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, 2002
                                       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
                            FIVE STAR PRODUCTS, INC.
             (Exact name of registrant as specified in its charter)


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

777 Westchester Avenue, White Plains, New York, NY                  10604
--------------------------------------------------                  -----
(Address of principle executive offices)                          (Zip code)

Registrant's telephone number, including area code:             (914) 249-9700

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

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

                          Common Stock, $.01 Par Value
                          ----------------------------
                                (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. / /

Indicate by check mark whether the registrant is an accelerated filer.

               Yes    ____                         No    x


The aggregate market value of the outstanding shares of the Registrant's Common
Stock, par value $.01 per share, held by non-affiliates as of June 28, 2002 was
approximately $1,269,431 based on the closing price of the Common Stock on the
OTC Bulletin Board, which is operated by the NASDAQ Stock Market, on June 28,
2002.

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 27, 2003

Common Stock, par value $.01 per share                     14,946,867 shares


<PAGE>





                                TABLE OF CONTENTS
PART I                                                                     Page

     Item 1. Business  1

     Item 2. Properties......................................................6

     Item 3. Legal Proceedings...............................................6

     Item 4. Submission of Matters to a Vote of Security Holders.............6

PART II

     Item 5. Market for the Registrant's Common
     Equity and Related Stockholder Matters..................................7

     Item 6. Selected Financial Data.........................................8

     Item 7.  Management's Discussion and Analysis of
     Financial Condition and Results of Operations...........................9

     Item 7A. Quantitative and Qualitative Disclosures About Market Risk....11

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

     Item 9.  Changes in and Disagreements with
     Accountants on Accounting and Financial Disclosure.....................31

PART III

     Item 10. Directors and Executive Officers of the Registrant............32

     Item 11. Executive Compensation........................................34

     Item 12. Security Ownership of Certain Beneficial
     Owners and Management..................................................40

     Item 13. Certain Relationships and Related Transactions................41

     Item 14. Controls and Procedures.......................................42

PART IV

     Item 15. Exhibits, Financial Statement Schedules, and
     Reports on Form 8-K....................................................43


<PAGE>


                                     PART I

Item 1.  Business

(a)      General Development of Business

         On September 30, 1998, a newly formed wholly owned subsidiary of Five
Star Products, Inc. (the "Company"), Five Star Group, Inc. ("Five Star")
purchased from JL Distributors, Inc. ("JL"), a wholly owned subsidiary of GP
Strategies Corporation ("GP Strategies"), substantially all of the operating
assets of JL. The assets were purchased for $16,476,000 in cash and a $5,000,000
unsecured promissory note ("Note") which bears interest at the rate of 8%,
payable quarterly, with the principal due on September 30, 2004.

         On August 2, 2002 the Company entered into a transaction to reduce its
long-term debt to GP Strategies. The principal amount of the Note was reduced by
$500,000 to $4,500,000. In connection with this debt reduction, GP Strategies
received 2,272,727 shares of the Company's common stock. The transaction valued
the Company's common stock at $0.22 per share, which was a premium to the open
market value at that time. As a result of this transaction, GP Strategies'
ownership of the Company increased to approximately 47% from approximately 37%
of the Company's outstanding shares of common stock.

         Five Star is a leading distributor of home decorating, hardware and
finishing products in the northeast. For the year ended December 31, 2002 Five
Star had sales of approximately $94,000,000.

         Additional information about Five Star, may be found at
www.fivestargroup.com


(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

Five Star

         Five Star is engaged in the wholesale distribution of home decorating,
hardware and finishing products. Five Star leases two strategically located
warehouse distribution centers in New Jersey and Connecticut with approximately
347,000 square feet of space between them. All operations are coordinated by
senior management from offices in New Jersey. Five Star's sales force consists
almost entirely of employees.

         In the first quarter of 2000, Five Star expanded its sales territory
with the addition of an established, dedicated sales force servicing the
Mid-Atlantic States, as far south as Virginia. This new addition to the sales
force generates revenues of approximately $7 million annually. Five Star
services this new territory from its 236,000 square foot East Hanover, New

<PAGE>

Jersey facility, from which it currently services the Northeast. Five Star's
ability to service this territory from its existing New Jersey facility has
enabled Five Star to leverage its fixed costs over a broader revenue base.

         Five Star is a leading distributor of paint sundry items, interior and
exterior stains, brushes, rollers, caulking compounds and hardware products.
Five Star offers products from leading manufacturers such as Cabot Stain,
William Zinsser & Company, DAP, General Electric Corporation, American Tool,
USG, Stanley Tools, Minwax and 3M Company. Five Star distributes its products to
retail dealers, which include lumber yards, "do-it yourself" centers, hardware
stores and paint stores principally in the northeast region. It carries an
extensive inventory of the products it distributes and provides delivery,
generally within 24 to 72 hours. Five Star has grown to be one of the largest
independent distributors in the Northeast by providing a complete line of
competitively priced products, timely delivery and attractive pricing and
financing terms to its customers. Much of Five Star's success can be attributed
to a continued commitment to provide customers with the highest quality service
at reasonable prices.

         As one of the largest distributors of paint sundry items in the
Northeast, Five Star enjoys cost advantages and favorable supply arrangements
over the smaller distributors in the industry. This enables Five Star to compete
as a "low cost" provider. Five Star uses a fully computerized warehouse system
to track all facets of its distribution operations. Five Star has enhanced the
sophistication of its warehouse and office facilities to take full advantage of
economies of scale, speed the flow of orders and to compete as a low cost
distributor. Nearly all phases of the selling process from inventory management
to receivable collection are automated and tracked; all operations are overseen
by senior management at the New Jersey facility. Five Star is able to capitalize
on manufacturer discounts by strategically timing purchases involving large
quantities.

         Management takes a proactive approach in coordinating all phases of the
Company's operations. For example, sales managers require all sales
representatives to call on customers once every week. Each salesperson transmits
his or her orders through Five Star's automated sales system, to the IBM AS/400
computer located at the New Jersey facility. The salesperson system combines the
ability to scan product codes in the customers' stores and download the
information to a laptop computer for final transmission. Based on the floor plan
of each warehouse and the location of products therein, the computer designs a
pattern for the orders to be picked. The orders are then relayed to the
appropriate location and typically picked in the evening. The warehouse
facilities are well-maintained and skillfully organized. A bar-coded part number
attached to the racking shelves identifies the location of each of the
approximately 23,000 stock keeping units (SKUs). The products are loaded onto
Five Star's trucks in the evening in the order that they will be unloaded, and
are delivered directly to the customers' locations the following morning.

Customers

      Five Star's largest customer accounted for approximately 3.6% of its sales
in 2002 and its 10 largest customers accounted for approximately 11.6% of such
sales. All such customers are unaffiliated and Five Star does not have a
long-term contractual relationship with any of them.


<PAGE>


Management Information System

      All of Five Star's inventory control, purchasing, accounts payable and
accounts receivable are fully automated on an IBM AS/400 computer system. In
addition, Five Star's software alerts buyers to purchasing needs, and monitors
payables and receivables. This system allows senior management to control
closely all phases of Five Star's operations. Five Star also maintains a
salesperson-order-entry system, which allows the salesperson to scan product and
then download the information to a laptop. The laptop contains all product and
customer information and interacts with the AS/400.

Purchasing

      Five Star relies heavily upon its purchasing capabilities to gain a
competitive advantage relative to its competitors. Five Star's capacity to stock
the necessary products in sufficient volume and its ability to deliver them
promptly upon demand is one of the strongest components of service in the
distribution business, and is a major factor in Five Star's success.

      Since retail outlets depend upon their distributor's ability to supply
products quickly upon demand, inventory is the primary working capital
investment for most distribution companies, including Five Star. Through its
strategic purchasing decisions, Five Star carries large quantities of inventory
relative to its competitors and thus can boast fill ratios of approximately 95%.

      All purchasing decisions based on current inventory levels, sales
projections, manufacturer discounts and recommendations from sales
representatives, are made by the merchandising group, located in New Jersey, in
order to coordinate effectively Five Star's activities. In addition to senior
management's active involvement, regional sales managers play an extremely
critical role in this day-to-day process.

      Five Star has developed strong, long-term relationships with the leading
suppliers since its predecessor company, J. Leven, was founded in 1912. As a
major distributor of paint sundry items, suppliers rely on Five Star to
introduce new products to market. Furthermore, suppliers have grown to trust
Five Star's ability to penetrate the market. As a result, Five Star is often
called on first by manufacturers to introduce new products into the marketplace.
For example, Minwax, Best Liebco and Cabot Stain have utilized Five Star to
introduce and distribute some of their new product innovations.

Marketing

      The do-it-yourself industry relies on distributors to link manufacturer's
products to the various retail networks. The do-it-yourself market operates on
this two-step distribution process, i.e., manufacturers deal through
distributors who in turn service retailers. This occurs principally because most
retailers are not equipped to carry sufficient inventory in order to be cost
effective in their purchases from manufacturers. Thus, distributors add
significant value by effectively coordinating and transporting products to
retail outlets on a timely basis. Five Star distributes and markets products
from hundreds of manufacturers to all of the various types of retailers from
regional paint stores, to lumber yards, to independent paint and hardware
stores.

<PAGE>

      The marketing efforts are directed by regional sales managers. These
individuals are responsible for designing, implementing and coordinating
marketing policies. They work closely with senior management to coordinate
company-wide marketing plans as well as to service Five Star's major multi-state
customers. In addition, each regional sales manager is responsible for
overseeing the efforts of his sales representatives.

      The sales representatives, by virtue of daily contact with Five Star's
customers, are the most integral part of Five Star's marketing strategy. It is
their responsibility to generate revenue, ensure customer satisfaction and
expand the customer base. Each representative covers an assigned geographic
area. The representatives are compensated based solely on commission. Five Star
has experienced low turnover in its sales force; most representatives have a
minimum of five years' experience with Five Star. Many sales representatives had
retail experience in the paint or hardware industry when they were hired by Five
Star.

      Five Star's size, solid reputation for service, large inventory and
attractive financing terms provide sales representatives with tremendous
advantages relative to competing sales representatives from other distributors.
In addition, the representatives' efforts are strengthened by company-sponsored
marketing events. For example, each year in the first quarter, Five Star invites
all of its customers to special trade shows for Five Star's major suppliers, so
that suppliers may display their products and innovations. Five Star also
participates in advertising circular programs in the spring and the fall which
contain discount specials and information concerning new product innovations.

         Five Star has a history of enhancing its growth through complementary
acquisitions which have allowed it to preempt much of its competition as a
high-quality, competitively priced distributor.

