UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                              Washington D.C. 20549

                                     ------

                                   FORM 10-QSB

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

For the quarter ended  December 31, 1999       Commission File Number 000-28876

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

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

   201 Route 22
 Hillside, New Jersey                                              07205
(Address of principal                                            (Zip code)
 executive offices)
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 or 15(d) of the  Securities  and  Exchange Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

                              Yes __X__        No _____

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

         Class                               Outstanding as of February 8, 2000
----------------------------                 ----------------------------------

Common Stock, Par Value                                    5,178,300

<PAGE>


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

Part I: Financial Information
<TABLE>
<CAPTION>
Item 1:Consolidated Financial Statements

<S>                                                                           <C>     <C>
      Consolidated Balance Sheet as of December 31, 1999 [Unaudited]   . . .    1 . . . 2

      Consolidated Statements of Operations for the three and six months
      ended December 31, 1999 and 1998 [Unaudited]    . . . . .  . . . . . .    3 . . .

      Consolidated Statement of Stockholders' Equity for the six months
      ended December 31, 1999 [Unaudited]  .  . . . . . . .  . . . . . . . .    4 . . .

      Consolidated Statements of Cash Flows for six months ended
      December 31, 1999 and 1998  [Unaudited]  . . . . . . . . . . . . . . .    5 . . . 6

      Notes to Consolidated Financial Statements [Unaudited] . . . . . . . .    7 . . . 13

Item 2: Management's Discussion and Analysis of Financial Condition
       and Results of Operations  .  . . . .  . . . .  . . . .  . . . .  . .    14 . . .16

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

Signature  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    18
</TABLE>

                                  . . . . . .

<PAGE>


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

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999.
[UNAUDITED]
--------------------------------------------------------------------------------

Assets:
Current Assets:
   Cash and Cash Equivalents                                         $   528,106
   Accounts Receivable - Net                                           2,726,660
   Deferred Income Taxes                                                 231,000
   Inventories                                                         4,803,532
   Prepaid Expenses and Other Current Assets                             200,389
   Refundable Federal Income Taxes                                        47,966
                                                                     -----------
   Total Current Assets                                                8,537,653
                                                                     -----------

Property and Equipment - Net                                           1,440,263
                                                                     -----------

Other Assets:
   Security Deposits and Other Assets                                    107,787
                                                                     -----------
   Total Assets                                                      $10,085,703
                                                                     ===========

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


                                       1

<PAGE>


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

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999.
[UNAUDITED]
--------------------------------------------------------------------------------

Liabilities and Stockholders' Equity:
Current Liabilities:
   Accounts Payable                                                $  3,781,252
   Notes Payable                                                      2,204,018
   Accrued Expenses and Other Current Liabilities                       380,952
   Accrued Expenses - Related Party                                     100,000
   Capital Lease Obligation                                              39,019
                                                                   ------------
   Total Current Liabilities                                          6,505,241
                                                                   ------------
Non-Current Liabilities:
   Notes Payable                                                         25,331
   Notes Payable - Related Party                                        722,538
   Capital Lease Obligation                                              10,330
                                                                   ------------
   Total Non-Current Liabilities                                        758,199
                                                                   ------------
Commitments and Contingencies [9]                                            --
                                                                   ------------

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                                         4,847,405

   [Deficit]                                                         (2,035,499)
                                                                   ------------

   Total Stockholders' Equity                                         2,822,263
                                                                   ------------

   Total Liabilities and Stockholders' Equity                      $ 10,085,703
                                                                   ============

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


                                       2

<PAGE>


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

CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                           Three months ended            Six months ended
                                          --------------------          -------------------
                                               December 31,                 December 31,
                                          --------------------          -------------------
                                           1999           1998          1999           1998
                                          -----           ----          ----           ----
<S>                                 <C>            <C>            <C>            <C>
Sales                               $ 4,941,907    $ 2,839,762    $ 8,374,030    $ 5,063,494

Cost of Sales                         4,164,588      2,777,609      7,181,056      4,910,204
                                    -----------    -----------    -----------    -----------

Gross Profit                            777,319         62,153      1,192,974        153,290

Selling and Administrative
Expenses                                766,798      1,001,359      1,507,564      1,684,299
                                    -----------    -----------    -----------    -----------

