FORM 10-K
                   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 September 30, 1999

                       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 No. 0-15374

                           PENTECH INTERNATIONAL INC.
           (Exact name of registrant as specified in charter)

      Delaware                                            23-2259391
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                         Identification Number)

195 Carter Drive, Edison, New Jersey                      08817
(Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code       (732) 287-6640

Securities registered pursuant to Section 12(b) of the Act:       None

Securities registered pursuant to Section 12(g) of the Act:

                 Common Stock, par value $.01 per share
                             (Title of Class)

     Indicate by check mark whether the registrant (i) 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 (ii) has been subject to
such filing requirements for the past 90 days. Yes    X      No

     Indicate by check mark if disclosure of delinquent filers pursuant 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]

     The aggregate market value of the shares of Common Stock held by
non-affiliates of the registrant on December 16, 1999, was approximately
$5,296,933 based on the average of the closing bid and asked quotations of
the registrant's Common Stock, par value $.01 share, as reported by NASDAQ on
December 16, 1999.

     On December 16, 1999, there were outstanding 12,571,258 shares of the
registrant's Common Stock.

     The Proxy Statement of the registrant to be filed on or before January
29, 2000 is incorporated herein by reference.

                              PART I



Item 1. BUSINESS.


     (a)  Pentech International Inc. (the "Company") was formed in
April 1984 to design and market writing and drawing instruments and
other stationery products.  In November 1989, the Company formed a
wholly-owned subsidiary, Sawdust Pencil Co. ("Sawdust"), to
manufacture certain of the Company's writing instruments.  The
Company and its wholly-owned subsidiaries are collectively referred
to herein as the "Company."

     (b)  The Company primarily operates in one business segment:
the manufacture and marketing of pens, markers, pencils, other
writing instruments and activity kits, primarily to major mass
market retailers located in the United States, under the "Pentech"
name or licensed trademark brand.  For financial information
relating to this business segment, please refer to the financial
statements contained elsewhere herein.

     (c)  The Company's product line consists of pens, markers,
pencils, activity products and miscellaneous products.  These
products compete on the basis of special features, packaging
design, quality and price, or a combination of these
characteristics.  The Company believes its reputation and ability
to develop innovative products and marketing programs for its
products, through the  industry experience and marketing expertise
of its management, are principal success factors.

     The Company has also had an ongoing program to secure select
license agreements with licensors of established trademarks to
utilize with certain of the Company's products.  The Company views
its licenses as an important ingredient in offering a strong
product line with strong consumer appeal.

     (i)  The Company markets its product line on a direct basis as
well as through approximately 100 independent, nonexclusive, sales
representatives throughout the United States.  Generally sales
initiated by the sales representatives are made directly to retail
chains including mass merchants, chain drug stores, grocery stores,
warehouse clubs, and office supply super stores.  The Company also
has limited sales to the stationary, military and college store
markets and some sales through distributors and wholesalers.
Additionally, the Company sells its products in Canada, Europe,
Mexico and other selected countries, generally through a variety of
distribution arrangements.



     The percentages of revenues contributed by the following
classes of products over the Company's last three fiscal years are
as follows:


                                        Activity      Miscellaneous
           Pens   Markers   Pencils     Products      Products

FY 1997    27.8%   19.2%     33.4%        14.4%            5.2%
FY 1998    18.8%   26.5%     42.0%        11.7%            1.0%
FY 1999    13.6%   27.6%     45.3%        13.5%              -


     (ii)  The Company conducts market research to stay abreast of
consumer trends and to gauge the demand for new writing instruments
and related products.  Once the Company identifies a product for
marketplace introduction, it either selects a suitable overseas
manufacturer to manufacture the product or elects to manufacture
the product itself.

     The Company's domestic pencil and marker manufacturing
facility, Sawdust, is presently being utilized by the Company to
manufacture a significant portion of the Company's writing
instruments.  Sawdust's capacity (on a two shift basis) is
approximately $34,500,000 (wholesale value) of pencils, markers and
other writing instruments.  During the Company's fiscal year ended
September 30, 1999 ("Fiscal 1999"), the Company manufactured
approximately $28,200,500 (wholesale value) of products at Sawdust,
which represents 81.7% of its current capacity and approximately
44.2% of the Company's current sales requirements.  During its
fiscal year ended September 30, 1998 ("Fiscal 1998"), the Company
manufactured 42% of the wholesale value of the products it sold.

     An important part of the product development process is
packaging.  The Company leverages its unique packaging style to
reinforce its image as a marketer of modern, well-designed, high
quality, and reasonably priced writing instruments and children's
activity products.

     (iii)  The Company utilizes foreign manufacturers to supply a
large percentage of the products it sells.  It acquires a majority
of its products from contract manufacturers located in Taiwan,
China, Korea, Italy, India and other foreign countries.  Such
products are manufactured to the Company's order.  The Company
generally acquires its imported products pursuant to purchase
orders, which typically provide for delivery within 60 to 90 days
after the order.  The present policy is to establish with a
majority of its vendors payment terms ranging from 30 to 60 days
and finance the remainder pursuant to letters of credit.

     To date, the Company has experienced limited supply shortages
with respect to these imported products.  The Company has
occasionally incurred additional costs by shipping goods into its
warehouse via airfreight, as opposed to by ship when the
manufacturers did not timely deliver products or the Company
required faster delivery.  The Company is unable to predict whether
it will experience similar or more severe product shortages in the
future.  The Company has successfully developed alternative sources
of supply for virtually all of its important items to ensure timely
deliveries in the event of a disruption in deliveries due to a
dispute with any overseas manufacturer or any other reason.  The
Company has achieved this through building Sawdust and developing
multiple sources in Taiwan, China, Korea, Italy, India and other
foreign countries.  As a result, the loss of any one overseas
manufacturer would probably not create any long-term disruptions in
the Company's ability to ship its goods to its customers on a
timely basis.  Management believes that it is not now dependent,
upon any one manufacturer for its product lines.  It believes that
products of quality comparable to its present products could, if
necessary, be acquired from a variety of overseas manufacturers at
comparable rates.

     The Company obtains raw materials for Sawdust from domestic
and foreign suppliers.  It has not faced material supply shortages,
and it generally has multiple sources for most of its product
requirements.  Due to a determination by the United States
International Trade Commission that certain Chinese manufacturers
of pencils were dumping these pencils in the United States, the
Company has been required to pay "Dumping Duties" to acquire
pencils from certain of its Chinese suppliers of pencils.  The
Company has also been successful in developing additional sources
for its supply of certain of its pencils.  In some instances, this
has resulted in increased costs to the Company for the wood for its
pencils.  Recently, certain of the Company's Chinese suppliers of
pencils and related products have been the subject of a
redetermination which, in certain instances, increased the amount
of Dumping Duties the Company has or may be required to pay.  The
Company has accrued for any additional duties which may arise from
this redetermination.

     On September 26, 1999 the Company signed a letter of intent
with a Chinese manufacturer to establish a joint venture in
Shanghai China for the purpose of developing additional capability
to manufacture pencils and markers.  The transaction is subject to
the manufacturer's ability to operate the Company's machinery and
produce comparable product, approval of the Company's bank, final
approval of the Company's Board of Directors, approval of the
Chinese government, and approval of the final documents.
Accordingly, there is no assurance that the transaction will be
completed, or what, if any, impact this will have on the Company's
current manufacturing operations.

     As of the September 30, 1999 the Company has not recorded any
impact of this transaction given the uncertainty of its successful
completion, however, if the transaction is successful there is the
potential of some costs associated with closing down the Company's
domestic manufacturing facility.

     (iv)  The Company generally markets its products under the
individual product's name and either the Company's name or the
trademark of one of its licensors.  In the event opportunities
present themselves which the Company determines are advantageous
for it to import certain products in bulk on a private label basis
(i.e., store brand), the Company may capitalize on such
opportunity.  In such event, the Company may request an advance
deposit from the customer before effecting such transaction,
depending on the credit worthiness of the customer.  This,
historically, has been a small portion of the Company's business.

     The Company's marketing efforts include the development of
special promotions in connection with purchases of merchandise by
certain major chain stores.  These promotions often feature
advertising allowances, free goods and free displays or permit the
sale of several of the Company's products at one favorable price.
The funding for these special promotions is substantially derived
from the revenues to be received from the sales themselves, and
generally the Company is not required to allocate a large portion
of its working capital to such efforts.  The Company also has
designed point of purchase product displays which it offers to its
customers.