Industry Dynamics

The Do-It-Yourself Industry

         The paint sundry items distribution industry is closely related to the
do-it-yourself retail market, which has tended to exhibit elements of
counter-cyclicality. In times of recession, consumers tend to spend more on home
improvements if they cannot afford to trade up to bigger homes. In times of
economic strength, consumers tend to spend heavily in home improvements because
they believe they can afford to complete their home improvement projects.
According to the National Retail Hardware Association, total retail sales by
home improvement retailers were $199 billion in 2002, and are projected to grow
at a 5.7% compound rate through 2006.

         Painting is the quintessential do-it-yourself project. Painting has to
be done more frequently than most remodeling jobs, and it is a relatively
inexpensive way to update the appearance of a home. For these reasons, the paint
and paint sundry items industry tends to be counter-cyclical and a solid growth
segment of the do-it-yourself market.


<PAGE>


Competition

         Competition within the industry is intense. There are much larger
national companies commonly associated with national franchises such as Ace and
TruServ as well as smaller regional distributors, all of whom offer similar
products and services. Other than paint sundry item distributors, Five Star
faces stiff competition from Home Depot, which purchases directly from
manufacturers and dealer-owned distributors such as Ace and TruServ. Moreover,
in some instances manufacturers will bypass the distributor and choose to sell
and ship their products directly to the retail outlet. The principal means of
competition for Five Star are its strategically placed distribution centers and
its extensive inventory of quality, name-brand products. Five Star will continue
to focus its efforts on supplying its products to its customers at a competitive
price and on a timely, consistent basis. In the future, Five Star will attempt
to acquire complementary distributors and to expand the distribution of its line
of private-label products sold under the "Five Star" name. Through internal
growth and acquisitions, Five Star has already captured a leading share in its
principal market, the Northeast. This growth-oriented acquisition strategy of
acquiring complementary distributors has allowed Five Star to compete against a
substantial number of its competitors. While other paint sundry items
distributors sell to the same retail networks as Five Star, they are at a
distinct disadvantage due to Five Star's experience, sophistication and size.

         Hardware stores that are affiliated with the large, dealer-owned
distributors such as Ace also utilize Five Star's services because they are
uncomfortable with relying solely on their dealer network. Most cooperative-type
distributors lack the level of service and favorable credit terms that
independent hardware stores enjoy with Five Star. Five Star effectively competes
with the dealer-owned distributors because it provides more frequent sales
calls, faster deliveries, better financing terms and a full line of vendors and
products to choose from.

Employees

         The Company employs approximately 275 people. Management-employee
relations are considered good at both of Five Star's warehouse facilities. The
Teamsters union represents approximately 95 union employees at the New Jersey
warehouse facility. The Connecticut warehouse facility is completely
non-unionized. Five Star has never experienced a labor strike at its facilities.
Five Star's contract with Local No. 11, affiliated with the International
Brotherhood of Teamsters expires on December 20, 2003.

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

         Not Applicable.



<PAGE>


Item 2. Properties

         Five Star leases 236,000 square feet in New Jersey, 111,000 square feet
in Connecticut, 1,300 square feet of sales offices in New York and 800 square
feet in Maryland. Five Star's operating lease for the New Jersey facility
expires in March, 2007, and the annual rent is $1,187,000. Five Star's lease for
the Connecticut facility expires in February, 2007, and its annual rent is
$402,000. The New York sales office pays $19,000 per year in rent and the
Maryland office pays $11,000. The Company's White Plains, New York office space
is provided by GP Strategies pursuant to the Management Services Agreement. As
part of the Management Services Agreement, GP Strategies receives up to $10,000
a month for services provided by GP Strategies employees, such as, legal, tax,
business development, insurance and employee benefit administration services.

         The facilities leased by the Company and Five Star are considered to be
suitable and adequate for their intended uses and are considered to be well
maintained and in good condition.

Item 3. Legal Proceedings

         The Company is not a party to any legal proceeding, the outcome of
which is believed by management to have a reasonable likelihood of having any
material adverse effect upon the financial condition of the Company.

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 2002 and 2001. 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

2002           First                       $0.15                       $0.12
               Second                      $0.22                       $0.12
               Third                       $0.18                       $0.13
               Fourth                      $0.13                       $0.05

2001           First                       $0.15                       $0.09
               Second                      $0.21                       $0.13
               Third                       $0.25                       $0.12
               Fourth                      $0.15                       $0.11
----------
         The number of shareholders of record of the Common Stock as of March
27, 2003 was 3,595. On March 27, 2003, the average of the closing bid and asked
prices on the OTC Bulletin Board was $0.14. 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.

Equity Compensation Plan Information as of December 31, 2002
<TABLE>

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

Plan category                   Number of securities         Weighted-average          Number of securities
Non-Qualified                   to be issued upon            exercise price of         remaining available for
Stock Option Plan               exercise of                  outstanding,              future issuance under
                                outstanding options,         options warrants          equity compensation
                                warrants and rights          warrants and rights       plans (excluding securities
                                                                                       reflected incolumn(a) (c)
                                (a)                          (b)
------------------------------- ---------------------------- ------------------------- ---------------------------------
------------------------------- ---------------------------- ------------------------- ---------------------------------
Equity compensation             (outstanding options)        (weighted average         number of options left
plans not approved                                           price)
<S>                                      <C>                          <C>                         <C>
by security holders                      2,930,000                    $0.16                       1,070,000
------------------------------- ---------------------------- ------------------------- ---------------------------------
------------------------------- ---------------------------- ------------------------- ---------------------------------
Total                                    2,930,000                    $0.16                       1,070,000
------------------------------- ---------------------------- ------------------------- ---------------------------------
</TABLE>

         For a description of the material terms of the Company's Non-Qualified
Stock Option Plan, see Note 10 in the Notes to the Consolidated Financial
Statements.


                    FIVE STAR PRODUCTS, INC. AND SUBSIDIARIES

                      SELECTED CONSOLIDATED FINANCIAL DATA

                    (in thousands, except per share amounts)

Item 6.  Selected Financial Data

<TABLE>
                                                       Years Ended December 31,

<CAPTION>
                                              2002        2001        2000        1999      1998*
                                              ----        ----        ----        ----      -----

Statement of Operations Data:

<S>                                         <C>        <C>         <C>         <C>        <C>
Revenue                                     94,074     $94,908     $93,878     $83,134    $17,080
Cost of goods sold                          77,461      78,854      77,372      68,646     13,686
Selling, general and administrative
 expenses                                   14,665      13,576      13,154      11,627      3,187
Net income (loss)                              391         417         775         647       (664)

Income (loss) per share:
Basic and diluted
 before extraordinary item                     .03         .03         .06         .05      (.03)
Basic and diluted                              .03         .03         .06         .05      (.05)

                                                               December 31,

                                              2002        2001        2000        1999       1998
                                              ----        ----        ----        ----       ----

Balance Sheet Data:

Current assets                             $34,214     $35,045     $34,983     $32,810    $32,291
Current liabilities                         27,585      28,762      29,183      27,598     27,596
Non-current liabilities                      4,500       5,000       5,000       5,000      5,000
Working capital                              6,629       6,283       5,800       5,212      4,695
Total assets                                35,366      36,184      36,188      33,828     33,179
Total stockholders' equity                   3,281       2,422       2,005       1,230        583

</TABLE>

*Statement of Operations Data include the operations of Five Star Group, Inc.
 from September 30, 1998, the date of its acquisition by the Company.


<PAGE>


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

                              Results of Operations
Overview

On September 30, 1998 a newly formed wholly owned subsidiary of the Company,
Five Star Group, Inc. ("Five Star") purchased from JL Distributors, Inc. ("JL"),
substantially all of the operating assets of JL. JL is a wholly owned subsidiary
of GP Strategies Corporation ("GP Strategies"). The assets were purchased for
$16,476,000 in cash and a $5,000,000 unsecured promissory note. On August 2,
2002, GP Strategies converted $500,000 of the Note into 2,272,727 shares of the
Company's common stock at a conversion price of $.22 per share.

Five Star is a leading distributor of home decorating, hardware and finishing
products in the northeastern United States.

Liquidity and Capital Resources

At December 31, 2002, the Company had cash of $16,000 and working capital of
$6,629,000. On November 1, 2001, Five Star renewed a $25,000,000 loan and
security agreement with a group of banks. The credit facility allowed Five Star
to borrow up to 50% or, under certain circumstances, 55% of eligible inventory
and up to 80% of eligible accounts receivable. At December 31, 2002, the Company
had borrowed $13,808,000 and had $3,900,000 of additional availability under the
loan agreement.

The Company's operations provided $2,826,000 in cash in 2002. The operating cash
flow in 2002 was primarily the result of a decrease in the accounts receivable
balance and increases in accounts payable and accrued expenses principally
relating to increased inventory purchases during the fourth quarter of 2002,
payment for which was not due until the following quarter. The Company purchased
$229,000 of machinery and equipment in 2002. The Company's financing activities
used $2,641,000 in 2002 principally consisting of net repayments of short-term
borrowings. The Company's Board of Directors has authorized the repurchase of up
to 1,000,000 shares of the Company's common stock.

Management believes that cash generated from operations and borrowing
availability under existing credit agreements will be sufficient to fund the
Company's working capital requirements.

Results of operations

The Company had income before income taxes of $719,000 in 2002 as compared to
$714,000 in 2001. The relatively stable income before income taxes was
principally the result of an increase in gross margin and a decrease in interest
expense, offset by an increase in selling, general & administrative expenses as
discussed below.


<PAGE>



Sales

The Company had sales of $94,074,000 in 2002 as compared to sales of $94,908,000
in 2001 and $93,878,000 in 2000. Sales were essentially flat from 2001 to 2002.
There was no significant change in the Company's customer base in 2002.

Gross margin

The Company had gross margin of $16,613,000 in 2002, $16,054,000 in 2001, and
$16,506,000 in 2000. The gross margin percentage in 2002 was 17.7%, essentially
in line with the 16.9% and the 17.6% gross margin percentages in 2001 and 2000,
respectively. The Company includes warehousing costs in the Cost of Goods Sold.

Selling, general and administrative expenses

The Company had Selling, general and administrative (SG&A) expense of
$14,665,000 in 2002, $13,576,000 in 2001, and $13,154,000 in 2000. The increase
in SG&A expense in 2002 was principally attributable to write-offs of
uncollectible receivables (see Note 13 to the Company's financial statements
included herein) and rising insurance costs. Insurance premiums rose
significantly in 2002 for two reasons. First, rates in the insurance market
increased drastically after the terrorist attacks in 2001. Second, in 2002 the
Company replaced its large-deductible workers' compensation policy with a
zero-deductible policy, paying a larger premium in consequence. The Company has
included delivery costs in SG&A expenses; delivery costs were not materially
changed from 2001 to 2002.

