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

                                   FORM 10-Q
                                   (MARK ONE)

           [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                    For the Quarter Ended September 30, 1996
                                       OR
           [   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
            For the Transition Period from __________ to __________.

                         Commission File Number 1-10867



                          GENERAL PHYSICS CORPORATION
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)



                     Delaware                                       52-0845774
      ----------------------------------------            ---------------------
      (State or other jurisdiction of                     (I.R.S. Employer
      incorporation or organization)                       Identification No.)


     Suite 400, 6700 Alexander Bell Drive, Columbia, MD           21046
     --------------------------------------------------   ---------------------
     (Address of Principal Executive Offices)                   (Zip Code)

     Registrant's telephone number, including area code       (410) 290-2300
                                                          ---------------------

     Indicate by check mark whether the Registrant (1) has filed all reports
     required to be filed by Section 13 or 15(d) of the Securities Exchange Act
     of 1934 during the preceding 12 months (or for such shorter period that the
     Registrant was required to file such reports) and (2) has been subject to
     such filing requirements for the past 90 days.

     Yes   x   No
         -----   -----     

     At November 12, 1996, the Registrant had 10,552,360 shares of Common Stock,
     $.025 par value, issued and outstanding.
<PAGE>
 
                  GENERAL PHYSICS CORPORATION AND SUBSIDIARIES

                                     INDEX

<TABLE> 
<CAPTION> 

                                                                            Page
                                                                            ----
<S>                                                                         <C> 
PART I - FINANCIAL INFORMATION
 
     ITEM 1 - Financial Statements

 
          Consolidated Balance Sheets as of
           December 31, 1995
            and September 30, 1996 (unaudited)..........................       1
 
          Consolidated Statements of Operations
           for the three and nine months
            ended September 30, 1995 and 1996
             (unaudited)................................................       3
 
          Consolidated Statements of Cash Flows
           for the nine months
            ended September 30, 1995 and 1996
             (unaudited)................................................       4
 
          Notes to Consolidated Financial
           Statements (unaudited).......................................       5
 
       ITEM 2 - Management's Discussion and Analysis of Financial
          Condition and Results of Operations...........................       6

<CAPTION>
 
 
PART II - OTHER INFORMATION                                                 Page
                                                                            ----
<S>                                                                         <C> 
 
          ITEM 1 - Legal Proceedings...................................        9
 
          ITEM 6 - Exhibits and Reports on Form 8-K....................       10
 
          Signature....................................................       11
</TABLE>
<PAGE>
 
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                 General Physics Corporation and Subsidiaries
                          Consolidated Balance Sheets
<TABLE>
<CAPTION>
 
                                                December 31,   September 30,
                                                -------------  --------------
                                                    1995            1996
                                                    ----            ----     
                                                                (Unaudited)
                                                       (in thousands)
<S>                                             <C>            <C>
Assets
Current assets:                                                              
                                                     
 Cash.........................................       $   108         $    99 
 Accounts receivable, less allowance for                                     
  doubtful accounts of $1,000 and $1,191......        25,066          29,043 
 Costs and estimated earnings in excess of          
  billings on uncompleted contracts...........         9,118          10,125 
 Income taxes recoverable.....................           777              -- 
 Prepaid expenses and other current assets....         1,063             985 
                                                     -------         -------                            
   Total current assets.......................        36,132          40,252  
                                                     -------         -------  
Property and equipment, at cost...............         5,625           7,159  
Less accumulated depreciation and                                             
 amortization.................................        (1,924)         (2,935) 
                                                     -------         -------  
   Net property and equipment.................         3,701           4,224  
                                                     -------         -------  
Excess of costs over net assets of                                            
 subsidiaries acquired, less accumulated                                      
 amortization of $1,571 and $1,798............         9,887          11,712  
Other assets..................................         1,573           1,752  
                                                     -------         -------  
                                                     $51,293         $57,940  
                                                     =======         =======  
 
</TABLE> 
                                                                  (continued)
 
 

                                       1
<PAGE>
 
<TABLE> 
<CAPTION> 
                                                     December 31,  September 30,
                                                        1995            1996
                                                        ----            ----
                                                                     (Unaudited)

