SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                    For the fiscal year ended August 31, 1998
                         Commission File Number 0-22813
                        North Atlantic Acquisition Corp.
                 (Name of Small Business Issuer in Its Charter)

Delaware                                               13-3853272
-----------------------                          ----------------------------
(State of Incorporation)                           (Small Business Issuer
                                                 I.R.S. Employer I.D. Number)
5 East 59th Street, 3rd Floor
New York, New York                                                10022
---------------------------------------                        -----------
(Address of principal executive offices)                       (Zip Code)

                                 (212) 486-4444
                  ---------------------------------------------
                 (Issuer's Telephone Number Including Area Code)

           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                 Class A Common Stock, $.01 par value per share
                Redeemable Class A Common Stock Purchase Warrants
                 Class B Common Stock, $.01 par value per share
                   Units of Class A Common Stock and Warrants

Check  whether  the Issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirement for the past 90 days. Yes  X  No___

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the best of the  registrant's  knowledge,  in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. Yes X No___

Issuer's revenues for the fiscal year ended August 31, 1998 were $411,393.

As of December 1, 1998,  the aggregate  market value of the common stock held by
nonaffiliates of the Registrant was approximately $9,228,375.

As of December 1, 1998, there were 906,000 shares of Class A Common Stock,  $.01
par value per share, and 150,000 shares of Class B Common Stock,  $.01 par value
per share, outstanding.

Transitional Small Business Disclosure Format (check one):  Yes __  No   X


<PAGE>



Documents Incorporation by Reference: None.

                                     PART I

Item 1.  DESCRIPTION OF BUSINESS

General

     North Atlantic  Acquisition Corp.  ("NAAC") was organized on August 9, 1995
as a Specialized Merger and Acquisition  Allocated Risk Transaction  company, to
acquire by purchase,  merger,  combination or otherwise ("Business Combination")
an operating business ("Target Business").

     Since its  inception,  NAAC has not engaged in any  substantive  commercial
business  and its sole  activities  have been to evaluate  and select a suitable
Target   Business  and  to  structure,   negotiate  and  consummate  a  Business
Combination  with a Target  Business.  On August 27, 1997,  NAAC  consummated an
initial  public  offering  ("IPO") in which it sold 800,000  Units at $10.00 per
Unit, each Unit consisting of one share of Class A Common Stock,  $.01 par value
("Class A Common Stock"),  and one Class A Common Stock Purchase Warrant ("Class
A Warrant"),  and 150,000 shares of Class B Common Stock, $.01 par value ("Class
B Common  Stock")at  $10.00 per share. As more fully described  below, on August
18, 1998,  NAAC signed an  Agreement  and Plan of Merger and  Reorganization  to
acquire Moto Guzzi Corp., a leading  Italian  manufacturer  of  performance  and
luxury motorcycles and motorcycle parts.

Characteristics  of  a  Specialized   Merger  and  Acquisition   Allocated  Risk
Transaction Company

     A Specialized Merger and Acquisition Allocated Risk Transaction company has
certain shareholder  protections not ordinarily found in companies.  Immediately
after the consummation of the first Business  Combination by NAAC, these special
provisions will no longer apply.

Offering Proceeds Held in Escrow Account

     NAAC  consummated  the IPO on August 27, 1997 and  received  net  proceeds,
after  commissions  and expenses,  of  approximately  $8,100,000.  Approximately
$8,000,000  of the net  proceeds  was  placed in an escrow  account  with  Chase
Manhattan  Bank,  N.A.  ("Escrow  Account")  until the  earlier  of  NAAC's  (i)
consummation of a Business  Combination or (ii) redemption of the Class A Common
Stock  (other than the Class A Common  Stock  issued  prior to the IPO  "Pre-IPO
Shares").  As of November  30, 1998 there was  approximately  $8,520,995  in the
Escrow  Account.  The remaining net proceeds of the IPO which were not placed in
the Escrow  Account  have been used by NAAC to  identify,  evaluate and select a
suitable  Target  Business,  to structure,  negotiate and  consummate a Business
Combination, and for general, administrative and organizational expenses.

Fair Market Value of Target Business

     NAAC is not permitted to acquire a Target  Business  unless the fair market
value of such business (as determined by the NAAC board of directors  based upon
standards  generally accepted by the financial  community,  such as earnings and
earnings  potential,  cash flow and book  value) is equal to at least 80% of the
net  assets  of  NAAC  at the  time of such  acquisition.  The  purpose  of this
requirement  is  to  ensure  that  a  Business  Combination  will  constitute  a
significant acquisition.

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<PAGE>



Stockholder Approval of Business Combination

     NAAC, after signing a definitive  agreement for the acquisition of a Target
Business, but prior to the consummation of any Business Combination, is required
to submit such  transaction to the holders of the Class A Common Stock and Class
B Common Stock (together  "Common Stock") for approval,  even if the acquisition
would not ordinarily  require  stockholder  approval under applicable state law.
NAAC will  consummate  a Business  Combination  only if at least  two-thirds  in
interest  of the  outstanding  shares of Common  Stock are voted in favor of the
Business Combination and will not consummate a Business Combination if more than
20% of the  outstanding  shares of Class A Common Stock  (excluding  the Pre-IPO
Shares), or more than 160,000 shares, are submitted to NAAC for redemption.  See
below "Redemption Rights."

     The  stockholders  who hold Pre-IPO Shares have agreed to vote their shares
(approximately  11.7% of the  outstanding  shares of Common Stock) in accordance
with the vote of the  majority in interest of all other  holders of Common Stock
on a proposal  to approve a Business  Combination.  For this  purpose  they have
given their proxy to the current officers of NAAC.

Redemption Rights  in Connection with Business Combination

     Holders of Class A Common  Stock,  other than the  stockholders  of Pre-IPO
Shares,  have the right to have NAAC  redeem  for cash up to a maximum of 20% of
the Class A Common Stock (up to 160,000 shares),  other than the Pre-IPO shares,
in  connection  with  a  Business  Combination  upon  its  consummation.   If  a
specifically  proposed  Business  Combination is not  consummated,  the right of
redemption terminates as to that transaction.

     The per share redemption price will be determined by dividing the amount in
the Escrow Account  (including earned interest) by the number of shares of Class
A Common Stock  outstanding,  excluding the Pre-IPO Shares.  The stockholders of
Pre-IPO  Shares do not have  redemption  rights with  respect to those shares of
Class A Common Stock.

Escrow of the Pre-IPO Shares

     The Pre-IPO Shares (approximately 11.7% of the outstanding shares) are held
in escrow with  Greenbaum,  Rowe,  Smith,  Ravin,  Davis & Himmel LLP, as escrow
agent,  until the earlier of the consummation of the first Business  Combination
or August 22,  1999.  During such escrow  period,  the  stockholders  of Pre-IPO
Shares  are  unable  to  sell  or  otherwise  transfer  them,  except  (i)  in a
transaction  subsequent to the consummation of a Business  Combination  which is
offered to all NAAC  stockholders  and (ii) to family members or pursuant to the
laws  of  descent.  Accordingly,  the  stockholders  of  Pre-IPO  Shares  cannot
separately negotiate the purchase of any portion of their Pre-IPO Shares as part
of a Business Combination.

Redemption Payment If No Business Combination

     If NAAC does not consummate a Business Combination by August 22, 1999, NAAC
will  distribute  to the holders of Class A Common  Stock with  respect to their
shares  (excluding  the Pre- IPO  Shares),  the  amount in the  Escrow  Account,
including any interest earned thereon. The stockholders of Pre-IPO Shares do not
have the right to participate  in any  redemption  payment with respect to their
Pre-IPO  Shares and their shares of Class A Common Stock will be cancelled.  The
remaining assets of NAAC, if any, will be used to pay NAAC's  liabilities and to
redeem the outstanding  Series A Preferred Stock at its liquidation  value.  The


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<PAGE>


Class B Common  Stock will not receive any  redemption  payment.  Following  the
Class A Common Stock  redemption and  cancellation,  the  outstanding  shares of
Class B Common  Stock  automatically  will be  exchanged  for two shares of NAAC
Class A Common  Stock.  In this event,  the holders of the Class B Common  Stock
will be the sole shareholders of a public shell corporation with no assets.

Selection of a Target Business and Structuring of a Business Combination

     Management of NAAC has substantial flexibility in identifying and selecting
a prospective  Target Business.  However,  NAAC's  flexibility is limited to the
extent that it must  satisfy the fair market  value test and obtain  stockholder
approval. In evaluating a prospective Target Business, management will consider,
among other factors,  the  following:  (i) costs  associated  with effecting the
Business Combination; (ii) equity interest in and opportunity for control of the
Target Business;  (iii) growth potential of the Target Business; (iv) experience
and skill of management  of and  availability  of  additional  personnel for the
Target  Business;  (v)  capital  requirements  of  the  Target  Business;   (vi)
competitive  position of the Target Business;  (vii) stage of development of the
Target Business;  (viii) degree of current or potential market acceptance of the
Target Business,  (ix) proprietary features and degree of intellectual  property
or other protection of the Target Business;  (x) the financial  condition of the
Target  Business;  and (xi) the  regulatory  environment  in  which  the  Target
Business operates. NAAC will retain an independent investment banking firm which
is a member in good  standing of the NASD to assist the Company in  identifying,
evaluating,  structuring and negotiating  potential  Business  Combinations.  In
connection with its evaluation of a prospective Target Business, management will
conduct a due diligence review which will encompass, among other things, meeting
with  incumbent  management,   inspecting  the  facilities,  and  reviewing  the
financial, legal and other information which will be made available to NAAC.

     The time and  costs  required  to select  and  evaluate  a Target  Business
(including  conducting a due diligence  review) and to structure and  consummate
the  Business  Combination   (including   negotiating  relevant  agreements  and
preparing requisite documents for filing pursuant to applicable  securities laws
and state "blue sky" and corporation  laws) will not be  ascertainable  with any
degree of certainty until  consummation of the Business  Combination.  Any costs
incurred in connection with the  identification  and evaluation of a prospective
Target Business with which a Business Combination is not ultimately  consummated
will  result in a loss to NAAC and reduce the  amount of  capital  available  to
otherwise  complete  a  Business  Combination  or for the  resulting  entity  to
utilize.

