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
