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, 1999

     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.  [  X   ] Yes        [      ] No

      The aggregate market value of the voting stock held by non-affiliates of
the registrant was $ 9,496,906 at September 9, 1999 based upon a closing price
of $3.625 per share on such date for the Company's Common Stock.

      As  of  September 9, 1999 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.

                                     1
<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  yachts 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 and to  a
lesser degree on the product's price or other economic considerations.

Products.

     Each of the Company's recreational products is based upon a deep V-shaped
fiberglass  hull  with  a  V-shaped pad and a notched  transom.   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,  best-handling, and safest boats of their kind.  In Fiscal 1994,  the
Company  developed a new, high performance hull design for its  boats.   These
new  "positive-lift" designs increase speed significantly and  give  a  softer
ride  by  incorporating radically different keel lines with steps in the  hull
bottoms.   Handling and fuel economy are also substantially improved with  the
new designs.

       The   Company's  sport  boats,  ranging  from  27'  to   51'   are   of
inboard/outboard or surface drive design.  They are propelled by single, twin,
or triple gasoline (or diesel) engines ranging from 310 HP to more than 900 HP
each.   Fountain  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 32'.  Furthermore, the Company builds 29', 32', 38' and 47' sport
cruisers.   During the first half of Fiscal 1999, the company  introduced  the
first  of  the new Super Cruiser Line, a 65 foot long by 16' wide  high  speed
cruising  yacht.   This  is  the first of a family of  Super  Cruisers  to  be
introduced during the next several years.

      In  addition to the Sportboats, Fishing boats and Supercruising  Yachts,
Fountain  is producing an ever increasing line of military/governmental  boats
of  various  configurations.   These  boats  are  based  on  the  racing  boat
technology  that's  incorporated into the large  sportboats;  along  with  new
models  including the new rigid inflatables (RIB) in 38' and 46' design  along
with additional new designs in process to meet specific governmental needs.

     The  47'  Sport Cruiser is the flagship of the Fountain fleet.  Its  hull
design  is  based  upon  that  of  the  Company's  47'  Super  boat  and   42'
manufacturer's Super-Vee boats which won 10 out of 10 races in a recent twelve
month  period.  The model features a walk-in cabin, enclosed head with shower,
complete galley with refrigerator and microwave among it's 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 502 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 $373,000 to $416,000.

                                       2
<PAGE>


      The  Company's  47' Lightning Sport Boat has been newly  redesigned  and
restyled and 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  $403,000  to
$750,000.   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".  Equipped with special racing engines, this model set a new
world speed record for V-hulled boats in February, 1996 at 131.941 mph.

     The 38' Sport Cruiser offers most of the amenities found on the 47' Sport
Cruiser.  This model has successfully incorporated the performance type  sport
boat's  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 $236,000 to $270,000.

      The  38'  Sport Boat operates at speeds of between 70 and 100 mph.   The
retail  price ranges from $220,000 to $263,000, 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".

      The 35' Lightning Sport Boat is being totally redesigned this year to go
with  a  higher freeboard, new 2-step design, new deck and interior.  It  will
operate at speeds between 70 and 100 mph.  The current 35' Lightning was named
by  Powerboat Magazine "Offshore Boat of the Year" for 1981 and 1995.  It  has
also  captured that magazine's title, "Outstanding Offshore Performance  Boat"
for  1980,1981,1982,1983,1984, and 1987.  This boat retails at prices  ranging
from  $178,000  to  $217,000, depending primarily upon  the  type  of  engines
selected.

      Fountain's  32' Fever Sport Boat was introduced during  Fiscal  1991  to
satisfy the market's demand for a mid-size twin engine sport boat between  the
single  engine 29' Fever and the 35' Lightning.  This model combines  many  of
the  advantages of both the 29' model the 35' model.  Depending primarily upon
the  customer's  choice of engines, the retail price  of  this  boat  is  from
$146,000 to $179,000.

      The 29' Fever is one of the most popular boats in our line.  It operates
at  speeds  of 55 to 75 mph and retails between $95,000 and $111,000 depending
on  engine  size.   It  has great balance and speed for a  single  engine  and
offshore sea conditions with superior safety and handling.

      Fountain's 27' Fever and 27' Fever II Sport Boats are also equipped with
single  engines.   These  boats represent the most affordable  access  tot  he
Fountain line of safe, smooth, high performance boats.  The 27' Fever  won  an
award  from Powerboat Magazine for "The Full Size Boat of the Year"  for  1991
and  1992.   It also captured that magazine's award for "Outstanding full-size
Workmanship"  for 1995.  Depending primarily upon the type of engine  selected
the retail price of this boat is from $79,000 to $100,000.

      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 eight years and has  won
more than 50% of the top ten positions over the same period.

      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, make a line which in management's view will  appeal  to
many experienced sport fishermen.

      To  further enhance its sport fishing boat 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, which incorporates  a  walk-in  cabin,
enclosed  head  with  shower, and a full galley.  With  twin  outboard  engine
power,  this model is produced either as a fishing boat for the serious angler
or as a purely recreational sport boat type cruiser.

                                    3
<PAGE>


      The  Company also produces both, a 25' and 29' walk around cabin fishing
boats  with  outboard engine power and a 32' walk around cabin  model  fishing
boat  with twin inboard power.  Inboard power has been introduced to  the  29'
walk-around cabin model as well.

      In Fiscal 1999, the Company introduced a redesigned 27' with a new deck,
glass  windshield, anchor locker and swim ladder.  A new 38'  Lightning  sport
boat  was  introduced  at mid-year, sporting a new glass windshield,  standard
bimini  top, new style engine vents along with other features standard in  the
42'  Lightning.  Another introduction for the year was the all new  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 beginning in  the  first
quarter of Fiscal year 2000.

     For  Fiscal 1998, the Company introduced an all-new 42' Lightning.   This
boat comes with the Company's new second-generation positive lift hull.     It
comes  with a new style deck with full wrap around windshield, canvas top  and
the  all-new  positive lift hull, which increases speed,  stability  and  ride
comfort.   This  model  set a new world speed record  for  V-hulled  boats  in
August, 1999 at 140.120 mph.

     Also  in  1998,  Fountain  launched  into  the  yacht  market  with   the
introduction of the all-new 65' Supercruiser.  This performance yacht is  much
faster  than  the  competition, while still providing all the  comforts  of  a
luxury  yacht through the use of Fountain's all new super ventilated  positive
lift  hull equipped with Fountain's all new Surface Drive System.  Performance
at wide-open throttle can exceed 60 mph.

     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
                          1999                1998                1997

   Sport boats             316                 324                 336

   Sport cruisers            1                   9                  14

   Yachts                    1                   -                   -

   Sport fishing boats     130                 116                 128
                         ------              ------              ------
   Total                   448                 449                 478
                         ======              ======              ======

      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  38  full-
time employees.  Amounts spent on design research and development and to build
new plugs and molds in recent years were:

                                       4
<PAGE>




                                Design               Construction
                              Research &             of New Plugs
                              Development              and Molds

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

     Fiscal 1998                575,918                2,010,634

     Fiscal 1997                635,652                1,684,274

     Fiscal 1996                234,425                  878,274


      For  Fiscal  2000, planned design research and development expenses  are
estimated  to  be  $ 800,000 and plug and mold construction  expenditures  are
estimated to be $ 1,500,000.  These expenditures will be primarily to complete
the  tooling for the all-new 35' sport boat plus tooling of the first  in  the
new mid-size cruiser line.

      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 500 sport and fishing boats and 12 yachts 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, Plexiglas, plastic, and  small
parts  (such  as gas 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 manufacturers  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,  where  practicable,  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 item 3. Legal Proceedings.)

                                    5
<PAGE>


     Recreational  powerboats must be certified by the  manufacturer  to  meet
U.S.  Coast  Guard specifications.  In addition, 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 affection  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 39 dealers throughout the  United
States.   The Company also has 5 international dealers.  Most of these dealers
are  not  exclusive  to  the Company and carry the boats  of  other  companies
including  some,  which 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.

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

                             Fiscal `99        Fiscal `98        Fiscal `97

   United   States          $49,711,114       $46,068,495       $48,346,485

   Canada, Mexico, Central
    and South America       $ 2,495,048       $ 2,639,523       $ 1,047,913

   Europe and
    the Middle East         $ 1,222,325       $ 1,834,524       $   752,801

   Asia                     $         -       $   109,495       $   367,126
                            -----------       -----------       -----------

   Total                    $53,428,487       $50,652,037       $50,514,325
                            ===========       ===========       ===========


     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 Fareast  and  the
Mideast.   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 1999 one dealer accounted for 6.83% of sales, one for 6.77% of
sales  and  one for 6.71% of sales.  For Fiscal 1998 one dealer accounted  for
6.7% of sales, one for 6.3% and one other dealer accounted for more than 5% of
sales.   For Fiscal 1997 one dealer accounted for 6.6% of sales and two  other
dealers  each accounted for more than 5% of sales.  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 yachts.  The Company is seeking
to  establish  separate sport boat and fishing boat dealers in most  marketing
areas  due to the specialization of each type of boat and the different  sales
programs required.

                                      6
<PAGE>

      Beginning in Fiscal 1999, sales to Government and Defense Agencies, both
domestic  and  foreign  are  headed up by a newly hired  Director  of  Defense
Operations, who is responsible for establishing contractual relationships with
key  Armed  Services and Congressional Leaders.  The Company  is  seeking  new
growth in this market.

      Although a sales order can be cancelled at any time, most boats are pre-
sold  to  a dealer before entering the production line.  The Company has  been
able  to  resell  any boat for which the order has been cancelled.   To  date,
cancellations  have not had any material effect on the Company.   The  Company
normally does not manufacture boats for 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, net of shipping charges, 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 1999 model  year
(which  commenced July 1, 1998), the Company had made arrangements to pay  all
interest  charged  to  dealers by certain floor plan lenders  for  up  to  six
months.   This and other incentives to the dealers have resulted in relatively
level  month  to  month  production and sales.  After  six  months,  the  free
interest program ends and interest cost reverts to the dealer at the rates set
by  the  lender.   The  dealers  will  make  curtailment  payments  (principal
payments)  in  the  boats as required by their particular commercial  lenders.
Similar sales promotion programs were in effect during Fiscal 1998, 1997,  and
1996.

      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 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  Item  7,
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 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 contribute to its sales volume.   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.  The Company
constructed two race boats during Fiscal 1997 and implemented a racing program
during  Fiscal 1998, of which a major engine manufacturer was a  sponsor.   In
Fiscal 1998, the company completed the structure of its racing program with  a
third  boat  and captured several world speed records through  the  summer  of
calendar 1998 with the 100th victory completed by Reggie Fountain in New  York
City  in  September.  During the second quarter of Fiscal  1999,  the  Company
announced  its withdrawal from active racing and proceeded to sell  its  owned
racing  boats.   Beginning with the 1999 racing season,  the  Company  stopped
racing its owned boats and changed its focus to a lower cost sponsorship basis
where the Company is only involved in participating on a limited cost basis as
sponsor for selective Fountain race boat owners.

                                    7
<PAGE>

        As  part of the marketing program for its line of sport fishing boats,
the  Company  sponsors  several outstanding sport fishermen  in  the  Southern
Kingfish  Association  Circuit.   This  competitive  circuit  sanctions   King
Mackerel  Tournaments  throughout  the Atlantic  and  Gulf  Coast  from  North
Carolina  to  Texas.   In  Fiscal  1991, the  Company's  boats  and  sponsored
fishermen  dominated  this circuit by winning 4  of  the  top  5  spots.   One
Fountain  fisherman, Clayton Kirby was named `Angler of the Year' and finished
in first place.  Since Fiscal 1992, the Fountain Fishing Team has continued to
dominate  the  S.K.A.  circuit winning no less than 5  of  the  top  10  spots
annually.  Fountain Fishermen have won the coveted `Angler of the Year'  title
5  of  the last 8 years.  Kirby's son, Brandon has won the coveted Jr.  Angler
title  4  of  the  last 5 years.  The S.K.A. Tournaments are held  weekly  and
attract from 100 - 1000 entrants with prize money in excess of $500,000.   The
Fountain  fishing  teams  winning record 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.

Sales Order Backlog.

      The  sales  order  backlog typically builds to approximately  200  boats
during  the August-October Dealer allocation period having an estimated  sales
value  of  $20,000,000.   All  of the backlog is generally  shipped  within  6
months.     During the last year, the Company's performance boats increased in
sales  value  to  a  greater degree than fishing boats,  which  increased  the
overall  average  unit boat price.  In addition, the sale  of  the  first  65'
SuperCruiser  contributed to a substantial per boat increase.   The  Company's
Fall  Dealer Allocation Program is designed to promote early replenishment  of
the  stock  in  Dealer inventories depleted throughout the  prime  spring  and
summer selling seasons.


Product Warranty.

       The  Company  warrants  its  boats  against  defects  in  material  and
workmanship  for  a  period of three years.  The engine manufacturer  warrants
engines included in the boats.  Warranty expenses of $856,694 or 1.6% of sales
were  incurred  in  Fiscal 1999 and were charged-off against  net  income.   A
reserve  for  warranty expenses estimated to be incurred in future  years  had
been  recorded and amounted to $590,000 at June 30, 1999.  For 1998,  warranty
costs were $531,062 or 1.0 percent of sales.  Warranty cost as a percentage of
sales  are  among  the  lowest in the marine industry thereby  reflecting  the
Company's superior construction of its boats.


