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, 1997

                       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 5, 1997 was approximately
$12,485,018 based on the average of the bid and asked quotations of the
registrant's Common Stock, par value $.01 share, as reported by NASDAQ on
December 5, 1997.

     On December 5, 1997 there were outstanding 12,504,258 shares of the
registrant's Common Stock.

     The Proxy Statement of the registrant to be filed on or before January
29, 1998 is incorporated herein by reference.

<PAGE>
                                  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., to
manufacture certain of the Company's writing instruments.  In
October 1993, the Company formed another wholly-owned subsidiary,
Pentech Cosmetics, Inc., to manufacture and distribute a line of
cosmetic products.  During the fiscal year ended September 30,
1997 ("Fiscal 1997"), the Company decided to dispose of this
product line.  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, children's activity kits and related
products, 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, other writing instruments, children's activity kits and
related 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 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 powerful consumer appeal.

     (d)(i)  The Company markets a variety of pens, markers,
pencils, other writing instruments, children's activity kits and
related products 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 to include mass merchants, chain drug stores,
grocery stores, warehouse clubs, and office supply super stores. 
The Company also has limited sales to the stationery, military
and college store markets and some sales go through distributors
and wholesalers.  Additionally, the Company sells its products in
Canada, Europe, Mexico and other selected countries 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:

                                                   Miscellaneous
                                  Other Writing    Cosmetics
                                  Instruments and  Products     
           Pens   Markers Pencils Related Products(Discontinued)

FY 1995    18.6%   23.0%    34.1%       20.3%           4.0%
FY 1996    21.1%   21.7%    36.4%       16.0%           4.8%
FY 1997    27.8%   19.2%    33.4%       14.4%           5.2%

     (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 Pencil Company ("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 Fiscal
1997, the Company manufactured approximately $23,788,000
wholesale value of products at Sawdust, which represents 69% of
its current capacity and approximately 39% of the Company's
current requirements.  During its fiscal year ended September 30,
1996 ("Fiscal 1996"), the Company manufactured 38% 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 pens, markers, pencils, other writing
instruments, children's activity kits and related products that
it sells throughout the United States.  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 days to 90
days after the order.  Historically, the Company has financed a
large percentage of its purchases pursuant to letters of credit. 
The present policy is to establish with a majority of its
accounts 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, nor is it likely to become 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 manufacturers
of Chinese pencils were dumping these pencils in the United
States, the Company has been required to pay "Dumping Duties" to
acquire pencils and related pencils from certain of its Chinese
suppliers of pencils and related products.  The Company has also
been developing additional sources for its supply of certain of
its pencils, which, to date, it has been successful in doing.  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.

     (iv)  The Company markets its products under the individual
product's name and the Company's name.  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 segment 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
any 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 The Walt Disney Company, the NBA (National
Basketball Association), NHL (National Hockey League), Coca-Cola
Company, Dilbert, and WWF (World Wildlife Fund), using these
trademark names on the Company's products.  In most situations,
the licensor requires an advance royalty, a royalty against net
sales for the licensed product and a minimum royalty.  Generally,
the Company satisfies the minimum royalty; occasionally it does
not.  In such a case, 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 normally 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 this seasonality.

     (vi)  The Company maintains a warehouse in North Brunswick,
New Jersey where it stores its product until it ships them.

     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, except for the Phar-Mor
bankruptcy in Fiscal 1992 and the Happiness Express bankruptcy in
Fiscal 1996, 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 functions.

     (vii)  The Company's primary customers include major mass
market retailers in the United States.  In Fiscal 1997, one
customer accounted for 13% 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               -  CVS Stores
          -  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 no current plans for any other
major advertising campaign, however it is investigating
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 11, 1997 and December 31, 1996, the
Company's backlog of firm written orders was approximately
$2,100,000 and $1,900,000, respectively.  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 and Newell some of which may 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) and price.
     
     (xiii)  As of November 30, 1997, the Company had
approximately  209 employees, including Messrs. Norman Melnick,
David Melnick, John Linster and John F. Kuypers.  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 Pencil Co. ("Sawdust"), voted to join
Local 478 of the International Brotherhood of Teamsters (the
"Union").  In Fiscal 1996, Sawdust renewed its labor agreement
with the Union for the benefit of these employees which expires
August 31, 1999.

     (e)  The Company exports approximately 5.3% percent of its
sales, primarily to customers in Canada, Europe and Mexico.


Item 2.  PROPERTIES

     The Company's present 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, with an unaffiliated party,
expiring March 1, 1998.  In October 1997, the Company exercised
its option to renew this lease for an additional five years.

     The Company extended its lease for five years commencing
June 1, 1995 (the "Sawdust Lease") with an unaffiliated company
for approximately 50,000 square feet for Sawdust's premises
located at 44 National Road, Edison, New Jersey 08817.  The
Sawdust Lease, which is triple net, currently requires annual
rental payment of $173,376 with yearly moderate 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") with an unaffiliated Company 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, which is with an unaffiliated party, is for approximately
1,885 square feet and commenced May 1, 1997.  The Madison Lease
calls for annual rental of $25,541, which increases by 3.5
percent each subsequent lease year until termination.

Item 3.  LEGAL PROCEEDINGS

     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 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 (the "Initial Payment"); deliver its promissory note for
$3,000,000 plus interest at the rate of 7% per annum (the "Note")
and enter into a five year non-exclusive license to sell such
products for a 10% royalty, with a minimum royalty of $500,000
(the "Paradise Settlement").  During Fiscal 1997, Pentech paid
Paradise the Initial Payment, reduced the Note by $400,000, and
paid $100,000 of the minimum royalty.  The Note requires $100,000
quarterly principal payments commencing January 1, 1998.

     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 the Paradise litigation. 
The Company is seeking damages of no less than $5,000,000,
additional compensatory damages, punitive damages, legal interest
and reimbursement of attorneys' fees, costs and expenses incurred
by the Company in the prosecution of this action.  Presently,
this action is in the early stages of discovery.

     There are no other 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 SHAREHOLDERS

     Not applicable.

     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

1996      

1st Quarter              3 3/8                         2
2nd Quarter              2 1/4                         1 3/4
3rd Quarter              2 1/4                         1 3/4
4th Quarter              2 3/16                          5/8

1997

1st Quarter              1 3/16                          21/32
2nd Quarter              1 3/4                         1 1/16
3rd Quarter              2 7/16                        1 3/8
4th Quarter              3 1/16                        2 5/16

     On December 5, 1997, the closing "bid" and "ask" prices for
the Common Stock were $2.8125 and $2.9375 respectively, as
reported by NASDAQ.

