UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                              Washington D.C. 20549
                                    ---------

                                   FORM 10-QSB

                Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For the quarter ended   December 31, 1997    Commission File Number    000-28876

                            CHEM INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)

                         Delaware                           13-3035216
            (State or other jurisdiction of              (I.R.S. Employer
            incorporation or organization)              Identification No.)

             201 Route 22
             Hillside, New Jersey                             07205
            (Address of principal executive offices)        (Zip code)

Registrant's telephone number, including area code:          (973) 926-0816
                                                        ------------------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the  Securities  and  Exchange Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

                              Yes   X        No

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.


             Class                           Outstanding as of February 9, 1998
----------------------------------           ----------------------------------

Common Stock, Par Value                                  5,178,300


<PAGE>



CHEM INTERNATIONAL, INC.
------------------------------------------------------------------------------


INDEX
------------------------------------------------------------------------------




Part I: Financial Information

Item 1: Consolidated Financial Statements

        Consolidated Balance Sheet as of December 31, 1997 [Unaudited] 1...2

        Consolidated Statements of Operations for the three and six 
        months ended December 31, 1997 and 1996 [Unaudited]........... 3...

        Consolidated Statement of Stockholders' Equity for the six 
        months ended December 31, 1997 [Unaudited].................... 4...

        Consolidated Statements of Cash Flows for six months ended
        December 31, 1997 and 1996 [Unaudited]........................ 5.....6

        Notes to Consolidated Financial Statements [Unaudited]........ 7.....12

Item 2: Management's Discussion and Analysis of Financial Condition
        and Results of Operations.................................... 13.....15

Part II: Other Information........................................... 16

Signature............................................................ 17




                          .   .   .   .   .   .   .   .


<PAGE>



CHEM INTERNATIONAL, INC.
------------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1997.
[UNAUDITED]
------------------------------------------------------------------------------




Assets:
Current Assets:
  Cash and Cash Equivalents                                         $   381,840
  Accounts Receivable - Net                                           1,789,614
  Inventories                                                         3,295,266
  Prepaid Expenses and Other Current Assets                             296,193
  Refundable Federal Income Taxes                                       410,000
                                                                    -----------

  Total Current Assets                                                6,172,913
                                                                    -----------
Property and Equipment - Net                                          1,282,085
                                                                    -----------

Other Assets:
  Goodwill                                                              287,878
  Prepaid Pension Costs                                                 340,291
  Security Deposits and Other Assets                                     87,465
                                                                    -----------

  Total Other Assets                                                    715,634
                                                                    -----------
  Total Assets                                                      $ 8,170,632
                                                                    ===========




The Accompanying Notes are an Integral Part of These Consolidated Financial 
Statements.

                                         1

<PAGE>



CHEM INTERNATIONAL, INC.
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CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1997.
[UNAUDITED]
------------------------------------------------------------------------------




Liabilities and Stockholders' Equity:
Current Liabilities:
  Accounts Payable                                                  $ 2,241,735
  Notes Payable                                                          51,166
  Accrued Expenses and Other Current Liabilities                        147,871
  Accrued Expenses - Related Party                                      297,000
                                                                    -----------

  Total Current Liabilities                                           2,737,772
                                                                    -----------
Non-Current Liabilities:
  Notes Payable                                                         206,410
  Notes Payable - Related Party                                         276,444
                                                                    -----------

  Total Non-Current Liabilities                                         482,854
                                                                    -----------
Commitments and Contingencies [10]                                           --

Stockholders' Equity:
  Preferred Stock - Authorized 1,000,000 Shares,
   $.002 Par Value, No Shares Issued                                         --

  Common Stock - Authorized 25,000,000 Shares,
   $.002 Par Value, 4,335,000 Shares Issued and Outstanding               8,670

  Additional Paid-in Capital                                          4,203,123

  Retained Earnings                                                     738,213
                                                                    -----------
  Total Stockholders' Equity                                          4,950,006
                                                                    -----------
  Total Liabilities and Stockholders' Equity                        $ 8,170,632
                                                                    ===========



The Accompanying Notes are an Integral Part of These Consolidated Financial 
Statements.

