FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

               /X/ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   For the Fiscal Year Ended December 31, 1997
                                       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 033-78252
                              AMERICAN DRUG COMPANY
             (Exact name of registrant as specified in its charter)


Delaware                                                  13-3729186
(State  of Incorporation)                   (I.R.S. Employer Identification No.)

P.O. Box 73037 N.W., Washington, D.C.                       20036
(Address of principle executive offices)                  (Zip code)

Registrant's telephone number, including area code:    (202) 833-9223

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

Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, Par Value $.01 Per Share
                                (Title of Class)

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

Indicate  by  check  mark if  disclosure  of  delinquent  filers  to item 405 of
Regulation S-K is not contained herein,  and will not be contained,  to the best
of  Registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10- K. /X/

As of March 2, 1998, the aggregate market value of the outstanding shares of the
Registrant's  Common Stock, par value $.01 per share, held by non-affiliates was
approximately $586,559 based on the closing price of the Common Stock on the OTC
Bulletin Board, which is operated by the NASDAQ Stock Market on March 2, 1998.

Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.


Class                                            Outstanding at March 2, 1998
-----                                            ----------------------------
Common Stock, par value $.01 per share                 13,020,155 shares

DOCUMENTS INCORPORATED BY REFERENCE:                          None


<PAGE>


                                                         1



                                                 TABLE OF CONTENTS
PART I                                                                      Page

Item 1. Business

         (a)      General Development of Business.............................1

         (b)      Financial Information About
                  Industry Segment............................................1

         (c)      Narrative Description of Business...........................1

         (d)      Financial Information About Foreign
                  and Domestic Operations and Export Sales....................4

         Item 2. Properties...................................................5

         Item 3. Legal Proceedings............................................5

         Item 4. Submission of Matters to a Vote of Security Holders..........5

PART II
         Item 5. Market for the Registrant's Common
         Equity and Related Stockholder Matters...............................6

         Item 6. Selected Financial Data......................................7

         Item 7.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations........................8

         Item 8. Financial Statements and Supplementary Data.................12

         Item 9.  Changes in and Disagreements with
         Accountants on Accounting and Financial Disclosure..................36

PART III
         Item 10. Directors and Executive Officers of the Registrant.........36

         Item 11. Executive Compensation.....................................41

         Item 12. Security Ownership of Certain Beneficial
         Owners and Management...............................................42

         Item 13. Certain Relationships and Related Transactions.............45

PART IV
         Item 14. Exhibits, Financial Statement Schedules, and
         Reports on Form 8-K.................................................48


<PAGE>





                                     PART I

Item 1.  Business

(a)      General Development of Business

         American  Drug  Company (the  "Company")  was  organized in 1993,  as a
wholly-owned  subsidiary of GP Strategies  Corporation (formerly National Patent
Development  Corporation)  ("GP  Strategies")  to initiate  marketing  and sales
activities  for generic  pharmaceutical  and medical  products in Russia and the
Commonwealth  of  Independent  States (the "CIS").  NPD Trading (USA) Inc. ("NPD
Trading")  was  formed  in  January  1990  as a  wholly-owned  subsidiary  of GP
Strategies  to provide  services  to Western  businesses  in Russia and  Eastern
Europe.

         In August 1994, GP Strategies  entered into a Transfer and Distribution
Agreement with the Company whereby GP Strategies transferred to the Company (the
"Distribution") immediately prior to the closing of the Distribution, all of its
interest  in NPD Trading and in two  newly-formed,  50% owned joint  ventures in
exchange for (i) the issuance by the Company of 6,990,900 shares of Common Stock
to GP  Strategies  (ii) the issuance of  6,017,775  shares of Common Stock to be
distributed to GP Strategies  stockholders,  and (iii) the issuance of 6,017,775
warrants to be  distributed  to GP  Strategies  stockholders.  Each  warrant was
initially  exercisable  for a period  of two  years  from  August  5, 1994 at an
exercise  price per  share of $1.00.  In  August  1996,  the Board of  Directors
approved an  extension  of the  Company's  warrants  until  August 5, 1998 and a
reduction  of the exercise  price to $.50 per share,  subject to  adjustment  in
certain  circumstances.  The  Distribution was at the rate of one share plus one
warrant to purchase  one share of common  stock for every four then  outstanding
shares of common stock of GP Strategies.  Upon  completion of the  Distribution,
the Company became a separate  public company from GP Strategies and NPD Trading
became a wholly-owned subsidiary of the Company.

         The Company maintains offices in Washington, D.C., New York, Prague and
Moscow.

(b) Financial Information about Industry Segments

         This item is not applicable  because the Company has only a single line
of business.

(c) Narrative Description of Business

General and Background

         The  Company  develops  and  assists  Western   businesses  to  develop
investment,  manufacturing and trade opportunities and business relationships in
Russia,  the Czech and Slovak Republics,  and other countries of Eastern Europe.
In this  regard,  it  continues  and builds  upon the 30-year  tradition  of its
principal  stockholder,   GP  Strategies,  of  licensing,   commercializing  and
marketing technologies from this region. The Company believes that its principal
strength lies in the quality of its  established  relationships  with scientists
and commercial  organizations both in the United States and in the former Soviet
Union and the Czech and Slovak Republics.

American-Made Generic Pharmaceutical Products

The Company's  Initial Products and Operations.  In 1993, the Company  initiated
activities aimed at the export of American-made  generic  pharmaceutical and OTC
healthcare  products in Russia.  These  activities  were initiated to complement
sales of U.S. and European  medical  equipment begun by the Company in Russia in
1992. By 1997, the Company had completed  registration in Russia of 25 products,
including  vitamins,  bandages,  feminine  hygiene  products,   toothpaste,  and
antibiotic  creams and ointments.  The Company  maintained an inventory of these
products in  warehouses in Moscow and sold these  products  through a network of
local distributors throughout the Russian Federation.

         In 1997,  the Company also  established a  relationship  with a Russian
company  ZAO  (Akorta)  ("Akorta")  to  provide  support  for  the  importation,
clearance  and sales of its  products.  Akorta has the legal  authority  to sell
products for Russian rubles and transfer those funds, in dollars, to the Company
in the United  States.  Akorta is a private  company  owned by  employees of the
Company's  Moscow  office.  Subsequent  to December 31, 1997,  such  individuals
ceased to be employees of the Company.

Change  in  Russian  Operations.  Despite  some  initial  success,  sales of the
Company's  generic  products  declined  significantly  in  1997.  The  Company's
inability  to  maintain  and  expand  sales  may  be  attributed,  in  part,  to
deficiencies in the Russian distribution system.  Additionally,  the Company did
not  compete  effectively  against  international  manufacturers  of brand  name
products,  which were able to invest large sums into marketing and  distribution
in the expectation of long term rewards.

         At the end of 1997,  the Company  made the decision to  concentrate  on
marketing and sales of medical equipment and related products,  such as hospital
furniture   and   laboratory   supplies   and  to  withdraw   from  the  generic
pharmaceutical and over-the-counter (OTC) healthcare product business because of
significantly  declining sales of generic products.  Sales activity with respect
to generic drugs will be undertaken  solely through the Russian  company Akorta.
In the  short-term,  the Company will attempt to sell its existing  inventory of
generic products in Moscow warehouses through Akorta and other third parties. No
additional products will be purchased in the United States.

Consulting Services and Sales of Medical Equipment

         In its seven years of operation, NPD Trading has provided a broad range
of  business  services to a number of American  and  Western  corporations.  The
Company's  employees  have  backgrounds  in  diverse  disciplines,  such as law,
engineering,  international trade and economics.  The Company is able to provide
the contacts necessary for interested clients to locate a venture partner and to
establish viable  financing.  Recognizing that successful  conclusion of project
negotiations in this region often depends upon financing, the Company has worked
closely  with the U.S.  Exim-Bank,  OPIC,  the  World  Bank and its  affiliates,
including  the European  Bank for  Reconstruction  and  Development,  as well as
private  commercial  banks.  Additionally,  the Company advises its clients with
respect to new commercial,  tax,  currency and other laws of Eastern Europe,  as
well as U.S. foreign  government  regulations and policies which directly affect
business operations.

Projects.  The Company has been  instrumental in the successful  conclusion of a
variety of  projects.  Summarized  below are examples of the type of projects in
which the Company has been involved.

Kamaz  Hospital.  As is typical of many of the  Company's  sales to hospitals in
Russia, the Company succeeded in 1997 in providing the hospital within the Kamaz
industrial  complex in Tatarstan with a variety of medical equipment and related
products.  The equipment was purchased as part of a modernization  program which
is being  implemented  at the hospital.  The Company's  contracts  were executed
within the  framework  of a larger  financing  package  provided to Kamaz by the
Export-Import Bank of Japan.

ICF Kaiser International. The Company's on-going efforts on behalf of ICF Kaiser
International  ("ICF") and their associated company,  Kaiser Engineers,  secured
for these  companies  contracts to perform  feasibility  studies in the areas of
hazardous  waste  management  and  steel  industry  modernization  in the  Czech
Republic.  The Company is providing ICF with technical and commercial assistance
on a contract for a $250 million hot strip mini mill in the Czech  Republic.  To
date,  the  Company  has  received  $1 million  for this  assistance,  including
$840,000  received in September  1997. The Company expects to receive another $1
million payment  contingent upon the completed  construction on the mini mill in
mid-1999.

Competition

         The  principal  competitive  factors in the  Company's  markets are the
experience  and expertise of technical  personnel,  performance,  reputation and
price. Most of the Company's  competitors have greater financial,  technical and
marketing resources than the Company. Additionally, because financing from local
private  sources  and  regional or  international  public  sources is  extremely
limited and highly  competitive,  the Company's  projects  compete against other
ventures to obtain funds necessary for successful competition.

Clients

         The Company has provided  financial  management and general  consulting
support to a number of American and foreign  clients.  The Company's  clients to
date have been  principally in the energy,  healthcare,  environmental,  machine
tool and  computer  industries.  Because the  Company's  consulting  business is
project driven, rather than oriented toward on-going consultation, the Company's
major clients vary from year to year. In addition,  the successful completion of
a single  or a few large  projects  typically  accounts  for a  majority  of the
Company's revenues.


<PAGE>


International

         The political  situation in Russia,  where the Company has focused much
of its effort, has in recent years been in constant transition. Since the advent
of  the  Yeltsin   government  in  December  1991,   Russia  has  experienced  a
proliferation  of political  parties,  an increase of nationalist  sentiment,  a
fragmentation of its economic and political institutions and a dramatic increase
in crime.  The  viability of the Russian  government  has been tested by various
political factions gaining strength and two unsuccessful coup d'etats.  In 1996,
Presidential elections resulted in Yeltsin's  re-election;  however, his ongoing
health problems contribute to political unease.

         Foreign  firms'  operations  in this  region may be subject to numerous
other risks which are not present in domestic  operations,  including  political
strife, the possibility of expropriation,  inadequate  distribution  facilities,
telecommunications  deficiencies,   restrictions  on  royalties,  dividends  and
currency remittances,  inflation,  fluctuations of foreign currencies,  high and
unpredictable  levels of taxation,  requirements for governmental  approvals for
new ventures and local  participation in operations.  Such problems could have a
material  adverse  effect on the  Company  by  affecting  the  Company's  direct
operations  abroad and by  discouraging  trade and  investment  by other western
businesses to whom the Company provides services.

Employees

         As a result of the  Company's  decision to sell  generic  drugs  solely
through Akorta,  there has been a reduction of employees in both the Washington,
D.C.  office and the Moscow  office.  As of March 1, 1998,  the  Company had six
full-time employees and two part-time employees. Several officers of the Company
are also  employed by GP  Strategies,  a principal  stockholder  of the Company.
Martin M.  Pollak,  the  Company's  President,  Chief  Executive  Officer  and a
director,  is  Executive  Vice  President,   Treasurer  and  a  director  of  GP
Strategies,  and will devote approximately one-half of his time to his duties at
GP Strategies; Jerome I. Feldman, Chairman of the Board of, and a consultant to,
the  Company,  is  President,  Chief  Executive  Officer  and a  director  of GP
Strategies;  and Scott N. Greenberg,  Chief Financial Officer, is Vice President
and Chief Financial Officer and a director of GP Strategies. Messrs. Feldman and
Greenberg  will devote a portion of their time to the  business of the  Company,
for which GP Strategies will charge a management fee. See "Certain Relationships
and Related  Transactions  - Certain  Employment  Matters and  Management".  The
Company   believes  that  its  relations   with  its  employees  are  good.  See
"Management."