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.


      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.

     The market for fishing boats is much larger than the one for sport boats,
but  there are many more fishing boat manufacturers than there are sport  boat
manufacturers.

     The Company believes that its current 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.

                                     8
<PAGE>



Employees.

      As  of  September 1, 1999 the Company had 370 employees, of whom  twelve
were  executive  and management personnel.  Twenty 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  $11,409,551
at June 30, 1999.

      The  operating facility contains buildings totaling 229,280 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 shop.

      Building 3       75,800            Lamination, upholstery, final
                                         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            Yacht manufacturing.
                    ----------
      Total           229,280
                    ==========

                                     9
<PAGE>


Over the last two years there has been heavy expenditures in property, plant
and equipment, which include additions to the plant, plus a travellift bay,
boat ramp and docking facilities along a 600-foot canal leading to the Pamlico
River.  In addition, approximately 200,000 square feet of concrete paving
surrounding the buildings and providing employee parking has been completed
this year.  The present site can accommodate an addition of up to 300,000
square feet of manufacturing space.


Item 3.  Legal Proceedings.

      The Company's subsidiary was notified by the United States Environmental
Protection  Agency ("EPA") and the North Carolina Department  of  Environment,
Health  and  Natural Resources ("NCDEHNR") that it has been  identified  as  a
potentially  responsible party ("PRP") and may incur, or  may  have  incurred,
liability  for  remediation  of  contamination at  the  Spectron/Galaxy  Waste
Disposal  Site  in Elkton, Maryland, and the Seaboard Disposal Site,  in  High
Point, North Carolina, also referred to as the Jamestown, North Carolina site,
respectively,  resulting from the disposal of hazardous  substances  at  those
sites  by  a  third  party  contractor  of  the  Company,  which  disposed  of
approximately  3,300  gallons of hazardous waste at the Spectron/Galaxy  waste
disposal    site,    according   to   PRP   Group    records.     The    Group
Administrator/Counsel for that site estimates that the Company's proportionate
share  of  the  total assessment and cleanup costs of $40-45 million  will  be
approximately  $10,000.  The EPA is expected to circulate a draft  De  Minimis
(i.e.,  small volume contributor) Settlement Agreement to all de minimis  PRPs
sometime  this  summer or fall.  The Group Administrator  indicated  that  the
likely "buy out" offer in the proposed settlement agreement is anticipated  to
be  approximately  $3  per  gallon.  Accordingly, the Company's  proportionate
share  is calculated to be $9,900.  If the Company accepts EPA's buyout  offer
and  a  Consent  Decree is entered in Court in a timely  manner,  this  matter
likely will be concluded for the Company and all other de minimis PRPs by  the
end  of  1999,  even though completion of site cleanup may take  several  more
years.  The Company's subsidiary also disposed of approximately 19,245 gallons
of  hazardous  waste  at the Seaboard disposal site, according  to  PRP  Group
records.   The total of estimated gallons for this site is approximately  14.3
million.   Accordingly, the Company's share is .132% of  the  total  estimated
assessment  and  cleanup cost of $23 million, or approximately  $30,000.   The
Group  Administrator confirmed that this is a revised estimate and that, under
the  worst case conditions, the Company's potential liability at this site  is
now expected to be no more than $30,000, and could be considerably less if the
Company's subsidiary is eligible for a De Minimis Settlement Agreement  likely
to be proposed by the EPA sometime next year.  A remedial investigation of the
site  and  a  feasibility study of cleanup options has been  completed,  which
proposes  natural  attenuation  as  the preferred  remediation  approach.   If
approved by the State and EPA, the Company's share could be as low as  $18,000
according  to the Group Administrator.  Completion of site cleanup could  take
several   years,  depending  on  the  cleanup  option  selected.   The   Group
Administrator  noted  that  the Company already has  paid  amounts  previously
assessed for its proportionate share of the costs.

      The  Company is involved in litigation in Texas and North Carolina  with
one  of  its  dealers in Austin, Texas, concerning termination of  the  dealer
agreement.   The  Company's  position is that the  dealer  agreement  is  non-
exclusive,  allowing the Company to have other dealers in  the  Austin,  Texas
area.   The  Company  is  seeking  a  declaratory  judgment  that  the  dealer
terminated  the agreement or, alternatively, that the dealer is bound  by  the
agreement and should fulfill its inventory-stocking obligation.   The  Company
intends to vigorously defend its interests in this matter.

     As  of  June  30,  1999, the Company's chief operating subsidiary  was  a
defendant  in  two product liability suits and four alleged breach-of-warranty
suits.   In  the  Company's opinion, these lawsuits  are  without  merit  and,
therefore,  the Company is vigorously defending its interests 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.


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

     The  only matters submitted to the Shareholders for a vote during  Fiscal
1999  were  at the annual meeting with the election of directors, approval  of

                                       10
<PAGE>


the  1999 Employee Stock Option Plan, and appointment and ratification of  the
Board's  selection  of  Pritchett,  Siler  &  Hardy,  P.C.,  Certified  Public
Accountants, as the Company's independent public accountants.




                                    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 since August 28, 1996 and the  American  Stock
Exchange prior to such date:


          Quarter Ended                  High           Low


          September 30, 1996             8.08           5.69
          December 31, 1996             12.33           7.75
          March 31, 1997                16.08          10.65
          June 30, 1997                 13.16           9.50

          September 30, 1997            14.88           9.00
          December 31, 1997             15.38           8.88
          March 31, 1998                12.75           8.50
          June 30, 1998                 13.00           8.93

          September 30, 1998            11.13           4.38
          December 31, 1998              6.72           3.88
          March 31,1999                  7.00           4.50
          June 30, 1999                  5.00           3.97


      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 earning, 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, 1999 was approximately 1906.

                                    11
<PAGE>






Item 6.  Selected Financial Data

<TABLE>
               Fountain Powerboat Industries, Inc. and Subsidiary
                             Selected Financial Data
                         Fiscal Years 1995 through 1999
<CAPTION>


                                                         Year Ended June 30,
Operations Statement Data: ----------------------------------------------------------------------------
     (Period Ended)            1999            1998            1997          1996            1995
-------------------------  ------------    ------------    ------------    ------------    ------------
<S>                        <C>             <C>             <C>             <C>             <C>
Sales ...................  $ 53,428,487    $ 50,652,037    $ 50,514,325    $ 41,598,051    $ 38,727,329

Net Income (loss) .......  $ (1,255,791)   $  2,740,487    $  1,239,951    $  3,680,034    $  2,047,876

Income (loss) per share .  $       (.27)   $        .58    $        .27    $        .81    $        .45

Weighted average shares
 outstanding ............     4,702,608       4,751,779       4,664,251       4,528,608       4,528,608

Diluted earnings (loss)
 per share ..............  $        N/A    $        .54    $        .24    $        .77    $        .45

Diluted weighted average
 shares outstanding .....           N/A       5,110,090       5,093,289       4,573,153       4,539,694

Balance Sheet Data
(At Period End)
-------------------------
Current assets ..........  $ 14,084,888    $ 12,718,535    $ 10,997,133    $  8,378,341    $  6,185,727

Total Assets ............  $ 33,930,960    $ 32,497,393    $ 23,713,896    $ 18,498,104    $ 16,334,757

Current Liabilities .....  $ 12,183,630    $ 10,289,985    $  6,305,212    $  6,180,476    $  6,081,298

Long-term debt ..........  $ 10,215,334    $  9,499,895    $  8,047,039    $  5,433,184    $  7,049,049

Stockholders' equity (1)   $ 10,632,316    $ 11,780,707    $  9,361,645    $  6,884,444    $  3,204,410
-------------------------        (1) The Company has not paid any cash dividends since its inception.
</TABLE>
                                           12
<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
dealers  defaults  under his credit arrangement.  The balance of  shipments  was
C.O.D. or payment prior to shipment.

      Generally,  the  Company recognizes a sale when a boat  is  shipped  to  a
customer,  legal  title and all other incidents of ownership  have  passed  from
the  Company to the customer, and payment is received from the customers' third-
party  commercial  lender or from the customer.  This is  the  method  of  sales
recognition believed to be 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 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.

      At June 30, 1995, the Company estimated the balances in deferred sales  to
be  $197,541 and in deferred cost of sales to be $183,393.   At June  30,  1999,
1998,  1997  and 1996, 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.   This was because of improved market conditions and strong  ongoing
consumer demand for boats.  Therefore, there were no deferred sales or  cost  of
sales  estimated  at  June  30, 1999, 1998, 1997,  and  1996.   The  differences
between  the  estimates for deferred sales and deferred cost of  sales  at  June
30,  1995  and  June 30, 1996 had the effect of increasing the gross  margin  on
sales  and  net income after taxes for the year by $14,148.  There was  no  such
effect on Fiscal 1999, 1998 and 1997.

      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.   The  Company
had  a  contingent liability of approximately $23,350,000 at June 30,  1999  and
1998  for  the  shipment  of boats, which remained uncollected  by  the  finance
companies  at  those  dates.   Additionally, at June  30,  1999  and  1998,  the
Company  had  recorded  reserves  of  $200,000  and  $200,000,  which  represent
losses  which  may be reasonably expected to be incurred on boat repurchases  in
future years.

Business Environment.

      The  Company's Sales have continued to increase each year.  Sales for 1999
were  $53,428,487  up  5.5%  from Fiscal 1998.  The sales  volume  increase  for
Fiscal  1999 was in line with the overall recreational boating industry.   Plant
utilization  stands at about 80% until full production of the new 65'  yacht  is
achieved.

                                    13
<PAGE>


      Sales  for  Fiscal 1998 were $50,652,037, up less than 1% from  sales  for
Fiscal 1997.  Sales for Fiscal 1997 were $50,514,325.

       In   Fiscal   1999,  the  Company  continued  to  advertise  and   market
aggressively.   Management believes that the Company's  advertising,  marketing,
racing,  and  tournament fishing programs, as well as,  its  reputation  as  the
builder  of  the  highest quality, best performing, and safest high  performance
boats  in  the  industry, all contributed in maintaining our performance  market
share.

      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
repurchase a boat for the convenience of a dealer.

      No  boats  were  repurchased  in Fiscal 1999,  1998  and  Fiscal  1997  in
connection with floor plan arrangements.  At June 30, 1999, 1998 and  1997,  the
Company  had  recorded  a $200,000 reserve for losses which  may  be  reasonably
expected to be incurred on boat repurchases in future years.

Results of Operations.

      During  the  second  quarter  of Fiscal 1999,  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.  As  part  of  this  plan
the  Company  decided  to  eliminate its direct racing program  and  reduce  the
yacht  tooling  cost  (carrying  value), along with  other  discontinued  unused
tooling.   The  carrying  value of the assets held was  reduced  to  fair  value
based  on estimated realizable value based on future cash flows from use of  the
asset  or  sale  of  the  related assets.  The resulting  pretax  adjustment  of
$2,440,000  was  recorded as a strategic charge in the statement  of  operations
of the Company.

      During  Fiscal 1999, the Company had a net loss of $(1,255,791) or  $(.27)
per  share.  This compares to net income for Fiscal 1998 of $2,740,487, or  $.58
per  share.   The change to a net loss from the previous year's  net  income  is
primarily  due  to the restructuring charge, increased selling  expenses  and  a
drop  in  margins  due  to the sales mix of fish boats in  relation  to  overall
boats.

      Operating income before strategic charge decreased to $819,059  in  Fiscal
1999  from  $4,084,388 in Fiscal 1998 and $4,520,333 in Fiscal 1997.   This  was
primarily  due  to  a substantial increase in selling expenses  and  a  drop  in
margins  due  to  a higher number of fishing boats in relation  to  total  boats
sold.

                                      14
<PAGE>

      The  Company's gross profit margin as a percentage of sales  decreased  to
22.2%  in  Fiscal 1999 from 24.8% in Fiscal 1998 and 26.8% in Fiscal 1997.   The
change  in  the  gross  margin percentage was due to the overall  sales  mix  of
boats.

      Depreciation  expense  was  $2,280,871 for  Fiscal  1999,  $1,953,207  for
Fiscal  1998  and  $1,642,975 for Fiscal 1997.  Depreciation  expense  by  asset
category was as follows:

                                    Fiscal       Fiscal        Fiscal
                                     1999         1998          1997

Land  Improvements ...........    $   57,065   $   29,504   $   22,468

Buildings  ...................    $  256,205   $  239,187   $  231,546

Molds & Plugs  ...............    $1,236,027   $1,112,705   $1,041,217

Machinery & Equipment ........    $  387,732   $  353,102   $  295,829

Furniture & Fixtures  ........    $   30,842   $   15,238   $   24,572

Transportation Equipment .....    $  194,627   $  129,722   $   27,343

Racing Equipment .............    $  118,373   $   73,749            -
                                  ----------   ----------   ----------
Total                             $2,280,871   $1,953,207   $1,642,975
                                  ==========   ==========  ===========


      Following  is  a schedule of the net fixed asset additions  during  Fiscal
      1999 and Fiscal 1998.

