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     March 31, 1998   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 May 11, 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 March 31, 1998 [Unaudited]        1...2

        Consolidated Statements of Operations for the three and nine months
        ended March 31, 1998 and 1997 [Unaudited]..................        3...

        Consolidated Statement of Stockholders' Equity for the nine months
        ended March 31, 1998 [Unaudited]............................       4...

        Consolidated Statements of Cash Flows for nine months ended
        March 31, 1998 and 1997 [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..16

Part II: Other Information..........................................      17

Signature...........................................................      18




                          .   .   .   .   .   .   .   .


<PAGE>



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


CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998.
[UNAUDITED]
------------------------------------------------------------------------------




Assets:
Current Assets:
  Cash and Cash Equivalents                                         $   660,482
  Accounts Receivable - Net                                           3,077,200
  Inventories                                                         4,127,564
  Prepaid Expenses and Other Current Assets                             194,271
  Refundable Federal Income Taxes                                       195,000
                                                                    -----------

  Total Current Assets                                                8,254,517
                                                                    -----------
Property and Equipment - Net                                          1,517,498
                                                                    -----------

Other Assets:
  Goodwill                                                              284,881
  Prepaid Pension Costs                                                 340,291
  Security Deposits and Other Assets                                     94,967
                                                                    -----------

  Total Other Assets                                                    720,139
                                                                    -----------
  Total Assets                                                      $10,492,154
                                                                    ===========



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

                                         1

<PAGE>



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


CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998.
[UNAUDITED]
------------------------------------------------------------------------------




Liabilities and Stockholders' Equity:
Current Liabilities:
  Accounts Payable                                                  $ 3,237,556
  Notes Payable                                                         385,682
  Accrued Expenses and Other Current Liabilities                        111,110
  Accrued Expenses - Related Party                                       15,000
                                                                    -----------

  Total Current Liabilities                                           3,749,348
                                                                    -----------
Non-Current Liabilities:
  Deferred Income Taxes                                                  73,000
  Notes Payable                                                         268,468
  Notes Payable - Related Party                                         682,765
                                                                    -----------

  Total Non-Current Liabilities                                       1,024,233
                                                                    -----------
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, 5,178,300 Shares Issued and Outstanding              10,357

  Additional Paid-in Capital                                          4,843,062

  Retained Earnings                                                     865,154
                                                                    ----------- 
  Total Stockholders' Equity                                          5,718,573
                                                                    -----------
  Total Liabilities and Stockholders' Equity                        $10,492,154
                                                                    ===========


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

                                         2

<PAGE>




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


CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
------------------------------------------------------------------------------
<TABLE>


                                       Three months ended            Nine months ended
                                             March31,                     March 31,
                                            --------                      ---------
                                      1 9 9 8      1 9 9 7        1 9 9 8       1 9 9 7
                                      -------      -------        -------       -------

<S>                                <C>           <C>            <C>          <C>        
Sales                              $ 4,978,839   $3,123,960     $9,948,939   $ 7,061,875

Cost of Sales                        4,010,136    2,447,173      8,225,099     5,755,432
                                   -----------   ----------     ----------   -----------

  Gross Profit                         968,703      676,787      1,723,840     1,306,443

Selling and Administrative
  Expenses                             732,255      644,629      2,047,980     1,750,568
                                   -----------   ----------     ----------   -----------

  Operating Income [Loss]              236,448       32,158       (324,140)     (444,125)
                                   -----------   ----------     ----------   -----------

Other Income [Expense]:
  Interest Expense                     (15,028)      (9,683)       (43,009)      (63,943)
  Interest and Investment Income           267       25,238         19,702        36,676
  Income [Loss] on Investment in
   Partnership                              --        1,780         (5,000)        1,780
                                   -----------   ----------     ----------   -----------

  Other [Expense] Income - Net         (14,761)      17,335        (28,307)      (25,487)
                                   -----------   ----------     ----------   -----------