     NAAC will use the net proceeds derived from the IPO, and may use additional
equity securities,  debt securities or bank or other borrowings or a combination
thereof as consideration to effect a Business  Combination.  There currently are
no  limitations  on NAAC's  ability to borrow funds for a Business  Combination.
However,  NAAC's  limited  resources  and lack of operating  history may make it
difficult to borrow funds.  The amount and nature of any borrowings by NAAC will
depend on numerous considerations, including the Company's capital requirements,
potential  lenders'  evaluation of the Company's ability to meet debt service on
borrowings and the then prevailing  conditions in the financial markets, as well
as general economic conditions.  The Company does not have any arrangements with
any bank or financial  institution to secure additional  financing and there can
be no  assurance  that such  arrangements  if  required  will be  obtainable  or
otherwise in the best interests of the Company.  The inability of the Company to
obtain the funds required to effect or facilitate a Business Combination,  or to
provide funds for an additional infusion of capital into a Target Business,  may
have material adverse effects on the Company's business prospects, including the
ability to effect a Business Combination.


                                        4

<PAGE>



Proposed Business Combination

     On August 18, 1998, NAAC, Moto Guzzi Corp., a Delaware  corporation ("Guzzi
Corp."),  and, for certain  provisions,  Trident  Rowan Group,  Inc., a Maryland
corporation  ("TRG"),   entered  into  an  Agreement  and  Plan  of  Merger  and
Reorganization  ("Merger Agreement"),  pursuant to which Guzzi Corp. would merge
with and into NAAC, with NAAC being the surviving corporation  ("Merger").  TRG,
through  its  84%  owned  subsidiary,   O.A.M.  S.p.A.  ("OAM"),  owns  all  the
outstanding  common  stock of  Guzzi  Corp.  Guzzi  Corp.  also has  outstanding
1,500,000 shares of preferred stock and warrants to purchase 1,500,000 shares of
its common stock. The Merger Agreement was amended on December 3, 1998 to change
certain of the terms  relating to the  consideration  to be paid for Guzzi Corp.
and to modify the indemnification provisions.

     The  consummation  of the Merger is subject to the terms and  conditions of
the Merger  Agreement  and  approval by the  holders of the Common  Stock of the
Merger  and  Merger  Agreement  at a  stockholders  meeting to be called for the
purpose  ("Stockholders  Meeting").  At the Stockholders Meeting, the holders of
the  Common  Stock  also  will  be  asked  to  approve  certain  changes  to the
certificate of incorporation  of NAAC,  approve stock option plans for employees
and directors, and approve a recapitalization of the Class B Common Stock and to
elect eight  persons to be members of the board of  directors  of NAAC after the
Merger.  Implementation  of  each  of  these  proposals  is  contingent  on  the
consummation of the Merger.

The Merger

     Subject  to the terms and  conditions  of the Merger  Agreement,  NAAC will
issue to the current  holders of the common stock and  preferred  stock of Guzzi
Corp.  an  aggregate  of  3,110,058  shares of Class A Common Stock and warrants
("Nominal Warrants") to purchase 592,400 shares of Class A Common Stock ("Merger
Consideration"). Simultaneously with the consummation of the Merger, TRG and OAM
have agreed to  contribute  to the capital of Guzzi Corp.  certain  intercompany
debt between each of those  companies and Guzzi Corp.  aggregating  at September
30, 1998 approximately Lit. 12,919,  plus the interest due thereon,  in exchange
for the issuance of an  aggregate of 871,953  shares of Class A Common Stock and
Nominal Warrants to purchase  166,080 shares of Class A Common Stock.  NAAC will
also offer to the  holders  of the  outstanding  warrants  of Guzzi  Corp.,  the
opportunity  to  exchange  them for an  aggregate  of 217,989  shares of Class A
Common Stock and Nominal  Warrants to purchase  41,520  shares of Class A Common
Stock.  The Merger  Consideration is subject to being increased if NAAC has less
than  $8,150,000  in cash assets at the time of the  Merger,  at the rate of one
share of Class A Common Stock for each $11.00 of shortfall, excluding any amount
used to pay for the redemption of Class A Common Stock.

     The Nominal Warrants are  exerciseable at $.01 per share,  between April 1,
2000 and June 30, 2001, provided that the surviving  corporation has either Lit.
7,140 million or Lit. 8,211 million of operating income in the fiscal year ended
December 31, 1999 or 2000, respectively.

     To provide a fund for the  indemnification of NAAC in the event of a breach
of a representation  or warranty in the Merger  Agreement,  determined after the
Merger, 200,000 shares of Class A Common Stock issued as Merger Consideration in
the Merger will be  deposited in escrow with TRG.  Claims  against the shares in
escrow must aggregate at least  $600,000  before they may be made. The escrow is
for a  maximum  period  ending  approximately  April  2000,  unless  there is an
outstanding claim for indemnification.


                                        5

<PAGE>



     The fees and expenses of the transaction  attributable to NAAC will be paid
from the amount held in the Escrow  Account.  TRG will pay the fees and expenses
of the transaction attributable to Guzzi Corp.

     The  consummation of the Merger is conditioned  upon various  matters.  The
obligations  of NAAC,  Guzzi Corp.  and TRG are  subject to various  conditions,
including (i) the  representations  and warranties of NAAC,  Guzzi Corp. and TRG
are  true and  correct  in all  material  respects  (as  defined  in the  Merger
Agreement) at the consummation of the Merger, (ii) performance of and compliance
with the  covenants,  agreements  and  conditions,  (iii) absence of any pending
claim, action, suit, investigation or governmental proceeding which would render
the Merger unlawful,  and (iv) receipt of all necessary  consents,  approvals or
waivers.  The  obligation  of NAAC to  consummate  the Merger is also subject to
approval  of various  matters by the  stockholders  of NAAC and  approval by the
security holders of Guzzi Corp.

     The Merger  Agreement may be  terminated by (i) mutual  consent of NAAC and
Guzzi Corp.  and TRG, (ii) by Guzzi Corp. if the cash assets of NAAC at the time
of the Merger are less than  $8,000,000  (after  various cash expenses of NAAC),
(iii) if the Merger is not  consummated by February 18, 1999, (iv) if there is a
breach  of  any  of  the  covenants,  representations  or  warranties  as of the
consummation of the Merger that have not been waived,  or (v) the failure of the
stockholders  of  NAAC  to  approve  the  transaction  or up to 20% of the  NAAC
stockholders  who are  eligible to, and do,  exercise  their right to have their
Class A Common Stock redeemed at the time of the Merger.

Guzzi Corp.

     Guzzi Corp.,  through its Moto Guzzi S.p.A subsidiary ("Moto Guzzi"),  is a
leading Italian manufacturer, marketer and distributor of performance and luxury
motorcycles and motorcycle parts, marketed under the "Moto Guzzi(R)" brand name.
Guzzi Corp. is a Delaware  corporation formed in 1996 to acquire Moto Guzzi, its
principal  operating  subsidiary and Moto America,  Inc. ("Moto  America"),  the
exclusive U.S.  importer and  distributor of "Moto Guzzi" brand  motorcycles and
parts.

         Products and Distribution

     Moto Guzzi, over a period of more than 75 years, earned a reputation as one
of the world's  elite  designers and  manufacturers  of  performance  and luxury
motorcycles. While Moto Guzzi's models vary in engine displacement from 350cc to
1,100cc, in recent years, Moto Guzzi has focused its product design, development
and sales  efforts on the  heavyweight  segment of the market.  This segment has
experienced rapid growth with global new heavyweight  registrations,  increasing
17% in  1997.  As  part of its  business  strategy,  Moto  Guzzi  will  evaluate
expansion  of  its  product  line  to  include   lower-cost  small  displacement
motorcycles and scooters.  At present,  Moto Guzzi's  primary product  offerings
include the following models:

   o California EV    Guzzi's classic cruiser with a 1064cc engine and 
                      traditional lines.

   o Nevada Club      A lower riding cruiser with a 744cc engine and chrome
                      accents.


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   o V10 Centauro      A performance touring bike with a powerful 992cc 4-valve
                       air-cooled engine.

   o 1100 Sport Corsa  A sleek sports bike with modern lines and a 1064cc 
                       engine.

   o Quota             Guzzi's new entrant into the enduro segment.

   o Police Bikes      Variations of Moto Guzzi's models targeted at government
                       agencies, national and local police forces and highway
                       patrols.

     Moto Guzzi  sells its  products  worldwide  through a network of wholly and
partially  owned  importers  and  independent  dealers.  In  Italy,  Moto  Guzzi
maintains a network of over 140 independent distributors. In Germany, Moto Guzzi
owns 25%,  and has an option  to buy a total of 90%,  of MGI GmbH,  which is the
exclusive  importer-distributor  of Moto  Guzzi  motorcycles  and  parts in that
country.  In France,  Moto Guzzi owns 100% of its  importer-distributor.  In the
United States,  Guzzi Corp.'s wholly owned Moto America subsidiary serves as the
exclusive importer- distributor and maintains a national network of 100 dealers.
Moto Guzzi's sales by region are:


                                            Year Ended December 31,
                                            ----------------------- 
Geographic Area                         1997          1996           1995
---------------                         ----          ----           ----

Italy..........................          37%           37%            35%
Europe (Other than Italy)......          46%           43%            49%
United States..................          13%            7%             6%
Elsewhere......................           4%           13%            10%

     History and Recent Developments

     Established in 1921, Moto Guzzi is one of the oldest  motorcycle  brands in
the  world.  Between  1921 and  1966,  Moto  Guzzi  operated  as an  independent
privately owned entity. In 1972, Moto Guzzi was acquired by de Tomaso Industries
("de  Tomaso"),  the  predecessor  of  TRG.  Because  management  attention  was
principally focused on de Tomaso's other operating units,  especially the luxury
automobile  manufacturer,  Maserati,  and  limited  investment  was made in Moto
Guzzi's product design and development activities and manufacturing  operations,
sales declined from a high of 46,487 units in 1971 to 3,274 units in 1993.  Moto
Guzzi has experienced  continuous losses for the last eleven years,  including a
loss of Lit. 10,569 million for the fiscal year ended December 31, 1997 and Lit.
8,608 million for the nine months ended September 30, 1998 and has not generated
cash from operations for over three years.

