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 December 31, 1999
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)
PENTECH INTERNATIONAL INC. 401(k) PLAN
YEARS ENDED DECEMBER 31, 1999 AND 1998
CONTENTS
Page
Independent auditors' report 1
Statements of net assets available for plan benefits 2
Statement of changes in net assets available for
benefits 3
Statement of changes in net assets available for
benefits 4
Notes to financial statements 5 - 10
Supplemental schedules:
Line 27(a) - Schedule of assets held for investment 12
Line 27(d) - Schedule of reportable transactions 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, 1999 and 1998, 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 December 31, 1999 and 1998, 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 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.
June 7, 2000 Drucker, Math & Whitman, P.C.
PENTECH INTERNATIONAL INC. 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1999 AND 1998
1999 1998
ASSETS
Investments, at fair market value:
Shares of registered investment companies:
MSDW Liquid Asset Fund $ 49,492 $ 39,145
MSDW U.S. Government Money Market Fund 9,291 461
MSDW U.S. Government Securities Trust 45,085 37,672
MSDW Dividend Growth Securities Fund 398,602 412,168
MSDW Global Dividend Growth Fund 179,466 117,108
Pentech International Inc. Common Stock 119,460 115,559
Participant loans 8,887 18,414
810,283 740,527
Cash overdraft (2,074) -
Receivables:
Employer's contribution 2,757 -
Participants' contributions 14,119 -
16,876 -
Net assets available for plan
benefits $825,085 $740,527
See notes to financial statements.
PENTECH INTERNATIONAL INC. 401(K) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
ADDITIONS
Additions to net assets attributed to:
Investment income:
Net appreciation (depreciation) in
fair market value ($115,875) ($190,407)
Interest and dividends 43,532 31,491
Realized gains 52,335 20
(20,008) (158,896)
Contributions:
Participants' 196,518 133,736
Employer's 44,372 33,288
Participant rollover contributions - 2,205
240,890 169,229
Total additions 220,882 10,333
DEDUCTIONS
Deductions from net assets attributed to:
Benefits paid to participants 136,324 175,558
Total deductions 136,324 175,558
Net increase (decrease) 84,558 (165,225)
Net assets available for benefits,
beginning of year 740,527 905,752
Net assets available for benefits,
end of year $825,085 $740,527
See notes to financial statements.
PENTECH INTERNATIONAL INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
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 years ended December 31, 1999, the employer
matching was 33% of the participants' contributions, limited to the
6% maximum.
Administration of Plan assets:
The assets of the Plan are administered under a trust agreement
between the Plan and Morgan Stanley Dean Witter ("MSDW"), 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
YEARS ENDED DECEMBER 31, 1999 AND 1998
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%.
Investment options:
Upon enrollment in the Plan, a participant may direct employee
contributions in 5% increments in any of six investment options:
MSDW Liquid Asset Fund - Funds are invested in a money market
account which earns a market interest rate.
MSDW U.S. Government Money Market Trust - Funds are invested in
U.S. Government obligations which earns a market interest rate.
PENTECH INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1. Description of the Plan: (continued)
Investment options: (continued)
MSDW Dividend Growth Securities Fund - Funds are invested in shares
of a registered investment company that invests mainly in common
stocks.
MSDW Global Dividend Growth Fund - Funds are invested in shares of
a registered investment company that invests mainly in U.S. and
foreign common stocks.
MSDW 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 MSDW 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, and any outstanding balance is
immediately due and payable upon the participant's termination.
PENTECH INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1. Description of the Plan: (continued)
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.
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 Plan year ended December 31,
1999 were $350. These contributions were refunded in March, 2000
and are included as a reduction of contributions received for the
plan year ended December 31, 1999.
PENTECH INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
2. Summary of significant accounting policies: (continued)
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.
