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

                                    FORM 20-F
(Mark One)
____     REGISTRATION  STATEMENT PURSUANT TO SECTION 12(B) OR (G) OF THE
         SECURITIES EXCHANGE ACT OF 1934.
                                       OR
  X      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934, FOR THE FISCAL YEAR ENDED FEBRUARY 29, 2001.
                                       OR
____     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934.

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)

          2060 Pine Street, Vancouver, British Columbia, Canada V6J 4P8
--------------------------------------------------------------------------------
                    (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: 13,079,000 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),  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.........................13

Item 6.  Directors, Senior Management and Employees...........................18

Item 7.  Major Shareholders and Related Party Transactions....................20

Item 8.  Financial Information................................................21

Item 9.  The Offer and Listing ...............................................21

Item 10. Additional Information. .............................................22

Item 11.  Quantitative and Qualitative Disclosures About Market Risk .........28

Item 12.  Description of Securities Other Than Equity Securities .............28

                                     PART II

Item 13.  Defaults, Dividend Arrearages and Delinquencies ....................28

Item 14.  Material Modifications to the Rights of
          Security Holders and Use of Proceeds................................28

Items 15 and 16 [Reserved by SEC].............................................28

                                    PART III

Item 17.  Financial Statements................................................29

Item 18.  Financial Statements................................................29

Item 19.  Exhibits............................................................29

Signatures....................................................................30



<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.

         The  table  below  provides  selected  financial  information  about us
covering  the  past  five  financial  years.  This  information,  and all  other
financial  information  in this  report,  is stated in Canadian  dollars  unless
otherwise noted. For information about the three fiscal years ended February 28,
2001 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>

                                                                   Fiscal Years Ended Feb. 28,
                                              ----------------------------------------------------------------------
OPERATING AND BALANCE SHEET DATA                 2001          2000           1999          1998         1997
                                                 ----          ----           ----          ----         ----
<S>                                           <C>            <C>           <C>           <C>           <C>
Sales, net of excise duties and taxes         $  1,518,011   $  2,019,985  $  2,633,421  $  2,011,739  $  1,796,549
Net earnings (loss)                                 17,395       (288,256)     (270,347)     (220,765)     (397,941)
Earnings (loss) per common share  basic)*           -0-             (0.03)        (0.02)        (0.05)        (0.25)
Capital lease obligations                           -0-            -0-           14,566        44,742        36,846
Total assets                                     1,519,664      1,037,233     1,525,765     1,181,195     1,175,206
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 8 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.

         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

                                        3

<PAGE>



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

         YOU COULD LOSE ALL OR A PORTION OF YOUR  INVESTMENT  IF WE  CONTINUE TO
SUFFER  RECURRING  LOSSES.  Except  for 2001  when we  earned a small  profit of
$17,395,  we have lost money.  At February 28, 2001, the total retained  deficit
was  $1,635,976,  compared to  $1,653,371  at  February  29,  2000.  See Item 5,
Operating  and Financial  Review and  Prospects.  Operating  losses may recur in
fiscal 2002 and continue, depending on our success in growing the internet sales
side of our business, which we began to implement toward the end of fiscal 2000.

         IF WE ARE UNABLE TO CONTINUE AS A GOING CONCERN,  YOU COULD LOSE ALL OR
A PORTION OF YOUR INVESTMENT, AS OUR BUSINESS MODEL WITH THE INTERNET IS NOT YET
PROVEN  AND COULD  FALTER.  At  February  28,  2001 we had  working  capital  of
$1,190,940.  To preserve  this level,  we will have to keep  generating  profits
going  forward.  If we  encounter a sales  slowdown  and need to spend money for
internet  marketing,  we would run the risk of depleting  cash reserves  without
increasing  operating  revenues to restore the working capital.  Working capital
now on hand and  expected  revenues  from  sales are  expected  to fund  ongoing
operations through at least calendar 2002. But, if we greatly expand advertising
and  especially  if we acquire  new  businesses  or add on new  people,  without
generating  more  business  which is  profitable,  we could  need  more  capital
financing.  There is a risk,  therefore,  that we could  run out of money  while
growing our  business and we may not be able to raise the money we would need to
stay in business.

         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 superior to (more  favorable) the rights of holders of the
common stock.

         IF WE LOST THE SERVICES OF ANY OF OUR EXECUTIVES,  OUR OPERATIONS COULD
BE MATERIALLY  AFFECTED AND THE VALUE OF YOUR  INVESTMENT  COULD BE REDUCED.  We
continue to depend upon the  services of our  principal  officers.  Our business
would suffer if the services of Louis Eisman (Chairman and Interim President) or
Don  Mazankowski  (General  Manager) were not available to us. We don't have key
person  life  insurance  on  these  people  and it would  be  difficult  to find
replacement  personnel.  We don't have written employment  agreements with these
people, but even if we did, such agreements would not prevent them from leaving.


                                        4

<PAGE>



         OUR  OPERATIONS  WOULD BE  MATERIALLY  AFFECTED,  AND THE VALUE OF YOUR
INVESTMENT REDUCED OR ELIMINATED,  IF WE ARE UNABLE TO SUCCESSFULLY COMPETE WITH
LARGER   COMPANIES.   Our  principal   competitors   include  Yamaha  and  Pearl
Corporation,  both of Japan.  There are  approximately  25 more companies in the
industry  who sell  into  North  America  and  Europe,  and the  market  is very
competitive. Many of these companies have significant customer relationships and
vastly  larger  financial,  marketing,  customer  support,  technical  and other
resources  than we do.  Therefore,  they may be able to respond  more quickly to
changes  in  customer  requirements  or be  able  to  undertake  more  extensive
marketing  campaigns,  adopt more  aggressive  pricing  policies,  and make more
attractive offers to potential customers and employees. They also may be able to
devote  greater  resources to new products and services than we can. Even though
we believe we have a superior  product,  that  advantage  could be outweighed by
marketing, pricing, or the other factors where our competitors are stronger.

         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 CDNX 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 and
a  substantial  portion of our 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.

         We make and sell music drums and drum-related  accessories and products
under  the  commercial   name  "Ayotte."  Most  of  our  products  are  used  by
professional and semi-professional  musicians in rock-n-roll and jazz venues. We
believe  our  "WoodHoop"  drums  are  a  superior  high-end  product.  They  are
hand-crafted from maple and artistically finished,  and incorporate  significant
unique performance features.


                                        5

<PAGE>



         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
1199 West  Hastings  Street,  suite 600,  Vancouver,  B.C. V6J 4P8  (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 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.

                                        6

<PAGE>



         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 that
period,  we have  not  divested  any  substantial  amounts  of  such  equipment.
Presently  we  have  no  plans  to buy or  divest  significant  amounts  of such
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.