  Income [Loss] Before Income
   Taxes                               221,687       49,493       (352,447)     (469,612)

Federal and State Income
  Tax Expense [Benefit]                 94,746      (19,817)       (91,000)     (180,732)
                                   -----------   ----------     ----------   -----------

  Net Income [Loss]                $   126,941   $   69,310     $ (261,447)  $  (288,880)
                                   ===========   ==========     ==========   ===========

Net Income [Loss] Per
  Common Share:
  Basic                            $       .03   $      .02     $     (.06)  $      (.08)
                                   ===========   ==========     ==========   ===========

  Diluted                          $       .02   $      .02     $     (.06)  $      (.08)
                                   ===========   ==========     ==========   ===========

Weighted Average Common
  Shares Outstanding                 5,065,685    4,286,000      4,575,068     3,727,369

Dilutive Potential Common Shares:
  Warrants and Options               1,925,247       70,000             --            --
                                   -----------   ----------     ----------   -----------

  Adjusted Weighted Average
   Common Shares                     6,990,932    4,356,000             --            --
                                   ===========   ==========     ==========   ===========



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

</TABLE>
                                         3

<PAGE>



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


CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE NINE MONTHS
ENDED MARCH 31, 1998.
[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>           <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
  
  Common Stock Issued in Payment
   of Debt                           843,300     1,687        --      571,757           --       573,444

  Fair Value of Stock Purchase
   Warrant [7][12A]                       --        --        --       68,182           --        68,182

  Net [Loss] for the nine months
   ended March 31, 1998                   --        --        --           --     (261,447)     (261,447)
                                    --------  --------  --------    ---------   ----------    ----------

Balance - March 31, 1998           5,178,300 $ 10,357  $      --   $4,843,062     $865,154    $5,718,573
                                   ========= ========  =========   ==========   ==========    ==========




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

</TABLE>
                                         4

<PAGE>



CHEM INTERNATIONAL, INC. AND SUBSIDIARIES
------------------------------------------------------------------------------


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

<TABLE>

                                                              Nine months ended
                                                                   March 31,
                                                             1 9 9 8       1 9 9 7
                                                             -------       -------
Operating Activities:
<S>                                                        <C>          <C>         
  Net [Loss]                                               $ (261,447)  $  (288,880)
                                                           ----------   -----------
  Adjustments to Reconcile Net [Loss] to Net Cash
   [Used for] Operating Activities:
   Depreciation and Amortization                              274,111       228,398
   Lease Termination Items                                         --      (108,753)
   Deferred Income Taxes                                       90,000         8,000
   Imputed Interest on Note Payable - Related Party             7,051        10,574
   [Gain] Loss on Investment in Partnership                     5,000        (1,780)
   Interest Income on Note Receivable                         (11,627)       (5,150)
   Write-off of Note Receivable                                33,058            --
   Bad Debt Expense                                             5,000            --
   Amortization of Discount on Note Payable                       947            --

  Changes in Assets and Liabilities:
   [Increase] Decrease in:
     Accounts Receivable                                     (639,492)      157,254
     Inventories                                           (2,041,198)   (1,333,054)
     Prepaid Expenses and Other Current Assets                 79,377      (143,106)
     Security Deposits and Other Assets                        (4,767)      (23,410)
     Refundable Federal Income Taxes                           45,000            --

   Increase [Decrease] in:
     Accounts Payable                                       1,475,594       203,917
     Federal and State Income Taxes Payable                   (41,416)     (110,309)
     Accrued Expenses and Other Liabilities                   (23,999)      (97,546)
                                                           ----------   -----------

   Total Adjustments                                         (747,361)   (1,214,965)
                                                           ----------   -----------

  Net Cash - Operating Activities - Forward                (1,008,808)   (1,503,845)
                                                           ----------   -----------

