FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 0-15374
Pentech International, Inc. 401(k) Plan
(Full title of the plan and address of the plan, if different
from that of the issuer named below)
PENTECH INTERNATIONAL, INC.
195 Carter Drive
Edison, New Jersey 08817
(Name of issuer of the securities held pursuant to the
plan and the address of its principal executive office)
<PAGE>
PENTECH INTERNATIONAL, INC. 401(k) PLAN
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
CONTENTS
Page
Independent auditors' report 1
Statements of net assets available for plan benefits 2
Statement of changes in net assets available for
benefits with fund information, 1997 3
Statement of changes in net assets available for
benefits with fund information, 1996 4
Notes to financial statements 5 - 10
Supplemental schedules:
Assets held for investment 11
Transactions in excess of 5% of the current
value of plan assets 12
<PAGE>
Independent Auditors' Report
Board of Directors
Pentech International, Inc. 401(k) Plan
Edison, New Jersey
We have audited the accompanying statements of net assets available
for plan benefits of Pentech International, Inc. 401(k) Plan
("Plan") as of September 30, 1997 and 1996, and the related
statements of changes in net assets available for benefits for the
years then ended. 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 audits 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 net assets available for
benefits of the Plan as of September 30, 1997 and 1996, and the
changes in net assets available for benefits for the years then
ended in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The accompanying
supplemental schedules are presented for the purpose of additional
analysis and are not a required part of the basic financial
statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of
1974. The fund information in the statement of changes in net
assets available for benefits is presented for purposes of
additional analysis rather than to present the net assets available
for benefits and the changes in net assets available for benefits
of each fund. The supplemental schedules and fund information have
been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, are fairly
stated in all material respects in relation to the basic financial
statements taken as a whole.
March 11, 1998 Drucker, Math & Whitman, P.C.
PENTECH INTERNATIONAL, INC. 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
SEPTEMBER 30, 1997 AND 1996
ASSETS:
1997 1996
Cash $ 6,594 $ 1,751
Investments, at fair market value:
Dean Witter Liquid Asset Fund 19,203 30,781
Dean Witter Dividend Growth Securities 356,010 205,619
Dean Witter U.S. Government Securities
Trust 28,063 20,229
Dean Witter Global Dividend Growth 109,967 46,207
Pentech International, Inc. Stock 302,056 58,371
Participant loans 13,024 -
834,917 362,958
Contributions receivable:
Participants 9,033 36,451
Employer 2,218 9,247
11,251 45,698
Net assets available for plan benefits $ 846,168 $408,656
See notes to financial statements.<PAGE>
<TABLE>
PENTECH INTERNATIONAL, INC. 401(k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
YEAR ENDED SEPTEMBER 30, 1997
<CAPTION>
Participant directed Employer directed
Dean Dean Dean Pentech Pentech
Dean Witter Witter Witter Inter- Inter-
Witter Dividend U.S. Global national, national,
Liquid Growth Government Dividend Inc. Inc.
Cash Assets Securities Securities Growth Stock Other Stock Other Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income:
Dividends and interest $514 $ 1,332 $10,663 $1,474 $ 7,229 $ - $ - $ - $ - $21,212
Realized gain (loss) - - 3,557 (20) 1,559 (9,294) - - - (4,198)
Unrealized gain - - 61,238 654 9,779 145,733 - 20,661 - 238,065
Exchange 4,160 (23,972) 5,974 1,098 9,219 13,671 - (7,028) - 3,122
4,674 (22,640) 81,432 3,206 27,786 150,110 - 13,633 - 258,201
Less: investment expenses(13) - - - - - - - - (13)
4,661 (22,640) 81,432 3,206 27,786 150,110 - 13,633 - 258,188
Contributions:
Participants' (5) 15,030 77,609 5,084 37,156 46,783 (27,418) - - 154,239
Employer's - - - - - - - 36,496 (7,029) 29,467
Participant loan repayments - - 2,378 1,098 - - (3,476) - - -
Other receipts (1,549) - 3,558 679 5,636 - - - - 8,324
(1,554) 15,030 83,545 6,861 42,792 46,783 (30,894) 36,496 (7,029) 192,030
Total additions 3,107 (7,610) 164,977 10,067 70,578 196,893 (30,894) 50,129 (7,029) 450,218
Deductions from net assets
attributed to:
Benefits paid 235 3,968 5,302 641 1,864 696 - - - 12,706
Loans to participants (1,971) - 9,284 1,592 4,954 2,641 (16,500) - - -
Total deductions (1,736) 968 14,586 2,233 6,818 3,337 (16,500) - - 12,706
Net increase (decrease) 4,843 (11,578) 150,391 7,834 63,760 193,556 (14,394) 50,129 (7,029) 437,512
Net assets available
for benefits:
Beginning of year 1,751 30,781 205,619 20,229 46,207 54,399 36,451 3,972 9,247 408,656
End of year $ 6,594 $19,203 $ 356,010 $28,063 $109,967 $247,955 $22,057 $ 54,101 $ 2,218 $846,168
See notes to financial statements.
