----

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**U.S.      SECURITIES AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

----

**FORM      10-Q**

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| **x** | **QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934** |
|-------|------------------------------------------------------------------------------------------------------------------------------------------|

**For      the quarterly period ended December 31, 2006**

**OR      **

| ** ̈** | **TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934** |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------|

**For      the transition period from **
**            **
**      to **
**            **
** **

***Commission      File Number 0-14712***

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**FOUNTAIN      POWERBOAT INDUSTRIES, INC. **

**(Exact      name of registrant as specified in its charter) **

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|                                                                                                |                                                                      |
|-----------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------|
| **Nevada**                                                                                          | **56-1774895**                                                            |
| **(State                or other jurisdiction of****incorporation                or organization)** | **(I.R.S.                employer****identification                No.)** |

**Whichard’s      Beach Road, P.O. Drawer 457, Washington, NC 27889**

**(Address      of principal executive offices)**

**Registrant’s      telephone no. including area code: (252) 975-2000**

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|                                        |   |                                                |
|---------------------------------------------|--------|-----------------------------------------------------|
| **Class**                                   |   | **Outstanding                at December 31, 2006** |
| Common                Stock, $.01 par value |   | 4,834,275                shares                     |

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**FOUNTAIN      POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY **

**INDEX      **

|             |                                                                                                                                                                         | **Page No.**               |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------|
|             |                                                                                                                                                                         |                                 |
| **Part I**  | **Financial                Information**                                                                                                                                     |                                 |
|             |                                                                                                                                                                         |                                 |
|             | Item                1. Financial Statements                                                                                                                                  |                                 |
|             |                                                                                                                                                                         |                                 |
|             | Unaudited                Condensed Consolidated Balance Sheets, December 31, 2006 and June                30, 2006                                                           | 3                -                4  |
|             |                                                                                                                                                                         |                                 |
|             | Unaudited                Condensed Consolidated Statements of Operations, for the three months                and                six months ended December 31, 2006 and 2005 | 5                -                6  |
|             |                                                                                                                                                                         |                                 |
|             | Unaudited                Condensed Consolidated Statements of Cash Flows, for the six months                ended                December 31, 2006 and 2005                  | 7                                    |
|             |                                                                                                                                                                         |                                 |
|             | Notes                to Unaudited Condensed Consolidated Financial Statements                                                                                                | 8                -                12 |
|             |                                                                                                                                                                         |                                 |
|             | Item                2. Management’s Discussion and Analysis of Financial Condition and Results                of Operations                                            | 13                - 15               |
|             |                                                                                                                                                                         |                                 |
|             | Item                3. Quantitative and Qualitative Disclosures of Market Risk                                                                                               | 15                                   |
|             |                                                                                                                                                                         |                                 |
|             | Item                4. Controls and Procedures                                                                                                                               | 15                                   |
|             |                                                                                                                                                                         |                                 |
| **Part II** | **Other                Information**                                                                                                                                         |                                 |
|             |                                                                                                                                                                         |                                 |
|             | Items                1, 2, 3, 4, 5 & 6                                                                                                                                   | 15                - 16               |
|             |                                                                                                                                                                         |                                 |
|             | Signature                                                                                                                                                                    | 17                                   |
|             |                                                                                                                                                                         |                                 |
|             | Exhibits                                                                                                                                                                     | 18                - 21               |

