UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 20-F/A
                                Amendment No. 1
(Mark One)
         REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR (G) OF THE
-----    SECURITIES EXCHANGE ACT OF 1934.
                                       OR
         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
------   EXCHANGE ACT OF 1934, FOR THE FISCAL YEAR ENDED ________________.
                                       OR
  X      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
-----    EXCHANGE ACT OF 1934:  Ten Months Ended December 31, 2001

COMMISSION FILE NUMBER  000-30683

                               AYOTTE MUSIC, INC.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

--------------------------------------------------------------------------------
                 (Translation of Registrant's name into English)

          Canada (Federal), under the Canada Business Corporations Act
--------------------------------------------------------------------------------
                 (Jurisdiction of incorporation or organization)

                   c/o Suite 2200, 1055 West Hastings Street,
                    Vancouver, British Columbia, Canada V6E 2E9
--------------------------------------------------------------------------------
                    (Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

     Title of each class            Name of each exchange on which registered
----------------------------     -----------------------------------------------


Securities registered or to be registered pursuant to Section 12(g) of the Act.

                                (Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.
--------------------------------------------------------------------------------
                                (Title of Class)

Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report: 14,494,000 SHARES OF COMMON STOCK.

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) ___ YES X NO, and (2) has been subject to such
filing requirements for the past 90 days. X YES ___ NO. Indicate which financial
statement item the registrant elects to follow: X ITEM 17 ___ ITEM 18.



<PAGE>



                                AYOTTE MUSIC INC.

                                TABLE OF CONTENTS

                                                                        Page No.
                                     PART I

Item 1.  Identity of Directors, Senior Management and Advisors................3

Item 2.  Offer Statistics and Expected Timetable..............................3

Item 3.  Key Information......................................................3

Item 4.  Information on the Company...........................................5

Item 5.  Operating and Financial Review and Prospects........................11

Item 6.  Directors, Senior Management and Employees..........................14

Item 7.  Major Shareholders and Related Party Transactions...................17

Item 8.  Financial Information...............................................17

Item 9.  The Offer and Listing ..............................................17

Item 10. Additional Information. ............................................18

Item 11.  Quantitative and Qualitative Disclosures About Market Risk ........24

Item 12.  Description of Securities Other Than Equity Securities ............24

                                     PART II

Item 13.  Defaults, Dividend Arrearages and Delinquencies ...................24

Item 14.  Material Modifications to the Rights of
          Security Holders and Use of Proceeds...............................24

Items 15 and 16 [Reserved by SEC]............................................24

                                    PART III

Item 17.  Financial Statements...............................................25

Item 18.  Financial Statements...............................................25

Item 19.  Exhibits...........................................................25

Signatures...................................................................26



<PAGE>



                                     PART I

ITEM 1.   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS. Not applicable.

ITEM 2.   OFFER STATISTICS AND EXPECTED TIMETABLE.  Not applicable.

ITEM 3.   KEY INFORMATION.

         A.   SELECTED FINANCIAL DATA.

         In January 2002, the Company changed its fiscal year to calendar year
ending December 31. The table below provides selected financial information
about us covering the past four fiscal financial years ended February 28, and
the ten months ended December 31, 2001. This information, and all other
financial information in this report, is stated in Canadian dollars unless
otherwise noted. For information about the two fiscal years ended February 28,
2001, and the 10 months ending December 31, 2001 (the conclusion of the first
new fiscal year), please see the financial statements and auditor's report. This
report does not contain financial statements for the two fiscal years ended
February 28, 1998.

         Note that the financial information is presented on the basis of
generally accepted accounting principles in Canada. There are no material
differences from applying these principles compared to applying United States
generally accepted accounting principles. Please see the auditor's report.

                                FIVE YEAR SUMMARY


<TABLE>
<CAPTION>
                                                Ten Months                 Fiscal Years Ended Feb. 28,
                                                Ended Dec.   ------------------------------------------------------
OPERATING AND BALANCE SHEET DATA                 31, 2001        2001           2000          1999          1998
                                                ----------       ----           ----          ----          ----

<S>                                            <C>           <C>           <C>           <C>           <C>
Sales, net of excise duties and taxes          $ 1,128,289   $ 1,518,011   $ 2,019,985   $ 2,633,421   $ 2,011,739
Net earnings (loss)                               (234,722)       17,395      (288,256)     (270,347)     (220,765)
Earnings (loss) per common share  basic*             (0.02)      -0-            (0.025)        (0.02)        (0.05)
Capital lease obligations                          -0-           -0-           -0-            14,566        44,742
Total assets                                   $ 1,459,955     1,519,664     1,037,233     1,525,765     1,181,195
Total long-term debt                               -0-           -0-           -0-           -0-           -0-
Dividends per common share                         -0-           -0-           -0-           -0-           -0-
Dividends per preferred share                      -0-           -0-           -0-           -0-           -0-
</TABLE>

         *See Note 9 to the Financial Statements for information on calculation
of this data. Fully diluted data is not presented above, as the effect of
including the potential shares is insignificant.

         B.   CAPITALIZATION AND INDEBTEDNESS.  Not applicable.

         C.   REASONS FOR THE OFFER AND USE OF PROCEEDS.  Not applicable.

         D.   RISK FACTORS AND FORWARD LOOKING STATEMENTS.

         There are significant risks associated with buying our shares. You
should carefully consider the risks of investing as you evaluate our business by
reading all of the information in this document.


                                        3

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         In this document, we are showing you a picture which is part historical
(events which have happened) and part predictive (events which we believe will
happen). Except for the historical information, all of the information in this
document make up "forward looking" statements. Specifically, all statements
(other than statements of historical fact) regarding our financial position,
business strategy and plans and objectives are forward-looking statements. These
forward-looking statements are based on the beliefs of management, as well as
assumptions made by and information currently available to management. These
statements involve known and unknown risks, including the risks resulting from
economic and market conditions, accurately forecasting operating and capital
expenditures and capital needs, successful anticipation of competition which may
not yet be fully developed, and other business conditions. Our use of the words
"anticipate," "believe," "estimate," "expect," "may," "will," "continue" and
"intend" and similar words or phrases, are intended to identify forward-looking
statements (also known as "cautionary statements"). These statements reflect our
current views with respect to future events. They are subject to the realization
in fact of assumptions, but what we now think will happen may be turn out to be
inaccurate or incomplete. We cannot assure you that our expectations will prove
to be correct. Actual operating results and financial performance may prove to
be very different from what we now predict or anticipate. The "risk factors"
below specifically address some of the factors that may influence future
operating results and financial performance.

         RISK FACTORS

         UNLESS AND UNTIL WE CLOSE OUR CONTRACT TO ACQUIRE VERB, WE HAVE NO
OPERATING BUSINESS. On January 14, 2002 (effective as of January 1, 2002) the
company sold all its assets related to the drum business for $400,000 ($200,000
cash and a secured promissory note for $200,000) and a royalty on the
purchaser's net profits. On May 1, 2002 the company signed an agreement to
acquire Verb Exchange, Inc. ("Verb") in a reverse takeover transaction. In
connection with the proposed acquisition, we have loaned cash to Verb ($600,000
at December 31, 2001, which has increased to a total of $1,727,808 at June 30,
2002), and our shareholders have approved the acquisition. However, pursuant to
the agreement with Verb and the requirements of the TSX Venture Exchange, we
can't close the acquisition until $700,000 of additional capital is raised. See
Item 4, "Information on the Company - Sale of Drum Business and Agreement with
Verb."

         Unless and until the Verb acquisition is closed, the company's assets
will consist of limited cash ($90,000 at June 30, 2002), promissory notes from
Verb, and the promissory note from the purchaser of the drum business.

         Closing of the Verb acquisition will be reported immediately thereafter
on Form 6-K.

         IF THE VERB ACQUISITION IS CLOSED, THE RESULTING COMPANY WILL REQUIRE
MORE CAPITAL TO FULLY IMPLEMENT ITS BUSINESS. We expect that if the Verb
acquisition is closed, thereafter the company will have sufficient capital to
operate for the next 12 months. However, substantial additional capital will be
required to fully implement Verb's business strategy. Verb has incurred losses
to date in developing its business, and losses are expected to continue into
mid-2004.

         IF WE HAVE TO RAISE DEBT FINANCING OR SELL SECURITIES IN THE FUTURE,
YOUR RIGHTS AND THE VALUE OF YOUR INVESTMENT IN THE COMMON STOCK COULD BE
REDUCED. If we issue debt securities, the lenders would have a claim to our
assets that would be superior to the stockholder rights. Interest on the debt
would increase costs and negatively impact operating results. If we issue more
common stock or any preferred stock, your percentage ownership will decrease and
your stock may experience additional dilution, and the holders of preferred
stock (called preference securities in Canada) may have rights, preferences and
privileges which are

                                        4

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superior to (more favorable) the rights of holders of the common stock. It is
likely the company will sell securities in the future. The terms of such future
transactions presently are not determinable.

         IF THE MARKET FOR OUR COMMON STOCK IS ILLIQUID IN THE FUTURE, YOU COULD
ENCOUNTER DIFFICULTY IF YOU TRY TO SELL YOUR STOCK. Our common stock is
currently trading on the TSX Venture Exchange but an active trading market may
not be sustained. If there is no active trading market for our common stock, you
may not be able to resell your shares at any price, if at all. It is possible
that the trading market for the common stock in the future will be "thin" or
"illiquid," which could result in increased volatility in trading prices. These
future prices cannot be predicted, and will be determined by the market. The
prices may be influenced by investors' perceptions of us and general economic
conditions. Until our financial performance indicates substantial success in
executing our business model, it is unlikely that significant coverage by stock
market analysts will be extended to us. Without such coverage, institutional
investors are not likely to buy our stock. Until such time, if ever, as such
coverage by analysts and wider market interest develops, the market may have a
limited capacity to absorb significant amounts of trading volumes. You should
read the next risk factor in connection with this discussion. Presently our
stock is not listed for trading in the United States.

         YOUR LEGAL RECOURSE AS A UNITED STATES INVESTOR COULD BE LIMITED. Our
company is incorporated under the laws of the federal jurisdiction of Canada.
Our assets (and most of Verb's assets) are located in Canada. Our directors and
officers and certain of the experts named in this prospectus are residents of
Canada, and all or a substantial portion of their assets are located outside the
United States. As a result, if any of our shareholders were to bring a lawsuit
against our officers, directors or experts in the United States it may be
difficult for them to effect service of legal process in the united States on
those people who are not residents of the United States based upon civil
liability under the Securities Act of 1933 or the Securities Exchange Act of
1934. In addition, we have been advised that a judgment of a United States court
based solely upon civil liability under these laws would probably be enforceable
in Canada if the U.S. court in which the judgment were obtained had a basis for
jurisdiction in the matter. We also have been advised that there is substantial
doubt whether an action could be brought successfully in Canada in the first
instance on the basis of liability predicated solely upon the United States'
laws.

ITEM 4.  INFORMATION ON THE COMPANY.

         A.   HISTORY AND DEVELOPMENT OF THE COMPANY.

         Through December 31, 2001, the company was in the business of making
and selling music drums and drum-related accessories and products under the
commercial name "Ayotte." The following information is presented for the 10
months ended December 31, 2001. We sold the drum business (subject to related
liabilities) as of January 1, 2002 (see "Sale of Drum Business and Agreement
with Verb"). Most of the products are used by professional and semi-professional
musicians in rock-n-roll and jazz venues. We believe the "WoodHoop" drums are a
superior high-end product. They are hand-crafted from maple and artistically
finished, and incorporate significant unique performance features.

         1, 2. Our legal name is "Ayotte Music, Inc." Our corporate charter has
an indefinite term of existence. Our registered office in Canada is located at
1055 West Hastings Street, Suite 2200, Vancouver, B.C. V6E 2E9 (Roderick W.
Kirkham, attorney). Our manufacturing and office facility is located at 2060
Pine Street, Vancouver, BC, Canada V6J 4P8. We do not have an agent in the
United States.