(d) Financial Information about Foreign and Domestic Operations and Export
Sales.

         In 1997,  export  sales  represented  approximately  $1,123,000  of the
Company's revenue.


<PAGE>


Item 2. Properties

         The  following  sets forth  information  with  respect to the  material
physical properties owned or leased by the Company and its subsidiaries.

         The Company maintains offices in Washington, D.C., New York, Prague and
Moscow.  In 1997,  the Company  reduced its office space  requirements  and rent
expenditures in Washington,  Prague and Moscow.  The annual rent for such office
spaces will be  approximately  $22,000 in 1998.  The  Company's  New York office
space is provided to it by GP  Strategies  pursuant to the  Management  Services
Agreement.  See "Certain  Relationships  and Related  Transactions  - Management
Services  Agreement." The Company believes that its facilities are sufficient to
meet its needs for the foreseeable future.

Item 3. Legal Proceedings

         There are currently no material legal proceedings  pending to which the
Company is a party or to which any of its property is subject.

Item 4. Submission of Matters to a Vote of Security Holders

         No matters  were  submitted  to a vote of security  holders  during the
fourth quarter of the fiscal year covered by this report.


<PAGE>


                                     Part II

Item 5. Market for the Registrant's Common Equity and Related
        Stockholder Matters

         The  following  table  presents  the high and low prices for the Common
Stock for 1997 and 1996. The Company's  Common Stock,  $.01 par value, is quoted
on the OTC Bulletin Board, which is operated by the NASDAQ Stock Market.

                      Quarter                  High                     Low

1997                  First                    $0.31                    $0.13

                      Second                   $0.28                    $0.16

                      Third                    $0.22                    $0.09

                      Fourth                   $0.17                    $0.08

1996                  First                    $0.63                    $0.31

                      Second                   $0.50                    $0.25

                      Third                    $0.59                    $0.28

                      Fourth                   $0.56                    $0.25

----------

         The number of shareholders of record of the Common Stock as of March 2,
1998 was 4,699.  On March 2, 1998,  the  average  of the  closing  bid and asked
prices on the OTC Bulletin Board was $0.10 The Company has not declared any cash
dividends  during or since its two most recent fiscal years.  The current policy
of the Company's  Board of Directors is to retain  earnings,  if any, to finance
the operation of the Company's  business.  The payment of cash  dividends on the
Common  Stock in the future will  depend on the  Company's  earnings,  financial
condition  and  capital  needs  and on other  factors  deemed  pertinent  by the
Company's Board of Directors.




<PAGE>


                      AMERICAN DRUG COMPANY AND SUBSIDIARY

Item 6.  Selected Financial Data

                      SELECTED CONSOLIDATED FINANCIAL DATA

                    (in thousands, except per share amounts)



                                                  Years Ended December 31,

                                     1997     1996     1995     1994      1993
                                     ----     ----     ----     ----      ----


Statement of Operations Data:

Revenue                            $2,047   $1,104    $ 529     $ 799     $ 752
Cost of goods sold                    936      496      155       456        -
General and administrative
 expenses                           1,385    1,674    1,690     1,355       838
Total expenses                      2,904    2,602    2,133     2,101       958
Net loss                             (857)  (1,498)  (1,604)   (1,302)     (206)
Basic and diluted loss per share    (.07)    (.12)    (.12)      (.10)     (.02)
Dividends                            -        -        -           -        -

                                              Years Ended December 31,

                                     1997     1996     1995     1994     1993
                                     ----     ----     ----     ----     ----


Balance Sheet Data:

Current assets                     $  514  $ 1,018   $  550     $  70     $ 474
Current liabilities                   199      152      356        73       464
Non current liabilities             4,933    4,739    2,633       955
Working capital (deficiency)          315      866      194        (3)       10
Total assets                          552    1,088      602       161       512
Total stockholders'
   (deficiency) equity             (4,580)  (3,803)  (2,387)     (867)       48


<PAGE>


Item 7.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations

                              Results of Operations
Overview

         The Company commenced  operations in January 1990 as NPD Trading (USA),
Inc., which is now its wholly-owned subsidiary. Since its inception, the Company
has focused on assisting  western business to develop trade,  manufacturing  and
investment  opportunities  in Russia,  the Czech and Slovak  Republics  and to a
lesser extent,  other  countries of the CIS. In late 1993, the Company began the
implementation of its plan for the export of American-made  generic prescription
drugs and  over-the-counter  healthcare products in both Russia and the CIS. The
Company received certain  regulatory  approvals in 1994, 1995 and 1996 to market
its products.

         Despite some initial success,  sales of the Company's  generic products
declined  significantly in 1997. The Company's  inability to maintain and expand
sales may be attributed,  in part, to deficiencies  in the Russian  distribution
system.   Additionally,   the  Company  did  not  compete   effectively  against
international  manufacturers  of brand name products,  which were able to invest
large sums into  marketing  and  distribution  in the  expectation  of long term
rewards.

         At the end of 1997, the Company made the decision to concentrate on the
marketing and sales of medical equipment and related products,  such as hospital
furniture   and   laboratory   supplies   and  to  withdraw   from  the  generic
pharmaceutical and over-the-counter (OTC) healthcare product business because of
significantly  declining sales of generic products.  Sales activity with respect
to generic drugs will be undertaken  solely through the Russian  company Akorta.
The Company  established a relationship  with Akorta to provide  support for the
importation, clearance and sales of its products. Akorta has the legal authority
to sell products for Russian rubles and transfer those funds, in dollars, to the
Company in the United states.  Akorta is a private company owned by employees of
the  Company's  Moscow  office.  In the  short-term,  the Company  will sell its
existing  inventory of generic products in Moscow warehouses  through Akorta and
other third  parties.  No  additional  products  will be purchased in the United
States.

Liquidity and Capital Resources

         At December 31, 1997, the Company had cash of $225,000 and had borrowed
$2,500,000  pursuant to its $2,500,000  loan  agreement from GP Strategies  (See
Note 12 to the Consolidated Financial  Statements).  These proceeds were used as
part of the Company's working capital. Such borrowings will bear interest at the
prime rate, with principal and accrued interest  becoming due on August 5, 1999.
In addition,  after the Company had borrowed the full $2,500,000  under the loan
agreement during the first quarter of 1996, GP Strategies  continued to fund the
operating needs of the Company until July 1996.

         As of December 31, 1997,  the Company had borrowed  $3,933,000  from GP
Strategies.  The  indebtedness  was  comprised of (i)  $2,500,000  pursuant to a
$2,500,000  loan  agreement  with GP  Strategies  (see  Note 12 to  Consolidated
Financial Statements),  (ii) cash advances from GP Strategies totaling $682,000,
and (iii) accrued  interest  totaling  $751,000 at the prime rate. In July 1996,
the Company issued 7% convertible notes in the principal amount of $1,000,000 in
a private offering; the net proceeds to the Company were $950,000 (See Note 6 to
the consolidated financial statements).

         At December  31,  1997,  the  Company's  working  capital  decreased to
$315,000  from  $866,000 as of December 31,  1996,  primarily as a result of the
Company's  operating  loss. At December 31, 1997,  the Company had no additional
borrowing capacity available under the GP Strategies Loan Agreement.

         Historically,  the  Company's  revenues,  prior to 1994,  were  derived
primarily  from the  consulting  fees and  commissions  of its  subsidiary,  NPD
Trading,  which had been earned  principally  on a  contingency  fee basis.  The
contingency  fee payment  structure  has affected the  Company's  liquidity  and
results of operations  because the Company became  entitled to payment only upon
successful completion of a business venture.

         The Company  believes it can satisfy its working  capital needs through
its operating activities, as a result of reductions to their level of operations
and their  renewed  focus on  consulting  activities  and the  sales of  medical
equipment. There is no assurance, however, that the Company will have sufficient
working capital to support operations. In this event, the Company will be forced
to further curtail its operations or seek alternate sources of financing.

         The   Company   does  not   manufacture,   and   does  not   anticipate
manufacturing,  any of its products. As a consequence, the Company has not made,
and does not anticipate making, any major capital expenditures.

1997 Compared to 1996

Revenues.  In  1997,  the  Company  had  revenues  of  $2,047,000,  compared  to
$1,104,000 in 1996. The increase in revenues from 1997 to 1996 was primarily due
to increased consulting revenues, of primarily $840,000 in the form of a success
fee related to a project with ICF Kaiser  International in the Czech Republic as
well as increased sales of medical equipment,  partially offset by reduced sales
of generic drugs in the Commonwealth of Independent States.

General and  Administrative  Expenses.  The Company's general and administrative
expenses  decreased by $289,000 in 1997 to $1,385,000  from  $1,674,000 in 1996.
The decrease in general and administrative expenses in 1997 was primarily due to
reduced  consulting,  marketing expense and facility costs,  partially offset by
costs associated with consulting projects.

Net Loss. The Company's net loss decreased to $857,000 for 1997 from  $1,498,000
incurred for 1996 due to increased  consulting  fees and  decreased  general and
administrative expenses, partially offset by increased interest expenses.


<PAGE>


1996 Compared to 1995

Revenues.  In 1996,  the Company had revenues of  $1,104,000,  a net increase of
$575,000  over 1995.  This  revenue  consisted  of  $842,000 of sales of medical
equipment  and  generic  drugs in the  Commonwealth  of  Independent  States and
$262,000  of  consulting  fees in 1996 as compared  to  $342,000  and  $187,000,
respectively   in  1995.  The  increased   consulting   revenues  are  primarily
attributable  to a contract  between  ICF Kaiser,  Inc.  and the  Company's  NPD
Trading, Inc. subsidiary.

General and Administrative Expenses. General and Administrative expenses consist
primarily of office rent, salaries, travel and related costs and legal expenses.
Direct  costs  relating  to  consulting  revenues  are  included  in general and
administrative  expenses. The general and administrative expenses decreased from
$1,690,000 in 1995 to $1,674,000 in 1996 or a decrease of $16,000. This decrease
was primarily due to reduced marketing expenses and facility costs.

Net loss. The Company's net loss decreased from $1,604,000 in 1995 to $1,498,000
in 1996 as a result of increased  revenues generated and gross margin earned, as
well as reduced general and administrative expenses, offset in part by increased
interest expense, due to increased levels of long-term debt.

Recent tax and accounting developments

         In February  1997,  the  Financial  Accounting  Standards  Board issued
Statement of  Financial  Accounting  Standards  (SFAS)) No. 128,  "Earnings  per
Share" which  established  standards for computing and  presenting  earnings per
share (EPS). The Statement  simplifies the standards for computing EPS, replaces
the  presentation  of primary EPS with a presentation  of basic EPS and requires
dual  presentation of basic and diluted EPS on the face of the income statement.
This Statement was effective for financial  statements issued for periods ending
after December 15, 1997 and required  restatement of all  prior-period  EPS data
presented.  The  adoption  of SFAS No.  128 did not have a  material  impact  on
previously reported EPS data.

         The Financial  Accounting  standards Board issued Accounting  Standards
(SFAS 130),  "Reporting  Comprehensive  Income",  in June 1997 which  requires a
statement of comprehensive income to be included in the financial statements for
fiscal years  beginning  after  December 15, 1997.  The Company does not believe
that this statement will have an impact on the 1998 financial statements.

         In addition,  in June of 1997,  the FASB issued SFAS 131,  "Disclosures
About  Segments of an  Enterprise  and Related  Information".  SFAS 131 requires
disclosure of certain  information  about operating  segments and about products
and  services,  geographic  areas in which a company  operates,  and their major
customers. The Company is presently in the process of evaluating the effect that
this  new  standard  will  have  on  disclosures  in  the  Company's   financial
statements.