----

**PART      I.**
**      FINANCIAL INFORMATION. **

**ITEM 1:**
**      Financial Statements. **

**FOUNTAIN      POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY **

**UNAUDITED      CONDENSED CONSOLIDATED BALANCE SHEETS **

|                                                  |   |                                      |        |                      |   |
|-------------------------------------------------------|--------|-------------------------------------------|-------------|---------------------------|--------|
|                                                  |   | **December                  31,****2006** |        | **June 30,****2006** |   |
|                                                  |   |                                      |        |                      |   |
|                                                  |   |                                      |        |                      |   |
| **ASSETS**                                       |   |                                      |        |                      |   |
| CURRENT                  ASSETS:                      |   |                                      |        |                      |   |
| Cash                  and cash equivalents            |   | $                                         | 2,466,989   |                      | $      | 4,474,552 |   |
| Accounts                  receivable, net             |   |                                      | 3,125,914   |                      |   | 3,405,868 |   |
| Inventories                                           |   |                                      | 9,379,114   |                      |   | 6,959,188 |   |
| Prepaid                  expenses                     |   |                                      | 945,593     |                      |   | 849,160 |   |
| Deferred                  tax assets                  |   |                                      | 1,507,215   |                      |   | 1,446,018 |   |
| Total                  Current Assets                 |   |                                      | 17,424,825  |                      |   | 17,134,786 |   |
|                                                  |   |                                      |        |                      |   |   |   |
| Property,                  Plant & Equipment |   |                                      | 49,142,646  |                      |   | 47,898,410 |   |
| Less:                  Accumulated Depreciation       |   |                                      | (31,926,006 | )                         |   | (30,790,537 | ) |
|                                                  |   |                                      | 17,216,640  |                      |   | 17,107,873 |   |
|                                                  |   |                                      |        |                      |   |   |   |
| CASH                  SURRENDER VALUE LIFE INSURANCE  |   |                                      | 2,660,098   |                      |   | 2,552,682 |   |
| OTHER                  ASSETS                         |   |                                      | 1,180,905   |                      |   | 1,065,019 |   |
| TOTAL                  ASSETS                         |   | $                                         | 38,482,468  |                      | $      | 37,860,360 |   |

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**FOUNTAIN      POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY **

**UNAUDITED      CONDENSED CONSOLIDATED BALANCE SHEETS **

|                                                                                                                                                                                             |   |                                          |               |                            |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------------------|---------------------------------|--------|
|                                                                                                                                                                                             |   | **December                31,****2006**  |               | **June 30,****2006**  |   |
|                                                                                                                                                                                             |   |                                          |               |                            |   |
|                                                                                                                                                                                             |   |                                          |               |                            |   |
| **LIABILITIES                AND STOCKHOLDERS’ EQUITY**                                                                                                                               |   |                                          |               |                            |   |
| CURRENT                LIABILITIES                                                                                                                                                               |   |                                          |               |                            |   |
| Current                maturities - long-term debt                                                                                                                                               |   | $                                             | 2,235,257          |                            | $      | 711,984 |   |
| Notes                payable                                                                                                                                                                     |   |                                          | 2,692,156          |                            |   | — |   |
| Accounts                payable - trade                                                                                                                                                          |   |                                          | 2,989,156          |                            |   | 3,861,061 |   |
| Accrued                expenses and other liabilities                                                                                                                                            |   |                                          | 1,146,178          |                            |   | 1,253,714 |   |
| Dealer                incentives                                                                                                                                                                 |   |                                          | 6,323,250          |                            |   | 6,367,229 |   |
| Customer                deposits                                                                                                                                                                 |   |                                          | 119,454            |                            |   | 391,024 |   |
| Allowance                for boat repurchases                                                                                                                                                    |   |                                          | 133,338            |                            |   | 15,459 |   |
| Warranty                reserve                                                                                                                                                                  |   |                                          | 613,685            |                            |   | 632,357 |   |
| Total                Current Liabilities                                                                                                                                                         |   |                                          | 16,252,474         |                            |   | 13,232,828 |   |
|                                                                                                                                                                                             |   |                                          |               |                            |   |   |   |
| OTHER                LONG-TERM LIABILITIES                                                                                                                                                       |   |                                          | 4,827              |                            |   | — |   |
| LONG-TERM                DEBT, less current maturities                                                                                                                                           |   |                                          | 14,855,160         |                            |   | 15,228,700 |   |
| DEFERRED                TAX LIABILITY                                                                                                                                                            |   |                                          | —            |                            |   | 305,133 |   |
|                                                                                                                                                                                             |   |                                          |               |                            |   |   |   |
| COMMITMENTS                AND CONTINGENCIES (Note 4)                                                                                                                                            |   |                                          |     |                            |   |       |   |
| Total                Liabilities                                                                                                                                                                 |   |                                          | 31,112,461         |                            |   | 28,766,661 |   |
|                                                                                                                                                                                             |   |                                          |               |                            |   |   |   |
| STOCKHOLDERS’                EQUITY                                                                                                                                                        |   |                                          |                    |                            |   |  |   |
| Common                stock, $.01 par value, 200,000,000 shares authorized, 4,834,275 shares                issued and outstanding as of December 31, 2006 and June 30,                2006 |   |                                          | 48,342             |                            |   | 48,342 |   |
| Additional                paid-in capital                                                                                                                                                        |   |                                          | 10,558,853         |                            |   | 10,558,853 |   |
| Accumulated                deficit                                                                                                                                                               |   |                                          | (3,196,450         | )                               |   | (1,630,472 | ) |
| Less:                Treasury stock, at cost 15,000 shares                                                                                                                                       |   |                                          | (110,748           | )                               |   | (110,748 | ) |
| Accumulated                other comprehensive income from interest rate swap                                                                                                                    |   |                                          | 70,010             |                            |   | 227,724 |   |
| Total                Stockholders’ Equity                                                                                                                                                  |   |                                          | 7,370,007          |                            |   | 9,093,699 |   |
| **TOTAL                LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                              |   | $                                             | 38,482,468         |                            | $      | 37,860,360 |   |