         B.       BUSINESS OVERVIEW.

         The performance features that make our drums unique are:

                  WoodHoops  - one  of  only  a very  few  manufacturers  to use
                  woodhoops  to  secure  the  drumheads  to the  drumshell.  The
                  woodhoops  improve  the sonic  quality  of the sound by adding
                  warmth and depth.

                  Tunelock Tension System - Drumhead  tuning/tension system that
                  incorporates  design  features  unique to  Ayotte.  The system
                  keeps  the  drum  tuning  rods  from  backing  off  due to the
                  vibrations caused by playing, thus keeping the drum in tune.

                  Multi-Ply Snare Drums - Snare drum shell thickness that ranges
                  from 6 ply (1/5 inch  thick) to 50 ply (1-2/3 inch thick) with
                  a wide variety in between  offering various sound and response
                  characteristics.

                  Rack & Pinion Snare Throw-Off - Snare throw-off is a mechanism
                  used to apply and  release  the wire snares to the bottom head
                  of the snare drum. Ayotte's Rack & Pinion snare release allows
                  for infinite positioning of the snare tension by simply moving
                  the handle providing quick and easy adjustment.

                  Finishes - Polyester lacquer finishes  available in any color.
                  Drums are  lacquer  finished  on the inside of each drum.  The
                  inside finish adds resonance to the sound.

                   Hardware - Hardware  components used to suspend the drums and
                  secure  them to stands are of  Ayotte's  design and built with
                  innovative  features  that  allow for quick head  changes  and
                  unlimited   positioning  (the  hardware  includes   Suspension
                  Bridge, Tom Bracket, Strong Arm Clamp, Turret Tom Mount).

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

         The "A-Level"  endorser receives free drums, has access to rental drums
located in many of the major music centers in North America, is featured in some
advertising, and is listed on Ayotte's website.


                                        7

<PAGE>



         The "B-Level" endorser receives an additional discount off the purchase
price of the  drumkit,  and has  access to rental  drums  located in many of the
major music centers in North America.  The financial impact of these benefits on
our  company  is minor (we only have a few  endorsements  but they are from very
popular musicians).

         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.  To the best of our  knowledge,  we are one of the  first  well-known
musical instrument manufacturers to operate in this manner.

         On March 6, 2000 we signed an agreement with Market Strategies,  (USA),
Endicott,  New York, by which Market Strategies provided marketing,  promotional
and investor  relation services for us, and also assisting us in identifying and
reviewing possible  acquisitions,  joint ventures or partnership  opportunities.
Our agreement ran through  January 21, 2001 subject to the right of either party
to cancel on 30 days notice.  We were to pay Market Strategies by issuing shares
of restricted  common stock to it. However,  we canceled this agreement and as a
consequence  did not issue any such shares.  We don't now have any agreements of
any  kind  for  any  acquisition  or  other  significant   business  combination
transaction,  and our current  business model is based on our internet  strategy
without assumptions of needing to acquire or combine another business with ours.

         Our fiscal year runs from March 1 through  February  28. 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"). As of February 29, 2001 there were
no material differences in result between the two GAAP presentations. Please see
the notes 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. 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 June 25, 2001, US$1.00 equaled Cdn.$1.5183.


                                        8

<PAGE>



         PRODUCTS

         We make 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  utilize 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 are at the top end of the market in terms of
price.

         Ayotte's  first or premier  drum line is the Ayotte  Custom Drums which
are  offered  at almost any size,  color and with a choice of hoop type  (metal,
wood) and are hand made to order.

         The  second  drum line is the  "ProMaple"  line which is  available  in
select  sizes and  colors.  These  drums are  manufactured  in  advance  and are
available "in stock."

         For comparison purposes,  the following shows the pricing in US dollars
for a standard 5 piece drum kit in ProMaple,  Ayotte Custom SteelHoop and Ayotte
Custom WoodHoop.

         Ayotte ProMaple                             US$1,600
         Ayotte Custom SteelHoop                     US$2,600
         Ayotte Custom WoodHoop                      US$3,300

         A customer can order more or less pieces and still have it constitute a
drumkit.

         The Ayotte  Custom  Drum Series is  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,  are processed and assembled at our Vancouver plant to fill
each product order. Every wood shell is custom finished through  labor-intensive
steps to  achieve  an  extremely  high  degree of finish  and color  uniformity.
Although we stock a few  oft-ordered  sizes and colors to have on hand,  we also
make  different  customized  colors and finishes as requested by customers,  and
keep an exact  history of how we make each color so we can make another batch if
needed for replacement or other purposes.  We believe that much of our favorable
reputation is due to this amount of personal attention.

         Tay-e Corporation,  Taipei, Taiwan, is the sole source manufacturer for
the chrome  hardware we use on our drums.  This  hardware is an integral part of
our product line; it would be difficult to find a replacement manufacturer if we
lost the services of Tay-e Corporation. There is no written contract with Tay-e.
The maplewood drums are made to our  specifications  by an external  supplier in
the northeast United States. Other companies from the same region can supply the
same quality stock at comparable prices. All other drum parts are available from
numerous manufacturers in North America.

         SERVICES

         Our  products  are sold  with  lifetime  warranty  against  defects  in
manufacture  or materials.  To date we have spent an immaterial  amount to honor
our warranty and therefor have not established a warranty reserve on the books.

                                        9

<PAGE>



         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 must be paid in full before
shipment date (Canadian  dealers have 30 days after shipment to pay in full). No
down  payments are required on any dealer  orders.  We request but don't require
new  dealers  to "buy in" a  limited  amount of our  products  for the show room
floor.

         Sales  throughout  fiscal  1999,  2000 and 2001 have been  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,  although  sales
outside  North America may increase as the web site becomes  better known.  Cash
flow never has been seasonally related,  although the summer months are somewhat
slower than the rest of the year.

         Dealer sales  dropped off  significantly  in the last quarter of fiscal
2000. In fiscal 1998 and fiscal 1999 (until December 1998) we supported  dealers
through an office in Nashville,  Tennessee which created and ran advertising and
promotional demonstrations,  attended trade shows, and provided customer support
to dealers and their customers. We closed the Nashville office in December, 1998
to save money.

         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. Since November,  1999, we
have been selling through the site "www.ayottedrums.com."

         Our web site provides  technical  information on our products,  a short
history of how we started in business,  a worldwide list of dealers,  and direct
shopping  and order  ability  (through  credit  cards) for  complete  drum sets,
individual drums, and all the components.  We also sell clothing items featuring
"Ayotte Drums" etc but these are a minor part of sales revenues.

