FORM 10-K/A
                       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, 1998
                                       OR
             / /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                        For the transition period from to

                        Commission File Number 033-78252
                              AMERICAN DRUG COMPANY
             (Exact name of registrant as specified in its charter)


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

9 West 57th Street, New York, NY                              10019
(Address of principle executive offices)                      (Zip code)

Registrant's telephone number, including area code:           (212) 826-8976

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. /X/

As of March 15, 1999, the aggregate  market value of the  outstanding  shares of
the Registrant's  Common Stock, par value $.01 per share, held by non-affiliates
was  approximately  $2,365,473 based on the closing price of the Common Stock on
the OTC  Bulletin  Board,  which is operated by the NASDAQ Stock Market on March
15, 1999.

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 15, 1999
-----                                            -----------------------------
Common Stock, par value $.01 per share                13,020,155 shares

DOCUMENTS INCORPORATED BY REFERENCE:                    None

<PAGE>

Item 10.  Directors  and  Executive  Officers of the  Registrant  is Hereby
          Amended and Restated in its Entirety as Follows:

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

Name                   Age       Position
Jerome I. Feldman      70        Chairman of the Board
Richard T. Grad        61        President, Chief Executive Officer and Director
Charles Dawson         43        Vice President and Director
Bruce Sherman          46        Vice President and Director
Steven Schilit         52        Vice President and Director
Joseph Leven           46        Vice President
Cindy Krugman          38        Vice President and Controller
Martin M. Pollak       71        Director
Scott N. Greenberg     42        Director

         Jerome I. Feldman has been  Chairman of the Board of the Company  since
1994. He is founder of, and since 1959, has been  President and Chief  Executive
Officer and a director of GP Strategies  Corporation  ("GPS"), a global provider
of performance  improvement services and products. He has been a director of GSE
Systems,  Inc.,  ("GSE") since 1994 and Chairman of the Board of GSE since 1997.
Mr. Feldman is also a Trustee of the New England Colleges Fund.

         Richard T. Grad has been  President and Chief  Executive  Officer and a
director of the Company since  September  1998 and President of Five Star Group,
Inc., a wholly-owned subsidiary of the Company ("Five Star") since 1985.

         Charles  Dawson has been Vice  President  and a director of the Company
since September 1998,  Vice President of  Merchandising  of Five Star since 1993
and Merchandising Manager from 1992.

         Bruce  Sherman  has been Vice  President  and a director of the Company
since  September 1998 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 Vice  President  and a director of the Company
since  September 1998 and since 1981 has held several  executive  positions with
Five Star. He has been a director of United Paint Sundry Distributors,  a buying
group, since 1996.

         Martin M.  Pollak has been a  director  of the  Company  since 1994 and
President and Chief Executive Officer from 1994 to September 1998. He is founder
of, and since 1959,  has been  Executive  Vice  President  and  Treasurer  and a
director of GPS and a director of GSE from 1994 to March 1999. Mr. Pollak is the
former  Chairman of the Czech and Slovak  United States  Economic  Council and a
trustee of the Board of Trustees of the Worcester  Foundation  for  Experimental
Biology.

         Scott N.  Greenberg has been a director of the Company since  September
1998,  a  director  of GPS since 1987 and  Executive  Vice  President  and Chief
Financial  Officer  since  June 1998 and since 1985 has held  several  executive
positions. Mr. Greenberg is a nominee for director of GSE.

         Joseph  Leven has been Vice  President of the Company  since  September
1998;  Vice  President of  Operations of Five Star since 1995 and since 1976 has
held various managerial positions with Five Star. Mr. Leven is the nephew of Mr.
Grad.

         Cindy  Krugman has been Vice  President  and  Controller of the Company
since September 1998, and Controller of Five Star since 1985. Ms. Krugman is the
daughter of Mr. Grad.

<PAGE>

         At each annual meeting of stockholders,  directors are elected to serve
for a term of office to expire at the next annual meeting of stockholders  after
their election. Under the Company's bylaws, the number of directors constituting
the  entire  Board  of  Directors  shall be  fixed,  from  time to time,  by the
directors  then in office,  who may decrease or increase the number of directors
by majority action without soliciting stockholder approval. The Company does not
currently pay compensation to directors for service in that capacity.

Item 1. Executive Compensation is Hereby Amended and Restated in its Entirety 
        as Follows:

Executive Compensation

         The  following  table sets  forth the  aggregate  compensation  paid or
accrued to the Company's executive officer for the services rendered in 1998.

                           SUMMARY COMPENSATION TABLE

<TABLE>

<CAPTION>
                                                                    Long-Term
                                                                  Compensation
                                                                     Awards
                                          Annual Compensation         Stock       All Other
                                          Salary        Bonus        Options    Compensation
Name and Principal Position      Year       ($)          ($)           (#)            ($)      
---------------------------      ----     -------       -----     ------------  ------------

<S>                              <C>     <C>                 <C>                  <C>     
Richard T. Grad                  1998    47,594(1)          -0-         -         1,943(2)
President, Chief Executive
Officer
------------------
</TABLE>

(1)      Mr. Grad became the Chief  Executive  Officer of the Company  effective
Septmember 30, 1998 and the above  compensation  relates to the period September
30, 1998 through December 31, 1998.