     (b)  On December 5, 1997, the number of shareholders of
record of the Common Stock was 468.

     (c)  The Company has not declared a cash dividend in the
past and is not permitted to do so without the consent of its
lenders. 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,
                          -------------------------------
                 1997        1996      1995      1994        1993
                 ----        ----      ----      ----        ----
                  ($ 000s omitted except per share amounts)
Net
sales           $60,806    $61,679   $54,892   $62,136   $51,321

Net income
(loss)              600     (5,317)   (1,059)    4,701     3,986

Net income
(loss)
per share          $.05      ($.51)    ($.10)     $.40      $.34

Weighted
average 
number 
of shares
outstanding
including
common
stock 
equi-
valents          12,297     10,497    10,661    11,855    11,876

Dividends           _          -         -         -         -   


<PAGE>
                            BALANCE SHEET DATA

                              September 30,

                          Fiscal Years Ended September 30,
                          -------------------------------
                 1997        1996      1995      1994        1993
                 ----        ----      ----      ----        ----
                             ($ 000s omitted)


Working
capital          $15,452     $13,676   $16,928   $21,451  $18,490

Total
assets           $42,503      48,189    44,518    42,558   42,130

Notes and bankers'
acceptances payable
(included
in current
liabil-
ities)           $17,238      22,841    17,011    11,023   13,538

Long-
term
debt               2,300       2,300        -          -       -


Share-
holders'
equity           $17,591      16,028    21,345    26,479   23,502


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

     Fiscal 1997 Compared to Fiscal 1996

     Net sales for Fiscal 1997 were $60,806,386 as compared to
$61,679,499 for Fiscal 1996, reflecting a decrease of $873,113 or
approximately 1.4%.  Sales for the company were relatively flat
due primarily to the Company's continuing efforts to consolidate
its product offering.  Sales of the Company's children's activity 
and licensed products lines grew, but this was offset by declines
in sales in some of its older product lines which the Company had
been de-emphasizing.  The Company increased its sales through the
office superstore channel which were offset by some softness with
its traditional mass merchandiser channel.

     In Fiscal 1997, the Company had income from operations of
$2,155,227 as compared to a loss from operations of $872,603 in
Fiscal 1996.  The Company's gross profit of 34.3% in Fiscal 1997
increased from 30.2% in Fiscal 1996.  The Company's gross profit
increased primarily due to improved product mix featuring less
slower moving items, improved manufacturing costs, improved
profitability of its cosmetic line (now discontinued), and higher
gross profit on its licensed items.

     The Company's selling, general and administrative ("SG&A")
expenses decreased during Fiscal 1997 to $17,988,791 from
$19,521,690 in Fiscal 1996, reflecting a decrease of $1,532,899. 
SG&A as a percentage of sales also decreased from 31.7% to 29.6%. 
This decrease was primarily related to certain non-recurring
expenses from the prior year including higher legal and
consulting fees due to the Paradise matter, the bankruptcy of
Happiness Express, higher warehouse costs due to relocation costs
of its distribution center and certain relocation costs of key
new hires.  Offsetting these decreases were higher royalty fees
for sales of licensed products and higher software costs used for
the Company's internal operating system.

     In the second quarter of Fiscal 1997, the Company recorded a
$687,000 write-down of its cosmetic line to its net realizable
value.  This was due to the Company's decision to dispose of this
product line and focus on its core stationery line of products. 
As discussed in a subsequent section, the Company reached an
agreement to sell this line of business in November 1997.

     During Fiscal 1997, the Company decreased its short-term
borrowings to an average level of $16,080,000 from $18,507,000 in
Fiscal 1996.  This decrease was due to the decrease in the
Company's inventory levels as well as the improved profitability. 
Offsetting the decline in average borrowings was an increase in
interest rates under the terms of the Company's new financing
arrangement which began in January of 1997.  The Company's
effective interest rate increased from 7.8% to 8.7%.  In
addition, the Company incurred higher interest costs due to
interest on the settlement note payable resulting from the
Paradise matter.  As a result, the Company's interest expense
increased during Fiscal 1997 to $1,583,750 from $1,447,499.

     During Fiscal 1997, as a result of its profitability, the
Company reduced its valuation allowance against its deferred tax
assets $277,626 from $1,243,191 to $965,565 resulting in a net
benefit from income taxes.

     Based on the above, the Company recognized net income of
$600,014 in Fiscal 1997 as compared to a net loss of $5,317,408
in Fiscal 1996.

     Fiscal 1996 Compared to Fiscal Year Ended September 30, 1995
     ("Fiscal 1995").

     Net sales for Fiscal 1996 were $61,679,499 as compared to
$54,891,592 for Fiscal 1995, reflecting an increase of $6,787,907
or approximately 12.4%.  The increase in sales was primarily due
to the growth in the Company's licensed products. 

     In Fiscal 1996, the Company incurred a loss from operations
of $872,603 as compared to a loss from operations of $474,368 in
Fiscal 1995.  The Company's gross profit of 30.2% in Fiscal 1996
was up from 28.8% in Fiscal 1995.  The Company's gross profit
increased primarily due to absence of the $1.3 million reserve
established the prior year for slow-moving inventory, an increase
in gross profit associated with its new licensed products and an
improvement in the sell-through of its product line which reduced
the overall return rates.  Offsetting these improvements were
higher costs incurred at the Company's manufacturing facility,
higher costs associated with its cosmetics business (now
discontinued) and aggressive efforts to close-out slow-moving
inventory.

     The Company's SG&A expenses increased during Fiscal 1996 to
$19,521,690 from $15,871,636 in Fiscal 1995, reflecting an
increase of $3,650,054.  SG&A expenses as a percentage of sales
increased to 31.7% from 28.9%.  The increase was primarily
related to higher royalty costs associated with many of the
Company's licensed products.  In addition, the Company incurred
higher variable costs such as freight, distribution and
commission costs associated with higher sales.  The Company also
incurred higher legal and expert fees during the trial leading up
to the Paradise Settlement.  The Company incurred higher bad debt
expense due to the bankruptcy of Happiness Express and incurred
additional royalty costs relating to its termination of several
license agreements.  The Company also incurred higher costs
relating to its establishment of a warehouse/distribution center
and the establishment of an expanded marketing department.  The
Company also hired a new President, human resource manager,
purchasing manager and an assistant controller.