Operating Income[Loss]                   10,521       (939,206)      (314,590)    (1,531,009)
                                    -----------    -----------    -----------    -----------

Other [Expense] Income:
Interest Expense- Related Party         (18,807)       (18,807)       (37,614)       (37,614)
Interest Expense                        (54,342)       (15,862)       (71,642)       (28,405)
Interest and Investment Income            1,621            131          1,751            348
                                    -----------    -----------    -----------    -----------

Total Other [Expense]                   (71,528)       (34,538)      (107,505)       (65,671)
                                    -----------    -----------    -----------    -----------

[Loss] Before Income Taxes              (61,007)      (973,744)      (422,095)    (1,596,680)

Federal and State Income
Tax Expense [Benefit]                    34,580        (15,594)        14,134       (215,779)
                                    -----------    -----------    -----------    -----------

Net [Loss]                          $   (95,587)   $  (958,150)   $  (436,229)   $(1,380,901)
                                    ===========    ===========    ===========    ===========

Net [Loss] Per Common  Share
Basic and Diluted                   $      (.02)   $      (.19)   $      (.08)   $      (.27)
                                    ===========    ===========    ===========    ===========

Average Common Shares Outstanding
                                      5,178,300      5,178,300      5,178,300      5,178,300
                                    ===========    ===========    ===========    ===========

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 SIX MONTHS
ENDED DECEMBER 31, 1999
[UNAUDITED]
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                        Common Stock                       Additional                     Total
                                  -------------------------   Preferred     Paid in      Accumulated    Stockholders'
                                     Shares      Par Value      Stock       Capital       (Deficit)       Equity
                                  -----------   -----------  ------------  -----------   -----------    -----------

<S>                                 <C>         <C>           <C>          <C>           <C>            <C>
Balance - July 1, 1999              5,178,300   $    10,357   $        --  $ 4,847,405   $(1,599,270)   $ 3,258,492


Net [Loss] for the six
months ended  December 31, 1999            --            --            --           --      (436,229)      (436,229)
                                  -----------   -----------   -----------  -----------   -----------    -----------

Balance-December 31, 1999           5,178,300   $    10,357   $        --  $ 4,847,405   $(2,035,499)   $ 2,822,263
                                  ===========   ===========   ===========  ===========   ===========    ===========
</TABLE>

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


                                       4

<PAGE>


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

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

<TABLE>
<CAPTION>
                                                                               Six months ended
                                                                               ----------------
                                                                                 December 31,
                                                                                 ------------
                                                                            1 9 9 9        1 9 9 8
                                                                            -------        -------
<S>                                                                     <C>            <C>
Operating Activities:
   Net [Loss]                                                           $  (436,229)   $(1,380,901)
                                                                        -----------    -----------
   Adjustments to Reconcile Net [Loss] to Net Cash
      [Used for] Operating Activities:
      Depreciation and Amortization                                         161,682        200,961
      Amortization of Discount on Note Payable                               11,364         11,364
      Deferred Income Taxes                                                  13,000        (34,000)
      Bad Debt Expense                                                       25,184          5,000

Changes in Assets and Liabilities:
   [Increase] Decrease in:
      Accounts Receivable                                                  (748,624)     1,443,055
      Inventories                                                        (1,324,905)      (377,210)
      Refundable Federal Income Taxes                                        (6,321)      (196,645)
      Prepaid Expenses and Other Current Assets                            (105,601)       (43,953)
      Security Deposits and Other Assets                                       (850)        (2,060)

   [Decrease] Increase in:
      Accounts Payable                                                    2,626,441       (553,619)
      Federal and State Income Taxes Payable                                     --        (40,000)
      Accrued Expenses and Other Liabilities                                 59,262        139,490
                                                                        -----------    -----------
Total Adjustments                                                           710,632        828,274
                                                                        -----------    -----------
Net Cash  Operating Activities                                              274,403       (552,627)
                                                                        -----------    -----------

Investing Activities:
   Purchase of Property and Equipment                                       (63,677)      (165,367)
   Loans to Stockholders'                                                    (3,881)       (13,017)
                                                                        -----------    -----------
Net CashInvesting Activities                                                (67,558)      (178,384)
                                                                        -----------    -----------