    Liabilities and Stockholders' Equity                   (in thousands)
<S>                                                  <C>             <C> 
Current liabilities:
 Accounts payable and accrued expenses........       $ 6,770         $ 8,574
 Billings in excess of costs and estimated
  earnings on uncompleted contracts...........         8,301           8,395
 Short-term borrowings........................         3,450           5,200
 Note payable.................................            --           1,414
 Capital lease obligation.....................           119             124
 Dividends payable............................           623             633
 Income taxes payable.........................            --             206
 Deferred income taxes........................            54             113
                                                     -------         -------
   Total current liabilities..................        19,317          24,659
                                                     -------         -------
Senior subordinated debentures................        11,173          11,473
Capital lease obligation......................         1,206           1,112
                                                     -------         -------
 
   Total liabilities..........................       
                                                      31,696          37,244
                                                     -------         -------
Stockholders' equity:
 Preferred stock, par value $.025 per share,         
 
  5,000,000 shares authorized; none issued....            --              -- 
 Common stock, par value $.025 per share,                           
  20,000,000 shares authorized; 11,085,720                                   
  and 11,086,420 shares issued................           277             277 
 Additional paid-in capital...................        25,074          24,488 
 Accumulated deficit..........................          (657)           (260) 
 Treasury stock at cost, 750,722 and                                          
  560,494 shares..............................        (5,097)         (3,809) 
                                                     -------         -------  
                                                                               
                                                                               
   Net stockholders' equity...................        19,597          20,696   
                                                     -------         -------   
                                                     $51,293         $57,940  
                                                     =======         =======   
</TABLE>

     See accompanying notes to consolidated financial statements.

                                       2
<PAGE>
 
                  General Physics Corporation and Subsidiaries
                     Consolidated Statements of Operations
                                  (Unaudited)
<TABLE>
<CAPTION>
 
 
                                    Three Months Ended      Nine Months Ended
                                      September 30,           September 30,
                                      -------------           -------------
                                   1995           1996    1995             1996
                                   ----           ----    ----             ----
                                  (in thousands, except   (in thousands, except
                                    per share amounts)      per share amounts)
<S>                               <C>          <C>        <C>          <C>
Revenue.........................     $26,117     $30,184     $80,399     $85,954
Cost of revenue.................      23,321      26,225      71,420      75,385
                                     -------     -------     -------     -------
     Gross profit...............       2,796       3,959       8,979      10,569
General and administrative and
 other                                 2,533       2,051       5,809       5,435
  expenses......................         542         472       1,732       1,361
Interest expense................           4           3         (14)         73
Other income/(expenses), net....     -------     -------     -------     -------
     Income (loss) before
      income taxes and
       equity in net earnings           (275)      1,439       1,424       3,846
        of investee
       company..................        (206)        615         529       1,647
                                     -------     -------     -------     -------
Income taxes (benefit)..........
     Income (loss) before
      equity in net                      (69)        824         895       2,199
       earnings of investee
        company.................
 Equity in net earnings of
  investee
   company (including gain on            713          18         776          87
    issuance of                      -------     -------     -------     -------
   stock in 1995), net of
    income taxes................
     Net income.................     $   644     $   842     $ 1,671     $ 2,286
                                     =======     =======     =======     =======
Net income per share............     $   .06     $   .08     $   .16     $   .22
                                     =======     =======     =======     =======
Weighted average number of
 shares                               10,441      10,492      10,247      10,430
  outstanding...................     =======     =======     =======     =======
 
 
</TABLE>

See accompanying notes to consolidated financial statements.