Investing Activities:
  Issuance of Note Receivable                                      --      (223,750)
  Repayment of Loan to Related Company                             --        16,849
  Repayment of Note Payable - Stock Retirement                     --      (156,473)
  Purchase of Property and Equipment                         (601,024)     (236,935)
  Loans to Stockholders'                                       (4,673)       (1,519)
  Repayment of Note Receivable                                250,000         3,183
  Loan to Related Company                                       2,500          (722)
                                                           ----------   -----------

  Net Cash - Investing Activities - Forward                  (353,197)     (599,367)
                                                           ----------   -----------

Financing Activities:
  Net Proceeds from Initial Public Offering                        --     3,426,344
  Proceeds from Notes Payable                               1,050,000       332,844
  Repayment of Notes Payable                                  (37,769)   (1,142,756)
                                                           ----------   -----------

  Net Cash - Financing Activities - Forward                $1,012,231   $ 2,616,432


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

</TABLE>
                                         5

<PAGE>



CHEM INTERNATIONAL, INC. AND SUBSIDIARIES
------------------------------------------------------------------------------


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


                                                              Nine months ended
                                                                   March 31,
                                                             1 9 9 8       1 9 9 7
                                                             -------       -------

<S>                                                        <C>          <C>         
  Net Cash - Operating Activities - Forwarded              $(1,008,808) $(1,503,845)

  Net Cash - Investing Activities - Forwarded                (353,197)     (599,367)

  Net Cash - Financing Activities - Forwarded               1,012,231     2,616,432
                                                           ----------   -----------

  Net [Decrease] Increase in Cash and Cash Equivalents       (349,774)      513,220

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

  Cash and Cash Equivalents - End of Periods               $  660,482   $ 1,278,285
                                                           ==========   ===========

Supplemental Disclosures of Cash Flow Information:
  Cash paid during the periods for:
   Interest                                                $   37,125   $    54,198
   Income Taxes                                            $   70,863   $    80,688

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 nine months ended March 31, 1997.

  The Company sold 843,300 shares of its common stock to Gerob, a related party.
The issuance of the stock was in  consideration of $297,000 of past due rent and
the satisfaction of a promissory note of $276,444.




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 nine  months  ended  March 31, 1998 are not  necessarily  indicative  of the
results for the entire fiscal year ending June 30, 1998.

[C] Income [Loss] Per Share - Income  [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.  Potential common
shares of 150,000 are not currently dilutive, but may be in the future.

[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 March 31, 1998.

[5] Inventories

Inventories consist of the following at March 31, 1998:

Raw Materials                 $ 2,217,189
Work-in-Process                 1,253,669
Finished Goods                    656,706
                              -----------

  Total                       $ 4,127,564
  -----                       ===========

                                        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 was taken into income
over the period of the loan.

[7] Notes Payable

Notes payable are summarized as follows at March 31, 1998:

                                                          Related Party
                                            Notes Payable Note Payable    Total
Notes Payable:
  Siemens Credit Corp. (a)                  $  109,545   $        --  $  109,545
  Bio Merieux Vitek, Inc. (b)                   65,795            --      65,795
  President and Chief Executive Officer (c)         --       682,765     682,765
  Summit Bank:
   Revolving Line-of-Credit (d)                300,000            --     300,000
   Equipment Term Loan (e)                     178,810            --     178,810
                                            ----------   -----------  ----------

  Totals                                       654,150       682,765   1,336,915
  Less:  Current Portion                       385,682            --     385,682
                                            ----------   -----------  ----------

   Noncurrent Portion                       $  268,468   $   682,765  $  951,233
   ------------------                       ==========   ===========  ==========

(a)Three year 9.66%  equipment  note dated March 17, 1998  providing for monthly
   payments of $3,497 for principal and interest.  The note is collateralized by
   machinery and equipment.

(b)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.