                                  Fiscal 1999       Fiscal 1998

      Buildings ...............    $  555,475        $  240,003

      Land and Improvements ...    $  804,226        $   35,537

      Molds and Plugs .........    $  312,045        $2,050,745

      Construction in Progress     $  760,052        $1,139,725

      Machinery & Equipment ...    $  597,610        $  512,933

      Furniture & Fixtures ....    $  217,123        $   24,495

      Transportation Equipment     $  506,172        $1,458,079

      Racing  equipment .......    $        -        $1,335,163
                                   ----------        ----------
      Total                        $3,752,703        $8,796,680
                                   ==========        ==========


                                      15
<PAGE>


      Selling  expenses were $7,934,683 for Fiscal 1999, $5,687,097  for  Fiscal
1998  and  $6,463,875  for Fiscal 1997.  The Company continued  to  promote  its
products   primarily  by  magazine  advertising  in  Fiscal  1999.   Advertising
expense  was  $1,411,883  in  Fiscal  1999,  $1,166,633  for  Fiscal  1998   and
$1,267,822  for  Fiscal  1997.   These  advertising  expenditures  continue   to
promote  the  Company's visibility in the recreational marine industry  and  its
boat  sales.   Management believes that advertising is  necessary  in  order  to
maintain the Company's sales volume and dealer base.

      Additionally,  in an effort to further promote its products,  the  Company
continued   its  offshore  racing  and  tournament  fishing  programs.     These
programs   cost  $2,503,699  in  Fiscal  1999,  $953,928  in  Fiscal  1998   and
$1,256,631   in  Fiscal  1997.   The  Company  reentered  active   racing   with
construction  of two race boats during late Fiscal 1997 added a  third  one  and
began  a  racing  program  during Fiscal 1998.  During  the  second  quarter  of
Fiscal  1999  the  Company announced its withdrawal from active  racing,  placed
its  owned  race  boats  for  sale  and  changed  its  focus  to  a  lower  cost
sponsorship  basis  where the Company is only involved  in  participating  on  a
limited cost basis as sponsor for selective Fountain race boat owners.

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

                                Fiscal 1999     Fiscal 1998     Fiscal 1997

Offshore racing and
 tournament fishing .........    $2,503,699      $  953,928      $1,256,631

Advertising   ...............    $1,411,883      $1,166,633      $1,267,822

Salaries & commissions ......    $1,054,467      $  939,541      $1,029,810

Boat Shows ..................    $  494,832      $  446,706      $  452,859

Dealer incentives  ..........    $1,612,415      $1,031,611      $1,286,649

Other selling expenses ......    $  857,387      $1,148,678      $1,170,104
                                -----------     -----------      ----------
Total                            $7,934,683      $5,687,097      $6,463,875
                                ===========     ===========      ==========

      General  and  administrative  expenses include  the  finance,  accounting,
legal,  personnel,  data processing, and administrative  operating  expenses  of
the  Company.   These expenses were $3,127,029 for Fiscal 1999,  $2,796,518  for
Fiscal  1998  and $2,553,870 for Fiscal 1997.  Most of the increase  for  Fiscal
1999 over Fiscal 1998 was due to expenses incurred for ISO 9001 Certification.

                                        16
<PAGE>


      Interest expense was $1,023,727 for Fiscal 1999, $833,932 for Fiscal  1998
and  $557,768  for  Fiscal 1997.  The increase in interest  expense  for  Fiscal
1999  was  primarily due to an overall increase in loan debt  during  the  first
quarter of Fiscal 1999.

      For  Fiscal 1999 the Company received $130,118 in other income,  primarily
from  vendor discounts and a gain of $69,100 on the disposal of certain  assets.
For  Fiscal  1998,  the Company recorded $500,000 in racing participation  fees,
which  reduced  our  overall  program cost for that  year.   Included  in  other
income  for  Fiscal 1997 are consulting fees earned by the use of  Mr.  Fountain
amounting to $260,000, and these were assigned to the company.


Liquidity and Financial Resources.

      Net  cash  provided by operations in Fiscal 1999 amounted  to  $2,738,206.
Net loss plus adjustment to reconcile net loss to net cash provided by
activities including $2,280,874 in depreciation, $2,440,000 in strategic
charges, and net of other of $20,900 provided net cash of $3,485,980 before
changes in assets and liabilities accounts.  However, relatively large  amounts
were needed to complete investment activities in  purchasing  property,  plant,
equipment, inventory and molds.  The ending cash balance was $2,217,301.

     Operations  in  Fiscal 1998 provided $3,869,619 in cash.  Net  income  plus
depreciation   expense   provided  cash  amounting  to   $4,693,694.    However,
relatively  large  amounts  were  needed to  finance  investment  activities  in
purchasing  property, plant, equipment, inventory and molds.  In  addition,  the
new  yacht  construction with associated development costs added  to  the  heavy
use of cash.  The ending cash balance was $1,376,984.

      Operations  for  the prior fiscal year 1997 provided $5,474,162  in  cash.
Net  income  plus  depreciation expense provided cash amounting  to  $2,882,925.
However,  relatively large amounts were needed to finance investment  activities
in  purchasing  property, plant, equipment and molds.  The loss from  operations
of  the  discontinued subsidiaries, Fountain Power, Inc. and  Mach  Performance,
Inc.  also  contributed  to  the  use of cash.   The  ending  cash  balance  was
$2,994,503.

      Investing  activities  for  Fiscal  1999  required  $3,710,206,  including
$2,477,520  for  property,  plant and equipment and  $1,275,183  for  additional
molds and plugs.  Increases in other assets required $131,696.

     Investing   activities  for  Fiscal  1998  required  $8,218,341,  including
expenditures  for  additional molds and plugs amounting to  $2,050,745  and  for
property,  plant and equipment for $6,745,936.  Also, increases in other  assets
required $124,396.

      Investing  activities  for  Fiscal  1997  required  $4,936,129,  including
expenditures  for  additional molds and plugs amounting to  $1,684,274  and  for
property,  plant and equipment for $2,249,670.  Also, increases in other  assets
required $306,030.

      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 total debt repayment of $2,547,637.

      Financing activities  for Fiscal 1998 provided  $2,731,203.   Included  in
this  amount  are proceeds from issuance of notes payable and long term-debt  to
G.  E.  Capital Corporation for $3,362,137 and the retirement of previous  long-
term debt of $738,434.

                                        17
<PAGE>


      Financing  activities  for Fiscal 1997 provided $1,095,851.   Included  in
this  amount are proceeds from issuance of notes payable and long-term  debt  to
G.  E.  Capital  Corporation for $8,500,000 and the retirement of  all  previous
long-term debt of $6,427,060.

     The  net increase in cash for Fiscal 1999 was $840,317, primarily due  from
a   new   $4,000,000   promissory   note  with  Transamerica   Business   Credit
Corporation,  which  included  restatement and  amendment  of  certain  existing
promissory  notes with General Electric Capital Corporation.  The  net  decrease
in  cash  for  Fiscal 1998 was $1,617,519, primarily due to  the  investment  in
facilities,  equipment and molds.  During Fiscal 1998, the Company borrowed  the
remaining  $1,500,000 against the initial General Electric  Capital  Corporation
loan,   bringing  the  balance  to  $10,000,000,  less  the  scheduled   monthly
principal  reductions.   At  June 30, 1997, the  total  outstanding  amount  was
$8,500,000  less scheduled monthly principal reductions.  For Fiscal  2000,  the
Company  anticipates that the $2,217,301 beginning cash balance along  with  the
net  projected  increase in cash provided from operations will be sufficient  to
meet  most  of  the Company's liquidity needs of the year.  The Company  intends
to  concentrate on reducing capital expenditures and building its cash  reserves
during Fiscal 2000.



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.


The Year 2000.

A  current concern, known as the "Year 2000" or "Y2K" Bug is expected to  effect
a  large number of computer systems and software during or after the year  1999.
The  concern is that any computer function that requires a date calculation  may
produce  errors.   The  Year  2000 issue affects  virtually  all  companies  and
organizations,  including  the  Company.   The  Company  is  taking  the   steps
necessary  to prevent these errors from occurring.  With respect to third  party
providers  whose  services are critical to the Company, the Company  intends  to
monitor  the  efforts  of  such  vendors, as they become  Year  2000  compliant.
Management  is  not  presently aware of any Year  2000  issues  that  have  been
encountered  by  any  such  third  party,  which  could  materially  affect  the
Company's   operations.   At  present,  the  Company  has  spent  $370,000   and
anticipates  $100,000 in additional costs in upgrading some of its software  and
hardware  in  order  to avoid any problems resulting from  the  Millennium  bug.
There  is  no  assurance  that  the  Company  will  not  experience  operational
difficulties as a result of Year 2000 issues.

                                     18
<PAGE>



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.

      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.

                                  19
<PAGE>

Item 8.  Financial Statements and Supplementary Data.





                                   CONTENTS

                                                                  PAGE

        -  Independent Auditors' Report                             21


        -  Consolidated Balance Sheets, as of June 30, 1999
             and 1998                                               22


        -  Consolidated Statements of Operations, for the
             years ended June 30, 1999, 1998 and 1997.         23 - 24


        -  Consolidated Statement of Stockholders' Equity,
             for the years ended June 30, 1999, 1998 and 1997.      25


        -  Consolidated Statements of Cash Flows, for the years
             ended June 30, 1999, 1998 and 1997.                26 -27


        -  Notes to the Consolidated Financial Statements      28 - 44




                                     20
<PAGE>



                         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, 1999 and  1998,  and
the  related consolidated statements of operations, stockholders'  equity  and
cash  flows  for  the  years  ended  June  30,  1999,  1998  and  1997.  These
consolidated  financial  statements are the responsibility  of  the  Company's
management.  Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In  our  opinion, the 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,  1999  and
1998,  and  the consolidated results of their operations and their cash  flows
for  the years ended June 30, 1999, 1998 and 1997 in conformity with generally
accepted accounting principles.



/s/ Pritchett, Siler & Hardy, P.C.

Pritchett, Sier & Hardy, P.C.

July 27, 1999
Salt Lake City, Utah

                                     21
<PAGE>


              FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEETS

                                    ASSETS

                                                      June 30,
                                           ______________________________
                                               1999             1998
                                           ____________      ____________
CURRENT ASSETS:
  Cash & cash equivalents                  $ 2,217,301       $ 1,376,984
  Accounts receivable, less allowance
   for doubtful accounts of $30,000
   for 1999 and 1998                         1,576,712         2,715,754
  Inventories                                7,307,890         7,077,540
  Prepaid expenses                             761,486           489,290
  Current tax assets                         2,221,499         1,058,967
                                           ____________      ____________
        Total Current Assets                14,084,888        12,718,535

PROPERTY, PLANT AND EQUIPMENT, net          19,065,270        19,156,855

OTHER ASSETS                                   780,802           622,003
                                           ____________      ____________
                                           $33,930,960       $32,497,393
                                           ____________      ____________

                     LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Notes payable - related party            $         -       $   415,821
  Current maturities of long-term debt       2,464,535           981,365
  Current maturities of capital lease           11,788                 -
  Accounts payable                           3,961,516         3,591,489
  Accrued expenses                           2,231,061         1,939,791
  Dealer territory service accrual           2,037,170         2,046,939
  Customer deposits                            687,560           510,967
  Allowance for boat repurchases               200,000           200,000
  Warranty reserve                             590,000           500,000
  Net liabilities of discontinued
   operations                                        -           103,612
                                           ____________      ____________
        Total Current Liabilities           12,183,630        10,289,984

LONG-TERM DEBT, less current maturities     10,138,395         9,499,895
CAPITAL LEASE, less current maturities          76,939                 -
DEFERRED TAX LIABILITY                         899,680           926,807

COMMITMENTS AND CONTINGENCIES (See Note 9)           -                 -
                                           ____________      ____________
        Total Liabilities                   23,298,644        20,716,686
                                           ____________      ____________
STOCKHOLDERS' EQUITY
  Common stock, par value $.01 per share,
   authorized 200,000,000 shares; issued
   $4,732,608 and 4,702,608 shares              47,326            47,026
  Additional paid-in capital                10,303,640        10,196,540
  Accumulated earnings                         392,098         1,647,889
                                           ____________      ____________
                                            10,743,064        11,891,455
        Less: Treasury Stock, at cost
         15,000 shares                        (110,748)         (110,748)
                                           ____________      ____________
                                            10,632,316        11,780,707
                                           ____________      ____________
                                           $33,930,960       $32,497,393
                                           ____________      ____________


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

                                     22
<PAGE>

              FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                                Year Ended June 30,
                                    ___________________________________________
                                        1999           1998           1997
                                    _____________  _____________  _____________
NET SALES                            $53,428,487    $50,652,037    $50,514,325

COST OF SALES                         41,547,716     38,084,034     36,976,247
                                    _____________  _____________  _____________
  Gross Profit                        11,880,771     12,568,003     13,538,078
                                    _____________  _____________  _____________
EXPENSES:
  Selling expense                      7,934,683      5,687,097      6,463,375
  Selling expense - related party              -              -            500
  General and administrative           2,628,722      2,722,665      2,240,112
  General and administrative -
   related parties                       498,307         73,853        313,758
                                    _____________  _____________  _____________
      Total expenses                  11,061,712      8,483,615      9,017,745
                                    _____________  _____________  _____________
OPERATING INCOME (LOSS) BEFORE
  STRATEGIC CHARGE                       819,059      4,084,388      4,520,333