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**FOUNTAIN      POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY **

**UNAUDITED      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS **

|                                                                 |   |  **For                the Three Months                Ended**     |       |
|----------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------|------------|
|                                                                 |   |  **December                31,****2006**                                         |       |  **December                31,****2005**  |   |
| NET                SALES                                             |   | $                                                                                          | 13,032,786 |   | $ | 18,210,092 |   |
| COST                OF SALES                                         |   |                                                                                       | 11,823,378 |   |   | 15,312,390 |   |
| Gross                Profit                                          |   |                                                                                       | 1,209,408  |   |   | 2,897,702 |   |
| EXPENSES:                                                            |   |                                                                                       |            |   |   |  |   |
| Selling                                                              |   |                                                                                       | 2,208,873  |   |   | 1,230,822 |   |
| General                and administrative                            |   |                                                                                       | 930,366    |   |   | 1,129,651 |   |
| Total                Expenses                                        |   |                                                                                       | 3,139,239  |   |   | 2,360,473 |   |
| OPERATING                INCOME (LOSS)                               |   |                                                                                       | (1,929,831 | ) |   | 537,229 |   |
| NON-OPERATING                INCOME (EXPENSE):                       |   |                                                                                       |            |   |   |  |   |
| Other                                                                |   |                                                                                       | (50,035    | ) |   | 41,516 |   |
| Interest                                                             |   |                                                                                       | (298,249   | ) |   | (259,449 | ) |
| Total                Non-operating (Expense)                         |   |                                                                                       | (348,284   | ) |   | (217,933 | ) |
| INCOME                (LOSS) BEFORE INCOME TAXES                     |   |                                                                                       | (2,278,115 | ) |   | 319,296 |   |
|                                                                 |   |                                                                                       |       |   |   |   |   |
| DEFERRED                TAX BENEFIT                                  |   |                                                                                       | 868,107    |   |   | — |   |
|                                                                 |   |                                                                                       |       |   |   |   |   |
| NET                INCOME (LOSS)                                     |   | $                                                                                          | (1,410,008 | ) | $ | 319,296 |   |
| BASIC                EARNINGS (LOSS) PER SHARE                       |   | $                                                                                          | (.29       | ) | $ | .07 |   |
| WEIGHTED                AVERAGE SHARES OUTSTANDING                   |   |                                                                                       | 4,834,275  |   |   | 4,834,275 |   |
| DILUTED                EARNINGS (LOSS) PER SHARE                     |   | $                                                                                          | (.29       | ) | $ | .07 |   |
| WEIGHTED                AVERAGE SHARES OUTSTANDING ASSUMING DILUTION |   |                                                                                       | 4,834,275  |   |   | 4,848,831 |   |

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**FOUNTAIN      POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY **

**UNAUDITED      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS **

|                                                                 |   | **For                the Six Months                Ended**      |       |
|----------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|------------|
|                                                                 |   | **December                31, 2006**                                           |       | **December                31, 2005**   |   |
| NET                SALES                                             |   | $                                                                                        | 32,446,638 |   | $ | 37,367,828 |   |
| COST                OF SALES                                         |   |                                                                                     | 28,320,613 |   |   | 30,794,012 |   |
| Gross                Profit                                          |   |                                                                                     | 4,126,025  |   |   | 6,573,816 |   |
| EXPENSES:                                                            |   |                                                                                     |            |   |   |  |   |
| Selling                expenses                                      |   |                                                                                     | 4,175,969  |   |   | 2,726,709 |   |
| General                and administrative expenses                   |   |                                                                                     | 1,877,692  |   |   | 1,971,454 |   |
| Total                Expenses                                        |   |                                                                                     | 6,053,661  |   |   | 4,698,163 |   |
| OPERATING                INCOME (LOSS)                               |   |                                                                                     | (1,927,636 | ) |   | 1,875,653 |   |
| NON-OPERATING                INCOME (EXPENSE):                       |   |                                                                                     |            |   |   |  |   |
| Other                                                                |   |                                                                                     | (50,011    | ) |   | (51,099 | ) |
| Interest                                                             |   |                                                                                     | (537,438   | ) |   | (808,200 | ) |
| Total                Non-operating (Expense)                         |   |                                                                                     | (587,449   | ) |   | (859,299 | ) |
| INCOME                (LOSS) BEFORE INCOME TAXES                     |   |                                                                                     | (2,515,085 | ) |   | 1,016,354 |   |
|                                                                 |   |                                                                                     |       |   |   |   |   |
| DEFERRED                TAX BENEFIT                                  |   |                                                                                     | 949,107    |   |   | — |   |
|                                                                 |   |                                                                                     |       |   |   |   |   |
| NET                INCOME (LOSS)                                     |   | $                                                                                        | (1,565,978 | ) | $ | 1,016,354 |   |
| BASIC                EARNINGS (LOSS) PER SHARE                       |   | $                                                                                        | (.32       | ) | $ | .21 |   |
| WEIGHTED                AVERAGE SHARES OUTSTANDING                   |   |                                                                                     | 4,834,275  |   |   | 4,834,275 |   |
| DILUTED                EARNINGS (LOSS) PER SHARE                     |   | $                                                                                        | (.32       | ) | $ | .21 |   |
| WEIGHTED                AVERAGE SHARES OUTSTANDING ASSUMING DILUTION |   |                                                                                     | 4,834,275  |   |   | 4,850,788 |   |

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**FOUNTAIN      POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY **

**UNAUDITED      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS **

|                                                                                                                          |   |  **For                the Six Months                Ended**  |       |
|-------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------|------------|
|                                                                                                                          |   | **December                31, 2006**                                   |       | **December                31, 2005** |   |
| CASH                FLOWS FROM OPERATING ACTIVITIES:                                                                          |   |                                                                   |       |   |   |
| Net                income (loss)                                                                                              |   | $                                                                      | (1,565,978 | ) | $ | 1,016,354 |   |
| Adjustments                to reconcile net income (loss) to net cash provided (used) by operating                activities: |   |                                                                   |            |   |   |  |   |
| Depreciation                                                                                                                  |   |                                                                   | 1,135,596  |   |   | 960,161 |   |
| Net                increase in cash surrender value of life insurance                                                         |   |                                                                   | (107,416   | ) |   | (98,967 | ) |
| Deferred                loan costs expensed                                                                                   |   |                                                                   | —    |   |   | 229,801 |   |
| Gain                on termination of interest rate swap                                                                      |   |                                                                   | —    |   |   | (84,524 | ) |
| Loss                on disposal of assets                                                                                     |   |                                                                   | —    |   |   | 11,875 |   |
| Bad                debt expense                                                                                               |   |                                                                   | 35,873     |   |   | 46,171 |   |
| Amortization                                                                                                                  |   |                                                                   | 18,001     |   |   | 25,323 |   |
| Deferred                taxes                                                                                                 |   |                                                                   | (1,047,987 | ) |   | — |   |
| Change                in assets and liabilities:                                                                              |   |                                                                   |            |   |   |  |   |
| Accounts                receivable                                                                                            |   |                                                                   | 244,081    |   |   | (1,679,039 | ) |
| Inventories                                                                                                                   |   |                                                                   | (2,419,926 | ) |   | (481,002 | ) |
| Prepaid                expenses                                                                                               |   |                                                                   | (96,433    | ) |   | (331,228 | ) |
| Other                assets                                                                                                   |   |                                                                   | 390,056    |   |   | 46,829 |   |
| Accounts                payable                                                                                               |   |                                                                   | (871,905   | ) |   | (9,223 | ) |
| Accrued                expenses                                                                                               |   |                                                                   | (107,536   | ) |   | (1,250 | ) |
| Dealer                incentives                                                                                              |   |                                                                   | (43,979    | ) |   | 958,111 |   |
| Customer                deposits                                                                                              |   |                                                                   | (271,570   | ) |   | (541,553 | ) |
| Warranty                reserve                                                                                               |   |                                                                   | (18,672    | ) |   | 7,035 |   |
| Buyback                allowance                                                                                              |   |                                                                   | 117,879    |   |   | (45,867 | ) |
| Other                long-term liabilities                                                                                    |   |                                                                   | 4,827      |   |   | — |   |
| Net                Cash (used) Provided by Operating Activities                                                               |   |                                                                   | (4,605,089 | ) |   | 29,007 |   |
| CASH                FLOWS FROM INVESTING ACTIVITIES:                                                                          |   |                                                                   |            |   |   |  |   |
| Purchase                of property, plant and equipment                                                                      |   |                                                                   | (466,505   | ) |   | (466,888 | ) |
| Investment                in molds and related plugs                                                                          |   |                                                                   | (777,857   | ) |   | (465,886 | ) |
| Net                Cash Used by Investing Activities                                                                          |   |                                                                   | (1,244,362 | ) |   | (932,774 | ) |
| CASH                FLOWS FROM FINANCING ACTIVITIES:                                                                          |   |                                                                   |            |   |   |  |   |
| Proceeds                from notes payable                                                                                    |   |                                                                   | 4,044,918  |   |   | — |   |
| Payments                of notes payable                                                                                      |   |                                                                   | (1,352,762 | ) |   | — |   |
| Proceeds                from long-term debt                                                                                   |   |                                                                   | 1,500,000  |   |   | 16,545,576 |   |
| Proceeds                received upon termination of interest rate swap                                                       |   |                                                                   | —    |   |   | 84,524 |   |
| Payment                of loan origination fees                                                                               |   |                                                                   | —    |   |   | (180,009 | ) |
| Payments                of long-term debt                                                                                     |   |                                                                   | (350,268   | ) |   | (16,414,320 | ) |
| Net                Cash Provided by Financing Activities                                                                      |   |                                                                   | 3,841,888  |   |   | 35,771 |   |
| Net                decrease in cash and cash equivalents                                                                      |   |                                                                   | (2,007,563 | ) |   | (867,996 | ) |
| Cash                and cash equivalents at the beginning of period                                                           |   |                                                                   | 4,474,552  |   |   | 4,013,225 |   |
| Cash                and cash equivalents at the end of period                                                                 |   | $                                                                      | 2,466,989  |   | $ | 3,145,229 |   |

----

**FOUNTAIN      POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY **

**NOTES      TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE      1. BASIS OF PRESENTATION **

**NOTE      2. RECENT ACCOUNTING PRONOUNCEMENTS**

**FIN      48: **
*Accounting      for Uncertainty in Income Taxes-an interpretation of FASB Statement      No. 109*

**FAS      157: **
*Fair      Value Measurements*

**FAS      158: **
*Employers’      Accounting for Defined Benefit Pension and Other Postretirement Plans (an      amendment of FASB Statements No. 87, 88, 106, and 132R) *