Financing Activities:
   Proceeds from Notes Payable                                              853,766        670,000
   Repayment of Notes Payable                                              (831,545)      (507,026)
                                                                        -----------    -----------
   Net CashFinancing Activities                                              22,231        162,974
                                                                        -----------    -----------

Net Increase/[Decrease] in Cash and Cash Equivalents                        229,076       (568,037)

Cash and Cash Equivalents  Beginning of Periods                             299,030        956,403
                                                                        -----------    -----------
   Cash and Cash Equivalents  End of Periods                            $   528,106    $   388,366
                                                                        ===========    ===========
</TABLE>

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


                                       5

<PAGE>


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

CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                       Six months ended
                                                                   -----------------------
                                                                          December 31,
                                                                   -----------------------
                                                                     1 9 9 9       1 9 9 8
                                                                   ----------   ----------
<S>                                                                <C>          <C>
 Supplemental Disclosures of Cash Flow Information:
   Cash paid during the periods for:
    Interest                                                       $   93,012   $   38,913
    Income Taxes                                                   $    5,160   $   51,047

Supplemental Schedule of Investing and Financial Activities:
   Note payable issued in payment of accounts payable, trade       $1,500,000
</TABLE>

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


                                       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 and Europe.

[2] Summary of Significant Accounting Policies

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.

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, 1999.  The results of  operations  for
the six months ended  December 31, 1999 are not  necessarily  indicative  of the
results for the entire fiscal year ending June 30, 2000.

Cash and Cash  Equivalents - Cash  equivalents  are comprised of certain  highly
liquid investments with a maturity of three months or less when purchased.

Inventories - The inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out method.

Depreciation - The Company follows the general policy of  depreciating  the cost
of property and equipment over the following estimated useful lives:

Leasehold Improvements                          15 Years
Machinery and Equipment                          7 Years
Machinery and Equipment Under Capital Leases     7 Years
Transportation Equipment                         5 Years

Machinery  and  equipment  are  depreciated  using  accelerated   methods  while
leasehold  improvements  are amortized on a  straight-line  basis.  Depreciation
expense was $161,682 and $194,967 for the six months ended December 31, 1999 and
1998,  respectively.  Amortization of equipment under capital leases is included
with the depreciation expense.

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

Revenue Recognition - The Company generally  recognizes revenue upon shipment of
the product.

Impairment  - Certain  long-term  assets of the  Company's  principal  operating
business  subsidiary are reviewed at least annually as to whether their carrying
value has become  impaired,  pursuant to guidance  established  in  Statement of
Financial  Accounting Standards ["SFAS"] No. 121, "Accounting for the Impairment
of Long-Lived  Assets and for Long-Lived  Assets to Be Disposed Of."  Management
considers  assets to be  impaired  if the  carrying  value  exceeds  the  future
projected cash flows from related operations  [undiscounted and without interest
charges].  If impairment is deemed to exist,  the assets will be written down to
fair value which  represents  the projected  discounted  cash flows from related
operations.   Management  also  re-evaluates  the  periods  of  amortization  to
determine whether subsequent events and circumstances  warrant revised estimates
of useful lives. As of December 31, 1999,  management expects these assets to be
fully recoverable.


                                       7

<PAGE>


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

[2] Summary of Significant Accounting Policies (Continued)

Advertising - Costs  incurred for producing and  communicating  advertising  are
expensed when incurred. Advertising expense was $52,278 and $173,280 for the six
months ended December 31, 1999 and 1998 respectively.

[3] Inventories

Inventories consist of the following at December 31, 1999:

Raw Materials                       $   2,686,758
Work-in-Process                         1,312,519
Finished Goods                            804,255
                                    -------------

Total                               $   4,803,532
-----                               =============

[4] Property and Equipment

Property and equipment comprise the following at December 31, 1999:

Leasehold Improvements                                                $1,157,960
Machinery and Equipment                                                2,490,325
Machinery and Equipment Under Capital Leases                             109,545
Transportation Equipment                                                  60,569
                                                                      ----------

Total                                                                  3,818,399
Less: Accumulated Depreciation and Amortization                        2,378,136
                                                                      ----------

    Total                                                             $1,440,263
    -----                                                             ==========