     The Company has entered into license agreements with entities
such as Lucasfilm, Ltd. (Star Wars), The Walt Disney Company
(Mickey Mouse and Winnie the Pooh), the NBA (National Basketball
Association), the NHL (National Hockey League), the NFL (National
Football League), and Coca-Cola Company, using these trademark
names on the Company's products.  In most situations, the licensor
requires an advance royalty, a royalty against net sales for
licensed products and a minimum royalty.  Generally, the Company
satisfies the minimum royalty; occasionally it does not.  When the
Company is unable to meet the minimum sales levels required under
a license, the Company must pay the minimum royalty and possibly
incur losses as  a result thereof.  The Company evaluates its
licenses carefully and attempts to minimize such losses.  These
licenses have terms ranging from one to three years and are renewed
by mutual consent from both parties.

     Except when the Company uses trademarks owned by others, the
Company follows a policy of registering with the U.S. Patent and
Trademark Office trademarks covering the names of items in its
product line and proposed names for new items.  The Company has
been awarded trademarks in the past.  There is no assurance that
any pending trademarks will be registered.

     (v)  The business of the Company has certain seasonal aspects.
Sales tend to increase during the months of May through August,
because retailers buy in anticipation of fall school opening, and
to decrease during the months of September through December. The
Company has been developing marketing programs to reduce the impact
of this seasonality.

     (vi)  The Company maintains a warehouse in North Brunswick,
NJ, for a portion of its inventory.

     Generally, the Company does not require any of its customers
to post letters of credit or to advance any deposits on orders,
except in certain instances, depending upon the creditworthiness of
the customer, for special orders.  The Company analyzes each
special order customer independently to determine whether any
deposits should be paid.  The Company considers credit rating,
location, and amount of order, among other factors, to determine
whether a deposit is required.  Normal credit terms are "net 30
days."  The Company, in certain instances, follows the industry
practice of "School Dating," which is the shipment of products from
May through August, for which payment is not due until September or
October.  The Company reviews its credit practices regularly and
currently attempts to insure 80% of its receivables through credit
insurance.  In the past, the Company has experienced a limited
amount of bad debts from its customers, usually as a result of a
bankruptcy.  In such a case the Company's policy has been to
liquidate its claims as promptly as reasonable under the
circumstances. This has been further ameliorated since the Company
obtained credit insurance.  The Company believes it has sufficient
resources to manage its credit function.

     (vii)  The Company's primary customers include major mass
market retailers in the United States.  In Fiscal 1999, one
customer accounted for 9% of the Company's revenues.  While the
loss of this customer could have a material adverse impact upon the
Company in the short-term, the Company believes such impact would
be minimized in the long-term since the Company could either reduce
its expenses related to this customer or sell all or a portion of
these products to other customers.

     Certain of the Company's customers include:

          -  Office Max            -  Walgreen Drug
          -  Walmart               -  Eckerd
          -  Target                -  Staples

     The above list of customers does not include independent
distributors nor products the Company sells to the stationery,
military and college store markets.

     The Company advertises in trade journals on a limited basis
and maintains display booths for use at trade shows.  It owns
several booths that attractively display its line of products for
such trade shows.  The Company has developed a website to
attractively display its products on the world wide web located at
"www.pentechintl.com."  The Company has no current plans for any
other major advertising campaign, however it regularly investigates
additional advertising avenues.

     The Company warrants its merchandise against manufacturing
defects.  In the event of any such returns the Company evaluates
the problem and attempts to rectify the problem for the customer,
if possible.  The Company  believes it maintains adequate product
liability insurance.

     (viii)  As of December 16, 1999 and 1998, the Company's
backlog of firm written orders was approximately $1,600,000 in each
year.  This backlog is comprised of the normal delay between
receipt and processing of orders and orders for delayed delivery.
All orders were delivered or are expected to be filled within the
applicable fiscal year.

     (x)  The industry in which the Company is engaged is highly
competitive.  The Company competes with a large number of
companies, including such well-known companies as Bic Pen Company,
Papermate, RoseArt Industries, Inc. and Newell.  Some of the
Company's competitors have far greater financial resources and
sales.  The Company generally competes on the basis of the special
features of its products, quality, packaging design (which includes
the individual product's name and the Company's name and logo or
the trademark of one of the Company's licensors) and price.

     (xiii)  As of December 16, 1999, the Company had approximately
146 employees.  The Company's sales are made primarily by
independent sales organizations which are compensated exclusively
on a commission basis with commissions ranging from two and one
half to seven percent.  The Company does not anticipate a
substantial increase in the number of its employees in the near
future.  The Company considers its relations with its employees to
be good.  In December 1992, the production and maintenance
employees of the Company's wholly-owned subsidiary, Sawdust, voted
to join Local 478 of the International Brotherhood of Teamsters
(the "Union").  In the Company's fiscal year ended September 30,
1996 ("Fiscal 1996"), Sawdust renewed its labor agreement with the
Union for the benefit of these employees, which agreement expired
August 31, 1999.  At present, the Union has agreed to work under
the terms and conditions of the expired contract until a new
contract is negotiated and a determination is made as to the impact
of the Company's investigation into moving a portion of its
manufacturing operations overseas.

     (d)  The Company exported approximately 6.3% of its sales,
primarily to customers in Canada, Europe and Mexico, during Fiscal
1999.

Item 2.  PROPERTIES.

     The Company's present executive offices are located at 195
Carter Drive, Edison, New Jersey 08817, where it occupies general
office, sales and warehouse space of approximately 40,500 square
feet pursuant to a five year lease expiring March 1, 2003.

     The Company extended its lease for five years commencing June
1, 1995 (the "Sawdust Lease") for approximately 50,000 square feet
for Sawdust's premises.  These premises are located at 44 National
Road, Edison, NJ 08817.  The Sawdust Lease, which is triple net,
currently requires annual rental payment of  $180,936 with yearly
increment additions in each subsequent year of the Sawdust Lease's
term.  The Sawdust Lease contains an option to renew on terms
providing for moderate increases in rent for up to an additional
five years.

     The Company entered into a five year lease for a warehouse at
1101 Corporate Road, North Brunswick, New Jersey (the "Warehouse
Lease") for approximately 130,000 square feet, which commenced on
September 1, 1995.  The Warehouse Lease provides for annual base
rent of approximately $436,000 per year.

     The Company entered into a year-to-year lease for a sales
office in Madison, Wisconsin (the "Madison Lease").  The Madison
Lease is for approximately 1,885 square feet and commenced May 1,
1997.  The Madison Lease calls for annual rental of $24,318, which
increases by 3.5 percent each subsequent lease year until
termination.

     The Company entered into a month-to-month lease for a studio
at 75 Broad Street, Red Bank, New Jersey for approximately 2,400
square feet which commenced on April 1, 1997.  The Studio Lease
provides for monthly rent of $3,700.

Item 3.  LEGAL PROCEEDINGS.

     There are no legal proceedings to which the Company is a party
or known to be contemplated that are deemed material by the Company
at the present time, and the Company knows of no material legal
proceedings pending or threatened, or judgments entered, against
any director or officer of the Company in his capacity as such.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     Not applicable.



<PAGE>
                         PART II



Item 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS.


     (a)  The shares of Common Stock are traded on the National
Association of Securities Dealers Automatic Quotation System
("NASDAQ") National Market System under the symbol PNTK.  The
following table shows the closing high and low "bid" prices of
these shares as reported by NASDAQ during the Company's last two
fiscal years presented on a calendar year basis.  Such quotations
represent prices between dealers without retail markups, markdowns
or commissions and may not represent actual transactions.


                         High                          Low


   1999

1st Quarter              1 3/16                        9/16
2nd Quarter              1 7/32                        5/8
3rd Quarter               25/32                       19/32
4th Quarter             1 15/32                        3/4


   1998

1st Quarter              3 1/16                      2 1/2
2nd Quarter             2 31/32                      1 1/8
3rd Quarter             2                            1 1/8
4th Quarter             1 13/16                       15/16



     On December 16, 1999, the closing "bid" and "ask" prices for
the Common Stock were $11/16 and $25/32 respectively, as reported
by NASDAQ.

     (b)  On December 16, 1999, the number of shareholders of
record of the Common Stock was 430.  The Company is aware that it
has a substantial number of additional shareholders who hold their
shares of Common Stock in "street name."

     (c)  The Company has not declared a cash dividend in the past
and is not permitted to do so without the consent of its lender.
See Item 7.  "Management's Discussion and Analysis of Financial
Condition and Results of Operations."



Item 6.  SELECTED FINANCIAL DATA.


     The following summary of financial information should be read
in conjunction with the Financial Statements and notes thereto
included elsewhere in this Form 10-K.