         The addition of direct  sales over the  internet had several  immediate
impacts. First, instead of supplementing dealer sales, many of our United States
dealers decided not to actively  support the Ayotte product line; they perceived
that our lower prices to customers  through the web site,  compared  with prices
customers were paying to buy from dealers, made us compete directly with dealers
for the same end users. In addition,  our founder Ray Ayotte left the company in
fiscal 2000, which many dealers thought signaled our demise. Mr. Ayotte resigned
his  positions as President  and Director  because he was unwilling to carry out
the direction he was given by the Board  regarding the  management and direction
of Ayotte.  Sales through  United States  dealers  dropped  dramatically  in the
period  from  December  1999 to February  2000,  although  Canadian  dealer unit
volumes remained intact in part due to our decision to complete all direct sales
in US dollars.  Global  sales  volumes  dropped  from an average of $185,800 per
month to $135,000-$145,000 per month.

         Second,  even though sales  volumes fell in early  calendar  2000 (late
fiscal 2000), our margins improved and customers  benefitted:  We sell our drums
for about 14% more than the price we realize from US dealers,  and customers who
buy direct from us now are paying about 38% less for the identical products.


                                       10

<PAGE>



         Third,  the  significantly  lower  price means we can compete for entry
level consumers, who now can buy a high quality product and pay no more than our
competitors'  prices for  mid-quality  product.  Internet  sales  probably  will
increase from current levels, but we make no prediction in this respect.

         Fourth,  internet  sales  give  us the  opportunity  to  require  those
customers to pay up front in full.  There- fore, we process credit cards in real
time and require 100%  prepayment.  The results have been greatly  improved cash
flow and reduced risk of bad debt. Furthermore, we decided not to participate at
the annual  dealer-focused  NAMM (National  Association of Music Merchants) show
which resulted in a significant cost saving compared to prior years.

         One possible  drawback to our internet  strategy is the fact that those
potential  customers who would be interested in trying the drums before purchase
can't do so now.  However,  many of our customers in fact already have tried our
products  through friends and contacts in the drum community.  Further,  we have
established  our brand and product as being of high quality,  manufactured  with
attention to detail and a commitment to the  satisfaction  of the  customer.  We
offer each customer a 7 day "no questions asked" return policy.  We will pick up
the drums from the  customer and refund 100% of their money back if they are not
satisfied  with their  purchase.  Last,  the move to the Internet has opened the
size of our market by giving  access to potential  customers who are not located
near  areas  where the  previous  dealers  were  located.  All of these  factors
mitigate the "no tryout"  drawback.  We will not reinstate the dealer network in
any  event,  so we will  never be able to  quantify  in lost  sales the  adverse
impact, if any, of the "no demo drums" result of our strategy change.

         In sum,  our  addition  of  internet  sales to our  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 make
more per internet sale than we make 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.

         Our  plans  for  fiscal  2002  include  a number  of steps to  increase
traffic,  enhance buying opportunities to buy from the web site, and enlarge the
advertising  campaign.  We are increasing  traffic to the web site by purchasing
banner  advertising  on drum and  percussion  web sites.  We are  marketing  our
various web pages to search engines on a bi-weekly basis.

         Bayleaf  Software has helped us  re-design  our web site to improve the
commerce opportunities.  Our Intenet site incorporates purchase opportunities on
the home page and throughout the site. Download times have been greatly reduced.
We are building an on-line  community through a section called "My Ayotte" where
the  customer  can design  and save any number of drum kits  safely in their own
password protected secure area. We have the opportunity to generate  demographic
information from our customers. We have added the ability to stream video to the
viewer to provide  product  information,  interviews  with our major  endorsers,
product  demonstrations and clinics.  Finally, we improved our security features
to provide a safe shopping experience.

         We have engaged an advertising company to prepare a series of full-page
ads which started to run in mid-September 2000 in drum and percussion magazines.
Our  intention is to develop a campaign  that will be unique in the industry and
build on our brand recognition.


                                       11

<PAGE>



         COMPETITION AND MARKETS. The market in which we compete is 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  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.

         Ayotte competes with the other drum manufacturers on a worldwide basis.
That  being  said,  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 our industry are Yamaha, Pearl, and Drum
Workshop.

         The principal  methods of  competition  are price,  brand  recognition,
sound,  material,  quality,  manufacturing  location  (North  America vs. Asia),
availability, and customer service.

         Drum kit materials  are primarily  wood with a small use of acrylic and
composite  materials.  Ayotte competes in the maple drum sector of the wood drum
market.  Other woods used for drum kits include birch,  bubiniga,  and mahogany.
Maple  drums are  generally  the most  expensive  drums when  compared  to other
materials.

         Positive features  regarding our competitive  position is that we offer
custom,  hand  made  drums  built  to  suit  the  specific  requirements  of the
individual player at a competitive  price and delivered in a timely manner.  Our
competitors use mass production techniques to a significant extent.

         Negative features regarding our competitive  position is that we do not
offer a  complete  line of  hardware  for the drum  kit.  Other  negative  items
affecting our position is that we do not offer a low-priced entry level drum kit
(where the  majority  of sales  occur),  and that the move to the  internet  has
caused our US dealer  network to  disappear  making it difficult  for  potential
customers to view our drums in person.

         PROPRIETARY  TECHNOLOGY.  We  rely  on a  combination  of  patent  law,
trademark law, trade secrets, and internal confidentiality procedures to protect
our  proprietary  rights.  However,  despite  efforts to protect  these  rights,
unauthorized  parties may attempt to copy  aspects of our  products or to obtain
and use information that we regard as proprietary.  Preventing  unauthorized use
of our proprietary  rights is difficult,  time-consuming and costly. Our current
means of protecting  proprietary rights may not be adequate, and our competitors
could independently develop similar products.

         In fiscal 1999 we spent $4,793 on research and development work related
to improving our product lines.  We spent nothing in this area in fiscal 2000 or
2001.

         There  has been no  financial  or  operation  effect  of  environmental
protection on our capital expenditures, earning and competitive position for the
current fiscal year and there is no expected impact on future years.

                                       12

<PAGE>



         FOREIGN OPERATIONS

         We  have no  material  foreign  operations  related  to  manufacturing.
However,  in 1996 we entered  into a verbal  agreement  with Tay-E Co.  Ltd.  of
Taiwan  pursuant to which we retained  Tay-E Co.  Ltd. to  manufacture  a medium
priced drum line called "drumSmith." In December 1999 we changed the name of the
drumSmith line to "Professional Maple" and started producing them at our factory
in  Vancouver.  The Tay-E Co.  continues to produce  hardware  products for both
Ayotte  Custom and  Professional  Maple  drums Our ability to sell into the drum
market  may  be  adversely   affected   should  there  be  any  change  to  this
relationship.