     In 1994, TRG retained Temporary  Integrated  Management S.p.A., a temporary
management  service,  to  stabilize  Moto  Guzzi's  operations  and to begin the
process of developing a business plan to restore Moto Guzzi to financial health.
In  1996,  Mario  Tozzi-Condivi  was  hired  as  President  of Moto  Guzzi.  Mr.
Tozzi-Condivi  had  previously  been an  independent  consultant  to  automotive
distributors  and  dealers in the United  Kingdom,  Italy,  Singapore  and South
Africa for more than ten years and was  Chairman of the Board of  Maserati  U.K.
Ltd.  Since  1994,  and more  recently  during  1997 and  1998,  Moto  Guzzi has
recruited new senior management that includes:

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Dino Falciola,  General Manager, who joined Moto Guzzi in November of 1997; Nick
Speyer,  Chief  Financial  Officer,  who joined  Moto Guzzi in November of 1998;
Gianluca Lanaro,  Director of Marketing,  who joined Moto Guzzi in May 1995; and
Louisa Brenna, Director of Purchasing, who joined Moto Guzzi in January, 1997.

     The new management team has focused its efforts on increasing sales and the
efficiency of Moto Guzzi's production process.  Capital  expenditures  increased
from Lit. 1,801 million in 1995 to Lit. 3,887 million in 1997. In the nine month
period ended September 30, 1998, capital  expenditures  totaled Lit. 5.6 billion
versus Lit. 2.4 billion during the  comparable  period in 1997. To enhance sales
volumes by ensuring  that new  products  meet Moto Guzzi's  quality,  design and
technical  standards,  investment  in new  product  design and  development  has
recently been  increased.  Research and  development  expenditures  rose to Lit.
3,125  million in 1997 from Lit.  602 million in 1995.  In the nine month period
ended September 30, 1998,  investment in research and development  totalled Lit.
3,078  million  versus Lit.  1,393  million for the  comparable  period in 1997.
Selling, general and administrative expense increased from Lit. 7,486 million in
1995 to Lit. 13,824 in 1997,  reflecting  higher staff costs associated with the
recruitment  and  employment  of the new  management  team  as  well  as  higher
marketing and sales expenditures. To fund its operations in 1997 and 1998, Guzzi
Corp.  sold shares of preferred  stock and common stock  purchase  warrants in a
private  placement  which  raised  approximately  $5.2  million and  borrowed or
obtained  capital from Italian  financial  institutions  and from Guzzi  Corp.'s
affiliated  entities,  TRG  and  OAM.  Partly  as  a  result  of  the  increased
investment, unit sales volumes increased from a low of 3,274 in 1993 to 6,052 in
the last four quarters  ended  September 30, 1998,  and Moto Guzzi added two new
models,  the  "Centauro"  and  "Quota,"  to its product  offerings.  During this
period, Moto Guzzi has also experienced improvement in its cost structure,  with
gross margins improving from 13.7% in 1993 to 17.6% during the nine months ended
September 30, 1998.

     Strategy

     Moto Guzzi's strategy is to increase sales volumes and gross profits by (i)
focusing  on the  breadth,  quality and design of its  product  offerings,  (ii)
increasing its marketing  activities,  (iii) enhancing its distribution network,
and (iv)  leveraging its brand name. Moto Guzzi believes that its reputation and
rich tradition as a technological  innovator and quality manufacturer provides a
solid  foundation.  Moto Guzzi has built a loyal  customer base over the past 77
years through the outstanding performance and reliability of its motorcycles, as
well as its strong distribution  network.  The current customer base ranges from
professional  motorcycle enthusiasts to government agencies,  police departments
and highway  patrols around the world.  While public  administration  sales have
traditionally  been a stable  source of revenue for Moto Guzzi,  its  management
believes  that there are  unexploited  growth  opportunities  in this market and
plans to refocus its sales and marketing efforts in this product category.

     Guzzi Corp.  intends to build on its existing  product family platforms and
to  develop  new  platforms  which  will be the  basis  for the  Company's  next
generation of motorcycles.  New power trains, which represent a significant part
of planned  development  activities,  typically  require at least  three  years'
development  time. In the interim,  new motorcycles based on the current product
platforms  will be  periodically  introduced.  The  focus of these  intermediate
offerings  will  be  significant   improvements  in  quality,   performance  and
refinement.

     The U.S.  market  represents  the largest  expansion  opportunity  for Moto
Guzzi. Between 1996 and 1997, U.S. registrations of new heavyweight  motorcycles
increased by 14.8% to 190,200 units. Moto Guzzi plans to implement an aggressive


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marketing  campaign  targeted at U.S.  consumers that is designed to build brand
value and name  recognition and to emphasize the technical and design  strengths
of Moto Guzzi's motorcycles.

     In the United  States,  Moto Guzzi  also  plans to expand and  enhance  its
distribution  network.  In  addition to  increasing  the size and quality of its
dealer network, Moto Guzzi also plans to introduce new sales incentives programs
for dealers and a floor plan financing  program.  Other  innovations that either
have been or are expected to be introduced in the U.S. include customer purchase
financing and an extended, three year warranty program.

     Finally,  Moto Guzzi plans to leverage  the "Moto Guzzi" brand by expanding
into new  products,  markets and  services  that also offer the  opportunity  to
enhance  its brand  awareness  and brand  image.  Moto Guzzi  currently  sells a
limited line of non-motorcycle  merchandise.  In the future, Moto Guzzi plans to
introduce  a range of  branded  accessories  such as hats,  jackets,  shirts and
luggage.  Moto Guzzi also plans to exploit  opportunities  to license  the "Moto
Guzzi" brand name to manufacturers and suppliers of other products and services.

     If Guzzi  Corp.  were to proceed  on all of the  projects  it is  currently
evaluating,  it estimates that  approximately Lit. 50 billion of development and
capital  expenditure  would be required over the next five years.  Additionally,
Moto Guzzi will have to make up to Lit. 20 billion of capital  investments  over
the next few years to refurbish  its plant to make it more  competitive  and for
investments in information technology and systems. As cash flows from operations
are not  anticipated  to be  sufficient to entirely  finance such  expenditures,
Guzzi Corp.'s actual product development  programs will be, in part,  determined
by its ability to obtain  further  financing.  It is  anticipated  that,  if the
Merger is consummated,  the immediate capital requirements would be satisfied by
the funds available in the Escrow Account and certain other funds. The immediate
capital  requirements  include  repayment of Lit 6 billion in interim  financing
incurred  by  Moto  Guzzi  in  October  1998,  repayment  of up to  $800,000  in
intercompany  debt to TRG and OAM and  payment of supplier  arrearages  which at
October 31, 1998 amounted to Lit 5.5 billion.

Item 2.  DESCRIPTION OF PROPERTIES

     The Company's executive office is located at 5 East 59th Street, 3rd Floor,
New York, New York 10022 and its telephone number is (212) 486-4444.

     Pursuant to an oral agreement,  Mitchell & Co., a corporation controlled by
David J. Mitchell,  a stockholder of the Company and,  currently,  the Company's
Chairman and Chief Executive Officer,  has agreed that it will make office space
and services available to the Company, as may be required until the consummation
of a Business Combination. NAAC pays $2,500 per month for these services.

     The Company  believes  that this  facility is adequate to meet its needs in
the foreseeable future pending the consummation of a Business Combination.

ITEM 3.  LEGAL PROCEEDINGS

     None.


                                        9

<PAGE>



ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters  were  submitted  to a vote of the  Company's  security  holders
through the  solicitation  of proxies or otherwise  during the fiscal year ended
August 31, 1998.


                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

     The NAAC Class A Common Stock,  Class A Warrants,  Class B Common Stock and
Units are traded in the  over-the-counter  market and quoted on the OTC Bulletin
Board under the symbols NACQA, NACQW, NACQB, NACQU, respectively.

     The  following  table sets forth the range of high and low closing  trading
prices for the Class A Common Stock, Class A Warrants,  Class B Common Stock and
Units for the period  since  August 22, 1997 the date of the IPO, as reported by
the OTC Bulletin  Board.  The OTC Bulletin  Board is an  inter-dealer  automated
quotation  system  sponsored and operated by the NASD for equity  securities not
included in the Nasdaq System. Such  over-the-counter  market quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
necessarily reflect actual transactions.

<TABLE>
<CAPTION>

                                                                         Class A              Class B            Class A
                                                       Units            Common Stock         Common Stock          Warrants
                                                       -----            ------------         ------------          --------
                                                   High       Low      High       Low       High       Low       High      Low
                                                   ----       ---      -----    ------      ----       ---       ----      ------
<S>                                              <C>         <C>       <C>      <C>        <C>        <C>       <C>        <C> 
Year Ended August 31, 1997:
   Fourth Quarter (from August 22, 1997)....       10.00      9.25       N/A       N/A      10.00     10.00      N/A       N/A
Year Ended August 31, 1998:
   First Quarter............................      10.125      9.00     8.375     8.375      10.50      9.25      .50       .50
   Second Quarter...........................       10.00     8.875     8.500     8.375      10.00      9.25      .50       .50
   Third Quarter............................        9.25      9.00      9.00      8.50       9.75      9.25      .50       .50
   Fourth Quarter...........................       9.313      9.13     9.375     8.625       9.75     9.375      .50       .50
Year Ending August 31, 1999:                        9.75     9.313     9.375     8.625       9.75     9.375      .75       .50
   First Quarter............................
</TABLE>

Holders

     As of  December  8, 1998,  there were  twenty-one  holders of record of the
Class A Common  Stock and one  holder  of  record  of the Class B Common  Stock.
Because  Units are separable  into Class A Common Stock and Class A Warrants,  a
transfer  of Units is recorded  by NAAC's  transfer  agent only as a transfer of
Class A Common Stock and Class A Warrants.  Consequently,  the number of holders
of record of Units is not available. Since the majority of the shares of Class A
Common Stock and Class B Common Stock is held in street name, NAAC believes that
there is a substantial number of beneficial holders of the shares.


