SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
(Mark One)
( X ) Annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934 (Fee Required)
For the fiscal year ended December 31, 1996 or
-----------------
( ) Transition report pursuant to Section 15(d) of the Securities Exchange
Act of 1934 (No Fee Required)
For the transition period from ____ to ____
Commission File Number 0-16109
ADVANCED POLYMER SYSTEMS, INC.
SALARY REDUCTION PROFIT SHARING PLAN
ADVANCED POLYMER SYSTEMS, INC.
3696 Haven Avenue
Redwood City, California 94063
Telephone: (415) 366-2626
<PAGE>
Financial Statement and Exhibits
<TABLE>
ADVANCED POLYMER SYSTEMS, INC.
SALARY REDUCTION PROFIT SHARING PLAN
STATEMENT OF FINANCIAL CONDITION
at December 31, 1996
<CAPTION>
Nationwide Nationwide Nationwide Warburg
American Bond Templeton Fidelity Twentieth Pincus
Balanced Fund of Foreign Magellan Century Emerging
Fund America Fund Fund Growth Growth
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash account $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Investments, at market 393,452 182,926 0 241,543 617,549 0
Participant loans 0 0 0 0 0 0
Contributions receivable 4,066 1,721 1,832 5,118 5 ,930 1,205
---------- ---------- ---------- ---------- ---------- ----------
TOTAL ASSETS $ 397,518 $ 184,647 $ 1,832 $ 246,661 $ 623,479 $ 1,205
========== ========== ========== ========== ========== ==========
LIABILITIES:
Distribution payable $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
---------- ---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES 0 0 0 0 0 0
PLAN EQUITY:
Salary reduction accounts 332,016 154,357 0 195,405 522,137 0
Employer matching accounts 65,502 30,290 1,832 51,256 101,342 1,205
---------- ---------- ---------- ---------- ---------- ----------
TOTAL EQUITY 397,518 184,647 1,832 246,661 623,479 1,205
TOTAL LIABILITIES
AND EQUITY $ 397,518 $ 184,647 $ 1,832 $ 246,661 $ 623,479 $ 1,205
========== ========== ========== ========== ========== ==========
</TABLE>
Nationwide
Guaranty APS Total
and Savings Common Participant All
Fund Stock Loans Funds
---------- ---------- ---------- ----------
ASSETS:
Cash account $ 5,887 $ 0 $ 0 $ 5,887
Investments, at market 390,911 67,489 0 1,893,870
Participant loans 0 0 11,128 11,128
Contributions receivable 3,787 1,378 0 25,037
---------- ---------- ---------- ----------
TOTAL ASSETS $ 400,585 $ 68,867 $ 11,128 $1,935,922
========== ========== ========== ==========
LIABILITIES:
Distribution payable $ 0 $ 0 $ 0 $ 0
---------- ---------- ---------- ----------
TOTAL LIABILITIES 0 0 0 0
PLAN EQUITY:
Salary reduction accounts 323,798 55,454 11,128 1,594,295
Employer matching accounts 76,787 13,413 0 341,627
---------- ---------- ---------- ----------
TOTAL EQUITY 400,585 68,867 11,128 1,935,922
TOTAL LIABILITIES
AND EQUITY $ 400,585 $ 68,867 $ 11,128 $1,935,922
========== ========== ========== ==========
See accompanying notes.
<PAGE>
Financial Statement and Exhibits
<TABLE>
ADVANCED POLYMER SYSTEMS, INC.
SALARY REDUCTION PROFIT SHARING PLAN
STATEMENT OF FINANCIAL CONDITION
at December 31, 1995
<CAPTION>
Nationwide Nationwide Nationwide Nationwide
American Bond Fidelity Twentieth Guaranty APS Total
Balanced Fund of Magellan Century and Savings Common Participant All
Fund America Fund Growth Fund Stock Loans Funds
------------- ----------- ----------- ------------------------------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash account $0 $0 $0 $0 $7,114 $0 $0 $7,114
Investments, at market 293,031 156,631 122,349 491,553 352,975 33,808 0 1,450,347
Participant loans 0 0 0 0 0 0 6,531 6,531
Contributions receivable 3,458 2,570 8,911 6,582 5,583 1,254 0 28,358
-------- -------- -------- -------- -------- ------- ------ ----------
TOTAL ASSETS $296,489 $159,201 $131,260 $498,135 $365,672 $35,062 $6,531 $1,492,350
======== ======== ======== ======== ======== ======= ====== ==========
LIABILITIES:
Distributions payable $0 $0 $0 $0 $0 $0 $0 $0
-------- -------- -------- -------- -------- ------- ------ ----------
TOTAL LIABILITIES $0 $0 $0 $0 $0 $0 $0 $0
PLAN EQUITY:
Salary reduction accounts 250,543 135,232 104,974 420,447 301,560 28,418 6,531 1,247,705
Employer matching accounts 45,946 23,969 26,286 77,688 64,112 6,644 0 244,645
-------- -------- -------- -------- -------- ------- ------ ----------
TOTAL EQUITY 296,489 159,201 131,260 498,135 365,672 35,062 6,531 1,492,350
TOTAL LIABILITIES
AND EQUITY $296,489 $159,201 $131,260 $498,135 $365,672 $35,062 $6,531 $1,492,350
======== ======== ======== ======== ======== ======= ====== ==========
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
ADVANCED POLYMER SYSTEMS, INC.