                                       3
<PAGE>
 
                  General Physics Corporation and Subsidiaries
                     Consolidated Statements of Cash Flows
                                  (Unaudited)
<TABLE>
<CAPTION>
 
                                                          Nine Months Ended
                                                             September 30,
                                                          -----------------
                                                           1995        1996
                                                           ----        ----
                                                           (in thousands)
<S>                                                       <C>       <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income..............................................  $ 1,671   $ 2,286

Adjustments to reconcile net income to net cash
 provided by operating activities:                                  
  Depreciation and amortization.........................    1,012     1,538
  Provision for doubtful accounts.......................       48       295
  Provision for deferred income taxes...................      253         2
  Equity in net earnings of investee company............      (86)      (87)
  Gain on issuance of stock by investee company.........     (690)       --
  Issuance of treasury stock to benefit plan............      765       701
  Changes in operating assets and liabilities:                             
   Accounts receivable..................................    2,212    (3,709)
   Costs and estimated earnings in excess of billings                      
    on uncompleted contracts............................    5,381    (1,007)
   Income taxes recoverable.............................      (65)      777
   Prepaid expenses and other current assets............       11        78
   Accounts payable and accrued expenses................   (3,244)    1,673
   Billings in excess of costs and estimated earnings                      
    on uncompleted contracts............................      758        94
   Income taxes payable.................................       --       206
   Other................................................       58        65
                                                          -------   -------
Net cash provided by operating activities...............    8,084     2,912
                                                          -------   ------- 
                                                                    
CASH FLOWS FROM INVESTING ACTIVITIES:

Additions to property and equipment.....................     (996)   (1,504)
Acquisition of net assets...............................       --    (1,200)
                                                          -------   -------
Net cash used in investing activities...................     (996)   (2,704)
                                                          -------   -------
CASH FLOWS FROM FINANCING ACTIVITIES:

Net short-term borrowings (repayments)..................   (5,000)    1,750
Principal payments on obligations under capital leases..      (47)      (89)
Payment of dividends....................................   (1,838)   (1,878)
                                                          -------   -------
Net cash used in financing activities...................   (6,885)     (217)
                                                          -------   -------
Increase (decrease) in cash.............................      203        (9)
Cash at beginning of period.............................      328       108
                                                          -------   -------
Cash at end of period...................................  $   531   $    99
                                                          =======   =======
 
 
</TABLE>
     See accompanying notes to consolidated financial statements.

                                       4
<PAGE>
 
                  General Physics Corporation and Subsidiaries
                   Notes to Consolidated Financial Statements
                                  (Unaudited)

     Note 1.  Consolidated Financial Statements

          The consolidated financial statements of General Physics Corporation
     ("GPC" or "the Company") included herein do not include all information and
     footnote disclosures normally included in financial statements prepared in
     accordance with generally accepted accounting principles.  For further
     information, such as significant accounting policies followed by the
     Company, refer to the notes to consolidated financial statements set forth
     in the Company's 1995 Annual Report.

          In the opinion of management, the consolidated financial statements
     included herein include all necessary adjustments (consisting of normal
     recurring accruals) necessary for a fair presentation of the financial
     position, results of operations and cash flows for the interim periods
     presented.  The results of operations for the periods ended September 30,
     1996 are not necessarily indicative of the operating results to be expected
     for the full year.

          The balance sheet at December 31, 1995 has been derived from the
     audited financial statements of the Company at that date.

     Note 2.  Proposed Merger

          On September 25, 1996, the Company and National Patent Development
     Corporation ("NPDC") announced that they had reached an agreement pursuant
     to which NPDC would acquire the remaining shares (approximately 48% of the
     outstanding shares) of the Company that it does not already own (the
     "Merger").  The agreement was recommended to the Board of Directors of the
     Company by a Special Committee of the Board composed of independent
     directors.  Based on an agreed upon price of NPDC common stock on September
     18, 1996 ($9.625 per share), NPDC would issue .5299 shares of its common
     stock, par value $.01 per share, for each outstanding share of the
     Company's common stock not owned by NPDC.  The exchange ratio, which is
     subject to certain adjustments, would provide approximately $5.10 in value
     for each outstanding share of the Company.  The proposed transaction is
     subject, among other things, to the execution of a definitive merger
     agreement, the approval by stockholders of each of NPDC and the Company,
     receipt of a fairness opinion, and registration under the Securities Act of
     1933 of the shares of NPDC common stock to be issued in the proposed
     transaction.