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, 1999:
MSDW Dividend Growth Securities 6,903 $398,602
MSDW Liquid Assets Fund 49,492 49,492
MSDW U.S. Government Securities Trust 5,249 45,085
MSDW Global Dividend Growth 13,596 179,466
Pentech International Inc. Stock 173,634 119,460
Shares Fair value
December 31, 1998:
MSDW Liquid Asset Fund 39,145 $ 39,145
MSDW Dividend Growth Securities 6,717 412,168
MSDW U.S. Government Securities Trust 4,095 37,672
MSDW Global Dividend Growth 8,872 117,108
Pentech International Inc. Stock 127,549 115,559
PENTECH INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
4. Non-participant directed investments:
Information about the net assets and the significant components
of the changes in net assets relating to the non-participant
directed investment is as follows:
1999 1998
Net assets:
Pentech International Inc. Stock $50,173 $30,952
Changes in net assets:
Contributions $44,372 $33,288
Realized gain (loss) (12,422) (8,364)
Unrealized appreciation (depreciation) (12,729) (54,485)
$19,221 ($29,561)
5. 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.
6. 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
MSDW. MSDW is the trustee as defined by the Plan, and therefore
these transactions qualify as party-in-interest transactions.
For the year ended December 31, 1999, the Plan purchased 62,316
and sold 16,231 shares of Company stock in the public market;
173,634 shares were held as investments at December 31, 1999.
PENTECH INTERNATIONAL, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
7. Subsequent event:
On May 23, 2000, Pentech announced plans to be acquired by JAKKS
Pacific, Inc. The agreement of merger calls for a purchase
price of $1.40 in cash for each Pentech share. The acquisition
is anticipated to be completed in the third calendar quarter of
2000. No determination has been made with respect to the effect
this acquisition will have on the Plan.
SUPPLEMENTAL SCHEDULES
<PAGE>
PENTECH INTERNATIONAL INC. 401(k) PLAN
LINE 27(a) - SCHEDULE OF ASSETS HELD FOR INVESTMENT
DECEMBER 31, 1999 AND 1998
Market
Shares Cost value
December 31, 1999:
MSDW Liquid Asset Fund 49,492 $49,492 $ 49,492
MSDW U.S. Government
Money Market Fund 9,291 9,291 9,291
MSDW Dividend Growth
Securities 6,309 360,581 398,602
MSDW U.S. Government
Securities Trust 5,249 47,410 45,085
MSDW Global Dividend
Growth 13,596 182,526 179,466
Pentech International Inc.
Stock 173,634 351,179 119,460
Participant loans, bearing
interest of 9 1/4% - 9 1/2% - - 8,887
$1,000,479 $810,283
December 31, 1998:
MSDW Liquid Asset Fund 39,145 $39,145 $39,145
MSDW U.S. Government
Money Market Fund 461 461 461
MSDW Dividend Growth
Securities 6,717 288,786 412,168
MSDW U.S. Government
Securities Trust 4,095 37,220 37,672
MSDW Global Dividend Growth 8,872 116,572 117,108
Pentech International Inc.
Stock 127,549 323,137 115,559
Participant loans, bearing
interest of 9 1/4% - 9 1/2% - - 18,414
$805,321 $740,527
PENTECH INTERNATIONAL INC. 401(k) PLAN
LINE 27(D) - SCHEDULE OF REPORTABLE TRANSACTIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
Year ended December 31, 1999:
Nature Amount
Sold MSDW Dividend Growth Securities Fund $212,538
Sold MSDW Dividend Growth Securities Fund 61,219
Sold MSDW U.S. Government Money Market Trust 75,661
Purchased MSDW Dividend Growth Securities Fund 212,376
Purchased MSDW Global Dividend Growth Fund 123,069
Purchased MSDW U.S. Government Money Market Trust 84,491
Purchased Pentech International Inc. Stock 63,414
Year ended December 31, 1998:
Nature Amount
Sold MSDW Dividend Growth Securities Fund $82,348
Purchased MSDW Global Dividend Growth Fund 58,303
Purchased Pentech International Inc. Stock 59,059
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: June 28, 2000
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