<PAGE>


         The Company is aware of the issues associated with the programming code
in existing computer systems as the millennium (year 2000) approaches. The "year
2000" problem is pervasive  and complex as virtually  every  computer  operation
will be affected in some way by the  rollover of the two digit year value to 00.
The issue is whether  computer  systems will properly  recognize  date sensitive
information  when  the  year  changes  to  2000.  Systems  that do not  properly
recognize such  information  could generate  erroneous data or cause a system to
fail.  The Company is  currently  evaluating  its  exposure  to this issue,  but
believes it does not have  significant  exposure due to its limited  reliance on
information  technology  systems.  However,  there can be no assurance  that the
systems of other  companies  on which the  Company's  systems  rely also will be
timely  converted or that any such failure to convert by another  company  would
not have an adverse effect on the Company's systems.

Forward-Looking   Statements.   This  report  contains  certain  forward-looking
statements  reflecting  management's current views with respect to future events
and  financial  performance.  These  forward-looking  statements  are subject to
certain  risks and  uncertainties  that  could  cause  actual  results to differ
materially  from those in the  forward-looking  statements,  including,  but not
limited to the Company's ability to reverse its history of operating losses.

Inflation

         Inflation is not expected to have a significant impact on the Company's
business.


<PAGE>



Item 8.  Financial Statements and Supplementary Data


                                    INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                          Page

Independent Auditors' Report                                              13

Financial Statements:

         Consolidated Balance Sheets - December 31, 1997 and
           1996                                                           14

         Consolidated Statements of Operations - Years ended
           December 31, 1997, 1996 and 1995                               16

         Consolidated Statements of Changes in Stockholders'
           Equity (Deficiency) - Years ended December 31,
           1997, 1996 and 1995                                            17

         Consolidated Statements of Cash Flows - Years ended
           December 31, 1997, 1996 and 1995                               18

         Notes to Consolidated Financial Statements                       19




<PAGE>


                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
American Drug Company:


We have audited the  consolidated  balance  sheets of American  Drug Company and
subsidiary  as of  December  31,  1997 and 1996,  and the  related  consolidated
statements of operations,  changes in stockholders' equity (deficiency) and cash
flows for each of the years in the  three-year  period ended  December 31, 1997.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
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 consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position of American  Drug
Company and  subsidiary at December 31, 1997 and 1996,  and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended  December 31, 1997,  in  conformity  with  generally  accepted  accounting
principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 3 to the
consolidated  financial  statements,  the Company has suffered  recurring losses
from  operations and has an  accumulated  deficit that raise  substantial  doubt
about its ability to continue as a going concern.  Management's  plans in regard
to these  matters are also  described  in Note 3 to the  consolidated  financial
statements. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.


                                                   KPMG Peat Marwick LLP


New York, New York
March 27, 1998


<PAGE>


                      AMERICAN DRUG COMPANY AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

             (in thousands, except shares and per share information)


                                                     December 31,   December 31,
                                                        1997            1996
                 ASSETS

Current assets

Cash                                                 $   225         $   586
Accounts receivable, trade, less allowance
 for doubtful accounts of $90 and $60
 in 1997 and 1996                                        139              84
Inventory                                                149             326
Prepaid expenses and other current assets                  1              22
                                                   ---------        --------

Total current assets                                     514           1,018
                                                     -------          ------

Machinery and equipment, at cost                         113             113
Less accumulated depreciation                           (113)           (103)
                                                     -------         -------
                                                                          10

Organization costs
 (net of accumulated amortization
 of $50 and $37 in 1997 and 1996)                                         13

Deferred finance costs
 (net of accumulated amortization
 of $14 and $4 in 1997 and 1996)                          36              46

Other assets                                               2               1
                                                     -------         -------
                                                     $   552         $ 1,088
                                                     =======         =======






        See accompanying notes to the consolidated financial statements.


<PAGE>





                      AMERICAN DRUG COMPANY AND SUBSIDIARY

                     CONSOLIDATED BALANCE SHEETS (Continued)

             (in thousands, except shares and per share information)


                                              December 31,          December 31,
                                                 1997                   1996


LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current liabilities

Customers' deposits                                   8                $     28
Accounts payable and accrued expenses               191                     124
                                              ---------              ----------

Total current liabilities                           199                     152
                                              ---------                --------

7% convertible notes                              1,000                   1,000

Long-term debt to GP Strategies                   3,933                   3,739

Stockholders' deficiency

Common stock, authorized 30,000,000 shares,
 par value $.01 per share
 13,020,155 shares issued and outstanding           130                     130
Capital in excess of par value                    1,762                   1,682
Deficit                                          (6,472)                 (5,615)
                                                -------                 -------

Total stockholders' deficiency                   (4,580)                 (3,803)
                                               --------                --------
                                               $    552               $   1,088
                                               ========               =========






        See accompanying notes to the consolidated financial statements.



<PAGE>


                      AMERICAN DRUG COMPANY AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                  (in thousands, except per share information)




                                                      Year Ended December 31,

                                               1997        1996         1995
                                              -------     -------    -------
Revenues
  Sales                                      $   1,123    $    842     $   342
  Consulting fees and commissions
   (including $65, $25 and $45 for 1997,
   1996 and 1995 from an affiliate)                912         262         187
  Investment income                                 12
                                             ---------

Total revenues                                   2,047       1,104         529
                                               -------     -------      ------

Expenses
  Cost of goods sold                               936         496         155
  General and administrative expenses            1,385       1,674       1,690
  Management fee to GP Strategies                  120         120         120
  Interest expense                                 463         312         168
                                             ---------     -------     -------
  Total expenses                                 2,904       2,602       2,133
                                              --------      ------      ------

Net loss                                       $  (857)    $(1,498)    $(1,604)
                                               =======     =======     =======

Basic and diluted loss per share              $  (.07)     $  (.12)    $  (.12)
                                              =======      =======     =======
  Weighted average number of
   shares outstanding                           13,020      13,020      13,020
                                               =======     =======     =======





        See accompanying notes to the consolidated financial statements.


<PAGE>





                      AMERICAN DRUG COMPANY AND SUBSIDIARY

               CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
<TABLE>

                               EQUITY (DEFICIENCY)
                  Years Ended December 31, 1997, 1996 and 1995
                     (in thousands, except number of shares)

<CAPTION>
                                               Shares of                   Capital in                                   Total
                                            Common Stock        Common     Excess of                  Deferred       Stockholders'
                                             Outstanding        Stock      Par Value      Deficit     Compensation     Deficiency

<S>                                               <C>             <C>           <C>         <C>                <C>             <C>

Balance at December 31, 1994                  13,019,601          $130        $1,682      $(2,513)           $(166)       $  (867)
----------------------------------------------------------------------------------------------------------------------------------
Net loss                                                                                   (1,604)                         (1,604)
Exercise of warrants                                 554
Amortization of deferred compensation                                                                           84             84
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995                  13,020,155           130         1,682       (4,117)             (82)        (2,387)
-----------------------------------------------------------------------------------------------------------------------------------
Net loss                                                                                   (1,498)                         (1,498)
Amortization of deferred compensation                                                                           82             82
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996                  13,020,155           130         1,682       (5,615)                         (3,803)
------------------------------------------------------------------------------------------------------------------------------------
Net loss                                                                                     (857)                           (857)
------------------------------------------------------------------------------------------------------------------------------------
Deferred compensation                                                             80                                           80
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997                  13,020,155          $130        $1,762      $(6,472)           $            $(4,580)
------------------------------------------------------------------------------------------------------------------------------------

        See accompanying notes to the consolidated financial statements.

</TABLE>

<PAGE>







                      AMERICAN DRUG COMPANY AND SUBSIDIARY
<TABLE>

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<CAPTION>

                                                             Years Ended December 31,
                                                           1997          1996          1995

Cash flows used in operations:
<S>                                                       <C>         <C>            <C>
Net loss                                                  $  (857)    $(1,498)       $(1,604)
Adjustments to reconcile net loss
  to net cash used in operating activities:
Depreciation and amortization                                  33          37             42
Deferred compensation                                          80          82             84

Changes in other operating items:
Accounts receivable                                           (55)         20           (104)
Inventory                                                     177           3           (329)
Prepaid expenses and other assets                              21          29            (39)
Customers' deposits                                           (20)       (208)           236
Accounts payable, accrued expenses
  and accrued interest                                        358          281           230
                                                        ---------   ----------    ----------

Net cash used in operations                                  (263)     (1,254)        (1,484)
                                                         --------     -------        -------

Cash flows from financing activities:
Net proceeds from issuance of 7% convertible notes                        950
Loans from GP Strategies                                                  829          1,495
Repayment of loans from GP Strategies                         (97)
                                                          --------
Net cash (used for) provided by financing activities          (97)      1,779          1,495
                                                          -------     -------         ------

Cash flows from investing activities:
Additions to machinery and equipment                                       (5)            (5)
Increase in other assets                                       (1)
                                                       ----------
Net cash used in investing activities                          (1)         (5)            (5)
                                                       ----------   ---------       --------

Net (decrease) increase in cash                              (361)        520              6
Cash at beginning of period                                   586          66             60
                                                        ---------     -------        -------
Cash at end of period                                     $   225    $    586        $    66
                                                          =======    =========       =======

</TABLE>



        See accompanying notes to the consolidated financial statements.


<PAGE>


                      AMERICAN DRUG COMPANY AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


1.       Organization and business

         (a)      Business

                  American Drug Company (the  "Company") a 54% owned  subsidiary
                  of  GP  Strategies  Corporation,  ("GP  Strategies")  formerly
                  National Patent  Development  Corporation,  performs marketing
                  and sales activities for American generic  pharmaceutical  and
                  medical products in Russia and the Commonwealth of Independent
                  States (the "CIS"). NPD Trading (USA), Inc. ("NPD Trading"), a
                  wholly-owned  subsidiary of the Company,  provides  consulting
                  services to Western  businesses in Russia and Eastern  Europe.
                  NPD Trading develops and assists Western businesses to develop
                  investment, manufacturing and trade opportunities and business
                  relationships in Russia,  the Czech and Slovak Republics,  and
                  other countries of Eastern Europe.

                  The  Company's  activities  have been  aimed at the  export of
                  American-made generic  pharmaceutical  (prescription drugs and
                  over-the-counter  personal  care  products)  and other medical
                  products  and  equipment  to  Russia  and the CIS.  Among  the
                  products  currently  being sold by the Company are toothpaste,
                  sanitary napkins, antibiotic ointments, vitamins, bandages and
                  medical equipment.


                  At  the  end  of  1997,  the  Company  made  the  decision  to
                  concentrate  on the marketing  and sales of medical  equipment
                  and  related   products,   such  as  hospital   furniture  and
                  laboratory   supplies   and  to  withdraw   from  the  generic
                  pharmaceutical and  over-the-counter  (OTC) healthcare product
                  business because of  significantly  declining sales of generic
                  products. Sales activity with respect to generic drugs will be
                  undertaken  solely  through the Russian  company ZAO  (Akorta)
                  (See Note 7).



<PAGE>


                      AMERICAN DRUG COMPANY AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

1.       Organization and business (Continued)

         (b)      Concentrations of credit risk

                  Financial  instruments that potentially subject the Company to
                  significant  concentrations of credit risk consist principally
                  of cash  investments  and  accounts  receivable.  The  Company
                  places  its cash and cash  equivalents  with  major  banks and
                  financial  institutions,   and  therefore  limits  its  credit
                  exposure.   As  of  December   31,   1997,   the  Company  had
                  uncollateralized    receivables    due   from   three   retail
                  distributors totaling $74,000,  which represent  approximately
                  32% of the Company's trade accounts receivable balance. Credit
                  risk is also  manifested in the fact that the Company's  sales
                  are  concentrated  in  Russia  and  the  former  Eastern  bloc
                  countries,  and are  concentrated  in the generic  medical and
                  health care  industries.  Substantially  all of the assets and
                  revenues are derived from foreign operations.