                                         2

<PAGE>



CHEM INTERNATIONAL, INC.
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CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
------------------------------------------------------------------------------
<TABLE>


                                           Three months ended            Six months ended
                                              December 31,                 December 31,
                                              ------------                 ------------
                                          1 9 9 7      1 9 9 6        1 9 9 7       1 9 9 6
                                          -------      -------        -------       -------

<S>                                    <C>           <C>            <C>          <C>        
Sales                                  $ 2,618,510   $1,829,461     $4,970,100   $ 3,937,915

Cost of Sales                            2,192,211    1,718,000      4,214,963     3,308,259
                                       -----------   ----------     ----------   -----------

  Gross Profit                             426,299      111,461        755,137       629,656

Selling and Administrative
  Expenses                                 719,969      527,390      1,315,725     1,105,939
                                       -----------   ----------     ----------   -----------

  Operating [Loss]                        (293,670)    (415,929)      (560,588)     (476,283)
                                       -----------   ----------     ----------   -----------

Other Income [Expense]:
  Interest Expense                         (16,784)     (27,791)       (27,981)      (54,260)
  Interest and Investment Income             2,819       10,656         19,435        11,438
  Loss on Investment in Partnership         (1,497)          --         (5,000)           --
                                            ------   ----------     ----------   -----------

  Total Other [Expense]                    (15,462)     (17,135)       (13,546)      (42,822)
                                       -----------   ----------     ----------   -----------

  [Loss] Before Income Taxes              (309,132)    (433,064)      (574,134)     (519,105)

Federal and State Income
  Tax [Benefit]                           (103,046)    (138,760)      (185,746)     (160,915)
                                       -----------   ----------     ----------   -----------

  Net [Loss]                           $  (206,086)  $ (294,304)    $ (388,388)  $  (358,190)
                                       ===========   ==========     ==========   ===========

  Net [Loss] Per Common Share
   [Basic and Diluted]                 $      (.05)  $     (.08)    $     (.09)  $      (.10)
                                       ===========   ==========     ==========   ===========

  Average Common Shares
   Outstanding                           4,335,000    3,887,250      4,335,000     3,454,125
                                       ===========   ==========     ==========   ===========



The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
</TABLE>

                                         3

<PAGE>



CHEM INTERNATIONAL, INC.
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CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE SIX MONTHS
ENDED DECEMBER 31, 1997.
[UNAUDITED]
------------------------------------------------------------------------------
<TABLE>



                                                                        Additional                      Total
                                        Common Stock         Preferred   Paid-in       Retained     Stockholders'
                                    Shares      Par Value       Stock    Capital       Earnings        Equity

<S>                               <C>         <C>           <C>        <C>           <C>            <C>        
Balance - July 1, 1997            4,335,000   $     8,670   $     --   $ 4,196,072   $ 1,126,601    $ 5,331,343

  Imputed Interest on Note
   Payable - Related Party               --            --         --         7,051            --          7,051

  Net [Loss] for the six months
   ended December 31, 1997               --            --         --            --      (388,388)      (388,388)
                                    -------      --------   --------     ---------      --------       --------

Balance - December 31, 1997       4,335,000    $    8,670   $     --   $ 4,203,123   $   738,213    $ 4,950,006
                                ===========    ==========   ========   ===========   ===========    ===========




The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
</TABLE>

                                         4

<PAGE>



CHEM INTERNATIONAL, INC.
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
------------------------------------------------------------------------------
<TABLE>


                                                              Six months ended
                                                                 December 31,
                                                             1 9 9 7       1 9 9 6
                                                             -------       -------
Operating Activities:
<S>                                                        <C>          <C>         
  Net [Loss]                                               $ (388,388)  $  (358,190)
                                                           ----------   -----------
  Adjustments to Reconcile Net [Loss] to Net Cash
   [Used for] Operating Activities:
   Depreciation and Amortization                              157,933       139,788
   Non-Current Rent Charge                                         --        (3,140)
   Deferred Income Taxes                                      (22,000)      (24,000)
   Imputed Interest on Note Payable - Related Party             7,051         7,049
   Loss on Investment in Partnership                            5,000            --
   Interest Income on Note Receivable                         (11,627)           --
   Write-off of Note Receivable                                33,058            --

  Changes in Assets and Liabilities:
   [Increase] Decrease in:
     Accounts Receivable                                      675,094       860,375
     Inventories                                           (1,208,900)     (872,960)
     Prepaid Expenses and Other Current Assets                 16,455      (201,843)
     Security Deposits and Other Assets                       (23,938)      (37,896)
     Refundable Federal Income Taxes                         (170,000)           --

   Increase [Decrease] in:
     Accounts Payable                                         479,773      (656,667)
     Federal and State Income Taxes Payable                   (41,416)      (48,398)
     Accrued Expenses and Other Liabilities                    (2,238)       80,978
                                                           ----------   -----------

   Total Adjustments                                         (105,755)     (756,714)
                                                           ----------   -----------

  Net Cash - Operating Activities - Forward                  (494,143)   (1,114,904)
                                                           ----------   -----------

Investing Activities:
  Payment for Property and Equipment                         (361,975)     (150,773)
  Loans to Stockholders'                                           --        (1,519)
  Repayment of Note Receivable                                250,000         2,109
  Loan to Related Company                                       2,500          (722)
                                                           ----------   -----------

  Net Cash - Investing Activities - Forward                  (109,475)     (150,905)
                                                           ----------   -----------