     Note 3.  Equity in Net Earnings of Investee Company

          On August 1, 1995, GSE Systems, Inc. ("GSES") completed an initial
     public offering of 1,500,000 shares of its common stock at $14 per share.
     The Company owns 250,000 shares of GSES common stock, which, after the
     offering, represented approximately a 6% interest in GSES.  As this
     investment is accounted for using the equity method of accounting, the
     capital transaction by GSES was treated as a sale of stock of a subsidiary
     by the Company and a gain of approximately $690,000, net of income taxes
     was recognized.

     Note 4.  Acquisitions

          Effective July 15, 1996, the Company acquired substantially all of the
     operations and assets of MTU Data Systems, Inc. ("MTU"), which is located
     in Grand Junction, Colorado.  The purchase price consisted of $200,000 in
     cash at closing and $150,000 contingent upon future events.  MTU provides
     multimedia products and services to fossil utility industry and operates as
     a component of the Company's Training and Technology Group.

                                       5
<PAGE>
 
          Effective July 31, 1996, the Company acquired substantially all of the
     operations and assets of Training Support Group, Inc. ("TSG"), which is
     located in Fenton, Michigan.  The purchase price consisted of $1 million in
     cash at closing, $1.5 million payable on specified future dates, and $1.2
     million contingent upon future sales.  TSG provides training programs and
     services to the automotive industry and operates as a component of the
     Company's Training and Technology Group.

     Note 5.  Settlement of Lawsuit

          On October 25, 1996, the U.S. District Court for the Southern District
     of Georgia gave final approval to a settlement of the action styled Bell v.
                                                                         -------
     General Physics Corporation filed against the Company by a former employee
     ---------------------------                                               
     on September 19, 1994, alleging that the Company willfully and
     intentionally violated the Fair Labor Standards Act by failing to pay
     overtime to the plaintiff and other similarly situated current and former
     employees of the Company.  Under the terms of the settlement,  the Company
     will pay $259,000, inclusive of the plaintiffs' legal fees and expenses.  A
     reserve for these amounts is included in the general and administrative and
     other expenses in the periods ended September 30, 1996.

     Note 6. Lawsuit

          On September 27, 1996, the Company, all of the directors of the
     Company and NPDC were named as defendants in a complaint filed in the Court
     of Chancery of the State of Delaware in and for New Castle County, styled
                                                                              
     Dunlop v. Pollak et al., Civil Action No. 15237-NC.  The complaint was
     -----------------------                                               
     brought by an alleged stockholder of the Company, individually and
     purportedly as a class action on behalf of all other stockholders of the
     Company.  The complaint alleges purported breaches of fiduciary duty by the
     directors of the Company, including certain directors who are also
     directors of NPDC, and purported breaches of fiduciary duty by NPDC, as an
     alleged majority and controlling shareholder, arising primarily from the
     Merger.  The complaint alleges, among other things, that the Merger has
     been timed to allow NPDC to take advantage of the current trading price of
     GPC Common Stock, which plaintiff alleges is depressed.  The complaint
     seeks, among other things, injunctive relief prohibiting the Merger or, if
     the Merger is consummated, an order rescinding the Merger or granting
     plaintiff and the other members of the purported class damages.  Plaintiff
     has granted the defendants extensions of the time in which to answer the
     complaint and to respond to plaintiff's pending request to review documents
     relating to the Merger.  The defendants believe that the claims set forth
     in the complaint are without merit, and intend vigorously to defend the
     litigation.


     Item 2.  Management's Discussion and Analysis of Financial Condition and
     Results of Operations

     General

          General Physics Corporation ("GPC" or "the Company") and its
     subsidiaries provide engineering, environmental, training, analytical and
     technical support services to commercial nuclear and fossil power
     utilities, the United States Departments of Defense and Energy, Fortune 500
     companies and other commercial and governmental customers.  The Company is
     organized into four groups:  Training and Technology; Engineering and
     Applied Sciences; Federal Systems and Department of Energy.  The Company's
     performance is significantly affected by the timing of performance on
     contracts.  Results of operations are not seasonal, since contracts are
     performed throughout the year.