Interest expense

The Company had interest expense of $1,131,000 in 2002, $1,692,000 in 2001, and
$2,220,000 in 2000. The decreased interest expense in 2002 is the result of
lower interest rates, reduced borrowing under the Company's revolving loan, and
the reduction of the principal amount of the Company's long-term note payable to
GP Strategies (see Note 1 to the Company's financial statements included
herein).

Application of Critical Accounting Policies

The Company's consolidated condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America. Certain accounting policies have a significant impact on amounts
reported in the financial statements. A summary of those significant accounting
policies can be found in Note 2 to the Company's financial statements included
herein. The Company has not adopted any significant new accounting policies
during the year ended December 31, 2002.


<PAGE>

Among the significant judgments made by management in the preparation of the
Company's financial statements are the determination of the allowance for
doubtful accounts and adjustments of inventory valuations. These adjustments are
made each reporting period in the ordinary course of accounting.

Inflation

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

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, all of which are
difficult to predict and many of which are beyond the control of the Company,
including, but not limited to the risks and uncertainties detailed in the
Company's periodic reports and registration statements filed with the Securities
and Exchange Commission.


Item 7A.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.


The information required by Item 7A is not applicable to 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, 2002 and
           2001                                                            14

         Consolidated Statements of Operations - Years ended
           December 31, 2002, 2001 and 2000                                16

         Consolidated Statements of Changes in Stockholders'
           Equity - Years ended December 31,
           2002, 2001 and 2000                                             17

         Consolidated Statements of Cash Flows - Years ended
           December 31, 2002, 2001 and 2000                                18

         Notes to Consolidated Financial Statements                        19


<PAGE>



         INDEPENDENT AUDITORS' REPORT




         Board of Directors and Stockholders
         Five Star Products, Inc.


         We have audited the accompanying consolidated balance sheets of Five
         Star Products, Inc. and subsidiaries (the "Company") as of December 31,
         2002 and 2001, and the related consolidated statements of operations,
         changes in stockholders' equity and cash flows for each of the years in
         the three-year period ended December 31, 2002. These financial
         statements are the responsibility of the Company's management. Our
         responsibility is to express an opinion on these financial statements
         based on our audits.

         We conducted our audits in accordance with auditing standards generally
         accepted in the United States of America. 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 enumerated above
         present fairly, in all material respects, the financial position of
         Five Star Products, Inc. and subsidiaries as of December 31, 2002 and
         2001, and the results of their operations and their cash flows for each
         of the years in the three-year period ended December 31, 2002, in
         conformity with accounting principles generally accepted in the United
         States of America.




         Eisner LLP


         New York, New York
         March 19, 2003






<PAGE>


                    FIVE STAR PRODUCTS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                 (in thousands, except share and per share data)


<TABLE>
<CAPTION>

                                                         December 31,        December 31,
                                                           2002                2001
                                                         -----------         ------------
                 ASSETS

Current assets

<S>                                                    <C>                    <C>
Cash                                                   $     16               $      60
Accounts receivable, less allowance
 for doubtful accounts of $640 and $631                  10,162                  11,215
Inventory                                                23,664                  23,325
Prepaid expenses and other current assets
(including due from affiliates of $33 in 2002)              372                     445
                                                       --------                     ---

Total current assets                                     34,214                  35,045

Machinery and equipment, net                                866                     904
Deferred income taxes                                       244                     193
Other assets                                                 42                      42
                                                      ---------             -----------
                                                       $ 35,366               $  36,184
                                                       ========               =========


</TABLE>




        See accompanying notes to the consolidated financial statements.


<PAGE>





                    FIVE STAR PRODUCTS, INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (Continued)

                 (in thousands, except share and per share data)


                                                  December 31,    December 31,
                                                    2002             2001
                                                  ------------    -------------


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Short-term borrowings                              $  13,808        $  16,414
Accounts payable and accrued expenses
  (including due to affiliates of $354 in 2001)       13,777           12,348
                                                    --------         --------
Total current liabilities                             27,585           28,762
                                                    --------         --------

Long-term debt to GP Strategies                        4,500            5,000
                                                   ---------        ---------

Commitments

Stockholders' equity

Common stock, authorized 30,000,000 shares,
  par value $.01 per share; 15,292,882 shares
  issued and 15,023,651 outstanding in 2002
  and 13,020,155 shares issued and outstanding
  in 2001                                                153              130
Capital in excess of par value                         8,069            7,589
Accumulated deficit                                   (4,906)          (5,297)
Treasury stock, at cost                                  (35)           -
                                                  -----------     -----------
Total stockholders' equity                             3,281            2,422
                                                   ----------       ---------
                                                    $ 35,366         $ 36,184
                                                    =========        ========






        See accompanying notes to the consolidated financial statements.



<PAGE>


                    FIVE STAR PRODUCTS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                      (in thousands, except per share data)

<TABLE>


                                                  Year Ended December 31,
<CAPTION>

                                                 2002          2001              2000
                                            -----------    ----------         ----------
<S>                                         <C>              <C>            <C>
Sales                                       $  94,074        $  94,908      $  93,878
Cost of goods sold                             77,461           78,854         77,372
                                            ---------        ---------      ---------
Gross margin                                   16,613           16,054         16,506

Selling, general and
 administrative expenses                      (14,665)         (13,576)       (13,154)

Management fee to GP Strategies                   (98)             (72)           (85)

Interest expense (including amounts
  to affiliates of $384, $400 and $400)        (1,131)          (1,692)        (2,220)
                                             ---------           -----       --------

Income before income taxes                        719              714          1,047

Income tax expense                               (328)            (297)          (272)
                                               -------           -----      ---------

Net income                                   $    391         $    417       $    775
                                             ========         ========       ========

Earnings per share
 Basic and diluted                          $     .03              .03             .06
                                            ---------       ----------      ----------

</TABLE>


        See accompanying notes to the consolidated financial statements.


<PAGE>





                    FIVE STAR PRODUCTS, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except number of shares)

<TABLE>
                                                   Common Stock                                    Treasury Stock
<CAPTION>
                                                   ------------                                    ---------------
                                                                    Capital in                     Number                     Total
                                         Number of        Par        Excess of    Accumulated        of                Stockholders'
                                             Shares     Value        Par Value        Deficit      Shares       Cost         Equity
----------------------------------------------------------------------------------------------------------------------------------
<S>                 <C> <C>              <C>             <C>            <C>         <C>              <C>     <C>            <C>
Balance at December 31, 1999             13,020,155      $130           $7,589      $(6,489)         0       $   -          $1,230
----------------------------------------------------------------------------------------------------------------------------------
Net income                                                                              775                                    775
----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000             13,020,155       130            7,589       (5,714)         0           -          $2,005
----------------------------------------------------------------------------------------------------------------------------------
Net income                                                                              417                                    417
----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2001             13,020,155       130            7,589       (5,297)         0           -          $2,422
----------------------------------------------------------------------------------------------------------------------------------
Net income                                                                              391                                    391
Purchase of treasury stock                                                                          269,231      (35)          (35)
Issuance of common stock in payment
 of indebtedness to GP Strategies         2,272,727        23              477                                                 500
Issuance of compensatory stock options                                       3                                                   3
----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2002             15,292,882      $153           $8,069      $(4,906)        269,231    $ (35)       $3,281
----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

        See accompanying notes to the consolidated financial statements.


<PAGE>



                    FIVE STAR PRODUCTS, INC. AND SUBSIDIARIES

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

<CAPTION>
                                                                   Year Ended December 31,
                                                           --------------------------------------
                                                              2002            2001           2000
                                                           --------        -------        --------
Cash flows from operating activities:
<S>                                                       <C>             <C>             <C>
Net income                                                $    391        $    417        $   775
Adjustments to reconcile net income
  to net cash provided by operating activities:
 Depreciation and amortization                                 267             263            234
 Deferred income taxes                                         (51)            (30)          (163)
 Issuance of compensatory stock options                          3             -              -

Changes in other operating items:
 Accounts receivable                                         1,053            (100)        (1,007)
 Inventory                                                    (339)            285         (1,056)
 Prepaid expenses and other current assets                      73            (107)          (124)
 Accounts payable and accrued expenses                       1,429            (661)         1,606
                                                             -----            ----       --------

Net cash provided by operating activities                    2,826              67            265
                                                             -----           -----      ---------

Cash flows from investing activities:
Additions to machinery and equipment                          (229)           (169)          (290)
                                                            -------         ------     ----------

Cash flows from financing activities:
 Net (repayments of) proceeds from
  short-term borrowings                                     (2,606)            111            (21)
 Purchase of treasury stock                                    (35)            -               -
                                                        -----------          -----           -----

Net cash (used in) provided by
 financing activities                                       (2,641)            111            (21)
                                                          ---------            ---            ----

Net (decrease) increase in cash                                (44)              9            (46)
Cash at beginning of period                                     60              51             97
                                                            ------       ---------     ----------
Cash at end of period                                   $       16        $     60     $       51
                                                        ==========        ========     ==========

Supplemental disclosures of cash flow information:

Cash paid during the periods for:
 Interest                                                 $  1,148         $ 1,863       $  2,304
                                                          ========         =======       ========
 Income tax                                              $     171        $    562      $     548
                                                         =========        ========      =========

Non-cash financing activity:
 Conversion of long-term debt to
  GP Strategies to common stock                          $     500     $    -          $    -
                                                         =========     ===========     ==========

</TABLE>
        See accompanying notes to the consolidated financial statements.


<PAGE>


                    FIVE STAR PRODUCTS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

1.       Acquisition of the assets and business of Five Star

         Five Star Products, Inc. (the "Company" or "Five Star") owns 100% of
         Five Star Group, Inc. which is a wholesale distributor of home
         decorating hardware and finishing products in the northeastern United
         States.

         The Company's business was purchased on September 30, 1998 from GP
         Strategies Corporation ("GP Strategies") for approximately $16,476,000
         in cash and a $5,000,000 unsecured promissory note (the "Note"). Under
         a separate Subordination Agreement with GP Strategies in favor of the
         banks providing the Company's $25,000,000 revolving loan (see Note 3),
         which Note is subordinate to the revolving loan, Five Star may make
         annual payments of principal to GP Strategies if the Company achieves
         certain financial performance benchmarks. On August 2, 2002 the Company
         entered into a transaction to reduce its long-term debt to GP
         Strategies. The principal amount of the Note was reduced by $500,000 to
         $4,500,000. In connection with this debt reduction, GP Strategies
         received 2,272,727 shares of the Company's common stock. The
         transaction valued the Company's common stock at $0.22 per share, which
         was a premium to the open market value at that time. At December 31,
         2002, GP Strategies owned approximately 47% of the Company's common
         stock.