         We do have a material  amount of foreign  sales,  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  are  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. The
facility is  configured to allow each stage of the  manufacturing  process to be
conducted  in a segregated  area  (sanding,  staining or painting,  bake drying,
assemblage,  etc.).  The  facility is adequate  for such  increased  business we
expect we may have in fiscal 2002.

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS.

         OVERVIEW

         We are an  industrial  company  formed  in 1974.  Our  business  is the
manufacturing  and distribution of high-end drums and other percussion items. We
are an integrated company, with product development,  design,  manufacturing and
marketing  capabilities  and  expertise.  The  principal  product is the "Ayotte
Custom  Drums"  handcrafted  wood drum line,  favored by many leading  local and
international artists. Our present business focus is to expand sales through the
internet   e-commerce   site,   increased   advertising   and   promotion,   and
diversification and increase in products, possibly through some arrangement with
another company although we are concentrating now on our internal efforts.

         A.       OPERATING RESULTS.

         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

                                       13

<PAGE>



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.  Now,  customers  worldwide can access and order the full line of
products direct from the factory at significant  discounts.  The move positioned
us as the first major drum  manufacturer  to sell direct to  consumers  over the
internet.

         The move to the internet produced significant cost savings. The ability
to process  credit cards in real time and the  requirement  for  prepayment  has
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 for us.

         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:

         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.


                                       14

<PAGE>



         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.

         RESULTS OF  OPERATIONS  (YEAR  ENDED  FEBRUARY  29, 2000 TO YEARS ENDED
FEBRUARY 28, 1999 AND 1998) This  discussion  includes a comparison of operating
results for fiscal 1998, although the financial statements for that year are not
included in this report.

         REVENUE

         Total revenue for 2000 decreased  32.5% to $2,019,985,  from $2,633,421
for 1999.  The  decrease in 2000 was due to the US dealers  defecting  en masse,
ending their  relationship  with Ayotte  after we launched our internet  site in
late November 1999. For fiscal 1999, our total revenue had increased  30.9% to $
2,633,421, up from $2,011,739 for 1998 and $1,796,549 for 1997. This increase in
1999 was due to the expansion of the dealer network in the United  States,  when
two major music retail chains began selling the Ayotte line. The addition of the
"drumSmith" mid-price drum line also contributed to the increase in sales.

         COST OF SALES

         For  2000,  our  cost of  sales  decreased  17.3%  to  $1,368,235  from
$1,654,166 in 1999.  This decrease was primarily due to decreased sales in 2000.
Cost of sales as a percentage of sales  increased in 2000 to 67.8% from 62.8% in
1999.  This  increase  was due to the  reduction  in margin that  occurred  when
management  moved  to  liquidate  unnecessary  inventory  and  improve  the cash
position.

         For  1999,  we  recognized  a  29.5%  increase  in  cost  of  sales  to
$1,654,166,  up from  $1,277,729 for 1998. This increase was primarily due to an
increase in sales of the same percentage.  Cost of sales decreased slightly as a
percentage of total revenue to 62.8% for 1999 from 63.5% for 1998. This decrease
was  primarily  due to  improvements  in  operations  and changes in the foreign
exchange rates.

         ADVERTISING AND PROMOTION

         Advertising and promotion  expense dropped to $167,274 for fiscal 2000,
compared to $216,353 for 1999,  because we stopped dealer support and trade show
functions. The decrease would have been larger but we spent about $15,000 in the
last two  quarters of fiscal 2000 to set up our  internet  site.  Comparing  our
prior two years,  advertising and promotion expense decreased 9% to $216,353, or
8.2% of total  revenue  for 1999 from  $237,865,  or 11.8% of total  revenue for
1998. This decrease in 1999 was due to cost cutting measures.


                                       15

<PAGE>



         GENERAL AND ADMINISTRATION EXPENSES

         General and  administration  expenses  (total  operating  expenses less
advertising and promotion  expense) decreased 28.9% to $765,548 for fiscal 2000,
compared to the  $1,076,783  we spent in this  category in 1999. A major savings
resulted  from closing the  Nashville,  Tennessee  sales office in December 1998
(late in fiscal 1999), and for discontinuing  salary to Ray Ayotte, who left the
company in fiscal 2000. For fiscal 1999, our general and administration expenses
had  increased  46.5% to  $1,076,783  or 39.9% of total  revenue  for 1999  from
$734,679,  or 36.5% of total  revenue for 1998.  The 1999 increase was primarily
due to increased  salaries,  benefits and rent for the  Nashville  sales office.
Other  contributing  areas  for the 1999  increases  were bad debt  costs,  bank
charges and management fees.

         OTHER INCOME (EXPENSES)

         The line item Other Income in our  Statement of  Operations  for fiscal
2000 and 1999 is made up of interest income,  foreign exchange gain or loss, bad
debt recovery and income from sources other than usual business operations.

         Total Other Income for fiscal 2000  decreased  $50,718 to ($7,184) from
$43,  534 for fiscal  1999.  Total  Other  Income for fiscal 2000 was made up of
$2,889 from other income and ($10,073) loss due to foreign exchange.

         Total Other  Income for fiscal 1999  increased  $25,767 to $43,534 from
$17,767  for fiscal  1998.  The fiscal  1999 Other  Income was made up of $7,883
other income,  $37,806 gain resulting from foreign exchange and ($2,155) loss on
sale of assets.

         Total  Other  Income  for  fiscal  1998  increased  $15,781  to $17,767
compared to $1,986 for fiscal 1997.  The fiscal 1998 Other Income was made up of
$4,496 other income and $13,271 gain from foreign exchange.

         INCOME TAXES

         At February 29, 2000, we had estimated non-capital losses of $1,797,300
which may be used to offset  taxable  income of future  years.  If  unused,  the
losses will expire as follows:


         2002                     $218,300
         2003                     $275,400
         2004                     $317,000
         2005                     $178,000
         2006                     $398,000
         2007                     $418,700

         We recorded no income tax  expense or benefit in fiscal  2000,  1999 or
1998 due to net  losses  incurred  and a  valuation  allowance  provided  on the
deferred tax assets.


                                       16

<PAGE>



         B.       LIQUIDITY AND CAPITAL RESOURCES

         FISCAL YEAR ENDED 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.

         FISCAL YEAR ENDED FEBRUARY 29, 2000 COMPARED TO FEBRUARY 28, 1999

         At February 29, 2000 accounts receivable were $183,717,  much less than
the $715,492 at February 28, 1999,  as payment  terms  changed for United States
dealer orders in fiscal 2000 from 30 days after  shipping to full payment before
shipping, and all our internet sales direct-to-customers require full payment by
the time the product leaves the factory. Similarly,  inventories at February 29,
2000 were $251,700 or 56% of the number at February 28, 1999 ($451,657). Part of
the  inventory  reduction in 2000 was due to reduction in some of our stock.  We
made the  decision  to produce our second  drum line in the  Vancouver  facility
instead  of having  it made in  Taiwan,  which  reduced  the need to carry  this
finished line in substantial numbers as shipped over from Taiwan.