STRATEGIC CHARGE                       2,440,000              -              -
                                    _____________  _____________  _____________
OPERATING INCOME (LOSS)               (1,620,941)     4,084,388      4,520,333
                                    _____________  _____________  _____________
NON-OPERATING INCOME (EXPENSE):
  Other income                           130,118        252,967        437,694
  Interest expense                    (1,003,280)      (807,423)      (557,768)
  Interest expense - related
   parties                               (20,447)       (26,509)             -
  Gain on disposal of assets              69,100          4,637              -
                                    _____________  _____________  _____________
                                        (824,509)      (576,328)      (120,074)

INCOME (LOSS) BEFORE INCOME
 TAXES                                (2,445,450)     3,508,060      4,400,259

CURRENT TAX EXPENSE                            -      1,057,640        330,427

DEFERRED TAX EXPENSE(BENEFIT)         (1,189,659)        10,864              -
                                    _____________  _____________  _____________
INCOME (LOSS) FROM CONTINUING
  OPERATIONS                          (1,255,791)     2,439,556      4,069,832

DISCONTINUED OPERATIONS (See Note 14):
 (Loss) from Operations of Fountain
   Power, Inc. and Mach Performance,
   Inc.(Net of no income tax effect)           -              -     (2,389,480)
 Estimated income (loss) on disposal
   of the operations of Fountain
   Power, Inc. and Mach Performance,
   Inc. (Net of $282,512 income tax
   benefit)                                    -        300,931       (440,401)
                                    _____________  _____________  _____________
INCOME (LOSS) FROM DISCONTINUED
  OPERATIONS                                   -        300,931     (2,829,881)
                                    _____________  _____________  _____________
NET INCOME (LOSS)                    $(1,255,791)   $ 2,740,487     $ 1,239,951
                                    _____________  _____________  _____________

                                  [Continued]

                                       23
<PAGE>

                    FOUNTAIN POWERBOAT, INC. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                  [CONTINUED]


                                                Year Ended June 30,
                                    ___________________________________________
                                        1999           1998           1997
                                    _____________  _____________  _____________
BASIC EARNINGS (LOSS) PER SHARE:

  Continuing operations              $      (.27)   $       .51    $       .87
  Loss from operations of
   discontinued segments                       -              -           (.51)
  Estimated income (loss) on
   disposal of discontinued
   segments                                    -            .07           (.09)
                                    _____________  _____________  _____________
BASIC EARNINGS PER SHARE             $      (.27)   $       .58    $       .27
                                    _____________  _____________  _____________
WEIGHTED AVERAGE SHARES
  OUTSTANDING                          4,711,896      4,751,779      4,664,251
                                    _____________  _____________  _____________

DILUTED EARNINGS PER SHARE:

  Continuing operations              $       N/A    $       .48    $       .80
  Loss from operations of
   discontinued segments                     N/A              -           (.47)
  Estimated income (loss) on
   disposal of discontinued
   segments                                  N/A            .06           (.09)
                                    _____________  _____________  _____________
DILUTED EARNINGS PER SHARE           $       N/A    $       .54    $       .24
                                    _____________  _____________  _____________
DILUTED WEIGHTED AVERAGE
  SHARES OUTSTANDING                         N/A      5,110,090      5,093,289
                                    _____________  _____________  _____________


















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

                                       24
<PAGE>

<TABLE>

               FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                    FROM JUNE 30, 1996 THROUGH JUNE 30, 1999

<CAPTION>
                                     Common Stock        Additional                   Treasury Stock        Total
                                ______________________    Paid-in     Accumulated   ___________________  Stockholders'
                                  Shares      Amount      Capital      Earnings      Shares    Amount       Equity
                                ___________  _________  ____________  ____________  ________  _________  ____________
<S>                             <C>          <C>        <C>           <C>           <C>       <C>        <C>
BALANCE, June 30, 1996           4,543,608   $ 45,436   $ 9,282,305   $(2,332,549)   15,000   $110,748   $ 6,884,444

Common stock issued for
  acquisition of Mach
  Performance, October 1996,
  at $8.17 per share               127,500      1,275     1,039,975             -         -          -     1,041,250

Additional common stock
  shares issued for options
  exercised during Fiscal 1997,
  at $3.58 to $3.67 per share       54,000        540       195,460             -         -          -       196,000

Net income for the year ended
  June 30, 1997                          -          -             -     1,239,951         -          -     1,239,951
                                ___________  _________  ____________  ____________  ________  _________  ____________
BALANCE, June 30, 1997           4,725,108     47,251    10,517,740    (1,092,598)   15,000    110,748     9,361,645

Cancellation of common stock
  previously issued in
  acquisition of Mach
  Performance during June 1998
  at $8.17 per share               (52,500)      (525)     (428,400)            -         -          -      (428,925)

Issuance of common stock
  upon exercise of options at
  $3.58 per share by a director
  of the Company during
  July 1997.                        30,000        300       107,200             -         -          -       107,500

Net income for the year ended
  June 30, 1998                          -          -             -     2,740,487         -          -     2,740,487
                                ___________  _________  ____________  ____________  ________  _________  ____________
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
                                ___________  _________  ____________  ___________  _________  _________  ____________

</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                      25
<PAGE>

              FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS


                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                                   Year Ended June 30,
                                       ________________________________________
                                           1999          1998          1997
                                       ____________  ____________  ____________
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                    $(1,255,791)  $ 2,740,487   $ 1,239,951
  Adjustments to reconcile net income
   (loss)to net cash provided by
   operating activities:
    Strategic charge                     2,440,000             -             -
    Depreciation expense                 2,280,871     1,953,207     1,642,974
    Gain on disposal of property,
     plant, and equipment                  (69,100)       (4,637)            -
    Warranty reserve                        90,000             -        90,000
    Net effect of acquired Subsidiary            -      (525,095)    1,041,250
    Change in assets and liabilities:
     (Increase) decrease in accounts
      receivable                         1,148,745      (848,007)      985,937
     (Increase) decrease in inventories   (959,172)   (3,139,783)       71,438
     (Increase) decrease in prepaid
      expenses                            (281,492)      642,413      (976,860)
     (Increase)in net tax asset         (1,293,271)     (132,160)            -
     Increase in accounts payable          370,027     1,603,982       273,748
     Increase (decrease) in accrued
      expenses                             292,316     1,079,005       (53,946)
     Increase (decrease) in Dealer
      territory service accrual             (1,520)      409,367       871,898
     Increase (decrease) in customer
      deposits                             (23,407)      200,925        81,434
     Decrease in allowance for boat
      returns                                    -             -        (7,359)
     Increase (decrease) in net
      liabilities of discontinued
      operations                                 -      (110,085)      213,697
                                       ____________  ____________  ____________
      Net Cash Provided by Operating
       Activities                       $2,738,206    $3,869,619    $5,474,162
                                       ____________  ____________  ____________

CASH FLOWS FROM INVESTING ACTIVITIES:
  Increase in notes receivable -
   related party                           (36,807)            -             -
  (Purchase) sale of certificates
   of deposits, net                              -       696,155      (696,155)
  Proceeds from sale of property,
   plant and equipment                     211,000         6,581             -
  Investment in additional molds and
    related plugs                       (1,275,183)   (2,050,745)   (1,684,274)
  Purchase of other property, plant
    and equipment                       (2,477,520)   (6,745,936)   (2,249,670)
  Increase in other assets                (131,696)     (124,396)     (306,030)
                                       ____________  ____________  ____________
      Net Cash (Used) by investing
       activities                      $(3,710,206)  $(8,218,341)  $(4,936,129)
                                       ____________  ____________  ____________


                                  [Continued]

                                       26
<PAGE>


              FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  [CONTINUED]


                                                   Year Ended June 30,
                                       ________________________________________
                                           1999          1998          1997
                                       ____________  ____________  ____________
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net borrowings (repayments) on
   engine floor plan agreement         $         -   $         -   $(1,173,089)
  Proceeds from issuance of common
   stock                                   107,400       107,500       196,000
  Proceeds from issuance of notes
   payable and long-term debt            4,279,554     3,362,137     8,500,000
  Payments on capital lease                   (931)            -             -
  Payments on related party payable       (415,821)            -             -
  Repayment of long-term debt           (2,157,885)     (738,434)   (6,427,060)
                                       ____________  ____________  ____________
      Net Cash Provided by
        Financing Activities           $ 1,812,317   $ 2,731,203   $ 1,095,851
                                       ____________  ____________  ____________
Net increase (decrease) in cash &
 cash equivalents                      $   840,317   $(1,617,519)  $ 1,633,884

Beginning cash & cash equivalents
 balance                                 1,376,984     2,994,503     1,360,619
                                       ____________  ____________  ____________
Ending cash & cash equivalents
 balance                               $ 2,217,301   $ 1,376,984   $ 2,994,503
                                       ____________  ____________  ____________
Supplemental Disclosures of Cash Flow Information:
  Cash paid during the period for:
    Interest:
     Unrelated parties                 $   996,640   $   767,867   $   557,768
     Related parties                        20,447        26,509             -
                                       ____________  ____________  ____________
                                       $ 1,017,087   $   794,376   $   557,768
                                       ____________  ____________  ____________
    Income taxes                       $   263,345   $   825,570   $   395,796
                                       ____________  ____________  ____________
Supplemental Schedule of Non-cash Investing and Financing Activities:
  For the year ended June 30, 1999:  None

  For the year ended June 30, 1998:
     The  Company  entered  into an agreement whereby  52,500  shares  of  stock
     previously issued in the acquisition of Mach Performance at $8.17 per share
     were returned for cancellation.

     The  Company  purchased an airplane for $1,375,000 by assuming  a  $959,179
     loan and issuing a $415,821 note payable (See Note 3).

     The Company borrowed $47,079 for the purchase of a vehicle.

  For the year ended June 30, 1997:
     The  Company  issued 127,500 shares of common stock in the  acquisition
     of Mach Performance valued at $1,041,250 or $8.17 per share
     (See Notes 6 and 13).

                                        27

<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  sixty  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 370  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.  Also
  effective  October 1, 1997, Fountain Trucking, Inc. and Fountain Sportswear,
  Inc.  were  dissolved and the operations transferred to Fountain Powerboats,
  Inc.   The  operations  of Fountain Power, Inc. and Mach  Performance,  Inc.
  were discontinued effective as of June 30, 1997(See Note 13).

  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, 1999  and  1998,
  the  Company  had  $2,117,301  and $1,276,984, 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  is  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.

                                  28
<PAGE>


              FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

  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, 1999 and 1998 of $2,037,170  and
  $2,046,939, 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).

  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 accrued a  reserve
  for these anticipated future warranty costs.

  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 month (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.

  Presently,  the Company's normal sales program provides for the  payment  of
  floor  plan  interest on behalf of its dealers for a maximum of six  months.
  The  Company  believes that this program is currently competitive  with  the
  interest payment programs offered by other boat manufacturers, but may  from
  time  to time adopt and publish different programs as necessary in order  to
  meet competition.

  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).

                                   29
<PAGE>


              FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

  Advertising  Cost:   Costs  incurred  in  connection  with  advertising  and
  promotion  of the Company's products are expensed as incurred.   Such  costs
  amounted to $1,411,883, $1,166,633 and $1,267,822 for the years ended  1999,
  1998 and 1997.

  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.
  Prior period earnings per share  and weighted average shares have been
  restated to reflect the adoption  of  SFAS No. 128. (See Note 14)

  Stock   Based  Compensation:  The  Company  accounts  for  its  stock  based
  compensation in accordance with Statement of Financial Accounting  Standards
  (SFAS)  No.  123 "Accounting for Stock-Based Compensation".  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.  The Company  has  adopted
  the  disclosure  only provisions of SFAS No. 123; accordingly,  the  Company
  has elected to determine net income using previous accounting standards.

  Reclassifications:  The financial statements for years  prior  to  June  30,
  1999   have   been   reclassified  to  conform   with   the   headings   and
  classifications used in the June 30, 1999 financial statements.

Note 2.  Inventories.

  Inventories consist of the following:
                                                    June 30,
                                           __________________________
                                               1999         1998
                                           ____________  ____________
               Parts and supplies           $3,296,244    $4,510,373
               Work-in-process               3,208,982     2,235,394
               Finished goods                  922,664       451,773
                                           ____________  ____________
                                             7,427,890     7,197,540
               Reserve for obsolescence       (120,000)     (120,000)
                                           ____________  ____________
                                            $7,307,890    $7,077,540
                                           ____________  ____________

                                   30
<PAGE>


              FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3.  Property, Plant, and Equipment.

  Property, plant, and equipment consists of the following:

                                          Estimated
                                           Useful            June 30,
                                           Lives    __________________________
                                          in Years       1999         1998
                                          ________  ____________  ____________
      Land and related improvements        10-30    $ 1,416,429   $ 1,416,429
      Buildings and related improvements   10-30     11,092,771     6,720,762
      Construction-in-progress              N/A         760,052     3,955,544
      Production molds and related plugs     8       14,527,208    13,669,394
      Machinery and equipment               3-5       4,562,734     4,063,671
      Furniture and fixtures                 5          754,497       538,516
      Transportation equipment               5        2,305,033     1,711,526
      Racing boats                          N/A         790,860     1,335,163
                                                    ____________  ____________
                                                    $36,209,584   $33,411,011
      Accumulated depreciation                      (17,144,314)  (14,254,156)
                                                    ____________  ____________
                                                    $19,065,270   $19,156,855
                                                    ____________  ____________

  Depreciation  expense amounted to $2,280,871, $1,953,207 and $1,642,975  for
  the years ended June 30, 1999, 1998 and 1997, respectively.