         The  additions,  charges to, and balance of the  allowance for doubtful
accounts at December 31, 1997, 1996 and 1995 is as follows (in thousands):

                                                   Additions
                                       Balance at  Charged to            Balanc
                                        Beginning    Costs &             at End
                                         of Year    Expenses  Deductions of Year
Year ended December 31, 1997
  Allowance for doubtful accounts (a)        $60         $30     $        $90
-----------------------------------------------------------------------------
Year ended December 31, 1996
  Allowance for doubtful accounts (a)        $20         $40     $        $60
-----------------------------------------------------------------------------
Year ended December 31, 1995
  Allowance for doubtful accounts (a)                    $20     $        $20
-----------------------------------------------------------------------------

(a) Deducted from related asset on Balance Sheet.

2.       Summary of significant accounting policies

         (a)      Revenue recognition

                  Consulting  fees and  commission  revenue are  recorded by the
                  Company when all material terms and conditions of an agreement
                  have been met.  Direct costs  relating to consulting  revenues
                  are included in general and administrative  expenses. Sales of
                  equipment and other products are recorded when title passes.


<PAGE>



                      AMERICAN DRUG COMPANY AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

2.       Summary of significant accounting policies (Continued)

         (b)      Principles of consolidation

                  The consolidated  financial statements include the accounts of
                  the  Company and its  wholly-owned  subsidiary,  NPD  Trading.
                  Investments in 50%-owned  affiliates in which the Company does
                  not have  control,  including  International  Anco  Corp.  and
                  General  Approach  Corporation,  which have had no significant
                  activities to date, are accounted for on an equity basis.  All
                  significant  intercompany  balances and transactions have been
                  eliminated in consolidation.

         (c)      Inventories

                  Inventories  are  valued  at the  lower  of  cost  or  market,
                  principally  using the first-in,  first-out (FIFO) method.  At
                  December 31, 1997 and 1996, the Company had a reserve for slow
                  moving inventory of $170,000 and $70,000, respectively.

         (d)      Machinery and equipment

                  Machinery and equipment are carried at cost.  Depreciation  is
                  computed  using the  straight-line  method.  When  assets  are
                  retired  or  otherwise  disposed  of,  the  cost  and  related
                  accumulated  depreciation  are removed from the accounts,  and
                  any  resulting  gain or loss is  reflected  in income  for the
                  period.  The cost of  maintenance  and  repairs  is charged to
                  income  as   incurred,   whereas   significant   renewals  and
                  betterments are capitalized.

         (e)      Organization and deferred finance costs

                  The Company  capitalized costs relating to the organization of
                  the Company which are being  amortized  over a period of three
                  years. The Company also  capitalized  costs incurred to obtain
                  long-term  debt  financing.  Such  costs  are  amortized  on a
                  straight line basis over the term of the related debt and such
                  amortization   is  classified  as  interest   expense  in  the
                  Consolidated Statements of Operations.



<PAGE>


                      AMERICAN DRUG COMPANY AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

2.       Summary of significant accounting policies (Continued)

         (f)      Income taxes

                  Income taxes are provided for based on the asset and liability
                  method  of  accounting  pursuant  to  Statement  of  Financial
                  Accounting  Standards No. 109,  "Accounting  for Income Taxes"
                  ("SFAS  109").   Under  SFAS  109,  deferred  tax  assets  and
                  liabilities  are  recognized  for  the  estimated  future  tax
                  consequences attributable to differences between the financial
                  statement  carrying amounts of existing assets and liabilities
                  and their  respective  tax  bases.  Deferred  tax  assets  and
                  liabilities are measured using enacted tax rates in effect for
                  the year in which those temporary  differences are expected to
                  be  recovered  or  settled.  Under  SFAS  109,  the  effect on
                  deferred tax assets and  liabilities  of a change in tax rates
                  is  recognized  in  income in the  period  that  includes  the
                  enactment date.

         (g)      Statement of cash flows

                  For  purposes  of the  statement  of cash  flows,  the Company
                  considers all liquid  investments with original  maturities of
                  three months or less to be cash equivalents.

         (h)      Foreign currency transactions

                  The Company conducts its business primarily in U.S. dollars.

         (i)      Use of estimates

                  The  preparation  of financial  statements in conformity  with
                  generally accepted  accounting  principles requires management
                  to make  estimates  and  assumptions  that affect the reported
                  amounts of assets and liabilities 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 these
                  estimates.

         (j)      Financial instruments

                  The carrying amounts of financial  instruments including cash,
                  trade  accounts   receivable   and  trade   accounts   payable
                  approximated fair value as of December 31, 1997 because of the
                  relatively short maturity of these  instruments.  The carrying
                  amount of long-term  debt to GP Strategies  approximated  fair
                  value  because   interest  is  charged  at  market  rates.  In
                  addition,  the carrying value of the 7% Convertible Notes (See
                  Note 6)  approximated  fair value  because  of the  conversion
                  feature.


<PAGE>


                      AMERICAN DRUG COMPANY AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

2.       Summary of significant accounting policies (Continued)

         (k)      Stock option plan

                  In 1996,  the Company  adopted  SFAS No. 123,  Accounting  for
                  Stock-Based Compensation,  which permits entities to recognize
                  as  expense  over the  vesting  period  the fair  value of all
                  stock-based awards on the date of grant.  Alternatively,  SFAS
                  No.  123  also  allows  entities  to  continue  to  apply  the
                  provisions  of APB  Opinion  No. 25 and  provide pro forma net
                  income  and pro  forma  earnings  per  share  disclosures  for
                  employee  stock option grants made in 1995 and future years as
                  if the  fair-value-based  method  defined  in SFAS No. 123 had
                  been applied. The Company has elected to continue to apply the
                  provisions  of APB  Opinion  No. 25 and  provide the pro forma
                  disclosure provisions of SFAS No. 123.

         (l)      Earnings per share

                  The Company  has adopted  Statement  of  Financial  Accounting
                  Standards  (SFAS)  No.  128,   "Earnings  per  Share",   which
                  established  standards for computing and  presenting  earnings
                  per share (EPS).  The statement  simplifies  the standards for
                  computing EPS, replaces the presentation of primary EPS with a
                  presentation of basic EPS and requires a dual  presentation of
                  basic and  diluted  EPS on the face of the  income  statement.
                  Basic EPS are based upon the weighted average number of common
                  shares  outstanding  during the period.  Diluted EPS are based
                  upon the weighted average number of common shares  outstanding
                  during the period  assuming the issuance of common  shares for
                  all dilutive potential common shares outstanding.  At December
                  31,  1997,  1996 and  1995 the  Company  did not  include  any
                  potential  common  stock in its  calculation  of diluted  EPS,
                  because all options and warrants are anti-dilutive.


<PAGE>


                      AMERICAN DRUG COMPANY AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

3.       Liquidity

         The Company has incurred  losses since  inception,  and at December 31,
         1997 had a capital deficiency of $4,580,000.  At December 31, 1997, the
         Company had $225,000 of cash. The Company's cash position is the result
         of issuance of 7% Convertible  Notes in July 1996,  which generated net
         proceeds of $950,000 (See Note 6), as well as $840,000 in the form of a
         success fee from ICF Kaiser International. As of December 31, 1997, the
         Company had borrowed  $3,933,000 from GP Strategies.  The  indebtedness
         was comprised of (i) $2,500,000 pursuant to a $2,500,000 loan agreement
         with GP Strategies (see Note 12), (ii) cash advances from GP Strategies
         totaling $682,000,  and (iii) accrued interest of $751,000 at the prime
         rate.  The Company  believes it can satisfy its working  capital  needs
         through its  operating  activities,  as a result of reductions to their
         level of operations  and their  renewed focus on consulting  activities
         and the sales of medical  equipment.  There is no  assurance,  however,
         that the  Company  will have  sufficient  working  capital  to  support
         operations.  In this  event,  the  Company  will be forced  to  further
         curtail its operations or seek alternate sources of financing.

4.       Pensions

         The  Company's  employees  are  included  in the GP  Strategies  401(K)
         pension  plan.  The Company pays its  allocable  share of costs as they
         accrue.  Such  costs,   including   administrative   expenses  and  the
         employer's  contributions,  amounted to approximately $13,000,  $13,000
         and $10,000  for the years  ended  December  31,  1997,  1996 and 1995,
         respectively.

5.       Machinery and equipment

         Major classes of machinery  and equipment  consist of the following (in
thousands):

                                                  December 31,        Estimated
                                              1997          1996    useful lives
                                              ----          ----    ------------

         Machinery and equipment            $     16      $    16       3 years
         Furniture and fixtures                   97           97       5 years
                                             -------      -------
                                                 113          113

         Less accumulated depreciation          (113)        (103)
                                            $             $    10
                                           =========      =======

         Depreciation  expense for the years ended  December 31, 1997,  1996 and
1995 was $10,000, $17,000 and $26,000, respectively.


<PAGE>


                      AMERICAN DRUG COMPANY AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

6.       Long-term debt

         In July 1996, the Company issued convertible notes (the "Notes") in the
         principal amount of $1,000,000 in a private offering (the  "Offering").
         The Company  received net proceeds of $950,000 from the  Offering.  The
         Notes  mature on June 30,  2001,  bear  interest  at the rate of 7% per
         annum,  and are convertible  into shares of common stock of the Company
         at a  conversion  price  of $.25  per  share.  In  connection  with the
         Offering,  GP  Strategies  issued  warrants to purchase an aggregate of
         82,306 shares of GP Strategies common stock,  exercisable at a price of
         $12.15 per share,  provided  that the  warrants  may only be  exercised
         utilizing  the Note.  In the event that the closing price of the common
         stock  of the  Company  is at least  $1.00  per  share  for at least 20
         consecutive  trading days,  the Notes shall be subject to redemption at
         the  election  of the  Company,  at a  redemption  price of 100% of the
         principal amount called for redemption, together with accrued interest.

         The  Company  and GP  Strategies  have agreed that (i) if the Notes are
         used to  exercise  the  warrants  prior to a default on the  Notes,  GP
         Strategies  will receive  from the Company,  in exchange for the Notes,
         shares of the  Company's  common  stock at a price  equal to 60% of its
         then current  market value,  and (ii) if the Notes are used to exercise
         the warrants after a default on the Notes,  GP Strategies  will receive
         from the Company,  in exchange  for the Notes  shares of the  Company's
         common stock at a price equal to 25% of its then current market value.

         On March 17,  1998,  the Company was informed by holders of $500,000 of
         the Company's convertible notes that they had converted $500,000 of its
         notes into 41,153 shares of GP Strategies common stock.

7.       Transactions with affiliates

         Transactions with GP Strategies and its subsidiaries,  other than loans
         and capital  contributions  received,  as  disclosed  elsewhere  in the
         financial  statements,  during the years ended December 31, 1997, 1996,
         and 1995 are summarized below (in thousands):

                                                          December 31,
                                              ---------------------------------
                                              1997          1996          1995
                                              ----          ----          ----

         Consulting fees from affiliate       $  65        $  25         $   45
                                              =====        =====         ======

         Transactions with GP Strategies
                  Management fees   $120       $120         $120
                  Interest expense  291         277          168


<PAGE>


                      AMERICAN DRUG COMPANY AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

7.       Transactions with affiliates (Continued)

         Since  inception,  the Company has been financed by GP  Strategies,  by
         means  of  capital  contributions,   short-term   non-interest  bearing
         advances and currently  long-term  interest  bearing  obligations.  The
         Company received $2,500,000 under its $2,500,000 loan agreement with GP
         Strategies,  plus additional funding totaling $682,000 through December
         31,  1997 (See Note  12).  Accrued  interest  on this loan  amounts  to
         $751,000 at December 31,  1997.  During the first  quarter of 1994,  GP
         Strategies issued options valued at $125,000 to the Company's Chairman,
         who is also the President of GP Strategies,  to acquire  250,000 shares
         of the Company's  common stock owned by GP  Strategies.  This issuance,
         which was in consideration  of services  rendered and to be rendered on
         behalf  of  the  Company,  has  been  recorded  by  the  Company  as  a
         contribution by GP Strategies to the Company's capital in excess of par
         value, and as deferred compensation.

         The  management  fee  charged to the  Company by GP  Strategies  covers
         services  provided by GP Strategies  such as  management,  legal,  tax,
         accounting, insurance and employee benefit administration services.