                      STATEMENT OF OPERATIONS DATA


                              Fiscal Years Ended September 30,
                       1999        1998       1997       1996      1995
                         ($ 000s omitted except per share amounts)

Net
sales                 $60,949   $57,485    $60,806    $61,679   $54,892

Net (loss)
income                    (334)   (3,504)       600      (5,317)   (1,059)

Basic and diluted
net (loss)
income
per share               ($.03)    ($.28)      $.05       ($.51)    ($.10)

Weighted
average
number
of shares
outstanding            12,570    12,537     12,297     10,497    10,661

Dividends                   -         -          -          -         -




<PAGE>
                           BALANCE SHEET DATA


                             September 30,



                     1999       1998        1997         1996       1995
                                       ($ 000s omitted)


Working
 capital            $11,971    $12,883     $15,452      $13,676    $16,928

Total
 assets              36,094     41,583      42,503       48,189     44,518

Notes and
 bankers'
 acceptances
 payable
 (included
 in current
 liabil-
 ities)              13,882     18,618      17,238       22,841     17,011

Long-
 term
 debt                 1,500      2,000       2,300        2,300          -

Share-
 holders'
 equity              13,985     14,758      17,591       16,028     21,345



Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS
         OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


     Fiscal 1999 compared to Fiscal 1998

     Net sales for Fiscal 1999 were $60,949,084 as compared to
$57,485,045 for Fiscal 1998, reflecting an increase of $3,464,039
or approximately 6%.  This was the result of the success of the
Company's new licenses and further market penetration of the
Company's childrens activity product line.

     In Fiscal 1999, the Company had income from operations of
$1,133,057 as compared to a loss from operations of $2,339,443 in
Fiscal 1998.  The Company's gross profit of 31.9% in Fiscal 1999
increased from 28.1% in Fiscal 1998 largely in part to the
increased sales from its three new licenses, which have higher
gross profit margins.  In addition, the Company made an investment
through aggressive pricing to gain shelf space for its children's
activity product line in the prior year.

     The Company's selling, general and administrative ("SG&A")
expenses decreased during Fiscal 1999 to $18,286,990 from
$18,474,161 in Fiscal 1998, reflecting an decrease of $187,171.
SG&A as a percentage of sales also decreased to 30% from 32.1%.
This decrease was primarily related to the Company's cost reduction
program offset by the increase in royalty expenses associated with
the success of the Company's three new licenses.  In addition, in
the prior year, the Company incurred higher promotional costs
associated with the launch of its activity product line.

     During Fiscal 1999, the Company's average level of short-term
borrowings increased to $16,500,000 from $16,000,000 in Fiscal
1998.  This was due to the increased loan balance at the beginning
of Fiscal 1999 resulting from the higher inventory levels.  These
levels were reduced during the course of the year.  The Company's
effective annual interest rate decreased from 8.4% to 8.0%.  In
addition, interest incurred on the settlement note was lower from
the prior year as a result of quarterly principal payments.  As a
result, the Company's interest expense decreased during Fiscal 1999
to $1,470,699 from $1,528,779.

     During Fiscal 1999, the Company increased its valuation
allowance against all of its deferred tax assets from $2,614,202 to
$2,670,714 due to the uncertainty of the Company's ability to
utilize its federal and state net operating loss carryforwards.

     As a result of the above, the Company recognized a net loss of
$333,609, or $.03 per share, in Fiscal 1999 as compared to a net
loss of $3,504,303, or $.28 per share, in Fiscal 1998.

     Fiscal 1998 Compared to Fiscal 1997

     Net sales for Fiscal 1998 were $57,485,045 as compared to
$60,806,386 for Fiscal 1997, reflecting a decrease of $3,321,341 or
approximately 5.5%.  Sales from three of the Company's licensed
products were down from the previous year as were sales from
promotional and holiday programs.  This was offset, in part, by the
success of the children's activity products as well as commodity
programs.

     In Fiscal 1998, the Company had a loss from operations of
$2,339,443 as compared to income from operations of $2,155,227 in
Fiscal 1997.  The Company's gross profit of 28.1% in Fiscal 1998
decreased from 34.3% in Fiscal 1997.  The Company's gross profit
decreased principally due to the decline in licensed products which
historically are marketed at higher margins and, to a lesser
extent, to an inventory write-down and the impact of a large return
of promotional back-to-school products.  The Company also made an
investment to gain shelf space for its activity product line
through aggressive pricing and various other promotions.

     The Company's SG&A expenses increased during Fiscal 1998 to
$18,474,161 from $17,988,791 in Fiscal 1997, reflecting an increase
of $485,370.  SG&A expenses as a percentage of sales also increased
from 29.6% to 32.1%.  The increase was primarily related to higher
promotional costs associated with the Company's launch of its
activity product line to new retail stores.  The Company incurred
higher bad debt expense as a result of bankruptcies of two
customers.  The Company also incurred additional costs for the
development of products for two of its new licenses.  Warehouse and
freight expenses also increased as a percentage of sales due to a
decline in the average order size as a result of increased sales to
the office superstores.  Finally, the percentage of SG&A expenses
to revenues increased as a result of higher levels of fixed costs
incurred but there was lower sales volume.

     In the second quarter of Fiscal 1998, the Company as part of
the settlement of a lawsuit, was awarded $965,000, net of legal
fees.

     During Fiscal 1998, the Company's average level of short-term
borrowings remained unchanged from the prior year at approximately
$16,000,000.  This was due to the sale of assets, related to the
cosmetic product line, plus the litigation settlement offset by an
increase in inventory levels and the operating loss.  The Company's
effective annual interest rate decreased from 8.7% to 8.4%.  In
addition, interest incurred on the settlement note was lower than
the prior year as a result of quarterly principal payments, which
began in January 1998.  As a result, the Company's interest expense
decreased during Fiscal 1998 to $1,528,779 from $1,583,750.

     During Fiscal 1998, the Company increased its valuation
allowance against its deferred tax assets from $965,565 to
$2,614,202.  The increase of $1,648,637 was recorded due to the
uncertainty of the Company's ability to fully utilize federal and
state net operating loss carryforwards.

     Based on the above, the Company recognized a net loss of
$3,504,303 in Fiscal 1998 as compared to net income of $600,014 in
Fiscal 1997.

     (b)  Liquidity and Capital Resources

     Cash and cash equivalents decreased to $0 at September 30,
1999 from $759,349 at September 30, 1998.  Accounts receivable
increased to $15,300,613 at September 30, 1999 from $14,327,195 at
September 30, 1998, primarily due to higher sales volume.  The
Company believes that its allowance for doubtful accounts and its
accrual for returns and advertising allowances are adequate given
the Company's detailed review of its accounts receivable aging, its
review of subsequent cash receipts, its use of credit limits and
its on-going credit evaluation and account monitoring.  In
addition, the Company has credit insurance on most of its major
accounts receivable.  Inventory decreased to $15,415,326 at
September 30, 1999 from $20,015,241 the year before due to the
Company's inventory reduction program.  The decrease to $3,154,383
for equipment at September 30, 1999 from $3,562,283 at September
30, 1998 primarily reflects a reduction in the rate of equipment
purchases.  Notes payable at September 30, 1999 decreased to
$13,881,901 from $18,618,186 at September 30, 1998 due primarily to
the decreased inventory levels.

     Net cash provided by operating activities for the Fiscal 1999
was $4,606,458 as compared to net cash used in operating activities
of $1,309,440 for Fiscal 1998.  This increase was primarily due to
improved operating results, the reduction in inventory, and to a
lesser extent, the increase in accounts payable offset by the
increase in accounts receivable.

     Cash used in investing activities during Fiscal 1999 of
$630,272 was higher than $9,643 in the prior year due to proceeds
from the sale of the cosmetic assets in the prior year.

     The cash used in financing activities during Fiscal 1999 was
$4,735,535 as compared to cash provided by financing activities of
$1,429,620 in Fiscal 1998.  The decrease in cash provided by
financing activities was primarily due to the decrease in notes
payable.  As a result of these activities, cash and cash
equivalents decreased $759,349 during Fiscal 1999 as compared to an
increase of $110,537 during Fiscal 1998.

     As a result of the above, the Company's working capital
decreased to $11,970,736 at September 30, 1999 from $12,882,941 at
September 30, 1998.

     In January 1997, the Company entered into a three year
$30,000,000 revolving credit facility with BankAmerica Business
Credit, Inc. now known as Bank of America, N.A.("BABC") (the
"Credit Agreement").  The amount of drawings under the facility is
subject to limitations based upon eligible inventory and accounts
receivable as described in the Credit Agreement.  The Credit
Agreement is collateralized by a security interest in substantially
all of the assets of the Company.  In addition, in accordance with
the Credit Agreement, the Company has agreed, among other things,
to the maintenance of certain minimum amounts of tangible net worth
and minimum interest coverage ratios.  In January 1999, the Company
and BABC entered into an agreement to amend the Credit Agreement.
This amendment, among other things, modified certain financial
covenants for Fiscal 1999, reduced the revolving credit facility to
$25,000,000, lowered the maximum inventory advance and allowed for
a seasonal over-advance.