         3, 4. Ayotte was founded by Ray Ayotte, who began his career in the
music and percussion business in 1966. He began selling, teaching and repairing
drums in 1972, and manufactured drums and other

                                        5

<PAGE>



related percussion and musical products starting in 1982. Originally, the
business was incorporated under the laws of British Columbia on November 28,
1974 under the name "Ray Ayotte's Drums Only! Inc." The name was changed on
February 11, 1993 to "Ayotte Drums Only Inc." (then in 1997 changed again to our
current name, see below). Mr. Ayotte left the company in 1999.

         In November 1994, a group of investors led by Louis Eisman, Bruce Allen
and Sam Feldman invested approximately $350,000 in Ayotte to assist in expanding
its production facilities and implementing a world-wide marketing program.

         In July 1995, Ayotte raised $1,560,000 through Ayotte Music (VCC) Ltd.
(the "VCC"), a company formed under the British Columbia Small Business Venture
Capital program. The funds invested by the VCC were used to expand our factory
and hire new employees including a controller, a general manager, and several
factory employees. Factory capacity was improved and new equipment was
purchased. The product line was expanded to include drumsticks, and our dealer
network was expanded from an initial 11 to more than 200 dealers, approximately
50% of whom were in the United States.

         On December 10, 1997 all the shareholders of Ayotte Drums Only Inc.
tendered their shares under a share exchange bid made by ISI Ventures Inc., an
Alberta Stock Exchange Listed Junior Capital Pool Company ("ISI"), in exchange
for which ISI issued the shares of ISI to then former Ayotte Drums Only Inc.
shareholders representing a controlling interest in ISI. Also in connection with
this reverse takeover transaction, a $640,000 cash financing (net of offering
costs and commissions, see below) was effected, for which ISI (renamed Ayotte
Music Inc.) issued 2,000,000 shares of common stock, plus warrants (since
expired, none exercised). ISI then was listed on the Alberta Stock Exchange (now
the Canadian Venture Exchange or CDNX) under the trading symbol "AYO."

         The $640,000 raised in connection with the reverse takeover transaction
was provided through Acumen Capital Finance Partners Ltd., Suite 200 - 513 - 8
Avenue S.W., Calgary, Alberta, Canada, T2P 1G3 (Alfred Sailor, associated with
Acumen, was instrumental in the capital raising). Acumen acted as ISI's agent
for the $640,000 financing, raising the money from a number of investors. The
money was provided to Ayotte Drums Only Inc. The consideration received by
Acumen was a cash commission equal to 10 percent of the gross proceeds raised,
plus 75,000 shares of Ayotte, plus an option to acquire warrants and options
(since expired without exercise). We don't know how much Mr. Sailor received
from Acumen.

         In the reverse takeover transaction, Ayotte Drums Only Inc. became a
wholly owned subsidiary of ISI. On February 27, 1998, Ayotte Drums Only Inc.
continued as a corporation subject to Alberta law and amalgamated (combined into
one entity) under the Alberta Business Corporations Act as Ayotte Music Inc.,
which is our present name.

         In late 1999, our shareholders approved (at the annual meeting in
Calgary, Alberta) and we implemented in 2000 the continuation (change of legal
domicile) of our company to the Canadian federal jurisdiction. Therefore, we now
are governed in corporate matters by the Canada Business Corporations Act.

         In late fiscal 2000 and early fiscal 2001 we completed a private
financing for approximately $500,000 by selling shares of common stock and
warrants.

         5, 6. Since March 1, 1998 we have invested approximately $26,500 in
principal capital expen- ditures for manufacturing and office equipment. In the
10 months ended December 31, 2001, we did not divest any substantial amounts of
such equipment, but on January 14, 2002, we sold the equipment (see "Sale

                                        6

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of Drum Business and Agreement with Verb"). Presently we have no plans to buy or
divest significant amounts of capital equipment.

         7. There have bee no public or private takeover offers or efforts by
third parties in respect of our shares, or by us in respect of other companies'
shares, in fiscal 2000 or 2001, or the 10 months ended December 31, 2001.

         SALE OF DRUM BUSINESS AND AGREEMENT WITH VERB

         SALE OF DRUM BUSINESS

         On November 30, 2001, the company signed an agreement to sell (subject
to approval by the corporation's shareholders, obtained January 4, 2002) to
Shetland Enterprises Ltd. (the "purchaser") all assets related to the core
business of manufacturing and selling drums and related products, subject to
related liabilities. The sale was completed to be effective as of January 1,
2002. The primary objective of the sale was to clear the company of the drum
business in order to make the corporation more attractive for an eventual
reverse take-over (acquisition of a new business). The assets sold included all
tangible and intangible assets (equipment, finished and raw inventory, work in
progress, accounts receivable, distribution contracts, and intellectual property
including patents, copyrights, trademarks and internet web site (URL)), and
excluded cash; liabilities included all trade payables, lease obligations, and
payroll obligations and other obligations to employees.

         The purchase price was $400,000, payable $200,000 at closing and the
$200,000 balance in vendor take back financing, and in addition, for so long as
any of the balance is outstanding, a royalty of 5% of the net profit of the
purchaser (determined before taxes, bonuses and profit sharing) for each year or
part thereof any balance is outstanding (if the latter, the royalty will be pro
rated for that part of the year when a balance is outstanding). The $200,000
balance will bear interest at 7% per year, to accumulate until December 31,
2002, when accrued interest will be capitalized and added to the balance. The
new balance will be payable in 36 equal payments of principal and interest,
starting February 1, 2003 through January 1, 2006. The debt is secured by a
general security interest in all the sold assets, and by the personal guarantees
of the principals of the purchaser.

         In connection with the sale, in January 2002 we paid a business
brokerage fee of $28,000 cash.

         AGREEMENT WITH VERB

         On May 1, 2002, we signed an arrangement agreement with Verb Exchange,
Inc., a private B.C. company incorporated January 14, 2000, and based in
Vancouver, British Columbia. Verb develops and sells hardware and software based
solutions for the telecommunications needs of business organizations and
business professionals. This essentially involves the enhancement of
telecommunications devices, so that users can actively manage and control
incoming and outgoing messages. In the past 12 months, Verb products have
reached the commercialization stage, although presently Verb is still in the
development stage and revenues have been minimal. Research and development of
Verb products will be continuous.

         At completion of the acquisition transaction, the company will change
its name to "Verb Exchange, Inc." and Verb will be a wholly-owned subsidiary of
the company (changing its name to "Verb Exchange (Management), Inc."). The
company will have issued and outstanding 11,671,790 shares of common stock,
including 3,288,800 shares held by current shareholders after a reverse split of
the outstanding shares on a 5

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for 1 basis, and 5,152,925 new shares to be issued to the Verb shareholders pro
rata in exchange for their share ownership in Verb. 29,940 shares will be issued
to pay the Sponsorship Fee, 900,125 shares will be issued upon the exercise of
the Ayotte Special Warrants, 300,000 shares will be issued to satisfy all
Finders' Fees, and 2,000,000 shares are to be issued pursuant to Subsequent
Financing. The number of shares to be issued to Verb's shareholders could be
reduced if Verb's aggregate liabilities exceed US$200,000 when the acquisition
is completed (the company's loans to Verb will be eliminated as of closing).

         As of the date of this report, the shareholders of the company and of
Verb separately have approved the acquisition transaction In addition, the
shareholders of the company have provisionally elected the six directors of Verb
to the board of directors of the company; these individuals will take office
when the acquisition transaction is completed, and two of the three current
directors of the company will resign (Louis Eisman, presently a director, will
continue on as the seventh director).

         With two exceptions, the principal conditions to complete the
acquisition transaction have been fulfilled. One of the conditions remaining to
be fulfilled is obtaining a final order of the Supreme Court of British
Columbia) approving the transaction, which approval is required by the Canada
Business Corporations Act (an interim approval order of the Court was obtained
in May 2002).

         The other unfulfilled condition is that there be sufficient capital in
the company when the acquisition is completed to sustain Verb's business plan
for 12 months. This is a requirement of the TSX Venture Exchange. Prior
arrangements to have this capital raised by Verb before the expected completion
date in early July 2002 were unsuccessful. The TSX Venture Exchange has advised
us that $700,000 will have to be raised. We anticipate the necessary funding
will be raised, and the acquisition completed, in early September 2002.

         Pursuant to an agreement in principle with Verb dated November 27,
2001, the company agreed to loan cash to Verb pending completion of the
acquisition transaction. Loans to Verb ($600,000 at December 31, 2001 and
$1,727,808 at June 30, 2002) are secured with Verb's assets and a pledge of
(security interest in) the shares of Verb held by its principal shareholders.
The loan and security therefor will be eliminated at completion of the
acquisition transaction.

         B.       BUSINESS OVERVIEW.

         We succeeded in establishing a small but loyal market share for Ayotte
Custom Drums, and a growing number of well known percussionists voluntarily
endorsed our products. "Voluntary endorse" means that the drummer (artist)
approached the company with a desire to play the company's drums for reasons
other than financial considerations. We didn't pay artists to play their drums.
There were two levels of endorsers:

         To supplement our traditional products distribution through music
instrument dealers, on November 26, 1999 we commenced a new internet based
"e-commerce initiative" by selling products directly to consumers at significant
discounts.

         Until the end of calendar 2001, our fiscal year ran from March 1
through February 28; the fiscal year was changed to the calendar year in January
2002. Our financial statements are stated in Canadian dollars and have been
prepared in accordance with Canadian Generally Accepted Accounting Principles
("Canadian GAAP"). In some respects financial statements prepared under Canadian
GAAP may differ materially from financial statements prepared under United
States Generally Accepted Accounting Principles ("US GAAP").

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As of December 31, 2001 there were no material differences in result between the
two GAAP presentations. Please see note 12 to the financial statements.

         The Government of Canada permits a floating exchange rate to determine
the value of the Canadian dollar against the United States dollar. We anticipate
that a significant portion of sales will continue to be conducted outside
Canada, principally in the United States, and also that we will continue to
import materials from other jurisdictions, especially the United States and
Taiwan. If currency rates fluctuate substantially, our cash flows from
operations could be impacted negatively or positively, depending on direction.

         This table shows the exchange rate for the Canadian Dollar for the five
fiscal years ended February 28, 2001, and the calendar year ended December 31,
2001. The rate of exchange means the noon buying rate in New York City for cable
transfers in foreign currencies as certified for customs purposes by the Federal
Reserve Bank of New York. Shown are the average number of Canadian dollars
required under the rate formula to buy one United States dollar during the
period (using only the exchange rates on the last day of each month).

              PERIOD                                  RATE IN US$
              ------                                  -----------
         Year ended 2/28/97                             1.3370
         Year ended 2/27/98                             1.4236
         Year ended 2/26/99                             1.5090
         Year ended 2/29/00                             1.4538
         Year ended 2/28/01                             1.5105

         At July 16, 2002, US$1.00 equaled Cdn.$1.5365.

         PRODUCTS

         We made custom "WoodHoop" and "SteelHoop" drums using high quality
maple, which is widely recognized as the most desirable wood for drums. All
drums can be ordered in custom dimensions, colors and finishes. The WoodHoop
drums are unique in the market and produce a product with superior performance
characteristics. Ayotte drums utilized the patented TuneLock Tension System,
incorporating a drum clamp bracket, which is characterized by its ability to
maintain the tuning of a drum over a long period of time and through vigorous
playing. It also reduces the tuning time required after a drumhead has been
changed. We believe that the Wood Hoop, in addition to being aesthetically
pleasing, allows a wider range of sound and superior tonal qualities than our
competitors' products. Our products were at the top end of the market in terms
of price.

         The Ayotte Custom Drum Series was manufactured to order based on the
customers specific requirements. The principal raw components of each drum,
including unfinished wood shells in a range of sizes which are outsourced from
external suppliers, were processed and assembled at our Vancouver plant to fill
each product order. Every wood shell was custom finished through labor-intensive
steps to achieve an extremely high degree of finish and color uniformity.
Although we stocked a few oft-ordered sizes and colors to have on hand, we also
made different customized colors and finishes as requested by customers, and
kept an exact history of how we made each color so we could make another batch
if needed for replacement or other purposes. We believe that much of our
favorable reputation was due to this amount of personal attention.