         Accounts  payable and  accrued  liabilities  at February  29, 2000 were
$163,530  compared to $322,928 a year  earlier.  The  reduction is due mostly to
reduced  sales  volumes in the last part of fiscal 2000,  and to a lesser extent
because of reduced dealer support activities and related administrative expenses
which were implemented in the last two quarters of fiscal 2000.

         D.       TREND INFORMATION.

         For  fiscal  2002 we expect no  material  adverse  trends in  operating
results,  as our costs of goods sold should remain relatively  constant compared
to 2001.  Sales  should  increase  as we refine and  expand  sales  through  the
internet.  General and  administration  expense also should not change and could
decrease  somewhat  as  we  incurred  some  expense  in  this  area  related  to
registration with the Securities and Exchange Commission in fiscal 2001. Adverse
changes in the currency exchange rate between the United States (the currency in
which  most of our  sales are made) and  Canada  (where we pay  expenses)  could
affect overall results from operations.  We experienced  favorable rates in 2001
compared to 2000,  so much so relative to our size of  operations  that the gain
for this item contributed significantly to our recording net income for 2001. We
do not engage in currency hedging  transactions,  hence we are unable to control
the amount of currency fluctuations risk to which we may be exposes from time to
time.


                                       17

<PAGE>



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             2000               Private equity capital investor, 1991     Chairman,
3704 Pine Crescent                          (Directors         to present                                Interim President
Vancouver, B.C.                             Elected                                                      and Director
V6J 4K3                                     Annually)

Michael Fugman             1998             2000               President of Gault Distribution Inc.,     Director
10891 Bromley Place                         (Directors         a wholesale distributor in business
Richmond, B.C.                              Elected            for 98 years
V7A 4J5                                     Annually)

Don Mazankowski            1999             2000               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  directors  became
directors on the amalgamation date,  although each was a director of one or more
of the companies which were amalgamated. See above.

         There are 2,097,318  shares owned by officers and directors,  including
shares held by their  relatives.  An additional  3,661,692  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 5,795,010  shares  (44.3%) are owned or controlled by our
officers and directors.  This percentage does not reflect  1,235,000  additional
shares issuable on exercise of warrants sold in the private placement,  nor does
the  number of shares or the  percentage  reflect  350,000  shares  issuable  to
directors  under  options.  Resale of all of these shares will be subject to SEC
rule 144.

         B. COMPENSATION.  In fiscal 2001 we paid a total of $129,939 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 three fiscal years ending  February 28,
2001.  Information  in the  table  also  is  included  for Ray  Ayotte,  who was
President and Chief Executive  Officer until his resignation on August 23, 1999.
No other executive officer received

                                       18

<PAGE>



total  annual  salary and bonus in excess of  $100,000.  We do not have any long
term compensation plan, other than stock options.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

                                                                   ANNUAL COMPENSATION
                                                        -----------------------------------------
                                       FISCAL                                        OTHER ANNUAL
     NAME AND POSITION                 YEAR              SALARY          BONUSES     COMPENSATION
     -----------------                 ----              ------          -------     ------------
<S>                                    <C>              <C>             <C>            <C>
Ray Ayotte (resigned)                  2000             $34,615         $ 3,000        $   -0-
                                       1999             $72,000         $ 6,000        $   -0-
Louis Eisman, Chairman
and Interim President                  2001             $48,000(1)      $   -0-        $   -0-
                                       2000             $48,000         $   -0-        $   -0-
                                       1999             $48,000         $   -0-        $   -0-

Don Mazankowski, General Manager       2001             $61,800         $              $   -0-
                                       2000             $60,000         $   -0-        $   -0-
                                       1999             $60,000         $   -0-        $   -0-
</TABLE>

         (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, and did not have one with Ray Ayotte (former President and Chairman
of the board or directors who resigned 1999). 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.
We owe no severance or pension to Mr. Ayotte.

         STOCK OPTION PLAN

         We have  adopted an  incentive  stock  option plan for the  issuance of
shares of common stock.  To date,  we have issued to our  employees  (other than
officers)  options to purchase  300,000  shares of common stock,  and options to
purchase  another  350,000  shares  are  held by three  directors.  All of these
options  have been issued with the  approval of the CDNX.  See below on options.
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.


                                       19

<PAGE>



         D.       EMPLOYEES.

         We have 15  employees,  of whom six have a  combined  experience  of 60
years in the drum  manufacturing  industry,  almost  all of which  has been with
Ayotte. The number of employees is not expected to change materially.  Relations
with employees are excellent; they are not represented by a union.

         E.       SHARE OWNERSHIP.  Our  directors own or control the  indicated
shares of common stock; percentages are based on the 13,079,000 shares outstand-
ing when  this report is filed.  Options  held by the directors covering 350,000
shares are not included in the data (see Item 12 B).

NAME                                   NO. OF SHARES            PERCENTAGE
Michael Fugman                         3,881,692 (1)               29.7%
10891 Bromley Place
Richmond, B.C. V7A 4J5

Louis Eisman                           1,777,318 (2)               13.6%
3704 Pine Crescent
Vancouver, B.C. V6J 4K3

Don Mazankowski                          100,000                    (3)
2745 Trafalgar Street
Vancouver, B.C. V6K 3T7

Officers and directors total           5,795,010                   44.3%

         (1) Includes  3,661,692 shares held by Ayotte Music (VCC) Ltd., 150,000
shares held by Mr.  Fugman  personally,  and 70,000  shares held by his wife and
children.  Mr.  Fugman  is  a  control  person  (officer,   director  and  minor
shareholder) of Ayotte Music (VCC) Ltd.

         (2) Includes  1,189,700  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 and investment control over all
of the 587,618 shares held by his wife.

         (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  13,079,000  shares of the
company  outstanding as of June 30, 2001. 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 (0.4% of our outstanding 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

                                       20

<PAGE>



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)                            4,740,051                              36%
25 The Esplanade
P.  O.  Box 1038, Ste.  A
Toronto, Ontario M5W 1G5

<FN>

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

         Of the total outstanding shares as of the date of this report,  569,482
shares  were  subject to escrow  provisions  imposed by the  Alberta  Securities
Exchange  (see  below) and are in escrow at  Montreal  Trust  Company of Canada.
These escrowed shares are held by a venture capital corporation of which Michael
Fugman (Director) is an officer, director and a minority shareholder of the VCC.
These shares were issued in connection with the VCC's funding  transaction  with
us in 1996 and the December 1997 reverse takeover  transaction with ISI Ventures
Inc. The shares can be voted by the owners  thereof but otherwise are subject to
the direction or determination of the Alberta Securities Commission or the CDNX,
and cannot be traded in or dealt with without the prior  written  consent of the
Commission  or the CDNX.  The shares  will be  released  in stages  through  the
balance of calendar 2001.