(c)Three year  non-collaterized  7%  promissory  note for $750,000  with related
   party providing for quarterly payments of $4,725 representing  interest only.
   The note matures on March 12, 2001. As additional  consideration for the loan
   and in the  light of the  below  market  interest  rate and  uncollateralized
   nature of the loan,  the  Corporation  issued a Class C Warrant  to  purchase
   150,000  shares of common stock at the aggregate  purchase price of $1.75 per
   share.  The note is recorded net of $68,182,  which represents the fair value
   of the Class C warrant.  The  amortization  at March 31, 1998 was $947 and is
   classified as interest  expense in the Company's  financial  statements.  The
   warrant is exercisable  for a four year period  commencing one year after the
   issuance of the note and expires on March 12, 2003 [See Note 12D].

(d)Under the terms of a  revolving  line of credit  which  expired  on April 30,
   1998,  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 March 31, 1998, the interest rate was
   9.25% [See Note 13].

(e)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
   March 31, 1998, 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  non-interest  bearing  note due to Gerob  Realty  Partnership  ["Gerob"] on
September 10, 2002 was exchanged in  consideration  of shares of authorized  but
unissued common stock [See Note 12B].

                                        8

<PAGE>



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


[7] Notes Payable [Continued]

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.

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

                                                         Related Party
                                           Notes Payable Note Payable    Total
March 31,
  1999                                      $  385,682   $        --  $  385,682
  2000                                          96,084            --      96,084
  2001                                         106,616       682,765     789,381
  2002                                          65,768            --      65,768
  2003                                              --            --          --
                                            ----------   -----------  ----------

  Totals                                    $  654,150   $   682,765  $1,336,915
  ------                                    ==========   ===========  ==========

[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 March 31, 1998, the
Company's uninsured cash balances totaled  approximately  $980,000.  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 March 31, 1998 is $20,750.

[9] Major Customer

For the nine months ended March 31, 1998 and 1997,  approximately 55% and 45% 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 nine months
ended  March 31,  1998 and 1997,  an  aggregate  of  approximately  12% and 25%,
respectively,  of  revenues  were  derived  from two other  customers;  no other
customers  accounted for more than 10% of consolidated sales for the nine months
ended  March  31,  1998 and  1997.  Accounts  receivable  from  these  customers
comprised  approximately  73% and 68% of total accounts  receivable at March 31,
1998 and 1997, 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 nine  months  ended March 31, 1998 and 1997 on this
lease was  approximately  $87,000  and  $115,000,  respectively.  Unpaid rent of
$15,000 due to Gerob at March 31, 1998 has been separately  disclosed as accrued
expenses on the consolidated  balance sheet.  Past due rent at December 31, 1997
of $297,000 was forgiven in  consideration of issuance of shares of common stock
[See Note 12C].

                                        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 nine
months ended March 31, 1998 on this lease was approximately $338,000.

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                       $   13,411     $  86,500    $   99,911
   1999                           53,646       346,000       399,646
   2000                           43,568       346,000       389,568
   2001                           28,070       346,000       374,070
   2002                           23,515       182,606       206,121
   Thereafter                         --            --            --
                              ----------     ---------    ----------

   Total                      $  162,210     $1,307,106   $1,469,316
   -----                      ==========     ==========   ==========

Total rent expense,  including real estate taxes and  maintenance  charges,  was
approximately $411,000 and $313,000 for the nine months ended March 31, 1998 and
1997,   respectively.   Rent  expense  is  stated  net  of  sublease  income  of
approximately  $16,000 and $166,000 for the nine months ended March 31, 1998 and
1997, 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 March 31,  1998 as to the  amount,  if any, of ultimate
recovery.

[D] Consulting  Agreement - The Company entered into a consulting agreement with
a financial  advisory group  ["Consultants"]  commencing on March 20, 1998 until
February 28, 1999. The Company is obligated to pay $2,500 for services  rendered
at the end of each month that  services  are  provided  during the terms of this
agreement.  In addition,  the Company has issued to the Consultants  options for
45,000 shares of common stock [See Note 12B].