2.       Summary of significant accounting policies

         Principles of consolidation. The consolidated financial statements
         include the accounts of the Company and its wholly owned subsidiaries.
         All significant intercompany balances and transactions have been
         eliminated in consolidation.

         Inventory. Inventory is valued at the lower of cost, using the
         first-in, first-out (FIFO) method, or market. Inventory consists solely
         of finished products.

         Machinery and equipment. Fixed assets are carried at cost less
         accumulated depreciation. Major additions and improvements are
         capitalized, while maintenance and repairs that do not extend the lives
         of the assets are expensed currently. Gain or loss, if any, on the
         disposition of fixed assets is recognized currently in operations.
         Depreciation is calculated on a straight-line basis over the estimated
         useful lives of the assets.

         Income taxes. Income taxes are provided for based on the asset and
         liability method of accounting pursuant to Statement of Financial
         Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes".
         Under SFAS No. 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

<PAGE>


                    FIVE STAR PRODUCTS, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

2.       Summary of significant accounting policies (Continued)

         year in which those temporary differences are expected to be recovered
         or settled. Under SFAS No. 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.

         Use of estimates. The preparation of financial statements in conformity
         with accounting principles generally accepted in the United States of
         America 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.

         Concentration of credit risk. Financial instruments that potentially
         subject the Company to significant concentrations of credit risk
         consist primarily of accounts receivable. Sales are made principally to
         independently owned paint and hardware stores in the northeast United
         States.

         Stock-based compensation. The Company has elected to continue to
         account for its stock-based compensation plans using the intrinsic
         value method prescribed by Accounting Principles Board Opinion No. 25
         ("APB No. 25"), "Accounting for Stock Issued to Employees". Under the
         provisions of APB No. 25, employee compensation is measured as the
         excess, if any, of the quoted market price of the Company's common
         stock at the date of the grant over the amount an employee must pay to
         acquire the stock.

         Had the Company determined compensation cost based on the fair value
         method at the grant date for its stock options under SFAS No. 123, the
         Company's net income would have been changed to the pro forma amounts
         indicated below (in thousands, except per share amounts):

<TABLE>

<CAPTION>
                                                                 2002             2001              2000
                                                                 ----             ----              ----

<S>                                                            <C>              <C>               <C>
         Reported net income                                   $  391           $  417            $  775
         Stock-based employee compensation
           determined under the fair-value based
           method, net of tax                                     (33)              (5)           $  (35)
                                                              --------        ---------           -------
         Pro forma net income                                  $  358           $  412             $ 740
                                                               ======           ======             =====

         Basic and diluted income
          per share                 As reported               $   .03          $   .03            $  .06
                                    Pro forma                 $   .03          $   .03            $  .05

</TABLE>


<PAGE>

                    FIVE STAR PRODUCTS, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

2.       Summary of significant accounting policies (Continued)

         The weighted-average fair value of options granted in 2002 and 2001 was
         approximately $.08 and $.11, respectively, using the Black-Scholes
         option-pricing model with the following assumptions:

                                                        2002             2001
                                              --------------         --------
         Volatility                                      73%             106%
         Risk-free interest rate               2.52% - 4.14%            4.24%

         Expected life in years                           3                 5
         Dividend yield                                   0                 0

         There were no options granted during the year ended December 31, 2000.


         Revenue recognition. Revenue is recognized upon shipment of product to
         customers. Allowances for estimated returns and allowances are
         recognized when sales are recorded.

         Earnings per share. Basic earnings per share (EPS) is based upon the
         weighted average number of common shares outstanding during the period.
         Diluted EPS is 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. Options
         outstanding at December 31, 2002, 2001 and 2000 to purchase
         approximately 1,700,000, 1,025,000, and 650,000 shares of common stock,
         respectively, were not included in the diluted per share computation
         because their effect would be anti-dilutive. Warrants outstanding
         during the year ended December 31, 2000 to purchase 6,017,775 shares of
         common stock were not included in the diluted per share computation
         because their effect would be anti-dilutive. Such warrants expired in
         August 2000.


<PAGE>


                    FIVE STAR PRODUCTS, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

2.       Summary of significant accounting policies (Continued)

         Advertising costs. The Company expenses advertising costs as incurred.
         Advertising expense was $57,000, $43,000 and $56,000 for the years
         ended December 31, 2002, 2001 and 2000, respectively.

3.       Short-term borrowings

         On November 1, 2001, the Company's wholly owned subsidiary, Five Star
         Group, Inc., renewed its Loan and Security Agreement (the "Loan
         Agreement") by and among three banks, which now matures on September
         30, 2004. The Loan Agreement provides for a $25,000,000 revolving
         credit facility, which allows Five Star to borrow based upon a formula
         of up to 50% and, under certain circumstances, 55% of eligible
         inventory and 80% of eligible accounts receivable, as defined in the
         Loan Agreement. The interest rates under the Loan Agreement are based
         upon LIBOR or the Prime rate, and can be reduced in the event Five Star
         achieves and maintains certain performance benchmarks. At December 31,
         2002, approximately $13,808,000 was outstanding under the Loan
         Agreement and approximately $3,900,000 was available to be borrowed. As
         of December 31, 2002, the LIBOR-based rates averaged 3.56% and the
         Prime-based rate was 4.25%. The weighted average interest rate on the
         Company's short-term debt at December 31, 2002 was 3.78%. Substantially
         all of the Company's assets are pledged as collateral for these
         borrowings. Under the Loan Agreement Five Star is subject to covenants
         requiring minimum net worth, limitations on losses, if any, and minimum
         or maximum values for certain financial ratios.

4.       401(k) plan

         The Company maintains a 401(k) Savings Plan for employees who have
         completed one year of service. The Savings Plan permits pre-tax
         contributions to the Savings Plan of 2% to 50% of compensation by
         participants pursuant to Section 401(k) of the Internal Revenue Code.
         The Company matches 40% of the participants' first 6% of compensation
         contributed, not to exceed an amount equivalent to 2.4% of that
         participant's compensation.

         The Savings Plan is administered by a trustee appointed by the Board of
         Directors of the Company and all contributions are held by the trustee
         and invested at the participants' directions in various mutual funds.
         The Company's expense associated with the Savings Plan was
         approximately $110,000, $137,000 and $120,000 for the years ended
         December 31, 2002, 2001, and 2000, respectively.


<PAGE>



                    FIVE STAR PRODUCTS, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

5.       Machinery and equipment

         Machinery and equipment consist of the following (in thousands):

                                                 December 31,        Estimated
                                              2002         2001    useful lives
                                              ----         ----    ------------

         Machinery and equipment           $   308        $  304      5-7 years
         Furniture and fixtures                735           521        5 years
         Leasehold improvements                839           828      3-9 years
                                           -------        ------
                                             1,882         1,653

         Less accumulated depreciation
           and amortization                 (1,016)         (749)
                                            -------       ------
                                            $  866        $  904
                                           =======        =======

         Depreciation and amortization expense for the years ended December 31,
         2002, 2001, and 2000 was $267,000, $263,000 and $234,000, respectively.

6.       Long-term debt, related party

         The Company has an unsecured note payable to GP Strategies in the
         amount of $4,500,000. The note bears interest at 8%, payable quarterly,
         with the principal due September 30, 2004. The note is subordinated to
         the indebtedness under the Loan Agreement (see note 3). Interest
         expense for the years ended December 31, 2002, 2001, and 2000 was
         $384,000, $400,000 and $400,000, respectively. A subordination
         agreement between the Company and GP Strategies permits the annual
         repayment of principal under certain circumstances (see Note 1).

         In August 2002, the principal amount of this indebtedness was reduced
         from $5,000,000 to $4,500,000 through issuance by the Company of
         2,272,727 shares of its common stock to GP Strategies (see Note 1).


<PAGE>


                    FIVE STAR PRODUCTS, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements (Continued

7.       Related party transactions

(a) Transactions with affiliates

         Transactions with GP Strategies and its subsidiaries, other than loans,
         as disclosed elsewhere in the financial statements, during the years
         ended December 31, 2002, 2001, and 2000 are summarized below (in
         thousands):

                                                          December 31,
                                                  2002         2001       2000
                                                  ----         ----       ----
              Transactions with GP Strategies
              Management fees incurred            $ 98      $     72      $ 85
              Interest expense incurred            384           400       400

         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, business development, insurance and employee benefit
         administration services. The Company pays GP Strategies a fee of up to
         $10,000 per month during the term of the agreement. 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 2002 and 2003. Fees incurred to GP Strategies under this
         agreement totaled $98,000, $72,000, and $85,000 for each of the years
         ended December 31, 2002, 2001 and 2000. At December 31, 2002, the
         amount receivable from GP Strategies, which is included in prepaid
         expenses and other current assets, was $33,000. At December 31, 2001,
         the amount due to GP Strategies for expenses and interest, which is
         included in accounts payable and accrued expenses, was $354,000.

         (b)  Other related party transactions

         On February 8, 2002, the Company entered into a Consulting and
         Severance Agreement (the "Agreement") with Richard Grad, the former
         President and Chief Executive Officer of the Company. Pursuant to the
         Agreement, Mr. Grad will receive $145,000 per year for consulting
         services to be rendered to the Company and a severance fee at the rate
         of $5,000 per year, for a five-year period ending December 31, 2006. In
         addition, in August, 2002, Mr. Grad was granted options to purchase
         150,000 shares of the Company's Common Stock at the quoted market price
         on the date of grant, which options will vest annually over the term of
         the Agreement in equal installments. Such options were valued at an
         aggregate amount of $13,000. The Agreement also provided for the
         repurchase by the Company of 192,308 shares of the Company's Common
<PAGE>

                    FIVE STAR PRODUCTS, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements (Continued

7.       Related party transactions (Continued)

         Stock held by Mr. Grad for an aggregate purchase price of $25,000.
         During this five-year period, Mr. Grad is also receiving certain
         benefits, including medical benefits, life insurance and use of an
         automobile.

         On February 8, 2002, the Company entered into a Consulting and
         Severance Agreement (the "Agreement") with Cynthia Krugman, the former
         Controller of the Company. Pursuant to the Agreement, Ms. Krugman will
         receive $105,000 per year for consulting services to be rendered to the
         Company and a severance fee of $5,000 per year, for an eighteen-month
         period ending June 30, 2003. The Agreement also provided for the
         repurchase by the Company of 76,923 shares of the Company's Common
         Stock held by Ms. Krugman for an aggregate purchase price of $10,000.
         During this period, Ms. Krugman is receiving certain benefits,
         including medical benefits. Ms. Krugman is the daughter of Richard
         Grad.

         Severance fees payable to Mr. Grad and Ms. Krugman under the
         aforementioned agreements are included in accrued expenses at December
         31, 2002.