[5] Notes Payable

Notes payable are summarized as follows at December 31, 1999:
<TABLE>
<CAPTION>
                                                         Related Party
                                                         -------------
                                         Notes Payable   Notes Payable          Total
                                         -------------   -------------          -----
<S>                                         <C>          <C>               <C>
Notes Payable:
   Bio Merieux Vitek, Inc. (a)              $   42,240   $          --     $   42,240
   Chairman of the Board (b)                        --         722,538        722,538
   Medallion Business Credit, LLC (c)          853,776              --        853,776
   Trade Creditor (d)                        1,333,333              --      1,333,333
                                            ----------   -------------     ----------

   Totals                                    2,229,349         722,538      2,951,887
   Less: Current Portion                     2,204,018              --      2,204,018
                                            ----------      ----------     ----------

      Noncurrent Portion                    $   25,331   $     722,538     $  747,869
                                            ==========   =============     ==========
</TABLE>


(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.


                                       8

<PAGE>


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

[5] Notes Payable (Continued)

(b) Three year  non-collateralized  7% promissory note for $750,000 with related
party providing for quarterly  payments of $13,125  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 an  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 December 31, 1999 was $11,364 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.  In order to  complete  the  Company's  new  financing  with
Medallion Business credit, the maturity date of the promissory note was extended
to December 31, 2001 and payment has been  subordinated  to  Medallion  Business
Credit, LLC.

(c) Under the terms of a  revolving  credit  note which  expires on  November 5,
2001,  the Company  may borrow up to  $1,000,000  at 3% above the prime  lending
rate. The loan is collateralized by the inventory,  receivables and equipment of
Chem International, Inc., and Chem's two operating subsidiaries,  Manhattan Drug
Company,  Inc. and Vitamin  Factory,  Inc. The note has been  guaranteed  by the
Company's  principal  stockholder.  At December 31, 1999 the  interest  rate was
11.5%.

(d) Secured  promissory  note dated  November  17, 1999,  providing  for monthly
payments of $83,333 for principal and interest on the unpaid  balance.  Interest
is computed at the prime  interest  rate.  The note matures on December 15, 2000
and  the  then  unpaid   principal   of  $416,667   becomes  due.  The  note  is
collateralized by the accounts receivable,  inventory and equipment of Manhattan
Drug Company,  Inc. and by the principal stockholder of the Company. At December
31, 1999 the interest rate was 8.5%. On January 20, 2000 the note was repaid.

The  loan  agreement  with  Medallion  Business  Credit,  LLC  contains  certain
financial  covenants  relating to the  maintenance of specified  liquidity,  and
tangible net worth.  The Company was not in compliance  with its working capital
covenant.

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

                                                Related Party
                              Notes Payable     Notes Payable             Total
                              -------------     -------------             -----
December 31,
    2000                       $2,204,018         $       --         $2,204,018
    2001                           18,680            722,538            741,218
    2002                            6,651                 --              6,651
                               ----------         ----------         ----------

   Totals                      $2,229,349         $  722,538         $2,951,887
                               ==========         ==========         ==========

[6] Capital Lease

The Company  acquired  equipment under the provision of a long-term  lease.  The
lease  expires  in March  2001.  The  equipment  under the  capital  lease as of
December  31, 1999 had a cost of $109,545  accumulated  depreciation  of $52,302
with a net book value of $57,243.


                                       9

<PAGE>


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

[6] Capital Lease (Continued)

The future minimum lease payments under capital leases and the net present value
of the future minimum lease payments at December 31, 1999 are as follows:

Total Minimum Lease Payments                                          $ 104,900
Amount Representing Interest                                            (55,551)
                                                                      ---------

Present Value of Net Minimum Lease Payment                               49,349
Current Portion                                                         (39,019)
                                                                      ---------

   Long-Term Capital Lease Obligation                                 $  10,330
                                                                      =========

[7] Significant Risks and Uncertainties

[A]  Concentrations  of Credit Risk - Cash - The Company  maintains  balances at
several financial institutions.  Accounts at each institution are insured by the
Federal Deposit Insurance  Corporation up to $100,000.  At December 31, 1999 the
Company's uninsured cash balances totaled  approximately  $675,000.  The Company
does not require collateral in relation to cash credit risk.