     In December 1999, the Company and BABC entered into an
agreement to renew the Credit Agreement for an additional three
years (the "Renewal").  The Renewal, among other things, waives
compliance with certain financial covenants violated at September
30, 1999, modifies the financial covenants for the next three
fiscal years, increases the maximum inventory advance and allows
for a seasonal over-advance.

     The note issued in connection with the legal settlement
referred to above requires $100,000 quarterly principal payments
through April 1, 2004.

     The Company continued several actions to increase its
liquidity during Fiscal 1999.  It continued a policy of obtaining
30 to 60 days vendor credit to finance a majority of its purchases;
previously these purchases had been financed pursuant to letters of
credit. Actions were also taken to reduce the number of items held
in inventory as well as reduce its headcount.

     On September 26, 1999 the Company signed a letter of intent
with a Chinese manufacturer to establish a joint venture in
Shanghai China for the purpose of developing additional capability
to manufacture pencils and markers.  The transaction is subject to
the manufacturer's ability to operate the Company's machinery and
produce comparable product, approval of the Company's bank, final
approval of the Company's Board of Directors, approval of the
Chinese government, and approval of the final documents.
Accordingly, there is no assurance that the transaction will be
completed, or what, if any, impact this will have on the Company's
current manufacturing operations.

     As of the September 30, 1999 the Company has not recorded any
impact of this transaction given the uncertainty of its successful
completion, however, if the transaction is successful there is the
potential of some costs associated with closing down the Company's
domestic manufacturing facility.

     As a result of the seasonal nature of the Company's business,
the Company's use of credit increases significantly in the months
of May, June, July and August as the Company finances its inventory
and receivables, and declines in September and October after
collection of the invoices from its Back-to-School sales.

     The Company anticipates that its revolving credit line
provided by the Credit Agreement, together with anticipated cash
flow from operations, will be sufficient to provide liquidity on
both a short-term and long-term basis to finance current and future
operations.

     With respect to the Year 2000 issue, all internal computer
equipment,  manufacturing, distribution and business equipment are
Year 2000 compliant.  The Company utilizes a third party software
package to run its internal operating and accounting systems and
purchased and installed the Year 2000 compliant version in December
1998.  In addition, all telecommunications equipment and computer
applications are Year 2000 compliant.  The Company has, therefore,
not developed any contingency plans relating to Year 2000 issues.
Year 2000 problems involving third parties may have a negative
impact on the Company's customers or suppliers, the general economy
or on the ability of businesses generally to receive essential
services (such as telecommunications, banking services, etc.).  Any
such problem could have a material adverse effect on the Company's
business and financial condition.  The Company has contacted its
major suppliers and customers in order to assess any third party
risk, the majority of which has stated that they are Year 2000
compliant, however, the Company is unable at this time to assess
the possible impact on its business of Year 2000 problems involving
any third party.  The costs associated with becoming Year 2000
compliant were not material and, for the most part, were absorbed
in the Company's normal information technology budget.  Although
the Company believes that its systems are Year 2000 compliant,
there can be no assurance that  unanticipated Year 2000 problems
will not arise which, depending on the nature and magnitude of the
problem, could have a material adverse effect on the Company's
business and financial condition.

     (c) Safe Harbor Statement

     Statements which are not historical facts, including
statements about the Company's confidence and strategies and its
expectations about new and existing products, technologies and
opportunities, market and industry segment growth, demand and
acceptance of new and existing products are forward looking
statements that involve risks and uncertainties.  These include,
but are not limited to, product demand and market acceptance risks;
the impact of competitive products and pricing; the results of
financing efforts; the loss of any significant customers of any
business; the effect of the Company's accounting policies; the
effects of economic conditions and trade, legal, social, and
economic risks, such as import, licensing, and trade restrictions;
the results of the Company's business plan and the impact on the
Company of its relationship with its lender.

Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET       RISK.

     None.

Item 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     This information is contained on pages F-1 through F-25
hereof.

Item 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

     None.


                            PART III


     The information required by this section will be incorporated
by reference to the Proxy Statement of the Company to be filed with
the Securities and Exchange Commission on or before January 29,
2000.



                             PART IV



Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

     (a) (1)  Financial Statements
                                                            Page

Independent Auditors' Report............................    F-1

Consolidated Balance Sheets as of September 30, 1999 and
1998....................................................    F-2-3

Consolidated Statements of Operations for the
years ended September 30, 1999, 1998 and 1997 ..........    F-4

Consolidated Statements of Shareholders' Equity for
the years ended September 30, 1999, 1998 and 1997.......    F-5

Consolidated Statements of Cash Flows for the
years ended September 30, 1999, 1998, and 1997..........    F-6-7

Notes to Consolidated Financial Statements..............    F-8-25


     (a) (2)  Financial Statement Schedules

Schedule II - Valuation and Qualifying Accounts and
Reserves...............................................     F-26

     All other schedules are omitted because they are not applicable,
not required, or because the required information is included in the
financial statements or notes thereto.


     (a) (3)  Exhibits

3.1       The Company's Certificate of Incorporation, as amended,
          incorporated by reference to Exhibit 3.1 to Registration
          Statement No. 2-95102-NY of the Company ("Form S-18").

3.2       The Company's By-laws incorporated by reference to Exhibit
          3.2 of Form S-18.

10.1      1989 Stock Option Plan incorporated by reference to Exhibit
          4.2 to the Registration Statement No. 33-27009 on Form S-8.

10.2      1993 Stock Option Plan incorporated by reference
          to Exhibit 4.1 to the Registration Statement No. 33-67802 on Form
          S-8.

10.3      1995 Stock Option Plan is incorporated by reference to
          Exhibit 4.1 to the Registration Statement No. 333-30595
          filed on Form S-8.

10.4      Loan and Security Agreement dated as of January 13, 1997,
          among the Company, Pentech Cosmetics, Inc., Sawdust Pencil
          Co. and BankAmerica Business Credit, Inc. incorporated by
          reference to Exhibit 10.7 of the Company's Form 10-K Annual
          Report for its fiscal year ended September 30, 1996.

10.5      Waiver and First Amendment to Loan and Security Agreement
          among the Company, Pentech Cosmetics, Inc., Sawdust Pencil
          Co. and BankAmerica Business Credit, Inc. dated as of
          January 11, 1999 incorporated by reference to Exhibit 10.5
          of the Company's Form 10-K Annual Report for its fiscal
          year ended September 30, 1998.

10.6      Waiver, Consent and Second Amendment to Loan and Security
          Agreement by and among Bank of America, N.A., the Company,
          Pentech Cosmetics and Sawdust Pencil Co. dated as of
          December 20, 1999.

10.8      Subsidiaries of the Company.

23.1      Consent of Ernst & Young LLP dated December 28, 1999.

























<PAGE>
                            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.

                                   PENTECH INTERNATIONAL INC.



December 27, 1999                  By:s/David Melnick
                                      David Melnick,
                                      President and
                                      Chief Executive Officer



     Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this Report has been signed below by the
following persons in the capacities and on the dates indicated.


s/Norman Melnick    Chairman of the Board       December 27, 1999
Norman Melnick      of Directors


s/David Melnick     President and Chief         December 27, 1999
David Melnick       Executive Officer and
                    Director (principal
                    operating officer)


s/John F. Kuypers   Director                    December 27, 1999
John F. Kuypers


s/Richard S. Kalin  Secretary and Director      December 27, 1999
Richard S. Kalin


s/Roy L. Boe        Director                    December 27, 1999
Roy L. Boe


s/Robert K. Semel   Director                    December 27, 1999
Robert Semel


s/William Visone    Executive Vice President-   December 27, 1999
William Visone      Strategic Planning
                    and Director (principal
                    financial officer)


                  REPORT OF INDEPENDENT AUDITORS





Board of Directors
Pentech International Inc.


We have audited the accompanying consolidated balance sheets of
Pentech International Inc. and subsidiaries as of September 30,
1999 and 1998 and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the
three years in the period ended September 30, 1999.  Our audits
also included the financial statement schedule listed in the Index
at Item 14(a).  These financial statements and schedule are the
responsibility of the Company's management.  Our responsibility is
to express an opinion on these financial statements and schedule
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 consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Pentech International Inc. and subsidiaries
as of September 30, 1999 and 1998, and the consolidated results of
its operations and its cash flows for each of the three years in
the period ended September 30, 1999, in conformity with generally
accepted accounting principles.  Also, in our opinion, the related
financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly, in
all material respects the information set forth therein.