8.       Income taxes

         The components of income tax expense (benefit) are as follows (in
         thousands):


         Years ended December 31,       2002            2001          2000
         -----------------------------------------------------------------
         Current
         Federal                      $  286          $  251        $  305
         State and local                  93              76           130
                                      ------        --------        ------
         Total current expense           379             327           435
                                      ------         -------           ---
         Deferred
         Federal                         (38)            (23)         (124)
         State and local                 (13)             (7)          (39)
                                      -------      ----------       -------
         Total deferred (benefit)        (51)            (30)         (163)
                                      -------       ---------         -----
         Total income tax expense     $  328          $  297        $  272
                                      -------         -------       -------



<PAGE>


                    FIVE STAR PRODUCTS, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

8.       Income taxes (Continued)

         As of December 31, 2002 and 2001, the Company had approximately
         $244,000 and $193,000, respectively, of deferred tax assets net of
         valuation allowances. The tax effects that gave rise to these deferred
         tax assets and the valuation allowance consist of the following (in
         thousands):

                                                         December 31,
                                                    2002              2001
                                                  ------           --------
         Deferred tax assets

         Allowance for doubtful accounts         $    35           $    31
         Machinery and equipment                     158               115
         Deferred compensation                        39                38
         Accrued compensation                         10                 -
         Inventory                                    41                47
                                                 -------           -------
         Deferred tax assets                         283               231
                                                  ------            ------

         Valuation allowance                         (39)              (38)
                                                 --------           ------
         Net deferred tax assets after
          valuation allowance                    $   244           $   193
                                                 =======           =======

         A reconciliation between the Company's tax provision and the U.S.
statutory rate follows:
<TABLE>

<CAPTION>
         Years ended December 31,                   2002             2001              2000
         ---------------------------------------------------------------------------------
<S>                                              <C>              <C>               <C>
         Tax at U.S. statutory rate              $  245           $  243            $  356
         State and local taxes net of
          Federal benefit                            51               49                84
         Items not deductible                        19               27                24
         Valuation allowance adjustment               1                -              (185)
         Other                                       12              (22)               (7)
         ----------------------------------------------------------------------------------
         Income taxes                            $  328           $  297            $  272
         ---------------------------------------------------------------------------------
</TABLE>

         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 provided a full valuation allowance at
         December 31, 2002 and December 31, 2001 for the deferred tax asset
         relating to the deferred compensation as the realization of such asset
         is uncertain.

         The valuation allowance increased $1,000 for the year ended December
         31, 2002. The valuation allowance for the year ended December 31, 2001
         decreased by $122,000 as a result of the expiration during 2001 of the
         underlying warrants which gave rise to the deferred tax asset relating
         to certain deferred compensation. The valuation allowance decreased by
         $185,000 for the year ended December 31, 2000.

<PAGE>

                    FIVE STAR PRODUCTS, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

9.       Major customers

         For the years ended December 31, 2002, 2001 and 2000 no customer
         accounted for more than 10% of the Company's revenue.

10.      Stock options and warrants

         (a) Stock option plan

         On January 1, 1994, the Company's Board of Directors adopted the Five
         Star Products, Inc. 1994 Stock Option Plan (the "Stock Option Plan"),
         which became effective August 5, 1994. On January 1, 2002, the Board of
         Directors amended the Stock Option Plan increasing the total number of
         shares of Common Stock to 4,000,000 shares reserved for issuance,
         subject to adjustment in the event of stock splits, stock dividends,
         recapitalizations, reclassifications or other capital

         (a)      Stock option plan (Continued)

         adjustments. Unless designated as "incentive stock options" intended to
         qualify under Section 422 of the Internal Revenue 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 subsidiaries, and to consultants and other
         individuals providing services to the Company.

         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.

         Options granted during 2002, 2001 and 1999 vest 20% on date of grant
         with the balance vesting in equal annual installments over four years.
         There were no options granted in 2000, and all options granted prior to
         1999 were fully vested as of December 31, 2002.



<PAGE>


                    FIVE STAR PRODUCTS, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

  10.     Stock options and warrants (Continued)

         Activity relating to stock options granted by the Company:

<TABLE>

<CAPTION>
                                                       Number of        Weighted-Average
                                                        Shares             Exercise Price
<S>                          <C> <C>                   <C>                    <C>
         Balance at December 31, 1999                  2,150,000              .19
                  Cancelled                              (25,000)             .13
                                                     -----------
         Balance at December 31, 2000                  2,125,000              .19
                  Granted           450,000                                   .14
                  Cancelled                              (75,000)             .33
                                                     -----------
         Balance at December 31, 2001                  2,500,000              .18
                  Granted           675,000                                   .15
                  Cancelled                             (245,000)             .27
                                                      -----------
         Balance at December 31, 2002                  2,930,000              .16
                                                       =========
         Exercisable at December 31, 2002              2,060,000              .16
                                                     ===========
</TABLE>

         The following table summarizes information about the Plan's options at
December 31, 2002:

<TABLE>
                                            Weighted          Weighted                         Weighted
<CAPTION>
                Range                        Average           Average                          Average
             of Exercise          Number    Exercise             Years            Number       Exercise
                  Price      Outstanding      Prices         Remaining       Exercisable          Price
          ---------------------------------------------------------------------------------------------
<S>       <C>      <C>         <C>            <C>             <C>              <C>              <C>
          $.13  -  $.13        1,400,000      $.13            .44              1,400,000        $.13
           .14  -   .14          925,000       .14           3.96                275,000         .14
           .15  -   .15           50,000       .15           4.24                 25,000         .15
           .16  -   .16          150,000       .16           4.64                 30,000         .16
           .33  -   .33          405,000       .33           1.29                330,000         .33
          ------------------------------------------------------------------------------------------
          $.13  -  $.33        2,930,000      $.16           1.95              2,060,000        $.16
       ---------------------------------------------------------------------------------
</TABLE>

         (b) Warrants to purchase common stock

         Warrants to purchase a total of 6,017,775 shares of the Company's
         common stock, which the Company had issued during 1994 in connection
         with its acquisition of NPD Trading from GP Strategies, were extended
         in 1996 at an exercise price of $.50 per share and in 1998 at an
         exercise price of $.75 per share. These warrants expired in August,
         2000.


<PAGE>


                    FIVE STAR PRODUCTS, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)


11.      Earnings per share

         Earnings per share (EPS) for the years ended December 31, 2002, 2001
         and 2000 are as follows (in thousands, except per share amounts):

<TABLE>
                                                                     Year ended December 31,
<CAPTION>
                                                          2002           2001                2000
                                                          ----           ----                ----
         Basic EPS
<S>                                                  <C>            <C>                 <C>
         Net income                                  $     391      $     417           $     775
         Weighted average shares
          outstanding                                   13,742         13,020              13,020
                                                      --------       --------            --------
         Basic earnings per share                   $      .03     $      .03          $      .06
                                                    ----------     ----------          ----------

         Diluted EPS
         Net income                                  $     391      $     417           $     775
                                                     ---------      ---------           ---------

         Weighted average shares
          outstanding                                   13,742         13,020              13,020
         Dilutive effect of stock options (a)               74            153                 719
                                                     ---------      ---------          ----------
         Weighted average shares
          outstanding, diluted                          13,816         13,173              13,739
                                                      --------       --------            --------

         Diluted earnings
          per share                                  $     .03     $      .03          $      .06
                                                     ---------     ----------          ----------
</TABLE>

(a)      Diluted earnings per share 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.

12.      Commitments and contingencies

         The Company has several noncancellable leases which cover real
         property, machinery and equipment. Such leases expire at various dates
         and some of them have options to extend their terms.


<PAGE>


                    FIVE STAR PRODUCTS, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

12.      Commitments and contingencies (Continued)

         Minimum rental obligations under long-term operating leases are
         indicated in the table below (in thousands). Figures for real property
         include estimated amounts of supplemental lease obligations, such as
         pro-rated assessments for property taxes or common-area expenses.

                        Real                  Machinery and
                       property                 equipment                Total
         2003           $ 1,616                   $1,098               $ 2,714
         2004             1,589                      796                 2,385
         2005             1,589                      376                 1,965
         2006             1,589                       29                 1,618
         2007               314                        7                   321
         ---------------------------------------------------------------------
         Total          $ 6,697                  $ 2,306               $ 9,003
         ---------------------------------------------------------------------

         During 2002, 2001, and 2000, the Company incurred $2,882,000,
         $2,721,000, and $3,412,000, respectively, of rental expenses. GP
         Strategies has guaranteed the leases for the Company's New Jersey and
         Connecticut warehouses, totaling approximately $1,589,000 per year
         through the first quarter of 2007.

13.      Valuation and Qualifying Accounts

         The following is a summary of the allowance for doubtful accounts
         related to accounts receivable for the years ended December 31 (in
         thousands):

                                                  2002        2001        2000
                                                  ----        ----        ----
         Balance at beginning of year           $  631      $  681      $  616
         Charged (credited) to expense             438         (47)         80
         Uncollectable accounts written off,
           net of recoveries                      (429)         (3)        (15)
                                                 -----     -------    ---------
         Balance at end of year                 $  640      $  631      $   681
                                                ======     =======      =======

14.      Subsequent events

         The Company's Board of Directors has authorized the repurchase of up to
         1,000,000 shares of the Company's common stock. In January, 2003, the
         Company purchased 76,000 shares of its common stock on the open market
         at prices per share ranging from $0.08 to $0.10. In February, 2003, the
         Company purchased 10,000 shares of its common stock on the open market
         at a price per share of $0.10.


<PAGE>


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

                None


<PAGE>



                                    PART III

Item 10.        Directors and Executive Officers of the Registrant

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

Name                Age  Position
------------------------------------------------------
Jerome I. Feldman   74   Chairman of the Board
Charles Dawson      46   President and Director
Bruce Sherman       50   Executive Vice President, Sales and Director
Steven Schilit      56   Executive Vice President, and Chief Operating Officer
                         and Director
Joseph Leven        50   Vice President
John Moran          52   Director
Carll Tucker        50   Director

         Jerome I. Feldman has been Chairman of the Board of the Company since
1994. In 1959 he founded GP Strategies Corporation ("GPS"), which today is a
workforce development company, and is Chief Executive Officer and a Director of
GPS. He also has been Chairman of the Board of GPS since 1999 and was President
of GPS until June 2001. He has been a director of GSE Systems, Inc., ("GSE"), a
software design and development company since 1994 and Chairman of the Board of
GSE since 1997. Mr. Feldman is also Chairman of the New England Colleges Fund
and a Trustee of Northern Westchester Hospital Center.

         Charles Dawson has been President of the Company and of Five Star
Group, Inc. ("Five Star") since January 2002 and Vice President and a director
of the Company since 1999. Since 1993 Mr. Dawson has held several managerial
positions with Five Star.