[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

[A] 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
March 31, 1998, none have been exercised.

[B]  Consultant  Agreement/Stock  Options  - In  connection  with  a  consulting
agreement  dated March 20, 1998, the Company has issued three options for 45,000
shares of common  stock [See Note 10C].  Each option is  exercisable  for 15,000
shares at  exercise  prices of  $1.125,  $2.50 and  $4.00,  respectively.  These
options are exercisable until five years following the date of this agreement.

[C] Related  Party Notes  Payable - On January 12,  1998,  the Company  signed a
Stock Sale Agreement with Gerob.  Under the terms of the agreement,  the Company
sold 843,300  shares of common stock to Gerob.  The issuance of the stock was in
consideration  of $297,000 of past due rent and the satisfaction of a promissory
note of $276,444 [See Note 7 and 10A].

[D] Related Party Promissory Note - On March 12, 1998, the Company  negotiated a
three year  promissory  note for $750,000 with its Chairman and  President.  The
note bears  interest at 7% and is due on March 12, 2001.  The note  provides for
interest only to be paid quarterly. As additional consideration for the loan and
in the light of the below market  interest rate and  uncollateralized  nature of
the loan, the Corporation issued a Class C Warrant to purchase 150,000 shares of
common stock at the  aggregate  purchase  price of $1.75 per share.  The note is
recorded  net of  $68,182,  which  represents  the  fair  value  of the  Class C
Warrants.  Amortization of $947 was recorded for the warrants at March 31, 1998.
The warrant is exercisable for a four year period  commencing one year after the
issuance of the note and expires on March 12, 2003 [See Note 7].

[13] Subsequent Events

Development  and Supply  Agreement  - On April 9,  1998,  the  Company  signed a
development and supply agreement with Herbalife  International of America,  Inc.
["Herbalife"]  whereby the Company will develop,  manufacture and supply certain
nutritional products to Herbalife through December 31, 2000.

Line of Credit - On April  30,  1998,  the  Company  signed a Loan  Modification
Agreement  with its bank,  extending the term of the $500,000  revolving line of
credit to July 31, 1998 [See Note 7].






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

                                       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.

Nine months  ended March 31,  1998  Compared to the Nine Months  ended March 31,
1997

Results of Operations

The  Company's net losses for the nine months ended March 31, 1998 and 1997 were
$(261,447)  and  $(288,880),   respectively.   This  decrease  in  net  loss  of
approximately  $27,000  is  primarily  the  result  of a  $117,000  decrease  in
operating  loss and a decrease  in the  federal  tax  benefit  of  approximately
$90,000 due to  forgiveness  of accrued rent which gave rise to deferred  taxes.
The  $117,000  decrease in operating  loss is due to a gross profit  increase of
approximately $417,000 and an increase in selling and administrative expenses of
approximately $300,000.

Sales for the nine  months  ended March 31,  1998 and 1997 were  $9,948,939  and
$7,061,875,  respectively, an increase of $2,887,064 or 41%. For the nine months
ended March 31, 1998,  the Company had sales to one customer,  who accounted for
55% of net sales in 1998 and 45% in 1997.

Retail and mail order  sales for the nine months  ended  March 31, 1998  totaled
$846,216 as compared to $682,109 for the nine months  ended March 31,  1997,  an
increase  of  $164,107  or 24% 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 nine  months  ended  March 31,  1998 under the  agreement  totaled
$912,214.

On April 9, 1998,  the Company  signed a development  and supply  agreement with
Herbalife  International  of America,  Inc. Under the  agreement,  the Company's
subsidiary  Manhattan Drug Company,  Inc. will develop,  manufacture  and supply
nutritional products to Herbalife through December 31, 2000.