                                        s/ERNST & YOUNG LLP
                                        ERNST & YOUNG LLP

MetroPark, New Jersey
December 8, 1999, except
for Note 3(c), as to which the
date is December 20, 1999



           PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

                   Consolidated Balance Sheets

                         Assets (Note 3)

                                               September 30,
                                          1999            1998

Current Assets:
  Cash and cash equivalents           $         -     $   759,349
  Accounts receivable, net
   of allowance for doubtful
   accounts $35,654 and $128,814
   in 1999 and 1998, respect-
   ively)                              15,300,613      14,327,195
  Inventory (Note 2)                   15,415,326      20,015,241
  Income taxes receivable (Note 5)            300         448,087
  Prepaid expenses and other            1,632,401       1,436,415
  Available-for-Sale Security
  (Notes 1 and 13)                        181,400         621,875

Total current assets                   32,530,040      37,608,162


Equipment:
  Equipment and furniture               9,472,206       8,934,327
  Less accumulated depreciation        (6,317,823)     (5,372,044)

                                        3,154,383       3,562,283

Other assets:
  Trademarks, net of
   amortization of $762,388
   and $666,766 in 1999 and
   1998, respectively                     236,301         239,530
  Due from officer                        173,512         173,512

                                          409,813         413,042

                                      $36,094,236     $41,583,487








See accompanying notes.




             PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

                     Consolidated Balance Sheets

                Liabilities and Shareholders' Equity

                                              September 30,
                                           1999            1998


Current liabilities:
  Notes payable (Note 3)               $13,881,901     $18,618,186
  Accounts payable                       3,322,094       2,455,073
  Accrued expenses (Note 11)             3,055,309       3,351,962
  Settlement note payable (Note 8)         300,000         300,000

Total current liabilities               20,559,304      24,725,221

Other liabilities:
  Royalty payable, long-term (Note 8)       50,000         100,000
  Settlement note payable,
   long-term (Note 8)                    1,500,000       2,000,000

                                         1,550,000       2,100,000

Commitments and contingencies
  (Note 6)
Shareholders' equity
  (Notes 1 and 4):
Preferred stock, par value
  $.10 per share; authorized
  500,000 shares; issued
  and outstanding, none                          -               -
Common stock, par value $.01
  per share; authorized 20,000,000
  shares; issued and outstanding
  12,571,258 and 12,570,258 in
  1999 and 1998, respectively              125,713         125,703
Capital in excess of par                 6,838,723       6,837,983
Retained earnings                        6,839,096       7,172,705
Accumulated other comprehensive
 income (Notes 1 and 13)                   181,400         621,875

                                        13,984,932      14,758,266

                                       $36,094,236     $41,583,487



See accompanying notes.




             PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

                Consolidated Statements of Operations


                                  Year ended September 30,
                                1999          1998          1997


Net sales (Note 9)          $60,949,084   $57,485,045   $60,806,386
Cost of sales                41,529,037    41,350,327    39,975,368

Gross profit                 19,420,047    16,134,718    20,831,018

Selling, general and
 administrative expenses     18,286,990    18,474,161    17,988,791
Loss from cosmetics
 operation (Note 7)                   -             -       687,000

Income (loss) from
 operations                   1,133,057    (2,339,443)    2,155,227

Other (income) expense:
(Income) from
  litigation (Note 14)                       (965,542)            -
 Interest expense             1,470,699     1,528,779     1,583,750
 Interest income                 (4,033)      (33,392)       (9,660)

                              1,466,666       529,845     1,574,090

(Loss) income before
 taxes                         (333,609)   (2,869,288)      581,137

Income tax expense (benefit)
 (Note 5)                             -       635,015       (18,877)

Net (loss) income           $  (333,609)  $(3,504,303)  $   600,014

Basic and diluted
 (loss) earnings per common
 share (Note 1)                 ($.03)       ($.28)          $.05





See accompanying notes.







                              Pentech International Inc. and Subsidiaries
<TABLE>                      Consolidated Statements of Shareholders' Equity
<CAPTION>                    Years ended September 30, 1999, 1998 and 1997

                       Common Stock               Capital
                     Number of Shares             in                                    Accumulated
                                                  Excess     Retained   Comprehensive   Other Comprehen-
                   Authorized Issued      Amount  of Par     Earnings   Income (loss)   sive Income
<S>                <C>        <C>         <C>      <C>       <C>         <C>            <C>
Balance, September
  30, 1996         20,000,000 10,496,758  104,968  5,845,781 10,076,994                 -
Issuance of Common
  Stock                        2,007,500   20,075    943,362

Net income                                                      600,014  $600,014

Balance, September
  30, 1997         20,000,000 12,504,258  125,043  6,789,143  10,677,008                -

Comprehensive (loss):
Net loss                                                     (3,504,303) $(3,504,303)

Other comprehensive income:
Unrealized gain on
 available-for-sale
 security                                                                    621,875    621,875

Comprehensive (loss)                                                     $(2,882,428)
Issuance of Common Stock          66,000      660     48,840

Balance, September 30,
  1998                20,000,000 12,570,258  125,703  6,837,983 7,172,705               621,875

Comprehensive (loss):
Net loss                                                         (333,609)  $(333,609)

Other comprehensive (loss)
Unrealized loss on
 available-for-sale
 security                                                                    (440,475) (440,475)

Comprehensive (loss)                                                                   $(774,084)
Issuance of Common Stock               1,000      10        740

                       20,000,000 12,571,258 $125,713 $6,838,723 $ 6,839,096           $181,400
</TABLE>
See accompanying notes.

                  PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

                     Consolidated Statements of Cash Flows


                                             Year ended September 30,
                                       1999            1998         1997
Cash flows from operating
activities
Net (loss) income                  $  (333,609)   $ (3,504,303) $   600,014
Adjustments to reconcile
 net (loss) income  to net cash
 (used in) provided by
 operating activities:
  Depreciation                         945,779         942,432      982,702
  Amortization                          95,622         100,363      116,925
  Provision for losses on
   accounts receivable                  95,753         134,974       15,401
  Deferred income taxes                      -         635,015      290,099
  Provision for loss from
   cosmetics operation                       -               -      687,000
       Change in assets and
   liabilities:
    (Increase) decrease in
      accounts receivable           (1,069,171)      1,746,117   (1,771,187)
    Decrease (increase) in
      inventory                      4,599,915      (1,957,743)    (152,916)
    (Increase) decrease in
      prepaid expenses and other      (195,986)        118,620     (605,228)
    (Increase) in due from
      officer                                -         (32,000)     (32,001)
    (Decrease) in bankers'
      acceptances payable                    -               -   (1,488,757)
    Increase (decrease) in
      accounts payable                 867,021       1,121,468     (331,698)
    (Decrease) in
      accrued expenses                (296,653)        (88,742)    (386,426)
    (Decrease) in settlement
      payables                        (550,000)       (500,000)  (1,000,000)
    Change in income
      taxes payable/
      receivable                       447,787         (25,641)     723,968

    Net cash provided
      by (used in)
      operating activities           4,606,458      (1,309,440)  (2,352,104)



See accompanying notes.

                  PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

                Consolidated Statements of Cash Flows (cont'd)

                           Year ended September 30,
                                        1999           1998         1997

Cash flows from investing
 activities
Sale of cosmetics assets                      -       758,426            -
Purchase of equipment and
 furniture                             (537,879)     (697,884)    (793,006)
Increase in trademarks                  (92,393)      (70,185)    (118,891)

 Net cash used in investing            (630,272)       (9,643)    (911,897)
 activities

Cash flows from financing
 activities
Net (decrease) increase in
 notes payable                       (4,736,285)    1,380,120   (4,114,432)
Proceeds from the issuance
 of Common Stock                            750        49,500      963,437

Net cash (used in)
 provided by financing
 activities                          (4,735,535)    1,429,620   (3,150,995)
Net (decrease) increase
 in cash and cash equi-
 valents                               (759,349)      110,537   (6,414,996)

Cash and cash equivalents,
 beginning of year                      759,349       648,812    7,063,808

Cash and cash equivalents,
 end of year                        $         -    $  759,349   $  648,812

Supplemental disclosures
 of cash flow information
Non-cash investing activities:
 (Decrease) increase in fair
  value of available for
  sale equity security              $  (440,475)   $  621,875
  Purchase of fixed assets by
   capital lease                              -             -   $   72,050
  Cash paid during the
   year for:
   Interest                         $ 1,557,011    $1,454,840    1,773,920
   Income taxes                               -             -       30,931



See accompanying notes.

           PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

            Notes to Consolidated Financial Statements
                        September 30, 1999


1.  Summary of Significant Accounting Policies

Organization

     Pentech International Inc. (the "Company") was formed in April
1984.  A wholly-owned subsidiary, Sawdust Pencil Co. ("Sawdust"),
was formed in November 1989.  The Company and its subsidiary are
engaged in the production, design, and marketing of writing and
drawing instruments.  In October 1993, the Company formed another
wholly-owned subsidiary, Pentech Cosmetics, Inc., to manufacture
and distribute cosmetic pencils.  During Fiscal 1997, the Company
decided to dispose of this product line.  The Company primarily
operates in one business segment:  the manufacture and marketing of
pens, markers, pencils, other writing instruments and activity
kits, primarily to major mass market retailers located in the
United States, under the "Pentech" name or licensed trademark
brand.  The Company's fiscal year ends September 30.