         The Company provided services to GSE Systems, Inc. (GSES), an affiliate
         of GP  Strategies,  in assisting that affiliate to obtain a contract to
         provide the Temelin Nuclear Power Plant and the St. Petersburg  Nuclear
         Power Plant with full scope simulators.  GSES is a successor to General
         Physics  International  Engineering and Simulation,  Inc. Revenues from
         this affiliate amounted to $65,000, $25,000 and $45,000,  respectively,
         for the years ended December 31, 1997, 1996, and 1995.

         In 1994 the Company  commenced paying $150,000 annually as compensation
         to an  officer  of GP  Strategies,  in  view  of  the  additional  time
         allocated by this officer to the Company.


<PAGE>


                      AMERICAN DRUG COMPANY AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

7.       Transactions with affiliates (Continued)

         As of January 1, 1994,  the Company and GP  Strategies  entered  into a
         three-year  Management  Services  Agreement  pursuant to which  certain
         direct and  indirect  services  will be  provided  to the Company by GP
         Strategies. The services to be provided by GP Strategies include legal,
         tax,   accounting,   insurance  and  employee  benefit   administration
         services.  The Company has agreed to pay GP Strategies a fee of $10,000
         per month during the first year of the agreement, and to negotiate with
         GP  Strategies a mutually  agreeable fee  thereafter.  The Agreement is
         automatically renewable for successive one-year terms unless one of the
         parties  notifies the other in writing at least six months prior to the
         end of the  initial  term of any renewal  thereof.  The  Agreement  was
         renewed for 1997 and 1998.

         During 1997,  certain  employees of the Company  established  a Russian
         company  named ZAO  (Akorta)  ("Akorta").  Subsequent  to year end such
         individuals  ceased to be  employees  of the  Company.  Sales to Akorta
         during 1997 were $63,000.  In addition,  Akorta operates a warehouse at
         which $122,000 of inventory is stored at December 31, 1997.

8.       Income taxes

         On August 5, 1994, GP Strategies  made a distribution  of the Company's
         common stock to  shareholders  of GP Strategies.  As a result,  on that
         date, the Company ceased to be included in GP Strategies'  consolidated
         Federal income tax return,  as its equity  interest in the Company fell
         below 80%. For periods  subsequent to August 5, 1994, the Company files
         its  own  consolidated   Federal  income  tax  return,   including  its
         wholly-owned subsidiary.

         The Company's tax net operating loss for the first eight months of 1994
         was  included  in the  consolidated  Federal  income  tax  return of GP
         Strategies,  as was the  Company's  loss for  1993.  The  policy  of GP
         Strategies  is to allocate a portion of the Federal tax  liability,  if
         any, of the consolidated group to the various subsidiaries.

         For the year ended  December 31, 1993 and through the  distribution  of
         shares in August 1994, the  consolidated  group was not in a tax paying
         position for Federal income tax purposes,  and  accordingly,  no income
         taxes were  allocated to the  Company.  Under SFAS No. 109, the Company
         would record  income taxes if it had earnings on a  stand-alone  basis,
         although  the  consolidated  group  was not in a tax  paying  position.
         Because  the  Company  and its  subsidiary  have had net  losses  since
         inception,  no Federal or state income taxes have been provided for any
         year.



<PAGE>


                      AMERICAN DRUG COMPANY AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

8.       Income taxes (Continued)

         Under SFAS No. 109, a valuation  allowance is provided  when it is more
         likely than not that some  portion of  deferred  tax assets will not be
         realized. The Company has determined,  based upon the Company's history
         of operating  losses,  that 100% valuation  reserves are required as of
         December 31, 1997 and 1996.

         As of  December  31,  1997 and  1996,  the  Company  had  approximately
         $1,700,000 and $1,417,000,  respectively, of deferred tax assets and no
         deferred  tax  liabilities.  The tax  effects  that  gave rise to these
         deferred  tax  assets  and  the  valuation  allowance  consist  of  the
         following (in thousands):


                                                   December 31,     December 31,
                                                      1997             1996
         Deferred tax assets

         Organization costs                       $       7         $       6
         Allowance for doubtful accounts                 34                23
         Net operating loss carryforwards             1,525             1,287
         Machinery and equipment                          9                 6
         Deferred compensation                          125                95
                                                     -------           -------
                                                      1,700             1,417

         Deferred tax liabilities
         Net deferred tax assets                      1,700             1,417

         Valuation allowance                         (1,700)           (1,417)
                                                    -------         ---------

         Net deferred tax assets after
          valuation allowance                      $                  $
                                                   ==========         ========

         The change in the valuation  allowance for the years ended December 31,
         1997 and  1996  amounted  to an  increase  of  $283,000  and  $557,000,
         respectively, primarily attributable to the net operating losses.


<PAGE>


                      AMERICAN DRUG COMPANY AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

8.       Income taxes (Continued)

         From  January 29, 1990  through  August 5, 1994,  the Company  reported
         approximately  $2,100,000  in net  operating  losses in GP  Strategies'
         consolidated  Federal  Income  Tax  Return.  As a  result  of the  loss
         allocation  rules  contained  in the  Federal  income tax  consolidated
         return  regulations,  approximately  $263,000  of  net  operating  loss
         carryforwards  expiring  between  2005 and 2008  are  allocable  to the
         Company  upon  ceasing  to be a member of GP  Strategies'  consolidated
         return  group.  As agreed  between GP  Strategies  and the Company,  GP
         Strategies  will  not  compensate  the  Company  for  any use by the GP
         Strategies Group of the net operating losses of the Company.

         For periods  subsequent  to August 5, 1994,  and through the year ended
         December  31,   1996,   the  Company  had  net   operating   losses  of
         approximately $3,124,000,  which expire in years 2009 through 2011. For
         the year ended  December 31, 1997, the Company had a net operating loss
         of approximately $626,000,  which expires in the year 2012. At December
         31, 1997,  the Company has total net operating  loss  carryforwards  of
         approximately  $4,013,000.  The loss  carryforwards  expire at  various
         dates from 2005 through 2012, as reflected above.

9.       Employment and consulting agreement

         (a)      Employment agreement

         As of January 1, 1994, the Company entered into an employment agreement
         with  its  President  and  Chief  Executive  Officer.  Pursuant  to the
         Employment Agreement, the officer will devote approximately one-half of
         his  time  to  serve  as the  Company's  Chief  Executive  Officer  and
         President.  The agreement has a three-year term with an option to renew
         for  successive  one-year  periods.  It provides  that the officer will
         receive,  in connection with services  rendered to the Company,  a base
         salary  in  the  amount  of  $150,000,  subject  to  adjustment  by the
         Compensation  Committee of the Board of  Directors.  In  addition,  the
         officer  received options to purchase an aggregate of 500,000 shares of
         Common Stock at an exercise price per share of $.50 under the Company's
         Stock Option Plan.

         Upon  termination by the Company other than "for cause,"  disability or
         retirement,  or by the  officer  "for  good  reason,"  the  officer  is
         entitled to receive as  severance  pay an amount equal to his full base
         salary at the rate then in effect, multiplied by the greater of (i) the
         number of years  remaining in the  employment  term, or (ii) three.  In
         addition,  the  officer  would  receive  an amount in cash equal to the
         aggregate  difference  between the  exercise  price of his  unexercised
         options  and the  closing  price  of the  Common  Stock  on the date of
         termination.


<PAGE>


                      AMERICAN DRUG COMPANY AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

9.       Employment and consulting agreement (Continued)

         (b)      Consulting agreement

         As of January 1, 1994, the Company entered into a consulting  agreement
         with its Chairman of the Board. Pursuant to the agreement, the Chairman
         will serve as a consultant  to the Company for a period of three years.
         In lieu of consulting fees or other  payments,  the Company granted the
         Chairman  options to purchase an aggregate of 250,000  shares of Common
         Stock at an exercise  price per share of $.50,  which  options  vest in
         equal installments over a three year period commencing August 5, 1994.

         These  options,  which are  non-transferable,  expire by their terms in
         January 2004 or on such  earlier  date as the  Chairman  shall cease to
         render services to the Company. In addition,  the Chairman,  who is the
         President of GP  Strategies,  has been  granted  options to purchase an
         additional 250,000 shares of Common Stock from GP Strategies,  pursuant
         to the GP  Strategies  American  Drug Company Stock Option Plan, on the
         same terms and subject to the same  conditions  as those granted to him
         by the Company.  The consulting  agreement may be renewed at the option
         of  the  Company  for  successive  one  year  periods.  The  consulting
         agreement  has been  renewed  for an  additional  one year term with no
         additional  compensation.  The  Company  has valued  these  services at
         $80,000 for the year ended  December  31,  1997 and has  recorded it as
         deferred compensation expense.

         The Company  believes the  estimated  fair value of the services of the
         Chairman for the initial three year period beginning January 1, 1994 to
         be approximately $250,000. The Company has estimated the intrinsic fair
         value of the options  granted to the  Chairman by the Company and by GP
         Strategies to be approximately $250,000 in the aggregate.  Such amount,
         which includes the $125,000 reflected as a capital contribution from GP
         Strategies (see Note 7), has been recorded as deferred compensation and
         as capital in excess of par value.  The deferred  compensation is being
         amortized   over  the  three  year  vesting   period  of  the  options.
         Amortization for the years ended December 31, 1996 and 1995 amounted to
         $82,000  and  $84,000,  respectively,  and is  included  in general and
         administrative   expenses.   The   unamortized   balance  of   deferred
         compensation was reflected as a deduction from stockholders' equity.

10.      Major customers and customers' deposits

         Several  customers  each  accounted  for more than 10% of the Company's
         revenues as follows:

         1997  Two   customers   accounted   for  41%  and  27  %  of  revenues,
         respectively.  1996 One customer accounted for 18% of revenue. 1995 Two
         customers accounted for 15% and 10% of revenues, respectively.


<PAGE>


                      AMERICAN DRUG COMPANY AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

10.      Major customers and customers' deposits (Continued)

         Of the aforementioned  customers,  GSES, an affiliate of GP Strategies,
         accounted for 3%, 2% and 9%, respectively, of revenue in 1997, 1996 and
         1995.

         Export  sales  represented  approximately   $1,123,000,   $842,000  and
         $342,000 of the Company's revenues in 1997, 1996 and 1995.

11.      Stock options and warrants

         (a)      Stock option plan

         On  January  1,  1994,  the  Company's  Board  of  Directors  and  sole
         stockholder  adopted the  American  Drug Company 1994 Stock Option Plan
         (the "Stock Option Plan"), which became effective August 5, 1994. Under
         the Stock Option Plan, a total of 2,000,000 shares of Common Stock have
         been reserved for issuance, subject to adjustment in the event of stock
         splits, stock dividends, recapitalizations,  reclassifications or other
         capital  adjustments.  Unless  designated as "incentive  stock options"
         intended  to qualify  under  Section 422 of the Code,  options  granted
         under the Stock  Option Plan are intended to be  nonqualified  options.
         Options may be granted to any  director,  officer or other key employee
         of the  Company  and  its  subsidiary,  and to  consultants  and  other
         individuals providing services to the Company.

         The  Compensation  Committee of the Board of Directors will  administer
         the Stock  Option  Plan and will  determine,  among other  things,  the
         persons  to be granted  options,  the number of shares to be subject to
         each option,  the exercise  price and vesting  schedule of each option,
         whether to  accelerate  the exercise date of the option for any reason,
         and whether to cause the Company to make loans which enable an optionee
         to pay the purchase price of any option. No options are transferable by
         the optionee other than by will.



<PAGE>


                      AMERICAN DRUG COMPANY AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

11.      Stock options and warrants (Continued)

         (a)      Stock option plan (Continued)

         The term of any option  granted  under the Stock  Option  Plan will not
         exceed ten years from the date of the grant of the option  and,  in the
         case of incentive  stock options  granted to a 10% or greater holder in
         the total  voting  stock of the  Company,  three years from the date of
         grant.  The exercise price of any option will not be less than the fair
         market  value of the Common  Stock on the date of grant or, in the case
         of incentive  stock options  granted to a 10% or greater  holder in the
         total voting stock, 110% of such fair market value.