                                       10

<PAGE>


Dividends

     The Company has paid no  dividends  on its shares of Common Stock since its
organization on August 9, 1995. The Company does not expect to pay any dividends
prior to the consummation of a Business Combination and anticipates that for the
foreseeable  future any earnings  will be retained for use in its business  and,
accordingly, does not anticipate the payment of cash dividends.

Sales of Unregistered Securities

     During  the  fiscal  year  ended  August  31,  1998,  NAAC has not sold any
unregistered securities.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION

Forward Looking Statements

     When  used in this  Form  10-KSB  and in  future  filings  by NAAC with the
Securities and Exchange  Commission,  the words or phrases "will likely result,"
"management   expects,"  or  "the  company   expects,"   "will   continue,"  "is
anticipated,"  "estimated"  or similar  expressions  are  intended  to  identify
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance
on any such forward- looking statements, each of which speak only as of the date
made.  Such statements are subject to certain risks and  uncertainties,  some of
which are described below,  that could cause actual results to differ materially
from  historical  earnings and those  presently  anticipated  or projected.  The
Company has no obligation to publicly  release the result of any revisions which
may be made to any  forward-looking  statements to reflect anticipated events or
circumstances occurring after the date of such statements.

Fiscal Year 1998

     NAAC is a Specialized  Merger and  Acquisition  Allocated Risk  Transaction
company,  the  objective of which is to acquire a Target  Business in a Business
Combination.  Since its  inception in 1995,  NAAC has engaged in  organizational
activities,  completing the IPO and identifying and evaluating Target Businesses
with which it might  effect a Business  Combination.  In March 1998,  NAAC began
evaluating  and  negotiating  a  Business  Combination  with Guzzi  Corp.  which
resulted in the signing of the Merger  Agreement on August 18, 1998,  as amended
December 3, 1998.  Since August 18, 1998, NAAC has been engaged in preparing the
required  documentation  for the  Stockholders  Meeting  at which the Merger and
Merger  Agreement and certain other  proposals will be submitted for stockholder
vote and  approval.  Except for its  efforts to identify a Target  Business  and
effect a Business  Combination,  NAAC has not engaged in any business activities
during the fiscal year ended August 31, 1998.

     On August 27,  1997,  NAAC  consummated  the IPO and raised net proceeds of
approximately   $8,100,000,   after  payment  of  underwriting  discounts,   the
underwriter's  non-accountable expense allowance, and other offering costs. NAAC
deposited  approximately  $8,000,000  of the  offering  proceeds  in the  Escrow
Account.  At November  30,  1998,  the Escrow  Account  amounted to  $8,520,995.
Cumulative  interest  earned  on the  Escrow  Account  and  other  funds  was an
aggregate of  approximately  $411,000 as of August 31, 1998.  All income through
August 31, 1998 has been from interest.


                                       11

<PAGE>



     During  fiscal  year  1998,   substantially  all  of  the  working  capital
requirements   and  the  expenses  of  NAAC  have  been   attributable   to  the
identification,  evaluation and selection of a suitable  Target  Business and to
structure and  consummate the  acquisition of Guzzi Corp.  NAAC has incurred and
accrued  costs  of  approximately  $268,000  in  connection  with  its  business
activities through August 31, 1998. Of this amount,  $203,000 is attributable to
general and  administrative  expenses and debt costs and $65,000 is attributable
to income  taxes due on the interest  earned on the funds in the Escrow  Account
and working capital funds. NAAC is incurring additional costs in connection with
the proposed  Merger.  NAAC will satisfy its working capital needs from existing
cash balances,  and if a Business Combination is consummated,  from the funds in
the Escrow  Account and payment of the exercise price of $300,000 of the Class B
Options held by Messrs. Mitchell and McMillen, officers of NAAC, which they have
agreed to exercise upon  consummation of the Merger. If the Merger, or any other
Business Combination is not consummated,  and NAAC effects the redemption of the
Class A Common  Stock  (other  than the Pre-IPO  Shares)  using the funds in the
Escrow  Account,  the  assets of NAAC will not be  sufficient  to pay all of its
accounts payable,  taxes due and accrued expenses. The report of the independent
certified public accountants of NAAC states that there are several factors which
raise substantial doubt about NAAC's ability to continue as a going concern.

     NAAC anticipates that upon  consummation of the Merger with Guzzi Corp., it
will have  available  for  working  capital  from the Escrow  Account  and other
resources of about  $8,000,000.  The immediate  capital needs of the post-Merger
company include the repayment of approximately Lit 6 billion (approximately $3.6
million) in interim financing incurred by Moto Guzzi in October 1998,  repayment
of up to  $800,000  in  intercompany  debt  to  TRG  and  OAM,  and  payment  of
substantial supplier  arrearages.  In addition to the immediate capital needs of
Guzzi  Corp.,  the  longer-term  capital  requirements  of  Moto  Guzzi  include
approximately Lit 70 billion (approximately $42 million) of capital improvements
to existing  plant and  machinery,  purchasing  of new  machinery  and  business
systems,  design and research  expenses and working capital to support  expanded
operations.  It is expected that this capital will come from bank  financing and
the additional sale of securities. There is no assurance that any financing will
be available.

     If NAAC does not consummate a Business  Combination by August 22, 1999, the
Class A Common  Stock  (other  than the  Pre-IPO  Shares)  will be  redeemed  by
distribution of the Escrow Account proceeds,  inclusive of any interest thereon,
to the holders of those shares of Class A Common Stock. The per-share redemption
price is equal to the amount in the Escrow  Account,  including  interest earned
thereon,  divided  by the  number  of  shares  of Class A Common  Stock  held by
stockholders  entitled to share in the Escrow Account. The Pre-IPO Shares do not
participate  in the funds held in the Escrow Account and those shares of Class A
Common Stock will be cancelled at the time of redemption. The assets of NAAC, if
any, other than the escrowed assets,  will be used to pay NAAC's liabilities and
to redeem the  outstanding  Series A Preferred  Stock of NAAC at its liquidation
value.  Upon redemption and cancellation of the Class A Common Stock, each share
of Class B Common Stock will  automatically be exchanged for two shares of Class
A Common  Stock,  and the  holders of this stock will be the  stockholders  of a
public shell corporation.

     Holders of Class A Common  Stock  (excluding  the Pre-IPO  Shares) have the
right to redeem their shares in connection with a Business Combination, provided
that if more than 20% of the shares are to be redeemed, the Business Combination
will not be consummated  and the right of redemption  will terminate  until such
time as another acquisition is submitted for approval of the NAAC stockholders.



                                       12

<PAGE>

Year 2000

     NAAC has evaluated the potential impact of the situation  commonly referred
to as the "Year 2000 Issue"  ("Y2K").  Y2K concerns the inability of information
systems, primarily computer software programs, to properly recognize and process
date  sensitive  information  relating to the year 2000 and beyond.  Many of the
world's computer  systems  currently  record years in a two-digit  format.  Such
computer  systems  will be unable to property  interpret  dates  beyond the year
1999, which could lead to business  disruptions in the U.S. and internationally.
The  potential  costs and  uncertainties  associated  with Y2K will  depend on a
number of factors,  including software,  hardware and the nature of the industry
in which a company operates.

     To ensure that the Company's  computer systems are Y2K compliant,  NAAC has
reviewed each of its systems and programs over the past year. NAAC does not have
any internal  systems or  operations  that may be affected by Y2K. NAAC believes
its only  exposure to the Y2K issue is in  connection  with the Escrow  Account.
NAAC believes that the Chase Manhattan Bank N.A.  systems relating to the Escrow
Account are Y2K compliant or will be Y2K compliant  prior to the year 2000. NAAC
does not believe it will incur any expenses associated with the Y2K compliance.

ITEM 7. FINANCIAL STATEMENTS

     The  financial  statements  listed in Item 13 are  included  in this report
beginning on page F-1.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
        ACCOUNTING AND FINANCIAL DISCLOSURE

     None.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
        PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

     The current directors and officers of the Company are as follows:

Name                          Age            Position

David J. Mitchell             37             Chairman of the Board,
                                             Chief Executive Officer, Director

C. Thomas McMillen            45             Secretary, Treasurer, Director

A.J. Nassar                   41             Director


     David J. Mitchell has been Chairman of the Board,  Chief Executive  Officer
and a director of the Company since October 1996. He also has been  President of
Mitchell & Company,  Ltd., a New York-based merchant banking firm, since January
1991 when he founded it. Mr.  Mitchell is a director  of  Kellstrom  Industries,
Inc. and Bogen Communications  International,  Inc., both of which are traded on
The Nasdaq National Market, as well as several private companies.

     C.  Thomas  McMillen  has been  Chairman  and Chief  Executive  Officer  of
Complete Wellness Centers, Inc., a physician practice management company founded

                                       13

<PAGE>


by him, since November 1994. He has been a director,  Treasurer and Secretary of
the Company since October 1996.  Mr.  McMillen has been  president of McMillen &
Company,  Inc., a health care consulting  firm, since January 1993. He served as
Chief Administrative Officer of CliniCorp, Inc. from November 1993 to March 1994
where he was  responsible  for a turnaround  effort that resulted in CliniCorp's
first profit for the quarter ended  November  1994.  Until  December  1994,  Mr.
McMillen was a director of CliniCorp,  which filed for  bankruptcy in June 1996.
Mr. McMillen serves on the Board of Directors of Commodore Applied Technologies,
Inc., Kellstrom, Inc., CHG, Inc. and UC Television Network Corp.

