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     September 30, 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 November 13, 1997
----------------------------------           -----------------------------------

Common Stock, Par Value                                  4,335,000


<PAGE>



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


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




Part I: Financial Information

Item 1: Consolidated Financial Statements

        Consolidated Balance Sheet as of September 30, 1997 [Unaudited] 1..2

        Consolidated Statements of Operations for the three months ended
        September 30, 1997 and 1996 [Unaudited]..................... 3.....

        Consolidated Statement of Stockholders' Equity for the three months
        ended September 30, 1997 [Unaudited]........................ 4.....

        Consolidated Statements of Cash Flows for three months ended
        September 30, 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.....14

Part II: Other Information..........................................15

Signature...........................................................16





                          .   .   .   .   .   .   .   .


<PAGE>

<TABLE>


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


CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997.
[UNAUDITED]
------------------------------------------------------------------------------



<S>                                                                   <C> 

Assets:
Current Assets:
  Cash and Cash Equivalents                                             $   514,531
  Accounts Receivable - Net                                               1,340,689
  Note Receivable                                                           247,720
  Inventories                                                             2,879,249
  Prepaid Expenses and Other Current Assets                                 192,825
  Refundable Federal Income Taxes                                           320,000
                                                                        -----------

  Total Current Assets                                                    5,495,014

Property and Equipment - Net                                              1,021,332
                                                                        -----------

Other Assets:
  Goodwill                                                                  290,875
  Prepaid Pension Costs                                                     340,291
  Security Deposits and Other Assets                                        219,318
                                                                        -----------

  Total Other Assets                                                        850,484

  Total Assets                                                          $ 7,366,830
                                                                        ===========




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

                                         1

<PAGE>


<TABLE>

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


CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997.
[UNAUDITED]
------------------------------------------------------------------------------



<S>                                                               <C>  

Liabilities and Stockholders' Equity:
Current Liabilities:
  Accounts Payable                                                      $ 1,299,574
  Notes Payable                                                              49,814
  Accrued Expenses and Other Current Liabilities                             80,229
  Accrued Expenses - Related Party                                          287,000
  Federal and State Income Taxes Payable                                        886
                                                                        -----------

  Total Current Liabilities                                               1,717,503

Non-Current Liabilities:
  Notes Payable                                                             220,316
  Notes Payable - Related Party                                             276,444
                                                                        -----------

  Total Non-Current Liabilities                                             496,760

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                                              4,199,598

  Retained Earnings                                                         944,299

  Total Stockholders' Equity                                              5,152,567

  Total Liabilities and Stockholders' Equity                            $ 7,366,830
                                                                        ===========



The Accompanying Notes are an Integral Part of These Consolidated Financial 

Statements.
</TABLE>

                                         2

<PAGE>


<TABLE>

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


CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
------------------------------------------------------------------------------


                                                              Three months ended
                                                                 September 30,
<S>                                                        <C>            <C>  

                                                             1 9 9 7       1 9 9 6
                                                             -------       -------

Sales                                                      $2,351,590   $ 2,108,454

Cost of Sales                                               2,022,752     1,590,259
                                                           ----------   -----------

  Gross Profit                                                328,838       518,195

Selling and Administrative Expenses                           595,756       578,549
                                                           ----------   -----------

  Operating [Loss]                                           (266,918)      (60,354)
                                                           ----------   -----------

Other Income [Expense]:
  Partnership Loss                                             (3,503)           --
  Interest Expense                                            (11,197)      (26,469)
  Interest and Income Investment Income                        16,616           782
                                                           ----------   -----------

  Other Income [Expense] - Net                                  1,916       (25,687)
                                                           ----------   -----------

  [Loss] Before Income Taxes                                 (265,002)      (86,041)

Federal and State Income Tax [Benefit]                        (82,700)      (22,155)
                                                           ----------   -----------

  Net [Loss]                                               $ (182,302)  $   (63,886)
                                                           ==========   ===========

  Net [Loss] Per Share                                     $     (.04)  $      (.02)
                                                           ==========   ===========

  Average Common Shares Outstanding                         4,335,000     3,021,000
                                                           ==========   ===========



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

                                         3
</TABLE>

<PAGE>


<TABLE>

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


CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 1997.
[UNAUDITED]
------------------------------------------------------------------------------



                                                          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         --        --        --     3,526       --             3,526