         Bruce Sherman has been Executive Vice President, Sales of the Company
and of Five Star since January 2002, Vice President and a director of the
Company since 1999 and Vice President of Sales of Five Star since 1993. He is a
member of the New York and New Jersey Paint and Decorating Association.

         Steven Schilit has been Executive Vice President, Chief Operating
Officer of the Company and of Five Star since January 2002, Vice President and a
director of the Company since 1999 and since 1981 has held several executive
positions with Five Star.

         Joseph Leven has been Vice President of the Company since 1999, Vice
President of Operations of Five Star since 1995 and since 1976 has held various
managerial positions with Five Star.

         John Moran has been a director of the Company since January 2002. He
has been Vice President of GPS since August 2001, President and Chief Executive
Officer of GP e-Learning Technologies, Inc. from 2000 to August 2001 and from
1994 to 2000 he was Group President, Training and Technologies Group of General
Physics Corporation.


<PAGE>

         Carll Tucker has been a director of the Company since January 2002. In
1986 he founded Trader Publications and was its President until 1999, which
published The Patent Trader newspaper and various local magazines, newsletters
and programs for cultural institutions in Westchester, Putnam and Fairfield
counties. Trader Publications was sold to Gannett Corporation in 1999. Mr.
Tucker is the author of a weekly newspaper column in the Westchester Patent
Trader, "Looseleaves", since 1983. Mr. Tucker is also a Trustee of Northern
Westchester Hospital Center and was its Chairman of the Board from 1999-2001.

Compliance with Section 16(a) of the Exchange Act

         Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's securities, to file reports of ownership and changes in ownership with
the SEC and NASDAQ. Officers, directors and greater than 10% shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.

         Based solely on its review of copies of such forms received by it and
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during the period January
1, 2002 to March 18, 2003, all filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were complied with, except that
Carll Tucker and GP Strategies filed one late report.



<PAGE>


Item 11. Executive Compensation

Executive Compensation

         The following table and notes present the aggregate compensation paid
by the Company's subsidiary, Five Star, to its President and to its most highly
compensated executive officers for services rendered to Five Star in 2002.

<TABLE>

                           SUMMARY COMPENSATION TABLE

<CAPTION>
                                                                                  Long-Term
                                                                                Compensation
                                                 Annual Compensation               Awards
                                                     Salary            Bonus        Stock               All Other
Name and Principal Position             Year       ($)                   ($)       (#)(1)                  ($)
---------------------------             ----     -------             -------  -----------------    ------------------
<S>                                    <C>          <C>                 <C>            <C>             <C>
Charles Dawson                         2002         226,615            -0-            -0-              20,602(2)
President                              2001         188,009            -0-            150,000             404(3)
                                       2000        161,544             -0-            -0-                 379(3)

Steven Schilit                         2002         201,475            -0-            -0-               5,391(4)
Executive Vice President and           2001         172,596            -0-            150,000           4,676(4)
Chief Operating Officer                2000         167,055            -0-            -0-               4,665(4)

Bruce Sherman                          2002         221,650            -0-            -0-              25,118(5)
Executive Vice President,              2001         221,571            -0-            150,000           4,842(6)
Sales                                  2000         171,586           15,000          -0-               4,701(6)

Joseph Leven                           2002         117,350            -0-            -0-               3,186(7)
Vice President                         2001         115,190            -0-            -0-               2,764(7)
                                       2000         113,800            -0-            -0-               2,050(7)

</TABLE>
(1)       Consists of options to purchase shares of Common Stock granted
          pursuant to the Company's 1994 Non-Qualified Stock Option Plan.

(2)       Consists of $602 for executive life insurance premiums and a $20,000
          bonus.

(3)       Consists of premiums for executive life insurance.

(4)       Consists of $4,400, $4,080 and $4,196 as matching contributions made
          by the Company to the 401(k) Savings Plan for 2002, 2001 and 2000,
          respectively, and $991, $596 and $469 for executive life insurance
          premiums for 2002, 2001 and 2000, respectively.

(5)       Consists of $4,400 as matching contributions made by the Company to
          the 401(k) Savings Plan, $718 for executive life insurance premiums
          and a $20,000 bonus.

(6)       Consists of $4,080 and $3,953 as matching contributions made by the
          Company to the 401(k) Savings Plan for 2001 and 2000, respectively,
          and $762 and $748 for executive life insurance premiums for 2001 and
          2000, respectively.
<PAGE>


(7)       Consists of $2,833, $2,449 and $1,768 as matching contributions made
          by the Company to the 401(k) Savings Plan for 2002, 2001 and 2000,
          respectively, and $353, $315 and $282 for executive life insurance
          premiums for 2002, 2001 and 2000, respectively.

Option Grants in 2002

No options were granted to the named executive officers in 2002.

                       Aggregate Option Exercises in 2002
                        And Fiscal Year-End Option Values

         The following table and notes contain information concerning the
exercise of stock options under the Plan during 2002 and unexercised options
under the Plan held at the end of 2002 by the named executive officers. Unless
otherwise indicated, options are to purchase shares of Common Stock.

<TABLE>

<CAPTION>
                                  Shares                       Exercisable/Unexercisable      Value of Unexercised
                                Acquired on      Value                Options at          In-the-Money Options at
                                 Exercise      Realized          December 31, 2002(#)     December 31, 2002($)(1)
                                                                 --------------------     -----------------------
Name                                (#)           ($)        Exercisable    Unexercisable Exercisable Unexercisable
----                                ---           ---        -----------    ------------- ----------- -------------

<S>                                  <C>           <C>         <C>             <C>             <C>          <C>
Charles Dawson.............         -0-           -0-          120,000         105,000        -0-          -0-
Steven Schilit.............         -0-           -0-          120,000         105,000        -0-          -0-
Bruce Sherman..............         -0-           -0-          120,000         105,000        -0-          -0-
Joseph Leven...............         -0-           -0-           60,000          15,000        -0-          -0-
</TABLE>


(1)      Calculated based on $0.08, which was the closing price of the Common
         Stock as quoted on the OTC Bulletin Board, which is operated by the
         NASDAQ Stock Market, on December 31, 2002, (which was below the
         exercise price of the stock options.)

Board Report on Executive Compensation

         During the year ended December 31, 2002, the Company did not have a
Compensation Committee. Accordingly, the full Board of Directors is responsible
for determining and implementing the compensation policies of the Company.

         The Board's executive compensation policies are designed to offer
competitive compensation opportunities for all executives which are based on
personal performance, individual initiative and achievement, as well as
assisting the Company in attracting and retaining qualified executives. The
Board also endorses the position that stock ownership by management and
stock-based compensation arrangements are beneficial in aligning management's
and shareholders' interests in the enhancement of shareholder value.

         Compensation paid to the Company's executive officers generally
consists of the following elements: base salary, annual bonus and long-term
compensation in the form of stock options and the 401(k) Savings Plan. The
compensation for the other executive officers of the Company is determined by a

<PAGE>

consideration of each officer's initiative and contribution to overall corporate
performance and the officer's managerial abilities and performance in any
special projects that the officer may have undertaken. Competitive base salaries
that reflect the individual's level of responsibility are important elements of
the Company's executive compensation philosophy. Subjective considerations of
individual performance are considered in establishing annual bonuses and other
incentive compensation.

         The Company has certain broad-based employee benefit plans in which all
employees, including the named executives, are permitted to participate on the
same terms and conditions relating to eligibility and subject to the same
limitations on amounts that may be contributed. In 2002, the Company also made
matching contributions to the 401(k) Savings Plan for those participants.

Mr. Dawson's Compensation

         Mr. Dawson's compensation in 2002 was determined principally by the
terms of his employment agreement with Five Star. Effective November 28, 2001,
Five Star and Mr. Dawson entered into an employment agreement which is described
below. In considering the terms of Mr. Dawson's employment agreement the Board
of Directors considered Mr. Dawson's significant contribution to the improved
financial performance of the Company.

          Mr. Dawson, has decades of experience in the industry and has strong
relationships with manufacturing companies that are the Company's suppliers. In
addition, Mr. Dawson helped lead management's efforts in expanding the Company's
sales territory to encompass the Mid-Atlantic states.

Employment Agreements

         Charles Dawson. As of November 28, 2001, Charles Dawson and Five Star
Group, Inc. entered into an employment agreement pursuant to which Mr. Dawson is
employed as President of the Company for a period commencing January 1, 2002
until December 31, 2005, (the "Employment Term"), unless sooner terminated.

         Commencing January 1, 2002, Mr. Dawson's base salary is $225,000, with
annual increases of at least 3% effective on the second year of the Employment
Term. Mr. Dawson will receive a target bonus of $100,000, calculated based upon
the following two components: (1) earnings growth of the Company, and (2) an
achievement of certain Company goals, weighted 75% and 25% respectively. The
goals component of the bonus for 2002 will be determined by the Steering Team at
the conclusion of the year. The Steering Team consists of Jerome I. Feldman,
John Moran, Steve Schilit, Bruce Sherman and Charles Dawson. The Board of
Directors shall determine whether earnings growth resulting from acquisitions
will be included in Mr. Dawson's bonus determination. In any determination by
the Steering Team of Mr. Dawson's bonus, Mr. Dawson shall recuse himself from
any such proceedings. Mr. Dawson's target bonus for the years 2003, 2004 and
2005, will be $110,000, $120,000, and $130,000, respectively, which will be
determined by components and weighting factors based upon the goals and
objectives of the Company, mutually agreed upon. Pursuant to the employment
agreement, the Company granted Mr. Dawson under the Company's option plan,
options to purchase 150,000 shares of the Company's Common Stock at an exercise
price of $0.14 per share. Such options vest 20% immediately and 20% on each
November 28, commencing November 28, 2001 and terminating on November 28, 2005.
The Company is also required to provide Mr. Dawson with an automobile.


<PAGE>

         The Company may terminate the employment agreement for cause which is
defined as (i) breach by Mr. Dawson of any of the terms of the employment
agreement, provided that the Company has given fifteen days notice prior to
termination for any breach of any of the terms of the employment agreement which
are capable of cure, (ii) gross neglect by Mr. Dawson of his duties continuing
for 30 days after written warning issued to Mr. Dawson setting forth the conduct
constituting such gross neglect, (iii) conviction of Mr. Dawson for any felony
or any crime involving moral turpitude; (iv) the conviction of Mr. Dawson of any
offense involving the property of the Company or any of its affiliates; (v) the
commission by Mr. Dawson of any act of fraud or dishonesty; (vi) the engagement
by Mr. Dawson in misconduct resulting in serious injury to the Company, or (vii)
the physical or mental disability of Mr. Dawson, whether totally or partially,
if he is unable to perform substantially his duties for a period of (i) two
consecutive months or (ii) shorter periods aggregating three months during any
twelve month period, such termination to be effective thirty days after written
notice of such decision delivered to Mr. Dawson. If Mr. Dawson is terminated for
cause, he shall not be entitled to any compensation, including without
limitation, the bonus, if any, after the date of termination for the year in
which the termination takes place. If Mr. Dawson's employment is terminated by
his death or disability, the Company is required to pay Mr. Dawson his base
salary then in effect for the month during which termination occurred, and four
months thereafter. In the event that termination occurs more than six months
after the start of the then-current contract year, Mr. Dawson shall receive a
bonus for that year prorated through the date of termination.