  During  December  1998,  as  part of a strategic restructuring  the  Company
  wrote off assets totaling $2,440,000 (See Note 15).

  During  fiscal  1998, the Company purchased an airplane from  its  executive
  officer  for $1,375,000 by assuming the loan on the airplane from GE Capital
  Credit  Corporation, and issuing a note to the Company's CEO.   The  balance
  owing  to  GE  Capital  Credit Corporation on June 30,  1999  and  1998  was
  $754,014  and  $872,881, respectively.  The balance owing to  the  Company's
  CEO on June 30, 1999 and 1998, was -0- and $415,821, respectively.

  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 $80,123  and  $219,227  at
  June 30, 1999 and 1998.

  During  Fiscal  1999  and 1998, the Company sold fixed assets  and  realized
  gains amounting to $69,100 and $4,637, respectively.

Note 4.  Notes Payable - Related Party.

  The  Company  issued a $415,821 note payable to an officer and  director  of
  the  Company,  in  connection with the purchase of an  airplane.   The  note
  accrues  interest  at a fixed rate of 8.5%, which is payable  monthly.   The
  principle  amount  was due in a balloon payment on March 31,  1999  and  was
  paid in full.

                                     31
<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 at:
                                                    June 30,
                                           __________________________
                                               1999          1998
                                           ____________  ____________
     Loan payable to General Electric
     Capital Corporation assumed on an
     airplane purchased by the Company
     from an officer and director
     during September, 1997 with a
     carrying value of $959,179 on that
     date.  The loan has a fixed
     interest rate of 7.26%.  Monthly
     payments of $15,181.  Matures
     August 1, 2004.                       $   754,014   $   872,881

     6.30% loan payable to Wachovia
     Bank for the purchase of a vehicle,
     monthly payment of $771 through
     December 2002, secured by the
     vehicle purchased.                         28,989             -

     7.15% loan payable to 1st Citizens
     Bank for the purchase of a vehicle,
     monthly payments of $1,055 through
     October 2002, secured by the vehicle
     purchased.                                 37,475        47,079

     6.30% loan payable to Wachovia Bank
     for the purchase of a vehicle,
     president of the Company pays the
     monthly payments of $979 through
     December 2002, secured by the vehicle
     purchased [See Note 11]                    36,807             -

     Amounts borrowed against the cash
     surrender value of keyman life
     insurance policies during June 1998,
     fixed interest rate of 8% on $274,060
     and variable interest rate of 7.39% at
     June 30, 1999 on the remaining $62,033,
     monthly payments of $10,000.              336,093       431,678

     $14,000,000 credit agreement with
     General Electric Capital Corporation.
     (See Below).                           11,409,552     9,129,622
                                           ____________  ____________
                                            12,602,930    10,481,260

     Less: Current maturities included in
     current liabilities:                   (2,464,535)     (981,365)
                                           ____________  ____________
                                           $10,138,395   $ 9,499,895
                                           ____________  ____________

                                    32
<PAGE>




              FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

  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 had additional funds made available to it for  expansion.
  Initially,  the Company borrowed $7,500,000 to primarily refinance  existing
  debts.   All  of  the  Company's prior interest  bearing  debts  to  MetLife
  Capital  Corporation,  Deutsche Financial Services, GE Capital  Corporation,
  Branch  Bank  & Trust Leasing Corp., and other smaller creditors  were  paid
  off  entirely.   During  1998 and 1997 the Company borrowed  the  additional
  $1,500,000  and  $1,000,000,  respectively,  to  fund  plant  and  equipment
  additions.  The credit agreement has a fixed interest 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  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.

  The  estimated aggregate maturities required on long-term debt at  June  30,
  1999 are as follows:
               2000                      $ 2,464,535
               2001                        2,460,416
               2002                        7,318,362
               2003                          185,677
               2004                          173,940
            Thereafter                             -
                                         ____________
                                         $12,602,930
                                         ____________

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

  Common  Stock:  The Company issued 127,500 new restricted common  shares  at
  $8.17  per share to acquire Mach Performance, Inc. in October, 1996  from  a
  director  of  the  Company. During June 1997, the Company  discontinued  the
  operations  and  subsequently filed a lawsuit asking for the  rescission  of
  the  acquisition  agreement  from  Mach Performance,  Inc.  to  recover  the
  127,500  restricted  common shares.  During July, 1998 the  parties  entered
  into  a  settlement agreement resulting in the recovery and cancellation  of
  52,500 shares of common stock.  (See Note 13).

  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  January
  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.  As of June 30, 1999 none of the options have been exercised.

                                     33
<PAGE>


              FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 6.  Common Stock, Options, and Treasury Stock. [Continued]
  Under  the  terms  of the Company's qualified 1986 employee incentive  stock
  option  plan, which expired on December 5, 1996, options were authorized  to
  purchase  up to 300,000 shares of the Company's common stock at a  price  of
  no  less  than  100%  of  the fair market value on  the  date  of  grant  as
  determined by the Board of Directors.  Options can be exercised for  a  ten-
  year  period  from  the date of grant.  During Fiscal 1995,  30,000  options
  each  were  granted to the former Chief Executive Officer and to  the  Chief
  Financial Officer at $3.94 and $3.67 per share, respectively.  During fiscal
  1997 the former Chief Financial Officer exercised his 30,000 options.

  During  June 1998, 30,000 options, issued to a former officer of the Company
  in  the  acquisition of Mach Performance, Inc., were cancelled in connection
  with the settlement agreement (See Note 13).

  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, 1999, 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.  During the year ended  1999,  a
  former  director  exercised 30,000 stock options for $107,400.   During  the
  year  ended  June  30, 1998, a director exercised 30,000 stock  options  for
  $110,000.   During Fiscal 1997, a director exercised his options for  24,000
  shares  for $86,000 and assigned, with the specific consent of the Company's
  Board of Directors, the remaining 6,000 options to another party.

  A  summary  of  the status of the options granted under the Company's  stock
  option  plans  and  other agreements at June 30, 1999, 1998  and  1997,  and
  changes during the periods then ended is presented in the table below:

                         1999               1998               1997
                  __________________  __________________  __________________

                            Weighted            Weighted            Weighted
                            Average             Average             Average
                            Exercise            Exercise            Exercise
                   Shares    Price     Shares    Price     Shares     Price
                  _________ ________  _________ ________  _________ ________
  Outstanding at
   beginning of
   period          546,000    $4.50    606,000    $4.63    630,000    $6.54
  Granted           30,000     5.00          -        -     30,000     8.17
  Exercised        (30,000)    3.58    (30,000)    3.58    (54,000)    3.58
  Forfeited              -        -          -        -          -        -
  Canceled               -        -    (30,000)    8.17          -        -
                  _________ ________  _________ _________  ________ ________
  Outstanding at
   end of period   546,000    $4.57    546,000    $4.50    606,000    $4.63
                  _________ ________  _________ _________  ________ ________
  Exercisable at
   end of period   522,000    $4.55    546,000    $4.50    576,000    $4.45
                  _________ ________  _________ _________  ________ ________
  Weighted average
   fair value of
   options granted  30,000    $ .14          -    $   -     30,000    $ .28
                  _________ ________  _________ __________  _______ ________

                                       34
<PAGE>


               FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

  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 years ended  June  30,  1999
  and  1997, respectively: risk-free interest rates of 4.5% and 6.6%,
  respectively, expected dividend  yields of zero for all periods, expected
  lives of 5 and 4 years, respectively, and expected volatility of 60% and
  83%, respectively.  No options were granted during the year ended June 30,
  1998.

  A  summary  of  the  status of the options outstanding under  the  Company's
  stock  option  plans  and other agreements at June  30,  1999  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
  ___________  ___________ ___________ ____________ ___________ __________
  $3.58-$3.94    66,000     5.9 years      3.67        66,000     3.67
    $4.67       450,000     6.1 years      4.67       450,000     4.67
    $5.00        30,000     4.6 years      5.00         6,000     5.00

  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 proforma amounts as indicated below:

                                                   Year Ended June 30,
                                        ______________________________________
                                            1999          1998         1997
                                        ____________  ___________  ___________

     Net Income(loss)    As reported    $(1,225,791)  $ 2,740,487  $ 1,239,951
                         Proforma       $(1,256,233)  $ 2,740,487  $ 1,234,605

     Earnings per share  As reported    $      (.27)  $       .58  $       .25
                         Proforma       $      (.27)  $       .58  $       .25

  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.

                                     35
<PAGE>

              FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED 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,  1999  and 1998, the totals of all deferred  tax  assets  were
  $2,388,559 and $1,328,619, respectively.  The totals of all deferred tax
  liabilities  were  $1,066,740  and $1,196,459.  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 net decrease in  the valuation allowance during the years
  ended June  30,  1999  and 1998, were $0 and $425,070, respectively.

  The  Company has an unused operating loss carryforwards at June 30, 1999  of
  approximately $2,080,000, which expires in 2019.

  As  a  result  of  the federal alternative minimum income tax,  the  Company
  incurred  current  tax expense amounting to $258,371 for  Fiscal  1997.  The
  components of federal income tax expense from continuing operations  consist
  of the following:
                                                  Year Ended June 30,
                                         _____________________________________
                                             1999        1998          1997
                                         ___________  ___________  ___________
     Current income tax expense:
          Federal                        $        -   $  783,508   $  258,371
          State                                   -      274,132       72,056
                                         ___________  ___________  ___________
     Net current tax expense             $        -   $1,057,640   $  330,427
                                         ___________  ___________  ___________
     Deferred tax expense (benefit) resulted from:
          Excess of tax over financial
           accounting depreciation       $ (129,720)  $  303,782   $  144,013
          Warranty reserves                 (15,600)           -      (42,300)
          Accrued vacations                  (2,317)      (3,850)      (8,107)
          Dealer incentive reserves         (13,537)    (293,662)     (37,500)
          Bad debt reserves                  12,491            -      (28,686)
          Accrued Dealer incentive
           interest                         (99,190)           -            -
          Excess contributions
           carryforwards                     (1,059)           -            -
          Inventory adjustment-Sec.263A     (13,170)    (131,941)      (6,366)
          Decrease in NOL carryforwards    (805,261)     204,380    1,014,168
          Decrease in valuation allowance         -     (316,948)    (599,075)
          Allowance for obsolete
           inventory                              -       (7,800)       3,000
          Alternative minimum tax credits   102,592      186,947     (256,982)
          Reserve for loss on disposition         -            -     (171,756)
          Investment tax credits                  -       86,294            -
          Allowance for boat repurchases     18,972            -      (10,409)
          Accrued executive compensation     (8,472)     (16,338)           -
          Accrued dealer incentives        (235,388)           -            -
                                        ____________  ___________  ___________
     Net deferred tax expense           $(1,189,659)  $   10,864   $        -
                                        ____________  ___________  ___________

                                         36
<PAGE>


              FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7. Income Taxes. [Continued]

  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,
                                   _________________________________
                                     1999         1998        1997
                                   ________     ________    ________
     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        (2.77)      (3.85)
     (Increase) decrease in NOL
       carryforwards                    -         4.86      (14.48)
     Officer's life insurance        (.38)         .36         .78
     Valuation allowance                -        (9.03)     (16.08)
     Net effect of alternative
       minimum taxes                (4.23)        (.34)        .03
     Other                          13.84        (1.62)       2.11
                                   ________    _________    ________
     Effective income tax rates     49.10%       30.46%       7.51%
                                   ________    _________    ________

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

                                                    June 30,
                                            _________________________
                                                1999        1998
                                            ____________ ____________
     Excess of tax over financial
       accounting depreciation              $(1,066,740) $(1,196,460)
     Warranty reserve                           230,100      214,500
     Obsolete inventory reserve                  46,800       46,800
     Accrued vacations                           54,230       51,914
     Allowance for boat repurchases              78,000       96,972
     Dealer incentive reserves                  365,699      352,162
     Bad debt reserve                            10,858       23,349
     Accrued Dealer incentive interest           99,190            -
     Inventory adjustments - Sec. 253A          270,103      256,932
     NOL carryforwards                          805,262            -
     Alternative minimum tax credits            167,060      269,652
     Accrued executive compensation              24,810       16,338
     Donations Carryforwards                      1,059            -
     Accrued dealer service incentives          235,388            -

                                  37
<PAGE>


FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 $876,965 for Fiscal  1999,
  $575,918 for Fiscal 1998, and $635,652 for Fiscal 1997.

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 1999, the  Company
  entered into a three year employment agreement with the Company's new  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 $1,353,848 for Fiscal 1999, $1,031,611 for Fiscal  1998,
  and  $1,009,285  for  Fiscal 1997.  They are included  in  the  accompanying
  consolidated statements of operations as part of selling expense.   At  June
  30,  1999  and 1998 the estimated unpaid dealer incentive interest  included
  in accrued expenses amounted to $327,643 and $160,000, respectively.

  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,  1999  and 1998, 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
  $23,350,000  at  each  year end.  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,  1999  and
  1998, the allowance for boat repurchases was $200,000.