         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  started
trading on the Alberta  Stock  Exchange  (now part of the CDNX) under the symbol
AYO in December 1997 when we completed the reverse takeover transaction with ISI
Ventures Inc.  which then was listed on the Alberta  Stock  Exchange as a listed
junior capital pool company.  The shares are not listed on any other  securities
exchange. All shares are registered shares.

         The  following  table sets  forth the high and low sales  prices on the
CDNX for fiscal  1998 and 1999,  by quarters  for fiscal  2000 and 2001,  and by
month for the three months ended May 31, 2001.


                                       21

<PAGE>




         PERIOD                  HIGH SALES PRICE       LOW SALES PRICE

         Fiscal 1998                  $0.40                  $0.08
         Fiscal 1999                  $0.33                  $0.08
         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
           Mar.                       $0.09                  $0.06
           Apr.                       $0.12                  $0.07
           May                        $0.08                  $0.05
           June                       $0.12                  $0.06


         On July 3, 2001 the closing  price of the common shares on the CDNX 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 are
13,079,000  shares of common stock issued and  outstanding  at February 28, 2001
and the date of filing this  report,  which is  1,385,000  shares more than were
issued and outstanding at February 29, 2000. All issued and  outstanding  shares
are fully paid and non-assessable.

                                       22

<PAGE>



         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 are granted and outstanding options to purchase 650,000 shares at
$0.10 per share,  expiring  October 17, 2003.  Options on an additional  100,000
shares  have been  granted  and are  outstanding,  at $0.42 per share,  expiring
February 2, 2004.

         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 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.

                                       23

<PAGE>



         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.

         - 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

                                       24

<PAGE>



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.

         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

                                       25

<PAGE>



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 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.


                                       26

<PAGE>



         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  Ellis  Foster,  Chartered
Accountants,   1650  West  1st  Avenue,  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.

         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.



                                       27

<PAGE>



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  650,000  shares of common
stock at $0.10 per share; all options expire October 17, 2003. Of these options,
300,000 are held by employees,  150,000 are held by Louis Eisman (an officer and
director), 100,000 are held by Michael Fugman (a director), and 100,000 are held
by Don Mazankowski (General Manager and a director). Not included are options 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. The options to Mr. Ruscitti are subject to approval
by the CDNX, now pending.  We don't have a written  agreement with Mr.  Ruscitti
but issued the options  for his  consulting  services  related to setting up our
computer  systems for the internet  direct-to-customers  project  implemented in
fiscal 2000.  All of the  preceding  are options to buy common stock from us; we
have no subsidiaries.

         PRIVATE  PLACEMENT  WARRANTS.  We  have  issued  (with  CDNX  approval,
received in June 2000) in a private  financing  warrants to buy 1,235,000 shares
of common stock.  The warrant  exercise  price is $0.80 per share;  the warrants
expire June 14,  2002.  The  warrants  were sold with a like number of shares of
common stock in a private  financing  (net proceeds of  approximately  $500,000)
completed  shortly  after our fiscal year end of February  29,  2000.  All these
securities 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]


                                       28

<PAGE>



                                    PART III

ITEM 17.  FINANCIAL STATEMENTS.

         See the financial  statements of the company for the three fiscal years
ended February 28, 2001, the notes thereto,  and the auditor's  reports thereon,
which are included in this annual  report  beginning on page 31. 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

         The following exhibits were filed with our initial registration on Form
20-F  (SEC  File  No.  0-30683,  filed  5/22/2000).  All of  such  exhibits  are
incorporated by reference into this annual report.

       Exhibit No.   Description of Exhibit

         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.

         99.1        Form of stock certificate

         99.2        Form of escrow agreement with Montreal Trust
                     Company of Canada dated November 29, 1996

         99.3        Escrow Share Transfer Agreement dated October 6, 1997

         99.4        Form of escrow agreement with Montreal Trust
                     Company of Canada dated December 4, 1997



                                       29

<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 13, 2001                        /s/     Louis Eisman
                                       -----------------------------------------
                                       Louis Eisman, President


                                       30

<PAGE>



ELLIS FOSTER
     CHARTERED ACCOUNTANTS

1650 West 1st Avenue
Vancouver, BC  Canada   V6J 1G1
Telephone:  (604) 734-1112  Facsimile: (604) 714-5916
E-Mail: generaldelivery@ellisfoster.bc.ca

INDEPENDENT AUDITORS' REPORT

TO THE SHAREHOLDERS OF

AYOTTE MUSIC INC.

We have audited the balance sheets of Ayotte Music Inc. as at February 28, 2001,
February 29, 2000 and February 28, 1999 and the statements of income and deficit
and cash flows for the years 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 audits.

We conducted our audits 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.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion  these  financial  statements  present  fairly,  in all  material
respects,  the  financial  position  of the  Company as at  February  28,  2001,
February 29, 2000 and February  28, 1999 and the results of its  operations  and
its cash flows for the years  then-ended in accordance  with Canadian  generally
accepted  accounting  principles.  As disclosed in Note 11, the  application  of
Canadian  generally-accepted   accounting  principles  results  in  no  material
differences from the application of United States generally accepted  accounting
principles.  As required by the Company Act of British Columbia, we report that,
in our opinion,  these  principles have been applied on a basis  consistent with
that of the preceding year.


                                                 [signed] "Ellis Foster"

Vancouver, Canada
April 10, 2001                                   Chartered Accountants



                                       31

<PAGE>



<TABLE>
<CAPTION>

AYOTTE MUSIC INC.

