employees  of  the  Company  amounting  to  $5,085   and   $9,001,
  respectively  which  includes  $500 and  $1,000,  respectively  from  Mr.
  Fountain.

  The  Company  paid $199,442, $345,049, and $478,576 for  the  year  ended
  June  30,  2001,  2000  and  1999 for advertising  and  public  relations
  services from an entity owned by a director of the Company.

  A  Director  of  the  Company  is  an owner of a marine dealership, which
  accounted for 10.5% of the Company's  sales  in  Fiscal 2001.

Note 12.  Concentration of Credit Risk.

  Concentration of credit risk arises due to the Company operating  in  the
  marine  industry, particularly in the United States. For Fiscal 2001  one
  dealer  accounted for 11.5% of sales, one dealer accounted for  10.5%  of
  sales,   and  four  other  dealers  accounted  for  4  to  6%  of   sales
  individually.  For Fiscal 2000 one dealer accounted for 7.4% of sales,  a
  dealer  accounted for 6.1% of sales, and a dealer accounted for  5.7%  of
  sales.   For Fiscal 1999, one dealer accounted for 6.8% of sales and  two
  dealers each accounted for 6.7% of sales.



-36-
<PAGE>


            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 13.  Gain on Insurance Claims from Hurricanes.

  During   September  1999,  the  Company  experienced  flooding  and   the
  temporary  closure of the production facility as a result  of  Hurricanes
  "Dennis" and "Floyd" hitting Eastern North Carolina.  As a result of  the
  hurricanes,  the Company sustained damages of $277,172 to  inventory  and
  $389,063  to  property, plant and equipment, which includes  $300,000  in
  damages  to the Company's yacht mold and $51,658 in additional  expenses.
  The  Company filed a business interruption claim for damages due to  loss
  revenues  from  the closure of the production facility and inefficiencies
  due  to  storm  preparation, cleanup and work  force  shortages.   During
  2000,  the  insurance  carriers  paid  $1,058,618  for  damages  to   the
  inventory,  property plant, and equipment including the  Yacht  Mold  and
  other  expenses,  and  $725,000 towards the business interruption  claim.
  During  October  2000, the Company received an additional  $1,350,000  as
  final  and  full  payment of business interruption  claims.   During  the
  years  ended  June  30,  2001 and 2000 the Company  recorded  a  gain  on
  insurance  claims  from  the  hurricanes of  $1,107,819  and  $1,065,725,
  respectively.

Note 14. - Earnings Per Share.

  The  following data show the amounts used in computing earnings per share
  and  the  effect on income and the weighted average number of  shares  of
  potential  dilutive  common  stock  for  the years ended June  30,  2001,
  2000 and 1999:
                                   2001       2000       1999
                              ___________  ___________  ____________
  Income (loss) from
    continuing operations
    available to
    common stockholders       $  (899,526) $   468,301  $(1,255,791)
                              ___________  ___________  ____________
  Gain on Settlement of
    a lawsuit                 $         -  $   790,041  $         -
                              ___________  ___________  ____________
  Weighted average number
    of common shares
    outstanding used in
    basic earnings
    (loss) per share            4,732,608    4,732,608    4,711,896

  Effect of dilutive
    stock options                       -           43            -

  Weighted number of common
    shares and potential
    dilutive common shares
    outstanding used in
    dilutive earnings
    (loss) re                   4,732,608    4,732,651    4,711,896
                              ___________  ___________  ___________

  The  Company had at June 30, 2001 options to purchase 516,000  shares  of
  common  stock at prices ranging from $3.58 to $5.00 per share  that  were
  not  included  in  the  computation of earning per  share  because  their
  effect was anti-dilutive.

Note 15.  Strategic Charge.

  During   December   1998,  The  Company  designed   and   implemented   a
  restructuring plan to aggressively improve the Company's Cost  Structure,
  refocus  sales  and  marketing expenditures and  divest  the  Company  of
  certain  non-realizable  assets.  In connection  with  the  restructuring
  plan  the  Company  reviewed  components of  its  business  for  possible
  improvement   of   future   profitability   through   reengineering    or
  restructuring.  The Company decided in the plan to eliminate  its  racing
  program,  to  write-off  excess  yacht tooling  costs  along  with  other
  discontinued unused tooling.  The Company completed these actions  during
  the  third and fourth quarters of Fiscal 1999.  The carrying value of the
  assets  held  was reduced to their estimated realizable fair value  based
  on  future  cash  flows from use of the assets or  sale  of  the  related
  assets.  The  resulting  adjustment  of  $2,440,000  was  recorded  as  a
  strategic charge in the statement of operations of the Company.