  Utility  Agreement:   As  of  June  30,  1999,  the  Company  fulfilled  its
  commitments   in  a  development  agreement  with  Beaufort  County,   North
  Carolina. Under the agreement, the County will provide $522,802 towards  the
  extension of community sewer and water service to the Company's plant  site.
  The  Company  agreed  to:  1)   expand it's plant  and  purchase  additional
  production equipment and 2) employ an additional fifty people by  April  30,
  1999,  sixty  percent  whose household incomes are  under  low  or  moderate
  income limits.

                                       38
<PAGE>


              FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9.  Commitments and Contingencies. [Continued]

  Litigation:   A  suit was filed against the Company on May 1,  1998  in  the
  Circuit  Court  for Lake County, Illinois.  The plaintiff seeks  to  collect
  fees  of  $6,641  for advertising services allegedly earned from  employment
  with  the  Company.   A motion to dismiss the suit has  been  filed  on  the
  Company's  behalf,  due to incorrect designation of the  defendant  in  this
  matter.   The  Company intends to vigorously defend its  interests  in  this
  matter.

  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  $10,000  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  $30,000  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.

  Litigation:  A suit was filed against the Company in District Court,  Travis
  County,  Austin,  Texas  on  February 5, 1998,  alleging  that  the  Company
  wrongfully  attempted  to terminate its dealer agreement  with  one  of  its
  dealers  (Dealer)  in Texas, or breached the agreement  by  attempting  to
  change to a different dealer in the Austin, Texas area.  In an answer  filed
  on  March 10, 1998, the Company asserted that on February 24, 1998,  it  had
  filed  a  related  declaratory judgement action in Beaufort County  Superior
  Court,  Washington,  North Carolina, and that the dealer  agreement  by  its
  terms  was  governed  by North Carolina law.  The Company  asked  the  Texas
  Court  to  abate  the Texas suit pending the outcome of the  North  Carolina
  declaratory  judgement  action.  On May 6, 1998, the  Texas  District  Court
  ordered  the  Texas  case abated pending the results of the  North  Carolina
  action,  but  allowed discovery to proceed in the Texas case.   The  Company
  obtained  a favorable judgement in the North Carolina action.  The plaintiff
  then  dismissed its lawsuit in Texas but retained the right to  re-file  the
  suit  within  one  year from the dismissal.  In the event the  suit  is  re-
  filed,  the  Company  intends to vigorously defend  its  interests  in  this
  matter.

                                   39
<PAGE>



              FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9.  Commitments and Contingencies. [Continued]

  Litigation: The Company received a demand letter, dated February  22,  1996,
  from  a  representative  of  a famous basketball player  (Player),  claiming
  damages  in  connection with an advertisement for the Company.   The  letter
  demanded  payment  of  $1,000,000 unless the claim  was  resolved  prior  to
  filing  suit.   The Company put its primary and umbrella insurance  carriers
  on  notice  after  receiving the demand.  On January 2,  1997,  the  Company
  filed  suit  in  U.S.  District  Court for the  Eastern  District  of  North
  Carolina  against the Player and his affiliated company and the  advertising
  agency  (an  agency  owned by a director of the Company) that  produced  the
  advertisement.   The  Company asserted that it  had  neither  previewed  nor
  authorized   an  advertisement  using  the  Player's  name  and   that   the
  advertising  agency  had  designed and run  the  advertisement  without  the
  Company's  prior review and consent.  The Company contends that it  withdrew
  the  advertisement after being contacted by the Player's  counsel  and  that
  Player  was not damaged by the advertisement.  The Company further  contends
  that  it  did not state that the Player was endorsing the product  and  that
  the  Player  has  no legal claim to the usage of a certain word  within  the
  advertisement.   Further,  the Company claims  that  Player's  counsel  used
  coercion  by  threatening suit and that the Company should  be  awarded  the
  costs  of suit.  On May 8, 1997, the Player and his affiliated company filed
  an  answer,  counterclaim, and crossclaim, alleging trademark  infringement,

  unfair   competition  and  trademark  dilution,  and  seeking   damages   of
  $10,000,000,  trebled,  plus punitive and exemplary  damages.   On  June  4,
  1997,  the  Company filed a reply to the counterclaim, denying the  Player's
  allegations  and  seeking  dismissal of the  counterclaims  against  it.   A
  discovery  plan  was agreed to by all parties and filed on  July  14,  1997.
  Shortly  after  the  Company filed suit in North Carolina,  the  Player  and
  affiliated  company  filed  suit against the  Company  and  its  advertising
  agency  on  February  24,  1997, in U.S. District  Court  for  the  Northern
  District of Illinois.  The Complaint alleges trademark infringement,  unfair
  competition  and  trademark  dilution, and  seeks  damages  of  $10,000,000,
  trebled,  plus  punitive and exemplary damages.  By Order  dated  April  30,
  1997, this matter was transferred to North Carolina without prejudice.   The
  North  Carolina suit then proceeded through the discovery stage  and,  as  a
  result of a court mediated settlement conference held during June 1998,  the
  parties  reached a confidential settlement of the matter, which was approved
  by the Court.

  Product   Liability  and  Other  Litigation:  There  were  various   product
  liability  lawsuits  brought against the Company  at  June  30,  1999.   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.

  Litigation:  The  Company was audited during Fiscal 1997  by  the  State  of
  North  Carolina under the Escheat and Unclaimed Property Statute.  The State
  Treasurer's  audit report was received and the Company paid a  small  amount
  of  the  escheated funds.  However, the Company filed a dispute  as  to  the
  remaining  escheats  property,  amounting  to  approximately  $65,000.   The
  matter  was  appealed to the Administrative Office of  the  State  of  North
  Carolina. The dispute was subsequently resolved by the Company's payment  of
  $3,090 to the state.

  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.

                                        40
<PAGE>

              FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 10.  Export Sales.

  The  Company had export sales of $3,717,373 for Fiscal 1999, $4,583,542  for
  Fiscal  1998 and $2,167,840 for Fiscal 1997.  Export sales were to customers
  in the following geographic areas:
                                      Year Ended June 30,
                               __________________________________
                                 1999         1998         1997
                               __________  __________  __________
     Americas                  $2,495,048  $2,639,523  $1,047,913
     Asia                               -   1,834,524     367,126
     Middle East and Europe.    1,222,325     109,495     752,801
                               __________  __________  __________
                               $3,717,373  $4,583,542  $2,167,840
                               __________  __________  __________


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, Chief Executive Officer, and Chief Operating
  Officer, or to entities owned or controlled by him:
                                        Year Ended June 30,
                               __________________________________
                                  1999        1998         1997
                               __________  __________  __________
     Apartments rentals        $   19,731  $    6,717  $   17,260
     R.M. Fountain, Jr. -
      airplane rentals                  -     107,312     296,498
     R.M. Fountain, Jr. -
      interest on loans            20,447      26,509           -
                               __________  __________  __________
                               $   40,178  $  140,538  $  313,758
                               __________  __________  __________

  During  the year ended June 30, 1998 the Company purchased an airplane  from
  Mr.  Fountain  for $1,375,000 by assuming the loan on the airplane  from  GE
  Capital  Services  for  $959,179, (See Note 5) and issuing  a  note  to  Mr.
  Fountain in the amount of $415,821 (See Note 5).

  As  of  June 30,1999 and 1998 the Company had receivables and advances  from
  employees  of  the Company amounting to $39,658 and $77,574, respectively
  which  includes $36,808 and $48,624, respectively from Mr. Fountain.

  The  Company  paid $478,576, $288,915 and $547,436 for the year  ended  June
  30,  1999, 1998 and 1997 for advertising and public relations services  from
  an entity owned by a director of the Company.

  Prior to June 30, 1997, the Company received consulting fees pursuant  to  a
  consulting  agreement  with  a  vendor of  the  Company.  Mr.  Fountain  has
  assigned  these  consulting fees to the Company.   Included  in  other  non-
  operating  income  are  consulting fees earned by the Company  amounting  to
  $498,307  for  Fiscal  1998  and $260,000 for Fiscal  1997.  The  consulting
  agreement expired on June 30, 1997 and has not been re-negotiated.

                                     41
<PAGE>


              FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11.  Transactions with Related Parties. [Continued]

  During 1998, the Company's President purchased a vehicle in the name of the
  Company.  All payments on the vehicle are being paid by the President.  The
  transaction has been recorded in the accompanying financial statements as a
  receivable from the president equal to the remaining amount owed on the
  vehicle (See Note 5).


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  1999  one
  dealer  who  accounted for 6.8% of sales and two dealers who each  accounted
  for  6.7% of sales.  For Fiscal 1998 one dealer accounted for 6.7% of sales,
  another  for  6.3%, and one other dealer for 5% of sales.  For  Fiscal  1997
  one  dealer accounted for 6.6% of sales and two other dealers each accounted
  for more than 5% of sales.

Note 13.  Acquisition and Discontinued Operations.

  On  October  11,  1996 Fountain Power, Inc. acquired Mach Performance,  Inc.
  using  the  purchase  method of accounting, in a stock  for  stock  exchange
  (from  a director of the Company) through the issuance of 127,500 restricted
  common  shares  of  the  Company valued at $8.167 per share  or  $1,041,250,
  which  exceeded the fair market value of the net assets of Mach Performance,
  Inc.  by  $411,401.   The  excess was recorded as  goodwill  and  was  being
  amortized  over  20  years. The operations were moved  from  Lake  Hamilton,
  Florida  to  the  Company's plant site near Washington,  North  Carolina  in
  December, 1996.

  During  June, 1997, the Company adopted a plan to discontinue the operations
  of  Mach  Performance  Inc.  and  Fountain  Power,  Inc.   The  accompanying
  financial  statements have been reclassified to segregate  the  discontinued
  operations  from  continuing operations.  Included in the  operating  losses
  from  the  discontinued operations for June 30, 1997 is the  write  down  of
  $395,761  of  remaining goodwill and $461,422 of propeller  inventory  which
  management   believes  is  not  saleable.   The  Company  also  reclassified
  $539,457  in fixed assets to net liabilities of discontinued operations  and
  accrued  a  $440,401 for estimated future losses expected to be incurred  in
  the disposition.

  The  Company  filed  suit on July 21, 1997, against the former  officer  and
  director,  his  wife,  Mach,  Inc., and Mach  Performance,  Inc.  seeking  a
  rescission  of  the Mach Performance, Inc acquisition and  merger  agreement
  and  voidance of the resulting transaction on grounds of fraud and  material
  breach  of  contract.  The former director and his wife filed  counterclaims
  alleging  breach of contract regarding the failure to merge the Company  and
  regarding options issued to the former employee and director.  In a  related
  action,  a  corporate  affiliate of the former  director  was  sued  by  the
  Company  in  a  declaratory judgement action filed  on  September  3,  1997,
  regarding  a  racing sponsorship contract.  The parties involved  reached  a
  confidential settlement of both lawsuits during June 1998. As  a  result  of
  the  settlement agreement, 52,500 shares of common stock valued at  $428,925
  have  been  returned  and cancelled by the Company and  the  30,000  options
  issued in connection with the former officer's employment were cancelled.

                                      42
<PAGE>

              FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 13.  Acquisition and Discontinued Operations. [Continued]

  During  the year ended June 30, 1998, the Company adjusted it estimates  for
  loss  on  disposal  resulting  in a gain on  the  disposal  of  discontinued
  operations of $290,512 (net of a tax benefit of $272,093).   The gain was  a
  result  of  the return of 52,500 shares of common stock valued at  $428,925,
  less  associated  legal fees of approximately $486,399 plus  adjustments  to
  the estimated loss on disposal of approximately $75,893.

  The  following is a condensed proforma statement of operations that reflects
  what the presentation would have been for the years ended June 30, 1999  and
  1998  without  the  reclassifications required by "discontinued  operations"
  accounting principles:
                                         1998       1997
                                   _____________   _____________
         Net sales                 $ 50,652,037    $ 50,954,753
         Cost of goods sold         (38,084,034)    (39,132,978)
         Other operating expenses    (8,894,121)    (10,127,760)
         Other income (expense)        (147,403)       (123,637)
         Provision for taxes           (785,992)       (330,427)
                                   _____________   _____________
         Net income                $  2,740,487     $ 1,239,951
                                   _____________   _____________
         Earnings per share        $        .58     $       .25
                                   _____________   _____________


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, 1999,  1998
and 1997:

                                            For the years ended June 30,
                                      ________________________________________
                                          1999          1998          1997
                                      ____________  ____________  ____________
  Income from continuing operations
   available to common stockholders   $(1,255,791)  $ 2,439,556   $ 4,069,832
                                      ____________  ____________  ____________
  Weighted average number of common
   shares outstanding used in basic
   earnings per share                   4,711,896     4,751,779     4,664,251

  Effect of dilutive securities:
   Stock options                                -       358,311       429,038

  Weighted number of common shares
   and potential dilutive common
   shares outstanding used in
   dilutive earning per share           4,711,896     5,110,090     5,093,289
                                      ____________  ____________  ____________

The Company had at June 30, 1999 options to purchase 546,000 shares of common
stock at prices ranging from $3.58 to $5.00 per share that were not in the
computation of earnings per share because their effect was anti-dilutive.