         At December  31,  1997,  the per share  weighted-average  fair value of
         stock options  granted during 1996 was $.40, on the date of grant using
         the modified  Black  Scholes  option-pricing  model with the  following
         weighted-average  assumptions:  1996  -  expected  dividend  yield  0%,
         risk-free interest rate of 6.6%,  expected volatility of 105.6%, and an
         expected life of 5 years.  There were no stock options  granted  during
         the year ended December 31, 1997.

         The Company  applies APB Opinion No. 25 in accounting for its Plan and,
         accordingly,  no  compensation  cost has been  recognized for its stock
         options  in  the  financial  statements.  Had  the  Company  determined
         compensation  cost  based on the fair  value at the grant  date for its
         stock  options  under SFAS No. 123, the  Company's  net loss would have
         been increased to the pro forma amounts indicated below:

                                                      1997               1996
                                                      ----               ----

         Net loss              As reported           $(857)            $(1,498)
                               Pro forma              (869)             (1,510)

         Basic and diluted
          loss per share       As reported            (.07)               (.12)
                               Pro forma              (.07)               (.12)



<PAGE>


                      AMERICAN DRUG COMPANY AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

11.      Stock options and warrants (Continued)

         Pro forma net income  reflects only options  granted in 1997,  1996 and
         1995. Therefore,  the full impact of calculating  compensation cost for
         stock  options under SFAS No. 123 is not reflected in the pro forma net
         income amounts  presented above because  compensation cost is reflected
         over the options' vesting period of 5 years and  compensation  cost for
         options granted prior to January 1, 1995 is not considered.

         Stock option activity during the periods indicated is as follows:

                                                 Number of      Weighted-Average
                                                   Shares        Exercise Price

         Balance at December 31, 1994            1,620,000          $ .50

                  Granted
                  Exercised
                  Forfeited                        110,000            .50
                  Expired
         Balance at December 31, 1995            1,510,000            .50

                  Granted                           90,000            .50
                  Exercised
                  Forfeited
                  Expired
         Balance at December 31, 1996            1,600,000            .50

                  Granted
                  Exercised
                  Forfeited
                  Expired                           60,000            .50
                                               -------------       ------
         Balance at December 31, 1997            1,540,000            .50
                                               ===========         ======

         At  December  31,  1997 and 1996,  the  range of  exercise  prices  and
         weighted-average  remaining contractual life of outstanding options was
         $.50 and $.50 and 3 years and 4 years, respectively.

         At December 31, 1997, 1996 and 1995, the number of options  exercisable
         was  1,509,996,   1,539,999  and  1,006,652,   respectively,   and  the
         weighted-average  exercise  price of those  options was $.50,  $.50 and
         $.50, respectively.


<PAGE>


                      AMERICAN DRUG COMPANY AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

11.      Stock options and warrants (Continued)

         (b)      Warrants to purchase common stock

         In August 1994, GP Strategies  entered into a Transfer and Distribution
         Agreement  with the Company  whereby GP Strategies  transferred  to the
         Company (the  "Distribution")  immediately  prior to the closing of the
         Distribution,   all  of  its   interest  in  NPD  Trading  and  in  two
         newly-formed, 50% owned joint ventures in exchange for (i) the issuance
         by the Company of  6,990,900  shares of Common  Stock to GP  Strategies
         (ii) the issuance of 6,017,775 shares of Common Stock to be distributed
         to GP  Strategies  stockholders,  and (iii) the  issuance of  6,017,775
         warrants to be distributed to GP Strategies stockholders.  Each warrant
         was initially exercisable for a period of two years from August 5, 1994
         at an exercise  price per share of $1.00.  In August 1996, the Board of
         Directors  approved an extension of the Company's warrants until August
         5,  1998 and a  reduction  of the  exercise  price  to $.50 per  share,
         subject to adjustment in certain circumstances. The Distribution was at
         the rate of one share plus one warrant to purchase  one share of common
         stock for  every  four then  outstanding  shares of common  stock of GP
         Strategies.  Upon completion of the Distribution,  the Company became a
         separate  public  company from GP Strategies  and NPD Trading  became a
         wholly-owned subsidiary of the Company.

         In connection with the Distribution,  6,017,775 warrants were issued to
         shareholders of GP Strategies.  Since August 1994,  2,380 warrants were
         exercised.  At December 31, 1997,  there were 6,015,395 shares reserved
         for  issuance  to  permit  the  exercise  in  full  of all  outstanding
         warrants.

         The Company has the right to cancel the  warrants if the closing  price
         of the  Company's  common  stock as  quoted by the OTC  Bulletin  Board
         during any ten consecutive trading days shall equal or exceed $1.00 per
         share.

12.      Loans and advances from GP Strategies

         In  August  1994,  GP  Strategies  entered  into  a $2.5  million  loan
         agreement  with NPD Trading,  under which GP Strategies  would fund the
         loan  with  either  securities  or cash,  at its  option.  NPD  Trading
         purchased  GP  Strategies  common  stock from time to time by issuing a
         note to GP Strategies  (the "Note").  At December 31, 1997, the Company
         had  borrowed  the full  $2,500,000  under its loan  agreement  with GP
         Strategies and therefore had no remaining borrowing  availability under
         this agreement. During 1997, GP Strategies advanced additional funds to
         the  Company,  and the total  amount  due to GP  Strategies,  including
         accrued interest of $751,000,  totaled $3,933,000 at December 31, 1997.
         Such amount is due on August 5, 1999.


<PAGE>


                      AMERICAN DRUG COMPANY AND SUBSIDIARY

             Notes to Consolidated Financial Statements (Continued)

13.      Commitments and contingencies

         The Company has several noncancellable leases which cover real property
         and  machinery  and  equipment.  Such  leases  expire at various  dates
         through 1998 and, in some cases, contain options to extend their terms.

         Minimum rentals under long-term operating leases are as follows:

                                   Real          Machinery &
         (in thousands)        property            equipment         Total
         1998                       $22                   $2           $24

         During 1997, 1996 and 1995, the Company incurred $158,000, $164,000 and
$207,000, respectively, of rental expenses.



<PAGE>


Item 9.  Changes in and Disagreements with Accountants and
                  Financial Disclosure.

         None.

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

Management

Directors and Executive Officers

The following  table sets forth  certain  information  concerning  directors and
executive officers of the Company.

Name                            Age          Position

Martin M. Pollak                70           Chief Executive Officer,
                                             President and Director

Jerome I. Feldman               69           Chairman of the Board

Scott N. Greenberg              41           Chief Financial Officer

Donald J. Hasfurther            48           Vice President - Washington

Sergey Efuni, M.D., Ph. D.      37           Managing Director - Moscow

Edward Dunay                    71           Director

John D. Scanlan                 69           Director

Arthur T. Downey                59           Director


<PAGE>


Martin M. Pollak. Mr. Pollak serves as Chief Executive Officer,  President and a
director of the Company and has served as Executive  Vice  President,  Treasurer
and a director of GP Strategies, the company which he co-founded, since 1959. He
has been involved in business in Eastern Europe and the Soviet Union for over 30
years.  He has been a  director  of  Interferon  Sciences,  Inc.  since 1981 and
Chairman of the Board from 1981 to 1996;  a director of GTS Duratek,  Inc.  from
1983 to 1996; a director of General Physics  Corporation since 1987 and Chairman
of the Board since 1988; and Chairman of the Board of SGLG,  Inc. since 1991. He
has  complemented  his business  activities by chairing the U.S.  section of the
U.S.-Czech and Slovak  Economic  Council for the past eight years and has been a
trustee on the Board of Trustees of the Worcester  Foundation  for  Experimental
Biology and was a director of Brandon Systems Corporation from 1986 to 1996.

Jerome I.  Feldman.  Mr.  Feldman  serves  as  Chairman  of the Board of,  and a
consultant  to the  Company  and has  served as  President  and Chief  Executive
Officer of GP Strategies,  the company which he  co-founded,  since 1959. He has
been a director since 1981 and Chairman of the Executive Committee of Interferon
Sciences,  Inc. from 1981 to 1996; a director of GTS Duratek,  Inc. from 1981 to
1996; Chairman of the Executive Committee since 1988 and Chief Executive Officer
since 1994 and a  director  of  General  Physics  Corporation  since  1987;  and
Chairman of the Executive Committee and a director of SGLG, Inc. since 1991. Mr.
Feldman  also  serves as Trustee of the New  England  Colleges  Fund and of Bard
College.

Scott N. Greenberg. Mr. Greenberg has been the Company's Chief Financial Officer
since its inception.  He has been Vice President and Chief Financial  Officer of
GP Strategies  since 1989, a director since 1987 ; a director of General Physics
Corporation  since 1987; a director of SGLG,  Inc. since 1991; and a director of
Interferon Sciences, Inc. since 1996.

Donald J. Hasfurther. Mr. Hasfurther has served as Vice President of the Company
since 1990. Prior to joining the Company,  Mr. Hasfurther served as director for
East/West Trade at the U.S. Chamber of Commerce for 13 years,  during which time
he was Executive  Director for four  bilateral  economic  councils with Hungary,
Poland,  Romania  and  Czechoslovakia.  Prior to working at the U.S.  Chamber of
Commerce,  he served as an international  economist with the Bureau of East/West
Trade at the U.S. Department of Commerce.

Sergey Efuni.,  Ph.D. Dr. Efuni joined the Company in 1994. From 1992 to 1994 he
served as  Representative of Lederle  International  with  responsibilities  for
developing that company's sales network in Russia, Kazakahstan and Uzbekistan. A
medical doctor by training, Dr. Efuni has also provided consulting and marketing
assistance to Sanofi of France and  established  two Russian  trading  companies
dealing  with  pharmaceuticals  from 1991 to 1992.  Dr.  Efuni  served as Senior
Scientific  Researcher  at the  Institute of  Immunology  in Moscow from 1989 to
1992.

Edward  Dunay.  Mr. Dunay became  director of the Company in 1994.  In 1979,  he
formed Edward Dunay Associates,  Ltd., an investment  advisory firm, of which he
is still President. Mr. Dunay also served as President of the City Athletic Club
from 1991 to 1996.  From 1984 to 1992 he was  director of Hamilton  Savings Bank
and served as Vice Chairman of its Audit Committee. From 1974 to 1979, Mr. Dunay
served as President of Ladenberg, Thallmann & Co., members of the New York Stock
Exchange.

John D. Scanlan.  Ambassador  Scanlan  became a director of the Company in 1994.
His diplomatic  career of 35 years was  concentrated in Soviet and East European
affairs. He served in Moscow,  Warsaw, Poznan and Belgrade, was Deputy Assistant
Secretary of State with  responsibility  for the Soviet Union and Eastern Europe
from  1981 to 1982,  Ambassador-designate  to  Poland  from  1982 to  1985,  and
Ambassador  to  Yugoslavia  from  1985 to 1989.  Since  June  1991,  he has been
employed by ICN Pharmaceutical,  Inc. first as Vice President for Eastern Europe
and since April 1994 as a Senior  Consultant.  Ambassador Scanlan is a member of
the  Council on Ethnic  Accord and an advisory  board  member of the Central and
East European Law Initiative of the American Bar Association.

Arthur T. Downey.  Mr.  Downey  became a director of the Company in 1996.  He is
Vice  President  and Counsel of Baker Hughes  Incorporated,  a Houston  based $3
billion industrial equipment manufacturer,  and he manages the Washington office
of Baker  Hughes.  For fifteen  years prior to joining  Baker  Hughes,  he was a
partner in two large national firms, representing domestic and foreign companies
in the  international  trade and investment  area. Mr. Downey also served during
most of that time as Adjunct Professor at Georgetown University Law Center where
he taught  international  law and  business  transactions.  Mr.  Downey also had
governmental service prior to his corporate and law firm activity.  He served as
Deputy  Assistant  Secretary of Commerce for  East-West  Trade,  and also on the
White House National Security Council staff. He began his career with service at
the State Department (in Washington and Berlin).

         The Company's Board of Directors  contains three  independent  members.
The Board of Directors  held two meetings in 1997, at which all of the directors
attended at least 75% of the  meetings.  All members  hold office until the next
annual meeting of  stockholders  or until their  successors are duly elected and
qualified. Executive officers serve at the pleasure of the Board of Directors.