-37-
<PAGE>


            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 16. Extraordinary Item / Gain on Settlement of Lawsuit

  During  April  2000,  the  Company recognized an  extraordinary  gain  of
  $1,313,224  from  the  settlement  of a  class  action  lawsuit  alleging
  antitrust  violations  against a vender of the  Company  who  is  in  the
  sterndrive and inboard engine business.

Note 17. Subsequent Events

  The  Company  is  in  the final phases of refinancing debt  with  General
  Electric   Capital   Corporations  ("GECC")  which  was   scheduled   for
  completion  on September 24, 2001.  Due to certain key individuals  being
  called  to  Washington D.C. as a result of the recent terrorist  attacks,
  the  closing  may  be  delayed  up to 30  days.   Under  the  refinancing
  agreement,  the  Company will be issued notes payable for $7,000,000  and
  $3,000,000 in payment of amounts outstanding under the current  financing
  agreement and to provide additional working capital. The notes will  have
  a  variable interest rate of prime + 2%, 8% at September 24,  2001.   The
  $7,000,000  note will call for monthly payments of approximately  $85,000
  and  will  have a ten-year amortization with a five-year balloon payment.
  The  $3,000,000  note  will  call for monthly payments  of  approximately
  $45,000  and will have a seven-year amortization with a five-year balloon
  payment.  These  notes will be secured by all of the Company's  real  and
  personal  property, an assignment of a $1,000,000 key man life  insurance
  policy  and  the  personal guarantee of the Company President  with  real
  estate valued at approximately $1,500,000.

Note 18. Going Concern

  Due  to  the  Company  incurring losses in the current  year  and  having
  current  liabilities in excess of current assets at  June  30,  2001,  it
  raised substantial doubt about the ability of the Company to continue  as
  a  going  concern,  the effects of which cannot be determined.   However,
  management has alleviated this doubt as they are in the final  phases  of
  refinancing  existing debt and raising an additional $3,400,000  in  long
  term  debt  financing.   In  addition,  management  is  accelerating  the
  introduction  of new product to increase current sales and has  put  into
  place  plans  and actions that reduce expenses through direct  labor  and
  overhead  cost  cuts, as well as implementing significant  reductions  to
  selling and general and administrative expenses.


-38-
<PAGE>



Item  9.   Changes in and Disagreements with Accountants on Accounting  and
Financial Disclosure.

      There  were  no  changes  in or disagreements  with  the  independent
auditors on accounting and financial disclosure matters.

                                 Part III

Item 10.  Directors and Executive Officers of Registrant.

The  Current  directors  and  executive  officers  of  Registrant  and  its
Subsidiary as of June 30, 2001 were as follows:

REGINALD M. FOUNTAIN, JR., age 61, founded the Company's Subsidiary  during
1979  and  has served as its Chief Executive Officer from its organization.
He  became a director and President of the Company upon its acquisition  of
the  Subsidiary in August 1986.  Mr. Fountain presently serves as Chairman,
President  and  Chief Executive Officer of the Company and its  Subsidiary.
From 1971 to 1979, Mr. Fountain was a world class race boat driver, and was
the Unlimited Class World Champion in 1976 and 1978.

ANTHONY  J.  ROMERSA, age 56, Executive Vice President and Chief  Operating
Officer,  became a director of the Company on March 2, 1999.   Mr.  Romersa
joined  the  Company following a 28 year business career  in  a  number  of
senior  management positions with the Brunswick Corporation and its Mercury
Marine  Consumer  and  Vapor  Divisions.   As  the  corporate  director  of
Brunswick's Marine Operations Planning since 1986, he was actively involved
in  Brunswick's acquisition of Bayliner and Sea Ray and was responsible  to
the  Vice President of Corporate Planning and Development for the strategic
performance of global marine operations.

GEORGE  L.  DEICHMANN, III, age 57, is the President  and  owner  of  Trent
Olds/Cadillac/Buick/GMC,  an automobile dealership  located  in  New  Bern,
North Carolina.