Financing Activities:
  Proceeds from Initial Public Offering                            --     3,645,790
  Proceeds from Notes Payable                                      --       332,844
  Repayment of Notes Payable                                  (24,798)   (1,134,117)
  Deferred Offering Costs                                          --      (219,446)
                                                           ----------   -----------

  Net Cash - Financing Activities - Forward                $  (24,798)  $ 2,625,071



The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

</TABLE>
                                         5

<PAGE>



CHEM INTERNATIONAL, INC.
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
------------------------------------------------------------------------------
<TABLE>


                                                              Six months ended
                                                                 December 31,
                                                             1 9 9 7       1 9 9 6
                                                             -------       -------

<S>                                                        <C>          <C>         
  Net Cash - Operating Activities - Forwarded              $ (494,143)  $(1,114,904)

  Net Cash - Investing Activities - Forwarded                (109,475)     (150,905)

  Net Cash - Financing Activities - Forwarded                 (24,798)    2,625,071
                                                           ----------   -----------

  Net [Decrease] Increase in Cash and Cash Equivalents       (628,416)    1,359,262

Cash and Cash Equivalents - Beginning of Periods            1,010,256       765,065
                                                           ----------   -----------

  Cash and Cash Equivalents - End of Periods               $  381,840   $ 2,124,327
                                                           ==========   ===========

Supplemental Disclosures of Cash Flow Information:
  Cash paid during the periods for:
   Interest                                                $   20,825   $    46,298
   Income Taxes                                            $   66,045   $    52,562

Supplemental Disclosure of Non-Cash Investing and Financing Activities:
  The Company  incurred  offering  costs of $69,174 as of June 30,  1996.  These
costs were offset  against the net  proceeds of the initial  public  offering as
reflected  in the  stockholders'  equity for the six months  ended  December 31,
1996.




The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

</TABLE>
                                         6

<PAGE>



CHEM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
------------------------------------------------------------------------------



[1] Business

Chem International, Inc. [the "Company"] is engaged primarily in the 
manufacturing, marketing and sales of vitamins, nutritional supplements and 
herbal products.  Its customers are located primarily throughout the United 
States.

[2] Summary of Significant Accounting Policies

[A]  Principles  of  Consolidation  - The  accompanying  consolidated  financial
statements include the accounts of the Company and its subsidiaries all of which
are wholly-owned. Intercompany transactions and balances have been eliminated in
consolidation.

[B] Basis of Reporting - The accompanying unaudited interim financial statements
have been prepared in accordance with generally accepted  accounting  principles
for interim  financial  information and with the instructions to Form 10-QSB and
Item  310(b)of  Regulation  S-B.  Accordingly,  they do not  include  all of the
information and footnotes required by generally accepted  accounting  principles
for complete financial  statements.  In the opinion of management,  such interim
statements  include all adjustments  which are considered  necessary in order to
make the interim financial statements not misleading. It is suggested that these
financial  statements be read in conjunction  with the financial  statements and
notes thereto,  together with management's  discussion and analysis of financial
condition and results of operations, contained in the Company's annual report to
stockholders  incorporated  by reference in the Company's  annual report on Form
10-KSB for the fiscal year ended June 30, 1997.  The results of  operations  for
the six months ended  December 31, 1997 are not  necessarily  indicative  of the
results for the entire fiscal year ending June 30, 1998.

[C]  [Loss]  Per Share - [Loss]  per  common  share is  computed  based upon the
weighted  average  number  of  common  shares  outstanding  during  the  periods
presented after giving  retroactive effect to the 1-for-4 reverse stock split in
July 1996. Potential common shares are included when dilutive.

[3] Investment in and Advances to Partnership

The  Company  was a 50%  general  partner in  Swedish  Herbal  Institute  - Chem
Associates [the  "Partnership"].  In addition to its $1,000 capital  investment,
the  Company had  advanced  approximately  $70,000 in  exchange  for a series of
promissory  notes.  As of June 30, 1996, the  Partnership  was insolvent and the
Company recorded a loss on its investment and a charge for  approximately 50% of
its note  receivable for the year ended June 30, 1997. At December 31, 1997, the
balance of this note of $33,058  including  accrued  interest was written off as
uncollectible.

[4] Investment in Manhattan Health Products, L.L.C.

The Company is a 50% partner in Manhattan  Health  Products,  L.L.C. at December
31, 1997.  The  Company's  capital  investment  was written down to $-0-,  which
reflects a capital cost of $5,000 and a net loss of $5,000 at December 31, 1997.