                                        9

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         Tay-e Corporation, Taipei, Taiwan, was the sole source manufacturer for
the chrome hardware used on our drums. This hardware was an integral part of our
product line. There was no written contract with Tay-e. The maplewood drums were
made to our specifications by an external supplier in the northeast United
States.

         SERVICES

         Our products were sold with lifetime warranty against defects in
manufacture or materials. Through December 31, 2001, we spent an immaterial
amount to honor our warranty and therefor did not establish a warranty reserve
on the books.

         MARKETS FOR AND METHODS OF DISTRIBUTION OF PRODUCTS

         DISTRIBUTION - DEALERS. From the early 1990s until November, 1999 we
distributed our products exclusively through musical instrument dealers and we
relied completely on their sales of our products. Just prior to starting our
internet web site selling effort in November 1999 we had increased the number of
outlets to more than 350 third-party dealer locations worldwide. About 85% of
the dealers were in the United States; the rest mostly were in Canada and
Europe. The majority of the outlets are small business operations which cater to
local musicians. We don't have written or oral contracts with dealers for any
period of time. Orders through United States dealers had to be paid in full
before shipment date (Canadian dealers have 30 days after shipment to pay in
full). No down payments were required on any dealer orders. We requested but
didn't require new dealers to "buy in" a limited amount of products for the show
room floor.

         Sales throughout fiscal 1999, 2000 and 2001 were about 80% to United
States residents, 15% to Canadian residents, and the balance to the United
Kingdom and Europe. This geographic mix of customers did not change
significantly when we added the internet marketing channel. Cash flow never has
been seasonally related, although the summer months were somewhat slower than
the rest of the year.

         DISTRIBUTION - INTERNET. In the third quarter of fiscal 2000 we
believed we could supplement our selling through dealers by developing and
selling direct to customers through an internet site. From November, 1999 until
we sold the drum business, we were selling through the site
"www.ayottedrums.com."

         The addition of direct sales over the internet had several immediate
impacts. Overall, the addition of internet sales to the traditional dealer
distribution channel overall showed operating profits for fiscal 2001 even
though we sold fewer units compared to the pre-internet era, because we made
more per internet sale than per dealer sale. We estimate that for fiscal 2001,
unit volumes averaged about 80% direct through the web site and 20% through U.S.
and Canadian. We paid for business expansion costs (primarily marketing and web
site improvements) in 2001 which offset some of our operating profits in 2001.

         Until the event of September 11, 2001, volumes and margin were somewhat
improved compared to the first eight moths of 2001. However, from September 11,
2001 until we sold the drum business (January 2002), sales dropped to low
levels, and we lost $244,029 from operations for the 10 months ended December
31, 2001.

         COMPETITION AND MARKETS. The market in which we competed was the drum
set component of musical percussion instruments. The world's largest drum
manufacturer is Pearl Corporation, Japan, producing approximately 80,000 drum
kits per annum (50% of which are sold in the United States). According to a
music industry census completed by the industry journal "Music Trades" (April
1997), the

                                       10

<PAGE>



market value for musical instruments in the United States was estimated at
US$5.6 billion in 1996. It was estimated that the percussion share was US$175
million (3.5%) of such market. We believe that the United States market
represents one-half of the world market for musical instruments (see below).

         The largest musical instrument manufacturer in the world is Yamaha,
which reported 1994 sales in the United States (excluding sporting goods and
home audio) of US$600 million. Peavey, the second largest manufacturer, had
sales of US$353 million, employed 2,370 people and utilized 1.3 million square
feet of manufacturing facilities.

         We competed with the other drum manufacturers on a worldwide basis,
although the market for drum kits is primarily in the Northern Hemisphere with
some pockets in South America, Southeast Asia, Africa and Australia. The
dominant competitors in this industry are Yamaha, Pearl, and Drum Workshop.

         PROPRIETARY TECHNOLOGY. We relied on a combination of patent law,
trademark law, trade secrets, and internal confidentiality procedures to protect
our proprietary rights.

         We spent nothing on research and development work related to improving
our product lines in fiscal 2000 or 2001, or in the 10 months ended December 31,
2001.

         There has been no financial or operation effect of environmental
protection on our capital expenditures, earnings or competitive position.

         FOREIGN OPERATIONS

         We had no material foreign operations related to manufacturing.

         We had a material amount of foreign sales in the 10 months ended
December 31, 2001: 80% to the customers in the United States and 3% to customers
elsewhere (17% to customers in Canada), i.e. sales outside of North America. In
fiscal 2001, foreign sales totaled $209,616 (13.8%) of total sales.

         C.   ORGANIZATIONAL STRUCTURE.  Not applicable.

         D.   PROPERTY, PLANTS AND EQUIPMENT.

         Our manufacturing facility and head office were located in leased
premises at 2060 Pine Street in Vancouver, British Columbia: two floors of
approximately 11,000 square feet of mixed office and manu- facturing space. This
lease was assumed by the purchaser of the drum business.

ITEM 5.   OPERATING AND FINANCIAL REVIEW AND PROSPECTS.

         A.   OPERATING RESULTS.

         RESULTS OF OPERATIONS (10 MONTHS ENDED DECEMBER 31, 2001 TO (THE FORMER
FISCAL) YEAR (12 MONTHS) ENDED FEBRUARY 28, 2001

         Sales for the 10 month period ending December 31, 2001 were $1,128,289
compared to $1,518,011 for the 12 months ended February 28, 2001. Cost of sales
for the 10 month period were $745,992 compared to $810,148 for the 12 month
period ended February 28, 2001, resulting in a gross margin of $382,297

                                       11

<PAGE>



compared to $707,863 for the compared period. Overall expenses were not
significantly out of proportion period to period, however, because of the
September 11, 2001 event, product sales dropped and finished and unfinished
inventory increased. For the 10 month period, cost of goods was 66% of sales,
compared to 53% in the compared period.

         For the 10 month period, we recorded a loss from operations of
$244,029, compared to $51,004 for the compared period. Other income was $68,399
in the compared period, which decreased to only $9,307 for the 10 month period.

         RESULTS OF OPERATIONS (YEAR ENDED FEBRUARY 28, 2001 TO YEAR ENDED
FEBRUARY 29, 2000)

         REVENUE

         Revenue ("sales" in our financial statements) is derived from sales of
products to direct customers and distributors: drums, drum sticks, parts and
accessories and branded collateral merchandise such as T-Shirts. Sales revenue
for transactions directly with end customers is recognized at the point of
invoicing/shipping/ processing of the credit card. The customer is required to
make a minimum 50% deposit prior to the start of production. The balance is due
prior to shipping. The product is paid prior to leaving the factory.

         Sales dropped 25% in 2001 compared to 2000, while costs of goods sold
dropped more (41%), due to our move to internet sales, as explained elsewhere in
this report, resulting in a gross margin on sales of 46.6% for 2001 compared to
32.3% for the prior year. We also reduced corporate expenses by 19% in 2001.
Also in 2001 we sold more accessories for "other income" of $33,892 and realized
a gain of $34,507 from foreign exchange. For 2001, we recorded net income of
$17,395 compared to the $288,256 net loss for 2000.

         E-COMMERCE STORE

         On November 26th 1999, Ayotte made a significant change in the method
of selling drums and related products to customers by launching an e-commerce
on-line store.

         The move to the internet produced significant cost savings. The ability
to process credit cards in real time and the requirement for prepayment greatly
improved cash flow and reduced the risk of bad debt. The net sale price to
consumers is greater than the net sale price was to dealers, creating greater
margin.

         In 2001 compared to 2000, cost savings have been realized in the
category of general and administration expenses (total operating expenses less
advertising and promotion). Overall, we pared $68,582 off in this category, even
after doubling computer and website costs, paying more in management fees, and
paying the increased professional fees related to registration with the United
States Securities and Exchange Commission. The major areas where we cut back
expenses were in rent (about $26,000 less) and salaries and employee benefits
(about $95,000 less).

         The cash position has been improved significantly. Compared current
assets at February 28, 1999, February 29, 2000, and February 28, 2001 follow.
Please note that we have removed the proceeds from our private placement (net
approximately $500,000, booked in fiscal 2001) to provide an accurate comparison
of cash position improvements from operations:


                                       12

<PAGE>



         FISCAL YEAR                       CASH ON HAND
         -----------                       ------------
         1999                                $ 43,625
         2000                                $348,742
         2001                                $438,214

         Our margins during the same period have also improved:

                                           GROSS MARGIN
        GROSS MARGIN                        % OF SALES
        ------------                        ----------
         1999                                  37.2%
         2000                                  32.3%
         2001                                  46.6%

         BAD DEBT EXPENSE

         Bad debt continued to rise in fiscal 2000 despite the significant
reductions in revenues and in accounts receivable because we had written off
receivables from retail music shops to which we had supplied product prior to
moving to the internet. Many of these retail shops, located in both North
America and Europe, had gone out of business and their debts were deemed not
collectable. In fiscal 2001, we completed the write off process.

         FOREIGN EXCHANGE

         All revenue from direct sales into the United States is received in
United States Dollars. A significant portion of expenses are incurred in
Canadian Dollars. As a result, appreciation in the value of Canadian currency
relative to the United States Dollar could adversely affect our operating
results. Foreign currency translation gains and losses arising from normal
business operations are credited to or charged against other income for the
period incurred. To date, we have not done any currency hedging to minimize the
effect of these gains or losses. As a result, fluctuations in the value of
Canadian Dollars relative to United States Dollars have caused and will continue
to cause currency translation gains and losses. In 2000 these changes caused a
loss of $10,073 but a gain of $34,501 in 2001.

          We do not have a line of credit or loans; therefore there is no
interest rate risk at present or in the foreseeable future.

         B.   LIQUIDITY AND CAPITAL RESOURCES

         DECEMBER 31, 2001 COMPARED TO FEBRUARY 29, 2001

         Working capital at December 31, 2001 was $578,367 compared to
$1,190,940 at February 28, 2001, reflecting the loans of $600,000 to Verb in
November and December 2001, and payment of expenses to sustain operations after
sales dropped following September 11, 2001.


                                       13

<PAGE>



         FEBRUARY 28, 2001 COMPARED TO FEBRUARY 29, 2000

         At February 28, 2001 we had $1,190,940 in working capital compared to
$627,512 at February 29, 2000. The favorable change was due principally but not
entirely to receipt in 2001 of approximately $500,000 of cash from our private
offering of 1,250,000 shares and 1,250,000 warrants which was cleared by the
CDNX in June 2000.

         Accounts receivable were $102,669 compared to $183,717 at the prior
year, in part because the volume of business dropped by $501,974 in 2001, and
also because our internet sales lets us book revenues immediately from the
customers' credit card payments up front at time of sale. A $22,988 increase in
prepaid expenses and deposits in 2001 (due to prepayment for a major shipment of
drum hardware from Taiwan that did not arrive until the next fiscal year) was
more than offset by a decrease in current liabilities of $38,299 from paying
bills on time

         Inventories were nearly level: $245,413 at February 28, 2001, and
$251,700 at February 29, 2000.

         D.   TREND INFORMATION.

         Not Applicable.

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.