CRAIG  F. GOESS, age 47, is the President and General Manager of Greenville
Toyota, an automobile dealership located in Greenville, North Carolina.

GUY  L.  HECKER, JR., age 68, is the President of Stafford, Burke & Hecker,
Inc.,  a  high technology consultant firm in Alexandria, Virginia.  General
Hecker  also  serves  as  a  director of 8 X  8,  Inc.,  a  public  company
headquartered in Santa Clara, CA, which develops, manufactures, and markets
telecommunications equipment.

ROBERT  L. HENKEL, age 55, is Partner and Chief Operating Officer,  Coastal
Plains  Restaurants,  LLC, an East Coast operation of Northwest  Restaurant
Group in Greenville, North Carolina.

MARK  SPENCER, age 45, became a director on February 26, 1992.  He  founded
Spencer   Communications  Inc.,  an  advertising  public   relations   firm
specializing  in  the  marine industry, in 1987.  Previously,  Mr.  Spencer
began  his  journalism career at Powerboat Magazine in 1976.  He was  named
Executive Editor of Powerboat Magazine in 1981 and served in that  capacity
until  1987.   During the last eight years Mr. Spencer has  served  as  on-
camera expert commentator for ESPN covering the boating industry.

DAVID A. SIMMONS, age 63, was appointed to serve as Chief Financial Officer
of  Registrant  during  September 2000.   He  previously  served  as  Chief
Financial  Officer  of Century Boat Company (boat manufacturer)  from  1993
through  1997,  and  as  Chief Financial Officer of  Loe's  Highport,  Inc.
(marina  and  retail  boat  sales) since 1998.  The  Registrant  previously
employed  Mr.  Simmons as Vice President and Chief Financial  Officer  from
1989 through 1991 and as Controller from 1997 through 1998.  He has a total
of 20 years experience in the boating industry.


-39-
<PAGE>



DAVID L. WOODS, age 43, is  Chief Manager of Woods  & McCauley, LLC, d.b.a.
Pier 57, which  has been a  top dealer for  the Company since October 1997.
He has been successfully self-employed as an entrepreneur for over 20 years
in  various  companies  including  Woods  Sales,  DD&M  Properties  and D&E
Properties.


Item 11.  Executive Compensation.

     The  following table contains information regarding cash  and  certain
other compensation paid to or deferred by certain of Registrant's executive
officers for the fiscal years listed.  Registrant's executive officers also
serve  and  are compensated as officers and employees of Fountain,  and  no
additional compensation is paid to any officer for his or her service as an
officer of Registrant.


                      SUMMARY COMPENSATION TABLE

                         Annual compensation Long term compensation
                         ___________________ ____________________

                                  Other
Name and                          annual    Restricted Securities  All other
Principal Fiscal  Salary        Compensation  stock    underlying   Compen-
position   year    (1)   Bonus      (2)       awards   options (#)  sation
_________ _____ ________ ______ ____________ _________ __________  _________

Reginald
M.         2001 $351,500   -0-  $    -0-     $   -0-       -0-     $   -0-
Fountain
President
and Chief  2000  361,330 81,438      -0-         -0-       -0-         -0-
Executive
Officer    1999  350,000   -0-       -0-         -0-       -0-         -0-


Anthony J. 2001  169,556   -0-       -0-         -0-       -0-      6,849 (3)
Romersa
Executive
Vice       2000  184,347 16,288      -0-         -0-       -0-      5,771 (3)
President
and Chief
Operating  1999  131,731   -0-       -0-         -0-       -0-      1,477 (3)
Officer


(1)  Includes  amounts deferred at the election of Mr. Romersa pursuant  to
     Fountain's Section 401(k) plan.  Mr. Fountain does not participate  in
     that plan.
(2)  In  addition  to  compensation  paid  in  cash,  Fountain's  executive
     officers  receive  certain  personal  benefits.   The  value  of  such
     benefits  received by each executive officer each year did not  exceed
     10% of his cash compensation for that year.
(3)  Consists  of Fountain's contributions to the Section 401(k)  plan  for
     Mr. Romersa's account.



Employment  Contracts  and Termination of Employment and  Change-in-Control
Arrangements.