Committees of the Board of Directors

         The Compensation  Committee consists of Messrs. Pollak and Feldman. The
Compensation  Committee  reviews and recommends  remuneration  arrangements  for
executive   officers  and  for  members  of  the  Board  of  Directors,   adopts
compensation  plans in which  officers and directors are eligible to participate
and grants stock  options under the  Company's  Stock Option Plan.  During 1997,
Messrs.  Pollak  and  Feldman  participated  in  deliberations  of the  Board of
Directors concerning compensation of executive officers.

         The Executive Committee consisting of Messrs.  Pollak and Feldman meets
on call and has authority to act on most matters during intervals  between board
meetings.

         The Audit  Committee  reviews the internal  controls of the Company and
the objectivity of its financial  reporting.  It meets with appropriate  Company
financial personnel and the Company's  independent  certified public accountants
in connection  with these reviews.  This  committee  recommends to the Board the
appointment of the independent certified public accountants to serve as auditors
for the following  year in examining  the books and records of the Company.  The
Audit Committee  currently consists John D. Scanlan,  Edward Dunay and Arthur T.
Downey. Director's Compensation

         The Company pays each director who is not an employee of, or consultant
to,  the  Company a fee of $1,000  for each  meeting  of the Board of  Directors
attended,  and reimburses each such director for out-of-pocket expenses incurred
in attending such meetings.

Employment Agreement

         As of January 1, 1994, the Company entered into an employment agreement
with its President and Chief Executive  Officer,  Martin M. Pollak.  Pursuant to
the Employment Agreement,  Mr. Pollak will devote approximately  one-half of his
time to serve as the  Company's  Chief  Executive  Officer  and  President.  The
agreement had an initial three-year term, which was automatically renewed for an
additional  one-year.  It provides that Mr.  Pollak will receive,  in connection
with services rendered to the Company,  a base salary in the amount of $150,000,
subject to adjustment by the  Compensation  Committee of the Board of Directors.
In addition,  Mr. Pollak has options to purchase an aggregate of 500,000  shares
of Common  Stock at an  exercise  price per share of $.50,  under the  Company's
Stock Option Plan.  These options vest in equal  installments  over a three-year
period which commenced on August 5, 1994, and will expire in January 2004, or on
such earlier date as Mr.  Pollak  leaves the  employment  of the Company for any
reason.   They  are  intended  to  be   non-qualified   stock  options  and  are
non-transferable.

         Mr.  Pollak's  Employment  Agreement  provides that his employment will
terminate  upon his death,  physical or mental  disability  or  retirement,  and
permits the Company to terminate his employment  "for cause" (i.e.,  he fails to
perform required duties or engages in gross misconduct). In addition, Mr. Pollak
may  voluntarily  terminate his employment  "for good reason" which involves his
good faith determination that due to a "change in control" of the Company, he is
not able to effectively discharge his duties. A "change in control" includes (i)
the acquisition of beneficial  ownership of 30% or more of the Company's  voting
securities by any person other than Mr. Pollak or GP Strategies, or (ii) certain
changes in the composition of the Board of Directors of the Company.

         Upon  termination  by the Company "for cause," all  obligations  of the
Company under the Employment  Agreement  cease.  Upon termination by the Company
other than "for Cause,"  disability  or  retirement,  or by Mr. Pollak "for good
reason," Mr.  Pollak is entitled to receive as severance  pay an amount equal to
his full base  salary at the rate then in effect,  multiplied  by the greater of
(i) the number of years  remaining in the  employment  term,  or (ii) three.  In
addition,  Mr.  Pollak  would  receive an amount in cash equal to the  aggregate
difference between the exercise price of his unexercised options and the closing
price of the Common Stock on the date of termination.


<PAGE>


Consulting Agreements

        As of January 1, 1994, the Company  entered into a consulting  agreement
with its Chairman of the Board,  Jerome I. Feldman.  Pursuant to the  agreement,
Mr.  Feldman  will serve as a  consultant  to the  Company for a period of three
years. The Consulting Agreement was renewed by the Company for an additional one
year  term,  with no  additional  compensation  to be paid  to Mr.  Feldman.  In
connection  with  services  rendered  and to be rendered  by Mr.  Feldman to the
Company,  which the Company  values at  approximately  $250,000,  and in lieu of
consulting fees or other  payments,  Mr. Feldman was granted options to purchase
(i) an aggregate of 250,000  shares of Common  Stock under the  Company's  Stock
Option Plan at an exercise price per share of $.50,  which options vest in equal
installments over a three year period which commenced on August 5, 1994 and (ii)
an additional 250,000 shares of Common Stock from GP Strategies, pursuant to the
GP  Strategies  American  Drug Company  Stock Option Plan,  on the same terms as
those granted to him by the Company. All such options will expire by their terms
in January  2004 or on such earlier  date as Mr.  Feldman  shall cease to render
services to the Company. They are non-transferable by him. Mr.
Feldman's  consulting  agreement may be renewed at the option of the Company for
successive one year periods.


<PAGE>


Item 11. Executive Compensation

        The  following  table and notes sets forth  information  concerning  the
compensation paid or awarded to the Chief Executive Officer for 1997:


                           SUMMARY COMPENSATION TABLE

                                    Annual
                                 Compensation
                                                       Long Term      All Other
Name and Principal                 Salary   Bonus       Awards     Compensation
Position              Year           ($)     ($)       Options         ($)
--------------------------------------------------------------------------------
Martin M. Pollak      1997     322,613(1)    -0-         -0-         3,800(2)
President and Chief   1996     310,731(1)    -0-         -0-         3,500(2)
Executive Officer     1995     314,376(1)    -0-         -0-         3,500(2)

Donald Hasfurther     1997     108,976      15,000       -0-         3,102(3)
Vice President        1996      98,335       -0-         -0-         2,792(3)
                      1995      95,400       -0-         -0-         2,733(3)

(1) For 1995, 1996 and 1997,  $150,000,  or  approximately  50%, of Mr. Pollak's
compensation was paid by GP Strategies,  as a consequence of his service to both
companies. See "Management - Employment Agreement."

(2)  Constitutes  matching  contributions  made by GP Strategies and the Company
equally on behalf of Mr. Pollak  pursuant to GP Strategies'  401(k) Savings Plan
which became effective on March 1, 1992.

(3) Includes $2,180, $1,967 and $1,908 for 1997, 1996 and 1995, respectively, as
a matching  contribution  by the Company to the 401(k) Savings Plan,  $922, $825
and $825 for 1997,  1996 and 1995,  respectively,  for Group Term Life Insurance
paid by the Company.


<PAGE>






The  following  table and notes set forth  information  for the named  executive
officers  regarding  the exercise of stock options  during 1997 and  unexercised
options held at the end of 1997.




<TABLE>

                AGGREGATED OPTION EXERCISES AT DECEMBER 31, 1997
                           AND YEAR-END OPTION VALUES

<CAPTION>

                                                       Number of
                                                       Unexercised       Value of Unexercised
                                                       Options at      In-the-Money Options
                                                       December 31,
                                                         1997 (#)      at December 31, 1997 ($)
                    Shares Acquired                    Exercisable/    Exercisable/
Name(#)(1)            on Exercise    Value Realized($) Unexercisable   Unexercisable (2)
-------------------------------------------------------------------------------------------------
<S>                        <C>               <C>        <C>      <C>           <C>
Martin M. Pollak          -0-               -0-         500,000/-0-           -0-
Donald Hasfurther         -0-               -0-         100,000/-0-           -0-


</TABLE>

(1) None of the named  executive  officers  exercised any stock  options  during
1997.

(2) Calculated based on the closing price of the Common Stock ($.08) as reported
by the OTC  Bulletin  Board on December 31,  1997.  The  exercise  price of such
option is $.50.


<PAGE>







Item 12.  Security Ownership of Certain Beneficial Owners and Management.

                             PRINCIPAL STOCKHOLDERS

         The following table sets forth certain information as of March 2, 1998,
with respect to shares of Common Stock which are beneficially  owned by (a) each
person who owns more than 5% of the Company's Common Stock, (b) each director of
the Company, (c) each of the persons named in the Summary Compensation Table and
(d) all officers and directors of the Company as a group.

                                            Beneficial Ownership

                                          Number of       Percentage
         Name and Address              Common Shares     of Class (1)
         ----------------              -------------     ------------

GP Strategies Corporation (2)          6,971,750             53.5%

Martin M. Pollak (3)(6)(7)(8)          7,564,322             55.9

Jerome I. Feldman (4)(6)(7)(8)         7,566,386             57.0

Scott N. Greenberg (5)(6)                 79,150                *

Donald J. Hasfurther (5)(6)              100,000                *

Edward Dunay (5)(9)                       50,000                *

John D. Scanlan (5)(9)                    50,000                *

Arthur T. Downey (5)(9)                   33,330                *

Sergey Efuni, MD, Ph.D.                   20,000                *

All directors and officers
as a group (8 persons)                 1,519,688             10.8

* The number of shares owned is less than one percent of the outstanding  shares
of Common Stock.

(1) Based upon 13,020,155  shares of Common Stock outstanding as well as options
outstanding as of March 2, 1998.

(2) GP Strategies has entered into a Voting  Agreement which limits its ability,
to a certain  degree,  to control  the  affairs  of the  Company.  See  "Certain
Relationships and Related Transactions - GP Strategies' Capital Stock Interest."



<PAGE>


(3)  Includes (i)  6,971,750  shares of Common  Stock  beneficially  owned by GP
Strategies,  (ii) 85,204 shares of Common Stock held by Mr. Pollak,  (iii) 5,751
shares of Common Stock held by Mr.  Pollak's  wife (iv) 1,617,  shares of Common
Stock for a foundation of which Mr.  Pollak is a trustee and (v) 500,000  shares
of Common Stock  issuable upon exercise of currently  exercisable  stock options
held by Mr.  Pollak.  Mr. Pollak  disclaims  beneficial  ownership of the shares
owned by GP Strategies and his wife.

(4)  Includes (i)  6,971,750  shares of Common  Stock  beneficially  owned by GP
Strategies,  (ii) 93,463 shares of Common Stock held by Mr. Feldman (iii), 1,173
shares of Common Stock which are held by certain members of Mr. Feldman's family
and (iv) 500,000  shares of Common  Stock  issuable  upon  exercise of currently
exercisable stock options held by Mr. Feldman.  Mr. Feldman disclaims beneficial
ownership of the shares owned by GP Strategies and his family.

(5)  Includes  4,150 shares of Common  Stock held by Mr.  Greenberg  and 75,000,
100,000,   50,000,  50,000  and  33,330  shares  each  for  Messrs.   Greenberg,
Hasfurther,  Dunay, Scanlan and Downey, respectively,  issuable upon exercise of
currently exercisable stock options.

(6) Of the  directors  and  executive  officers of the  Company,  the  following
beneficially  own  the  number  of  shares  of  common  stock  of GP  Strategies
indicated: Scott N. Greenberg (116,857, of which 60,875 shares are issuable upon
exercise of currently  exercisable  stock options and 49,950 shares which he has
the right to acquire  through the conversion of shares of GP Strategies  Class B
Capital Stock into shares of common stock) (1.1%) and Donald J.  Hasfurther (500
shares,  all of which are issuable upon exercise of currently  exercisable stock
options). Martin M. Pollak and Jerome I. Feldman beneficially own 792,405 (7.0%)
and 789,967  (6.9%) shares of GP Strategies  Common Stock,  respectively,  which
include (i) currently exercisable options to purchase 335,917 and 333,417 shares
of common  stock,  respectively;  (ii) options held by each to purchase  356,150
shares  of Class B  Capital  Stock  which  are  convertible  into  shares  of GP
Strategies Common Stock on a one-for-one basis; and (iii) 31,250 shares of Class
B Capital Stock  beneficially held by each, which are convertible into shares of
GP  Strategies  Common Stock on a  one-for-one  basis.  Also  included are 1,618
shares for a foundation of which Mr. Pollak is a trustee.  Mr. Pollak  disclaims
beneficial  ownership of 5,752 shares held by his wife which are also  included.
Mr. Feldman disclaims  beneficial ownership of the 1,173 shares held by his wife
and children  which are also included.  All directors and executive  officers of
the Company  (exclusive of Messrs.  Pollak and Feldman) as a group  beneficially
own 117,357 shares of common stock of GP Strategies, of which 111,325 shares are
issuable upon exercise of currently exercisable stock options.
All of such  persons  have sole  voting  and  investment  power as to all shares
except as indicated.