----

**SAB      108: **
*** ***
*Considering      the Effects of Prior Year Misstatements When Quantifying Misstatements in the      Current Year Financial Statements (SAB No. 108)*

**NOTE      3. LONG-TERM DEBT AND PLEDGED ASSETS **

*Accounting      for Derivative Instruments and Hedging Activities*

----

**FOUNTAIN      POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY **

**NOTES      TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL      STATEMENTS**

**NOTE      4. COMMITMENTS AND CONTINGENCIES **

**Manufacturer      Repurchase Agreements**

----

**Dealer      Interest**

**Interest      Rate Risk**
** **

**Engine      Supply Agreement **

**NOTE      5. TRANSACTIONS WITH RELATED PARTIES **

**NOTE      6. EARNINGS (LOSS) PER SHARE **

*Earnings      per Share*

|                                                                                                                                                         |   | **For                the Three Months Ended**  |      |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|-----------|
|                                                                                                                                                         |   | **December                31,****2006**             |      | **December                31,****2005**  |   |
| Weighted                average common shares outstanding used in basic earnings per share                for the                three months ending         |   |                                                     | 4,834,275 |   |   | 4,834,275 |   |
|                                                                                                                                                         |   |                                                     |      |   |   |   |   |
| Effect                of dilutive stock options                                                                                                              |   |                                                     | —   |   |   | 14,556 |   |
|                                                                                                                                                         |   |                                                     |           |   |   |  |   |
| Weighted                average common shares and potential dilutive common equivalent shares                outstanding used in dilutive earnings per share |   |                                                     | 4,834,275 |   |   | 4,848,831 |   |
|                                                                                                                                                         |   |                                                     |           |   |   |  |   |

|                                                                                                                                                         |   | **For                the Six Months Ended**  |      |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|-----------|
|                                                                                                                                                         |   | **December                31,****2006**           |      | **December                31,****2005**  |   |
| Weighted                average common shares outstanding used in basic earnings per share                for the                three and six months ending |   |                                                   | 4,834,275 |   |   | 4,834,275 |   |
|                                                                                                                                                         |   |                                                   |      |   |   |   |   |
| Effect                of dilutive stock options                                                                                                              |   |                                                   | —   |   |   | 16,513 |   |
|                                                                                                                                                         |   |                                                   |           |   |   |  |   |
| Weighted                average common shares and potential dilutive common equivalent shares                outstanding used in dilutive earnings per share |   |                                                   | 4,834,275 |   |   | 4,850,788 |   |
|                                                                                                                                                         |   |                                                   |           |   |   |  |   |

----

**NOTE      7. COMPREHENSIVE INCOME**

----

**ITEM 2:**
**      Management’s Discussion and Analysis of Financial Condition and Results of      Operations**

**Results      of Operations **

|   | 1) | Decrease                in the number of cruisers sold by the                Company. |
|--------|----|---------------------------------------------------------------------------------------|

|   | 2) | Disinclination                of some dealers to confirm orders and commitments for                production. |
|--------|----|----------------------------------------------------------------------------------------------------------------|

|   | 3) | Unavailability                of floor plan credit for some                dealers. |
|--------|----|-------------------------------------------------------------------------------------|

|   | 1) | Decrease                in net sales, thus reducing profit margin to cover fixed manufacturing                costs. |
|--------|----|----------------------------------------------------------------------------------------------------------------------|

|   | 2) | Property                insurance rates increased significantly due to the effect of hurricanes                Katrina, Rita and Wilma on the property insurance                industry. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3) | Depreciation                expense increased due to the completion of capital projects for factory                expansion and upgrade, and for tooling for new boat                models. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4) | Production                operation inefficiencies caused by having to adapt the production                workforce for the unplanned decline in sales during the second                quarter. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 5) | Promotional                programs and pricing concessions that were employed in Fiscal 2006                to                maintain sales volume, which were discontinued at June 30, 2006,                carried                over in the order backlog to the first quarter of Fiscal 2007 and                affected                the margins during that period. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 1) | The                Company’s support of offshore racing programs was expanded during the 2006                racing season, which concluded in November 2006, thus increasing                this                sales promotion expense for the six months ended December 31, 2006.                Management plans to curtail its support significantly for next season;                therefore racing support expense is expected to be considerably reduced                in                the second half of the year. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2) | The                Company’s support of tournament fishing programs was increased during 2006                to increase sales of the expanding fish boat product line, thus increasing                this sales promotion expense for the six months ended December 31,                2006.                The enhanced support was very successful and was a direct factor                in the                Company’s increase in fish boat sales by 38% in Fiscal 2006 and by 9% in                the six months ended December 31,                2006. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3) | Advertising                expenses were increased due to increased magazine advertisements                targeted                for the boat show season and the launch of an international magazine                advertising program. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4) | Other                dealer promotion related expenses also were                increased. |
|--------|----|--------------------------------------------------------------------------------------------|