  Net [Loss] for the three     
months
   ended September 30, 1997         --        --        --        --    (182,302)       (182,302)
                           ------  --------  -------- --------- --------   -------      --------

Balance - September 30, 1997 4,335,000    8,670  $     --   $4,199,598    $944,299      $5,152,567
                            =========     ======  ========   ===========    =======      ==========




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

                                         4
</TABLE>

<PAGE>


<TABLE>

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


CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
------------------------------------------------------------------------------


                                                              Three months ended
                                                                 September 30,
                                                             1 9 9 7       1 9 9 6
                                                             -------       -------
<S>                                                       <C>           <C>   
Operating Activities:
  Net [Loss]                                               $ (182,302)  $   (63,886)
                                                           ----------   -----------
  Adjustments to Reconcile Net [Loss] to Net Cash
   [Used for] Operating Activities:
   Depreciation and Amortization                               76,114        62,183
   Non-Current Rent Charge                                         --        (1,570)
   Deferred Income Taxes                                      (10,000)      (12,000)
   Imputed Interest on Note Payable - Related Party             3,526         3,524
   Loss on Investment in Partnership                            3,503            --
   Interest Income on Note Receivable                          (9,347)           --

  Changes in Assets and Liabilities:
   [Increase] Decrease in:
     Accounts Receivable                                    1,124,019       753,322
     Inventories                                             (792,883)     (316,642)
     Refundable Federal Income Taxes                          (80,000)           --
     Prepaid Expenses and Other Current Assets                108,564        39,742
     Security Deposits and Other Assets                      (121,977)           --

   Increase [Decrease] in:
     Accounts Payable                                        (462,388)     (764,254)
     Federal and State Income Taxes Payable                   (40,530)        3,140
     Accrued Expenses and Other Liabilities                   (79,880)      159,591
                                                           ----------   -----------

   Total Adjustments                                         (281,279)      (72,964)
                                                           ----------   -----------

  Net Cash - Operating Activities                            (463,581)     (136,850)
                                                           ----------   -----------

Investing Activities:
  Purchase of Property and Equipment                          (22,400)      (21,776)
  Loans to Stockholders'                                           --        (1,427)
  Repayment to Note Receivable                                     --         1,048
  Loan to Related Company                                       2,500          (722)
                                                           ----------   -----------

  Net Cash - Investing Activities                             (19,900)      (22,877)
                                                           ----------   -----------

Financing Activities:
  Proceeds from Notes Payable                                      --       200,000
  Repayment of Notes Payable                                  (12,244)     (248,448)
  Deferred Offering Costs                                          --      (219,446)
                                                           ----------   -----------

  Net Cash - Financing Activities                             (12,244)     (267,894)
                                                           ----------   -----------

  Net [Decrease] in Cash and Cash Equivalents                (495,725)     (427,621)

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

  Cash and Cash Equivalents - End of Periods               $  514,531   $   337,444
                                                           ==========   ===========


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

                                         5
</TABLE>

<PAGE>


<TABLE>

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


CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
------------------------------------------------------------------------------


                                                              Three months ended
                                                                 September 30,
                                                             1 9 9 7       1 9 9 6
                                                             -------       -------
<S>                                                       <C>           <C>  

Supplemental Disclosures of Cash Flow Information:
  Cash paid during the periods for:
   Interest                                                $   11,604   $    14,586
   Income Taxes                                            $   62,411   $       457



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 three months ended September 30, 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  and  "common  share  equivalent"   shares
outstanding  during the periods presented after giving retroactive effect to the
1-for-4 reverse stock split in July 1996.  Common stock equivalents 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 September 30, 1997, the
balance of this note is $32,317.

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

The Company is a 50% partner in Manhattan Health  Products,  L.L.C. at September
30,  1997.  The  Company's  capital  investment  was  recorded at $1,497,  which
reflects  a capital  cost of $5,000  and a net loss of $3,503 at  September  30,
1997. The investment is included in other assets.

[5] Inventories

Inventories consist of the following at September 30, 1997:

Raw Materials                 $ 1,586,883
Work-in-Process                   697,100
Finished Goods                    595,266
                              -----------

  Total                       $ 2,879,249
  -----                       ===========

                                        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. 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 [See Note 13].