     Mr.  Fountain  is employed as an officer of Fountain  pursuant  to  an
employment  agreement entered into during 1989 which provides  for  a  base
term  of one year and for automatic renewal at the end of each year for  an
additional one-year period until terminated as provided therein.   Pursuant
to  the  agreement, Mr. Fountain receives base salary in an amount approved
by  the  Board  of Directors (but not less than $104,000), an  annual  cash
bonus  in  an  amount equal to 5% of Registrant's consolidated  net  income
(calculated  after  deductions of profit sharing contributions  and  before
deductions for income taxes, but not more than $250,000), and certain other
benefits.

-40-
<PAGE>



     Mr.  Romersa  is  employed as an officer of Fountain  pursuant  to  an
employment  agreement entered into during 1998, which provides for  a  term
ending  August  23, 2001.  Pursuant to the agreement, Mr. Romersa  receives
base  salary in an amount approved by the Board of Directors (but not  less
than  $160,000), an annual cash bonus equal to 1% of Fountain's net profits
before  taxes  and before the deduction of bonuses paid to other  officers,
and  certain other benefits.  In the event (i) Mr. Romersa's employment  is
terminated within 24 months following a "change in control" (as defined  in
the  agreement)  of  Registrant or Fountain (other than a  termination  for
"Cause," retirement, death or disability), or (ii) following any Change  in
Control, and without his consent, Mr. Romersa's job location is transferred
an  unreasonable  distance from Washington, NC, he is not  paid  salary  or
bonus at the rates described in the agreement, other employee benefits  are
reduced  or  eliminated in a manner that does not apply proportionately  to
all  salaried  employees, or he is assigned duties  inconsistent  with  his
position,  duties or status at the time of the Change in Control,  then  he
will be entitled to receive (or, in the case of (ii), he may terminate  his
own  employment and be entitled to receive) from Fountain all  compensation
he  would have been entitled to receive under the agreement and which  then
remains  unpaid (not to exceed the amount of his then current  base  salary
for  two  years).  The agreement may be terminated by Fountain for  "Cause"
(as defined in the agreement).


Employee Stock Options.

      The  following  table contains information regarding all  options  to
purchase  shares  of Registrant's common stock held at June  30,  2001,  by
Registrant's  executive  officers named in the Summary  Compensation  Table
above:

 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES

                               Number of securities     Value of unexercised
          Shares              Underlying unexercised    in-the-money options
         Acquired               Options at FY-end             at FY-end
            On      Value
Name     exercise  Realized Exercisable Unexercisable Exercisable Unexercisable
-------------------------------------------------------------------------------
Reginald
M.
Fountain,
Jr.         (1)       (1)   450,000 (2)       -0-         (4)          -0-

Anthony
J. Romersa  (1)       (1)    30,000 (3)       -0-         (4)          (4)

(1)  No options were exercised during Fiscal 2001.
(2)  Includes options to purchase 450,000 shares at a price of  $4.67  per
     share which expire on August 4, 2005.
(3)  Includes options to purchase an aggregate of 30,000 shares at a price
     of  $5.00  per  share  which become exercisable as  to  5,000  shares
     each calendar quarter-end, beginning June 30, 1999, and, which expire
     on January 11,  2004.   At  June  30,  2001, the  options  had become
     completely exercisable with regard to the 30,000 shares.
(4)  The  options had no value on June 30, 2001, since, on that date,  the
     aggregate exercise price of the options exceeded the aggregate market
     value of  the  underlying  shares  (based on the  $2.00  closing sale
     price  of Registrant's common stock on that date).


Director Compensation.

      Registrant's  directors currently do not receive any  fees  or  other
compensation  for  their services as directors, but may be  reimbursed  for
travel  and other out-of-pocket expenses incurred in connection with  their
attendance at meetings of the Board of Directors.





-41-
<PAGE>



Item 12.  Security Ownership of Certain Beneficial Owners and Management.

      Principal  Shareholders.   The following  table  reflects,  based  on
information  currently available to the Company as of September  14,  2001,
the beneficial ownership of Registrant's common stock by shareholders known
to Registrant to beneficially own more than 5% of it's common stock.