     The Company incurred a significant loss of $4,433,920
associated with the Paradise Settlement.  This loss included the
cost of the Paradise Settlement, the legal and consulting fees
associated with the Paradise Settlement and the bank debt
refinancing which occurred as a result of the material adverse
effect on the Company from the Paradise Settlement.

     During Fiscal 1996, the Company increased its short-term
borrowings to an average level of $18,507,000 from $15,618,000 in
Fiscal 1995.  The increase was primarily due to the stock-buy-
back program completed in January 1995 and the higher cash
position maintained by the Company in August 1996 and September
1996 as a result of the bank refinancing activities.  The
Company's effective interest rate decreased slightly from 8.1% to
7.8% due to a slight decline in short-term interest rates.  As a
result, the Company's interest expense increased during Fiscal
1996 to $1,447,499 from $1,259,145.

     During Fiscal 1996, the Company established a valuation
allowance against its deferred tax assets in the amount of
$1,243,191 which reduced its income tax benefit for the year.

     Based on the above factors, the Company incurred a loss of
$5,317,408 in Fiscal 1996 as compared to a net loss of $1,058,946
in Fiscal 1995.

     (b)  Liquidity and Capital Resources

     Cash and cash equivalents decreased to $648,812 at September
30, 1997 from $7,063,808 at September 30, 1996.  Generally, the
Company uses its cash to reduce its outstanding borrowings in
order to reduce interest costs.  At September 30, 1996, due to
the status of the refinancing of the Company's borrowing
facilities, the Company maintained a high level of cash. 
Accounts receivable increased to $16,293,286 at September 30,
1997 from $14,537,500 at September 30, 1996, primarily due to
increased sales in the fourth quarter.  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 $18,480,924 at September 30,
1997 from $18,728,008.  This decrease was due to the Company's
decision to eliminate items from its product line and to move
aggressively to close-out excess and slow-moving inventory.  The
decrease to $3,963,831 for equipment at September 30, 1997 from
$4,368,477 at September 30, 1996 primarily reflects a portion of
the write-down from the Cosmetics operation.  Notes payable at
September 30, 1997 were $17,238,066 as compared to $21,532,498 at
September 30, 1996.  This decrease was primarily due to the
Company's decision to reduce its cash position at September 30,
1997.

     Net cash used in operating activities for the year ended
September 30, 1997 was $2,352,104 as compared to cash provided by
operating activities for Fiscal 1996 of $1,489,465.  This change
was primarily due to the decrease in bankers' acceptances payable
and the settlement note payments during Fiscal 1997.  In
addition, there was an increase in accounts receivable at
September 30, 1997 that was due to higher fourth quarter sales.

     Cash used in investing activities during Fiscal 1997 of
$911,897 was higher than the prior year due to the increase in
fixed asset additions. 

     The cash used in financing activities during Fiscal 1997 was
$3,150,995 as compared to cash provided by financing activities
of $6,183,395 in Fiscal 1996.  The decrease in cash provided by
financing activities was primarily due to the Company's decision
to reduce its cash balance at September 30, 1997 as compared to
1996.  As a result of these activities, cash and cash equivalents
decreased $6,414,996 during Fiscal 1997 as compared to an
increase of $7,063,808 during Fiscal 1996.

     The Company's working capital increased to $15,452,308 at
September 30, 1997 from $13,675,828 at September 30, 1996.  This
increase was primarily due to the net income earned during Fiscal
1997 as well as the proceeds from the private offering discussed
below.

     In January 1997, the Company entered into a three year
$30,000,000 revolving credit facility with BankAmerica Business
Credit, Inc. (the "New Banking Agreement").  The amount of
drawings under the facility is subject to limitations based upon
eligible inventory and accounts receivable as described in the
New Banking Agreement.  The New Banking Agreement is
collateralized by a security interest in substantially all of the
assets of the Company.  In addition, in accordance with the New
Banking Agreement, the Company has agreed, among other things, to
the maintenance of certain minimum amounts of tangible net worth
and minimum interest coverage ratios.

     The Note issued in connection with the Paradise Settlement
requires $100,000 quarterly principal payments commencing January
1, 1998.  

     The Company continued several actions to increase its
liquidity during Fiscal 1997.  It established a policy of
obtaining 30 to 60 days vendor credit to finance a majority of
its purchases that historically have been financed pursuant to
letters of credit.

     In the second quarter of Fiscal 1997, the Board of Directors
voted to dispose of its Cosmetics product line and to focus its
efforts primarily on its writing instruments business.  The main
reason for this decision was to better utilize the Company's cash
flow towards its stationery line of business.  It is not
anticipated that the disposition of this line of business will
have a material impact on sales or net income in the future.

     In November 1997, the Company reached an agreement to sell
the fixed assets and inventory of its Cosmetics subsidiary to an
outside company (significantly owned by a former employee) for
its net book value.  In December 1997, $100,000 was received as a
down payment, $150,000 is to be received at closing and a note
will be issued for the balance due bearing interest at a rate of
9% per annum.  The terms of the note provide that the principal
be reduced by $150,000 per month commencing February 1998, until
fully repaid.  No further write-downs relative to the Cosmetics
operation are anticipated in the year ended September 30, 1998
("Fiscal 1998").

     In December 1996 and 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 had net proceeds of $963,437
from the Private Offering.  Officers and directors of the Company
acquired 52.5% of the Units sold in the Private Offering.  They
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 "Item 3.  Legal Proceedings" and to enable the Company to
fund its requirements for capital expenditures.

     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 New Banking 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.  The Company believes these
resources are sufficient to support its operating expenses.

     The Company is exploring its options with respect to
software in order to be in compliance with year 2000.  The
Company does not expect the costs associated with this to be
material.


     (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 lenders.

Item 8.  FINANCIAL STATEMENTS 

     This information is contained on pages F-1 through F-24
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,
1998.
<PAGE>
                                  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, 1997 and 
1996....................................................    F-2-3

Consolidated Statements of Operations for the 
years ended September 30, 1997, 1996 and 1995 ..........    F-4

Consolidated Statements of Shareholders' Equity for
the years ended September 30, 1997, 1996 and 1995.......    F-5

Consolidated Statements of Cash Flows for the 
years ended September 30, 1997, 1996, and 1995..........    F-6-7

Notes to Consolidated Financial Statements..............    F-8-23


     (a) (2)  Financial Statement Schedules

Schedule II - Valuation and Qualifying Accounts and
Reserves...............................................     F-24

     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 the
          Registration Statement No. 33-27009 ("Form S-8").