         A.   DIRECTORS AND SENIOR MANAGEMENT.  The following table sets forth
the name, municipality of residence, positions with us and principal occupation
of each of our directors and officers:

<TABLE>
<CAPTION>

NAME AND                                                                                                       OTHER POSITION
MUNICIPALITY OF            YEAR FIRST       YEAR TERM          PRINCIPAL OCCUPATION AND POSITIONS              OR OFFICE WITH
RESIDENCE                  ELECTED (1)      EXPIRES            DURING LAST FIVE YEARS                          THE CORPORATION

<S>                        <C>              <C>                <C>                                             <C>
Louis Eisman               1998             2003               Private equity capital investor, 1991 to        Chairman,
3704 Pine Crescent                          (Directors         present                                         Interim President
Vancouver, B.C.                             Elected                                                            and Director
V6J 4K3                                     Annually)

Michael Fugman             1998             2003(2)            President of Gault Distribution Inc., a         Director
10891 Bromley Place                         (Directors         wholesale distributor in business for 98
Richmond, B.C.                              Elected            years
V7A 4J5                                     Annually)

Don Mazankowski            1999             2003(2)            General Manager, Ayotte Music Inc.              Director,
2745 Trafalgar Street                       (Directors         Vice President - Marketing, ETL.                General Manager
Vancouver, B.C.                             Elected            Environmental Technology Ltd
V6K 3T7                                     Annually)
</TABLE>

NOTES:

         (1) We were amalgamated under the laws of Alberta on February 27, 1998.
The amalgamating companies were Ayotte Drums Only Inc. ("ADO") and ISI Ventures
Inc. ("ISI"). Prior to that date, the business presently conducted was conducted
by ADO, a British Columbia company. Two of the present

                                       14

<PAGE>



directors became directors on the amalgamation date, although each was a
director of one or more of the companies which were amalgamated. See above.

         (2) This person will cease being a director at completion of the Verb
acquisition.

         There are 2,359,892 shares owned by officers and directors, including
shares held by their relatives, but not including 313,000 "special warrants"
held by Eisman Holdings Ltd. An additional 3,062,642 shares are held by a
venture capital corporation of which Michael Fugman (director) is an officer,
director and a minority shareholder (under SEC rules, all of the VCC's shares
are deemed controlled and beneficially owned by Mr. Fugman). Therefore, under
SEC rules, a total of 5,422,534 shares (33%) are owned or controlled by our
officers and directors. This percentage does not reflect 4,500,624 shares and
warrants to purchase 4,500,624 shares, which shares and warrants underlie
4,500,624 "special warrants" sold in April 2002. Resale of all of these shares
will be subject to SEC rule 144.

         B.   COMPENSATION. In the 10 months ended December 31, 2001 we paid a
total of $91,500 to all our officers and directors as a group, for services in
all capacities, including the salary paid to Mr. Mazankowski as General Manager.

         The following table sets forth certain information regarding the
compensation we paid or accrued to or for the account of the Chairman of the
board of directors (and Interim President and Chief Executive Officer) and the
General Manager for services rendered in all capacities to us during each of the
two fiscal years ending February 28, 2001, and for the 10 months ended December
31, 2002. No other executive officer received total annual salary and bonus in
excess of $100,000. We do not have any long term compensation plan, other than
stock options.

<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE

                                                               ANNUAL COMPENSATION
                                                     -----------------------------------------
                                       FISCAL                                     OTHER ANNUAL
     NAME AND POSITION                 YEAR           SALARY       BONUSES        COMPENSATION
     -----------------                 ----           ------       -------        ------------
<S>                                    <C>           <C>           <C> <C>          <C>
Louis Eisman, Chairman
and Interim President                   *            $   -0-       $   -0-          $40,000
                                       2001          $   -0-       $   -0-          $48,000(1)
                                       2000          $   -0-       $   -0-          $48,000


Don Mazankowski, General Manager        *            $51,500       $   -0-          $   -0-
                                       2001          $61,800       $   -0-          $   -0-
                                       2000          $60,000       $   -0-          $   -0-
</TABLE>

         *    10 months ended December 31, 2001.

         (1) Does not include $20,139 paid to Mr. Eisman as reimbursement of
expenses. See note 8 to the financial statements.

         We don't have written employment agreements with Louis Eisman or Don
Mazankowski. We pay Mr. Eisman $4,000 per month and Mr. Mazankowski $61,800 per
year under verbal employment agreements. Each employment agreement is terminable
at the will of the employee or the Company. At December 31,

                                       15

<PAGE>



2001, there were options outstanding to purchase 950,000 shares at $0.10; all
these options were exercised in January 2002. See note 6(d) to the financial
statements.

         STOCK OPTION PLAN

         We have adopted an incentive stock option plan for the issuance of
shares of common stock. There is no formal written option plan.

         C.   BOARD PRACTICES.

         Our audit committee consists of Messrs. Eisman and Fugman. The audit
committee has the responsibility of reviewing our financial statements,
exercising general oversight of the integrity and reliability of our accounting
and financial reporting practices, and monitoring the effectiveness of our
internal control systems. The audit committee also recommends a selection of the
auditing firm and exercises general oversight of the activities of our
independent auditors, principal financial and accounting officers and employees
and related matters.

         D.   EMPLOYEES.

         Through December 31, 2001, we had 15 employees. Since selling the drum
business, we employ only Mr. Eisman and Mr. Mazankowski.

         E.   SHARE OWNERSHIP. Our directors own or control the indicated shares
of common stock; percentages are based on the 16,444,000 shares outstanding when
this report is filed.

NAME                              NO. OF SHARES          PERCENTAGE

Michael Fugman                    3,812,642 (1)             23.2%
10891 Bromley Place
Richmond, B.C. V7A 4J5

Louis Eisman                      2,038,510 (2)             12.4%
3704 Pine Crescent
Vancouver, B.C. V6J 4K3

Don Mazankowski                     159,000                  (3)
2745 Trafalgar Street
Vancouver, B.C. V6K 3T7

Officers and directors total      5,795,010                 44.3%

         (1) Includes 3,062,642 shares held by Ayotte Music (VCC) Ltd., and
750,000 shares held by Mr. Fugman and his wife and children. Mr. Fugman is a
control person (officer, director and minor shareholder) of Ayotte Music (VCC)
Ltd.

         (2) Includes 1,450,892 shares held by Eisman Holdings Ltd, a private
company controlled by Mr. Eisman, and 587,618 shares held by Marion Eisman, his
wife. Mr. Eisman disclaims beneficial ownership

                                       16

<PAGE>



and investment control over all of the 587,618 shares held by his wife. Does not
include 313,000 "special warrants" held by Eisman Holdings Ltd.

         (3) Less than 1%.

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.

         A. MAJOR SHAREHOLDERS. To our knowledge, the following are the
shareholders (excluding our directors) who own of record or beneficially,
directly or indirectly, or exercise control or direction over shares carrying
more than 5% of the voting rights attached to all 16,444,000 shares of the
company outstanding as of June 30, 2002. We have approximately 49 shareholders
of record. The number of shareholders holding securities beneficially through
street name nominees, as reflected in the record position of CDS & Co. is not
known to us. Nearly all shareholders we can identify are Canadian residents;
approximately 50,000 shares are held by United States residents but we cannot
identify their beneficial owners, and do not know under what circumstances such
persons came to own our stock. There are no restrictions on non-Canadians owning
our shares. We have not engaged in any stock promoting activities in the United
States as of the date of this report. There is no United States trading market
for the shares as of the date of this report, and the shares are not listed for
trading on any securities exchange or approved for trading in any trading medium
in the United States.


<TABLE>
<CAPTION>
                                   NO. OF VOTING SHARES         PERCENTAGE OF OUTSTANDING VOTING
NAME OF SHAREHOLDER               (COMMON SHARES) OWNED              SHARES (COMMON SHARES)

<S>                                     <C>                                  <C>
CDS & Co.(1)                            13,864,541                           84.31%
25 The Esplanade
P.  O.  Box 1038, Ste. A
Toronto, Ontario M5W 1G5

Valor Invest Ltd.                       2,000,000                            12.16%
</TABLE>

(1)      CDS & Co. holds this number of shares in street name for brokerage
firms.  The identity of customers whom such brokers hold the shares is not known
to us.

         To our knowledge, as of the date of this annual report, we are not
directly or indirectly owned or controlled by another corporation or by any
foreign government, or by any other natural or legal person. No special voting
rights attach to shares held by any one shareholder or group of shareholders.

         B.   RELATED PARTY TRANSACTIONS.  Not applicable.

         C.   INTEREST OF NAMED EXPERTS AND COUNSEL.  Not applicable.

ITEM 8. FINANCIAL INFORMATION. See the financial statements filed with this
report (Item 17).

ITEM 9.  THE OFFER AND LISTING.

         A.   OFFER AND LISTING DETAILS. The company's common shares are traded
on the TSX Venture Exchange under the symbol AYO. The shares are not listed on
any other securities exchange. All shares are registered shares.

                                       17

<PAGE>



         The following table sets forth the high and low sales prices by
quarters for the fiscal years ended February 28, 2000 and 2001, and for the
three calendar quarters ended December 31, 2001.


                  PERIOD            HIGH SALES PRICE     LOW SALES PRICE

                  Fiscal 2000
                    1 Qtr.               $0.08                $0.06
                    2 Qtr.               $0.07                $0.06
                    3 Qtr.               $0.05                $0.03
                    4 Qtr.               $0.52                $0.03
                  Fiscal 2001
                    1 Qtr.               $0.60                $0.28
                    2 Qtr.               $0.37                $0.25
                    3 Qtr.               $0.28                $0.10
                    4 Qtr.               $0.19                $0.07
                  Calendar 2001
                    2 Qtr.               $0.14                $0.05
                    3 Qtr.               $0.24                $0.05
                    4 Qtr.               $0.13                $0.05


         On July 18, 2002 the closing price of the common shares was $0.10 per
share.

         B.   PLAN OF DISTRIBUTION.  Not applicable.

         C.   MARKETS.  See A above.

         D.   SELLING SHAREHOLDERS.  Not applicable.

         E.   DILUTION.  Not applicable.

         F.   EXPENSES OF THE ISSUE.  Not applicable.

ITEM 10.  ADDITIONAL INFORMATION.

         A.   SHARE CAPITAL.

         Ayotte's articles of incorporation provide for issuance of an unlimited
number of shares of preferred stock, with such voting, dividend, liquidation
preference or conversion rights as the board of directors may establish from
time to time. There is no class of preferred stock authorized and no preferred
shares are issued and outstanding.

         The articles of incorporation also provide for issuance of an unlimited
number of shares of common stock, without par value. All holders of common stock
have equal voting rights, equal rights to dividends when and if declared, and
equal rights to share in assets upon liquidation of the corporation. There were
14,494,000 shares of common stock issued and outstanding at December 31, 2001,
and 16,440,000 shares at the date of filing this report. Shares outstanding at
the filing date of this report do not include 4,500,624 shares, and another
4,500,624 shares underlying warrants exercisable for one year at $0.16 per
share, which

                                       18

<PAGE>



comprise the 4,500,624 "special warrants" sold in April 2002. The company has
agreed to file prospectus with the TSX Venture Exchange to qualify the issuance
of the shares and warrants on exercise of the special warrants; if this
prospectus is not cleared by the regulators within 120 days of the closing of
the private placement of the special warrants, the special warrants' terms will
be adjusted by 10% to be exercisable into 4,950,686 shares and 4,950,686
warrants. All issued and outstanding shares are fully paid and non-assessable.

         No shares are held by Ayotte itself. No shares are held by subsidiaries
(we have none).

         For information on issuance of shares over the past three fiscal years,
please see Item 4 A above.

         There are 1,235,000 warrants to purchase shares of common stock,
exercisable at $0.80 per share until June 14, 2002, when they expire.

         There were granted and outstanding options to purchase 950,000 shares
at $0.10 per share at December 31, 2001. All were exercised in January 2002.

         B.   MEMORANDUM AND ARTICLES OF ASSOCIATION.

         The articles of incorporation bear an entry number of A-47787 with the
Registrar of Companies, Province of British Columbia, Canada. Under article 5,
the company is allowed to carry on any business.

         Under the bylaws, a director who is a party to a material contract or
proposed material contract with us, or is a director or officer of or has a
material interest in any person who is a part to a material contract or proposed
material contract with us, must disclose to us in writing the nature and extent
of such interest. An interested director can vote on only a limited number of
such matters (securing a loan from the director to the company, his
remuneration, indemnity or insurance, or a contract with an affiliate) provided
the interest is disclosed. Otherwise, even with disclosure of the interest, such
a director cannot vote on a material contract or proposed material contract. A
contract approved by the board of directors is not voidable because one or more
directors has a conflict of interest, if the conflict is disclosed and the
interested director(s) do not vote on the matter.

         Subject to the conflict of interest provisions summarized above, there
is no restriction in the bylaws on the power of the board of directors to have
the company borrow money, issue debt obligations, or secure debt or other
obligations of the company.