</TABLE>
<TABLE>
PENTECH INTERNATIONAL, INC. 401(k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
YEAR ENDED SEPTEMBER 30, 1996
<CAPTION>
Participant directed Employer directed
Dean Dean Dean Pentech Pentech
Dean Witter Witter Witter Inter- Inter-
Witter Dividend U.S. Global national, national,
Liquid Growth Government Dividend Inc. Inc.
Cash Assets Securities Securities Growth Stock Other Stock Other Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income:
Dividends and interest $ - $ 1,308 $ 3,249 $ 1,142 $ 2,409 $ - $ - $ - $ - $8,108
Realized gain (loss) - - 4,271 (35) 462 (26,376) - - - (21,678)
Unrealized gain (loss) - 447 23,393 (446) 2,243 (105,655) - (3,659) - (83,677)
Exchange 712 - (99) - - 218 291 - - 1,122
712 1,755 30,814 661 5,114 (131,813) 291 (3,659) - (96,125)
Less: investment expenses - - - - - (918) - - - (918)
712 1,755 30,814 661 5,114 (132,731) 291 (3,659) - (97,043)
Contributions:
Participants' - 11,592 44,882 6,588 23,592 22,390 14,499 - - 123,543
Employer's - - - - - - - 7,631 9,247 16,878
Other receipts - - 306 102 102 - - - - 510
- 11,592 45,188 6,690 23,694 22,390 14,499 7,631 9,247 140,931
Total additions 712 13,347 76,002 7,351 28,808 (110,341) 14,790 3,972 9,247 43,888
Deductions from net assets
attributed to:
Benefits paid 701 597 2,164 1,374 4,560 2,344 - - - 11,740
Contributions refundable - 3,620 19,509 790 2,599 10,660 (37,178) - - -
Total deductions 701 4,217 21,673 2,164 7,159 13,004 (37,178) - - 11,740
Net increase (decrease) 11 9,130 54,329 5,187 21,649 (123,345) 51,968 3,972 9,247 32,148
Net assets available
for benefits:
Beginning of year 1,740 21,651 151,290 15,042 24,558 177,744 (15,517) - - 376,508
End of year $ 1,751 $30,781 $205,619 $20,229 $46,207 $54,399 $36,451 $3,972 $ 9,247 $408,656
See notes to financial statements.
</TABLE>
PENTECH INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
1. Description of the Plan:
The following brief description of the Pentech International,
Inc. 401(k) Plan ("Plan") is provided for general information
purposes only. More complete information concerning the Plan
and its provisions can be found in the Plan documents.
General:
The Plan, as amended and restated, began on April 1, 1993 and is
a defined contribution plan covering all eligible employees of
Pentech International, Inc. ("Company"). Employees are eligible
to participate when they have completed six months of service
and have reached age twenty and one-half. The Plan is subject
to the provisions of the Employee Retirement Income Security Act
of 1974 (ERISA). The Plan was amended and restated on April 1,
1995 to exclude collective bargaining employees. The Plan was
amended and restated on April 1, 1996 to include an employer
matching provision. The amount of the employer matching is a
percentage of the participants contributions up to a maximum of
6% of compensation, and is such percentage as is determined by
the employer. For the year ended September 30, 1997 and the
period April 1, 1996 to September 30, 1996, the employer
matching was 33% of the participants contributions up to a
maximum of 2% of compensation.
Administration of Plan assets:
The assets of the Plan are administered under a trust agreement
between the Plan and a trustee designated by the Company.
Administrative expenses of the Plan are paid by the Company.
Investment expenses, i.e. commissions, are charged to
participants' accounts at the time of withdrawal. For the years
ended September 30, 1997 and 1996, investment expenses were $13
and $918, respectively.
Contributions:
Employee contributions are made in the form of a salary
reduction by withholding an elected percentage from the
employee's salary each pay period. Participants may elect to
contribute up to 20% of their gross annual compensation subject
to deferral and non-discrimination limitations under the
Internal Revenue Code.