10.2      1993 Stock Option Plan incorporated by reference 
          to the 1992 Form 10-K.

10.3      Employment Agreement dated November 3, 1995, between
          the Company and John W. Linster incorporated by
          reference to the 1995 10-K.

10.4      1995 Stock Option Plan is incorporated by reference to
          the Registration Statement No. 333-30595 filed on Form
          S-8.

10.5      Settlement Agreement dated December 9, 1996, among the
          Company, Leon Hayduchok, All-Mark Corporation, Inc.,
          Paradise Creations, Inc. and Norman Melnick
          incorporated by reference to Exhibit 10.6 of the 1996
          Form 10-K.

10.6      Loan and Security Agreement dated as of January 13,
          1997, among the Company, Pentech Cosmetics, Inc.,
          Sawdust Pencil Co. and Bank America Business Credit,
          Inc. incorporated by reference to Exhibit 10.7 of the
          1996 Form 10-K.

10.7      Settlement Letter dated November 15, 1996 from Fisher-
          Price to the Company incorporated by reference to
          Exhibit 10.8 of the 1996 Form 10-K.

10.8      Settlement Agreement dated December 27, 1996, between
          the Company and Pentel Co., Ltd. incorporated by
          reference to Exhibit 10.9 of the 1996 Form 10-K.

10.9      Form of Subscription Agreement connected with the
          Company's Private Offering Memorandum dated December
          10, 1996 incorporated by reference to Exhibit 10.10 of
          the 1996 Form 10-K.

10.10     Form of Registration Rights Agreement connected with
          the Company's Private Offering Memorandum dated
          December 10, 1996 incorporated by reference to Exhibit
          10.11 of the 1996 Form 10-K.

10.11     Agreement for Sale and Purchase of Assets dated as of
          November 1997, among the Company, Pentech Cosmetics,
          Inc., Fun Cosmetics, Inc. and David Blau.

21        Subsidiaries of the Company.

23.1      Consent of Ernst & Young LLP.











<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 19, 1997                  By:  s/ John W. Linster     
                                        John W. Linster,
                                        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 19, 1997
Norman Melnick      of Directors 


s/ John W. Linster  President and Chief Executive December19,1997
John W. Linster      Officer (principal executive 
                     officer)

s/ David Melnick    Chief Operating Officer and   December 19, 1997
David Melnick       Director (principal operating
                    officer)

s/ John F. Kuypers  Executive Vice President-
John F. Kuypers     Sales and Director            December 19, 1997


s/ Richard S. Kalin Secretary and Director        December 19, 1997
Richard S. Kalin    


                    Director                      
Jerry Della Femina


s/ Roy L. Boe       Director                      December 19, 1997
Roy L. Boe


s/ William Visone   Treasurer (principal          December 19, 1997
William Visone      accounting officer)


s/ Robert Semel     Director                      December 19, 1997
Robert Semel   

ptk\10K.97 

                      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,
1997 and 1996 and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the
three years in the period ended September 30, 1997.  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, 1997 and 1996, and the
consolidated results of its operations and its cash flows for
each of the three years in the period ended September 30, 1997,
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 5, 1997


                              F-1






               PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
                        Consolidated Balance Sheets

                              Assets (Note 3)

                                             September 30,
                                          1997            1996
                                          ----            ----
<S>                                      <C>           <C>
Current Assets:
  Cash and cash equivalents          $    648,812    $ 7,063,808
  Accounts receivable, net
   of allowance for doubtful 
   accounts ($30,087 and $402,513
   in 1997 and 1996, respect-
   ively)                              16,293,286     14,537,500
  Inventory (Note 2)                   18,480,924     18,728,008
  Income taxes receivable                 422,446      1,146,414
  Deferred tax assets (Note 5)            271,180        618,929
  Prepaid expenses and other            1,648,035      1,042,807
                                       ----------     ----------
Total current assets                   37,764,683     43,137,466
                                       ----------     ----------

Equipment:
  Equipment and furniture               8,895,443      8,030,387
  Less accumulated depreciation        (4,931,612)    (3,661,910)
                                       ----------     ----------
                                        3,963,831      4,368,477
                                       ----------     ----------
Other assets:
  Deferred tax assets, long term
  (Note 5)                                363,835        306,185
  Trademarks, net of 
   amortization                           269,708        267,742
  Due from officer                        141,512        109,511
                                       ----------     ----------
                                          775,055        683,438
                                       ----------     ----------
                                      $42,503,569    $48,189,381
                                       ==========     ==========









See accompanying notes.

                              F-2



<PAGE>
               PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES
<CAPTION>
                        Consolidated Balance Sheets

                   Liabilities and Shareholders' Equity

                                              September 30,
                                          1997            1996
                                         -----            ----
<S>                                 <C>                <C>
Current liabilities:
  Notes payable (Note 3)           $17,238,066        $21,352,498
  Bankers' acceptances
   payable (Note 3)                      -              1,488,757
  Accounts payable                   1,333,605          1,593,253
  Accrued expenses (Note 11)         3,440,704          3,827,130
  Settlement payable (Note 8)            -                500,000
  Settlement note payable (Note 8)     300,000            700,000
                                    ----------         ----------
Total current liabilities           22,312,375         29,461,638
                                    ----------         ----------
Other liabilities:
  Royalty payable, long-term (Note 8)  300,000            400,000
  Settlement note payable, 
   long-term (Note 8)                2,300,000          2,300,000
                                    ----------         ----------
                                     2,600,000          2,700,000
                                    ----------         ----------
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
  12,504,258 and 10,496,758 in
  1997 and 1996, respectively          125,043            104,968
Capital in excess of par             6,789,143          5,845,781
Retained earnings                   10,677,008         10,076,994
                                    ----------         ----------
                                    17,591,194         16,027,743
                                    ----------         ----------
                                   $42,503,569        $48,189,381
                                    ==========         ==========
See accompanying notes.