     A.J. Nassar has served as President, Chief Executive Officer, Treasurer and
a Director of The Maxim Group,  Inc. since December 1990. From 1986 to 1990, Mr.
Nassar served as Vice President and Chief Operating  Officer of Kenny Carpet and
Linoleum,  Inc., a multistore  retail  carpet chain in western New York.  He was
previously  employed by Trend Carpet Mills and Queen Carpet Mills, both of which
are carpet  manufacturers,  where he was responsible for cultivating new markets
in the  northeastern  United  States.  In addition,  Mr.  Nassar has served as a
managing partner of K.K.N.  Investment, a privately held real estate development
and holding company.

Compliance with Section 16(a) of the Exchange Act

     Section 16(a) of the Exchange Act requires officers,  directors and persons
who beneficially own more than 10% of a registered class of equity securities of
NAAC ("10%  stockholders") to file reports of ownership and changes in ownership
with  the  Securities  and  Exchange  Commission.  Officers,  directors  and 10%
stockholders  also are required to furnish NAAC with copies of all Section 16(a)
forms  they  file.  Based  solely  on its  review of the  copies  of such  forms
furnished  to it,  and  written  representations  that  no  other  reports  were
required,  NAAC believes that during the fiscal year ended August 31, 1998, each
of its officers,  directors and 10% stockholders complied with the Section 16(a)
reporting requirements.

ITEM 10. EXECUTIVE COMPENSATION

Compensation

     No executive officer of NAAC has received from NAAC since its inception any
cash  compensation  for  services  rendered.  David J.  Mitchell  and C.  Thomas
McMillen,  in consideration for their services as directors and officers of NAAC
were each granted  options to purchase an aggregate of 50,000  units,  each unit
consisting  of one share of Class A Common Stock and one Class A Warrant,  at an
exercise  price of $12.50 per unit,  until the third  anniversary  of a Business
Combination  and options to purchase an  aggregate  of 15,000  shares of Class B
Common Stock at $10.00 per share until the  consummation  of the first  Business
Combination of NAAC,  which each has agreed to exercise at the  consummation  of
the Merger.  Directors  receive  reimbursement  for any  out-of-pocket  expenses
incurred in connection with NAAC's business. The Company does not pay directors'
fees.

NAAC Board Meetings and Committees

     During the fiscal year ended August 31,  1998,  the NAAC board of directors
met on one occasion. All the members of the NAAC board of directors attended the
meeting.  The NAAC board of directors has  established no  committees.  The NAAC
board of directors has no compensation policies required to be disclosed as none
of its executive officers receives any compensation.

                                       14

<PAGE>



Directors  serve for a term of one year after  election or until  their  earlier
resignation or their successor is elected or appointed and qualified.

Stock Option Plans

     On July 23,  1998,  the NAAC  board of  directors  approved  the 1998 Stock
Option  Plan  ("1998  Plan")  and  the  Outside  Directors'  Stock  Option  Plan
("Directors Plan"). The 1998 Plan provides for stock options for up to 1,250,000
shares of Class A Common  Stock  which may be  granted to  employees,  officers,
directors and  consultants  of NAAC and its  subsidiaries.  The  Directors  Plan
provides  for stock  options for up to 400,000  shares of Class A Common  Stock.
Stock  options under the  Directors  Plan will be granted on an automatic  basis
each January 2, beginning January 2, 2000, to each  non-employee  director as of
that date, at the rate of 12,500 shares of Class A Common Stock,  exercisable at
the then market price of a share of Class A Common Stock.

     Both  plans  must be  approved  by the  holders  of the  Common  Stock  and
implementation  of both plans is contingent on  consummation  of the Merger.  No
stock  options have been granted  under either plan.  However,  if the Merger is
consummated,  an  aggregate  of 625,000  shares of Class A Common  Stock will be
subject to options  under the 1998 Plan to be granted to  executive  officers of
the post-Merger company and its subsidiaries.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT

     The following table sets forth  information as of December 1, 1998 based on
information  obtained  from  the  persons  named  below.  With  respect  to  the
beneficial  ownership of shares of the Company's Common Stock by (i) each person
known to be the owner of more than 5% of the outstanding shares of Common Stock,
(ii) each director and (iii) all executive officers and directors as a group.

<TABLE>
<CAPTION>
                                                                                                         Percent
                                                                                                        of Class A
                                                                                                          Common
                                                                                                          Stock
                                                            Class A                 Class B            Beneficially
Name                                                     Common Stock            Common Stock             Owned
----                                                     ------------            ------------            ------
<S>                                                       <C>                     <C>                    <C>  
David J. Mitchell(1)........................              172,500(2)              15,000(3)              16.2%
C. Thomas McMillen(1).......................              172,500(2)              15,000(3)              16.2%
A.J. Nassar(1)..............................              115,000(4)                 -0-                  9.5%
Barry Rubenstein............................              218,000(5)              32,000                 21.1%
The Maxim Group, Inc........................              100,000                   - 0 -                 8.3%
All NAAC officers and directors as a group                460,000(6)              30,000(5)              30.1%
  (3 persons)...............................
</TABLE>

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

*    Beneficial  ownership is  determined  in  accordance  with the rules of the
     Securities and Exchange  Commission  ("Commission")  and generally includes
     voting or  investment  power with respect to  securities.  Shares of common
     stock  issuable  upon  the  exercise  of  options  or  warrants   currently
     
                                                        15

<PAGE>



     exercisable,  or  exercisable  or  convertible  within 60 days,  are deemed
     outstanding  for computing the  percentage  ownership of the person holding
     such options or warrants but are not deemed  outstanding  for computing the
     percentage ownership of any other person.

(1)  The address of each of Messrs.  Mitchell  and  McMillen  is c/o  Mitchell &
     Company, 3rd Floor 5 East 59th Street, New York New York 10022. The address
     of Mr. Nassar is c/o The Maxim Group,  Inc., 210 Townpark Drive,  Kennesaw,
     Georgia 30144.

(2)  Includes  50,000  shares of Class A Common  Stock and the 50,000  shares of
     Class A Common Stock underlying a like number of Class A Warrants  issuable
     upon exercise of the Class A Options.  Also includes 60,000 shares of Class
     A Common Stock issuable upon (i) conversion of the Class B Common Stock and
     (ii) exercise of the Class A Warrants,  both of which  underlie the Class B
     Common Stock subject to the Class B Options.

(3)  Represents  the Class B Common Stock  issuable upon exercise of the Class B
     Option.

(4)  Includes  100,000  shares of Class A Common Stock owned by The Maxim Group,
     Inc. of which Mr. Nassar is the President and Chief Executive Officer and a
     Director.

(5)  Includes  128,000  shares  of  Class  A  Common  Stock  issuable  upon  (i)
     conversion  of the Class B Common  Stock and (ii)  exercise  of the Class A
     Warrants, both of which underlie the Class B Common Stock.

(6)  Includes  the Class A Common  Stock  and Class B Common  Stock set forth in
     Notes (2) and (3) above.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     NAAC pays $2,500 per month to Mitchell & Company, Ltd. for office space and
office services.  David J. Mitchell,  a director,  and currently the Chairman of
the Board,  and Chief Executive  Officer of NAAC,  controls  Mitchell & Company,
Ltd.  NAAC  management  believes that this  arrangement  is on terms at least as
favorable as would be available from an unaffiliated third party. This agreement
will terminate upon consummation of the Merger.

     Mr. David Mitchell and Mr. Thomas McMillen,  directors of the Company, have
each received  options to purchase up to 15,000  shares,  or up to 30,000 in the
aggregate,  of the  Company's  Class  B  Stock  at an  exercise  price  of up to
$300,000.  The options will expire, if not sooner exercised upon consummation of
the first Business  Combination of NAAC.  Each of Messrs.  Mitchell and McMillen
has agreed to exercise these options in connection with the proposed Merger.

     Mr.  Mitchell  and the other  directors  of the Company may be deemed to be
"promoters" of the Company.

ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K

     (a)  Exhibits

     2.1  Agreement and Plan of  Reorganization,  dated August 18, 1995 (Exhibit
          2.1) (1)

     2.2  First  Amendment  to  Agreement  and  Plan  of  Reorganization,  dated
          December 3, 1998 (Exhibit 2.2)(1)

     3.1  Amended and Restated  Certificate of  Incorporation  of the Registrant
          (Exhibit 3.1)(2)

                                       16

<PAGE>



     3.2  By-laws of the Registrant (Exhibit 3.2)(2)

     4.1  Warrant  Agency  Agreement  dated May 28, 1996 between  American Stock
          Transfer & Company and the Registrant (Exhibit 4.2)(2)

     4.2  Form of  Representative's  Warrant  Agreement of  Registrant  (Exhibit
          4.5)(2)

     4.3  Form of  Class A  Common  Stock  Certificate  of  Registrant  (Exhibit
          4.1)(2)

     4.4  Form of Class B Stock Certificate of the Registrant (Exhibit 4.4)(2)

     4.5  Form of Class A  Common  Stock  Purchase  Warrant  Certificate  of the
          Registrant (Exhibit 4.3)(2)

     4.6  Form of Warrant (Nominal Warrant) to Purchase Shares of Class A Common
          Stock (Exhibit 4.6)(1)

     10.1 Underwriting Agreement (Exhibit 1.1)(2)

     10.2 Form of Escrow  Agreement  for  proceeds  from sale of Units  (Exhibit
          10.1)(2)

     10.3 Amended and Restated  License  Agreement,  dated May 9, 1997,  between
          Bright Capital, Ltd. and the Company (Exhibit 10.3)(2)

     10.4 Management Unit Purchase Option Plan (Exhibit  10.4)(1) 10.5-- Form of
          Class B Stock Option Agreement (Exhibit 10.5)(2)

     10.6 Form of Registration Rights Agreement, undated (Exhibit 10.6)(1)

     10.7 Form  of  Escrow  Agreement  for  outstanding  Common  Stock  (Exhibit
          10.2)(2)

     10.8 Form of  Subscription  Agreement,  dated  August 29, 1995  between the
          Company and Investors (Exhibit 10.8)(1)

     10.9 Form of  Escrow  Agreement  for  Class A Common  Stock to be dated the
          Merger Effective Time (Exhibit 10.9)(1)

     27.1* Financial Data Schedule


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

*    Filed herewith.