Cost of sales  increased to $8,225,099  for the nine months ended March 31, 1998
as compared to  $5,775,432  for the nine months  ended March 31,  1997.  Cost of
sales  increased as a percentage of sales to 83% for the nine months ended March
31, 1998 from 82% for the nine months ended March 31, 1997.

Selling and  administrative  expenses  for the nine months  ended March 31, 1998
were  $2,047,980 as compared to  $1,750,568  for the nine months ended March 31,
1997. The increase of  approximately  $297,000 was primarily  attributable to an
increase  in  bad  debt  expense  of  approximately   $38,000,  an  increase  in
advertising  of  approximately  $151,000,  an  increase  in  consulting  fees of
approximately  $36,000, an increase in office salaries of approximately $40,000,
a decrease in professional fees of approximately $67,000, an increase in freight
out of  approximately  $52,000  and an  increase  in  entertainment  expenses of
approximately $59,000.

Other income [expense] was $(28,307) for the nine months ended March 31, 1998 as
compared to $(25,487) for the nine months ended March 31, 1997. This increase in
net  expense of $2,820 is  attributable  to a decrease  in  interest  expense of
$20,934, a decrease in interest and investment income of $16,974 and an increase
in partnership losses of $6,780.



                                       13

<PAGE>



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



Nine months  ended March 31,  1998  Compared to the Nine months  ended March 31,
1997

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 March
31, 1998 as to the amount, if any, of ultimate recovery.

Three months  ended March 31, 1998  Compared to the Three months ended March 31,
1997

Results of Operations

The Company's net income for the three months ended March 31, 1998 and 1997 were
$126,941 and $69,310, respectively. This increase in net income of approximately
$58,000 is primarily the result of an increase in gross profit of  approximately
$292,000,  an increase in selling and  administrative  expenses of approximately
$88,000  and an  increase in federal  and state  income  taxes of  approximately
$115,000 due to forgiveness of accrued rent which gave rise to deferred taxes.

Sales for the three  months  ended March 31, 1998 and 1997 were  $4,978,839  and
$3,123,960, respectively, an increase of $1,854,879 or 59%. For the three months
ended March 31, 1998,  the Company had sales to one customer,  who accounted for
65% of net sales in 1998 and 45% in 1997.

Retail and mail order sales for the three  months  ended March 31, 1998  totaled
$296,537 as compared to $265,505  for the three  months  ended March 31, 1997 an
increase of $31,032 or 12%.

Sales under the Roche Vitamins, Inc. distribution agreement totaled $374,942 for
the three months ended March 31, 1998.

Because  of the  increase  of sales to one  customer,  whose  cost of sales  are
higher,  the cost of sales  increased to  $4,010,136  for the three months ended
March 31, 1998 as compared to  $2,447,173  for the three  months ended March 31,
1997.  Cost of sales  increased  as a  percentage  of sales to 81% for the three
months  ended March 31, 1998 as compared to 78% for the three months ended March
31, 1997.

Selling and  administrative  expenses  for the three months ended March 31, 1998
were $732,255 as compared to $644,629 for the three months ended March 31, 1997.
The increase of $87,626 is  primarily  due to an increase in bad debt expense of
approximately  $5,000, an increase in advertising of approximately  $96,000,  an
increase in entertainment of approximately  $20,000,  a decrease in professional
fees  of   approximately   $30,000,   and  a  decrease  in  consulting  fees  of
approximately $18,000.

Other income  [expense]  was $(14,761) for the three months ended March 31, 1998
as compared to $17,335 for the three months ended March 31, 1997.  This decrease
of $32,096 is  attributable  to an  increase in  interest  expense of $5,345,  a
decrease of interest and investment  income of $24,971 due to a decrease in cash
available for investing and a decrease in partnership income of $1,780.