[5] Inventories

Inventories consist of the following at December 31, 1997:

Raw Materials                 $ 1,576,714
Work-in-Process                 1,018,715
Finished Goods                    699,837
                              -----------

  Total                       $ 3,295,266
  -----                       ===========

                                        7

<PAGE>



CHEM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
[UNAUDITED]
------------------------------------------------------------------------------



[6] Note Receivable

On  February  3, 1997,  the Company  received a secured  promissory  note in the
amount of $250,000 with interest at 14% per annum.  The note was due and payable
on November 3, 1997 and was repaid on November  19,  1997.  Advance  interest of
$26,250  was  payable  out of the  proceeds of the loan and is taken into income
over the period of the loan.

[7] Notes Payable

Notes payable are summarized as follows at December 31, 1997:

                                                         Related Party
                                           Notes Payable Note Payable     Total
Notes Payable:
  Bio Merieux Vitek, Inc. (a)               $   69,186   $        --  $   69,186
  Gerob Realty Partnership (b)                      --       276,444     276,444
  Summit Bank:
   Revolving Line-of-Credit (c)                     --            --          --
   Equipment Term Loan (d)                     188,390            --     188,390
                                            ----------   -----------  ----------

  Totals                                       257,576       276,444     534,020
  Less:  Current Portion                        51,166            --      51,166
                                            ----------   -----------  ----------

   Noncurrent Portion                       $  206,410   $   276,444  $  482,854
   ------------------                       ==========   ===========  ==========

(a)Five year 10%  equipment  note  dated  April 1, 1997  providing  for  monthly
   payments of $1,698 for principal and interest.  The note is collateralized by
   laboratory equipment.

(b)Noninterest  bearing note due  September 10, 2002.  For  financial  reporting
   purposes, interest has been imputed at 8.5% a year with the net of tax effect
   being credited to additional paid-in capital [See Note 13].

(c)Under the terms of a revolving  line of credit which  expired on November 30,
   1997,  the Company  may borrow up to $500,000 at 3/4% above the bank's  prime
   rate.  The loan is  collateralized  by  accounts  receivable,  inventory  and
   machinery  and  equipment.  The  loan has been  guaranteed  by the  Company's
   president  and  principal  stockholder.  At December 31, 1997,  there were no
   borrowings under the line of credit [See Note 13].

(d)Under the terms of an equipment term loan, due November 30, 2001, the Company
   may borrow up to $350,000  at 1-1/2%  above the bank's  prime rate.  The term
   loan provides for monthly  payments of $4,698 for principal and interest.  At
   December 31, 1997, the interest rate was 9.75%. The loan is collateralized by
   machinery  and  equipment.  The  loan has been  guaranteed  by the  Company's
   president and principal stockholder.

The loan  agreement  with  Summit  Bank  contains  certain  financial  covenants
relating to the  maintenance  of  specified  liquidity,  debt to equity and debt
coverage  ratios  and  requires  that  the  Company's  president  and  principal
stockholder  maintain a minimum stock  ownership  percentage of the Company.  At
June 30, 1997, the Company was in compliance with all bank covenants.

                                        8

<PAGE>



CHEM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3
[UNAUDITED]
------------------------------------------------------------------------------



[7] Notes Payable [Continued]

The following are maturities of long-term debt for each of the next five years:

                                                         Related Party
                                           Notes Payable Note Payable     Total
December 31,
  1998                                      $   51,166   $        --  $   51,166
  1999                                          50,501            --      50,501
  2000                                          52,028            --      52,028
  2001                                          53,710            --      53,710
  2002                                          50,171       276,444     326,615
                                            ----------   -----------  ----------

  Totals                                    $  257,576   $   276,444  $  534,020
  ------                                    ==========   ===========  ==========

[8] Significant Risks and Uncertainties

[A]  Concentrations  of Credit Risk - Cash - The Company  maintains  balances at
several financial institutions.  Accounts at each institution are insured by the
Federal Deposit Insurance  Corporation up to $100,000. At December 31, 1997, the
Company's  uninsured cash balances totaled  approximately  $55,000.  The Company
does not require collateral in relation to cash credit risk.

[B] Concentrations of Credit Risk - Receivables - The Company routinely assesses
the financial strength of its customers and, based upon factors  surrounding the
credit  risk  of its  customers,  establishes  an  allowance  for  uncollectible
accounts and, as a  consequence,  believes that its accounts  receivable  credit
risk exposure  beyond such  allowances is limited.  The Company does not require
collateral in relation to its trade accounts  receivable credit risk. The amount
of the allowance for uncollectible accounts at December 31, 1997 is $15,750.

[9] Major Customer

For the six months ended December 31, 1997 and 1996,  approximately  45% and 37%
of revenues were derived from one customer. The loss of this customer would have
an adverse affect on the Company's operations.  In addition,  for the six months
ended  December 31, 1997 and 1996,  an aggregate of  approximately  15% and 42%,
respectively,  of  revenues  were  derived  from two other  customers;  no other
customers  accounted for more than 10% of consolidated  sales for the six months
ended  December  31, 1997 and 1996.  Accounts  receivable  from these  customers
comprised approximately 57% and 62% of total accounts receivable at December 31,
1997 and 1996, respectively.