(1)  Filed as an Exhibit to the Registrant's  Registration Statement on Form S-4
     (No. 333-65267).


                                       17

<PAGE>




(2)  Filed as an Exhibit to the Registrant's Registration Statement on Form SB-2
     (No. 33-80647) declared effective August 22, 1997.

     (b)  Reports on Form 8-K

     On August 18, 1998, the  Registrant  signed an Agreement and Plan of Merger
     and  Reorganization  which was  reported  under Item 5 on Form 8-K filed on
     August 25, 1998.

                                       18


<PAGE>




                        NORTH ATLANTIC ACQUISITION CORP.
                      (FORMERLY ORION ACQUISITION CORP. I)
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                              FINANCIAL STATEMENTS
                      YEARS ENDED AUGUST 31, 1998 AND 1997






                                       F-1

<PAGE>




                        NORTH ATLANTIC ACQUISITION CORP.
                      (FORMERLY ORION ACQUISITION CORP. I)
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                                    CONTENTS


PAGE

Report of independent certified public accountants.......................F-3

Financial statements:

   Balance sheet.........................................................F-4

   Statements of operations..............................................F-5

   Statements of stockholders' equity....................................F-6

   Statements of cash flows..............................................F-7

   Notes to financial statements...................................F-9 - F-17



                                       F-2

<PAGE>




               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders of North Atlantic Acquisition Corp.
New York, New York

We have audited the  accompanying  balance sheet of North  Atlantic  Acquisition
Corp.  (formerly  Orion  Acquisition  Corp. I) (a corporation in the development
stage)  as of  August  31,  1998,  and the  related  statements  of  operations,
stockholders'  equity,  and cash flows for the years  ended  August 31, 1998 and
1997,  and the period  September 1, 1995 (date of inception) to August 31, 1998.
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  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of North  Atlantic  Acquisition
Corp.  as of August 31,  1998,  and the results of its  operations  and its cash
flows for the years ended August 31, 1998 and 1997, and the period  September 1,
1995 (date of  inception)  to August 31,  1998,  in  conformity  with  generally
accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going  concern.  As discussed in Notes 1 and 2 to the
financial  statements,  the Company is unable to use escrow funds to pay general
and  administrative  expenses  and merger  costs.  Currently,  the  Company  has
insufficient   funds  to  pay  its   liabilities  and  its  future  general  and
administrative  expenses and merger  costs,  nor has the Company  completed  its
pending  merger (see Note 3). These  factors raise  substantial  doubt about the
Company's  ability to continue as a going concern.  The financial  statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.

                                                 BDO SEIDMAN, LLP

New York, New York
October 12, 1998





                                       F-3

<PAGE>




                        NORTH ATLANTIC ACQUISITION CORP.
                      (FORMERLY ORION ACQUISITION CORP. I)
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                                  BALANCE SHEET


                                     ASSETS

                                                                  August 31,
                                                                     1998

Current:
     Cash...................................................... $     1,079
     Cash held in escrow.......................................         324
     Investment in United States Government Treasury 
      securities held in escrow (Notes 2 and 5)................   8,408,801
     Deferred merger costs.....................................     105,000
                                                                 ----------
                                                                 $8,515,204
                                                                 ==========

                                   LIABILITIES

Liabilities:
     Accrued expenses.......................................... $  174,496
         Total liabilities.....................................    174,496
Commitments (Note 6)
Common Stock subject to possible redemption, 160,000 
 shares at redemption value (Note 2)...........................  1,681,825
Stockholders' equity (Notes 1, 2, 4 and 8):
     Convertible preferred stock, $.01 par value--shares 
         authorized 1,000,000, outstanding 94;
         liquidation value--$9,400.............................          1
     Subscription receivable...................................       (100)
     Class A common Stock, $.01 par value--shares authorized 
         10,000,000; outstanding 906,000.......................      9,060
     Class B common stock, $.01 par value--shares authorized 
         250,000; issued and outstanding 150,000...............      1,500
     Additional paid-in capital................................  6,586,948
     Retained earnings during the development stage............     61,474
                                                                ----------
         Total stockholders' equity............................ $8,515,204
                                                                ==========







                 See accompanying notes to financial statements.


                                       F-4

<PAGE>



                        NORTH ATLANTIC ACQUISITION CORP.
                      (FORMERLY ORION ACQUISITION CORP. I)
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                            STATEMENTS OF OPERATIONS


                                                                 Period from
                                                               September 1, 1995
                                          Year Ended August 31,  (inception) to 
                                          1998           1997    August 31, 1998
                                          ----           ----  -----------------
Interest income......................     $  411,393   $      -    $411,393
General and administrative expenses
 and debt costs......................        133,089     38,920     203,094
Income taxes.........................         65,000          -      65,000
                                          ----------   --------    --------
Net income (loss)....................     $  213,304   $(38,920)   $143,299
                                          ==========   ========    ========

Net income (loss) per common 
 share--basic and diluted............     $      .20   $   (.33)
                                          ==========   ========
Weighted average common 
 shares outstanding..................      1,056,000    119,014
                                          ==========   ========


















                 See accompanying notes to financial statements.


                                       F-5

<PAGE>



                        NORTH ATLANTIC ACQUISITION CORP.
                      (FORMERLY ORION ACQUISITION CORP. I)
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                       STATEMENTS OF STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                                                                                         
                                                                                                                         
                                                                                                           Retainednal   
                          Preferred Stock                   Common Stock      Common Stock    Additional   During the    Total
                                              Subscription                                      Paid-In    Development Stockholders'
                         Shares     Amount     Receivable  Shares  Amount    Shares  Amount     Capital      Stage       Equity   
                         ------     ------    -----------  ------  ------    ------  ------    ---------   ----------  ------------
<S>                      <C>        <C>       <C>         <C>      <C>        <C>    <C>        <C>         <C>        <C>
Issuance of founders'
  shares..............        -     $    -     $     -     86,000  $  860         -  $    -     $  7,740    $      -   $   8,600
  Sale of common stock        -          -           -     20,000     200         -       -       44,800           -      45,000
  Subscription
    receivables.......       94          1      (9,400)         -       -         -       -        9,399           -           -
  Net loss............        -          -           -          -       -         -       -            -     (31,085)    (31,085)
                         ------     -------   --------   --------  ------   -------  -------    --------     -------   ---------  

Balance, August 31,
  1996................       94          1      (9,400)   106,000   1,060         -       -       61,939     (31,085)     22,515
  Net loss............        -          -           -          -       -         -       -            -     (38,920)    (38,920)
  Sale of common stock,
    net...............        -          -           -    800,000   8,000   150,000   1,500    8,125,009           -   8,134,509
  Reclassification to
    redeemable
    common stock......        -          -           -          -       -         -       -   (1,600,000)          -  (1,600,000)
                         ------     -------   --------   --------  ------   -------  -------    --------     -------   --------- 

Balance, August 31,
  1997................       94          1      (9,400)   906,000   9,060   150,000   1,500   6,586,948      (70,005)  6,518,104
  Subscription paid...        -          -       9,300          -       -         -       -           -            -       9,300
  Net income..........        -          -           -          -       -         -       -           -      213,304     213,304
  Accretion to
    redemption value
    of common stock...        -          -           -          -       -         -       -           -      (81,825)    (81,825)
                         ------     -------   --------   --------  ------   -------  -------    --------   ---------   ----------  

Balance, August 31,          94     $    1    $   (100)   906,000 $ 9,060   150,000 $ 1,500  $6,586,948    $  61,474  $6,658,883
                         ======     ======    ========   ========  ======   ======= =======  ==========    =========  ========== 
</TABLE>





                 See accompanying notes to financial statements.

                                       F-6

<PAGE>
                        NORTH ATLANTIC ACQUISITION CORP.
                      (FORMERLY ORION ACQUISITION CORP. I)
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                                                   Period from   
                                                                        Year Ended August 31,                   September 1, 1995
                                                                        ---------------------                    (inception) to
                                                                   1998                       1997               August 31, 1998
                                                                   ----                       ----              -----------------
<S>                                                             <C>                   <C>                       <C>          
Cash flow from operating activities:
  Net income (loss)....................................         $    213,304          $     (38,920)            $     143,299
  Adjustments to reconcile net income (loss) to net
     cash provided by (used in) operating activities:
     Amortization of deferred debt costs...............                    -                      -                     9,800
     Amortization of discount on notes payable.........                    -                 17,088                    35,000
     Changes in assets and liabilities:
       Accrued expenses................................               (7,935)                84,332                   (63,303)
       Interest on receivable on investments...........              271,654)                     -                  (123,555)
                                                                ------------          -------------             -------------
           Net cash provided by (used in)operating
           activities..................................               66,285                 62,500                       941
                                                                ------------          -------------             -------------
Cash flows from investing activities:
  Purchase of treasury securities in escrow............          (10,634,874)            (7,998,324)              (18,634,198)
  Sale of treasury securities in escrow................           10,497,051                      -                10,495,375
  Decrease (increase) in cash held in escrow...........                1,352                 (1,676)                    1,352
                                                                ------------          -------------             ------------
           Net cash used in investing activities.......             (137,471)            (8,000,000)               (8,137,471)
                                                                ------------          -------------             ------------
Cash flows from financing activities:
  Proceeds from sale of common stock...................                    -              8,134,509                8,188,109
  Subscription paid....................................                9,300                      -                    9,300
  Deferred costs:
     Registration......................................                    -                177,792                   90,000
     Merger costs......................................             (105,000)                     -                 (105,000)
     Debt..............................................                    -                      -                   (9,800)
     Repayment of notes payable........................             (100,000)                     -                 (100,000)
  Proceeds from issuance of notes payable..............                    -                      -                   65,000
                                                                ------------          -------------             ------------
           Net cash provided by (used in)financing activities       (195,700)             8,312,301                8,137,609
                                                                ------------          -------------             ------------
Net increase (decrease) in cash........................             (399,456)               374,801                    1,079
Cash, beginning of period..............................              400,535                 25,734                        -
                                                                ------------          -------------             ------------
Cash, end of period....................................         $      1,079          $     400,535             $      1,079
                                                                ============          =============             ============
Supplemental disclosures for cash flow
  information:
  Cash paid for:
     Interest..........................................        $           -          $            -            $           -
     Taxes.............................................                    -                       -                        -
</TABLE>
In fiscal  1996,  the Company  received a note for  subscribed  preferred  stock
amounting to $9,400, which is a noncash financing activity.