          On September 25, 1996, the Company and National Patent Development
     Corporation ("NPDC") announced that they had reached an agreement pursuant
     to which NPDC would acquire the remaining shares (approximately 48% of the
     outstanding shares) of the Company that it does not already own (the
     "Merger").  The agreement was recommended to the Board of Directors of the
     Company by a Special Committee of the Board composed of independent
     directors.  Based on an agreed upon price of NPDC common stock on September
     18, 1996 ($9.625 per share), NPDC would issue .5299 shares of its common
     stock, par value $.01 per share, for each outstanding share of the
     Company's common stock not owned by NPDC.  The exchange ratio, which is
     subject to certain adjustments, would provide

                                       6
<PAGE>
 
     approximately $5.10 in value for each outstanding share of the Company.
     The proposed transaction is subject, among other things, to the execution
     of a definitive merger agreement, the approval by stockholders of each of
     NPDC and the Company, receipt of a fairness opinion, and registration under
     the Securities Act of 1933 of the shares of NPDC common stock to be issued
     in the proposed transaction.

          Since mid-1992, the Company has experienced lower levels of contract
     activity at United States Department of Energy ("DOE") facilities which
     resulted in declining revenue.  In addition, at the DOE's Savannah River
     Site, the volume of contract activity for which the Company is eligible to
     compete has been further reduced since 1994 by the award to small
     businesses of certain types of work which have been performed by the
     Company.  However, the lower level of contract activity has been somewhat
     offset by task orders issued under an architect engineering contract
     awarded to the Company by Westinghouse Savannah River Company in July 1995.
     The eventual value of the contract to the Company is not presently
     determinable.

          The Company has also experienced decreasing revenues from commercial
     nuclear power utilities over the last three years as a result of cost
     reduction efforts at many of the utilities, though during the first nine
     months of 1996, revenues from the commercial nuclear power utilities were
     up slightly as compared to the first nine months of 1995.  The cost
     reduction efforts by utilities are expected to continue, but the long-term
     effect on the Company is not presently determinable.

          While the Company continues to provide services to the DOE, the
     Department of Defense and the commercial nuclear power industry, it is
     unsure what effect continued cutbacks will have on the Company's future
     results.  In response to these factors, the Company has focused its
     marketing resources on expanding management and technical training services
     to manufacturing and process industries and specialized engineering
     services to federal agencies and process industries.  During 1995 and the
     first nine months of 1996, the Company experienced growth in these areas
     and anticipates future growth may come from these areas.

          In September, 1996, the Company was awarded a renewal of its contract
     to operate the U.S. Army's Chemical Demilitarization Training Facility and
     provide training services to the Army's chemical weapon demilitarization
     program nationwide.  The Company estimates the value of the contract over
     its initial five-year term and three-year option period, if the option is
     exercised, to be approximately $45,000,000.

          Set forth below is a discussion and analysis of the results of
     operations for the Company for the three and nine month periods ended
     September 30, 1996 and 1995.

     Revenue

          Revenue for the nine months ended September 30, 1996 was approximately
     $85,954,000, an increase of approximately $5,555,000, or 6.9%, compared to
     revenue for the nine months ended September 30, 1995 of approximately
     $80,399,000.  Revenue for the three months ended September 30, 1996 was
     approximately $30,184,000, an increase of approximately $4,067,000, or
     15.6%, from revenue for the three months ended September 30, 1995 of
     approximately $26,117,000.  The increase for both periods was due primarily
     to expansion of managerial and technical training services in manufacturing
     and process industries.

     Gross Profit

          Gross profit for the nine months ended September 30, 1996 was
     approximately $10,569,000 (12.3% of revenue), an increase of approximately
     $1,590,000, or 17.7%, compared to gross profit of approximately $8,979,000
     (11.2% of revenue) for the nine months ended September 30, 1995.

                                       7
<PAGE>
 
          Gross profit for the three months ended September 30, 1996 was
     approximately $3,959,000  (13.1% of revenue), compared to approximately
     $2,796,000 (10.7% of revenue) for the three months ended September 30,
     1995.  Gross profit for both periods increased because of higher revenue
     and reduced overhead costs as a percent of revenue.