                                       14

<PAGE>



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




Liquidity and Capital Resources

At March 31, 1998, the Company's  working  capital was $4,505,169 an increase of
$472,767 over working capital at June 30, 1997. Cash and cash  equivalents  were
$660,482  at March 31,  1998,  a decrease of $349,774  from June 30,  1997.  The
Company  utilized  $1,008,808  and $1,503,845 for operations for the nine months
ended  March 31,  1998 and  1997,  respectively.  The  primary  reasons  for the
decrease in cash utilized for  operations  are (a) an increase in inventories of
approximately  $2,000,000 as more  inventory is needed as more products are sold
through  retail  and mail  order and  there is an  increase  in  work-in-process
inventory, (b) an increase in accounts receivable of approximately $640,000, and
(c) an increase in accounts  payable of  approximately  $1,475,000.  The Company
utilized $353,197 and $599,367 in investing activities for the nine months ended
March 31, 1998 and 1997,  respectively.  The Company  generated  $1,012,231  and
$2,616,432  from  financing  activities for the nine months ended March 31, 1998
and 1997, respectively.

The Company has a revolving  line of credit with a bank which bears  interest at
3/4% above the bank's  prime  lending rate which  expired on April 30, 1998.  On
April 30, 1998, the Company signed a Loan Modification  Agreement with its bank,
extending the term of the $500,000  revolving line of credit to May 31, 1998. At
March 31, 1998, the balance due under the line of credit loan was $300,000.  The
Company had  additionally  secured a five year  equipment  loan with interest at
1.5% above the bank's prime  lending  rate.  At March 31, 1998,  the balance due
under the equipment loan was $178,810.

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  years  ending June 30, 1998 and $680,000 for
fiscal year ending June 30, 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 nine months ending December 31, 1997.

On February 10, 1998,  the Company  signed an exclusive  manufacturer  agreement
with Martin Health Care Products,  Inc. to provide to Martin Health Care certain
products for a ten year period.  In connection  with the agreement,  the Company
also agreed to forgive  from Martin  Heath Care  outstanding  invoices  totaling
$22,000.  In return for the  forgiveness,  Martin agreed to pay to the Company a
royalty on sales of certain  products and to issue to the Company  15,000 shares
of common stock in Martin  Health Care  Products,  Inc. The Company has recorded
the cost of the  common  stock at $1,000 and has  recorded  the  royalties  as a
non-current asset in the amount of $21,000.

On March 12, 1998, the Company  negotiated a three year promissory note with its
Chairman and  President.  The note bears  interest at 7% and is due on March 12,
2001.  The note provides for interest only to be paid  quarterly.  As additional
consideration  for the loan and in the light of the below market  interest  rate
and  uncollateralized  nature  of the  loan,  the  Corporation  issued a Class C
Warrant to purchase  150,000  shares of common stock at the  aggregate  purchase
price of $1.75 per share.  The  warrant is  exercisable  for a four year  period
commencing  one year  after the  issuance  of the note and  expires on March 12,
2003.

On March 17, 1998, the Company secured a three year equipment loan with interest
at 9.66%. At March 31, 1998, the balance due on the note was $109,545.



                                       15

<PAGE>



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



Three months  ended March 31, 1998  Compared to the Three months ended March 31,
1997

Liquidity and Capital Resources [Continued]

On April 9, 1998,  the Company  signed a development  and supply  agreement with
Herbalife  International of America, Inc. ["Herbalife"] whereby the Company will
develop,  manufacture  and supply  certain  nutritional  products  to  Herbalife
through December 31, 2000.

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.

Management  expects to renew the $500,000  line of credit which  expires on July
31, 1998. In the event 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.

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 nine
months ended March 31, 1998 was immaterial.


                                       16

<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

                                       17

<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: May 12, 1998                 By:/s/ E. Gerald Kay
                                      -----------------------------------------
                                      E. Gerald Kay,
                                      President and Chief Executive Officer

Date: May 12, 1998                 By:/s/ Eric Friedman
                                      -----------------------------------------
                                      Eric Friedman,
                                      Chief Financial Officer

                                       18