                              F-3



<PAGE>
                 PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES
<CAPTION>
                    Consolidated Statements of Operations


                                  Year ended September 30,
                                1997          1996          1995
                                ----          ----          ----
<S>                       <C>             <C>             <C>
Net sales (Note 9)       $60,806,386     $61,679,499    $54,891,592
Cost of sales             39,975,368      43,030,412     39,087,504
                          ----------      ----------     ----------
Gross profit              20,831,018      18,649,087     15,804,088

Selling, general and
 administrative expenses  17,988,791      19,521,690     15,871,636
Loss on Mexican 
 affiliate (Note 14)                                        406,820
Loss from Cosmetics
 operation                   687,000               -              -
                          ----------      ----------     ----------
Income (loss) from
 operations                2,155,227        (872,603)      (474,368)
                          ----------      ----------     ----------
Other (income) expense:
 Loss from litigation              -       4,433,920              -
 Interest expense          1,583,750       1,447,499      1,259,145
 Interest income              (9,660)        (39,661)       (35,215)
                          ----------      ----------     ----------
                           1,574,090       5,841,758      1,223,930
                          ----------      ----------     ----------
Income (loss) before
 taxes                       581,137      (6,714,361)    (1,698,298)

Income tax (benefit) 
 expense (Note 5)            (18,877)     (1,396,953)      (639,352)
                          ----------      ----------      ---------
Net income (loss)        $   600,014    $ (5,317,408)   $(1,058,946)
                          ==========      ==========      =========
Primary and fully-diluted
 earnings (loss) per common
 and common equivalent 
 shares (Note 1)                $.05           ($.51)        ($.10)
                          ==========      ==========     ==========




See accompanying notes.

                                    F-4


<PAGE>
                                Pentech International, Inc. and Subsidiaries
<CAPTION>
                              Consolidated Statements of Shareholders' Equity
                               Years ended September 30, 1997, 1996 and 1995

                             Common Stock
                                                          Capital
                            Number of Shares              in                     Treasury Stock
                                                          Excess    Retained     
                          Authorized  Issued     Amount   of Par    Earnings   Shares       Amount
                          ----------  ------     ------   -------   --------   ------       ------
<S>                       <C>        <C>         <C>      <C>       <C>          <C>        <C>            
Balance, September 
  30, 1994                20,000,000 11,692,958 $116,930 $6,512,044 $20,893,681   196,800   $1,043,268
 Retirement of 
  common stock 
  options                                                                (7,500)
 Purchase of Treas-
  ury Stock                                                                        999,400   4,067,790
 Retirement of 
  Treasury Stock                     (1,196,200) (11,962)  (666,263) (4,432,833)(1,196,200) (5,111,058)
Net loss                                                             (1,058,946)
                           ---------  ---------   ------  ---------   ---------  ---------   ---------
Balance, September 
  30, 1995                20,000,000 10,496,758  104,968  5,845,781  15,394,402      -         -    

                                                                    
 Net loss                                                            (5,317,408)
                          ---------- ----------  -------  ---------  ----------  ---------  ---------
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
                          ---------- ----------  -------  ---------  ----------  ---------  ---------
Balance, September
  30, 1997                20,000,000 12,504,258 $125,043 $6,789,143 $10,677,008      -          -    
                          ========== ==========  =======  =========  ==========  =========  =========
See accompanying notes.

                                       F-5



                   PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES
<CAPTION>
                      Consolidated Statements of Cash Flows

                                             Year ended September 30,
                                       1997            1996           1995
                                     --------       ----------      ----------
<S>                                 <C>              <C>             <C>
Cash flows from operating           
activities
Net income (loss)                 $   600,014      $(5,317,408)    $(1,058,946)
Adjustments to reconcile
 net income (loss) to net cash 
 (used in) provided by
 operating activities:
  Depreciation and amortiza-
   tion                             1,099,627        1,044,920         939,505
  Provision for losses on
   accounts receivable                 15,401          401,620          62,467
  Paradise Settlement                       -        4,000,000
  Provision for slow-moving
   inventory                                                         1,286,000
  Benefit (provision) for 
   deferred income taxes              290,099         (699,701)       (565,515)
  Provision for loss from
   Cosmetics operation                687,000

  Change in assets and 
   liabilities:
    (Increase) decrease in
      accounts receivable          (1,771,187)      (2,488,160)        616,415
    (Increase) decrease in 
      inventory                      (152,916)       4,116,474      (2,803,788)
    (Increase) decrease in 
      prepaid expenses and other     (605,228)         184,622          80,587
    (Increase) in due from                            
      officer                         (32,001)                         (30,999)
    (Decrease) in bankers'
      acceptances payable          (1,488,757)        (353,228)        (18,211)
    (Decrease) increase in
      accounts payable               (331,698)        (789,706)        957,793
    (Decrease) increase in
      accrued expenses               (386,426)         713,405          81,742
    (Decrease) in settlement
      payables                     (1,000,000)             -               -
    Change in income                               
      taxes payable/
      receivable                      723,968          676,627      (1,453,922)
                                   ----------        ---------       ---------
    Net cash (used in) provided            
      by operating         
      activities                   (2,352,104)       1,489,465      (1,906,872)

See accompanying notes.

                                      F-6


<PAGE>
                   PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES
<CAPTION>
                  Consolidated Statements of Cash Flows (cont'd)

                                                 Year ended September 30,
                                       1997             1996          1995
                                       ----             ----          ----
<S>                                 <C>               <C>            <C>
Cash flows from investing             
 activities
Purchase of equipment and   
 furniture                        (793,006)         (488,176)       (652,037)
Increase in trademarks            (118,891)         (120,876)        (69,725)
                                 ---------         ---------        -------- 
 Net cash used in investing       (911,897)         (609,052)       (721,762)
 activities

Cash flows from financing
 activities
Net (decrease) increase in
 notes payable                  (4,114,432)        6,183,395       6,006,379
Proceeds from the issuance
 of common stock                   963,437
Payments to acquire
 treasury stock                                                   (4,067,790)
Payments to acquire
 common stock options                                                 (7,500)
Net cash (used in) provided 
  by financing                   ----------        ---------       ---------
  activities                    (3,150,995)        6,183,395       1,931,089
 Net (decrease) increase         ---------         ---------       ---------
 in cash and cash equi-
  valents                       (6,414,996)        7,063,808        (697,545)

Cash and cash equivalents,                             
 beginning of year               7,063,808              0            697,545

Cash and cash equivalents,       ---------         ---------         -------
 end of year                    $  648,812        $7,063,808       $   -0- 
                                 =========         =========         ======= 

Supplemental disclosures 
 of cash flow information
Non-cash investing activities:

  Purchase of fixed assets by
   capital lease                $   72,050
  Retirement of treasury                            
   stock                                                         $ 5,111,058
  Cash paid during the 
   year for:
   Interest                      1,773,920        $1,319,958       1,259,145
   Income taxes                     30,931           140,000       1,380,085




See accompanying notes. 