[B] Concentrations of Credit Risk - Receivables - The Company routinely assesses
the financial strength of its customers and, based upon factors  surrounding the
credit  risk  of its  customers,  establishes  an  allowance  for  uncollectible
accounts and, as a  consequence,  believes that its accounts  receivable  credit
risk exposure  beyond such  allowances is limited.  The Company does not require
collateral in relation to its trade accounts  receivable credit risk. The amount
of the allowance for uncollectible accounts at December 31, 1999 is $362,750.

[8] Major Customer

For the six months ended December 31, 1999 and 1998,  approximately  57% and 40%
of revenues were derived from one customer. The loss of this customer would have
an adverse effect on the Company's operations.  In addition,  for the six months
ended  December 31, 1999 and 1998,  an aggregate of  approximately  16% and 18%,
respectively,  of  revenues  were  derived  from two other  customers;  no other
customers  accounted for more than 10% of consolidated  sales for the six months
ended  December  31, 1999 and 1998.  Accounts  receivable  from these  customers
comprised approximately 81% and 64% of total accounts receivable at December 31,
1999 and 1998, respectively.

[9] 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 June 30,  2000,  provides  for a minimum
annual  rental of $60,000 plus payment of all real estate  taxes.  Rent and real
estate tax expense for the six months  ended  December 31, 1999 and 1998 on this
lease was  approximately  $51,000  and  $41,000,  respectively.  Unpaid  rent of
$100,000  due to Gerob at December  31, 1999 has been  separately  disclosed  as
accrued expenses on the consolidated balance sheet.

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
Chairman of the Board 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 a minimum  annual  rental of $346,000  through
January 10, 2002 plus  increases  in real estate  taxes and  building  operating
expenses.  At its  option,  the  Company has the right to renew the lease for an
additional five year period.  Rent expense for the six months ended December 31,
1999  and  1998  on  this  lease  was   approximately   $227,000  and  $230,000,
respectively.


                                       10

<PAGE>


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

[9] Commitments and Contingencies (Continued)

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 2002.

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

                                                    Related
                                                    -------
                                Lease              Party Lease
                                -----              -----------
December 31,                   Commitment          Commitment         Total
                               ----------          ----------         -----

  2000                          $ 44,800             $346,000      $390,800
  2001                            31,915              346,000       377,915
  2002                            23,678                9,609        33,287
  2003                                --                   --            --
  2004                                --                   --            --
Thereafter                            --                   --            --
                                --------             --------      --------
Total                           $100,393             $701,609      $802,002
                                ========             ========      ========

Total rent expense,  including real estate taxes and  maintenance  charges,  was
approximately  $250,000 and $270,000 for the six months ended  December 31, 1999
and 1998,  respectively.  Rent  expense  is  stated  net of  sublease  income of
approximately  $2,900 and $13,000 for the six months ended December 31, 1999 and
1998, respectively.

[B] Employment  Agreements - Effective  July 1, 1999,  the Company  entered into
three year employment  agreements with its four executive officers which provide
for aggregate  annual salaries of $485,000 for the year ending June 30, 2000 and
$495,000  for the  years  ending  June 30,  2001 and 2002,  respectively.  These
agreements are subject to annual increases equal to at least the increase in the
consumer price index for the Northeastern area.

[C]  Investment in and Royalties  Receivable  from Martin Health Care  products,
Inc. - 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 Health 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 for the  common  stock at $1,000  and has  recorded  the
royalties as a  non-current  asset in the amount of $21,000.  No royalties  have
been paid as of December 31, 1999.

[D]  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  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.

The Company is a participant  in a Class Action  Lawsuit  against  several major
bulk vitamin  material  suppliers.  The suit seeks to recover damages  resulting
from price fixing  charges  filled  against the  suppliers by the United  States
Government.  There are  approximately  1,000 corporate buyers that are involved.
The Company is unable to predict the ultimate financial recovery.

[E]  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.


                                       11

<PAGE>


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

[9] Commitments and Contingencies (Continued)

[F]  Manufacturing  Agreement  - On February  14,  1998,  the  Company  signed a
manufacturing  agreement with Pilon International,  PLC, a company that supplies
Zepter  International,   a  world-wide  direct  sales  distributor  of  consumer
products.  The Company will manufacture and develop dietary  supplements through
the year 2001.