SALARY REDUCTION PROFIT SHARING PLAN
STATEMENT OF INCOME AND CHANGES IN PLAN EQUITY
for the year ended December 31, 1996
<CAPTION>
Nationwide Nationwide Nationwide
American Bond Templeton Fidelity Twentieth
Balanced Fund of Foreign Magellan Century
Fund America Fund Fund Growth
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest and dividends $ 0 $ 0 $ 0 $ 0 $ 0
----------- ----------- ----------- ----------- -----------
Total investment income 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Net realized and unrealized
gains on investments 37,966 8,749 0 19,348 68,997
----------- ----------- ----------- ----------- -----------
Contributions:
Employee 53,948 23,696 0 88,164 77,480
Employer 16,724 7,582 1,832 27,347 24,837
Rollovers 5,058 14 0 4,936 11,964
----------- ----------- ----------- ----------- -----------
Total contributions 75,730 31,292 1,832 120,447 114,281
----------- ----------- ----------- ----------- -----------
Withdrawals, transfers and
distributions:
Member accounts
withdrawn &
distributed (14,487) (10,488) 0 (23,534) (56,696)
Member accounts
transferred-in (out) 1,820 (4,107) 0 (860) (1,238)
----------- ----------- ----------- ----------- -----------
Net withdrawals, transfers and
distributions (12,667) (14,595) 0 (24,394) (57,934)
----------- ----------- ----------- ----------- -----------
Net increase in plan equity
101,029 25,446 1,832 115,401 125,344
Plan equity:
Beginning of the year 296,489 159,201 0 131,260 498,135
----------- ----------- ----------- ----------- -----------
End of the year $ 397,518 $ 184,647 $ 1,832 $ 246,661 $ 623,479
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Warburg Nationwide
Pincus Guaranty APS Total
Emerging and Savings Common Participant All
Growth Fund Stock Loans Funds
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest and dividends $ 0 $ 19,981 $ 0 $ 781 $ 20,762
----------- ----------- ----------- ----------- -----------
Total investment income 0 19,981 0 781 20,762
----------- ----------- ----------- ----------- -----------
Net realized and unrealized
gains on investments 0 0 13,150 0 148,210
----------- ----------- ----------- ----------- -----------
Contributions:
Employee 0 61,207 16,439 0 320,934
Employer 1,205 20,393 5,511 0 105,431
Rollovers 0 2,873 0 0 24,845
----------- ----------- ----------- ----------- -----------
Total contributions 1,205 84,473 21,950 0 451,210
----------- ----------- ----------- ----------- -----------
Withdrawals, transfers and
distributions:
Member accounts
withdrawn &
distributions 0 (66,590) (4,815) 0 (176,610)
Member accounts
transferred-in (out) 0 (2,951) 3,520 3,816 0
----------- ----------- ----------- ----------- -----------
Net withdrawals, transfers and
distributions 0 (69,541) (1,295) 3,816 (176,610)
----------- ----------- ----------- ----------- -----------
Net increase in plan equity 1,205 34,913 33,805 4,597 443,572
Plan equity:
Beginning of the year 0 365,672 35,062 6,531 1,492,350
----------- ----------- ----------- ----------- -----------
End of the year $ 1,205 $ 400,585 $ 68,867 $ 11,128 $ 1,935,922
=========== =========== =========== =========== ===========
<FN>
See accompanying notes
</FN>
</TABLE>
<PAGE>
<TABLE>
ADVANCED POLYMER SYSTEMS, INC.