Principles of Consolidation

     The consolidated financial statements include the accounts of
the Company and its subsidiaries.  All significant intercompany
balances and transactions have been eliminated.

Cash Equivalents

     The Company considers all time deposits with a maturity of
three months or less to be cash equivalents.

Inventory and Cost of Sales

     Inventory is stated at the lower of cost (first-in, first-out)
or market.  Cost of sales for imported products includes the
invoice cost, duty, freight in, display and packaging costs. Cost
of domestically manufactured products includes raw materials,
labor, overhead and packaging costs.

Equipment and Depreciation

     Equipment is stated at cost.  Depreciation is provided by the
straight-line method over the estimated useful lives of the assets,
which range between five to ten years.  Major improvements to
existing equipment are capitalized.  Expenditures for maintenance
and repairs which do not extend the life of the assets are charged
to expense as incurred.



           PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

       Notes to Consolidated Financial Statements (cont'd)
                        September 30, 1999


1. Summary of Significant Accounting Policies (cont'd)


Trademarks

     Costs related to trademarks are being amortized over a five
year period on a straight-line basis.

Revenue recognition

     Revenue is recognized upon shipment of product to the
customer.

Fair Value of Financial Instruments

     The fair value for cash and accounts receivable approximate
carrying amounts due to the short maturity of these instruments.
The fair value amounts for notes payable approximate carrying
amounts due to the variable interest rates.

Use of Estimates

     The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those estimates.

(Loss) Earnings Per Share:

     In February 1997, the Financial Accounting Standards Board
issued Statement No. 128, Earnings Per Share, which was adopted by
the Company in December 1997.  SFAS No. 128 replaced the
calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share.  Unlike primary earnings per
share, basic earning per share excludes any dilutive effects of
options, warrants and convertible securities.  Diluted earnings per
share is very similar to the previously reported fully diluted
earnings per share.  All earnings per share for all periods have
been presented and conform to the SFAS No. 128 requirements.






             PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

         Notes to Consolidated Financial Statements (cont'd)
                         September 30, 1999



1.   Summary of Significant Accounting Policies (cont'd)


     The following table sets forth the computation of basic and
diluted earnings per share:



                                   YEAR ENDED SEPTEMBER 30,
                               1999           1998          1997


Numerator:
 Net (loss) income        $  (333,609)    $(3,504,303)  $   600,014


Denominator:
 Denominator for basic
   earnings per share-
   weighted average
   shares                  12,570,508      12,537,258    12,297,124


Effect of dilutive
 securities:
 Employee stock
  options                           0               0       194,043

Denominator for diluted
 earnings per share -
 adjusted weighted
 average shares and
 assumed conversions:      12,570,508      12,537,258    12,491,167


Basic and diluted
 (loss) income
  per share                   ($.03)         ($.28)         $.05





           PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

       Notes to Consolidated Financial Statements (cont'd)
                        September 30, 1999


1.   Summary of Significant Accounting Policies (cont'd)


Stock Based Compensation

     Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation," encourages, but does not
require companies to record compensation cost for stock-based
employee compensation plans at fair value.  The Company has elected
to follow Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its employee stock options.  Under APB 25,
because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized.


Other Recently Issued Accounting Standard

     In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 "Accounting for
Derivative Instruments and Hedging Activities" which is effective
for years beginning after June 15, 2000.  The Company has completed
its review of SFAS 133 and has concluded that the adoption of this
statement would not have any effect on the Company and its
reporting.




<PAGE>
              PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

          Notes to Consolidated Financial Statements (cont'd)
                           September 30, 1999



2.  Inventory


                                        1999                1998


Raw materials                       $ 4,261,866         $ 6,634,833
Work-in-process                       1,748,504           1,641,162
Finished goods                       10,510,956          12,849,246
Allowance for slow-
moving items                         (1,106,000)         (1,110,000)

                                    $15,415,326         $20,015,241



3.  Notes Payable

                                        1999                1998


Revolving line of credit
 interest payable monthly
 at prime plus .5% (8.75% at
 September 30, 1999 and 9%
 at September 30, 1998)             $ 1,881,901         $ 4,618,186

Revolving line of credit,
 interest payable monthly at
 libor plus 2.5% (ranging from
 7.76% to 7.87% at September 30,
 1999 and 7.813% to 8.188%
 at September 30, 1998)              12,000,000          14,000,000

                                    $13,881,901         $18,618,186



           PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

       Notes to Consolidated Financial Statements (cont'd)
                        September 30, 1999


3.  Notes Payable (cont'd)

     (a)  In January 1997, the Company entered into a three year
$30,000,000 Revolving Credit Agreement with BankAmerica Business
Credit, Inc. now known as Bank of America, N.A. ("BABC") (the
"Credit Agreement").  Borrowings under the Credit Agreement are
subject to limitations based upon eligible inventory and accounts
receivable as defined in the Credit Agreement.  Amounts borrowed
under the Credit Agreement accrue interest, at the Company's
option, at either prime plus .5% or libor plus 2.5%.

     The Credit Agreement is collateralized by a security interest
in substantially all of the assets of the Company.  In connection
with the Credit Agreement, the Company has agreed, among other
things, to the maintenance of certain minimum amounts of tangible
net worth and interest coverage ratios and the Company cannot
declare a cash divided without the consent of BABC.

     (b) In January 1999, the Company and BABC entered into an
agreement to amend the Credit Agreement.  This amendment, among
other things, waived compliance with the violated covenants,
reduced the revolving credit facility to $25,000,000, modified the
financial covenants for Fiscal 1999, lowered the maximum inventory
advance and allowed for a seasonal over-advance.

     (c)  In December 1999, the Company and BABC entered into an
agreement to renew the Credit Agreement for an additional three
years (the "Renewal").  The Renewal, among other things, waives
compliance with certain financial covenants violated at September
30, 1999, modifies the financial covenants for the next three
fiscal years, increases the maximum inventory advance and allows
for a seasonal over-advance.

     The weighted average annual interest rate during the periods
on the outstanding short-term borrowings was 8.0% and 8.4% for
fiscal years ended September 30, 1999 and 1998, respectively.

4.  Shareholders' Equity

Stock Options

     During Fiscal 1997, the Company granted options (outside of
the plans discussed herein) covering in the aggregate 20,000 shares
of common stock at an exercise price of $1.19 per share
(representing fair market value at date of grant).  In addition,
options covering in the aggregate of 175,000 shares were canceled.


           PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

       Notes to Consolidated Financial Statements (cont'd)
                        September 30, 1999


4. Shareholders' Equity (cont'd)

Stock Option Plans

     On January 5, 1989, the Company adopted a stock option plan
("1989 Plan").  The 1989 Plan provides for options and limited
stock appreciation rights ("Limited SARs") to be granted in tandem
to issue up to 600,000 shares of common stock. Limited SARs may
only be granted in conjunction with related options.

     The exercise price of options granted may not be less than the
fair market value of the shares on the date of the grant (110% of
such fair market value for a holder of more than 10% of the
Company's voting securities), nor may options be exercised more
than ten years from date of grant (5 years for a holder of more
than 10% of the Company's voting securities).  No SARs have been
granted.  The 1989 Plan was terminated on January 5, 1999.
Outstanding options continue to be exercisable according to their
terms and remain subject to all the terms and conditions of the
1989 Plan, however no more grants can be issued.

     On April 14, 1993, the Company adopted a Stock Option Plan
("1993 Plan").  The 1993 Plan provides for the issuance of
incentive and nonstatutory stock options to employees, consultants,
advisors and/or directors for a total up to 700,000 shares of
common stock.  The exercise price of options granted may not be
less than the fair market value of the shares on the date of grant
(110% of such fair market value for a holder of more than 10% of
the Company's common stock), nor may options be exercised more than
five years from date of grant.  The 1993 Plan will terminate on
January 4, 2003.

     On May 9, 1995, the Company adopted a Stock Option Plan ("1995
Plan").  The 1995 Plan provides for the issuance of incentive and
nonstatutory stock options to employees, consultants, advisors
and/or directors for a total of up to 700,000 shares of Common
Stock.  The determination of the exercise price of the options
granted under the 1995 Plan are the same as those of the 1993 Plan.
The 1995 Plan will terminate on January 4, 2005.

     On November 26, 1996, the Board of Directors offered to cancel
and reissue certain options (at a reduced level) in the 1989 and
1993 Plans at the fair market value of the Company's Common Stock
on such date.  Upon acceptance by the option holders, the vesting
period began one year from the date of the offer and the options
become exercisable ratably over a period of three years and expire
four years from the date of issuance.

