FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from October 1, 1997 to December 31, 1997.
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
OCTOBER 1, 1997 TO DECEMBER 31, 1997
AND YEAR ENDED SEPTEMBER 30, 1997
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, October 1, 1997
to December 31, 1997 3
Statement of changes in net assets available for
benefits with fund information, year ended
September 30, 1997 4
Notes to financial statements 5 - 10
Supplemental schedules:
Assets held for investment 12
Transactions in excess of 5% of the current
value of plan assets 13
Signatures 14
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
December 31 and September 30, 1997, and the related statements of
changes in net assets available for benefits for the period from October
1 to December 31, 1997 and the year ended September 30, 1997. 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 December 31 and September 30, 1997, and the changes
in net assets available for benefits for the period from October 1 to
December 31, 1997 and the year ended September 30, 1997 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.
April 30, 1998 Drucker, Math & Whitman, P.C.
PENTECH INTERNATIONAL INC. 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31 AND SEPTEMBER 30, 1997
1997
December 31 September 30
Cash $ 6,382 $ 6,594
Investments, at fair market value:
Dean Witter Liquid Asset Fund 28,263 19,203
Dean Witter Dividend Growth Securities 379,157 356,010
Dean Witter U.S. Government Securities
Trust 30,299 28,063
Dean Witter Global Dividend Growth 108,560 109,967
Pentech International Inc. Stock 329,052 302,056
Participant loans 10,624 13,024
892,337 834,917
Contributions receivable:
Participants 10,475 9,033
Employer 2,940 2,218
13,415 11,251
Net assets available for plan
benefits $ 905,752 $ 846,168
See notes to financial statements.
<TABLE>
PENTECH INTERNATIONAL INC. 401(k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
OCTOBER 1, 1997 TO DECEMBER 31, 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
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Additions to net assets
attributed to:
Investment income:
Dividends and interest $ 98 $ 309 $ 4,467 $455 $ 8,300 $ - $ - $ - $ - $ 13,629
Realized gain (loss) - - 8,049 128 959 (186) - - - 8,950
Unrealized gain (loss) - - (2,474) 70 (14,300) 20,266 - - - 3,562
Exchange (4,290) 8,751 (4,466) - - (683) - - - (688)
(4,192) 9,060 5,576 653 (5,041) 19,397 - - - 25,453
Less: investment expenses - - - - - - - - - -
(4,192) 9,060 5,576 653 (5,041) 19,397 - - - 25,453
Contributions:
Participants' (20,568) - 22,544 5,931 16,317 2,027 1,442 - - 27,693
Employer's - - - - - - - 6,412 722 7,134
Participant loan repayments- - 1,097 206 - 1,097 (2,400) - - -
Participant rollover
contributions - - 21,297 - - - - - - 21,297
(20,568) - 44,938 6,137 16,317 3,124 (958) 6,412 722 56,124
Total additions (24,760) 9,060 50,514 6,790 11,276 22,521 (958) 6,412 722 81,577
Deductions from net assets
attributed to:
Benefits paid (24,548) - 27,367 4,554 12,683 1,937 - - - 21,993
Loans to participants - - - - - - - - - -
Miscellaneous - - - - - - - - - -
Total deductions (24,548) - 27,367 4,554 12,683 1,937 - - - 21,993
Net increase (decrease) (212) 9,060 23,147 2,236 (1,407) 20,584 (958) 6,412 722 59,584
Net assets available
for benefits:
Beginning of year 6,594 19,203 356,010 28,063 109,967 247,955 22,057 54,101 2,218 846,168
End of year $6,382 $28,263 $379,157 $30,299 $108,560 $268,539 $21,099 $60,513 $2,940 $905,752
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
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 (loss) - - 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 partic-
ipants (1,971) - 9,284 1,592 4,954 2,641 (16,500) - - -
Total deductions(1,736) 3,968 14,586 2,233 6,818 3,337 (16,500) - - 12,706
Net increase
(decrease) 4,843 (11,578) 150,331 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>
<PAGE>
PENTECH INTERNATIONAL INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
PERIOD OCTOBER 1, 1997 TO DECEMBER 31, 1997
AND YEAR ENDED SEPTEMBER 30, 1997
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 match 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 period from October 1 to December 31, 1997 and
the year ended September 30, 1997, the employer matching was 33%
participants contributions up to a maximum of 2% of
compensation.