[10] Commitments and Contingencies

[A] Leases

Related Party Leases - Certain  manufacturing  and office  facilities are leased
from Gerob Realty  Partnership  ["Gerob"] whose partners are stockholders of the
Company.  The lease, which expires on December 31, 1998,  provides for a minimum
annual  rental of $60,000 plus payment of all real estate  taxes.  Rent and real
estate tax expense for the six months  ended  December 31, 1997 and 1996 on this
lease was  approximately  $58,000  and  $87,000,  respectively.  Unpaid  rent of
$297,000  due to Gerob at December  31, 1997 has been  separately  disclosed  as
accrued expenses on the consolidated balance sheet [See Note 13].

                                        9

<PAGE>



CHEM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #4
[UNAUDITED]
------------------------------------------------------------------------------



[A] Leases [Continued

Related Party Leases  [Continued] - Other  warehouse and office  facilities  are
leased from Vitamin Realty  Associates,  L.L.C.,  a limited  liability  company,
which is 90% owned by the  Company's  president and  principal  stockholder  and
certain family members and 10% owned by the Company's Chief  Financial  Officer.
The lease was  effective  on January 10, 1997 and  provides  for minimum  annual
rental of $346,000  through January 10, 2002 plus increases in real estate taxes
and building  operating  expenses.  At its option,  the Company has the right to
renew the lease for an  additional  five year  period.  Rent expense for the six
months ended December 31, 1997 on this lease was approximately $202,000.

Other Lease Commitments - The Company leases warehouse equipment for a five year
period providing for an annual rental of $15,847 and office equipment for a five
year period providing for an annual rental of $8,365.

The Company leases automobiles under  non-cancelable  operating lease agreements
which expire through 2001.

The minimum rental commitment for long-term non-cancelable leases is as follows:

                                              Related
Year Ending                      Lease      Party Lease
  June 30,                    Commitment    Commitment       Total

   1998                       $   28,398     $ 173,000    $  201,398
   1999                           53,646       346,000       399,646
   2000                           43,568       346,000       389,568
   2001                           28,070       346,000       374,070
   2002                           23,515       182,609       206,124
   Thereafter                         --            --            --
                              ----------     ---------    ----------

   Total                      $  177,197     $1,393,609   $1,570,806
   -----                      ==========     ==========   ==========

Total rent expense,  including real estate taxes and  maintenance  charges,  was
approximately  $260,000 and $255,000 for the six months ended  December 31, 1997
and 1996,  respectively.  Rent  expense  is  stated  net of  sublease  income of
approximately  $11,000 and $125,000  for the six months ended  December 31, 1997
and 1996, respectively.

[B] Employment  Agreements - Effective  July 1, 1996,  the Company  entered into
three year  employment  agreements  with its president  and four other  officers
which provide for aggregate annual salaries of $580,000 for the year ending June
30, 1997,  $630,000 for the year ending June 30, 1998, and $680,000 for the year
ending June 30, 1999.  These agreements are subject to annual increases equal to
at least the increase in the consumer price index for the Northeastern area.

[C]  Litigation  - The  Company  is unable to  predict  its  ultimate  financial
exposure  with  respect  to its prior sale of  certain  products  which may have
contained  allegedly  contaminated  Tryptophan  which is the subject of numerous
lawsuits against unrelated manufacturers, distributors, suppliers, importers and
retailers of that product.  However,  management does not presently  believe the
outcome of these actions will have a material adverse effect on the Company.


                                       10

<PAGE>



CHEM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5
[UNAUDITED]
------------------------------------------------------------------------------



[10] Commitments and Contingencies [Continued]

[C] Litigation [Continued] - On July 7, 1997, the Company was informed by one of
its  suppliers  of a recall of the  supplier's  raw  material  which was used in
manufacturing  of tablets  sold by the Company.  On July 17,  1997,  the Company
issued a voluntary recall to three customers affected by this and,  accordingly,
reduced its sales and  accounts  receivable  at June 30, 1997 by $ 127,000.  The
Company  believes they have recourse  against the supplier for the full value of
the tablets sold  containing  the recalled  raw  material.  The Company does not
believe there will be any significant  additional costs relating to this recall.
On September 30, 1997, the Company  instituted  suit to recover all damages.  No
estimate can be made at December 31, 1997 as to the amount,  if any, of ultimate
recovery.

[11] New Authoritative Pronouncements

The FASB has issued SFAS No. 125, "Accounting for Transfers and Servicing of 
Financial Assets and Extinguishment of Liabilities."  SFAS No. 125 is effective 
for transfers and servicing of financial assets and extinguishment of 
liabilities occurring after December 31, 1996.  Earlier application is not 
allowed.  The provisions of SFAS No. 125 must be applied prospectively; 
retroactive application is prohibited.  Adoption on January 1, 1997 is not 
expected to have a material impact on the Company.  The FASB deferred some 
provisions of SFAS No. 125, which are not expected to be relevant to the 
Company.