[10] Related Party Transactions

During the year ended June 30,  1997,  the  Company  entered  into a  consulting
agreement with the brother of the Company's  president on a month to month basis
for $1,100 per month.  The total  consulting  expense  recorded  per this verbal
agreement for the six moths ended December 31, 1999 and 1998, by the Company was
$6,600 and $6,600, respectively.

[11] Fair Value of Financial Instruments

Generally  accepted  accounting  principles require disclosing the fair value of
financial  instruments to the extent practicable for financial instruments which
are  recognized  or  unrecognized  in the balance  sheet.  The fair value of the
financial instruments disclosed herein is not necessarily  representative of the
amount  that  could be  realized  or  settled,  nor does the fair  value  amount
consider the tax consequences of realization or settlement.

In assessing the fair value of financial instruments, the Company uses a variety
of methods and  assumptions,  which are based on estimates of market  conditions
and risks existing at the time. For certain instruments, including cash and cash
equivalents,  accounts  receivable,  notes  receivable,  accounts  payable,  and
accrued  expenses,  it was estimated that the carrying amount  approximated fair
value because of the short maturities of these instruments.  Short-term debt and
long-term debt  including  long-term debt to a related party is based on current
rates at which the Company could borrow funds with similar remaining  maturities
and approximates fair value.

[12] New Accounting Pronouncements

In June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments and Hedging  Activities".  Statement No. 133 establishes  accounting
and reporting  standards for derivative  instruments and for hedging activities.
It  requires  that an entity  recognize  all  derivatives  as  either  assets or
liabilities  and measure them at fair value.  Under certain  circumstances,  the
gains or losses from  derivatives may be offset against those from the items the
derivatives  hedge  against.  The Company  will adopt SFAS No. 133 in the fiscal
year  ending  June 30,  2001.  SFAS No. 133 is not  expected  to have a material
impact on the financial statements.

[13] Equity Transactions

[A] Incentive  Stock Options- On December 1, 1999, the Company  granted  720,000
incentive  stock options for a term of ten years  commencing on December 1, 1999
to its  officers  and  employees  at the  exercise  price of $.50 per  share and
167,000 stock  options at $.55 per share for a term of five years  commencing on
December 1, 1999.

[B]  Non-Statutory  Stock  Options-  On December  1, 1999,  the Company  granted
120,000  non-statutory  stock options to officers,  directors and members of its
Scientific  Advisory Board at the exercise price of $.50 for a term of ten years
commencing on December 1, 1999 and 583,000  non-statutory  stock options at $.55
for a term of five years commencing on December 1, 1999.


                                       12

<PAGE>


CHEM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #7
[UNAUDITED]
--------------------------------------------------------------------------------

[14] Subsequent Events

Litigation- On January 20, 2000, the Company entered into a settlement Agreement
with a major  supplier in connection  with a  multidistrict  consolidated  class
action brought on behalf of direct purchasers of vitamin products,  in which the
plaintiffs have alleged violations of Section 1 of the Sherman Antitrust Act and
other  wrongful  anti-competitive  conduct in violation  of various  federal and
state laws.

In exchange for the Company's release and agreement to opt out of any settlement
or litigation  pertaining to the pending class action lawsuit and to release the
supplier from any and all claims it may have  concerning  the pricing,  selling,
discounting, marketing or distributing of vitamin products, the Company received
a $4.9 million cash payment.

In the event  that the  plaintiffs  in the  class  action  receive a  percentage
distribution  under the class  settlement  agreement in excess of the percentage
agreed to in the  Settlement  Agreement,  the  Company  will be  entitled  to an
additional payment to increase the Company's net recovery to the same percentage
as that received by the other plaintiffs in the class action suit.

The  Company  intends  to use the  proceeds  from the  settlement  to reduce its
outstanding debt and to use the excess for working capital.


                                       13

<PAGE>


Item 2.

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

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

Six months ended December 31, 1999 Compared to December 31, 1998

Results of Operations

The  Company's  net losses for the six months  ended  December 31, 1999 and 1998
were  $(436,229) and  $(1,380,901).  This decrease in net loss of  approximately
$950,000 is  primarily  the result of a $1,200,000  decrease in  operating  loss
resulting  from a  corresponding  increase  in  gross  profit  of  approximately
$1,000,000. The increase in gross profit is due to increased sales.