         Cumulative voting for directors is not allowed. Directors serve from
year to year; there is no provision for election of a staggered board. Between
annual meetings, the existing board can appoint one or more additional directors
of the company to serve until the next annual general meeting, but the number of
additional directors shall not at any time exceed one-third of the number of
directors who held office at the expiration of the last annual meeting.

         Meetings of shareholders must be called by the board of directors not
later than 15 months after the last annual meeting. The board at any time may
call a special meeting of shareholders. Notice of any meeting must be sent not
less than 21 nor more than 50 days before the meeting, to every shareholder
entitled to vote (presently, all the holders of shares of common stock, as there
is no preferred stock outstanding). All shareholders entitled to vote are
entitled to be present at a shareholders meeting. A quorum is the presence in
person or by proxy of the holders of at least 5% of the issued and outstanding
shares of common stock. For adoption of any matter presented for a vote at a
shareholders meeting, approval by the holders of a

                                       19

<PAGE>



majority of the votes at the meeting is required, unless a higher approval level
is required by law (one vote for each share held). For an example of higher
approval level under law, the holders of a majority of the issued and
outstanding shares of common stock would have to approve any proposed changes to
the rights of the holders of such stock, although presently the board of
directors has blanket authority to issued preferred stock with preferences and
rights superior to the common stock.

         C.   MATERIAL CONTRACTS.  Not applicable.

         D.   EXCHANGE CONTROLS.

         There are no laws, decrees or regulations in Canada relating to
restrictions on the export or import of capital, or affecting the remittance of
interest, dividends or other payments to non-resident holders of our shares of
common stock.

         Except under the Investment Canada Act, there are no limitations
specific to the rights of non- Canadians to hold or vote our shares under the
laws of Canada or our charter documents.

         The Investment Canada Act ("ICA") requires a non-Canadian making an
investment which would result in the acquisition of control of a Canadian
business, the gross value of the assets of which exceed certain threshold levels
or the business activity of which is related to Canada's cultural heritage or
national identity, to either notify, or file an application for review with,
Investment Canada, the federal agency created by the ICA.

         The notification procedure involves a brief statement of information
about the investment on a prescribed form which is required to be filed with
Investment Canada by the investor at any time up to 30 days after implementation
of the investment. It is intended that investments requiring only notification
will proceed without intervention by government unless the investment is in a
specific type of business related to the scope of the Act.

         If an investment is reviewable under the Act, an application for review
in the prescribed form normally is required to be filed with Investment Canada
before the investment is made and it cannot be implemented until completion of
review and Investment Canada has determined that the investment is likely to be
of net benefit to Canada. If the agency is not so satisfied, the investment
cannot be implemented if not made, or if made, it must be unwound.

         E.   TAXATION.

         CANADA. We believe the following general summary fairly describes all
of the substantive Canadian federal income tax consequences which apply to a
shareholder who resides in the United States, is not a resident of Canada, and
who does not use or hold (and is not deemed to use or hold) shares in connection
with carrying on a business in Canada (a "non-resident shareholder").
Nonetheless, we recommend that anyone who considers buying our shares obtain
independent tax advise, as tax implications may affect people differently.

         The summary is based on current provisions of the Income Tax Act
(Canada), referred to as the "ITA" and regulations thereunder, and current
administrative and assessing policies of Revenue Canada, Taxation. This
description is not exhaustive and does not consider possible changes in law or
regulations, or provincial or foreign tax matters.

                                       20

<PAGE>



         - DIVIDENDS. Dividends paid on our shares to a non-resident holder will
be subject to withholding tax. The Canada-US Income Tax Convention (1980) as
amended by the March 17, 1985 treaty protocol, provides that the usual 25%
withholding tax rate is reduced to 15% on dividends paid on shares of a
corporation resident in Canada (like us) to residents of the United States, and
also provides for a further reduction of this rate to 5% where the beneficial
owner of the dividends is a United States resident corporation owning 10% or
more of the voting shares of the dividend paying corporation. However, given our
current level of business we don't expect paying dividends in the near future.

         - CAPITAL GAINS. A non-resident of Canada is not subject to tax under
the ITA for a capital gain realized on disposition of shares of a public
corporation unless the shares represent "taxable Canadian property" to the
holder. Our shares are listed on the CDNX and therefore will be taxable Canadian
property to a non-resident holder if, at any time during the five years before
disposition, the non-resident holder, either alone or together with affiliates
of the Company, owned 25% or more of the issued shares. However, under the 1985
treaty protocol, a non-resident holder who is a United States resident and for
whom shares represent taxable Canadian property, no Canadian taxes will be due
on a capital gain unless the value of the shares derives from realty or natural
resources in Canada.

         UNITED STATES. We believe the following fairly summarizes all material
provisions of the United States Internal Revenue Code with respect to
information reporting and backup withholding requirements. However, it is noted
that United States income tax laws and regulations applicable to investments in
foreign entities are complex. A United States resident should not rely unduly on
the summary, and always should consult a personal tax advisor in these respects.

         - DIVIDENDS. Dividends generally are subject to the information
reporting requirements of the Internal Revenue Code (the "Code"). Dividends may
be subject to backup withholding at the rate of 31% unless the holder provides a
taxpayer identification number on a properly completed Form W-9 or otherwise
establishes an exemption. The amount of backup withholding does not constitute
an additional tax and will be allowed as a credit against the United States
investor's federal income tax liability.

         - FILING OF INFORMATION RETURNS. Under a number of circumstances, a
United States investor acquiring shares of the company may be required to file
an information return at the Internal Revenue Center where they are required to
file their tax returns with a copy to the Internal Revenue Service Center,
Philadelphia, PA 19255. In particular, any United States investor who become the
owner, directly or indirectly, of 10% or more of the shares of the company will
be required to file such a return. Other filing requirements may apply, and
United States investors should consult their own tax advisors concerning these
requirements.

         Certain United States income tax legislation contains rules governing
passive foreign investment companies ("PFICs"), which can have significant tax
effects on U.S. shareholders of foreign corporations. These rules do not apply
to non-U.S. shareholders. Section 1296 of the Code defines a PFIC as a
corporation that is not formed in the United States and, for any taxable year,
either (i) 75% or more of its gross income is "passive income", which includes
interest, dividends and certain rents and royalties or (ii) the average
percentage, by fair market value or, if the company is a controlled foreign
corporation or makes an election, by adjusted tax basis, of its assets that
produce or are held for the production of "passive income", is 50% or more.


                                       21

<PAGE>



         A U.S. shareholder who holds stock in a foreign corporation during any
year in which such corporation qualifies as a PFIC is subject to U.S. Federal
income taxation under one of two alternative tax regimes at the election of each
such U.S. Shareholder. The following is a discussion of such two alternative tax
regimes applied to such U.S. shareholders of the company.

         A U.S. shareholder who elects in a timely manner to treat the company
as a Qualified Electing Fund ("QEF"), as defined in the Code (an "Electing U.S.
Shareholder"), will be subject, under Section 1293 of the Code, to current
federal income tax for any taxable year in which the company qualifies as a PFIC
on his pro- rata share of the company's (i) "net capital gain" (the excess of
net long-term capital gain over net short-term capital loss), which will be
taxed as long-term capital gain to the Electing U.S. Shareholder and (ii)
"ordinary earnings" (the excess of earnings and profits over net capital gain),
which will be taxed as ordinary income to the Electing U.S. Shareholder, in each
case, for the shareholder's taxable year in which (or with which) the company's
taxable year ends, regardless of whether such amounts are actually distributed.

         The effective QEF election also allows the Electing U.S. Shareholder to
(i) generally treat any gain realized on the disposition of his common shares
(or deemed to be realized on the pledge of his common shares) as capital, (ii)
treat his share of the company's net capital gain, if any, as long-term capital
gain instead of ordinary income, and (iii) either avoid interest charges
resulting from PFIC status altogether, or make an annual election, subject to
certain limitations, to defer payment of current taxes on his share of the
company's annual realized net capital gain and ordinary earnings subject,
however to an interest charge on the deferred taxes. If the Electing U.S.
Shareholder is not a corporation, such an interest charge would be treated
generally as "personal interest" that can be deducted only when it is paid or
accrued. The procedures a U.S. shareholder must comply with in making an
effective QEF election will depend on whether the year of the election is the
first year in the U.S. shareholders' holding period in which the company is a
PFIC. If the U.S. shareholder makes a QEF election in such first year, i.e. a
timely QEF election, the U.S. shareholder may make the QEF election by simply
filing the appropriate documentation at the time the U.S. shareholder files its
tax return for such first year. If, however, the company qualified as a PFIC in
a prior year during such shareholder's holding period, then in addition to
filing documents, the U.S. shareholder must elect to recognize (i) (under the
rules of Section 1291 discussed below) any gain that he would otherwise
recognize if the U.S. shareholder sold his stock on the application date or (ii)
if the company is a controlled foreign corporation, and such shareholder so
elects, his/her allocable portion of the company's post-1986 earnings and
profits.

         When a timely QEF election is made, if the company no longer qualifies
as a PFIC in a subsequent year, normal code rules will apply. It is unclear
whether a new QEF election is necessary if the company thereafter re-qualifies
as a PFIC. U.S. shareholders should seriously consider making a new QEF election
under those circumstances.

         If a U.S. shareholder does not make a timely QEF election in the year
in which it holds (or is deemed to have held) the shares in question and the
company is a PFIC, then special taxation rules under Section 1291 of the Code
will apply to (i) gains realized on disposition (or deemed to be realized by
reason of a pledge) of his/her common shares and (ii) certain "excess
distributions", as specially defined, by the company.

         Non-electing U.S. shareholders generally would be required to pro-rata
all gains realized on the disposition of his/her common shares and all excess
distributions over the entire holding period for the common shares. All gains or
excess distributions allocated to prior years of the U.S. holder (other than
years prior to the first taxable year of the company during such U.S. holder's
holding period and beginning after January 1, 1987 for which it was a PFIC)
would be taxed at the highest tax rate for each such prior year applicable to
ordinary income. The Non-electing U.S. Shareholder also would be liable for
interest on the

                                       22

<PAGE>



foregoing tax liability for each such prior year calculated as if such tax
liability had be due with respect to each such prior year. A Non-electing U.S.
Shareholder that is not a corporation must treat this interest charge as
"personal interest" which, as discussed above, is partially or wholly
non-deductible. The balance of the gain or the excess distribution will be
treated as ordinary income in the year of the disposition or distribution, and
no interest charge will be incurred with respect to such balance.

         If the company is a PFIC for any taxable year during which a
Non-electing U.S. Shareholder holds common shares, then the company will
continue to be treated as a PFIC with respect to such common shares, even if it
is no longer by definition a PFIC. A Non-electing U.S. Shareholder may terminate
this deemed PFIC status by electing to recognize a gain (which will be taxed
under the rules discussed above for Non-electing U.S. Shareholders) as if such
common shares had been sold on the last day of the last taxable year for which
it was a PFIC.

         Under Section 1291(f) of the code, the Department of the Treasury has
issued proposed regulations that would treat as taxable certain transfers of
PFIC stock by Non-electing U.S. Shareholders that are generally not otherwise
taxed, such as gifts, exchanges pursuant to corporate reorganizations, and
transfers at death.

         Because the company's shares are "marketable" under section 1296(e), if
the company is a PFIC with respect to a U.S. investor, the U.S. investor may
elect to mark the stock to market each year. In general, a PFIC shareholder who
elects under Section 1296 to mark the marketable stock of a PFIC includes in
income each year an amount equal to the excess, if any, of the fair market value
of the PFIC stock as of the close of the taxable year over the shareholder's
adjusted basis in such stock. A shareholder is also generally allowed a
deduction for the excess, if any of the adjusted basis of the PFIC stock over
the fair market value as of the close of the taxable year. Deductions under this
rule, however, are allowable only to the extent of any net mark to market gains
with respect to the stock included be the shareholder for prior taxable years,
while the interest charge regime under the PFIC rules generally does not apply
to distributions from the dispositions of stock of a PFIC where the U.S.
investor has elected to mark the stock to market, coordination rules for limited
application will apply in the case of a U.S. investor that marks to market PFIC
stock later than the beginning of the shareholder's holding period for the PFIC
stock.