                                     43
<PAGE>


              FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Note 16. 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  at  June
  30, 1999 under capital lease obligations is as follows:

                                             1999
                                          ___________
     Equipment                              $ 89,659
     Less: accumulated amortization               (-)
                                           __________
                                            $ 89,659
                                           __________

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

  Future minimum lease payments for the years ended June 30,:

    Year ending June 30,                         Lease Payments
            2000                                     39,552
            2001                                     39,552
            2002                                     39,552
            2003                                     39,552
            2004                                     54,140
                                                 ______________
      Total future minimum lease payments          $212,348
      Less: amounts representing maintainance
       and usage fee, interest and executory
       costs                                       (123,621)
                                                 ______________
      Present value of the future minimum
        lease payments                               88,727
      Less: Lease current portion                   (11,788)
                                                 ______________
      Capital lease obligations - long term       $  76,939
                                                 ______________


                                     44
<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.

                                     45
<PAGE>

                                   Part III

Item 10.  Directors and Executive Officers of Registrant.

     The Current directors of Registrant and its Subsidiary are as Follows:

REGINALD  M.  FOUNTAIN,  JR.,  age 59, 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  54,  Executive Vice President  and  Chief  Operating
Officer,  became a director of the Company on March 2, 1999.  Mr. Romersa  joins
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.

DARRYL  M. DIAMOND, M. D., age 62, is a retired physician.  From 1984  to  1986,
Dr. Diamond served as a director of the Company's subsidiary.

GEORGE  L.  DEICHMANN,  III,  age  55, is  the  President  and  owner  of  Trent
Olds/Cadillac/Buick/GMC, an automobile dealership located  in  New  Bern,  North
Carolina.

CRAIG  F.  GOESS,  age  45, is the President and General Manager  of  Greenville
Toyota, an automobile dealership located in Greenville, North Carolina.

FEDERICO  PIGNATELLI,   age 46, became a director of the  Company  on  April  8,
1992.   Mr.  Pignatelli  is  the U.S. Representative  of  Eurocapital  Partners,
Ltd.,  and  investment  banking  firm.  From 1989  to  April,  1992,  he  was  a
Managing  Director at Gruntal & Company, an investment banking firm.  From  1988
to  1989,  he  was  General  Manager  of  Euromobiliar  Ltd.,  a  subsidiary  of
Euromobiliare, SpA, a publicly held investment and merchant bank  in  Italy  and
Senior  Vice  President  of  New  York and Foreign  Securities  Corporation,  an
institutional  brokerage firm in New York.  From 1986 to 1988, he  was  Managing
Director  at Ladenburg, Thalmann & Co.,  an investment banking firm.  From  1980
to  1986, he was Assistant Vice President of E. F. Jutton International.   Prior
to  1980,  he  was  a financial journalist.  Mr. Pignatelli  was  elected  as  a
director of the Company pursuant to the right of Eurocapital Partners,  Ltd.  to
designate  one  member of the Board of Directors in connection  with  a  private
placement  of  the  Company's  Common Stock.   Mr.  Pignatelli  also  serves  as
chairman  of  BioLase  Technology, Inc., a company which  produces  medical  and
dental  lasers  and endodontic products.  Formerly, he served as a  director  of
MTC  Electronic  Technologies  Co.,  Ltd., a  NASDAQ/NMS  company,  and  of  CST
Entertainment  Imaging,  Inc., and American Stock Exchange  Company  engaged  in
colonizing black and white film.

MARK  SPENCER,  age  43, became a director on February  26,  1992.   He  founded
Spencer  Communications, 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  seven  years  Mr. Spencer has served as on-camera expert  commentator  for
ESPN covering the boating industry.

                                      46
<PAGE>


      In  addition  to  Mr. Fountain, who is listed above as a  director,  other
executive officers of the Company are as follows:

JOSEPH  F.  SCHEMENAUER,  age 53, was appointed Vice  President  -  Finance  and
Chief  Financial  Officer in September, 1997.  Mr. Schemenauer has  over  twenty
years  experience as Chief Financial Officer and or Controller  in  the  boating
industry,  primarily  with Chris Craft Corporation (and its  successors,  Murray
Chris  Craft  Sportboats,  Inc. and Murray Chris Craft  Cruisers,  Inc.),  Donzi
Marine   Corporation,   Wellcraft  and  Triumph  Yachts  Divisions   of   Genmar
Industries, Inc. and Luhrs Corporation.

BLANCHE  C.  WILLIAMS,  age 65, has been Corporate Secretary  and  Treasurer  of
the  Company  since  August, 1986,  and has held the  same  positions  with  the
Company's  Subsidiary  since  it was formed during  1979.   Mrs.  Williams  also
served  as  Executive  Assistant to the President  from  1979  to  1988  and  is
currently serving in that capacity.


Item 11.  Executive Compensation.

The  following table sets forth the compensation awarded, paid to or  earned  by
the  Company's  Chief Executive Officer and Chief Operating  Officer,  the  only
executive  officers  of  the  Company whose compensation  exceeded  $100,000  in
Fiscal 1999, 1998, and 1997.

Name and Principal         Fiscal   Annual Compensation   Long-term     Stock
    Position                Year    Salary(1)  Bonus(2)  Compensation  Options

Reginald M. Fountain Jr.    1999    $350,000   $  -0-     $  -0-         -0-
Chairman, President and     1998    $350,000   $218,017   $  -0-         -0-
Chief Executive Officer     1997    $350,000   $ 78,519   $  -0-         -0-

Anthony J. Romersa          1999    $134,808   $  -0-     $  -0-        30,000
Executive Vice President,
Chief Operating Officer


(1)   The  Board  of Directors increased Mr. Fountain's annual  base  salary  to
$285,000  for  the    period March 30, 1995 to March 30, 1996  and  to  $350,000
for  Fiscal  1997  forward.   The amounts shown do  not  include  the  value  of
certain  personal  benefits  received in addition  to  cash  compensation.   The
aggregate  value  of such personal benefits received was less than  ten  percent
(10%) of the total cash compensation paid.

(2)   The  bonuses paid to Mr. Fountain for Fiscal 1997 and 1998 were authorized
by  the  Board on May 1, 1994.  His bonus represents 5% of net income after  the
profit  sharing  distribution, if any, but before  income  taxes  limited  to  a
maximum of $250,000.

(3)   Mr.  Fountain does not participate in the Company's 401 (k) Plan  and  has
no other long-term compensation, other than stock options.


      The  Following  table contains information concerning the grant  of  stock
options to the named executive officer in Fiscal 1995:

                                       47
<PAGE>


Name  ..........................................    Reginald M. Fountain, Jr.

Number of securities underlying options/SARS
 granted .......................................             450,000


Percent of total options/SARS granted to
 employees in the fiscal year ..................               100%

Exercise price .................................             $4.667

Expiration date ................................             8/04/05



      The  following table contains information concerning the exercise of stock
options  and  employment related options and information concerning  unexercised
stock options held as of June 30, 1998 by the named executive officer:






Name ...........................................    Reginald M. Fountain, Jr.

Shares acquired on exercise ....................               -0-

Market value at time of exercise less exercise
 price, or value realized ......................               -0-

Number of unexercised options & warrants:

       Exercisable options .....................             480,000
       Non-Exercisable .........................               -0-

Value of unexercised in-the-money options at
 June 30, 1999,
       Exercisable .............................             $1,584(1)

(1)   The  closing sale price of the Common stock on Tuesday, June 30, 1999  was
$4.625.  Value equals the difference between market value and exercise price.

      In  October,  1995, the Financial Accounting Standards Board  issued  SFAS
No.  123,  "Accounting for Stock Based Compensation".  SFAS No.  123  permits  a
company  to  choose either a new fair value based method of accounting  for  its
stock  based  compensation  arrangements or  to  comply  with  the  current  APB
Opinion  25  intrinsic  value based method adding pro forma  disclosure  of  net
income  and  earnings per share computed as if the fair value based  method  had
been  applied  in  the  financial statements.  SFAS No.  123  is  effective  for
fiscal  years beginning after December 15, 1995.  The Company adopted  SFAS  No.
123  in  1997 using pro forma disclosures of net income and earnings per  share.

                                       47
<PAGE>


The  impact  of  stock  options on the Company's pro forma  disclosures  of  net
income  and  earnings  per  share calculations is disclosed  in  the  "Notes  To
Consolidated Financial Statements" contained within this report.


Directors' Compensation.

      Outside  Directors  of the Company currently do not receive  any  fees  or
other  compensation  for their services as directors, but  they  are  reimbursed
for   travel   and  other  out-of-pocket  expenses  in  connection  with   their
attendance at meetings of the Board of Directors.

      In  Fiscal  1995,  each non-employee director (Messrs. Pignatelli,  Mazza,
Garbrecht,  and  Spencer) was granted non-qualified stock  options  to  purchase
30,000  common  shares at $3.5833 per share.  These non-qualified stock  options
awarded  to  the outside directors were not under any of the Company's  existing
stock  option  plans.   Mr. Pignatelli exercised a portion  of  his  options  to
purchase  24,000  shares during Fiscal 1997.   Mr. Mazza exercised  all  of  his
options  during  July 1997.  Mr. Garbrecht exercised his options  during  Fiscal
1999.   Mr.  Spencer  retains his issued stock options of  30,000  shares.   Mr.
Garbrecht  resigned  as  a director in April 1997 and  Mr.  Mazza  was  not  re-
elected as a director at the Fiscal year 1998 annual meeting.

Employment Agreement.

      Reginald  M.  Fountain,  Jr.  serves as  the  Company's  President,  Chief
Executive  Officer,  and  Chief  Operating Officer  pursuant  to  an  employment
agreement  entered  into  during  1989.  The agreement  provides  for  automatic
extensions  of  one-year  periods until terminated.  Under  the  agreement,  Mr.
Fountain  receives  a  base salary approved by the Board  of  Directors  and  an
annual  cash  bonus based upon the Company's net profits before taxes.   On  May
1,  1994,  the  Board of Directors authorized an increase in  the  annual  bonus
payment  to  Mr.  Fountain  to  5%  of  net  income  after  the  profit  sharing
distribution  but  before  income  taxes  limited  to  a  maximum  of  $250,000.
Bonuses  of  $218,017 for Fiscal 1998, $78,519 for Fiscal 1997 and $199,984  for
Fiscal  1996  were earned by Mr. Fountain.  No bonus was paid  in  Fiscal  1999.
The  agreement  terminates  upon  death or permanent  disability.   The  current
agreement  replaced  a  similar agreement with Mr. Fountain  that  had  been  in
effect from December, 1986 to 1989.

      Anthony  J. Romersa joined the Company during the first quarter of  Fiscal
1999  and  serves  as  Executive  Vice President  and  Chief  Operating  Officer
pursuant  to  an  employment agreement entered into at  that  time.   Under  the
agreement,  Mr. Romersa receives a base salary set by the Board of Directors  at
a  rate  of $160,000 annually and an annual bonus payment equal to 1% of  pretax
earnings.  This agreement runs for a period of three years.

Stock Option Plans.

      During  1987,  shareholders  of the Company approved  the  1986  Incentive
Stock  Option  Plan.  The Plan is administered by the Board of  Directors  which
may,  in  its discretion, from time to time, grant to officers and key employees
options  to  purchase share of the Company's common stock.   Directors  who  are
not  officers or employees of the Company or its Subsidiary are not eligible  to
be granted options under the 1986 plan.

      The  1986 Plan provides that the purchase price per share of common  stock
provided  for  in  options granted should not be less  than  100%  of  the  fair

                                      48
<PAGE>


market  value of the stock at the time the option is granted.  However,  in  the
case  of  an  optionee who possesses more than 10% of the total combined  voting
power  of  all classes of the Company's stock, the purchase price shall  not  be
less than 110% of the fair market value of the stock on the date of the grant.

      No  consideration is payable to the Company by an optionee at the time  an
option  is  granted. Upon exercise of an option, payment of the  purchase  price
of  the  common stock being purchased shall be made to the Company in  cash,  or
at  the  discretion of the Board of Directors, by surrender of a promissory  not
from  the  optionee, or by surrender of shares of common stock already  held  by
the  optionee which shall be valued at their fair market value on the  date  the
option  is  exercised,  or by any combination of the foregoing.   Also,  payment
may  be  in installments, and upon such other terms and conditions as the  Board
of Directors, in its discretion, shall approve.

      Under  the  1986  Plan, the aggregate fair market  value  of  shares  with
respect  to  which options are exercisable for the first time by an employee  in
any calendar year generally may not exceed $100,000.

      The  term of each option granted under the Plan is determined by the Board
of  Directors,  but may in no event be more than ten years from  the  date  such
option  is granted.  However, in the case of an option granted to a person  who,
at  the  time the option is granted, owns stock possessing more than 10% of  the
total  combined  voting power of all classes of stock of the Company,  the  term
of  the option may not be for a period of more than five years from the date  of
grant.   Unless  the Board of Directors determines otherwise, no option  may  be
exercised  for one year after the date of grant.  Thereafter, an option  may  be
exercised  either  in  whole or in installments as shall be  determined  by  the
Board  of  Directors  at  the time of the grant for each  option  granted.   All
rights  to  purchase  stock pursuant to an option, unless sooner  terminated  or
expired, shall expire ten years from the date option was granted.