     General and Administrative and Other Expenses

          General and administrative and other expenses for the nine months
     ended September 30, 1996 were approximately $5,435,000, or 6.3% of revenue,
     compared to approximately $5,809,000, or 7.2% of revenue, for the nine
     months ended September 30, 1995.

          General and administrative and other expenses for the three months
     ended September 30, 1996 were approximately $2,051,000, or 6.8% of revenue,
     compared to approximately $2,533,000, or 9.7% of revenue, for the three
     months ended September 30, 1995.  The decrease for both periods is due to
     the recording of a reserve of approximately $1,015,000 in 1995 related to
     potentially uncollectible revenue recorded in years prior to December 31,
     1993, offset in part by the recording of a $259,000 reserve in the third
     quarter of 1996 for the settlement of an action described below.

     Interest Expense

          Interest expense relates to interest on the Company's senior
     subordinated debentures and the short-term borrowings owed to a commercial
     bank under the Company's revolving credit agreement.  Interest expense for
     the nine months ended September 30, 1996 was approximately $1,361,000,
     compared to approximately $1,732,000 for the nine months ended September
     30, 1995.  Interest expense for the three months ended September 30, 1996
     was approximately $472,000, compared to approximately $542,000 for the
     three months ended September 30, 1995.  The decrease for both periods is
     due to lower average outstanding borrowings under the Company's line of
     credit during  1996, compared to 1995.

     Income (Loss) Before Income Taxes and Equity in Net Earnings of Investee
     Company

          Income before income taxes and equity in net earnings of investee
     company for the nine months ended September 30, 1996 was approximately
     $3,846,000, an increase of approximately $2,422,000 over the nine months
     ended September 30, 1995.

          Income before income taxes and equity in net earnings of investee
     company for the three months ended September 30, 1996 was approximately
     $1,439,000, an increase of approximately $1,714,000 over the three months
     ended September 30, 1995.  The increase for both periods was due primarily
     to increased revenue in 1996 and the recording in 1995 of the reserve
     related to potentially uncollectible revenue discussed above.

     Income Taxes

          The Company's effective income tax rates for the nine months ended
     September 30, 1996 and 1995 were 42.8% and 37.1%, respectively, and for the
     three months ended September 30, 1996 and 1995 were 42.7% and 28.5%,
     respectively.  The lower effective tax rates in 1995 were the result of
     permanent differences between book and tax, and the reversal of prior year
     over-accruals.

     Equity in Net Earnings of Investee Company

          On August 1, 1995, GSE Systems, Inc. ("GSES") completed an initial
     public offering of 1,500,000 shares of its common stock at $14 per share.
     The Company owns 250,000 shares of GSES common stock, which, after the
     offering, represented approximately a 6% interest in GSES.  As this
     investment is accounted for using the equity method of accounting, the
     capital transaction by GSES was treated as a sale of stock of a subsidiary
     by the Company and a gain of approximately $690,000 net of income taxes was
     recognized.

                                       8
<PAGE>
 
          For the nine months ended September 30, 1996 and 1995, the Company
     recognized its proportionate share of the net earnings of GSES of $87,000
     and $86,000, respectively.  For the three months ended September 30, 1996
     and 1995, the Company recognized $18,000 and $24,000, respectively.  Such
     amounts are net of income taxes payable upon distribution of the earnings
     by the investee.

     Liquidity and Capital Resources

          The Company has historically financed its operations through cash
     generated from operations and bank borrowings.  Working capital was
     $15,593,000 at September 30, 1996 and $16,815,000 at December 31, 1995.
     Net cash provided by operating activities for the nine months ended
     September 30, 1996, decreased from net cash provided by operating
     activities for the nine months ended September 30, 1995, because of
     increased accounts receivable and costs and estimated earnings in excess of
     billings on uncompleted contracts primarily as a result of higher revenue.