Balance Sheets
February 28, 2001, February 29, 2000 and February 28, 1999
--------------------------------------------------------------------------------------------------
                                                               2001           2000          1999
--------------------------------------------------------------------------------------------------
                                                                    (Canadian Dollars)
                                                        ------------------------------------------
ASSETS

CURRENT
<S>                                                     <C>            <C>            <C>
  Cash and cash equivalents                             $   938,218    $   348,742    $    43,625
  Accounts receivable                                       102,669        183,717        715,492
  Inventories                                               245,413        251,700        451,657
  Prepaid expenses                                           31,208          8,220         14,700
--------------------------------------------------------------------------------------------------
                                                          1,317,508        792,379      1,225,474

CAPITAL ASSETS (note 4)                                     201,140        243,838        299,275

Patent                                                        1,016          1,016          1,016
--------------------------------------------------------------------------------------------------
                                                        $ 1,519,664    $ 1,037,233    $ 1,525,765
==================================================================================================

LIABILITIES

CURRENT
  Accounts payable and accrued liabilities              $   126,568    $   163,530    $   322,928
  Current portion of obligations under capital leases          --            1,337         27,649

                                                            126,568        164,867        350,577

OBLIGATIONS UNDER CAPITAL LEASES                               --             --           14,566
--------------------------------------------------------------------------------------------------
                                                            126,568        164,867        365,143
--------------------------------------------------------------------------------------------------
SHARE CAPITAL & DEFICIT

SHARE CAPITAL (note 6)                                    3,029,072      2,525,737      2,525,737

DEFICIT                                                  (1,635,976)    (1,653,371)    (1,365,115)
--------------------------------------------------------------------------------------------------
                                                          1,393,096        872,366      1,160,622
--------------------------------------------------------------------------------------------------
                                                        $ 1,519,664    $ 1,037,233    $ 1,525,765
==================================================================================================
</TABLE>



                                       32

<PAGE>



<TABLE>
<CAPTION>

AYOTTE MUSIC INC.

Statements of Income and Deficit
Years Ended February 28, 2001, February 29, 2000 and February 28, 1999
------------------------------------------------------------------------------------------------------
                                                                 2001            2000            1999
------------------------------------------------------------------------------------------------------
                                                                       (Canadian Dollars)
                                                          --------------------------------------------

<S>                                                       <C>             <C>             <C>
SALES                                                     $  1,518,011    $  2,019,985    $  2,633,421

COST OF GOODS SOLD                                             810,148       1,368,235       1,654,166
------------------------------------------------------------------------------------------------------
GROSS MARGIN (2001 - 46.6%; 2000 - 32.3%; 1999 - 37.2%)        707,863         651,750         979,255
------------------------------------------------------------------------------------------------------
EXPENSES
  Advertising and promotion                                     61,901         167,274         216,353
  Amortization                                                  50,678          59,919          81,390
  Auto                                                             422           1,208           2,419
  Bad debts                                                      4,136          65,352          54,953
  Bank charges and interest                                     35,151          30,867          30,922
  Computer and website costs                                    42,217          20,608           9,574
  Insurance                                                     12,944          20,659          20,876
  Legal and accounting                                         110,614          71,055          57,507
  Management fees (see note 8 - Related Party)                  68,000          48,000          78,000
  Office                                                        35,796          21,158          86,973
  Rent                                                          76,348         102,157         122,647
  Repairs and maintenance                                        8,223           7,346          11,606
  Research and development                                        --              --             4,793
  Salaries and employee benefits                               187,301         272,521         456,484
  Telephone and fax                                             24,750          16,282          36,752
  Travel                                                        15,371           6,212            --
  Utilities                                                     25,015          22,204          21,887
------------------------------------------------------------------------------------------------------
                                                               758,867         932,822       1,293,136
------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS                                           (51,004)       (281,072)       (313,881)

OTHER INCOME (EXPENSES)
  Other income                                                  33,892           2,889           7,883
  Gain (loss) on foreign exchange                               34,507         (10,073)         37,806
  Loss on sale of assets                                          --              --            (2,155)
------------------------------------------------------------------------------------------------------
                                                                68,399          (7,184)         43,534

NET INCOME (LOSS) FOR THE YEAR                                  17,395        (288,256)       (270,347)

DEFICIT, beginning of year                                  (1,653,371)     (1,365,115)     (1,094,768)
------------------------------------------------------------------------------------------------------
DEFICIT, end of year                                      $ (1,635,976)   $ (1,653,371)   $ (1,365,115)
======================================================================================================
EARNINGS (LOSS) PER SHARE (note 9)                        $       0.00    $      (0.03)   $      (0.02)
======================================================================================================
WEIGHTED AVERAGE SHARES                                     12,531,192      11,694,000      11,688,247
======================================================================================================
</TABLE>



                                       33

<PAGE>



<TABLE>
<CAPTION>

AYOTTE MUSIC INC.

Statements of Cash Flows
Years Ended February 28, 2001, February 29, 2000 and February 28, 1999
--------------------------------------------------------------------------------------------------------
                                                                         2001         2000         1999
--------------------------------------------------------------------------------------------------------


CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                 <C>          <C>          <C>
  Net income (loss) for the year                                    $  17,395    $(288,256)   $(270,347)
  Adjustments for:
    Amortization of capital assets                                     50,678       59,919       81,390
    Loss on sale of assets                                               --           --          2,155
--------------------------------------------------------------------------------------------------------

                                                                       68,073     (228,337)    (186,802)

Changes in non-cash working capital
  Decrease (increase) in accounts receivable                           81,048      531,775     (118,013)
  Decrease (increase) in inventories                                    6,287      199,957      (75,749)
  Decrease (increase) in prepaid expenses                             (22,988)       6,480       (9,923)
  Increase (decrease) in accounts payable and accrued liabilities     (36,962)    (159,398)      70,218
--------------------------------------------------------------------------------------------------------

                                                                       95,458      350,477     (320,269)
--------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of capital assets (net of disposals)                        (7,980)      (4,482)     (16,537)
--------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Issuance of share capital                                           503,335         --         15,000
  Share issue costs                                                      --           --        (33,520)
  Capital leases                                                       (1,337)     (40,878)     (36,781)
--------------------------------------------------------------------------------------------------------

                                                                      501,998      (40,878)     (55,301)
--------------------------------------------------------------------------------------------------------

INCREASE (DECREASE) IN CASH                                           589,476      305,117     (392,107)

CASH, beginning of year                                               348,742       43,625      435,732
--------------------------------------------------------------------------------------------------------

CASH, end of year                                                   $ 938,218    $ 348,742    $  43,625
========================================================================================================
</TABLE>



                                       34

<PAGE>


AYOTTE MUSIC INC.

Notes to Financial Statements
February 28, 2001, February 29, 2000 and February 28, 1999


These financial  statements are presented in accordance with Canadian  Generally
Accepted Accounting Principles ("GAAP").

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.

2.       SIGNIFICANT ACCOUNTING POLICIES

         a)       Inventories

                  Inventories are valued at the lower of cost and net realizable
                  value.  Cost is determined  under the specific  identification
                  method.  Inventory is comprised  primarily of custom-made drum
                  kits.

         b)       Capital Assets

                  Capital assets 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.

         c)       Foreign Exchange

                  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.
                  Transaction gains or losses are reflected in operations.

                  All  revenue  from  direct  sales  into the  United  States is
                  received in US dollars.  As the Company's main  operations are
                  located in Canada,  a  significant  portion  of  expenses  are
                  incurred in Canadian dollars,  therefore,  the Canadian dollar
                  is   considered   the   functional   currency  for   measuring
                  transactions.  Foreign currency  translation  gains and losses
                  arising  from normal  business  operations  are credited to or
                  charged against other income for the period incurred.