SALARY REDUCTION PROFIT SHARING PLAN
STATEMENT OF INCOME AND CHANGES IN PLAN EQUITY
for the year ended December 31, 1995
<CAPTION>
Nationwide Nationwide Nationwide Nationwide
American Bond Fidelity Twentieth Guaranty APS Total
Balanced Fund of Magellan Century and Savings Common Participant All
Fund America Fund Growth Fund Stock Loans Funds
---------- --------- ---------- ---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest and dividends $0 $0 $0 $0 $18,162 $0 $753 $18,915
---------- --------- ---------- ---------- ---------- ---------- ------------ ----------
Total investment income 0 0 0 0 18,162 0 753 18,915
---------- --------- ---------- ---------- ---------- ---------- ------------ ----------
Net realized and unrealized
gains on investments 46,387 21,690 26,872 71,238 0 5,247 0 171,434
---------- --------- ---------- ---------- ---------- ---------- ------------ ----------
Contributions:
Employee 43,172 19,728 57,220 61,994 66,221 11,399 0 259,734
Employer 12,777 7,237 20,869 21,815 22,760 4,036 0 89,494
Rollovers 3,458 3,270 2,417 18,285 16,689 0 0 44,119
---------- --------- ---------- ---------- ---------- ---------- ------------ ----------
Total contributions 59,407 30,235 80,506 102,094 105,670 15,435 0 393,347
---------- --------- ---------- ---------- ---------- ---------- ------------ ----------
Withdrawals, transfers and
distributions:
Member accounts
withdrawn & distributed (12,848) (20,558) (7,413) (57,690) (22,723) (2,885) 0 (124,117)
Member accounts
transferred-in (out) 8,919 (9,411) 7,923 (18,312) 20,840 (5,629) (4,330) 0
---------- --------- ---------- ---------- ---------- ---------- ------------ ----------
Net withdrawals, transfers and
distributions (3,929) (29,969) 510 (76,002) (1,883) (8,514) (4,330) (124,117)
---------- --------- ---------- ---------- ---------- ---------- ----------- ----------
Net increase (decrease) in plan
equity 101,865 21,956 107,888 97,330 121,949 12,168 (3,577) 459,579
Plan equity:
Beginning of the year 194,624 137,245 23,372 400,805 243,723 22,894 10,108 1,032,771
---------- -------- --------- -------- ---------- ---------- ----------- -----------
End of the year $296,489 $159,201 $131,260 $498,135 $365,672 $35,062 $6,531 $1,492,350
========= ======== ========= ======== ========== ========= =========== ===========
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
ADVANCED POLYMER SYSTEMS, INC.
SALARY REDUCTION PROFIT SHARING PLAN
STATEMENT OF INCOME AND CHANGES IN PLAN EQUITY
for the year ended December 31, 1994
<CAPTION>
Nationwide Nationwide Nationwide Nationwide
American Bond Fidelity Twentieth Guaranty
Balanced Fund of Magellan Century and Savings
Fund America Fund Growth Fund
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest and dividends $ 0 $ 0 $ 0 $ 0 $ 11,201
----------- ----------- ----------- ----------- -----------
Total investment income 0 0 0 0 11,201
----------- ----------- ----------- ----------- -----------
Net realized and unrealized
gains (losses) on investments (3,954) (8,797) 449 (8,297) 0
----------- ----------- ----------- ----------- -----------
Contributions:
Employee 47,870 22,930 7,831 81,238 54,366
Employer 11,858 6,741 1,396 20,285 12,505
Rollovers 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Total contributions 59,728 29,671 9,227 101,523 66,871
----------- ----------- ----------- ----------- -----------
Withdrawals, transfers and
distributions:
Member accounts
withdrawn (133,785) (31,598) 0 (217,652) (92,441)
Distributions 0 0 0 0 (2,005)
Member accounts
transferred-in (out) (27,892) 18,819 13,696 (43,724) 45,804
----------- ----------- ----------- ----------- -----------
Net withdrawals, transfers and
distributions (161,677) (12,779) 13,696 (261,376) (48,642)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in plan
equity (105,903) 8,095 23,372 (168,150) 29,430
Plan equity:
Beginning of the year 300,527 129,150 0 568,955 214,293
----------- ----------- ----------- ----------- -----------
End of the year $ 194,624 $ 137,245 $ 23,372 $ 400,805 $ 243,723
=========== =========== =========== =========== ===========
</TABLE>
APS Total
Common Participant All
Stock Loans Funds
----------- ----------- -----------
Investment income:
Interest and dividends $ 0 $ 966 $ 12,167
----------- ----------- -----------
Total investment income 0 966 12,167
----------- ----------- -----------
Net realized and unrealized
gains (losses) on investments (3,460) 0 (24,059)
----------- ----------- -----------
Contributions:
Employee 9,375 0 223,610
Employer 2,381 0 55,166
Rollovers 0 0 0
----------- ----------- -----------
Total contributions 11,756 0 278,776
----------- ----------- -----------
Withdrawals, transfers and
distributions:
Member accounts
withdrawn (21,528) 0 (497,004)
Distributions 0 0 (2,005)
Member accounts
transferred-in (out) (3,149) (3,554) 0
----------- ----------- -----------
Net withdrawals, transfers and
distributions (24,677) (3,554) (499,009)
----------- ----------- -----------
Net increase (decrease) in plan
equity (16,381) (2,588) (232,125)
Plan equity:
Beginning of the year 39,275 12,696 1,264,896
----------- ----------- -----------
End of the year $ 22,894 $ 10,108 $ 1,032,771
=========== =========== ===========
See accompanying notes.