                                 F-7

</TABLE>

               PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES

                Notes to Consolidated Financial Statements
                            September 30, 1997

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, children's activity kits and related
products, 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.

                              F-8


               PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES

                Notes to Consolidated Financial Statements
                            September 30, 1997


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.

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.

Earnings (Loss) Per Common and Common Equivalent Shares

     Primary and fully diluted earnings (loss) per share are
computed on the basis of the weighted average number of shares
outstanding plus the common stock equivalents which would arise
from the exercise of stock options and warrants.

     The average number of shares used was:

                                  Primary   Fully Diluted
                                  -------   -------------

Year ended September 30, 1997   12,297,124   12,491,167
Year ended September 30, 1996   10,496,758   10,496,758*
Year ended September 30, 1995   10,660,988   10,660,988*


-------

* In 1996 and 1995 fully diluted was anti-dilutive.



                                F-9






               PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES

                Notes to Consolidated Financial Statements
                            September 30, 1997

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.

2.  Inventory
                            1997              1996
                            ----              ----
Raw materials            $ 6,245,696       $  6,732,751
Work-in-process            1,579,274          1,265,795
Finished goods            11,865,954         12,115,462
Allowance for slow-
moving items              (1,210,000)        (1,386,000)
                          ----------         ----------
                         $18,480,924        $18,728,008
                          ==========         ==========

3.  Notes and Bankers' Acceptances Payable


                          September 30,           September 30,
                Interest      1997      Interest      1996
                --------  ------------- --------  -------------
Notes payable    8.128%  $ 13,000,000     8.25%   $11,725,000
Notes payable    9.00 %     4,238,066     8.25%     9,627,498
                           ----------              ----------
 Total                   $ 17,238,066             $21,352,498
                           ==========              ==========
Bankers'
 acceptances
 payable                       -          None    $ 1,488,757
                           ==========               ==========


     Notes and bankers' acceptances payable as of September 30,
1996 were initially advanced under a $34,000,000 line of credit
which was available at the banks' discretion and subject to

                              F-10



               PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES

                Notes to Consolidated Financial Statements
                            September 30, 1997

3.  Notes and Bankers' Acceptances Payable (cont'd)

limitations based upon eligible inventory and accounts receivable
as defined by that agreement.  In December 1996, the Company's
original line of credit was restructured by the Banks through
January 31, 1997.

     In January 1997, the Company entered into a new three year
$30,000,000 Revolving Credit Agreement with BankAmerica Business
Credit, Inc. (the "New Credit Agreement").  Borrowings under the
New Credit Agreement are subject to limitations based upon
eligible inventory and accounts receivable as defined in the New
Credit Agreement.

     The New Credit Agreement is collateralized by a security
interest in substantially all of the assets of the Company.  In
connection with the New Credit Agreement, the Company has agreed,
among other things, to the maintenance of certain minimum amounts
of tangible net worth and interest coverage ratios.

     The weighted average interest rate during the periods on the
outstanding short-term borrowings was 8.7% and 7.8% for fiscal
year ended September 30, 1997 and 1996, 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,
175,000 shares were cancelled.

     During Fiscal 1996, the Company granted options covering in
the aggregate 175,000 shares of common stock at an exercise price
of $3.125 per share (representing fair market value at date of
grant). During Fiscal  1995, there were no options granted.
During these periods, no options were exercised. At September 30,
1997, 195,000 options remain outstanding at prices ranging from
$1.19 to $3.125 per share, of which all are presently
exercisable.

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

                             F-11



               PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES

                Notes to Consolidated Financial Statements
                            September 30, 1997

4. Shareholders' Equity (cont'd)

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 will terminate on January 5, 1999.

     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.

                           F-12


<PAGE>
                            PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES

                             Notes to Consolidated Financial Statements
                                         September 30, 1997


4. Shareholders' Equity (cont'd)

<TABLE>
<CAPTION>
     The table below presents option information for the 1989 Plan:

                         Year ended            Year ended                  Year ended
                        Sept. 30, 1997        Sept. 30, 1996              Sept. 30, 1995
                    Price range   Shares   Price range    Shares       Price Range    Shares
                    -----------   ------    -----------   ------       -----------    ------
<S>                <C>           <C>        <C>           <C>          <C>            <C> 
Outstanding,
 beginning of 
 year              $3.125-7.875  351,000   $4.00-$7.875   392,000      $4.00-$7.875  397,000

Options granted     0.75         285,600    3.125         180,000

Cancelled           3.125-7.875 (351,000)   4.00-6.50    (221,000)      6.50          (5,000)

Exercised                                               
                    -----------  -------    -----------   -------       ----------   -------
Outstanding,
 end of year        0.75         285,600   $3.125-7.875   351,000      $4.00-7.875   392,000
                    -----------  -------    -----------   -------       ----------   -------

Eligible for
 exercise 
 currently               -          -      $4.50-7.875    118,600      $4.00-7.875   267,000
                    ===========  =======    ===========   =======       ==========   =======

                                                    F-13
</TABLE>
 


<PAGE>
                              PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES

                               Notes to Consolidated Financial Statements
                                           September 30, 1997

     4. Shareholders' Equity (cont'd)
<TABLE>
<CAPTION>
          The table below presents option information for the 1993 Plan:

                     Year ended               Year ended               Year ended
                   Sept. 30, 1997           Sept. 30, 1996           Sept. 30, 1995
                Price range   Shares     Price range   Shares       Price Range    Shares
                -----------   ------     -----------   ------       -----------    ------
<S>             <C>           <C>         <C>          <C>          <C>             <C>
Outstanding,
 beginning of
 year           $3.125-6.125  647,500    $4.50-6.125   668,750       $4.50-6.125   678,750

Options
 granted         0.75 -0.875  385,500     3.125         20,000

Cancelled        3.125-6.125 (592,500)    4.50-6.125   (41,250)       5.25         (10,000)

Exercised 
                 ----------   ------      ---------    -------        ----------    -------
Outstanding,
 end of year     0.75 -5.50   440,500    $3.125-6.125  647,500       $4.50-6.125   668,750
                 ===========  =======     ==========   =======        ==========    =======

Eligible for
 exercise
 currently      $4.50 -5.50    43,000    $4.50-6.125   301,500       $4.50-6.125   273,000
                 ===========  =======     ==========   =======        ==========    =======
                                               F-14
</TABLE>

<PAGE>
                  PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                               September 30, 1997



4. Shareholders' Equity (cont'd)

     The table below presents option information for the 1995 Plan:

                            Year Ended                  Year Ended
                           Sept. 30, 1997             Sept. 30, 1996
                       Price range    Shares       Price range    Shares
                       -----------    ------       -----------    ------ 
   
    Outstanding,
     beginning of
     year               $3.00          10,000                        -

    Options granted      0.75-2.9375  123,000          $3.00      10,000

    Cancelled            3.00         (10,000)

    Exercised                 
                         -----------   -------         -----      ------
    Outstanding, 
     end of year        $0.75-2.9375   123,000         $3.00      10,000
                         ===========   =======         =====      ======
    Eligible for
     exercise
     currently           1.4375         12,000           -           -
                         ===========   =======         =====      ======


     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.