Sales for the six months ended  December 31, 1999 and 1998 were  $8,374,030  and
$5,063,494,  respectively,  an increase of approximately  $3,300,000 or 65%. For
the six months ended  December  31, 1999 the Company had sales to one  customer,
who  accounted  for 57% of net  sales in 1999 and 40% in 1998.  The loss of this
customer would have an adverse affect on the Company's operations.

Retail and mail order sales for the six months  ended  December 31, 1999 totaled
$331,611 as compared to $367,495 for the six months  ended  December 31, 1998, a
decrease of 10%. The Company has been experiencing a decline in mail order sales
due to increased competition and a decrease in advertising expenses.

Sales under the Roche Vitamins,  Inc. distribution agreement were $1,188,092 for
the six months  ended  December  31, 1999 as  compared  to $654,777  for the six
months ended December 31, 1998, an increase of $533,315 or 81%.

Cost of sales increased to $7,181,056 for the six months ended December 31, 1999
as compared to $4,910,204  for the six months ended  December 31, 1998.  Cost of
sales  decreased  as a  percentage  of  sales  to 86% for the six  months  ended
December  31, 1999 from 97% for the six months  ended  December  31,  1998.  The
decrease  in cost of  sales is due to  greater  manufacturing  efficiencies  and
higher margin sales.

Selling and  administrative  expenses for the six months ended December 31, 1999
were $1,507,564  versus  $1,684,299 for the same period a year ago. The decrease
of $176,735  was  primarily  attributable  to a decrease in goodwill  expense of
$275,891 due to the write off in 1998, a decrease in advertising of $121,002, an
increase  in office  salaries of  $24,179,  a decrease  in officers  salaries of
$54,960,  an increase  in  consulting  fees of $220,356  due to the hiring of an
independent sales and marketing firm to help launch a new private label line.

Other income [expense] was $(107,505) for the six months ended December 31, 1999
as compared  to  $(65,671)  for the six months  ended  December  31,  1998.  The
increase of $41,834 is primarily  the result of an increase in interest  expense
of $43,237 due to increased borrowings.

Three months ended December 31, 1999 Compared to the Three months ended December
31, 1998

The Company's  net losses for the three months ended  December 31, 1999 and 1998
were  $(95,587)  and  $(958,150),  respectively.  This  decrease  in net loss of
approximately  $(860,000)  is  primarily  the result of an increase in operating
income of $950,000 due to an increase in gross profit of approximately $715,000.

Sales for the three months ended December 31, 1999 and 1998 were  $4,941,907 and
$2,839,762, respectively, an increase of $2,102,145 or 74%. For the three months
ended  December 31, 1999 the Company had sales to one customer who accounted for
54% of net sales in 1999 and 36% in 1998.


                                       14

<PAGE>


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

Results of Operations - Continued

Retail and mail order sales for the three months ended December 31, 1999 totaled
$155,200 as compared to $169,376 for the three months ended December 31, 1998, a
decrease of $14,176 or 8% due to increased competition.

Sales under the Roche Vitamins, Inc. distribution agreement totaled $600,581 for
the three months  ended  December 31, 1999 as compared to $344,756 for the three
months ended December 31, 1998, an increase of $255,825 or 74%.

Cost of sales  increased to $4,164,588  for the three months ended  December 31,
1999 as compared to  $2,777,609  for the three months  ended  December 31, 1998.
Cost of sales  decreased as a percentage  of sales to 84% as compared to 98% for
the three months ended  December 31, 1998.  The decrease in cost of sales is due
to greater manufacturing efficiencies and higher margin sales.

Selling and administrative expenses for the three months ended December 31, 1999
were $766,798 as compared to $1,001,359  for the three months ended December 31,
1998.  The  decrease of $234,561  was  primarily  attributable  to a decrease in
goodwill  expense  of  $275,891  due to the write  off in 1998,  a  decrease  in
advertising of $69,044,  a decrease in officer salaries of $72,661,  an increase
in consulting fees of $125,402.

Other income  [expense] was  $(71,528)  for the three months ended  December 31,
1999 as compared to $(34,538) for the three months ended  December 31, 1998. The
increase of $36,990 is primarily  the result of an increase in interest  expense
of $38,480 due to increased borrowings.