                        PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

                    Notes to Consolidated Financial Statements (Cont'd)
                                    September 30, 1999


4. Shareholders' Equity (cont'd)


     The table below presents option information for the 1989 Plan:

                  Year ended         Year ended             Year ended
                 Sept. 30, 1999     Sept. 30, 1998         Sept. 30, 1997
            Price range Shares  Price range Shares   Price Range Shares


Outstanding,
 beginning of
 year      $0.75-2.875  270,600  $0.75       285,600  $3.125-7.875 351,000

Options granted                   1.50-2.875 105,000   0.75        285,600

Canceled    0.75-2.875  (78,600)  0.75       (72,000)  3.125-7.875 (351,000)

Exercised                         0.75       (48,000)

Outstanding,
 end of year $0.75-2.875 192,000 $0.75-2.875  270,600 $0.75         285,600


Eligible for
 exercise
 currently   $0.75-2.875  107,835 $0.75        51,200     -           -







                         PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

                     Notes to Consolidated Financial Statements (cont'd)
                                     September 30, 1999

     4. Shareholders' Equity (cont'd)

          The table below presents option information for the 1993 Plan:


                Year ended            Year ended          Year ended
              Sept. 30, 1999        Sept. 30, 1998      Sept. 30, 1997
           Price range Shares   Price range   Shares  Price Range   Shares


Outstanding,
 beginning of
 year     $0.75-5.50  310,500  $0.75-5.50    440,500  $3.125-6.125  647,500

Options
 granted   0.75-1.25  155,600          -          -    0.75 -0.875  385,500

Canceled   0.75-5.50 (125,500)  0.75-4.50   (112,000)  3.125-6.125 (592,500)

Exercised  0.75      (1,000)    0.75        ( 18,000)

Outstanding,
 end of year $0.75-5.50 339,600 $0.75-5.50   310,500   $0.75 -5.50  440,500


Eligible for
 exercise
 currently   $0.75-5.50 133,500 $0.75-5.50    96,000   $4.50 -5.50   43,000







                            PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

                        Notes to Consolidated Financial Statements (cont'd)
                                        September 30, 1999



4. Shareholders' Equity (cont'd)

     The table below presents option information for the 1995 Plan:



                   Year Ended          Year Ended            Year Ended
                 Sept. 30, 1999      Sept. 30, 1998        Sept. 30, 1997
              Price range  Shares  Price range   Shares  Price range   Shares


Outstanding,
beginning of
year       $ 0.75-2.9375    75,002 $0.75-2.9375  123,000 $3.00         10,000

Options granted      -         -    1.625-1.688    9,500  0.75-2.9375  123,000

Canceled     0.75-1.4375    (8,500) 1.4375-2.9375 (57,498) 3.00       (10,000)

Exercised            -         -          -            -     -           -

Outstanding,
end of year $1.4375-2.9375    66,502 $ 0.75-2.9375  75,002 $0.75-2.9375 123,000

Eligible for
exercise
currently   $1.4375-2.9375    49,002 $ 0.75-2.9375  29,750 $1.4375      12,000





           PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

       Notes to Consolidated Financial Statements (Cont'd)
                        September 30, 1999

4. Shareholders' Equity (cont'd)

     The Financial Accounting Standards Board has issued Financial
Accounting Standard No. 123 "Accounting for Stock-Based
Compensation" ("FAS 123").  FAS 123 took effect for transactions
entered into during the fiscal year beginning October 1, 1996; with
respect to disclosures required for entities that elect to continue
to measure compensation cost using  prior permitted accounting
method, such disclosures must include the effects of all awards
granted in the fiscal year beginning October 1, 1995.  The Company
has elected to follow Accounting Principles Board Opinion No. 25.
"Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock options.
Under APB 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock on
the date of grant, no compensation expense is recognized.

     Pro forma information regarding net income and earnings per
share is required by Statement No. 123, and has been determined as
if the Company had accounted for its employee stock options under
the fair value method of that Statement.  This fair value for these
options was estimated at the date of grant using a Black-Scholes
option pricing model with the following assumptions:

     Risk-free interest rate                 6.01%
     Expected dividend yield                    0%
     Expected stock price volatility         .605%
     Expected life of options            2-6 years

     The weighted average fair value of options granted during
Fiscal 1999 and Fiscal 1998 is $.68 and $.74 per share,
respectively.

     The Black-Scholes option valuation model was developed for use
in estimating the fair value of traded options which have no
vesting restrictions and are fully transferable.  In addition,
option valuation models require the input of highly subjective
assumptions including the expected stock price volatility.  Because
the Company's employee stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can mutually affect the
fair value estimate, in management's opinion, the existing models
do not necessarily provide a reliable single measure of the fair
value of its employee stock options.  For purposes of pro forma
disclosures, the estimated fair value of the options is amortized
to expense over the options' vesting period.  The Company's pro
forma information is as follows (in thousands except for earnings
per share amounts):

                 PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Cont'd)
                              September 30, 1999


4. Shareholders' Equity (cont'd)


            Sept. 30, 1999         Sept. 30, 1998       Sept. 30, 1997

        As reported Pro forma  As reported Pro forma  As reported Pro forma


Net (loss)
 income    ($334)     ($404)     ($3,504)   ($3,594)      $600      $491
(Loss) earn-
 ings per
 share     ($.03)     ($.03)     ($  .28)   ($  .29)      $.05      $.04





<PAGE>
            PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

        Notes to Consolidated Financial Statements (Cont'd)
                         September 30, 1998



5. Income Taxes


                           1999           1998          1997

Expense/(Benefit)

Federal:
  Current               $       -     $        -     $(309,276)
  Deferred                      -        349,002       273,730
State:
  Current                       -              -           300
  Deferred                      -        286,013        16,369

                        $       -     $  635,015     $ (18,877)





     Reconciliations of the statutory federal income tax rate of
34% to the effective tax rates are as follows:


                             1999          1998         1997


Statutory tax rate         (34.00%)      (34.00%)      34.00%
State income taxes, net
  of federal tax expense
  (benefit)                  9.88%        (4.84%)       1.86
IRS audit adjustment                                    5.32
Permanent differences       10.04%                      1.37%
Increase (decrease) in
  valuation allowance       16.94%        57.46%      (47.77%)
Other                       (2.86%)        2.14%       (6.65%)

Effective tax rate              -         22.13%       (3.25%)




<PAGE>
              PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

          Notes to Consolidated Financial Statements (Cont'd)
                          September 30, 1999
5. Income Taxes (cont'd)

    Significant components of the Company's deferred tax assets and
liabilities as of September 30, 1999 and 1998 are as follows:

                                               September 30,
                                          1999             1998

Current deferred tax liability:
  State taxes on deferred
   federal items                      $  (51,957)      $  (68,687)

Current deferred tax assets:
  Bad debts                               15,331           55,390
  Inventory reserve                      475,580          477,300
  Reserve for returns and
   allowances                            267,018          303,528
  Unicap                                   8,364            7,787

  Total current deferred
   tax assets                            766,293          844,005
Valuation allowance on current
  deferred tax assets                   (714,336)        (775,318)

                                          51,957           68,687

  Net current deferred tax assets     $        -       $        -

Long-term deferred tax liabilities:
  Depreciation                        $ (853,163)      $ (932,290)

Long-term deferred tax assets:
  Reserve for litigation                 817,000        1,053,500
  State net operating loss
   carryforwards                         552,210          535,598

  Federal net operating loss carry-
   forward                             1,440,331        1,182,076

Total long-term deferred
  tax assets                           2,809,541        2,771,174
Valuation allowance on
  long-term deferred
  tax assets                          (1,956,378)      (1,838,884)

                                         853,163          932,290

  Net long-term deferred tax
   assets                             $        -       $        -

             PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

       Notes to Consolidated Financial Statements (Cont'd)
                        September 30, 1999

5. Income Taxes (cont'd)

     The Company has generated state net operating loss
carryforwards of $6,135,663, which will expire in varying amounts
beginning on September 30, 2001.  The Company has also generated a
federal net operating loss carry-forward of $4,206,218, which will
expire in varying amounts on September 30, 2013.

     In 1997, approximately $277,000 of the valuation allowance was
recognized as a tax benefit.  In 1998, the Company increased the
valuation allowance to $2,614,202 due to the uncertainty of its
ability to fully utilize the federal and state net operating loss
carry-forward.  In 1999, there was a net increase in the valuation
allowance to $2,670,714.  As in the prior year, in 1999 no tax
benefit was recognized due to the uncertainty of utilizing the net
loss carry-forwards.

6.  Commitments and Contingencies
Letters of Credit

    The Company was contingently liable for outstanding letters of
credit of $158,202 at September 30, 1999.