PENTECH INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
1. Description of the Plan: (continued)
The Company makes a matching contribution, as described above,
or may make a profit sharing contribution, or both, as
determined by the Company. Such Company contributions are
subject to the provisions and limitations prescribed by the
Plan. Company matching contributions are invested in Company
stock, while Company profit sharing contributions, if any, are
invested in the same funds in which the participants chose to
invest their contributions.
Participants' accounts:
Each participant's account is credited with the participant's
and the Company's contributions, if any, and forfeitures of
terminated participants' nonvested amounts are used to reduce
Company contributions. Income and profits attributable to the
assets of the Plan are allocated among the participants'
accounts in relation to their account balances. The benefit to
which a participant is entitled is the benefit that can be
provided from the participant s vested account.
Vesting:
Participants are immediately vested in their salary reduction
contributions plus actual earnings thereon. Vesting in the
Company matching and profit sharing contributions, if any, plus
earnings thereon is based on years of service as follows: Less
than 2 years, none; 2 years but less than 3, 20%; 3 years but
less than 4, 40%; 4 years but less than 5, 60%; 5 years but less
than 6, 80%; 6 years or greater, 100%.
Investment options:
Upon enrollment in the Plan, a participant may direct employee
contributions in 5% increments in any of five investment
options:
Dean Witter Liquid Asset Fund - Funds are invested in a money
market account which earns a market interest rate.
Dean Witter Dividend Growth Securities Fund - Funds are
invested in shares of a registered investment company that
invests mainly in common stocks.
PENTECH INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
1. Description of the Plan: (continued)
Investment options: (continued)
Dean Witter Global Dividend Growth Fund - Funds are invested
in shares of a registered investment company that invests
mainly in U.S. and foreign common stocks.
Dean Witter U.S. Government Securities Fund - Funds are
invested in a registered investment company that invests
mainly in U.S. Government Securities.
Pentech International, Inc. Stock - Funds are invested in
common stock of Pentech International, Inc.
Participants may change their investment options at any time
by contacting Dean Witter directly.
Payment of benefits:
The distribution of Plan benefits, as defined, is permitted upon
the earlier of retirement, death, disability, separation of
service with the Company or attainment of age 59 1/2. Withdrawal
will also be available in certain hardship situations, as
defined in the Plan document. Distribution of account balances
may be made in either a lump-sum amount, or in installments over
a fixed reasonable period not to exceed the life expectancy of
the participant. Distributions must commence at age 70 1/2 even if
the participant does not retire.
Loans receivable from Plan participants:
A participant of the Plan who needs temporary financial
assistance may request a loan from the Plan. A minimum of
$1,000 may be borrowed in $250 increments, subject to statutory
restrictions (may not exceed the lesser of $50,000 or 50% of the
vested account balance). The participant may have only one loan
outstanding at any time. Loans bear interest at market rates.
Loan repayments are made by payroll deduction; the participant
may prepay principal and interest at any time. At September 30,
1997 loans receivable totalled $13,024. At September 30, 1996,
there were no loans receivable from Plan participants.
Plan termination:
Although it has not expressed any intent to do so, the Company
has the right to terminate the Plan at any time. In the event
of Plan termination, the time and manner of distribution of
vested benefits shall be subject to the discretion of the Plan
administrator. If the Plan is terminated by the Company, all
employer contributions plus earnings become fully vested.
PENTECH INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
2. Summary of significant accounting policies:
Basis of accounting:
The accompanying financial statements have been prepared on the
accrual basis of accounting. Purchases and sales of securities
are recorded on trade dates. Dividend income is accrued on the
ex-dividend date. Unrealized gains and losses from security
transactions are reported on the specific cost method.
Investment valuation:
Investments are valued at fair market value based upon market
quotations.
Benefit payments:
Benefits are recorded when paid.
Contributions refundable:
Contributions to the Plan made by certain participants are
deemed to be excess contributions as a result of the Plan s
failure to satisfy the Actual Deferral Percentage test. Such
refundable contributions are recorded as a reduction of
contributions received and a Plan liability if the refunds are
issued within two and one-half months of the Plan s year end.
Excess contributions not refunded within this time limit are
recorded when the refunds are issued. Excess contributions for
the 1997 Plan year have not been computed as of the date of
these financial statements. Excess contributions relating to
the 1996 Plan year in the amount of $7,500 were refunded in
March, 1996 and have therefore been recorded as a benefit
distribution for the year ended September 30, 1997 in the Plan s
financial statements.
Reclassifications:
Certain items in the 1996 financial statements have been
reclassified to conform to the presentation used in 1997.
3. 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
certain reported amounts and disclosures. Actual results could
differ from those estimates.