<PAGE>
ADVANCED POLYMER SYSTEMS, INC.
SALARY REDUCTION PROFIT SHARING PLAN
Notes to Financial Statements
December 31, 1996, 1995 and 1994
1. DESCRIPTION OF THE PLAN
The following description of the Advanced Polymer Systems, Inc. Salary
Reduction Profit Sharing Plan (the "401(k) Plan" or the "Plan") provides only
general information. Members should refer to the 401(k) Plan document for more
complete information.
(a) General
The 401(k) Plan is a defined contribution plan covering active
employees of Advanced Polymer Systems, Inc. ("APS" or the "Company") and its
subsidiaries. Any employee who is at least 21 years old is eligible to become a
voluntary member of the 401(k) Plan immediately upon employment.
The 401(k) Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA").
(b) Contributions - Employee
Eligible domestic employees may contribute up to 15% of their total
compensation for each calendar year, limited to $9,500 in 1996, and $9,240 in
1995 and 1994 (the "Employee Contribution").
(c) Contributions - Employer
For the 1994 Plan year, the Company made matching contributions equal
to 50% of each member's Employee Contribution during the Plan year up to a
maximum amount equal to the lesser of 1.5% of each member's annual compensation,
or $1,000 per calendar year (the "Employer Matching Contribution"). The Company
may also contribute additional discretionary amounts as it may determine (the
"Employer Discretionary Contribution"). No Employer Discretionary Contributions
have been made to the Plan since its inception. Beginning with the 1995 Plan
year, the Plan document was amended to change the maximum Employer Matching
Contribution to 3% of the participants' annual gross compensation, limited to
$4,500.
(d) Members' Accounts
The Company maintains separate Employee Contribution accounts,
Employer Matching Contribution accounts and Employer Discretionary Contribution
accounts for each member. Contributions are credited to the member accounts each
bi-weekly payroll period.
In 1994, the plan trustees added the Fidelity Magellan Fund to the
investment options offered to the participants. In 1996, the plan trustees added
the Warburg Pincus Emerging Growth Fund and the Templeton Foreign Fund to the
investment options offered to the participants. Each member may elect from the
following investment options for his/her Employee Contribution accounts:
Company Common Stock:
The Common Stock of APS will be purchased by the 401(k) Plan's investment
manager for the member in a market transaction at the then current market price
as quoted on the NASDAQ National Market System. Each member may elect to invest
up to 10% of his/her Employee Contributions and Employer Matching Contributions
in this option.
<PAGE>
Warburg Pincus Emerging Growth:
A mutual fund seeking capital appreciation by investing primarily in common
stock of small and medium size companies that show positive earnings and
prospects of achieving significant gains in a relatively short time period.
Templeton Foreign:
A mutual fund seeking capital growth by investing in stock and debt securities
of companies and governments outside of the United States.
Fidelity Magellan Fund:
A mutual fund seeking capital growth by investing primarily in common stocks and
securities convertible into common stock of domestic and foreign multinational
issuers of all sizes.
Nationwide Twentieth Century Growth:
A mutual fund seeking capital growth by investing primarily in common stocks
that are considered by fund management to have better-than-average prospects for
appreciation.
Nationwide American Balanced Fund:
A mutual fund seeking conversion of capital, current income and long-term growth
of both capital and income through investments in stocks, bonds and other
fixed-income securities.
Nationwide Bond Fund of America:
A mutual fund seeking to provide shareholders as high a level of current income
as is consistent with the preservation of capital by investing primarily in
bonds such as marketable corporate debt securities, U.S. Government securities,
mortgage related securities and cash or money market instruments.