[7] Notes Payable

Notes payable are summarized as follows at September 30, 1997:

                                                         Related Party
                                           Notes Payable Note Payable    Total
Notes Payable:
  Bio Merieux Vitek, Inc. (a)               $   72,495   $        --  $   72,495
  Gerob Realty Partnership (b)                      --       276,444     276,444
  Summit Bank:
   Revolving Line-of-Credit (c)                     --            --          --
   Equipment Term Loan (d)                     197,635            --     197,635
                                            ----------   -----------  ----------

  Totals                                       270,130       276,444     546,574
  Less:  Current Portion                        49,814            --      49,814
                                            ----------   -----------  ----------

   Noncurrent Portion                       $  220,316   $   276,444  $  596,388
   ------------------                       ==========   ===========  ==========

(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.

(c)Under the terms of a revolving  line of credit which  expires 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 September 30, 1997,  there were no
   borrowings under the line of credit.

(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
   September 30, 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
September 30,
  1998                                      $   49,814   $        --  $   49,814
  1999                                          50,501            --      50,501
  2000                                          52,028            --      52,028
  2001                                          53,710            --      53,710
  2002                                          52,166       276,444     328,610
  Thereafter                                    11,911            --      11,911
                                            ----------   -----------  ----------

  Totals                                    $  270,130   $   276,444  $  546,574
  ------                                    ==========   ===========  ==========

[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 September 30, 1997, the
Company's  uninsured cash balances totaled  approximately  $92,000.  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 September 30, 1997 is $15,750.

[9] Major Customer

For the three months ended  September 30, 1997 and 1996,  approximately  39% and
48% 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 three
months ended September 30, 1997 and 1996, an aggregate of approximately  23% and
32%, respectively,  of revenues were derived from two other customers;  no other
customers accounted for more than 10% of consolidated sales for the three months
ended  September 30, 1997 and 1996.  Accounts  receivable  from these  customers
comprised  approximately  64% and 50% of total accounts  receivable at September
30, 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, 1997,  provides for a minimum
annual  rental of $60,000 plus payment of all real estate  taxes.  Rent and real
estate tax expense for the three  months  ended  September  30, 1997 and 1996 on
this lease was approximately $29,000 and $43,000,  respectively.  Unpaid rent of
$287,000 due to Gerob at  September  30, 1997 has been  separately  disclosed as
accrued expenses on the consolidated balance sheet.

                                        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 three
months ended September 30, 1997 on this lease was approximately $102,000.

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                       $   29,159     $ 259,500    $  288,659
   1999                           38,449       346,000       384,449
   2000                           37,768       346,000       383,768
   2001                           24,717       346,000       370,717
   2002                           23,515       182,609       206,124
   Thereafter                         --            --            --
                              ----------     ---------    ----------

   Total                      $  153,608     $1,480,109   $1,633,717
   -----                      ==========     ==========   ==========

Total rent expense,  including real estate taxes and  maintenance  charges,  was
approximately  $122,000 and $137,000  for the three months ended  September  30,
1997 and 1996,  respectively.  Rent expense is stated net of sublease  income of
approximately  $8,000 and $62,000 for the three months ended  September 30, 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 and  $680,000  for the years  ending  June 30,  1998 and  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  this  time 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,  including  interim  periods;  earlier
application  is  not  permitted.   When  adopted,  SFAS  No.  128  will  require
restatement of all prior-period EPS data presented; however, the Company has not
sufficiently  analyzed  SFAS No. 128 to determine  what effect SFAS No. 128 will
have on its historically reported EPS amounts.

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.  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.

[13] Subsequent Event

Note  Receivable - The balance due on the secured  promissory note receivable in
the amount of $250,000 was in default at November 3, 1997. The Company is in the
process of enforcing collection on this note.




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

                                       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 the  historical
financial statements of the Company and notes thereto.

Three months ended September 30, 1997 Compared to September 30, 1996

Results of Operations

The Company's net losses for the three months ended  September 30, 1997 and 1996
were  $(182,302)  and  $(63,886),  respectively.  This  increase  in net loss of
approximately  $120,000  is  primarily  the  result of a  $200,000  increase  in
operating  loss  resulting  from a  correspondingly  $200,000  decrease in gross
profit.  The  decrease in gross  profit is due to an  increase in  manufacturing
expenses and an increase in raw material costs.

Sales for the three months ended September 30, 1997 and 1996 were $2,351,590 and
$2,108,454,  respectively,  an increase of approximately $240,000 or 11.5 %. For
the  three  months  ended  September  30,  1997,  the  Company  had sales to one
customer, who accounted for 39% of net sales in 1997 and 48% in 1996.