         Certain special generally adverse rules will apply with respect to the
common shares while the company is a PFIC whether or not it is treated as a QEF.
For example under Section 1297(b)(6) of the code, a U.S. holder who uses PFIC
stock as security for a long (including a margin loan) will, except as may be
provided in regulations, be treated as having made a taxable disposition of such
stock.

         Ayotte presently is not, and for fiscal 2002 does not expect to qualify
for status as a PFIC. If Ayotte should in subsequent years in fact qualify for
PFIC status, U.S. investors should take into account the foregoing tax aspects
concerning PFIC matters.

         F.   DIVIDENDS AND PAYING AGENTS.  Not applicable.

         G.   STATEMENTS BY EXPERTS. The audit report on our financial
statements in this report has been furnished by KPMG LLP, Chartered Accountants,
Vancouver, British Columbia, Canada, independent accountants, and is included in
this report upon the authority of that firm as experts in accounting, with their
consent to such inclusion.


                                       23

<PAGE>



         H.   DOCUMENTS ON DISPLAY. Information not included in this report but
incorporated by reference from our prior filings can be inspected on the
Securities and Exchange Commission's internet site (www.sec.gov) at the EDGAR
location.

         I.   SUBSIDIARY INFORMATION.  Not applicable.

ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         A.   QUANTITATIVE INFORMATION ABOUT MARKET RISK.  Not applicable.

         B.   QUALITATIVE INFORMATION ABOUT MARKET RISK.  Not applicable.

         C.   INTERIM PERIODS.  Not applicable.

         D.   SAFE HARBOR.  Not applicable.

ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

         A.    DEBT SECURITIES.  Not applicable.

         B.    WARRANTS AND RIGHTS.

         OPTIONS TO EMPLOYEES AND DIRECTORS. As the date of this report, there
were options granted and out- standing to purchase 100,000 shares which have
been granted to a consultant for media and advertising (Giovanni Ruscitti), at
an exercise price of $0.42 per share, expiring February 22, 2004. Note: these
options have been cancelled.

         PRIVATE PLACEMENT WARRANTS. We have issued in a private financing
warrants to buy 1,000,000 shares of common stock. The warrant exercise price is
$0.15 per share; the warrants expire August 8, 2003.
 The warrants were sold with a like number of shares of common stock in a
private financing in the 10 months ended December 31, 2001 (net proceeds of
approximately $100,000), were sold to Canadian residents.

         C.   OTHER SECURITIES.  Not applicable.

                                     PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.  Not Applicable.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS. Not applicable (we are subject to section 12(g) through filing of Form
20-F registration, effective in 2000).

ITEMS 15 AND 16. [Reserved by SEC - No disclosure required]


                                       24

<PAGE>



                                    PART III

ITEM 17.  FINANCIAL STATEMENTS.

         See the financial statements of the company for the two fiscal years
ended February 28, 2001, and the 10 months ended December 31, 2001, the notes
thereto, and the auditor's reports thereon, which are included in this annual
report. As set forth in the notes, all of the financial information is presented
in accordance with Canadian GAAP, however, as stated in the notes, there are no
material differences between Canadian GAAP and United States GAAP as applied to
our financial statements.

ITEM 18. FINANCIAL STATEMENTS.  Not applicable.

ITEM 19. EXHIBITS

<TABLE>
<CAPTION>
         Exhibit No.    Description of Exhibit
         -----------    ----------------------

<S>           <C>                                                                            <C>
              3.(i)     Articles of Incorporation (including continuance
                        to federal jurisdiction of Canada)                                    *

              3.(ii)    By-laws                                                               *

              4.1       Stock Option Plan dated August 30, 1996                               *

              4.2       Form of Stock Option Agreement dated October 18, 1999                 *

              10.1      Investor relations agreement with Marketing Strategies Inc.           *

              10.2      Arrangement Agreement with Verb Exchange Inc.                        **

              99.1      Form of stock certificate                                             *

              99.2      Certification Pursuant to Section 1350 of Chapter 63
                        of Title 18 of the United States Code                               ***
</TABLE>

*       Incorporated by reference from the like-numbered exhibit filed with our
        initial registration on Form 20-F (SEC File No. 0-30683, filed
        5/22/2000).

**      Incorporated by reference from the like-numbered exhibit filed with our
        Annual Report on Form 20-F (SEC File No. 0-30683, filed August 1, 2002).

***     Filed herewith.


                                       25

<PAGE>



                                   SIGNATURES

         The registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.


                                                 Ayotte Music Inc.


Date:  July 29, 2002                               /s/  Louis Eisman
                                                 -------------------------------
                                                 Louis Eisman, President



                                       26

<PAGE>



KPMG
         KPMG LLP                                    Telephone (604) 691-3000
         Chartered Accountants                       Telefax   (604) 691-3031
         Vancouver BC V7Y 1K3                        www.kpmg.ca
         Canada



AUDITORS' REPORT TO THE SHAREHOLDERS

We have audited the balance sheet of Ayotte Music Inc. as at December 31, 2001
and the statements of operations and deficit and cash flows for the ten month
period then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with Canadian generally accepted auditing
standards and United States generally accepted auditing standards. Those
standards require that we plan and perform an audit to obtain reasonable
assurance 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.

In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 2001 and the
results of its operations and cash flows for the ten month period then ended in
accordance with Canadian generally accepted accounting principles. As required
by the Company Act (British Columbia), we report that, in our opinion, these
principles have been applied, after giving retroactive effect to the change in
method of accounting for income taxes and the change in accounting for earnings
per share as explained in notes 2(e) and 2(g) to the financial statements, on a
basis consistent with that of the preceding year.

The financial statements as at February 28, 2001 and for the years ended
February 28, 2001 and February 29, 2000 were audited by other auditors who
expressed an opinion without reservation on these statements in their report
dated April 10, 2001.


KPMG LLP (SIGNED)

Chartered Accountants

Vancouver, Canada
January 31, 2002, except as to note 14,
   which is as of March 5, 2002



            KPMG LLP, a Canadian owned limited liability partnership
            established under the laws of Ontario, is a member firm of
            KPMG International, a Swiss association.


                                       27

<PAGE>


<TABLE>
<CAPTION>

AYOTTE MUSIC INC.
Balance Sheets
(Expressed in Canadian dollars)
-----------------------------------------------------------------------------------------------
                                                               December 31,        February 28,
                                                                       2001                2001
-----------------------------------------------------------------------------------------------
ASSETS

Current assets:
<S>                                                         <C>                    <C>
     Cash and cash equivalents                              $     431,369          $    938,218
     Accounts receivable                                           52,457               102,669
     Inventories                                                  233,321               245,413
     Prepaid expenses and deposits                                 22,801                31,208
-----------------------------------------------------------------------------------------------
                                                                  739,948             1,317,508

Promissory notes receivable (note 4)                              600,000                     -

Equipment and leasehold improvements (note 5)                     120,007               201,140

Patent                                                                  -                 1,016
-----------------------------------------------------------------------------------------------

                                                            $   1,459,955          $  1,519,664
===============================================================================================


LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Accounts payable and accrued liabilities               $     140,137          $    115,061
     Deferred revenue                                              21,444                11,507
-----------------------------------------------------------------------------------------------
                                                                  161,581               126,568

Shareholders' equity:
     Share capital (note 6)                                     3,169,072             3,029,072
     Deficit                                                   (1,870,698)           (1,635,976)
-----------------------------------------------------------------------------------------------
                                                                1,298,374             1,393,096
-----------------------------------------------------------------------------------------------
                                                            $   1,459,955          $  1,519,664
===============================================================================================
</TABLE>


Operations (note 1)
Subsequent events (notes 1 and 14)
Commitment (note 13)

See accompanying notes to financial statements,

Approved on behalf of the Board:

"LOUIS EISMAN"            Director
------------------------

"MICHAEL FUGMAN"          Director
------------------------

                                       28

<PAGE>


<TABLE>
<CAPTION>

AYOTTE MUSIC INC.
Statements of Operations and Deficit
(Expressed in Canadian dollars)
--------------------------------------------------------------------------------------------------------------
                                                            Ten month
                                                         period ended          Year ended           Year ended
                                                         December 31,        February 28,         February 29,
                                                                 2001                2001                 2000
--------------------------------------------------------------------------------------------------------------

<S>                                                   <C>                  <C>                  <C>
Sales                                                 $     1,128,289      $    1,518,011       $    2,019,985
Cost of goods sold                                            745,992             810,148            1,368,235
--------------------------------------------------------------------------------------------------------------

Gross margin                                                  382,297             707,863              651,750

Expenses:
     Advertising and promotion                                 53,353              61,901              167,274
     Amortization                                              35,770              50,678               59,919
     Automobile                                                     -                 422                1,208
     Bad debts                                                    268               4,136               65,352
     Bank charges and interest                                 25,736              35,151               30,867
     Computer and website costs                                16,258              42,217               20,608
     Insurance                                                  9,492              12,944               20,659
     Management fees (note 8)                                  59,500              68,000               48,000
     Office                                                    25,013              35,796               21,158
     Professional fees                                        128,895             110,614               71,055
     Rent                                                      95,241              76,348              102,157
     Repairs and maintenance                                      484               8,223                7,346
     Salaries and employee benefits                           147,958             187,301              272,521
     Telephone and fax                                          8,643              24,750               16,282
     Travel                                                       636              15,371                6,212
     Utilities                                                 19,079              25,015               22,204
     ---------------------------------------------------------------------------------------------------------
                                                              626,326             758,867              932,822
--------------------------------------------------------------------------------------------------------------

Loss from operations                                         (244,029)            (51,004)            (281,072)

Other income (expenses):
     Other income                                              62,710              33,892                2,889
     Gain (loss) on foreign exchange                            3,880              34,507              (10,073)
     Loss on disposal of equipment                             (5,351)                  -                    -
     Write-down of equipment (note 1(b))                      (51,932)                  -                    -
     ---------------------------------------------------------------------------------------------------------
                                                                9,307              68,399               (7,184)
--------------------------------------------------------------------------------------------------------------

Net earnings (loss) for the period                           (234,722)             17,395             (288,256)

Deficit, beginning of period                               (1,635,976)         (1,653,371)          (1,365,115)
--------------------------------------------------------------------------------------------------------------

Deficit, end of period                                $    (1,870,698)     $   (1,635,976)       $  (1,653,371)
==============================================================================================================

Earnings (loss) per share:
     Basic and diluted                                $        (0.02)      $         0.00        $       (0.03)
==============================================================================================================
</TABLE>


See accompanying notes to financial statements.


                                       29

<PAGE>


<TABLE>
<CAPTION>

AYOTTE MUSIC INC.
Statements of Cash Flows
(Expressed in Canadian dollars)
--------------------------------------------------------------------------------------------------------------
                                                            Ten month
                                                         period ended          Year ended           Year ended
                                                         December 31,        February 28,         February 29,
                                                                 2001                2001                 2000
--------------------------------------------------------------------------------------------------------------

Cash provided by (used in):

Operations:
<S>                                                   <C>                  <C>                  <C>
     Net earnings (loss) for the period               $     (234,722)      $       17,395       $    (288,256)
     Items not involving cash:
         Amortization                                          35,770              50,678              59,919
         Loss on disposal of capital asset                      5,351                   -                   -
         Write-down of equipment                               51,932                   -                   -
     Changes in non-cash working capital:
         Accounts receivable                                   50,212              81,048             531,775
         Inventories                                           12,092               6,287             199,957
         Prepaid expenses and deposits                          8,407             (22,988)              6,480
         Accounts payable and accrued
            liabilities                                        35,013             (36,962)           (159,398)
     ---------------------------------------------------------------------------------------------------------
                                                              (35,945)             95,458             350,477

Investments:
     Purchase of equipment and leasehold
         improvements, net                                    (10,904)             (7,980)             (4,482)
     Investment in promissory notes                          (600,000)                  -                   -
     ---------------------------------------------------------------------------------------------------------
                                                             (610,904)             (7,980)             (4,482)

Financing:
     Issuance of share capital                                140,000             503,335                   -
     Capital leases                                                 -              (1,337)            (40,878)
     ---------------------------------------------------------------------------------------------------------
                                                              140,000             501,998             (40,878)
--------------------------------------------------------------------------------------------------------------

Increase (decrease) in cash and cash
     equivalents                                             (506,849)            589,476             305,117

Cash and cash equivalents, beginning of
     period                                                   938,218             348,742              43,625
--------------------------------------------------------------------------------------------------------------

Cash and cash equivalents, end of period              $       431,369      $      938,218       $     348,742
==============================================================================================================
</TABLE>


See accompanying notes to financial statements.