In fiscal  1996,  the Company has recorded a $90,000  liability  relating to the
purchase of a license agreement, which is a noncash financing activity.

                 See accompanying notes to financial statements.

                                       F-7

<PAGE>

                        NORTH ATLANTIC ACQUISITION CORP.
                      (FORMERLY ORION ACQUISITION CORP. I)
                    (A CORPORATION IN THE DEVELOPMENT STAGE)

                          NOTES TO FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

     The  accompanying  financial  statements  have been  prepared  assuming the
Company will continue as a going concern which  contemplates the consummation of
the pending merger (see Note 3). If the pending merger is not  consummated,  the
Company  will be  unable  to pay its  liabilities  and its  future  general  and
administrative expenses and merger costs.

     Management cannot be assured that the Company will be able to continue as a
going concern due to the  uncertainty  in  completing  the pending  merger.  The
Company's  continued  existence  is  dependent  upon its ability to complete the
pending merger.

     The financial  statements do not include any adjustments  that might result
from the outcome of this uncertainty.

Income Taxes

     North  Atlantic   Acquisition  Corp.  (the  "Company"  or  "NAAC")  follows
Financial  Accounting  Standards Board ("FASB") Statement No. 109 Accounting for
Income Taxes.  This  statement  requires that deferred  income taxes be recorded
following the liability method of accounting and be adjusted  periodically  when
income tax rates change.

Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Earnings Per Share

     During 1997, the Financial  Accounting  Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share," which provides for
the  calculation of "basic" and "diluted"  earnings per share.  This  Statement,
effective for financial  statements issued for periods ending after December 15,
1997,  requires  restatement  of all  prior-period  EPS  data  presented.  Basic
earnings  per share  includes  no dilution  and is  computed by dividing  income
available to common shareholders by the weighted average number of common shares
outstanding for the period.  Diluted  earnings per share reflect,  in periods in


                                       F-8

<PAGE>


which they have a dilutive  effect,  the effect of common  shares  issuable upon
exercise of stock  options.  All periods  presented have been restated to comply
with the provisions of SFAS No. 128.

     Basic and diluted net  earnings/loss  per share are based upon the weighted
average number of common shares outstanding. Diluted earnings/loss per share did
not include the assumed  exercise of common stock  options and warrants  because
the effect was anti-dilutive.

Accounting for Stock-based Compensation

     In October 1995, the FASB issued SFAS No. 123,  "Accounting for Stock-based
Compensation".  Beginning in 1996, SFAS No. 123 requires expanded disclosures of
stock-based  compensation  arrangements with employees and encourages,  but does
not require,  the recognition of employee  compensation expense related to stock
compensation based on the fair value of the equity instrument granted. Companies
that do not adopt the fair  value  recognition  provisions  of SFAS No.  123 and
continue  to follow the  existing  APB  Opinion  No. 25 rules to  recognize  and
measure  compensation  will be required to disclose the pro forma amounts of net
income and  earnings  per share that would have been  reported  had the  Company
elected to follow the fair value  recognition rules of SFAS No. 123. The Company
has elected to continue to use the intrinsic  value-based  method of APB Opinion
No. 25, and has adopted the disclosure requirements of SFAS No. 123.

2.  ORGANIZATION AND BUSINESS OPERATIONS

     The  Company was  incorporated  in Delaware on August 9, 1995 to acquire an
operating  business.  Operations  did not occur  until  September;  accordingly,
financial statements have been presented commencing on September 1, 1995.

     The Registration  Statement for the Company's  Initial Public Offering (the
"Offering")  became  effective  August 22,  1997.  The Company  consummated  the
Offering on August 27, 1997 and raised net proceeds of approximately  $8,100,000
(see Note 4). The Company's  management has broad discretion with respect to the
specific   application   of  the  net  proceeds  of  this   Offering,   although
substantially  all of the net  proceeds  of this  Offering  are  intended  to be
generally applied toward  consummating a business  combination (see Note 3) with
an operating business ("Business  Combination").  There is no assurance that the
Company will be able to successfully effect a Business Combination. An aggregate
of $8,000,000 of the net proceeds was placed in an escrow account which has been
invested in short-term United States Government  Securities,  including treasury
bills and cash and cash  equivalents  ("Proceeds  Escrow  Account"),  subject to
release at the earlier of (i) consummation of its first Business  Combination or
(ii)  redemption of the Class A stock (see below).  The remaining  proceeds from
the  Offering  will be  used to pay for  business,  legal  and  accounting,  due
diligence on prospective acquisitions, costs relating to the public offering and
continuing general and administrative expenses in addition to other expenses.

     The Company,  prior to the consummation of any Business  Combination,  will
submit such transaction to the Company's  stockholders for their approval,  even
if the  nature  of the  acquisition  is such as  would  not  ordinarily  require
stockholder  approval  under  applicable  state law. All of the Company's  prior
stockholders, including all directors and the Company's executive officers, have
agreed to vote their  respective  shares of Class A stock in accordance with the
vote of the  majority  of the  shares  voted by all  other  stockholders  of the


                                       F-9

<PAGE>


Company  ("nonaffiliated public stockholders") with respect to any such Business
Combination. A Business Combination will not be consummated unless approved by a
vote of two-thirds of the shares of common stock owned by  nonaffiliated  public
stockholders.

     At the  time  the  Company  seeks  stockholder  approval  of any  potential
Business  Combination,  the Company will offer ("Redemption  Offer") each of the
nonaffiliated  public Class A stockholders  the right, for a specified period of
time not less than 20 calendar days, to redeem his shares of Class A stock.  The
per share  redemption  price will be  determined  by dividing  the amount in the
escrow account  (including all interest  earned thereon) by the number of shares
of Class A stock held by such nonaffiliated public  stockholders.  In connection
with the Redemption  Offer, if nonaffiliated  public  stockholders  holding less
than 20% or 160,000  shares of the Class A stock elect to redeem  their  shares,
the Company may proceed with such Business Combination.  If nonaffiliated public
stockholders  holding  20% or more of the Class A stock  elect to  redeem  their
shares,  the Company will not proceed with such potential  Business  Combination
and will not redeem such shares. Accordingly, a portion of the net proceeds from
the Offering (20% of the cash and treasury  securities  held in escrow) has been
classified  as common stock subject to possible  redemption in the  accompanying
balance sheet at the estimated value.

     Class A stock  subject to possible  redemption  are  carried at  redemption
value and are presented outside of stockholders' equity. Changes in the carrying
value of these shares are charged or credited directly to stockholders' equity.

     All shares of the escrowed stock outstanding  immediately prior to the date
of the  Offering  have  been  placed  in escrow  until  the  earlier  of (i) the
occurrence of the first Business Combination,  (ii) 18 months from the effective
date of the Offering or (iii) 24 months from the effective  date of the Offering
(August 22, 1999) if prior to the expiration of such 18 month period the Company
has become a party to a letter of intent or a  definitive  agreement to effect a
Business  Combination,  in which case such period  shall be extended six months.
During the escrow period,  the holders of escrowed  shares of Class A stock will
not be able to sell or otherwise  transfer  their  respective  shares of Class A
stock  (with  certain   exceptions),   but  will  retain  all  other  rights  as
stockholders of the Company,  including,  without limitation,  the right to vote
escrowed  shares of Class A stock,  subject  to their  agreement  to vote  their
shares  in  accordance  with  a  vote  of a  majority  of the  shares  voted  by
nonaffiliated  public  stockholders  with respect to a Business  Combination  or
liquidation proposal.

     If the Company does not effect a Business Combination within 18 months from
the  effective  date or 24  months  from  the  effective  date if the  extension
criteria have been satisfied, the Company will distribute the amount held in the
Escrow Account to all  non-affiliated  public  stockholders  in respect of their
Class A  stock.  The  Class  A  stock  of the  affiliated  stockholders  will be
cancelled.  After the  redemption  and  cancellation  of the Class A stock,  the
assets of NAAC,  if any,  will be used to pay its  liabilities  and  redeem  the
outstanding Series A preferred stock at its liquidation  value.  Thereafter each
outstanding  share of Class B stock will be exchanged  for two shares of Class A
stock and the holders will be the sole stockholders of a public shell.

3.  PENDING MERGER

     On August 18, 1998, the Company,  Moto Guzzi Corp., a Delaware  corporation
("Guzzi  Corp."),  and for certain  provisions,  Trident  Rowan  Group,  Inc., a
Maryland  corporation  ("TRG"),  entered into a definitive Agreement and Plan of
Merger and Reorganization,  as amended ("Merger  Agreement"),  pursuant to which


                                      F-10

<PAGE>


Guzzi  Corp.  would  merge  with and into NAAC,  with NAAC  being the  surviving
corporation ("Merger").  TRG and its partially-owned  subsidiary,  O.A.M. S.p.A.
together own all the outstanding  common stock of Guzzi Corp.  Guzzi Corp., is a
leading Italian manufacturer, marketer and distributor of performance and luxury
motorcycles and motorcycles parts,  marketed under the "Moto  Guzzi(Registered)"
brand name.