(7)      Member of the Executive Committee.

(8)      Member of the Compensation Committee.

(9)      Member of the Audit Committee.



<PAGE>


Item 13. Certain Relationships and Related Transactions

Management Services Agreement

         As of January 1, 1994,  the Company and GP  Strategies  entered  into a
three-year  Management  Services  Agreement pursuant to which certain direct and
indirect  services  will be  provided  to the  Company by GP  Strategies,  which
agreement  was  automatically  extended for an additional  one year period.  The
services  to be  provided  by GP  Strategies  include  management,  legal,  tax,
accounting,  insurance and employee benefit administrative services. The Company
paid $10,000 per month to GP Strategies in 1997.  The Company  believes that the
terms of this  agreement are  comparable to those  available  from  unaffiliated
third parties. The Agreement is automatically  renewable for successive one-year
terms unless one of the parties notifies the other in writing that the Agreement
is terminated.  In such event,  the Company will be required to hire  additional
employees to perform these services or to contract with third parties to do so.

Loans and Advances from GP Strategies

         As of December 31, 1997,  the Company's  long-term  indebtedness  to GP
Strategies  totaled  $3,933,000.  The  indebtedness  was  comprised  of (i) $2.5
million pursuant to a $2.5 million loan agreement with GP Strategies(see Note 12
to  Consolidated  Financial  Statements),  (ii) cash advances from GP Strategies
totaling  $682,000,  and (iii)  accrued  interest at the prime rate of $751,000.
These  proceeds  were  used to fund the  Company's  working  capital  needs.  At
December 31, 1997, the Company had no additional  borrowing  capacity  available
under its GP Strategies Loan Agreement.  Principal and accrued interest pursuant
to such agreement is due on August 5, 1999.

         In July 1996, the Company issued a convertible note (the "Note") in the
principal  amount of $1,000,000 in a private offering (the "Offering") (See Note
6 to Consolidated  Financial  Statements).  The Company received net proceeds of
$950,000 from the Offering. The Note matures on June 30, 2001, bears interest at
the rate of 7% per annum,  and is convertible into shares of common stock of the
Company  at a  conversion  price  of $.25  per  share.  In  connection  with the
Offering,  GP  Strategies  issued  warrants to purchase an  aggregate  of 82,306
shares of GP  Strategies  Common  Stock,  exercisable  at a price of $12.15  per
share,  provided that the warrants may only be exercised  utilizing the Note. In
the event that the closing  price of the common stock of the Company is at least
$1.00 per share for at least 20  consecutive  trading  days,  the Notes shall be
subject to redemption at the election of the Company,  at a redemption  price of
100% of the  principal  amount  called for  redemption,  together  with  accrued
interest.

         The  Company  and GP  Strategies  have agreed that (i) if the Notes are
used to exercise the  warrants  prior to a default on the Notes,  GP  Strategies
will receive from the Company, in exchange for the Notes shares of the Company's
common stock at a price equal to 60% of its then current market value,  and (ii)
if the Notes are used to exercise the warrants after a default on the Notes,  GP
Strategies  will receive  from the Company,  in exchange for the Notes shares of
the  Company's  Common Stock at a price equal to 25% of its then current  market
value.

GP Strategies' Capital Stock Interest

         Upon completion of the Distribution,  GP Strategies held  approximately
6,990,900 shares of Common Stock,  representing  approximately 54% of the Common
Stock  issued and  outstanding  on August 5, 1994  (without  taking into account
outstanding  options and  warrants).  The  Company's  by-laws do not provide for
cumulative voting. GP Strategies has entered into a Voting Agreement pursuant to
which it has agreed  that,  for a period of three  years from  August 5, 1994 it
will  vote its  shares  of  Common  Stock (i) such that not more than 50% of the
Company's directors will be officers or directors of GP Strategies;  and (ii) on
all matters  presented  to a vote of  stockholders,  other than the  election of
directors,  in the same  manner  and in the  same  proportion  as the  remaining
stockholders of the Company vote. GP Strategies,  nevertheless,  will be able to
influence   substantially   the   affairs  of  the   Company.   See   "Principal
Stockholders."  The Company has  extended the Voting  Agreement  for another two
years through August 5, 1999.

Certain Employment Matters

         Several  officers and directors of the Company also render  services to
GP Strategies.  Mr. Martin M. Pollak,  President,  Chief Executive Officer and a
director of the Company,  is Executive Vice President,  Treasurer and a director
of GP  Strategies.  Mr.  Jerome  I.  Feldman,  Chairman  of the  Board  of,  and
consultant to the Company,  serves as President,  Chief Executive  Officer and a
director of GP Strategies.  Finally, Mr. Scott N. Greenberg, the Company's Chief
Financial  Officer  serves as Vice President and Chief  Financial  Officer and a
director of GP Strategies. See "Management."

Tax Allocation Agreement

         In connection with the Distribution, GP Strategies and the Company have
entered  into a tax  allocation  agreement,  dated as of August 5, 1994,  which,
among other things,  provides for the  allocation  between GP Strategies and the
Company of (i)  responsibility for the preparation and filing of tax returns and
the payment of tax liabilities and (ii) entitlement to tax refunds.

         In general,  the tax allocation  agreement  provides that GP Strategies
will  indemnify  and hold  harmless  the  Company  and its  present  and  future
affiliates,  including NPD Trading  (collectively,  the "ADC Group") against tax
liabilities  of GP Strategies or any of its affiliates or  subsidiaries  that is
not a member of the ADC Group (the "GP  Strategies  Group") and (ii) all federal
income tax  liabilities  of the ADC Group,  except  deferred tax  liabilities as
recorded under generally accepted accounting  principals,  until August 5, 1994.
The Company  will  indemnify  and hold GP  Strategies  harmless  against (i) all
federal income tax  liabilities of the ADC Group for all periods after August 5,
1994 and (ii) all tax liabilities of the ADC Group other than federal income tax
liabilities.

         From  January 29, 1990  through  August 5, 1994,  the Company  reported
approximately  $2,100,000 in net operating losses in GP Strategies' consolidated
Federal Income Tax Return. As a result of the loss allocation rules contained in
the Federal income tax consolidated return regulations,  approximately  $263,000
of net operating loss carryforwards are allowable to the Company upon ceasing to
be a member of GP Strategies'  consolidated  return group.  As agreed between GP
Strategies  and the Company,  GP Strategies  will not compensate the Company for
any use by the GP Strategies Group of the net operating losses of the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         Mr. Pollak, the Company's President and Chief Executive Officer and Mr.
Feldman,  the  Company's  Chairman of the Board and a consultant to the Company,
served on the  Compensation  Committee  of the Company for the past year.  Other
than the foregoing,  no director or executive officer of the Company served as a
director or executive  officer of any other  corporation  that has a director or
executive  officer  who is also a director  or a board  committee  member of the
Company.


<PAGE>


                                     PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)(1) The following financial statements are included in Part II, Item 8:
                                                                          Page

         Independent Auditors' Report........................................13

         Financial Statements:

         Consolidated Balance Sheets -
         December 31, 1997 and 1996..........................................14

         Consolidated Statements of
         Operations - Years ended
         December 31, 1997, 1996 and 1995....................................16

         Consolidated Statements of Changes in
         Stockholders' Equity (Deficiency)- Years
         ended December 31, 1997, 1996 and 1995..............................17

         Consolidated Statements of Cash Flows
         Years ended December 31, 1997, 1996 and 1995........................18

         Notes to Consolidated Financial Statements..........................19

(a)(2)   Schedules have been omitted because they are not required
         or are not applicable, or the required information has been
         included in the financial statements or the notes thereto.

(a)(3)   See accompanying Index to Exhibits

(b)      There were no Reports  on Form 8-K filed by the  Registrant  during the
         last quarter of the period covered by this report.


<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 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.

                                            AMERICAN DRUG COMPANY

                                             Martin M. Pollak, President
                                              and Chief Executive Officer

Dated:   March 31, 1998

         Pursuant to the  requirements  of 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.

Signature                                     Title


Martin M. Pollak          President, Chief Executive Officer and Director
                          (Principal Executive and Operating Officer)

Jerome I. Feldman         Chairman of the Board


Scott N. Greenberg        Chief Financial Officer and
                          (Principal Financial and Accounting Officer)

Edward Dunay              Director





<PAGE>



                                       iii




                                INDEX TO EXHIBITS


Exhibit No.                Document                                       Page
-----------                                                      ----


3              Amended Certificate of Incorporation of the Registrant.
               Incorporated herein by reference to Exhibit 3 of the Registrant's
               Annual Report on Form 10-K for the year ended December 31, 1996.

3.1            By-laws of the Registrant. Incorporated herein by reference to
               Exhibit 3.2 of the Registrant's Registration Statement on Form
               S-1 filed on July 22, 1994, Registration Statement No. 33-78252.

10.            1994 Stock Option Plan of the Registrant. Incorporated herein by
               reference to Exhibit 10.1 of the Registrant's Registration
               Statement on Form S-1 filed on July 22, 1994, Registration
               Statement No. 33-78252.

10.1           Transfer and Distribution Agreement. Incorporated herein by
               reference to Exhibit 2.1 of the Registrant's Registration
               Statement on Form S-1 filed on July 22, 1994, Registration
               Statement No. 33-78252.

10.2           Management Services Agreement, dated as of August 5, 1994,
               between GP Strategies Corporation and the Registrant.
               Incorporated herein by reference to Exhibit 10.3 of the
               Registrant's Registration Statement on Form S-1 filed on July
               22,1994, Registration Statement No. 33-78252.

10.3           Employment Agreement, dated as of January 1, 1994, between Martin
               M. Pollak and the Registrant. Incorporated herein by reference to
               Exhibit 10.4 of the Registrant's Registration Statement on Form
               S-1 filed on July 22, 1994, Registration Statement No. 33-78252.


<PAGE>



10.4           Consulting Agreement, dated as of January 1, 1994, between Jerome
               I. Feldman and the Registrant. Incorporated herein by reference
               to Exhibit 10.5 of the Registrant's Registration Statement on
               Form S-1 filed on July 22, 1994, Registration Statement No.
               33-78252.

10.5           Form of Generic Pharmaceutical Products Supply Agreement.
               Incorporated herein by reference to Exhibit 10.7 of the
               Registrant's Registration Statement on Form S-1 filed on July 22,
               1994, Registration Statement No. 33-78252.

10.6           Form of Warrant Agreement, dated as of August 5, 1994, between
               the Registrant, The Harris Trust Company of New York, as Warrant
               Agent, and the holder of Warrants from time to time. Incorporated
               herein by reference to Exhibit 10.8 of the Registrant's
               Registration Statement on Form S-1 filed on July 22, 1994,
               Registration Statement No. 33-78252.

10.7           Tax Allocation Agreement, dated as of August 5, 1994, between GP
               Strategies Corporation and the Registrant. Incorporated herein by
               reference to Exhibit 10.9 of the Registrant's Registration
               Statement on Form S-1 filed on July 22, 1994, Registration
               Statement No. 33-78252.

10.8           Voting Agreement, dated as of August 5, 1994, from GP Strategies
               Corporation to the Registrant. Incorporated herein by reference
               to Exhibit 10.10 of the Registrant's Registration Statement on
               Form S-1 filed on July 22, 1994, Registration Statement No.
               33-78252.

10.9           Stock Purchase and Loan Agreement, dated as of August 5, 1994
               between GP Strategies Corporation and the Registrant.
               Incorporated herein by reference to Exhibit 10.11 of the
               Registrant's Registration Statement on Form S-1 filed on July 22,
               1994, Registration Statement No. 33-78252.

10.10          Form of 7% Convertible Note due 2001 of the Registrant.
               Incorporated herein by Reference to Exhibit 4.1 of the
               Registrant's Form 10-Q for the second quarter ended June 30,
               1996.

21.            Subsidiaries.