Nationwide Guaranty and Savings Fund:
Money market funds invested in short-term securities with a guaranteed rate of
5.85% in 1996, 6.1% in 1995 and 5.6% in 1994.
Members may change their investment options at specified dates during
the Plan year as set forth in the 401(k) Plan document. Income from the selected
investments of 401(k) Plan assets is allocated quarterly in the proportion that
each member's investment option balance bears to the cumulative balance of each
investment option.
(e) Vesting
The 401(k) Plan provides that the allocated contribution and income of
both the Employee Contribution account and the Employer Matching Contribution
account are immediately and fully vested. Employer Discretionary Contributions
become vested over a period of 6 years in accordance with the following
schedule:
<PAGE>
Years of Service Vested Percentage
---------------- -----------------
Less than 1 0%
1 10%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
(f) Withdrawal of Member Accounts
The full amounts in a member's accounts, other than the amounts
constituting Employer Discretionary Contributions, will be distributed upon
retirement (at 62 years of age or if later, the employee's fifth anniversary of
employment with the Company), death, or permanent disability of the member.
If a member's employment with the Company terminates prior to normal
retirement (as defined above) for any reason other than death or disability, the
participant will be entitled to a distribution equal to the vested portion of
his/her accounts.
Members should refer to the 401(k) Plan document for a more complete
description of procedures and calculations for the withdrawal of accounts.
(g) Trustees
The 401(k) Plan is administered by the Company. A Trustee is
responsible for investing the assets of the Plan which are held in Trust. The
current trustee is Michael O'Connell, Chief Financial Officer of Advanced
Polymer Systems, Inc.
The Trustee has retained CMG Consulting, Inc. ("CMG") to provide
recordkeeping services to the 401(k) Plan. CMG also invests Plan assets in the
various mutual funds offered by Nationwide Life Insurance.
Members of the Board of Directors and employees of the Company serving
as Trustees receive no additional compensation for services in connection with
the administration of the 401(k) Plan.
(h) Participant Loans
Participants are allowed to borrow from the Plan assets. The Plan will
allow a participant to borrow up to the lesser of 50% of his/her vested Plan
balance or $50,000. The loan, secured by the vested Plan balance of the
participant, is repayable in installments over a period up to 5 years at the
prime rate plus 2%. The term of the loan can be extended for more than 5 years
if the loan is used to purchase the principal dwelling of the participant.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Investment Valuation
The value of investments is based upon quoted market values on the
last business day of the year.
(b) Security Transactions and Investment Income
Securities transactions are recorded on a trade date basis. The
difference between cost and market value of investments at the beginning and end
of the period is reported as unrealized appreciation or depreciation in the
market value of investments using the average cost method.
<PAGE>
(c) Expenses of the 401(k) Plan
Reasonable fees and expenses incurred in the establishment and
administration of the 401(k) Plan, and reasonable compensation of attorneys,
accountants, investment managers, actuaries, consultants or expenses of the
Trustees or any agent of the Trustees if not employed by the Company will be
paid out of the assets of the 401(k) Plan, except to the extent that the Company
pays such expenses directly. For the three-year period ended December 31, 1996,
all such expenses were paid by the Company.
(d) Forfeited Funds
If a Participant terminates employment with APS prior to completing
six years of service, the unvested portion of such member's Employer
Discretionary Contribution account will be forfeited and allocated among the
remaining participants in the 401(k) Plan.
(e) Basis of Accounting
The financial statements are prepared on the accrual basis of
accounting.
(f) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the plan administrator to make estimates
and assumptions that affect the amounts reported in the financial statements and
related notes to financial statements. Changes in such estimates may affect
amounts reported in future periods.
3. INVESTMENTS
Investments of the 401(k) Plan at market value as of December 31 are
summarized as follows:
1996 1995
---- ----
Nationwide American Balanced Fund $393,452 $293,031
Nationwide Bond Fund of America 182,926 156,631
Fidelity Magellan Fund 241,543 122,349
Nationwide Twentieth Century Growth 617,549 491,553
Nationwide Guaranty and Savings Fund 390,911 352,975
APS Common Stock 67,489 33,808
<PAGE>
Investment option elections of the members of the 401(k) Plan at
December 31 are summarized as follows:
Number of Participants
1996 1995
---- ----
Nationwide American Balanced Fund 46 40
Nationwide Bond Fund of America 28 29
Fidelity Magellan Fund 44 33
Nationwide Twentieth Century Growth 53 49
Nationwide Guaranty and Savings Fund 43 43
APS Common Stock 48 39
4. INCOME TAXES
APS received a favorable determination from the Internal Revenue
Service ("IRS") stating that the 401(k) Plan is qualified under Section 401 of
the Internal Revenue Code ("Code") as amended, and is exempt from federal income
taxation under Section 501 of the Code. Accordingly, the financial statements do
not contain a provision for income taxes. The continued qualification is
dependent on the Plan's future operation.