     The Merger will be treated as a reverse acquisition of the Company by Guzzi
Corp. In a reverse  acquisition,  the  shareholders  of NAAC will own, after the
Merger, less than 50% of the post-Merger shares. The shareholders of Guzzi Corp.
will  receive  approximately  76.4% of the  post-Merger  shares of the  Company,
excluding  any  shares  of the  Company's  Class A common  stock  issuable  upon
exercise of any options or warrants,  and Guzzi Corp. ,  therefore,  will be the
accounting acquirer. The cost of the acquisition of the Company will be based on
the fair value of the  Company's  assets and  liabilities  as of the date of the
Merger  (which  amounts   approximate  book  value).  The  Company   anticipates
completing  the merger by February 1, 1999. The Merger is subject to shareholder
approval and certain other conditions.

4. PUBLIC OFFERING

     On August 27, 1997, the Company  consummated  the Offering and sold 800,000
units  ("Units") and 150,000 shares of Class B exchangeable  common stock.  Each
Unit consists of one share of the Company's Class A common stock and one Class A
redeemable  common stock  purchase  warrant  ("Class A  Warrant").  Each Class A
Warrant  entitles  the holder to purchase  from the Company one share of Class A
stock at an exercise  price of $9.00;  each Class B Stock entitles the holder to
receive two Units in exchange 90 days after the date of a Business  Combination.
The Class A Warrants are redeemable,  as a class, in whole and not in part, at a
price of $.05 per warrant  upon 30 days'  notice at any time  provided  that the
Company's  stockholders  have approved a Business  Combination and the last sale
price of the Class A stock has been $11.00 or higher for 10 of the trading  days
prior to the day on which the Company gives notice of redemption.

     Concurrent  with  the  Offering,  the  Company  amended  and  restated  its
certificate  of  incorporation  to  increase  its  authorized  common  stock  to
10,250,000 shares, of which 10,000,000 shares are designated Class A stock Class
A stock and  250,000  shares are  designated  Class B stock.  The  Company  also
increased its authorized preferred stock to 1,000,000 shares.

5. UNITED STATES TREASURY SECURITIES HELD IN ESCROW

     Treasury  securities  held in escrow  at August  31,  1998  consist  of the
following:
<TABLE>
<CAPTION>

                                                                       MATURITY            INTEREST          MATURITY
                                                    COST               AMOUNT              RATE              DATE
<S>                                                 <C>                <C>                 <C>                       <C> <C> 
Treasury bill                                       $6,423,585         $6,478,000          5.23%             October 27, 1998
Treasury note                                       $1,985,216          2,018,000          5.00              February 15, 1998
                                                    ----------         -----------         ----
Total Treasury securities held in escrow            $8,408,801         $8,496,000
                                                    ==========         ==========
</TABLE>

     At  August  31,  1998,  the  cost  of  each  of the  above-listed  treasury
securities approximated its market value.

                                      F-11

<PAGE>



6. COMMITMENTS

     The Company  has entered  into an oral  agreement  with David J.  Mitchell,
Chairman and Chief Executive Officer,  to lease office space, as well as certain
office  and  secretarial  services.  The  Company  pays  $2,500 per month to Mr.
Mitchell  for such  services.  The  expense was $30,000 and $20,000 for 1998 and
1997, respectively.

7. INCOME TAXES

     The  fiscal  1998  income tax  provision  of $65,000 is net of a benefit of
$27,000  due to the  utilization  of the prior  years net  operating  loss carry
forwards. The tax expense consists of federal, current income taxes.

8. STOCKHOLDERS' EQUITY

     (a)  Private Placement

     In November  1995,  the Company  completed a private  offering to a limited
group of investors which consisted,  in the aggregate,  of $100,000 in unsecured
promissory  notes bearing  interest at 8% per annum. The notes were payable upon
the earlier of May 1998 or the completion of an initial public  offering.  As of
August 31, 1998,  the notes,  together with accrued  interest,  were repaid.  In
addition,  the Company  also issued to the private  placement  investors  20,000
shares of common  stock for  $10,000.  The notes were  recorded at a discount of
$35,000 for financial  reporting  purposes as a result of additional  fair value
attributed to the common stock issued to the private placement shareholders. The
effective interest rate on the notes was approximately 45%.

     (b)  Preferred Stock

     The  Company  is  authorized  to issue  1,000,000  shares of "blank  check"
preferred stock with such designations,  voting and other rights and preferences
as may be determined from time to time by the Board of Directors.

     The Company has outstanding 94 shares of Series A preferred stock, owned by
CDIJ Capital Partners, L.P., an indirect affiliate of Bright Licensing Corp. The
purchase price for such shares, $100.00 per share or $9,400 in the aggregate, is
payable to the Company,  without interest, upon the earlier of November 15, 1996
or the closing of the Offering.  As of August 31, 1998, $9,300 has been received
by the  Company.  The Series A  preferred  stock is  nonvoting,  does not bear a
dividend and has a liquidation  value of $100.00 per share. Each share of Series
A preferred  stock will be  convertible  into 1,000 shares of common stock for a
period one year following the  consummation  of a Business  Combination.  In the
event  that a  Business  Combination  does not occur  within 18 months  from the
effective  date or 24 months from the effective  date if the extension  criteria
are satisfied,  the Series A preferred stock will be redeemed by the Company for
its liquidation value.

     (c)  Options

     The Company granted options to purchase  100,000 Units to the founders,  in
consideration for their service as directors,  and officers of the Company.  The


                                      F-12

<PAGE>


options are  exercisable for a period of three years from the date of a Business
Combination  at an  exercise  price of $12.50 per Unit.  The  options  are fully
vested. The shares issuable upon exercise of the options and underlying warrants
may not be sold or otherwise transferred until 120 days after the first Business
Combination.

     In October  1996,  the Company  cancelled  the 100,000  options and granted
additional  options  to  purchase  133,333.3  Units  to the  Company's  two  new
directors and to a founder.  The options are  exercisable  for a period of three
(3) years from the date of a Business Combination at an exercise price of $12.50
per Unit.

     The Company has granted  options to purchase 30,000 shares of the Company's
Class B stock to two  directors  at an exercise  price of $10.00 per share.  The
options will expire,  if not sooner  exercised,  upon consummation of a Business
Combination.

     On July 23, 1998, the Company adopted the 1998 Stock Option Plan (the "1998
Plan"), subject to stockholder approval and consummation of the Merger. The 1998
Plan  provides  for the grant of  options  to  purchase  up to an  aggregate  of
1,250,000  shares of the Company's Class A common stock to be made to employees,
officers,  directors and consultants of the Company and its  subsidiaries  after
the  Merger.  An  aggregate  of 625,000 of such  options  will be granted at the
effective  time of the Merger.  The 1998 Plan provides both for incentive  stock
options  ("Incentive  Options"),  and for options not  qualifying  as  Incentive
Options  ("Nonqualified  Options").  The Company's  Board or the Committee  will
determine  the  exercise  price for each share of the  Company's  Class A common
stock  purchasable  under an  Incentive  or  Nonqualified  Option  (collectively
"Options"). The exercise price of a Nonqualified Option may be less than 100% of
the fair market value on the last trading day before the date of the grant.  The
exercise  price of an  Incentive  Option  may not be less  than 100% of the fair
market  value on the last  trading day before the date of grant (or, in the case
of an Incentive Option granted to a person  possessing at the time of grant more
than 10% of the  total  combined  voting  power of all  classes  of stock of the
Company,  not less than 110% of such fair  market  value).  Options  may only be
granted  within a ten-year  period  commencing  on July 23,  1998 and  Incentive
Options  may only be  exercised  within  ten  years of the date of the grant (or
within five years in the case of an Incentive Option granted to a person who, at
the time of the grant, owns stock possessing more than 10% of the total combined
voting  power of all  classes  of stock of the  Company  or of its parent or any
subsidiary).

     The 1998 Plan for Outside Directors provides for the grant of non-incentive
options to purchase up to an aggregate of 400,000 shares of the Company's  Class
A common stock, to the non-employee  directors of the Company,  each grant to be
on the effective date of the Merger and on each January 2, beginning  January 2,
2000, of options to purchase  12,500  shares of Company's  Class A common stock.
The options will expire upon the earlier of ten years following date of grant or
three  months  following  the date on which  the  grantee  ceases  to serve as a
director.

     (d)  Warrants

     Class A Warrants entitle the holder to purchase one share of Class A common
stock at a price of $9.00 per share.  These  warrants will become  separable and
transferable  and can be  redeemed by the Company at a price of $.05 per warrant
any time after the consummation of a Business Combination.


                                      F-13

<PAGE>



     The underwriters  engaged by the Company in the Offering received a warrant
to purchase  80,000 shares of Class A common stock with 80,000 Class A Warrants,
at an exercise  price of $11.00 per share and  warrant  and to  purchase  15,000
shares of Class B common stock for $11.00 per share.

     Upon  closing of the  pending  merger the  Company  will issue a warrant to
Allen & Company (Fairness  Opinion) to purchase 350,000 shares of Class A common
stock at an exercise  price of $10.00 per share.  The Warrant may be exercisable
at any time prior to July 1, 2003.



                                      F-14

<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of the  Section  13 or 15 or  15(d)  of the
Securities  Exchange Act of 1934,  the registrant has duly caused this report to
be signed on its behalf by the  undersigned,  thereunto  duly  authorized on the
12th day of December, 1998.

Date: December 12, 1998
          
                                     NORTH ATLANTIC ACQUISITION CORP. II

                                     /s/ David J. Mitchell
                                     -----------------------------------
                                     David J. Mitchell
                                     Chairman of the Board
                                     Chief Executive Officer


     In accordance  with the  Securities  Exchange Act of 1934,  this report has
been signed below by the following  persons on behalf of the  registrant  and in
the capacities and on the dates indicated.


  /s/ David J. Mitchell       Chairman of the Board         December 12, 1998
------------------------      and Chief Executive Officer
David J. Mitchell             (Principal Executive Officer)


 /s/ Thomas McMillen          Secretary, Treasurer          December 12, 1998
------------------------      and Director
Thomas McMillen               (Chief Accounting Officer and
                               Principal Accounting Officer)


_______________________       Director                      December   , 1998
A.J. Nassar



<PAGE>