Liquidity and Capital Resources

At December 31, 1999 the Company's working capital was $1,965,412, a decrease of
$532,049 over working capital at June 30, 1999. Cash and cash  equivalents  were
$528,106 at December 31, 1999, an increase of $229,076  from June 30, 1999.  The
Company  generated  $274,403 and utilized  $552,627 for  operations  for the six
months ended December 31, 1999 and 1998, respectively.

The primary  reasons for the cash generated  from  operations for the six months
ended  December  31,  1999  are an  increase  in  inventories  of  approximately
$1,300,000 and an increase in accounts payable of approximately $2,600,000.  The
Company believes that the anticipated sales for the third and fourth quarters of
fiscal 2000 and the  litigation  settlement  of $4.9  million will meet the cash
needs for operations.

The Company  utilized  $67,558 and $178,384 in investing  activities for the six
months ended December 31, 1999 and 1998, respectively. The Company generated net
cash of $22,231 and $162,974 from debt  financing  activities and the six months
ended December 31, 1999 and 1998, respectively.

The Company has a  $1,000,000  revolving  line of credit  agreement  which bears
interest at 3.0% above the prime  interest rate and expires on November 5, 2001.
At December  31, 1999 the  balance  due under the  revolving  line of credit was
$853,776.

On January 20, 2000 the Company entered into a Settlement Agreement with a major
supplier in  connection  with a  multidistrict  consolidated  class  action.  In
exchange for the Company's release and agreement to opt out of any settlement or
litigation pertaining to the pending class action lawsuit, the Company agreed to
a settlement  of 4.9 million  dollars.  The  settlement  proceeds were offset by
$1,333,333,  the amount due under a secured  promissory  note dated November 17,
1999. [See Note 5D].


                                       15

<PAGE>


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

Liquidity and Capital Resources - Continued

The  Company's  total annual  commitment  at December 31, 1999 for the next five
years  of  $1,394,701   consists  of  obligations  under  operating  leases  for
facilities  and lease  agreements  for the  rental of  warehouse  equipment  and
automobiles.

Effective  July  1,  1999,  the  Company  entered  into  three  year  employment
agreements  with four  executive  officers  which provide for  aggregate  annual
salaries of $485,000  for the year  ending  June 30, 2000 and  $495,000  for the
years ending June 30, 2001 and 2002.

Recent Developments

On  September  23, 1999 the Company was notified by the Nasdaq  SmallCap  Market
that its shares of common  stock had failed to  maintain a minimum  bid price of
greater  than or equal to  $1.00  per  share  over the last  thirty  consecutive
trading days, as required under Marketplace Rule 4310(c)(4).

The Company had ninety (90) calendar  days, or until December 23, 1999 to regain
compliance  with this Rule.  On December 21, 1999 the Company  requested an oral
hearing to  determine  its  continued  listing  on the  Nasdaq  Small Cap Market
because it failed to  maintain a minimum  bid price of greater  than or equal to
$1.00  per  share.  The  Company  was  advised  on  December  28,  1999  that in
anticipation  of an oral  hearing to be held on February  3, 2000 the  delisting
action referred to the September 23, 1999 letter was stayed.

On January 18, 2000,  the bid price of the  Company's  common stock closed above
the $1.00 minimum and has  subsequently  maintained the $1.00 minimum since that
date.

On January 27, 2000,  Nasdaq  informed the Company that it was not in compliance
with the  independent  directors and audit committee  requirements.  The Company
responded  informing  Nasdaq of the  appointment  of an  additional  independent
director  on  December  1,  1999  and  that  it  was  in  compliance   with  the
requirements.

The Company  attended  the hearing on  February 3, 2000 and  presented  its oral
arguments for its continued  listing on the Nasdaq SmallCap Market.  The hearing
committee  advised  the  Company  that  the  committee's   decision  would  take
approximately two weeks.


                                       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:   February 8, 2000                By:/s/ Seymour Flug
                                           -------------------------------------
                                           Seymour Flug,
                                           President and Chief Executive Officer

Date:   February 8, 2000                By:/s/ Eric Friedman
                                           -------------------------------------
                                           Eric Friedman,
                                           Chief Financial Officer


                                       18