         If the Company terminates the employment agreement for any reason,
other than those set forth in the employment agreement, the Company is obligated
to continue to pay Mr. Dawson's base salary as then in effect for the period
commencing from the date of termination and ending on the termination date of
the employment agreement and shall only be obligated to pay the Bonus, if any,
through the date of termination on a pro rata basis.

         Bruce Sherman As of November 28, 2001, Bruce Sherman and Five Star
Group, Inc. entered into an employment agreement pursuant to which Mr. Sherman
is employed as Executive Vice President, Sales of the Company for a period
commencing January 1, 2002 until December 31, 2005, (the "Employment Term"),
unless sooner terminated.

         Commencing January 1, 2002, Mr. Sherman's base salary is $220,000, with
annual increases of at least 3% effective on the second year of the Employment
Term. Mr. Sherman will receive a target bonus of $100,000, calculated based upon
the following two components: (1) earnings growth of the Company, and (2) an
achievement of certain Company goals, weighted 75% and 25% respectively. The
goals component of the bonus for 2002 will be determined by the Steering Team at
the conclusion of the year. The Steering Team consists of Jerome I. Feldman,
John Moran, Steve Schilit, Charles Dawson and Bruce Sherman. The Board of
Directors shall determine whether earnings growth resulting from acquisitions
will be included in Mr. Sherman's bonus determination. In any determination by
the Steering Team of Mr. Sherman's bonus, Mr. Sherman shall recuse himself from
any such proceedings. Mr. Sherman's target bonus for the years 2003, 2004 and
2005, will be $110,000, $120,000, and $130,000, respectively, which will be
determined by components and weighting factors based upon the goals and
objectives of the Company, mutually agreed upon. Pursuant to the employment

<PAGE>

agreement, the Company granted Mr. Sherman under the Company's option plan,
options to purchase 150,000 shares of the Company's Common Stock at an exercise
price of $0.14 per share. Such options vest 20% immediately and 20% on each
November 28, commencing November 28, 2001 and terminating on November 28, 2005.
The Company is also required to provide Mr. Sherman with an automobile.

         The Company may terminate the employment agreement for cause which is
defined as (i) breach by Mr. Sherman of any of the terms of the employment
agreement, provided that the Company has given fifteen days notice prior to
termination for any breach of any of the terms of the employment agreement which
are capable of cure, (ii) gross neglect by Mr. Sherman of his duties continuing
for 30 days after written warning issued to Mr. Sherman setting forth the
conduct constituting such gross neglect, (iii) conviction of Mr. Sherman for any
felony or any crime involving moral turpitude; (iv) the conviction of Mr.
Sherman of any offense involving the property of the Company or any of its
affiliates; (v) the commission by Mr. Sherman of any act of fraud or dishonesty;
(vi) the engagement by Mr. Sherman in misconduct resulting in serious injury to
the Company, or (vii) the physical or mental disability of Mr. Sherman, whether
totally or partially, if he is unable to perform substantially his duties for a
period of (i) two consecutive months or (ii) shorter periods aggregating three
months during any twelve month period, such termination to be effective thirty
days after written notice of such decision delivered to Mr. Sherman. If Mr.
Sherman is terminated for cause, he shall not be entitled to any compensation,
including without limitation, the bonus, if any, after the date of termination
for the year in which the termination takes place. If Mr. Sherman's employment
is terminated by his death or disability, the Company is required to pay Mr.
Sherman his base salary then in effect for the month during which termination
occurred, and four months thereafter. In the event that termination occurs more
than six months after the start of the then-current contract year, Mr. Sherman
shall receive a bonus for that year prorated through the date of termination.

         If the Company terminates the employment agreement for any reason,
other than those set forth in the employment agreement, the Company is obligated
to continue to pay Mr. Sherman's base salary as then in effect for the period
commencing from the date of termination and ending on the termination date of
the employment agreement and shall only be obligated to pay the Bonus, if any,
through the date of termination on a pro rata basis.

         Steven Schilit As of November 28, 2001, Steven Schilit and Five Star
Group, Inc. entered into an employment agreement pursuant to which Mr. Schilit
is employed as Executive Vice President and Chief Operating Officer of the
Company for a period commencing January 1, 2002 until December 31, 2005, (the
"Employment Term"), unless sooner terminated.

         Commencing January 1, 2002, Mr. Schilit's base salary is $200,000, with
annual increases of at least 3% effective on the second year of the Employment
Term. Mr. Schilit will receive a target bonus of $100,000, calculated based upon
the following two components: (1) earnings growth of the Company, and (2) an
achievement of certain Company goals, weighted 75% and 25% respectively. The
goals component of the bonus for 2002 will be determined by the Steering Team at
the conclusion of the year. The Steering Team consists of Jerome I. Feldman,
John Moran, Charles Dawson, Bruce Sherman and Steven Schilit. The Board of
Directors shall determine whether earnings growth resulting from acquisitions
will be included in Mr. Schilit's bonus determination. In any determination by
the Steering Team of Mr. Schilit's bonus, Mr. Schilit shall recuse himself from
any such proceedings. Mr. Schilit's target bonus for the years 2003, 2004 and
2005, will be $110,000, $120,000, and $130,000, respectively, which will be

<PAGE>

determined by components and weighting factors based upon the goals and
objectives of the Company, mutually agreed upon. Pursuant to the employment
agreement, the Company granted Mr. Schilit under the Company's option plan,
options to purchase 150,000 shares of the Company's Common Stock at an exercise
price of $0.14 per share. Such options vest 20% immediately and 20% on each
November 28, commencing November 28, 2001 and terminating on November 28, 2005.
The Company is required also to provide Mr. Schilit with an automobile.

         The Company may terminate the employment agreement for cause which is
defined as (i) breach by Mr. Schilit of any of the terms of the employment
agreement, provided that the Company has given fifteen days notice prior to
termination for any breach of any of the terms of the employment agreement which
are capable of cure, (ii) gross neglect by Mr. Schilit of his duties continuing
for 30 days after written warning issued to Mr. Schilit setting forth the
conduct constituting such gross neglect, (iii) conviction of Mr. Schilit for any
felony or any crime involving moral turpitude; (iv) the conviction of Mr.
Schilit of any offense involving the property of the Company or any of its
affiliates; (v) the commission by Mr. Schilit of any act of fraud or dishonesty;
(vi) the engagement by Mr. Schilit in misconduct resulting in serious injury to
the Company, or (vii) the physical or mental disability of Mr. Schilit, whether
totally or partially, if he is unable to perform substantially his duties for a
period of (i) two consecutive months or (ii) shorter periods aggregating three
months during any twelve month period, such termination to be effective thirty
days after written notice of such decision delivered to Mr. Schilit. If Mr.
Schilit is terminated for cause, he shall not be entitled to any compensation,
including without limitation, the bonus, if any, after the date of termination
for the year in which the termination takes place. If Mr. Schilit's employment
is terminated by his death or disability, the Company is required to pay Mr.
Schilit his base salary then in effect for the month during which termination
occurred, and four months thereafter. In the event that termination occurs more
than six months after the start of the then-current contract year, Mr. Schilit
shall receive a bonus for that year prorated through the date of termination.

         If the Company terminates the employment agreement for any reason,
other than those set forth in the employment agreement, the Company is obligated
to continue to pay Mr. Schilit's base salary as then in effect for the period
commencing from the date of termination and ending on the termination date of
the employment agreement and shall only be obligated to pay the Bonus, if any,
through the date of termination on a pro rata basis.



<PAGE>


Item 12. Security Ownership of Certain Beneficial Owners and Management

                             PRINCIPAL STOCKHOLDERS

         The following table sets forth certain information as of March 14,
2003, 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

GP Strategies Corporation                    7,102,831(1)             47.5%
777 Westchester Avenue
White Plains, NY 10604

Jerome I. Feldman                            7,757,467(2)              51

Charles Dawson                                 312,308(3)             2.1

Bruce Sherman                                  312,308(3)             2.1

Steven Schilit                                 312,308(3)             2.1

Joseph Leven                                   267,308(3)             1.8

John Moran                                      85,000(3)               *

Carll Tucker                                    50,000(3)               *

All directors and officers
as a group (8 persons)                       2,074,493(3)            13.0
--------------
* The number of shares owned is less than one percent of the outstanding shares
of Common Stock.

(1)      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."

(2)      Includes (i) 7,102,831 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) 560,000 shares of Common Stock issuable
         upon exercise of currently exercisable stock options (of which 250,000
         options were granted pursuant to GP Strategies Five Star Stock Option
         Plan) held by Mr. Feldman. Mr. Feldman disclaims beneficial ownership
         of the shares owned by GP Strategies and his family.


<PAGE>

(3)      Includes (i) 192,308 shares of Common Stock held by each of Messrs.
         Dawson, Sherman, Schilit and Leven, and 863,320 shares for all
         executives and officers as a group, and (ii) 120,000 shares of Common
         Stock issuable upon exercise of currently exercisable stock options
         held by each of Messrs. Dawson, Sherman, Schilit, 235,000, 75,000,
         85,000 and 50,000 shares of Common Stock issuable upon exercise of
         currently exercisable stock options held by Messrs. Leven, Moran and
         Tucker, respectively and 1,210,000 shares for all executives and
         officers as a group.

Item 13.      Certain Relationships and Related Transactions

         On September 30, 1998, a newly formed wholly owned subsidiary of the
Company, Five Star, purchased from JL Distributors, Inc. ("JL"), a wholly owned
subsidiary of GP Strategies, substantially all of the operating assets of JL.
The assets were purchased for approximately $16,476,000 in cash and a $5,000,000
unsecured promissory note (the "Note"). The Note, which bears interest at the
rate of 8% payable quarterly to GP Strategies, was amended in November, 2001, to
provide for the extension of the due date of the Note until September 30, 2004.
Under a separate Subordination Agreement between GP Strategies and the banks
providing the Company's $25,000,000 revolving loan, Five Star may make annual
payments of principal to GP Strategies, if the Company achieves certain
financial performance benchmarks.