(2)      Includes  $911 as a matching  contribution  made by the  Company to the
401(k) Savings Plan and $1,032 for Group Term Life Insurance paid by the Company
for the period September 30, 1998 though December 31, 1998.


<PAGE>


Option Grants in 1998

         No options were granted in 1998 to the named executive officer pursuant
to the 1994 Stock Option Plan of the Company.

Item 12.  Security Ownership of Certain Beneficial Owners and Management is 
          Hereby Amended and Restated in its Entirety as Follows:

                             PRINCIPAL STOCKHOLDERS

         The  following  table sets forth  certain  information  as of April 15,
1999, 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             4,830,104(1)                    37%
9 West 57th Street
New York, NY 10019

Jerome I. Feldman                     5,424,740(2)                    41

Richard T. Grad                         224,883(3)                   1.7

Charles Dawson                          207,308(3)                   1.6

Bruce Sherman                           207,308(3)                   1.6

Steven Schilit                          207,838(3)                   1.6

Martin M. Pollak                        592,953(4)                   4.4

Scott N. Greenberg                      129,150(3)                     *

All directors and officers
as a group (9persons)                 2,457,777(3)                  17.6
--------------
* 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 - GP Strategies'
         Capital Stock Interest."

(2)      Includes (i) 4,830,104 shares of Common Stock  beneficially owned by GP
         Strategies,  (ii)  93,463  shares of Common  Stock held by Mr.  Feldman
         (iii),  1,173 shares of Common Stock which are held by certain  members
         of Mr.  Feldman's  family  and (iv)  500,000  shares  of  Common  Stock
         issuable upon exercise of currently  exercisable  stock options held by
         Mr. Feldman.  Mr. Feldman disclaims  beneficial ownership of the shares
         owned by GP Strategies and his family.

(3)      Includes  (i) 194,883 and 4,150  shares of Common Stock held by Messrs.
         Grad and Greenberg,  respectively,  192,308 shares of Common Stock held
         by each of Messrs.  Dawson,  Sherman,  and Schilit and 1,223,855 shares
         for all  executives  and  officers as a group,  (ii) 30,000 and 125,000
         shares of Common Stock issuable upon exercise of currently  exercisable
         stock options held by Messrs. Grad and Greenberg,  respectively, 15,000
         shares of Common Stock issuable upon exercise of currently  exercisable
         stock  options  held by each of Messrs.  Dawson,  Sherman , Schilit and
         (iii) 975,000 shares for all executives and officers as a group.

(4)      Includes  (i) 85,204  shares of Common  Stock held by Mr.  Pollak (ii),
         6,132 shares of Common Stock which are held by Mr. Pollak's wife, (iii)
         1,617 shares of Common  Stock which are held by a  foundation  in which
         Mr.  Pollak  is a Trustee  and (iv)  500,000  shares  of  Common  Stock
         issuable upon exercise of currently  exercisable  stock options held by
         Mr. Pollak.  Mr. Pollak  disclaims  beneficial  ownership of the shares
         owned by his wife and the foundation.

Item 13. Certain Relationships and Related  Transactions is Hereby Amended and
         Restated in its Entirety as follows:

Transactions with GP Strategies

         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 GPS,  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
senior note. The unsecured senior note payable to GPS bears interest at the rate
of 8% payable quarterly, with the principal due on September 30, 2003.

         As of January 1, 1994,  the Company and GPS entered  into a  three-year
Management  Services  Agreement  pursuant to which  certain  direct and indirect
services  will be provided to the Company by GPS. The services to be provided by
GPS  include   legal,   tax,   accounting,   insurance   and  employee   benefit
administration  services. The Company pays GPS a fee of $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 1998 and 1999.

         Five Star leases  250,000  square feet in New Jersey and 110,000 square
feet in  Connecticut.  Five Star's  operating  lease for the New Jersey facility
expires in March 2007 and the annual rent is $885,731. Five Star's lease for the
Connecticut  facility  expires in February 2001 and its annual rent is $379,780.
The Company's New York office space is provided by GP Strategies pursuant to the
Management Services Agreement. GPS has guaranteed the leases for two of the Five
Star's warehouses in New Jersey and Connecticut totaling  approximately $886,000
and $380,000 per year through 2007 and 2001, respectively.

         GPS  holds   approximately   shares  of  Common   Stock,   representing
approximately  37% of the Common Stock issued and  outstanding on April 15, 1999
(without taking into account  outstanding  options and warrants).  The Company's
by-laws do not  provide for  cumulative  voting.  GPS has entered  into a Voting
Agreement pursuant to which it has agreed that, for a period of three years from
August 31,  1998 it will vote its shares of Common  Stock (i) such that not more
than 50% of the  Company's  directors  will be officers or directors of GPS; 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. GPS. See "Principal Stockholders."

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.




                                      AMERICAN DRUG COMPANY



                                      Richard T. Grad
                                      President and Chief Executive Officer

Dated:  April 26, 1999