PENTECH INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
4. Investments:
The fair value of individual investments which represent 5% or
more of the Plan s net assets available for benefits are as
follows:
Shares Fair value
September 30, 1997:
Dean Witter Dividend Growth Securities 6,646 $ 356,010
Dean Witter Global Dividend Growth 7,405 109,967
Pentech International, Inc. Stock 112,372 302,056
September 30, 1996:
Dean Witter Liquid Asset Fund 30,781 $ 30,781
Dean Witter Dividend Growth Securities 4,854 205,619
Dean Witter Global Dividend Growth 3,546 46,207
Pentech International, Inc. Stock 60,238 58,371
As of March 11, 1998, the value of the Plan s investment in
Company stock declined by $42,140 due to a decline in the share
price of the stock.
5. Tax status:
The Company has received a determination letter dated July 1994
from the Internal Revenue Service that the Plan is qualified
under Sections 401(a) and 401(k) and that the related trust is
exempt from federal income taxes under Section 501(a) of the
Internal Revenue Code. The Plan has been amended since
receiving the determination letter. However, the Plan
administrator believes the Plan is designed and is currently
being operated in compliance with the applicable requirements of
the IRC.
6. Party-in-interest transactions:
All expenses incurred in the operation and administration of the
Plan are borne by the Company.
For the year ended September 30, 1997, the Plan purchased 55,860
and sold 3,726 shares of Company stock in the public market;
112,372 shares were held as investments at September 30, 1997.
For the year ended September 30, 1996 the Plan purchased 18,317
and sold 10,744 shares of Company stock in the public market;
60,238 shares were held as investments at September 30, 1996.
PENTECH INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
6. Party-in-interest transactions: (continued)
Certain Plan investments are shares of mutual funds managed by
Dean Witter. Dean Witter is the trustee as defined by the Plan,
and therefore these transactions qualify as party-in-interest
transactions.
7. Subsequent events:
Effective October 1, 1997, the Plan elected to change its year
end from September 30 to December 31.
<PAGE>
SUPPLEMENTAL SCHEDULES<PAGE>
<TABLE>
PENTECH INTERNATIONAL, INC. 401(k) PLAN
ASSETS HELD FOR INVESTMENT
SEPTEMBER 30, 1997 AND 1996
<CAPTION>
1997
Market
Shares Cost value
<S> <C> <C> <C>
Dean Witter Liquid Asset Fund 19,203 $ 19,203 $ 19,203
Dean Witter Dividend Growth
Securities 6,646 248,365 356,010
Dean Witter U.S. Government
Securities Trust 3,104 27,912 28,063
Dean Witter Global Dividend
Growth 7,405 96,751 109,967
Pentech International, Inc.
Stock 112,372 325,328 302,056
Participant loans, bearing
interest of 9 1/4 - 9 1/2% - - 13,024
Total investments $717,559 $ 28,323
<CAPTION>
1996
Market
Shares Cost value
<S> <C>
Dean Witter Liquid Asset Fund 30,781 $ 30,781 $ 30,781
Dean Witter Dividend Growth
Securities 4,854 159,212 205,619
Dean Witter U.S. Government
Securities Trust 1,303 20,732 20,229
Dean Witter Global Dividend
Growth 3,546 42,770 46,207
Pentech International, Inc.
Stock 60,238 248,036 58,371
Total investments $501,531 $361,207
<TABLE/>
PENTECH INTERNATIONAL, INC. 401(k) PLAN
TRANSACTIONS IN EXCESS OF 5% OF THE CURRENT VALUE OF PLAN ASSETS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
Year ended September 30, 1997:
Nature Amount
Purchased Dean Witter Dividend Growth Securities Fund $ 100,181
Purchased Dean Witter Global Dividend Growth Fund 64,405
Purchased Pentech International, Inc. Stock 89,921
Year ended September 30, 1996:
Nature Amount
Purchased Dean Witter Dividend Growth Securities Fund $ 48,438
Purchased Dean Witter Global Dividend Growth Fund 26,103
Purchased Pentech International Inc. Stock 40,328
Sold Pentech International, Inc. Stock 24,363
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the trustee (or other persons who administer the employee benefit
plan) has duly caused this annual report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: March 27, 1998
PENTECH INTERNATIONAL, INC.
401(k) PLAN
s/David Melnick
David Melnick, Plan Administrator
s/Libby Melnick
Libby Melnick, Plan Administrator
s/William Visone
William Visone, Plan Administrator
WPDOCS\PTK\FS97-96.401
</TABLE>