                                F-15


                  PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                               September 30, 1997

4. Shareholders' Equity (cont'd)

     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            6.65%
     Expected dividend yield               0%
     Expected stock price volatility    .663%
     Expected life of options         3-5 years

     The weighted average fair value of options granted during Fiscal
1997 and Fiscal 1996 is $.78 and $1.92 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):



                           Sept. 30, 1997        Sept. 30, 1996

                    As reported    Pro forma As reported    Pro forma

Net income (loss)         $ 600        $ 491   $ (5,317)    $(5,354)
Earnings (loss) 
  per share               $ .05        $ .04   $   (.51)    $ (.51)


                                 F-16



<PAGE>
                  PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                               September 30, 1997



5. Income Taxes


                           1997            1996         1995
                           ----            ----         ----
(Benefit)/Expense        
                         
Federal:
  Current               $ (309,276)    $ (697,252)    $ (73,837)
  Deferred                 273,730       (421,047)     (503,308)
State:
  Current                      300           -             -
  Deferred                  16,369       (278,654)      (62,207)
                           -------      ---------      --------
                        $  (18,877)   $(1,396,953)   $ (639,352)
                           =======      =========      ========


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

                             1997          1996           1995
                             ----          ----           ----
Statutory tax rate           34.00%      (34.00%)       (34.00%)
State income taxes, net
  of federal tax (benefit)
  expense                     1.86        (6.00)         (3.63)
IRS audit adjustment          5.32
Permanent timing differences  9.99
(Decrease) increase in 
  valuation allowance       (47.77%)      18.5%
Other                        (6.65%)        .7%
                             -----        -----          -----
Effective tax rate          ( 3.25%)     (20.80%)       (37.63%)
                             =====        =====          =====

                               F-17




<PAGE>
                  PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                               September 30, 1997
5. Income Taxes (cont'd)

    Significant components of the Company's deferred tax assets and
liabilities as of September 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
                                               September 30,
                                         1997               1996
                                         ----               ----
<S>                                    <C>                 <C>
Current deferred tax liability:
  State taxes on deferred
   federal items                      $ ( 149,823)        $(224,935)
                                          -------           -------
Current deferred tax assets:
  Bad debts                                12,938           231,392
  Inventory reserve                       520,300           595,980
  Reserve for returns and                 313,042           369,017
   allowances
  Unicap                                   12,813            33,110
  Reserve for restructuring                   -             129,000
  Cosmetics fixed asset reserve           123,410              -

  Total current deferred                  -------         ---------
   tax assets                             982,503         1,358,499

Valuation allowance on current
  deferred tax assets                    (561,500)         (514,635)
                                          -------         ---------
                                          421,003           843,864
                                          -------         ---------
  Net current deferred tax assets     $   271,180         $ 618,929
                                          =======         =========
Long-term deferred tax liabilities:
  Depreciation                        $  (832,800)        $(888,450)
                                          -------         ---------
Long-term deferred tax assets:
  Reserve for litigation                1,290,000         1,720,000
  State net operating loss 
   carryforwards                          310,700           203,191
                                        ---------         ---------
Total long-term deferred
  tax assets                            1,600,700         1,923,191

Valuation allowance on
  long-term deferred
  tax assets                             (404,065)         (728,556)
                                        ---------         ---------
                                        1,196,635         1,194,635
                                        ---------         ---------
  Net long-term deferred tax
   assets                               $ 363,835         $ 306,185
                                        =========         =========
                                    F-18
</TABLE>


                  PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                               September 30, 1997



5. Income Taxes (cont'd)


     The Company has generated state net operating loss carryforwards of
$3,452,227, which expire in varying amounts beginning on September 30,
2001.

     In 1996, the Company recorded a valuation allowance of $1,243,191
against deferred tax assets due to the uncertainty of its ability to
recognize a full tax benefit for future payments against the litigation
reserve and its ability to fully utilize the state net operating loss
carryforwards.  In 1997, approximately $277,000 of the valuation
allowance was recognized as a tax benefit.

6.  Commitments and Contingencies                                    

Letters of Credit

   The Company was contingently liable for outstanding letters of
credit of $350,062 at September 30, 1997.

Leases

   Rent expense for the years ended September 30, 1997, 1996 and 1995
amounted to $498,126, $480,563 and $487,959, 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.  In March 1993, the Company exercised
its first option and extended the lease for an additional 60 months.

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

                                F-19



                  PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                               September 30, 1997


6. Commitments and Contingencies (cont'd)

     Future minimum rental payments under operating leases are as
follows:

     1998                $ 764,262
     1999                  767,739
     2000                  699,323
     Thereafter            345,743
                         ---------
                        $2,577,067
                        ==========


7. Loss from Cosmetics operation:

   During the second quarter of 1997, the Board of Directors
determined to discontinue its Cosmetics subsidiary and focus its efforts
primarily on its writing instruments business.  The loss from Cosmetics
operation reported in the second quarter reflects the write-down of
certain assets of this operation to their estimated net realizable value
(Note 16).  At September 30, 1997, the net book value of such assets
approximated $1,100,000.


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 for the five year period, deliver a
$3,000,000 promissory note plus interest at the rate of 7% per annum
(the "Note") and enter into a five year non-exclusive license to sell
such products for a 10% royalty, with a minimum royalty of $500,000 (the
"Paradise Settlement").  The Company paid Paradise $400,000 in February
1997, $500,000 in January 1997, and $100,000 of the minimum royalty in
December 1996.  The Note requires $100,000 quarterly principal payments
commencing January 1, 1998.