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**Liquidity      and Capital Resources **

**Cautionary      Statement for Purposes of “Safe Harbor” Under the Private Securities Reform Act      of 1995. **

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**ITEM 3:**
**      Quantitative and Qualitative Disclosures about Market Risk.**

**Interest      Rate Risk**
** **

**ITEM 4.      Controls and Procedures **

**PART      II.**
**      OTHER INFORMATION. **

**ITEM 1:**
**      Legal Proceedings. **

**ITEM 1      A:**
**      Risk Factors**

**ITEM 2:**
**      Unregistered Sales of Equity Securities and Use of Proceeds.**

**ITEM 3:**
**      Defaults Upon Senior Securities. **

**ITEM 4:**
**      Submission of Matters to a vote of Security Holders. **

|                                     |   | **Shares Voting****For**  |      | **Withheld**  |   | **Abstentions                and Non-votes**  |   |
|------------------------------------------|--------|-------------------------------------|-----------|--------------------|--------|----------------------------------------------------|--------|
| Reginald                M. Fountain, Jr. |   |                                | 4,534,706 |               |   | 16,186                                             |   |   | — |   |
| A.                Myles Cartrette        |   |                                | 4,058,162 |               |   | 492,730                                            |   |   | — |   |
| George                L. Deichmann, III  |   |                                | 4,541,041 |               |   | 9,851                                              |   |   | — |   |
| Guy                L. Hecker, Jr.        |   |                                | 4,524,106 |               |   | 26,786                                             |   |   | — |   |
| David                C. Miller           |   |                                | 4,526,486 |               |   | 24,406                                             |   |   | — |   |
| Mark                L. Spencer           |   |                                | 4,540,306 |               |   | 10,586                                             |   |   | — |   |
| Anthony                J. Romersa        |   |                                | 4,525,456 |               |   | 25,436                                             |   |   | — |   |
| Anthony                A. Sarandes       |   |                                | 4,067,746 |               |   | 483,146                                            |   |   | — |   |
| Robert                L. Stallings, III  |   |                                | 4,042,862 |               |   | 508,030                                            |   |   | — |   |

----

**ITEM 5:**
**      Other Information. **

**ITEM 6:**
**      Exhibits. **

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**SIGNATURE      **

|                                                           |                                   |                                        |
|----------------------------------------------------------------|----------------------------------------|---------------------------------------------|
| FOUNTAIN                POWERBOAT INDUSTRIES, INC.(Registrant) |                                   |
|                                                           |                                   |                                        |
| By:                                                            | /s/                Irving L. Smith     | Date: February                14, 2007 |
|                                                           | Irving                L. Smith         |                                        |
|                                                           | Chief                Financial Officer |                                        |

----

**EXHIBIT      INDEX **

|                 |   |                                                                                                  |
|----------------------|--------|-------------------------------------------------------------------------------------------------------|
| **Exhibit No.** |   | **Exhibit                Description**                                                                |
|                 |   |                                                                                                  |
| 31.1                 |   | Certification                pursuant to Rule 13a-14(a) by the Chief Executive                Officer |
|                 |   |                                                                                                  |
| 31.2                 |   | Certification                pursuant to Rule 13a-14(a) by the Chief Financial                Officer |
|                 |   |                                                                                                  |
| 32    |   | Certifications                Pursuant to 18 U.S.C.                Section 1350                  |

----