      Upon  the  termination  of optionee's employment  with  the  Company,  his
option  shall  be  limited  to the number of shares  for  which  the  option  is
exercisable  by  him  on  the date of his termination of employment,  and  shall
terminate  as  to  any  remaining shares.  However,  if  the  employment  of  an
optionee  is  terminated for "cause" (as defined in the  Plan),  the  optionee's
rights  under any then outstanding option immediately terminate at the  time  of
his  termination of employment.  No option shall be transferable by an  optionee
otherwise than by will or the laws of descent and distribution.

      Under  the 1986 Plan, a maximum of 300,000 shares of the Company's  common
stock  have  been reserved for issuance.  In the event of a stock dividend  paid
in  shares of the common stock, or a recapitalization, reclassification,  split-
up  or  combination of shares of such stock, the Board of Directors  shall  have
the  authority to make appropriate adjustments in the members of shares  subject
to  outstanding  options  and the option prices relating  thereto,  and  in  the
total  number  of shares reserved for the future granting of options  under  the
Plan.

      During  1989 the Board of Directors amended the Plan to delete a provision
requiring  that  options granted to any one employee be exercised  only  in  the
sequential  order in which they were granted.  That provision at one  time  was,
but  is  no  longer, required by the Internal Revenue Code, as  amended,  to  be
contained in incentive stock option plans.

      During Fiscal 1995 options to purchase 30,000 shares were awarded  to  Mr.
Fountain  at  $3.9417 ($3.5833 X 110%) per share and options to purchase  30,000
share  were awarded to the Chief Financial Officer at $3.667 per share.  Of  the
options  granted  in previous years, all had expired by June 30,  1996.   During
Fiscal  1997  options  to  purchase 30,000 shares were exercised  by  the  Chief
Financial Officer.  The 1986 Plan terminated on December 5, 1996.

                                     49
<PAGE>


      On  June 21, 1995, a Special Meeting of the shareholders was held to  vote
upon  the  adoption of the 1995 Stock Option Plan.  The new Plan as  adopted  by
the  Shareholders allowed for up to 450,000 common stock options to  be  granted
by  the Board of Directors to employees or directors of the Company on either  a
qualified  or non-qualified basis.  Subsequently, on August 4, 1995,  the  Board
unanimously  voted  to grant the entire 450,000 stock options  authorized  under
the  1995  Stock  Option Plan to Mr. Reginald M. Fountain,  Jr.  at  $4.667  per
share  on  a  non-qualified basis.  None of the options granted to Mr.  Fountain
under  the  1995 Plan have been exercised.  The expiration date of  the  options
granted to Mr. Fountain is August 4, 2005.

      During  Fiscal 1995, each of the four non-employee directors  was  granted
non-qualified  stock  options to purchase 30,000 common shares  at  $3.5833  per
share.   These  non-qualified stock options awarded  to  the  outside  directors
were  not  under  any  of  the  Company's existing  stock  option  plans.   (See
Directors' Compensation for status)

     During  January  1999,  the Board of Directors adopted  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 options to employees,  officers,
directors  and  consultants  of  the Company.  The  plan  was  approved  by  the
shareholders of the Company during March 1999.

401 (k) Payroll Savings Plan.

      The  Company  currently has 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 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 benefit plans in effect.

Performance Table.

      The  following  table  was  prepared by  Research  Data  Group,  Inc.   It
compares  the Company's cumulative total shareholder return with a stock  market
performance  indicator  (S.  & P. 500 Index) and an  industry  index  (S.  &  P.
Leisure  Time).  The table assumes a base point of June 30, 1994 to be equal  to
$100.00   Accumulated  returns  are noted through  June  30,  1999.   Each  time
period  covered  by the table gives the dollar value of the investment  assuming
monthly  reinvestment  of  dividends.  The  Company  has  never  paid  any  cash
dividends.

                                  50
<PAGE>


                 COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
         AMONG FOUNTAIN POWERBOAT INDUSTRIES, INC., THE S&P 500 INDEX
                   AND THE S&P LEISURE TIME (PRODUCTS) INDEX


         *     $100 INVESTED ON 6/30/94 IN STOCK OR INDEX
     INCLUDING REINVESTMENT OF DIVIDENDS.
     FISCAL YEAR ENDING JUNE 30.


      As  can  be seen from the table, the total return to shareholders  of  the
Company's  common  stock over the past five years compares to  the  S  &  P  500
stocks  and  the S & P Leisure Time stocks through 1998 and the S  &  P  Leisure
Time stocks through 1999.


Board Report on Executive Compensation.

      The  entire  Board of Directors, including its Chairman, Mr.  Reginald  M.
Fountain,  Jr.,  who  also  serves as the Company's President,  Chief  Executive
Office,   and   Chief   Operating  Officer  has   prescribed   unanimously   the
compensation  amounts for the Company's executive officers.  These  compensation
amounts  are  deemed  adequate by the Board based upon its judgment  as  to  the
qualifications,   experience,  and  performance  of  the  individual   executive
officers,  as  well  as, the Company's size, complexity, growth,  and  financial
performance.

                                         51
<PAGE>


      During  Fiscal  1995,  recognizing the Company's much  improved  financial
performance  under  his  leadership, the Board increased Mr.  Fountain's  salary
from $285,000 to $350,000 beginning March 30, 1996 and thereafter.

      The  entire  Board  has also approved Mr. Fountain's employment  agreement
with  the  Company,  more  fully described above (Item  11),  under  "Employment
Agreements",  which  provides for a minimum base salary and  annual  cash  bonus
equal  to  five  percent  of  the  Company's net profits  after  profit  sharing
distribution  but  before  income  taxes  limited  to  a  maximum  of  $250,000.
Bonuses  earned by Mr. Fountain for Fiscal 1999 were -0-, for Fiscal  1998  were
$218,017 and for Fiscal 1997 amounted to $78,519.

Compliance with Section 16.

     Not applicable.

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

      Principal  Shareholders.  The following table sets  forth  the  beneficial
ownership  of  the  Company's  Common Stock as of September  1,  1999,  by  each
person  known to the Company to beneficially own more than five percent (5%)  of
the   Company's  Common  Stock.   This  table  had  been  prepared  based   upon
information provided to the Company by each Shareholder:




      Name and                     Amount of Beneficial         Percent of
      Address                            Ownership               Class (3)

Reginald M. Fountain, Jr.
P.O. Drawer 457
Whichard's Beach Road
Washington, N.C. 27889                   2,569,372(1)             48.68%

Triglova Finanz, A.G.
P.O. Box 1824
52nd Street
Urbanization Obarrio
Torre Banco Sur, 10th Floor
Panama City, Republic of Panama            266,500(2)              5.05%


(1)   Mr.  Fountain  has sole voting and investment power with  respect  to  all
shares  shown  as beneficially owned.  Includes options to acquire 480,000
shares of common stock.

(2)   The Company is informed that the shares shown as beneficially  owned  by
Triglova  Finanz,  A.G. are owned directly by it, and it  claims  shared  voting
and  investment  power  with  respect to all such shares  held  by  Mr.  Filippo
Dollfus  De  Vockersberg, C/O Fider Service, 1 Via Degli  Amadio  6900,  Lugano,

                                    52
<PAGE>


Switzerland.  Mr. Dollfus had been authorized to act as  attorney-in-fact for
Triglova  Finanz,  A.G.,  and, therefore, claims  shared voting and investment
power with respect to such shares.

(3)   The  percentage  for  each  person is  calculated  on  the  basis  of  the
Company's  total      outstanding shares less the 15,000  shares  owned  by  the
Company's Subsidiary.


Directors   and  Officers.   The  following  table  sets  forth  the  beneficial
ownership  of the Company's common stock as of September 1, 1999,  for  each  of
the  Company's  current directors, and for all directors  and  officers  of  the
Company as a group.

     Name                             Amount of                      Percent
      and                             Beneficial                       of
    Address                           Ownership                      Class (3)

Reginald M. Fountain, Jr.(1)           2,569,372(2)                   48.68%

Anthony J. Romersa(1)                     30,000(2)                    (3)

Mark L. Spencer(1)                        33,400(2)                    (3)

Federico Pignatelli(1)                    26,000(2)                    (3)

Blanche C. Williams(1)                       800                       (3)

Darryl M. Diamond, M.D.(1)                   -0-                       (3)

George L. Deichmann, III(1)                  -0-                       (3)

Craig F. Goess(1)                            -0-                       (3)

Joseph F. Schemenauer(1)                     -0-                       (3)

All directors and officers as
a group (6 persons)                    2,659,572(2)                   50.38%


(1)        The  address  of  each person is P.O. Drawer  457,  Whichard's  Beach
Road,  Washington,   North Carolina  27889.  Except as otherwise  indicated,  to
the  best knowledge of management of the Company, each of the persons listed  or
included  in  the  group has sole voting and investment power  over  all  shares
shown  as  beneficially owned.  Percentages for each person listed and  for  the
group  are  calculated  on the basis of the Company's total  outstanding  shares
less the 15,000 shares owned by the Company's Subsidiary.

(2)   For  Mr. Fountain, includes options to purchase 480,000 shares  of  common
stock  held.  For  Messrs. Romersa, Spencer and Pignatelli includes  options  to
purchase  30,000, 30,000 and 6,000 common shares respectively.   Mr.  Pignatelli
has already exercised 24,000 options shares.

(3)  Less than 1%
                                   53
<PAGE>


Item 13.  Certain Relationships and Related-Party Transactions.

      The  following  is  a  schedule of related party transactions  for  Fiscal
1999,  1998  and  1997.  No interest was paid to Mr. Fountain  in  Fiscal  1997.
The  Company  has  paid  rentals at what it believes to  be  their  fair  market
values  during the last three fiscal years to Mr. Fountain or to entities  owned
by him as follows:

                                    Fiscal         Fiscal         Fiscal
                                     1999           1998           1997

Apartment Rentals............     $ 19,731       $  6,717       $ 17,260

R. M. Fountain, Jr.
     - airplane rentals .....     $   -0-        $107,312       $296,498

     - interest .............     $ 20,447       $ 26,509       $  -0-

                                  --------       --------       --------
                                  $ 40,178       $140,538       $313,758
                                  ========       ========       ========

      The rentals paid to Eastbrook Apartments and Village Green Apartments  are
primarily  for temporary lodging for relocating and transient Company  personnel
and  visitors.   The  rentals paid for the airplane are based  upon  the  actual
hours  that  the airplane was used for Company business plus a monthly  stand-by
charge  for  the exclusive use of the airplane.  The airplane rentals  ended  in
September  1997.  During the first quarter of Fiscal 1998 the Company  purchased
an  airplane  from  Mr. Fountain for $1,375,000.  Principal  financing  for  the
airplane  is  through  General  Electric Capital  Corporation.   A  second  note
payable to Mr. Fountain for $415,821 was paid off during Fiscal year 1999.

      Mr.  Gary  D. Garbrecht was a director of the Company through  April  1997
and  the  President  and  sole  shareholder of  Mach  Performance,  Inc.   which
supplied  the Company's subsidiary with some of its requirements for  propellers
and  other  accessory items.  The Company paid Mach Performance,  Inc.  $254,623
in  Fiscal  1997.   The  Company  acquired Mach Performance,  Inc.  for  127,500
shares  of  common  stock during Fiscal 1997.  At the end of  Fiscal  1997,  the
Company  ceased operations of Fountain Power, Inc., the operating  Company  into
which  Mach Performance was contained and filed suit during Fiscal 1998  seeking
rescission of the acquisition and merger agreement.  On June 10, 1998,  a  Court
mediated legal settlement was reached between the parties.  Refer to note  13  -
Acquisition   and   Discontinued  Operations  in  the   Consolidated   Financial
Statements contained herein.

     Mr.  Mark  L.  Spencer is a director of the Company and the  President  and
sole  shareholder  of  Spencer Communications, Inc. which furnishes  advertising
and   public   relations  services  the  Company.   The  Company  paid   Spencer
Communications,  Inc.  $478,576 in Fiscal 1999,  $288,915  in  Fiscal  1998  and
$547,436 in Fiscal 1997.

                                      54
<PAGE>



                                    Part IV


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

       (1)  Exhibits.  The following exhibits are filied with this report:
                                                                Page No.

     10.1 - 1999 Employee Stock Option Plan                         59

     10.2 - Stock Option Agreement dated January 1999               74

     10.3 - Employment Agreement dated August 24, 1998 with         81
            Anthony J. Romersa and the Company's Subsidiary

       27 - Financial Data Schedule                                58


        (2)  No Amendments on Form 8 or Current Reports on Form 8-k were
             filed by the Registrant during the quarter ended June 30, 1999.

                                     55
<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 POWERBOATS INDUSTRIES, INC.

By: /s/ Reginald M. Fountain, Jr.                      September 15, 1999
     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 15, 1999
Chairman, President, and Chief Executive Officer
(Principal Executive Officer)


/s/ Anthony J. Romersa                                 September 15, 1999
Executive Vice President, and
Chief Operating Officer


/s/ Darryl M. Diamond, M. D.                           September 15, 1999
Director


/s/ George L. Deichmann, III                           September 15, 1999
Director


/s/ Craig F. Goess                                     September 15, 1999
Director


/s/ Federico Pignatelli                                September 15, 1999
Director


/s/ Mark  L Spencer                                    September 15, 1999
Director


/s/ Joseph F. Schemenauer                              September 15, 1999
Chief Financial Officer
(Principal Accounting and Financial Officer)

                                  56