                               F-20







                  PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                               September 30, 1997


9.  Major Customer and Concentration of Credit Risk

     For the years ended September 30, 1997, 1996 and 1995, the Company
had one customer who accounted for 13%, 11% and 9%, 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 adopted a defined contribution 401(k) plan effective
April 1, 1993, 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.  During
1995 and 1994 the Company did not make 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 Fiscal 1997 and Fiscal 1996, the Company contributed $36,273 and
$16,941, respectively.

11.  Accrued Expenses

                                          September 30,
                                       1997         1996
                                       ----         ----
Accrued returns and advertising       
  rebates                            $1,833,450     $1,552,204
Accrued legal/consulting fees            -             579,550
Accrued royalties                       637,477        776,132
Other accrued expenses                  969,777        919,244
                                      ---------      ---------
                                     $3,440,704     $3,827,130
                                      =========      =========

12.  New Authorative Accounting Pronouncement:

   In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share, which is required to be adopted
by the Company in the quarter ending December 31, 1997.  At that time,
the Company will be required to change the method currently used to
compute earnings per share and to restate all prior periods.  Under the
new requirements for calculating primary earnings per share, the
dilutive effect of stock options will be excluded.  There is no impact
on primary earnings per share for the years ended September 30, 1997 and
1996, respectively.  The impact of Statement 128 on the calculation of
fully diluted earnings per share for these years is not expected to be
material.

                                 F-21



                  PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                               September 30, 1997


13.   Unaudited Summarized Quarterly Information

   Unaudited summarized quarterly financial information for the years
ended September 30, 1997 and 1996 are as follows:

                    (000's except for per share information)

                                     Three Months Ended
                     December      March        June       September
                     31, 1996      31, 1997(b) 30, 1997    30, 1997
                     --------      --------    --------    ---------

Net sales            $12,540       $10,852     $21,333     $16,081
Gross profit           4,493         3,734       7,426       5,178
Net income/(loss)         54          (661)        911         296
Earnings (loss)
 per common share        .01          (.05)        .07         .02


                     December      March        June       September
                     31, 1995      31, 1996    30, 1996    30, 1996(a)
                     --------      --------    --------    ---------

Net sales            $11,892       $10,410     $21,976     $17,401
Gross profit           4,236         3,458       6,994       3,961
Net income/(loss)        130          (703)        617      (5,361)
Earnings (loss) 
  per common share       .01          (.07)        .06        (.51)


(a)    In the fourth quarter of Fiscal 1996, the Company settled the
       Paradise litigation (Note 8).  

(b)    In the second quarter of Fiscal 1997, the Company wrote-down its    
       Cosmetics operation (Note 7).

14.    Loss on Mexican Affiliate

   In 1992, the Company began an affiliation with a Mexican
distributor to sell its products in Mexico.  As a result of the Pesos
devaluation and the eventual termination of the relationship in Fiscal
1995, the Company incurred a loss of $407,000.

15.  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 Offering.  Officers
and directors of the Company acquired 52.5% of the Units sold in the

                               F-22


                  PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                               September 30, 1997



15.  Private Placement (cont'd)

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.


16.    Subsequent Event

   In November 1997, the Company entered into an agreement to sell the
fixed assets and inventory of its Cosmetics subsidiary to an outside
company (significantly owned by a former employee) for its book value. 
In December 1997, $100,000 was received as a down payment, $150,000 is
to be received at closing and a note is to be issued for the balance due
bearing interest at a rate of 9% per annum.  The terms of the note
provide that the principal be reduced by $150,000 a month commencing
February 1998, until repaid.

                               F-23


<PAGE>
                  PENTECH INTERNATIONAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
          SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

                 Years Ended September 30, 1997, 1996 and 1995



  Column A                Column B     Column C   Column D   Column E
  --------                --------     --------   --------   --------
                                       Charged
                          Balance at   to Costs               Balance
                          Beginning       and                 End of
Description               of Period    Expenses Deductions(1) Period 

<S>                        <C>          <C>      <C>          <C>
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
                          =========   =========   =======   =========

Year ended September 
 30, 1996
Allowance for doubtful
 accounts                $   70,314  $  401,620  $ 69,421  $  402,513
                          =========   =========   =======   =========
Allowance for slow 
 moving items            $1,386,000        -          -    $1,386,000
                          =========   =========   =======   =========
Valuation allowance
 for deferred taxes      $    -      $1,243,191  $    -    $1,243,191
                          =========   =========   =======   =========
Year ended September 
 30, 1995
Allowance for doubtful
 accounts                $   54,565  $   62,467  $ 46,718  $   70,314
                          =========   =========   =======   =========
Allowance for slow 
 moving items            $  100,000  $1,286,000       -    $1,386,000
                          =========   =========   =======   =========




(1)  Amount represents various accounts written off during the year, net
of recoveries.
</TABLE>
                                        
                               F-24



                                 EXHIBIT INDEX






Exhibit 10.11.   Agreement for Sale and Purchase of Assets dated as
                 of November 1997, among the Company, Pentech
                 Cosmetics, Inc., Fun Cosmetics, Inc. and David
                 Blau.



Exhibit 21       Subsidiaries of the Company.



Exhibit 23.1         Consent of Ernst & Young LLP.















<PAGE>
                                   EXHIBIT 21

                  Subsidiaries of Pentech International, Inc.




                                        Jurisdiction of
          Name                           Incorporation 
          
          Sawdust Pencil Co.               Delaware
          
          Pentech Cosmetics, Inc.          Delaware
                                        


<PAGE>
                                  EXHIBIT 23.1

                        Consent of Independent Auditors




We consent to the incorporation by reference in (i) the Registration
Statement (Form S-8 No. 33-27009) dated February 28, 1989 pertaining
to the 1989 Stock Option Plan of Pentech International, Inc.
("Pentech"); (ii) the Registration Statement (Form S-8 No. 33-67802)
dated August 23, 1993 pertaining to the 1993 Stock Option Plan of
Pentech and (iii) the Registration Statement (Form S-8, No. 333-30595)
dated July 2, 1997 pertaining to the 1995 Stock Option Plan of
Pentech, of our report dated December 5, 1997 with respect to the
consolidated financial statements and schedule of Pentech
International, Inc. included in this Annual Report (Form 10-K) for the
year ended September 30, 1997.

                                   ERNST & YOUNG LLP



                              By:  /s/ Ernst & Young LLP  




MetroPark, New Jersey
December 17, 1997














WPDOCS\PTK\10K97