The FASB issued Statement of Financial  Accounting  Standards  ["SFAS"] No. 128,
"Earnings Per Share," and SFAS No. 129, "Disclosure of Information about Capital
Structure"  in February  1997.  SFAS No. 128  simplifies  the earnings per share
["EPS"] calculations required by Accounting Principles Board ["APB"] Opinion No.
15, and related  interpretations,  by replacing the  presentation of primary EPS
with a  presentation  of basic EPS. SFAS No. 128 requires dual  presentation  of
basic and diluted EPS by entities  with complex  capital  structures.  Basic EPS
includes no dilution  and is computed  by dividing  income  available  to common
stockholders by the weighted-average number of common shares outstanding for the
period.  Diluted EPS reflects the potential  dilution of  securities  that could
share in the  earnings  of an entity,  similar to the fully  diluted  EPS of APB
Opinion No. 15. SFAS No. 128 is effective  for financial  statements  issued for
periods  ending after December 15, 1997. The Company has adopted SFAS No. 128 in
these  financial  statements.  Basic  EPS is  based  on  average  common  shares
outstanding and diluted EPS include the effects of potential common stock,  such
as, options and warrants, if dilutive.  Adoption of SFAS No. 128 is not material
to the Company.

SFAS No. 129 does not change any previous  disclosure  requirements,  but rather
consolidates existing disclosure requirements for ease of retrieval.

The FASB has issued SFAS No. 130, "Reporting Comprehensive Income."  SFAS No 130
is effective for fiscal years beginning after December 15, 1997.  Earlier 
application is permitted.  Reclassification of financial statements for earlier 
periods provided for comparative purposes is required.  SFAS No. 130 is not 
expected to have a material impact on the Company.

The FASB has issued SFAS No. 131, "Disclosures About Segments of an Enterprise 
and Related Information."  SFAS No. 131 changes how operating segments are 
reported in annual financial statements and requires the reporting of selected 
information about operating segments in interim financial reports issued to 
shareholders.  SFAS No. 131 is effective for periods beginning after 
December 15, 1997, and comparative information for earlier years is to be 
restated.  SFAS No. 131 need not be applied to interim financial statements in 
the initial year of its application.  Management is in the process of evaluating
the disclosure requirements.  SFAS No. 131 is not expected to have a material 
impact on the Company.

                                       11

<PAGE>



CHEM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6
[UNAUDITED]
------------------------------------------------------------------------------



[12] Equity Transactions

Stock Option Plan - The Company has adopted a stock option plan for the granting
of options to employees,  officers,  directors and consultants of the Company to
purchase up to 1,000,000  shares of common stock, at the discretion of the Board
of Directors.  Stock options grants are limited to a total of 500,000 shares for
"incentive  stock options" and 500,000 shares for  "non-statutory  options" and,
may not be priced less than the fair market value of the Company's  common stock
at the date of grant. Options granted are generally for ten year periods, except
that options  granted to a 10% stockholder [as defined] are limited to five year
terms. On October 16, 1996,  options to purchase  573,597 shares at the offering
price [$3.50] and 25,974 shares at 110% of the offering price were granted. Such
options became  exercisable on October 16, 1997. At December 31, 1997, none have
been exercised.

[13] Subsequent Events

[A] Related  Party Notes  Payable - On January 12,  1998,  the Company  signed a
Stock Sale Agreement with Gerob Realty Partnership ["Gerob"]. Under the terms of
the agreement,  the Company sold from its authorized but unissued common stock a
total of 843,300 shares to Gerob. The issuance of the stock was in consideration
of $297,000 of past due rent  separately  disclosed  as accrued  expenses on the
consolidated balance sheet and the satisfaction of a promissory note of $276,444
separately  disclosed as a non-current note payable on the consolidated  balance
sheet of December 31, 1997.

[B] Line of Credit - On January 26, 1998, the Company signed a Loan Modification
Agreement  with its bank,  extending the term of the $500,000  revolving line of
credit to April 30, 1998.






                 .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

                                       12

<PAGE>



Item 2.

CHEM INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------------



The following discussion should be read in conjunction with historical financial
statements of the Company and notes thereto.

Six months ended December 31, 1997 Compared to the Six Months ended December 31,
1996

Results of Operations

The  Company's  net losses for the six months  ended  December 31, 1997 and 1996
were  $(388,388)  and  $(358,190),  respectively.  This  increase in net loss of
approximately  $30,000  is  primarily  the  result  of an  $84,000  increase  in
operating loss, a decrease of interest expense of  approximately  $26,000 and an
increase  in the  federal  tax  benefit of  approximately  $25,000.  The $84,000
increase in operating  loss is due to an increase in selling and  administrative
expenses of approximately $210,000, and a gross profit increase of approximately
$126,000.