          The Company has a credit agreement with a commercial bank providing
     for a $20,000,000 secured revolving line of credit expiring April 10, 1998.
     Borrowings under the credit agreement bear interest at the prime rate
     (8.25% at September 30, 1996) or at LIBOR plus 1.75% (7.2% at September 30,
     1996), whichever is elected by the Company.  The credit agreement is
     secured by liens on accounts receivable of the Company and its domestic
     subsidiaries, and contains covenants that, among other things, limit the
     Company's ability to dispose of assets, incur debt, create liens, make
     capital expenditures and make certain investments or acquisitions.  In
     addition, the Company is required to meet certain financial ratios.  At
     September 30, 1996, the Company had available borrowings of approximately
     $14,651,000 under the credit agreement and borrowings of $5,200,000
     outstanding.

          The Company has not historically made substantial capital
     expenditures.  The Company has no current plans to increase in any material
     respect its historical level of capital expenditures, although the Company
     will consider making appropriate acquisitions as opportunities present
     themselves.  The Company believes that funds provided from operations and
     available borrowings will be sufficient to meet the operating needs and
     capital expenditures of the Company through 1996 and the twelve months
     thereafter.


     PART II - OTHER INFORMATION

     Item 1.  Legal Proceedings

          On October 25, 1996, the U.S. District Court for the Southern District
     of Georgia gave final approval to a settlement of the action styled Bell v.
                                                                         -------
     General Physics Corporation filed against the Company by a former employee
     ---------------------------                                               
     on September 19, 1994, alleging that the Company willfully and
     intentionally violated the Fair Labor Standards Act by failing to pay
     overtime to the plaintiff and other similarly situated current and former
     employees of the Company.  Under the terms of the settlement,  the Company
     will pay $259,000, inclusive of the plaintiffs' legal fees and expenses.  A
     reserve for these amounts is included in the general and administrative and
     other expenses in the periods ended September 30, 1996.

          On September 27, 1996, the Company, all of the directors of the
     Company and NPDC were named as defendants in a complaint filed in the Court
     of Chancery of the State of Delaware in and for New Castle County, styled
                                                                              
     Dunlop v. Pollak et al., Civil Action No. 15237-NC.  The complaint was
     -----------------------                                               
     brought by an alleged stockholder of the Company, individually and
     purportedly as a class action on behalf of all other stockholders of the
     Company.  The complaint alleges purported breaches of fiduciary duty by the
     directors of the Company, including certain directors who are also
     directors of NPDC, and purported breaches of fiduciary duty by NPDC, as an
     alleged majority and controlling shareholder, arising primarily from the
     Merger.  The complaint alleges, among other things, that the Merger has
     been timed to allow NPDC to take advantage of the current trading price of
     GPC Common Stock, which plaintiff alleges is depressed.  The complaint
     seeks, among other things, injunctive relief prohibiting the Merger or, if
     the Merger is consummated, an order rescinding the Merger or granting
     plaintiff and the

                                       9
<PAGE>
 
     other members of the purported class damages.  Plaintiff has granted the
     defendants extensions of the time in which to answer the complaint and to
     respond to plaintiff's pending request to review documents relating to the
     Merger.  The defendants believe that the claims set forth in the complaint
     are without merit, and intend vigorously to defend the litigation.

     Item 6.  Exhibits and Reports on Form 8-K

            (a)  Exhibits
                 --------

                 10.1  Contract No. DAAA-09-96-C-0019, dated September 13, 1996,
                       between the United States of America and the Company.

                 27.   Financial Data Schedule.

            (b)  Reports
                 -------

               There were no reports on Form 8-K filed by the Registrant during
               the period covered by this report.

                                       10
<PAGE>
 
                                   Signature
                                   ---------



          Pursuant to the requirements 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.


                                        GENERAL PHYSICS CORPORATION



     Date:  November 13, 1996           By:/s/ John C. McAuliffe
                                           ------------------------------------
                                           John C. McAuliffe
                                           Executive Vice President,
                                           Chief Operating Officer and
                                           Chief Financial Officer

                                       11
<PAGE>
 
                               INDEX OF EXHIBITS



     10.1 Contract No. DAAA-09-96-C-0019, dated September 13, 1996, between the
          United States of America and the Company.

     27.  Financial Data Schedule.

                                       12