Members do not become subject to income taxes as a result of
participation in the 401(k) Plan until assets in the members' accounts are
distributed. Under certain circumstances, a distribution from the 401(k) Plan is
subject to income tax as ordinary income.
5. PLAN TERMINATION
Although it has not expressed any intent to do so, APS has the right
to terminate the 401(k) Plan at any time. In the event of termination, all
accounts will become fully vested, and all net assets will be allocated and
distributed to the members based on their respective account balances.
<PAGE>
6. SCHEDULE OF MARKETABLE SECURITIES
Marketable Securities of the 401(k) Plan at December 31, 1996 and
1995, inclusive of contributions receivable, consisted of the following:
Market
Units Description Cost Value
- ------ ----------- -------- ------
1996
- ----
181,182 Nationwide American Balanced Fund $274,841 $397,518
85,433 Nationwide Bond Fund of America 140,188 184,647
1,346 Templeton Foreign Fund 1,832 1,832
123,698 Fidelity Magellan Fund 199,992 246,661
145,470 Nationwide Twentieth Century Growth 435,146 623,479
349,325 Nationwide Guaranty and Savings Fund 332,773 400,585
1,033 Warburg Pincus Emerging Growth 1,205 1,205
9,032 APS Common Stock 52,524 68,867
---------- -----------
$1,438,501 $1,924,794
1995
- ----
153,015 Nationwide American Balanced Fund $211,711 $296,489
78,610 Nationwide Bond Fund of America 123,491 159,201
73,602 Fidelity Magellan Fund 103,939 131,260
133,760 Nationwide Twentieth Century Growth 378,666 498,135
337,790 Nationwide Guaranty and Savings Fund 317,841 365,672
6,375 APS Common Stock 31,869 35,062
---------- -----------
$1,167,517 $1,485,819
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of Advanced Polymer Systems, Inc. and
the Trustees and Participants in the Advanced Polymer Systems, Inc. Salary
Reduction Profit Sharing Plan:
We have audited the accompanying statements of financial condition of
the Advanced Polymer Systems, Inc. Salary Reduction Profit Sharing Plan as of
December 31, 1996 and 1995, and the related statements of income and changes in
Plan equity for each of the years in the three-year period ended December 31,
1996. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Advanced Polymer
Systems, Inc. Salary Reduction Profit Sharing Plan as of December 31, 1996 and
1995, and the results of its operations and its changes in Plan equity for each
of the years in the three-year period ended December 31, 1996, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
San Francisco, California
March 5, 1997
<PAGE>
Exhibits.
23 Consent of Independent Certified Public Accountants
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the plan) have duly caused this
annual report to be signed by the undersigned thereunto duly authorized.
Advanced Polymer Systems, Inc.
Salary Reduction Profit Sharing Plan
------------------------------------
Date: March 26, 1997 /s/ Michael O'Connell
---------------- -------------------------
Michael O'Connell
Trustee
<PAGE>
EXHIBIT INDEX
Form 11-K Annual Report
ADVANCED POLYMER SYSTEMS, INC.
SALARY REDUCTION PROFIT SHARING PLAN
23 Consent of Independent Public Accountants
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders of Advanced Polymer Systems, Inc. and
the Trustees and Participants in the Advanced Polymer Systems, Inc. Salary
Reduction Profit Sharing Plan:
We consent to incorporation by reference in the Registration Statement (No.
33-29084) on Form S-8 of the Advanced Polymer Systems, Inc. Salary Reduction
Profit Sharing Plan of our report dated March 5, 1997 relating to the statements
of financial condition of the Advanced Polymer Systems, Inc. Salary Reduction
Profit Sharing Plan as of December 31, 1996 and 1995 and the related statements
of income and changes in Plan equity for each of the years in the three-year
period ended December 31, 1996, which report appears in the December 31, 1996
annual report on Form 11-K of the Advanced Polymer Systems, Inc. Salary
Reduction Profit Sharing Plan.
KPMG Peat Marwick LLP
San Francisco, California
March 26, 1997