                                       30

<PAGE>


AYOTTE MUSIC INC.
Notes to Financial Statements
(Expressed in Canadian dollars)

Ten month period ended December 31, 2001 Year ended February 28, 2001 Year ended
February 29, 2000
--------------------------------------------------------------------------------

AYOTTE MUSIC INC.
Notes to Financial Statements
(Expressed in Canadian dollars)

Ten month period ended December 31, 2001 Year ended February 28, 2001 Year ended
February 29, 2000
--------------------------------------------------------------------------------

1.   OPERATIONS:

     Ayotte Music Inc. ("Ayotte" or the "Company") is a British Columbia
     corporation in the business of manufacturing drums for the music
     entertainment industry.

     The following transactions occurred subsequent to the end of the reporting
     period:

     (a) On December 3, 2001, Ayotte Music Inc. announced a letter of intent
         with Verb Exchange Inc. ("Verb") effective November 27, 2001, to
         acquire Verb Exchange Inc., a privately held B.C. corporation, through
         a reverse takeover transaction. The transaction, which will be
         structured as a statutory plan of arrangement, is subject to a number
         of conditions, including a requirement of Ayotte to complete adequate
         financing to ensure that it has a minimum of $2 million net cash in its
         treasury.

         Following the completion of necessary financing, it is anticipated that
         the shareholders of Ayotte and Verb will each own 50% of the
         outstanding shares of the combined company, prior to issuance of any
         securities in settlement of advisory fees, finder's fees sponsorship
         fees and any other adjustments. Thomson Kernaghan & Co. Limited
         ("Thomson Kernaghan"), subject to completion of satisfactory due
         diligence, has agreed to act as sponsor to Ayotte in connection with
         the transaction.

         Verb is a provider of productivity-enhancing communications tools and
         wireless data messaging convergence applications - Unified
         Communications (UC), Interactive Broadcast Messaging (IBM) Services,
         technical development of large-scale telecom solutions, and Wireless
         (PDA) device messaging & solution bundling.

         Ayotte has also agreed to provide a bridge loan, to a maximum of
         $1,250,000, to Verb pending completion of the transaction. The loan is
         secured against the assets of Verb and is supported by a pledge of the
         shareholdings of Verb's principal shareholders. Advances under the loan
         are made against an approved budget (see note 4).

     (b) On January 14th, 2002, the Company announced the finalization and
         closing of its transaction with Shetland Enterprises ("Shetland") for
         the sale of the Company's assets in connection with the Company's core
         business of manufacturing and distribution of drums and related
         products pursuant to an agreement between the Company and Shetland
         dated November 30th, 2001. The transaction is effective January 1,
         2002. The Company has written down manufacturing equipment by $51,932
         to its estimated value to be received on the sale.

     (c) In January 2002, a group of shareholders have exercised their rights
         under the Canada Business Corporations Act to have their shareholding
         in the capital of the Company purchased by the Company at fair market
         value. The shareholdings of these shareholders total 350,000 shares.
         The Company has made these shareholders an offer for their
         shareholdings which has not been accepted.


                                       31

<PAGE>


AYOTTE MUSIC INC.
Notes to Financial Statements
(Expressed in Canadian dollars)

Ten month period ended December 31, 2001 Year ended February 28, 2001 Year ended
February 29, 2000
--------------------------------------------------------------------------------

2.   SIGNIFICANT ACCOUNTING POLICIES:

     (a) Basis of presentation:

         The Company prepares its financial statements in accordance with
         Canadian generally accepted accounting principles. Material measurement
         differences to accounting principles generally accepted in the United
         States are set out in note 12. During 2001 the Company changed its year
         end to December 31.

     (b) Cash equivalents:

         Cash equivalents represent highly liquid investments readily
         convertible into cash having terms to maturity of three months or less
         when acquired.

     (c) Inventories:

         Inventories are valued at the lower of cost and net realizable value.
         Cost is determined under the specific identification method.

     (d) Equipment and leasehold improvements:

         Equipment and leasehold improvements are recorded at cost. Amortization
         is provided on a declining- balance basis over the estimated useful
         lives of the assets at an annual rate of 20%. Computer software is
         amortized at 100%. One-half of the amortization is provided for in the
         year of acquisition.

     (e) Foreign exchange:

         The Company's main operations are located in Canada and a significant
         portion of expenses are incurred in Canadian dollars, therefore, the
         Canadian dollar is considered the functional currency for measuring
         transactions.

         All revenue from direct sales into the United States is received in
         U.S. dollars. Assets and liabilities denominated in foreign currencies
         are translated into Canadian dollars at the exchange rates in effect at
         year- end. Revenues and expenses are translated at the exchange rate
         prevailing at the time of the transactions. Foreign currency
         translation gains and losses arising from normal business operations
         are credited to or charged against other income for the period
         incurred.

     (f) Revenue recognition:

         The Company earns revenue from internet and direct sales, as well as
         sales to dealers.

         (i)  Dealers:

              Revenue from sales to dealers is recognized and recorded upon
              shipment of the completed product. The product is invoiced upon
              shipment, as this is a requirement for cross-border transactions.


                                       32

<PAGE>


AYOTTE MUSIC INC.
Notes to Financial Statements
(Expressed in Canadian dollars)
--------------------------------------------------------------------------------
Ten month period ended December 31, 2001 Year ended February 28, 2001 Year ended
February 29, 2000
--------------------------------------------------------------------------------

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

     (f) Revenue recognition (continued):

         (ii) Internet and direct sales:

              Revenues from sales on the internet and direct sales are received,
              recognized and recorded upon shipment of the completed product.
              Shipping occurs upon receipt of full payment for product.

     (g) Income taxes:

         In December 1997, the Accounting Standards Board of the Canadian
         Institute of Chartered Accountants ("CICA") issued Section 3465 of the
         CICA Handbook, Income Taxes ("Section 3465"). Section 3465 requires a
         change from the deferral method of accounting for income taxes to the
         asset and liability method.

         Under the asset and liability method, future tax assets and liabilities
         are recognized for the future tax consequences attributable to
         differences between the financial statement carrying amounts of
         existing assets and liabilities and their respective tax bases. Future
         tax assets and liabilities are measured using enacted or substantively
         enacted tax rates expected to be recovered or settled. Under Section
         3465, the effect on future tax assets and liabilities of a change in
         tax rates is recognized in income in the period that includes the
         enactment date.

         Pursuant to the deferral method, which was applied in the year ended
         February 28, 2001 and prior years, deferred income taxes are recognized
         for income and expense items that are reported in different years for
         financial reporting purposes and income tax purposes using the tax rate
         applicable for the year of the calculation. Under the deferral method,
         deferred taxes are not adjusted for subsequent changes in tax rates.

         During the period ended December 31, 2001, the Company has adopted the
         recommendations of Section 3465 with retroactive restatement to March
         1, 1999. There was no effect on net earnings (loss) for the period
         ended December 31, 2001 or prior years of this change in accounting for
         income taxes.

     (h) Use of 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 at the date of the financial statements and the reported
         amount of revenues and expenses during the period. Actual results may
         differ from those estimates.


                                       33

<PAGE>


AYOTTE MUSIC INC.
Notes to Financial Statements
(Expressed in Canadian dollars)

Ten month period ended December 31, 2001 Year ended February 28, 2001 Year ended
February 29, 2000
--------------------------------------------------------------------------------

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

     (i) Earnings (loss) per share:

         In December 2000, the Accounting Standards Board of the Canadian
         Institute of Chartered Accountants ("CICA") revised Section 3500 of the
         CICA Handbook, Earnings per Share ("Section 3500"). Section 3500
         requires a change to the treasury stock method of calculating fully
         diluted earnings per share.

         Under the treasury stock method, the weighted average number of common
         shares outstanding for the calculation of diluted earnings per share
         assumes that the proceeds to be received on the exercise of stock
         options or warrants is applied to repurchase common shares at the
         average market price for the period.

         During the period ended December 31, 2001, the Company has adopted the
         recommendations of Section 3500 with retroactive restatement for all
         periods presented. There was no effect on fully diluted earnings per
         share for any of the periods presented.

     (j) Stock-based compensation:

         The Company grants stock options as described in note 6(d). No
         compensation expense is recognized when stock options are issued as the
         exercise prices are based on market prices of the underlying common
         shares on the date of grant. Any consideration paid on exercise of
         stock options is credited to share capital.

3.   FINANCIAL INSTRUMENTS:

     The carrying amounts of cash and cash equivalents, accounts receivable,
     accounts payable and accrued liabilities approximate their fair values
     because of the short-term to maturity of these instruments. It is
     management's opinion that the Company is not exposed to significant
     interest, currency or credit risks arising from these financial
     instruments.

4.   PROMISSORY NOTES RECEIVABLE:

     In advance of the transaction described in note 1(a), the Company provided
     a bridge loan, in the form of promissory notes, to Verb. The notes bear
     interest at a rate of Canadian prime plus 1%, calculated and compounded
     monthly in arrears. The notes are payable on demand and are secured by a
     general security agreement covering the assets of Verb and a share pledge
     agreement under which seven shareholders of Verb have pledged their
     shareholdings representing 59% of the issued and outstanding share capital
     of Verb. At December 31, 2001, the Company has advanced funds totaling
     $600,000 to Verb.


                                       34

<PAGE>


<TABLE>
<CAPTION>
AYOTTE MUSIC INC.
Notes to Financial Statements
(Expressed in Canadian dollars)

Ten month period ended December 31, 2001
Year ended February 28, 2001 Year ended
February 29, 2000
------------------------------------------------------------------------------------------------

5.   EQUIPMENT AND LEASEHOLD IMPROVEMENTS:

     -------------------------------------------------------------------------------------------
                                                                     Accumulated
                                                                    amortization        Net book
                                                         Cost     and write-down           value
     -------------------------------------------------------------------------------------------

<S>                                               <C>              <C>               <C>
     Manufacturing equipment                      $   388,564      $   358,144       $    30,420
     Furniture and office equipment                    95,243           63,481            31,762
     Leasehold improvements                           186,318          129,622            56,696
     Software                                          17,810           16,681             1,129
     -------------------------------------------------------------------------------------------

                                                  $   687,935      $   567,928       $   120,007

     --------------------------------------------------------------------------------------------



     --------------------------------------------------------------------------------------------

                                                                    Accumulated         Net book
     February 28, 2001                                   Cost      amortization            value
     -------------------------------------------------------------------------------------------

     Manufacturing equipment                      $   385,964      $   290,001       $    95,963
     Furniture and office equipment                    93,870           57,267            36,603
     Leasehold improvements                           178,218          119,093            59,125
     Automobile                                        30,741           22,683             8,058
     Software                                          16,272           14,881             1,391
     -------------------------------------------------------------------------------------------


                                                  $   705,065      $   503,925       $   201,140

     --------------------------------------------------------------------------------------------
</TABLE>


6.   SHARE CAPITAL:

     (a) Authorized:
              Unlimited voting common shares without par value
              Unlimited preferred shares

<TABLE>
<CAPTION>
     (b) Issued and outstanding:

         -----------------------------------------------------------------------------------------
                                                                       Number
         Common shares                                              of shares               Amount
         -----------------------------------------------------------------------------------------

<S>                                                                <C>               <C>
         Balance, February 28, 1999 and February 29, 2000          11,709,000        $   2,525,737

         Issued for cash through private placement                  1,235,000              494,000
         Issued for cash                                              150,000               15,000
         Share issue costs                                                  -               (5,665)
         -----------------------------------------------------------------------------------------

         Balance, February 28, 2001                                13,094,000            3,029,072

         Issued for cash through private placement                  1,000,000              100,000
         Issued on exercise of stock options                          400,000               40,000
         -----------------------------------------------------------------------------------------

         Balance, December 31, 2001                                14,494,000        $   3,169,072
         -----------------------------------------------------------------------------------------
</TABLE>



                                       35

<PAGE>


AYOTTE MUSIC INC.
Notes to Financial Statements
(Expressed in Canadian dollars)

Ten month period ended December 31, 2001 Year ended February 28, 2001 Year ended
February 29, 2000
--------------------------------------------------------------------------------

6.   SHARE CAPITAL (CONTINUED):

     (c) Warrants:

         During the year ended February 28, 2001, 1,235,000 warrants were issued
         with the private placement. Each warrant can be exercised at a price of
         $0.60 for the period of June 14, 2000 until June 14, 2001, and then at
         a price of $0.80 prior to June 14, 2002.