Sales for the six months ended  December 31, 1997 and 1996 were  $4,970,100  and
$3,937,915,  respectively,  an increase of approximately  $1,032,000 or 26%. For
the six months ended  December 31, 1997,  the Company had sales to one customer,
who accounted for 45% of net sales in 1997 and 37% in 1996.

Retail and mail order sales for the six months  ended  December 31, 1997 totaled
$549,679 as compared to $416,604 for the six months ended  December 31, 1996, an
increase  of  $133,075  or 32% due to  increased  volume in mail order sales and
store sales.

On February 17, 1997,  the Company  signed a  distribution  agreement with Roche
Vitamins,  Inc. to service  and supply  Roche  products  to a select  segment of
Roche's food, nutrition and cosmetic accounts. The agreement has an initial term
of two years and shall be renewable for an additional term of one year each.
Sales for the six months ended under the agreement totaled $537,272.

Cost of sales increased to $4,214,963 for the six months ended December 31, 1997
as compared to $3,308,259  for the six months ended  December 31, 1996.  Cost of
sales  increased  as a  percentage  of  sales  to 85% for the six  months  ended
December 31, 1997 from 84% for the six months ended December 31, 1996.

Selling and  administrative  expenses for the six months ended December 31, 1997
were  $1,315,725 as compared to $1,105,939 for the six months ended December 31,
1996. The increase of  approximately  $210,000 was primarily  attributable to an
increase  in  bad  debt  expense  of  approximately   $33,000,  an  increase  in
advertising  of  approximately  $63,000,  an  increase  in  consulting  fees  of
approximately  $34,000, an increase in office salaries of approximately $35,000,
a decrease in professional fees of approximately $35,000, an increase in freight
out of  approximately  $42,000  and an  increase  in  entertainment  expenses of
approximately $41,000.

Other income  [expense] was $(13,546) for the six months ended December 31, 1997
as compared to  $(42,822)  for the six months  ended  December  31,  1996.  This
decrease  in net  expense of $29,276 is  attributable  to a decrease in interest
expense of $ 26,279, an increase in interest and investment income of $7,997 and
a $5,000 loss from a 50% owned partnership.



                                       13

<PAGE>



CHEM INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------------



Six months ended December 31, 1997 Compared to the Six months ended December 31,
1996

Results of Operations [Continued]

On July 7, 1997 the Company was informed by one of its  suppliers of a recall of
the supplier's raw material which was used in  manufacturing  of tablets sold by
the Company.  On July 17, 1997, the Company  issued a voluntary  recall to three
customers  affected  by this and  accordingly,  reduced  its sales and  accounts
receivable at June 30, 1997 by $127,000. The Company believes they have recourse
against the  supplier  for the full value of the  tablets  sold  containing  the
recalled  raw  material.  The  Company  does  not  believe  there  will  be  any
significant  additional costs relating to this recall. On September 30, 1997 the
Company  instituted  suit to recover all  damages.  No  estimate  can be made at
December 31, 1997 as to the amount, if any, of ultimate recovery.

Three months ended December 31, 1997 Compared to the Three months ended December
31, 1996

The Company's  net losses for the three months ended  December 31, 1997 and 1996
were  $(309,132)  and  $(433,064)  respectively.  This  decrease  in net loss of
approximately $122,000 is primarily the result of an increase in gross profit of
approximately $314,000 and an increase in selling and administrative expenses of
approximately $192,000.

Sales for the three months ended December 31, 1997 and 1996 were  $2,618,510 and
$1,829,461,  respectively,  an increase of $789,049 or 43%. For the three months
ended  December 31, 1997,  the Company had sales to one customer,  who accounted
for 50% of net sales in 1997 and 44% in 1996.

Retail and mail order sales for the three months ended December 31, 1997 totaled
$275,930 as compared to $233,200 for the three months ended December 31, 1996 an
increase of $42,730 or 18%.

Sales under the Roche Vitamins, Inc. distribution agreement totaled $262,140 for
the three months ended December 31, 1997.

Cost of sales  increased to $2,192,211  for the three months ended  December 31,
1997 as compared to  $1,718,000  for the three months  ended  December 31, 1997.
Cost of sales  decreased  as a  percentage  of sales to 84% for the three months
ended  December 31, 1997 as compared to 94% for the three months ended  December
31, 1996.  The  decrease in cost of sales is due to a decrease in  manufacturing
expenses.

The Company  completed  the  renovation  of its blending  department in December
1997.