Name and address              Amount and nature of         Percent of
of beneficial owner           Beneficial Ownership          Class (1)
-------------------           --------------------         ----------
Reginald M. Fountain, Jr.
P.O. Drawer 457
Washington, N.C. 27889             2,695,272 (2)             52.16%

Triglova Finanz, A.G.
Edificio Torre Swiss Bank
Piso 16, Apartado Postal 1824
Panama 1, Republica de Panama        266,500 (3)              5.65%

(1)  Percentages  are  calculated  based  on  4,732,608  total  outstanding
     shares, minus 15,000 shares held by the Subsidiary, plus, in the  case
     of  Mr.  Fountain,  the  number of additional  shares  that  he  could
     purchase upon the exercise of stock options.
(2)  Includes 450,000 shares which could be purchased by Mr. Fountain  from
     the  Company upon the exercise of stock options and as to which shares
     he may be deemed to have sole investment power only.
(3)  Based  on  information contained in filings with  the  Securities  and
     Exchange Commission.

Management Ownership.

     The  following table reflects as of September 14, 2001, the beneficial
ownership of Registrant's common stock by its current directors and certain
executive  officers,  individually,  and  by  all  current  directors   and
executive officers of the Company as a group:

Name of                         Amount and  nature of      Percent of
Beneficial Owner                Beneficial Ownership(1)      Class (2)
-------------------             -----------------------     ----------
Reginald M. Fountain, Jr.             2,695,272 (3)           52.16%

George L. Deichmann, III                 23,100                 *

Craig F. Goess                            -0-                   --

Guy L. Hecker, Jr.                        -0-                   --

Robert L. Henkel                          -0-                   --

Anthony J. Romersa                       35,000 (4)             *

Mark L. Spencer                          33,525 (5)             *

David L. Woods                           52,500 (6)             *

All current directors and executive
officers as a group (9  persons)      2,839,397 (7)          54.06%


-42-
<PAGE>



(1)  Except  as  otherwise noted below, the named individuals  and  persons
     included  in the group exercise sole voting and investment power  with
     respect to all shares.
(2)  Percentages  are  calculated  based  on  4,732,608  total  outstanding
     shares, minus 15,000 shares held by the Subsidiary, plus, in the  case
     of  each individual and the group, the number of additional shares (if
     any) that could be purchased by that individual or by persons included
     in  the group from the Company upon the exercise of stock options.  An
     asterisk indicates less than 1.0%.
(3)  Includes 450,000 shares which could be purchased by Mr. Fountain  from
     the Company upon the exercise of stock options and with respect to which
     shares he may be deemed to have sole investment power only.
(4)  Includes  30,000 shares which could be purchased by Mr.  Romersa  from
     the Company upon the exercise of stock options and with respect to which
     shares he may be deemed to have sole investment power only.
(5)  Includes  30,000 shares which could be purchased by Mr.  Spencer  from
     the Company upon the exercise of stock options and with respect to which
     shares he may be deemed to have sole investment power only.
(6)  Includes 25,000 shares which could be purchased by Mr. Woods from  the
     Company upon the exercise of stock options and with respect to which shares
     he may be deemed to have sole investment power only.
(7)  Includes  an  aggregate of 535,000 shares which could be purchased  by
     persons included in the group from the Company upon the exercise of stock
     options and as to which shares such persons may be deemed to have sole
     investment power only.


Item 13.  Certain Relationships and Related-Party Transactions.

      The  following  is  a schedule of amounts paid by the  Company  under
related party transactions for Fiscal 2001.  The Company has paid, at  what
it  believes  to be fair market value, amounts to the President  and  Chief
Executive Officer as follows:

                                         Fiscal
                                          2001
                                        --------
     Apartment rentals                  $ 22,734
     Advertising & public relations     $199,442


      The  apartment rentals paid to Eastbrook Apartments and Village Green
Apartments  are  primarily  for the relocating  and  temporary  lodging  of
Company  personnel  and  visitors.  The advertising  and  public  relations
services are rendered by an entity owned by a director of the Company.

     A  Director of the Company is an owner of a  marine  dealership, which
accounted for 10.5% of the Company's sales  in Fiscal 2001.




-43-
<PAGE>



                                  Part IV


Item  14.  Exhibits, Financial Statement Schedules, and Reports on  Form  8
and Form 8-K.

(a)  Documents filed with Report:

     (1)Financial   Statements.    The  following  consolidated   financial
     statements of Registrant are contained in Item 8 of this Report.