Leases

    Rent expense for the years ended September 30, 1999, 1998 and
1997 amounted to $1,022,852, $1,056,934 and $1,024,491,
respectively.

    In May 1990, the Company entered into a 60 month lease for
manufacturing space.  The lease provides for all real estate taxes
and operating expenses to be paid by the Company and it contains
options to renew for two 60 month periods.  The Company exercised
its first option and extended the lease for an additional 60 months
commencing in June 1995.

    In March 1993, the Company entered into a 60 month lease for
office, warehouse and manufacturing space.  The lease provides for
all real estate taxes and operating expenses to be paid by the
Company and it contains an option to renew for an additional 60
month period.  In October 1997, the Company exercised its option to
renew.

    In August 1995, the Company entered into a 60 month lease for
its 130,000 square foot distribution center.  The lease provides
for all real estate taxes and operating expenses to be paid by the

           PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

       Notes to Consolidated Financial Statements (Cont'd)
                        September 30, 1999

6. Commitments and Contingencies (cont'd)

Company and it contains two options to renew for two five year
periods.

     Future minimum rental payments under operating leases are as
follows:

     2000                  744,932
     2001                  177,743
     2002                  141,375
     2003                   82,469

                        $1,146,519

Concentration of Labor

    In December 1992, the production and maintenance employees of
the Company's wholly owned subsidiary, Sawdust, voted to join local
478 of the International Brotherhood of Teamsters (the "Union").
In the Company's fiscal year ended September 30, 1996 ("Fiscal
1996"), Sawdust renewed its labor agreement with the Union for the
benefit of these employees, which agreement expired August 31,
1999.  The Union has agreed to work under the terms and conditions
of the expired contract until a new contract is negotiated and a
determination is made as to the impact of the Company's
investigation into moving a portion of its manufacturing facility
overseas.  As of September 30, 1999, 47% of the Company's employees
were members of the Union.  To date, the Company has maintained a
favorable relationship with the Union.

7. Loss from Cosmetics Operation:

    During the second quarter of 1997, the Board of Directors
determined to discontinue its cosmetics operation and focus its
efforts primarily on its writing instruments business.  The loss
from cosmetics operation reported in the second quarter of 1997
reflects the write-down of certain assets of this operation to
their estimated net realizable value (Note 13).

8. Paradise Settlement

    In October 1987, the Company commenced an action against Leon
Hayduchok, All-Mark Corporation and Paradise Creations, Inc.,
(collectively, "Paradise") in the United States District Court for
the Southern District of New York which resulted in an adverse
multi-million dollar judgment against Pentech.  In December 1996,
the parties to such litigation entered into a settlement agreement
providing, among other things, for Pentech to pay $500,000 at the
date of signing, deliver a $3,000,000 promissory note plus interest
at the rate of 7% per annum (the "Note") and enter into a five year

           PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

       Notes to Consolidated Financial Statements (Cont'd)
                        September 30, 1999

8. Paradise Settlement (Cont'd)

non-exclusive license to sell such products for a 10% royalty, with
an aggregate minimum royalty of $500,000 (the "Paradise
Settlement").  The Company paid Paradise the $500,000 at the date
of signing in January 1997 and a required payment against the Note
of $400,000 in February 1997.  In addition, the Note required
$100,000 quarterly principal payments commencing January 1, 1998.
Quarterly principal payments have been made through October, 1999.
The Company also has paid $300,000 against the minimum royalty.

9.  Major Customer and Concentration of Credit Risk

     For the years ended September 30, 1999, 1998 and 1997, the
Company had one customer who accounted for 9%, 12% and 13%,
respectively, of net sales.  Concentration of credit risk with
respect to trade receivables is generally limited due to the
Company's use of credit limits, credit insurance and ongoing credit
evaluations and account monitoring procedures.

10.   401(k) Plan

    The Company has a defined contribution 401(k) plan, covering
substantially all employees not covered under a collective
bargaining agreement.  The plan provides employees an opportunity
to make pre-tax payroll contributions to the plan.  The plan was
amended on April 1, 1996 to incorporate an employer discretionary
match of 1/3 of the first 6% of employee contributions.  For the
years ended September 30, 1999, 1998, 1997 the Company contributed
$37,500, $32,558 and $36,273, respectively.

11.  Accrued Expenses
                                          September 30,
                                       1999          1998

Accrued returns and advertising
  rebates                           $2,038,410   $1,878,847
Accrued royalties                      430,000      346,940
Other accrued expenses                 586,899    1,126,175

                                    $3,055,309   $3,351,962

12.  Private Placement

    In January 1997, the Company completed a private offering of
20 Units, each Unit consisting of 100,000 shares of Common Stock of
the Company for $50,000 per Unit (the "Private Offering").  The
Company received net proceeds of $963,000 from the Private
           PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

       Notes to Consolidated Financial Statements (Cont'd)
                        September 30, 1998

12.  Private Placement (Cont'd)

Offering.  Officers and directors of the Company acquired 52.5% of
the Units sold in the Private Offering and participated on the same
terms as the other investors in the Private Offering.  The terms of
the Private Offering were established by a Special Committee of the
Board of Directors who did not participate in the Private Offering.
The Company was required by its banks (at that time) to raise funds
in the Private Offering in order to fund the $500,000 payment
referred to in Note 8 and to enable the Company to fund its
requirements for capital expenditures.

13. Sale of Cosmetic Assets/Available-for-Sale Security

    In November 1997, the Company entered into an agreement to
sell the fixed assets and inventory of its Cosmetics subsidiary to
an outside company, Fun Cosmetics Inc. ("Fun") (significantly owned
by a former employee) for its net book value of $758,000 plus
200,000 shares of Fun.  In December 1997, $100,000 was received as
a down payment, $150,000 was received at closing and a note was
issued for approximately $508,000 bearing interest at a rate of 9%
per annum.  The terms of the note provided that the principal be
reduced by $150,000 a month commencing February 1998, until paid.
This note was paid in full in March 1998.  At the time of sale, the
Company assigned no value to the shares received since the
acquiring company was a start-up company with minimal assets and
was still seeking financing.  Since November 1997, Fun has raised
additional equity and funding and has become a non-reporting
company whose shares are listed on the NASD Electronic Bulletin
Board.  At September 30, 1999, the value of this stock (based on
quoted market prices) was $.907 a share.  The Company has the right
to begin selling its shares in Fun.  However, due to the
historically low level of trading activity, the number of shares
the Company owns and the fact that the shares are unregistered,
there is no assurance the Company will realize the current market
value.

14. Income from Lawsuit Settlement:

    In June 1997, the Company commenced an action against Cooper
and Dunham LLP and Lewis H. Eslinger (collectively, "Defendants")
in the Supreme Court of the State of New York and County of New
York for legal malpractice, gross negligence, misrepresentation and
breach of contract in connection with the adverse, multi-million
dollar judgment resulting from a patent infringement case which the
defendants had been retained to pursue.  On April 10, 1998, the
Company terminated this action and received a payment of
$1,250,000.  All actions arising from the patent infringement case
have now been discontinued with prejudice.
              PENTECH INTERNATIONAL INC. AND SUBSIDIARIES

     SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

             Years Ended September 30, 1999, 1998 and 1997


  Column A                Column B     Column C  Column D     Column E

                                       Charged
                                       to Costs
                          Balance at   and                     Balance
                          Beginning    Expenses/               End of
Description               of Period    Other     Deductions(1) Period


Year ended September
 30, 1999

Allowance for doubtful
 accounts                $  128,814  $   95,753  $188,913  $   35,654

Allowance for slow
 moving items            $1,110,000  $  213,000  $217,000  $1,106,000

Valuation allowance
 for deferred taxes      $2,614,202  $   56,512  $      -  $2,670,714

Year ended September
 30, 1998
Allowance for doubtful
 accounts                $   30,087  $  134,974  $ 36,247  $  128,814

Allowance for slow
 moving items            $1,210,000  $  300,000  $400,000  $1,110,000

Valuation allowance
 for deferred taxes      $  965,565  $1,648,637         -  $2,614,202

Year ended September
 30, 1997
Allowance for doubtful
 accounts                $  402,513  $   15,401  $387,827  $   30,087

Allowance for slow
 moving items            $1,386,000  $  400,000  $576,000  $1,210,000

Valuation allowance
for deferred taxes       $1,243,191  $  237,009  $514,635  $  965,565


(1) Amount represents various accounts written off during the year, net
    of recoveries.

                          EXHIBIT INDEX




Exhibit


10.6          Waiver, Consent and Second Amendment to Loan and
              Security Agreement by and among Bank of America,
              N.A., the Company, Pentech Cosmetics and Sawdust
              Pencil Co. dated as of December 20, 1999.

21            Subsidiaries of the Company.

23.1          Consent of Ernst & Young LLP dated December 28, 1999.

27            Financial Data Schedule.