Selling and administrative expenses for the three months ended December 31, 1997
were  $719,969 as compared to $527,390 for the three  months ended  December 31,
1996.  The  increase  of $192,579  is  primarily  due to an increase in bad debt
expense of  approximately  $33,000,  an increase in advertising of approximately
$63,000,  an increase in freight out of  approximately  $23,000,  an increase in
entertainment  of  approximately  $24,000,  an  increase in  consulting  fees of
approximately  $41,000  and an increase in  professional  fees of  approximately
$11,000.

Other income  [expense] was $15,462 for the three months ended December 31, 1997
as compared to  $(17,135)  for the three months  ended  December 31, 1996.  This
increase of $1,673 is attributable to a decrease in interest  expense of $11,007
a decrease of interest and investment income of $7,837 and a loss of $1,497 from
a 50% owned partnership.



                                       14

<PAGE>



CHEM INTERNATIONAL, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------------



Liquidity and Capital Resources

At December 31, 1997, the Company's working capital was $3,435,141 a decrease of
$597,261 over working capital at June 30, 1997. Cash and cash  equivalents  were
$381,840 at December  31, 1997 a decrease of $628,416  from June 30,  1997.  The
Company utilized $494,143 and $1,114,904 for operations for the six months ended
December 31, 1997 and 1996,  respectively.  The primary reasons for the decrease
in  cash  utilized  for  operations  are  (a)  an  increase  in  inventories  of
approximately  $1,200,000 as more  inventory is needed as more products are sold
through retail and mail order sales, increasing work-in-process inventory, (b) a
decrease in accounts  receivable of approximately  $675,000,  (c) an increase in
accounts  payable of approximately  $480,000,  and (d) an increase in refundable
federal income taxes due to the potential carryback of net operating losses. The
Company  utilized  $109,475  and $150,905 in  investing  activities  for the six
months  ended  December  31, 1997 and 1996  respectively.  The Company  utilized
$24,798 from financing  activates for the six months ended December 31, 1997 and
generated $2,625,071 from financing activities for the six months ended December
31, 1996.

The  Company  had a  $500,000  revolving  line of credit  with a bank which bore
interest at .75% above the bank's prime lending rate and expired on November 30,
1997.  On January 26, 1998,  the Company  renewed the  revolving  line of credit
until April 30, 1998. The Company has additionally secured a five year equipment
term loan with  interest at 1.5% above the banks prime lending rate. At December
31, 1997, the balance due under the equipment loan was $188,390.

The Company's total annual  principal  commitments at June 30, 1997 for the next
five years of $1,633,717  consists of  obligations  under  operating  leases for
facilities and lease  agreements for the rental of warehouse  equipment,  office
equipment and automobiles.

Effective July 1, 1996, the Company entered into employment agreements with each
of its five  executive  officers  providing  for aggregate  compensation  in the
amount of $ 630,000 for the fiscal year  ending June 30, 1998 and  $680,000  for
1999.

In December 1997, the Underwriter of the public  offering ceased  operations and
market making activities. As part of the December 1996 underwriting arrangement,
the  Company  had entered  into an  agreement  retaining  the  Underwriter  as a
financial consultant to the Company for a two-year period commencing on the date
of the  completion of the offering at a fee of $88,550.  Accordingly at December
31, 1997, the balance of prepaid  consulting  fees of $36,896 was written off as
consulting expense for the six months ending December 31, 1997.

Based on a preliminary study, the Company expects to spend approximately $10,000
through  1999  to  modify  its  computer  information  systems  enabling  proper
processing  of  transactions  relating to the year 2000 and beyond.  The Company
continues  to  evaluate  appropriate  courses of  corrective  action,  including
replacement  of certain  systems  whose  associated  costs  would be recorded as
assets and  amortized.  Accordingly,  the  Company  does not expect the  amounts
required to be expensed over the next two years to have a material effect on its
financial  position  or results of  operations.  The amount  expensed in the six
months ended December 31, 1997 was immaterial.


                                       15

<PAGE>



Part II: Other Information

CHEM INTERNATIONAL, INC.
------------------------------------------------------------------------------



Item 1:  Legal Proceeding

            None

Item 2:  Changes in Securities

            None

Item 3:  Defaults Upon Senior Securities

            None

Item 4:  Submission of Matters to a Vote of Security Holders

            None

Item 5:  Other Information

            None

Item 6:  Exhibits and Reports on Form 8K

            None

                                       16

<PAGE>


SIGNATURES
------------------------------------------------------------------------------




Pursuant  to the  requirements  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.

                                   CHEM INTERNATIONAL, INC.

Date: February 9, 1998               By:  /s/ E. Gerald Kay
                                          -------------------------------------
                                          E. Gerald Kay,
                                          President and Chief Executive Officer

Date: February 9, 1998               By:  /s/ Eric Friedman
                                          -------------------------------------
                                          Eric Friedman,
                                          Chief Financial Officer


                                       17

<PAGE>