Retail and mail order sales for the first  quarter of 1997  totaled  $273,749 as
compared to $183,404  for the first  quarter of 1996,  an increase of $90,345 or
49% 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  quarter  ended  September  30, 1997 under the  agreement  totaled
$275,132.

Cost of sales  increased to $2,022,752 for the first quarter of 1997 as compared
to  $1,590,259  for the first  quarter  of 1996.  Cost of sales  increased  as a
percentage  of sales to 86% for the first quarter of 1997 from 75% for the first
quarter of 1996. The increase in cost of sales is due to an increase in material
costs and an increase in manufacturing expenses.

The  Company  began in July of 1997 a  renovation  of its  blending  department.
Management expects the renovation to be completed by the end of November 1997 at
an  approximate  cost of  $200,000.  The  Company  expects  to  achieve  greater
manufacturing efficiencies as a result.

Selling and  administrative  expenses for the three months ended  September  30,
1997 were $595,756  versus $578,549 for the same period a year ago. The increase
of $17,207 was  primarily  attributable  to an  increase  in office  salaries of
approximately $21,000, a decrease in professional fees of approximately $46,000,
an increase in freight out of approximately  $20,000,  an increase in consulting
fees  of   approximately   $12,000,   a  decrease  in  advertising   expense  of
approximately  $16,000, an increase in office rent of approximately $10,000, and
an increase in travel and entertainment expenses of approximately $15,000.

Other income  (expense)  was $1,916 for the first quarter of 1997 as compared to
$(25,687)  for  the  first  quarter  of  1996.   This  increase  of  $27,603  is
attributable  to a decrease  in  interest  expense of  $15,272,  an  increase in
interest  and  investment  income of $15,834  and a $3,503 loss from a 50% owned
partnership.



                                       13

<PAGE>



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



Three months ended September 30, 1997 Compared to September 30, 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 this
time as to the amount, if any, of ultimate recovery.

Liquidity and Capital Resources

At September 30, 1997, the Company's  working  capital was $3,777,511 a decrease
of $254,891 over working capital at June 30,1997. Cash and cash equivalents were
$514,531 at September  30, 1997 a decrease of $495,725  from June 30, 1997.  The
Company utilized $463,581 and $136,850 for operations for the three months ended
September 30, 1997 and 1996, respectively.  The primary reasons for the increase
in  cash  utilized  for  operations  are  (a)  an  increase  in  inventories  of
approximately $800,000, as more inventory is needed to cover more products being
sold through retail and mail order sales, and an increase in raw material costs,
(b) a decrease in accounts  receivable  of  approximately  $1,000,000  resulting
partially  from a decrease  in sales from a major  customer,  (c) a decrease  in
accounts payable of approximately $460,000 as more cash was used to pay accounts
payable,  and (d) an increase in security  deposits  and advances in relation to
the  renovation of the blending  department.  The Company  utilized  $19,900 and
$22,877 in investing  activities  for the three months ended  September 30, 1997
and 1996, respectively. The Company utilized $12,244 and $267,894 from financing
activities   for  the  three  months   ending   September  30,  1997  and  1996,
respectively.

The Company has a $500,000  revolving line of credit agreement with a bank which
bears  interest  at .75%  above the banks  prime  lending  rate and  expires  on
November 30, 1997.  At  September  30, 1997,  there was no balance due under the
line of credit  agreement.  The  Company  has  additionally  secured a five year
equipment term loan with interest at 1.5% above the banks prime lending rate. At
September 30, 1997, the balance due under the equipment loan was $197,635.

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 $680,000 for the fiscal years ending June 30, 1998 and 1999.

Management  expects  to renew the  $500,000  line of  credit  which  expires  on
November 30, 1997.  In the event that the Company  requires  additional  working
capital,  the Company would have to either increase its line of credit or engage
in sales of its equity  securities.  There can be no assurance  that any line of
credit increases or sales of equity securities can be accomplished on conditions
favorable to the Company.



                                       14

<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

                                       15

<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: November 13, 1997            By:/s/ E. Gerald Kay
                                      E. Gerald Kay,
                      President and Chief Executive Officer

Date: November 13, 1997            By:/s/ Eric Friedman
                                      Eric Friedman,
                                       Chief Financial Officer

                                       16

<PAGE>