         During the period ended December 31, 2001, 1,000,000 warrants were
         issued with the private placement. Each warrant can be exercised at a
         price of $0.15 prior to August 8, 2003.

     (d) Options:

         Pursuant to the policies of the Canadian Venture Exchange ("CDNX"), the
         Company may grant incentive stock options to its officers, directors
         and employees. CDNX policies permit the Company's directors to grant
         incentive stock options for the purchase of shares of the company to
         persons in consideration for services. Stock options must be
         non-transferable and the aggregate number of shares that may be
         reserved for issuance pursuant to stock options may not exceed 10% of
         the issued shares of the Company at the time of granting and may not
         exceed 5% to any individual. The exercise price of stock options is
         determined by the board of directors of the Company at the time of
         grant and may not be less than the average closing price of the
         Company's shares on the ten trading days immediately preceding the day
         on which the option is granted and publicly announced. Options have a
         maximum term of ten years and terminate 30 days following the
         termination of the optionee's employment, except in the case of
         retirement, death or disability, in which case they terminate one year
         after the event. Vesting of options is made at the time of granting of
         the options at the discretion of the board of directors. Once approved
         and vested, options are exercisable at any time.

<TABLE>
<CAPTION>
         --------------------------------------------------------------------------------------------
                                                                     Number          Weighted average
                                                                  of shares            exercise price
         --------------------------------------------------------------------------------------------

<S>                                                               <C>                       <C>
         Balance, February 29, 2000 and February 28, 2001          750,000                  $    0.14
              Granted                                              700,000                       0.10
              Exercised                                           (400,000)                      0.10
              Cancelled                                           (100,000)                      0.42
         --------------------------------------------------------------------------------------------

         Balance, December 31, 2001                                950,000                  $    0.10
         --------------------------------------------------------------------------------------------
</TABLE>


         The stock options outstanding at December 31, 2001 have a weighted
         average remaining contractual life of 3.3 years. All of the options
         were exercisable at December 31, 2001. On January 18, 2002, the
         remaining 950,000 stock options were exercised.


                                       36

<PAGE>


AYOTTE MUSIC INC.
Notes to Financial Statements
(Expressed in Canadian dollars)

Ten month period ended December 31, 2001 Year ended February 28, 2001 Year ended
February 29, 2000
--------------------------------------------------------------------------------

7.   INCOME TAXES:

     Income tax expense differs from the amounts computed by applying the
     combined Canadian federal and provincial income tax rate of 44.6% to the
     loss for the year as follows:

<TABLE>
<CAPTION>
     ---------------------------------------------------------------------------------------------------

                                                December 31,       February 28,       February 29,
                                                        2001               2001               2000
     ---------------------------------------------------------------------------------------------

<S>                                            <C>                <C>                 <C>
     Earnings (loss) for the period            $   (182,790)      $     17,395       $   (288,256)
     ---------------------------------------------------------------------------------------------


     Expected income tax recovery              $    (81,524)      $      7,932       $   (131,445)

     Tax effect of:
         Permanent differences                        1,814                 91                  -
         Change in valuation allowance               79,710             (8,023)           131,445
         -----------------------------------------------------------------------------------------
                                                     81,524             (7,932)           131,445
     ---------------------------------------------------------------------------------------------

                                               $          -      $           -      $           -
     ---------------------------------------------------------------------------------------------
</TABLE>

     The tax effects of temporary differences that give rise to significant
     portions of future income tax assets and liabilities are presented below:

<TABLE>
<CAPTION>
     ---------------------------------------------------------------------------------------------
                                                                   December 31,       February 28,
                                                                           2001               2001
     ---------------------------------------------------------------------------------------------
<S>                                                              <C>                <C>
     Future income tax assets:
         Non-capital loss carry forwards                         $     748,378      $     853,291
         Other                                                           4,737             28,360
         -----------------------------------------------------------------------------------------

     Future income tax liabilities:
         Capital assets                                                 (5,448)            (7,234)
     ---------------------------------------------------------------------------------------------

     Total net future income tax asset                                 747,667            874,417
     Valuation allowance                                              (747,667)          (874,417)
     ---------------------------------------------------------------------------------------------

     Net future income tax assets                                $            -     $          -
     ---------------------------------------------------------------------------------------------
</TABLE>


     The Company has non-capital loss carry forwards for income tax purposes of
     approximately $2,101,000 which can be used to offset future taxable income
     to 2008. If the transaction with Verb is completed, these losses will be
     restricted.


                                       37

<PAGE>


AYOTTE MUSIC INC.
Notes to Financial Statements
(Expressed in Canadian dollars)

Ten month period ended December 31, 2001 Year ended February 28, 2001 Year ended
February 29, 2000
--------------------------------------------------------------------------------

8.   RELATED PARTY TRANSACTIONS:

     Included in expenses is $59,500 (February 28, 2001 - $68,000; February 29,
     2000 - $48,000) of consulting and management fees paid to a shareholder of
     the Company and another company owned by a director.

9.   EARNINGS (LOSS) PER SHARE:

<TABLE>
<CAPTION>
     ----------------------------------------------------------------------------------------------------
                                                       December 31,      February 28,        February 29,
                                                               2001              2001                2000
     ----------------------------------------------------------------------------------------------------

<S>                                                  <C>                <C>                <C>
     Net earnings (loss) for the period              $    (240,722)     $      17,395      $    (288,256)
     Weighted average shares outstanding                13,214,458         12,531,192         11,694,000
     Earnings (loss) per share -
         basic and diluted                           $       (0.02)     $        0.00      $      (0.025)
     ----------------------------------------------------------------------------------------------------
</TABLE>


     All issued warrants and stock options have been excluded from the
     calculation of earnings (loss) per share as their impact is anti-dilutive.

10.  SEGMENTED INFORMATION:

     The Company operations in one industry segment, being drum kit
     manufacturing. All of the Company's operations and assets are located in
     Canada. Approximately 80% of sales are to customers located in the United
     States, 17% to customers in Canada and 3% to customers elsewhere in the
     world.

11.  COMPARATIVE FIGURES:

     Certain of the February 28, 2001 and February 29, 2000 figures have been
     reclassified to conform with the presentation adopted in the current
     period.

12.  RECONCILIATION TO UNITED STATES ACCOUNTING PRINCIPLES:

     The financial statements have been prepared in accordance with generally
     accepted accounting principles in Canada ("Canadian GAAP") which differ in
     certain respects from those principles and practices that the Company would
     have followed had its financial statements been prepared in accordance with
     generally accepted accounting principles in the United States ("U.S.
     GAAP").

                                       38

<PAGE>


AYOTTE MUSIC INC.
Notes to Financial Statements
(Expressed in Canadian dollars)

Ten month period ended December 31, 2001 Year ended February 28, 2001 Year ended
February 29, 2000
--------------------------------------------------------------------------------

12.  RECONCILIATION TO UNITED STATES ACCOUNTING PRINCIPLES (CONTINUED):

     The following are the material variations in accounting principles,
     practices and methods used in preparing these financial statements from
     those generally accepted in the United States:

     (a) Income taxes:

         Under Canadian GAAP, future tax assets and liabilities are recorded at
         substantially enacted tax rates. Under U.S. GAAP, deferred tax assets
         and liabilities are recorded at enacted tax rates. Recording Canadian
         deferred tax assets and liabilities at enacted tax rates would not
         change recorded net assets or shareholders' equity under U.S. GAAP.

     (b) Stock-based compensation:

         The Company has granted stock options to certain directors and
         employees for services provided to the Company. The Company has elected
         under Statement of Financial Accounting Standards No. 123 ("SFAS No.
         123"), "Accounting for Stock-Based Compensation" to continue to measure
         compensation cost by the intrinsic value method set out in APB Opinion
         No. 25 and related interpretations. As options are granted at exercise
         prices based on the market value of the Company's share at the date of
         grant, no adjustment for compensation expense is required.

     (c) Recent United States accounting standards:

         During 2001, the Financial Accounting Standards Board has issued four
         new pronouncements:

          o  Statement 141, "Business Combinations", requires the purchase
             method of accounting for all business combinations and applies to
             all business combinations initiated after June 30, 2001 and to all
             business combinations accounted for by the purchase method that are
             completed after June 30, 2001.

          o  Statement 142, "Goodwill and Other Intangible Assets", requires
             that goodwill as well as other intangible assets be tested annually
             for impairment and is effective for fiscal years beginning after
             December 15, 2001.

          o  Statement 143, "Accounting for Asset Retirement Obligations",
             requires entities to record the fair value of a liability for an
             asset retirement obligation in the period in which it is incurred
             and a corresponding increase in the carrying amount of the related
             long-lived asset and is effective for fiscal years beginning after
             June 15, 2002.


                                       39

<PAGE>


AYOTTE MUSIC INC.
Notes to Financial Statements
(Expressed in Canadian dollars)

Ten month period ended December 31, 2001 Year ended February 28, 2001 Year ended
February 29, 2000
--------------------------------------------------------------------------------
12.  RECONCILIATION TO UNITED STATES ACCOUNTING PRINCIPLES (CONTINUED):

     (c) Recent United States accounting standards (continued):

         o   Statement 144, "Accounting for the Impairment or Disposal of
             Long-lived Assets", provides that long- lived assets to be disposed
             of by sale be measured at the lower of carrying amount or fair
             value less cost to sell, whether reported in continuing operations
             or in discontinued operations, and broadens the reporting of
             discontinued operations to include all components of an entity with
             operations that can be distinguished from the rest of the entity
             and that will be eliminated from the ongoing operations of the
             entity in a disposal transaction. Statement 144 is effective for
             fiscal years beginning after December 15, 2001.

         The adoption of Statements 141, 142, 143 and 144 will not effect the
         current financial statements or historically reported results of
         operations.

13.  COMMITMENT:

     The Company is committed to minimum payments required under an operating
     lease of $99,804. The lease expires November 30, 2002.

14.  SUBSEQUENT EVENTS:

     (a) On February 15, 2002, the Company announced a private placement of up
         to 4,500,000 special warrants at $0.16 per special warrant, for
         proceeds of $720,000. Each special warrant will entitle the holder to
         acquire one common share of the Company and one share purchase warrant.
         Each share purchase warrant will entitle the holder to acquire one
         additional common share of the Company at $0.16 for a period of one
         year from the closing date of the financing. The proceeds of the
         private placement are intended to be advanced by the Company to Verb
         under Verb's existing credit facility with the Company.

         The Company will file a prospectus qualifying the issuance of the
         shares and warrants on exercise of the Special Warrants. If receipts
         for the final prospectus are not received within 120 days of the
         closing date, the special warrants will be convertible into 1.1 common
         shares and 1.1 share purchase warrants.

         The private placement and the advance of the proceeds to Verb are
         subject to the prior approval of the Canadian Venture Exchange.

     (b) The 1,000,000 warrants referred to in note 6(c) were exercised on
         March 5, 2002.


                                       40

<PAGE>