                                       35

<PAGE>


AYOTTE MUSIC INC.

Notes to Financial Statements
February 28, 2001, February 29, 2000 and February 28, 1999




2.       SIGNIFICANT ACCOUNTING PRINCIPLES (cont'd)

         d)       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.

                  (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.

         e)       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
                  amount 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.

         f)       Earnings (Loss) Per Share

                  Earnings  (loss)  per share is  computed  using  the  weighted
                  average  number  of  shares   outstanding   during  the  year.
                  Effective  for the year ended  February 28, 1998,  the Company
                  adopted SFAS No. 128 "Earnings per Share".

         g)       Advertising Expense

                  The Company expenses advertising costs as incurred.

         h)       Cash and Cash Equivalents

                  Cash  equivalents  are  comprised  of  certain  highly  liquid
                  instruments  with a  maturity  of three  months  or less  when
                  purchased.  As at February  28,  2001,  February  29, 2000 and
                  February 28, 1999, cash and cash equivalents consisted of cash
                  only.

                                       36

<PAGE>


AYOTTE MUSIC INC.

Notes to Financial Statements
February 28, 2001, February 29, 2000 and February 28, 1999




3.       FINANCIAL INSTRUMENTS

         The  Company's   financial   instruments   consist  of  cash  and  cash
         equivalents,   accounts   receivable,   accounts  payable  and  accrued
         liabilities  and obligations  under capital leases.  It is management's
         opinion  that the  Company  is not  exposed  to  significant  interest,
         currency or credit risks arising from these financial instruments.  The
         fair value of these financial  instruments  approximate  their carrying
         values, unless otherwise noted.

4.       CAPITAL ASSETS
<TABLE>
<CAPTION>


                                                                           Net Book Value
                                               Accumulated        ------------------------------
                                             Cost Amortization       2001        2000       1999
                                             -----------------       ----        ----       ----
<S>                                         <C>        <C>        <C>        <C>        <C>
 Manufacturing equipment                    $385,964   $290,001   $ 95,963   $ 73,992   $ 89,318
 Furniture and office equipment               93,870     57,267     36,603     21,262     24,226
 Leasehold improvements                      178,218    119,093     59,125     73,907     92,384
 Automobile                                   30,741     22,683      8,058     10,073     12,592
 Software                                     16,272     14,881      1,391       --         --
 Assets acquired under capital leases           --         --         --       64,604     80,755
------------------------------------------------------------------------------------------------
                                            $705,065   $503,925   $201,140   $243,838   $299,275
================================================================================================
</TABLE>

         The Company retained  ownership of all equipment under capital lease in
         March  2000.  The assets  have been  reallocated  to their  appropriate
         classes and will be amortized on the same basis as in the past.

5.       OBLIGATIONS UNDER LEASE

         Premises

         The Company's  lease has expired and, until such time as a new lease is
         negotiated,  the Company and their landlord will carry on in good faith
         on a month-to-month  basis until such time as the lease is renewed. The
         current monthly payment is $9,850 (including all operating costs).

6.       SHARE CAPITAL

         a)       Authorized:

                  Unlimited         Voting common shares without par value
                  Unlimited         Preferred shares


                                       37

<PAGE>


AYOTTE MUSIC INC.

Notes to Financial Statements
February 28, 2001, February 29, 2000 and February 28, 1999




         Issued and outstanding:


COMMON                                      NUMBER OF SHARES        AMOUNT

BALANCE FEBRUARY 28, 1998                       11,644,000      $  2,544,257
Issued for cash                                     50,000            15,000
Share issue costs                                        -           (33,520)
BALANCE FEBRUARY 28, 1999 AND                   11,694,000      $  2,525,737
FEBRUARY 29, 2000
Issued for cash through Private                  1,235,000           494,000
Placement ((note 6(b))                             150,000            15,000
Issued for cash                                          -            (5,665)
Share issue costs
BALANCE FEBRUARY 28, 2001                       13,079,000      $  3,029,072
=============================================================================

         b)       During  the year,  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.

                  As a  result,  the  potential  fully-diluted  amount of common
                  shares  outstanding with respect to warrants issued during the
                  private placement is 1,235,000.

7.       INCOME TAXES

         The  Company  is not  subject  to current  taxes  because of  operating
         losses. As at February 28, 2001, the Company has estimated  non-capital
         losses of  $1,871,300,  which may be used to offset  taxable  income of
         future years. If unused, the losses will expire as follows:


                  2002                   $       218,300
                  2003                           275,400
                  2004                           317,100
                  2005                           178,200
                  2006                           389,600
                  2007                           418,700
                  2008                            74,000
                  ---------------------------------------
                                         $     1,871,300
                  =======================================



                                       38

<PAGE>


AYOTTE MUSIC INC.

Notes to Financial Statements
February 28, 2001, February 29, 2000 and February 28, 1999



7.       INCOME TAXES (cont'd)

         A deferred tax asset of $692,381 (2000 - $654,702; 1999 - $468,320) are
         offset by an allowance of the same amount.

8.       RELATED PARTY TRANSACTIONS

         Included  in expenses  is $68,000  (2000 - $48,000;  1999 - $78,000) of
         consulting and management fees paid to a shareholder of the Company and
         another company owned by a director.

9.       EARNINGS (LOSS) PER SHARE

         The earnings (loss) per share figures are calculated using the weighted
         average  number of shares  outstanding  during the year.  Fully diluted
         earnings (loss) per share is not calculated,  as the effect on earnings
         (loss) per share is of no significance. Potential equity issuances that
         may dilute  earnings  (loss) per share in the future are  disclosed  in
         note 6(b).

<TABLE>
<CAPTION>

                                                       2001           2000            1999
                                                       ----           ----            ----
<S>                                            <C>            <C>             <C>
Net income (loss) for year                     $     17,395   $   (288,256)   $   (270,347)
Weighted average shares outstanding              12,531,192     11,694,000      11,688,247
Earnings (loss) per share                      $       0.00   $      (0.03)   $      (0.02)
===========================================================================================
</TABLE>

10.      COMPARATIVE FIGURES

         Certain  figures for 2000 and 1999 have been restated to conform to the
         presentation adopted for the year 2001.

11.      UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

         These  financial  statements  have been  prepared  in  accordance  with
         generally accepted  accounting  principles in Canada ("Canadian GAAP"),
         which  may  differ,  in  certain  respects,   from  generally  accepted
         accounting  standards in the United States ("U.S.  GAAS"). There are no
         material differences between Canadian GAAP and U.S. GAAS in relation to
         these financial statements.




                                       39

<PAGE>