The Plan was amended effective October 1, 1997 to change the Plan
year end from September 30 to December 31. Accordingly, financial
statements have been prepared for the period from October 1 to
December 31, 1997.
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. No investment
expenses were incurred during the periods presented.
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
PERIOD OCTOBER 1, 1997 TO DECEMBER 31, 1997
AND YEAR ENDED SEPTEMBER 30, 1997
1. Description of the Plan: (continued)
Contributions: (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%.
Ivestment options:
Upon enrollment in the Plan, a participant may direct employee
contributions in 5% increments in any of six 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.
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.
PENTECH INTERNATIONAL INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
PERIOD OCTOBER 1, 1997 TO DECEMBER 31, 1997
AND YEAR ENDED SEPTEMBER 30, 1997
1. Description of the Plan: (continued)
Investment options: (continued)
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 and one half. 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 and one half 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 December 31 and September
30, 1997 loans receivable totaled $10,624 and $13,024,
respectively.
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
PERIOD OCTOBER 1, 1997 TO DECEMBER 31, 1997
AND YEAR ENDED SEPTEMBER 30, 1997
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. For the period October 1 to December 31, 1997, there
were no excess contributions to the Plan. Excess contributions
for the Plan year ended September 30, 1997 were $58,792. These
contributions were refunded in April, 1998 and will be included as
a reduction of contributions received for the plan year ending
December 31, 1998.
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. Accordingly, actual
results could differ from those estimates.
PENTECH INTERNATIONAL INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
PERIOD OCTOBER 1, 1997 TO DECEMBER 31, 1997
AND YEAR ENDED SEPTEMBER 30, 1997
3. 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
December 31, 1997:
Dean Witter Dividend
Growth Securities 6,977 $379,157
Dean Witter Global Dividend Growth 8,325 108,560
Pentech International Inc. Stock 114,453 329,052
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
As of April 30, 1998, the December 31, 1997 value of the Plan s
investment in Company stock declined by $142,493 due to a decline
in the share price of the stock.
4. Tax status:
The Company has received a determination letter dated April 1998
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.
5. Party-in-interest transactions:
All expenses incurred in the operation and administration of the
Plan are borne by the Company.
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.
For the period October 1 to December 31, 1997, the Plan purchased
2,814 and sold 733 shares of Company stock in the public markets;
114,453 shares were held as investments at December 31, 1997.
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 December 31, 1997.
SUPPLEMENTAL SCHEDULES
<PAGE>
PENTECH INTERNATIONAL INC. 401(k) PLAN
ASSETS HELD FOR INVESTMENT
DECEMBER 31, 1997 AND SEPTEMBER 30, 1997
Market
Shares Cost value
December 31, 1997:
Dean Witter Liquid Asset Fund 28,263 $ 28,263 $ 28,263
Dean Witter Dividend Growth
Securities 6,977 273,986 379,157
Dean Witter U.S. Government
Securities Trust 3,329 30,077 30,299
Dean Witter Global Dividend
Growth 8,325 109,644 108,560
Pentech International Inc.
Stock 114,453 331,643 329,052
Participant loans, bearing
interest of 9 1/4 - 9 1/2% - - 10,624
Total investments $773,613 $ 885,955
September 30, 1997:
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 3,164 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
$ 717,559 $828,323
PENTECH INTERNATIONAL INC. 401(k) PLAN
TRANSACTIONS IN EXCESS OF 5% OF THE CURRENT VALUE OF PLAN ASSETS
PERIOD FROM OCTOBER 1 TO DECEMBER 31, 1997
AND YEAR ENDED SEPTEMBER 30, 1997
Period October 1 to December 31, 1997:
Nature Amount
Purchased Dean Witter Dividend
Growth Securities Fund $44,939
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
<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: April 30, 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
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