     Independent auditor's report

     Consolidated balance sheets at June 30, 2001 and 2000

     Consolidated  statements of operations for the years ended  June  30,
     2001, 2000 and 1999

     Consolidated  statements of stockholder's equity for the  years  ended
     June 30, 2001, 2000 and 1999

     Consolidated  statements of cash flows for the years ended  June  30,
     2001, 2000 and 1999

     Notes to consolidated financial statements

     (2)Financial Statement Schedules.

     Not applicable.

     (3)Exhibits.  The following exhibits are filed herewith or
     incorporated herein by reference as part of this Report.





-44-
<PAGE>


                               EXHIBIT INDEX

   Exhibit
    Number                           Description of Exhibit
   ________________________________________________________________________
      3.1      Registrant's Articles of  Incorporation, as amended   (filed
               herewith)

      3.2      Registrant's Bylaws, as amended (filed herewith)

      4.1      Form of stock certificate  (incorporated herein by reference
               to  exhibits to Registrant's  Annual Report on Form 10-K for
               the fiscal year ended October 1, 1989)

     10.1*     Employment Agreement dated  March 31, 1989, between Reginald
               M. Fountain, Jr. and Fountain Powerboats, Inc. (incorporated
               herein by  reference  from  Exhibits to  Registrant's Annual
               Report  on  Form  10-K for  the fiscal year ended October 1,
               1989)

     10.2*     Employment Agreement dated August 24, 1998, between Fountain
               Powerboats, Inc. and Anthony J. Romersa (incorporated herein
               by reference from exhibits to  Registrant's Annual Report on
               Form 10-K for the fiscal year ended June 30, 1999)

     10.3*     Stock   Option  Agreement  dated  August  4,  1995,  between
               Registrant and Reginald M. Fountain, Jr. (filed herewith)

     10.4*     1999  Employee  Stock Option  Plan  (incorporated  herein by
               reference to exhibits to Registrant's Annual  Report on Form
               10-K  for  the fiscal year ended June 30, 1999)

     10.5*     Stock  Option  Agreement  dated  January  12, 1999,  between
               Registrant and  Anthony  J.  Romersa (incorporated herein by
               reference  from Exhibits  to  Registrant's Annual Report  on
               Form  10-K  for  the fiscal year ended June 30, 1999)

     10.6*     Stock  Option  Agreement  dated  March  17,  1995,  between
               Registrant and Mark L. Spencer (filed herewith)

     27        Financial data schedule
______________________________
*     Denotes  a  management  compensation plan  or  compensatory  plan  or
arrangement.




(b)  Reports on Form 8-K.  During the last quarter of the period covered by
     this Report, no Current Reports on Form 8-K were filed by Registrant.



-45-
<PAGE>


     Signatures

     Pursuant to the requirements of Section 13 or 15 (d) 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.

FOUNTAIN POWERBOAT INDUSTRIES, INC.

By:  Reginald M. Fountain, Jr.
     ___________________________________________       September 21, 2001
     Chairman, President, and Chief Executive Officer


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



/S/ Reginald M. Fountain, Jr.                          September 21, 2001
Reginald M. Fountain, Jr.
Chairman, President, and Chief Executive Officer
(Principal Executive Officer)



/S/ Anthony J. Romersa                                 September 21, 2001
-----------------------
Anthony J. Romersa
Executive Vice President, and
Chief Operating Officer



/S/ George L. Deichmann, III                           September 21, 2001
----------------------------
George L. Deichmann, III
Director



/S/ Craig F. Geoss                                     September 21, 2001
------------------
Craig F. Geoss
Director



/S/ Guy L. Hecker, Jr.                                 September 21, 2001
----------------------
Guy L. Hecker, Jr.
Director



/S/ Robert L. Henkel                                   September 21, 2001
--------------------
Robert L. Henkel
Director



-46-
<PAGE>




/S/ Mark L. Spencer                                    September 21, 2001
-------------------
Mark L. Spencer
Director



/S/ David L. Woods                                     September 21, 2001
------------------
David L. Woods
Director



/S/ David A. Simmons                                   September 21, 2001
--------------------
David A. Simmons
Chief Financial Officer
(Principal Accounting and Financial Officer)



-47-
<PAGE>