         On August 2, 2002, the Company entered into a transaction to reduce its
long-term debt to GP Strategies. The principal amount of said debt was reduced
by $500,000 to a new principal amount of $4,500,000. The Company executed a new
promissory note to GP Strategies but under the same terms and conditions as the
original note. In connection with this debt reduction, GP Strategies received
2,272,727 shares of the Company's common stock. The transaction valued the
Company's stock at $0.22 a share, which was at a premium to the open market
value at that time. As a result of this transaction, GP Strategies' ownership of
the Company has increased to approximately 47% from approximately 37% of the
Company's outstanding shares of common stock.

         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, business development,
accounting, insurance and employee benefit administration services. The Company
pays GP Strategies a fee of up to $10,000 per month during the term of the
agreement. The Agreement is automatically renewable for successive one-year
terms. The Agreement was renewed for 2002 and 2003.

         Five Star leases 236,000 square feet in New Jersey and 111,000 square
feet in Connecticut. Five Star's operating lease for the New Jersey facility
expires in March, 2007 and the annual rent is $1,187,000. Five Star's lease for
the Connecticut facility expires in February, 2007 and its annual rent is
$402,000. The Company's White Plains, New York office space is provided by GP
Strategies pursuant to the Management Services Agreement. GP Strategies has
guaranteed the leases for Five Star's New Jersey and Connecticut warehouses
totaling approximately $1,589,000 per year through the first quarter of 2007.


<PAGE>

         GP Strategies holds 7,102,831 shares of Common Stock, representing
approximately 48% of the Common Stock issued and outstanding on March 14, 2003
(without taking into account outstanding options and warrants). The Company's
by-laws do not provide for cumulative voting. GP Strategies had entered into a
Voting Agreement pursuant to which it had agreed that, for a period of three
years from August 31, 1998 it would 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. See "Principal
Stockholders." GP Strategies and the Company renewed the Voting Agreement until
June 30, 2004.

         On February 8, 2002, the Company entered into a Consulting and
Severance Agreement (the "Agreement") with Richard Grad, the former President
and Chief Executive Officer of the Company. Pursuant to the Agreement, Mr. Grad
will receive $145,000 per year for consulting services rendered to the Company
and a severance fee at the rate of $5,000 per year, for a five-year period
ending December 31, 2006. In addition, in August, 2002, Mr. Grad was granted
options to purchase 150,000 shares of the Company's Common Stock at the quoted
market price on the date of grant, which options will vest annually over the
term of the Agreement in equal installments. The Agreement also provided for the
repurchase by the Company of 192,308 shares of the Company's Common Stock held
by Mr. Grad for an aggregate purchase price of $25,000. During this five-year
period, Mr. Grad is also receiving certain benefits, including medical benefits,
life insurance and use of an automobile.

         On February 8, 2002, the Company entered into a Consulting and
Severance Agreement (the "Agreement") with Cynthia Krugman, the former
Controller of the Company. Pursuant to the Agreement, Ms. Krugman will receive
$105,000 per year for consulting services to be rendered to the Company and a
severance fee of $5,000 per year, for an eighteen-month period ending June 30,
2003. The Agreement also provided for the repurchase by the Company of 76,923
shares of the Company's Common Stock held by Ms. Krugman for an aggregate
purchase price of $10,000. During this period, Ms. Krugman is receiving certain
benefits, including medical benefits. Ms. Krugman is the daughter of Richard
Grad.

Item 14. Controls and Procedures

         Within the 90-day period prior to the filing of this report, the
Company's management, including the President and the Chief Financial Officer,
conducted an evaluation of the effectiveness of the design and operation of the
Company's disclosure controls and procedures as defined in Exchange Act Rule
13a-14(c). Based on that evaluation, the President and the Chief Financial
Officer concluded that the Company's disclosure controls and procedures were
effective as of the date of that evaluation. There have been no significant
changes in internal controls, or in factors that could significantly affect
internal controls, subsequent to the date the Chief Executive Officer and the
Chief Financial Officer completed their evaluation.


<PAGE>



                                     PART IV

Item 15. 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, 2002 and 2001..........................................14

         Consolidated Statements of
         Operations - Years ended
         December 31, 2002, 2001 and 2000....................................16

         Consolidated Statements of Changes in
         Stockholders' Equity - Years
         ended December 31, 2002, 2001 and 2000..............................17

         Consolidated Statements of Cash Flows
         Years ended December 31, 2002, 2001 and 2000........................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

         There were no reports filed by the Registrant on Form 8-K for the
period ended December 31, 2002.


<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.

                                                     FIVE STAR PRODUCTS, INC.


                                                     Charles Dawson, President

Dated:   April 14, 2003

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


Charles Dawson                President, and Director
                              (Principal Executive and Operating Officer)



Jerome I. Feldman             Chairman of the Board


Bruce Sherman
                              Executive Vice President, Sale and Director


Steven Schilit
                              Executive Vice President, Chief Operating Officer
                              and Director



Roger Antaki                  Chief Financial Office
                              (Principal Financial and Accounting Officer)

John Moran                     Director


                                       3
<PAGE>


        CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14
                     OF THE SECURITIES EXCHANGE ACT OF 1934

         I, Charles Dawson, President of Five Star Products, Inc., certify that:

         1. I have reviewed this annual report on Form 10-K of Five Star
Products, Inc.;

         2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;

         3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

         4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

         a) designed such disclosure controls and procedures to ensure that
      material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this annual report is
      being prepared;

         b) evaluated the effectiveness of the registrant's disclosure controls
      and procedures as of a date within 90 days prior to the filing date of
      this annual report (the "Evaluation Date"); and

         c) presented in this annual report our conclusions about the
      effectiveness of the disclosure controls and procedures based on our
      evaluation as of the Evaluation Date;

         5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and board of
directors:

         a) all significant deficiencies in the design or operation of internal
      controls which could adversely affect the registrant's ability to record,
      process, summarize and report financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and

         b) any fraud, whether or not material, that involves management or
      other employees who have a significant role in the registrant's internal
      controls; and

         6. The registrant's other certifying officer and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: April 14, 2003
                                             Charles Dawson


<PAGE>


        CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14
                     OF THE SECURITIES EXCHANGE ACT OF 1934

         I, Roger P. Antaki, Chief Financial Officer of Five Star Products,
Inc., certify that:

         1. I have reviewed this annual report on Form 10-K of Five Star
Products, Inc.;

         2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;

         3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

         4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

             a) designed such disclosure controls and procedures to ensure that
         material information relating to the registrant, including its
         consolidated subsidiaries, is made known to us by others within those
         entities, particularly during the period in which this annual report is
         being prepared;

             b) evaluated the effectiveness of the registrant's disclosure
         controls and procedures as of a date within 90 days prior to the filing
         date of this annual report (the "Evaluation Date"); and

             c) presented in this annual report our conclusions about the
         effectiveness of the disclosure controls and procedures based on our
         evaluation as of the Evaluation Date;

         5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and board of
directors:

             a) all significant deficiencies in the design or operation of
         internal controls which could adversely affect the registrant's ability
         to record, process, summarize and report financial data and have
         identified for the registrant's auditors any material weaknesses in
         internal controls; and

             b) any fraud, whether or not material, that involves management or
         other employees who have a significant role in the registrant's
         internal controls; and

         6. The registrant's other certifying officer and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: April 14, 2003
                                                              Roger P. Antaki


<PAGE>



                                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 as amended on January 1,
               2002. Incorporated herein by reference to Exhibit 10 of the
               Registrant's Form 10-K for the year ended December 31, 2001.

10.1           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.

10.2           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.

10.3           Amended Voting Agreement, dated as of June 30, 2002 between
               Registrant and GP Strategies Corporation.*

10.4           Lease dated as of February 1, 1986 between Vernel Company and
               Five Star Group, Inc., as amended on July 25, 1994. Incorporated
               herein by reference to Exhibit 10.6 of the Registrant's Form 10-K
               for the year ended December 31, 1998.


<PAGE>



10.5           Lease dated as of May 4, 1983 between Vornado, Inc., and Five
               Star Group, Inc. Incorporated herein by reference to Exhibit 10.7
               of the Registrant's Form 10-K for the year ended December 31,
               1998.

10.6           Lease Modification and Extension Agreement dated July 6, 1996
               between Hanover Public Warehousing, Inc. and Five Star Group,
               Inc. Incorporated herein by reference to Exhibit 10.8 of the
               Registrant's Form 10-K for the year ended December 31, 1998.

10.7           Agreement between Five Star Group and Local No. 11 affiliated
               with International Brotherhood of Teamsters dated December 12,
               2000. Incorporated herein by reference to Exhibit 10.7 to the
               Registrant's Annual Report on Form 10-K for the year ended
               December 31, 2000.

10.8           Asset Purchase Agreement dated as of August 31, 1998 between Five
               Star Products, Inc. and Five Star Group, Inc. Incorporated herein
               by Reference to Exhibit 10 of the Registrant's Form 8-K dated
               September 15, 1998.

10.9           Loan and Security Agreement by and between the Registrant, as
               Borrower and Summit Business Capital Corp. doing business as
               Fleet Capital-Business Finance Division as Agent. Incorporated
               herein by reference to Exhibit 10 of the Registrant's Form 10-Q
               for the quarter ended September30, 2001.

10.10          Amended Note in the amount of $4,500,000 dated August 2, 2002,
               between the Registrant and GP Strategies Corporation.*

10.11          Consulting and Severance Agreement dated as of February 8, 2002
               between the Registrant and Richard Grad. Incorporated herein by
               reference to Exhibit 10.11 of the Registrant's Form 10-K for the
               year ended December 31, 2001.

10.12          Employment Agreement dated as of November 28, 2001 between the
               Registrant and Charles Dawson. Incorporated herein by reference
               to Exhibit 10.12 of the Registrant's Form 10-K for the year ended
               December 31, 2001.


<PAGE>


10.13          Employment Agreement dated as of November 28, 2001 between the
               Registrant and Bruce Sherman. Incorporated herein by reference to
               Exhibit 10.13 of the Registrant's Form 10-K for the year ended
               December 31, 2001.

10.14          Employment Agreement dated as of November 28, 2001 between the
               Registrant and Steven Schilit. Incorporated herein by reference
               to Exhibit 10.14 of the Registrant's Form 10-K for the year ended
               December 31, 2001.

10.15          Consulting and Severance Agreement dated as of February 8, 2002
               between the Registrant and Cynthia Krugman.*

21.            Subsidiaries*

22.            N/A

23.            Consent of Eisner LLP, (formerly,Richard A. Eisner & Company,
               LLP) Independent Auditors*

99.1           Certification Pursuant to 18 U.S.C. Section 1350 of President*

99.2           Certification Pursuant to 18 U.S.C. Section 1350 of Chief
               Financial Officer*


*Filed herewith





<PAGE>