UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

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

                                   FORM 10-QSB

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

For the quarter ended     September 30, 1996    Commission File Number 000-28876

                    CHEM INTERNATIONAL, INC. AND SUBSIDIARIES
             (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:        (201) 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          No   X

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 December 6, 1996
----------------------------------           ----------------------------------

Common Stock, Par Value                                  4,335,000


<PAGE>



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


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




Part I: Financial Information

Item 1: Financial Statements

        Consolidated Balance Sheet as of September 30, 1996 [Unaudited] 1..2

        Consolidated Statements of Operations for the three months ended
        September 30, 1996 and 1995 [Unaudited]..................... 3.....

        Consolidated Statement of Stockholders' Equity for the three months
        ended September 30, 1996 [Unaudited]........................ 4.....

        Consolidated Statements of Cash Flows for three months ended
        September 30, 1996 and 1995 [Unaudited]..................... 5.....6

        Notes to Consolidated Financial Statements [Unaudited]...... 7.....9

Item 2: Management's Discussion and Analysis of Financial Condition
        and Results of Operations...................................10.....11

Part II: Other Information..........................................12

Signature...........................................................13





                          .   .   .   .   .   .   .   .


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


CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996.
[UNAUDITED]
------------------------------------------------------------------------------



<S>                                                                    <C> 

Assets:
Current Assets:
  Cash and Cash Equivalents                                             $   337,444
  Accounts Receivable - Net                                               1,443,178
  Inventories                                                             1,749,874
  Deferred Income Taxes                                                      87,000
  Prepaid Expenses and Other Current Assets                                 233,315
                                                                        -----------

  Total Current Assets                                                    3,850,811

Property, Plant and Equipment - Net                                         964,598
                                                                        -----------

Other Assets:
  Goodwill                                                                  302,862
  Prepaid Pension Costs                                                     294,334
  Deferred Offering Costs                                                   288,620
  Security Deposits and Other Assets                                        153,342
                                                                        -----------

  Total Other Assets                                                      1,039,158

  Total Assets                                                          $ 5,854,567
                                                                        ===========




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

                                         1
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CHEM INTERNATIONAL, INC. AND SUBSIDIARIES
------------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996.
[UNAUDITED]
------------------------------------------------------------------------------



<S>                                                                    <C> 

Liabilities and Stockholders' Equity:
Current Liabilities:
  Notes Payable - Trade and Bank                                        $   978,797
  Note Payable - Stock Retirement                                           156,473
  Accounts Payable                                                        1,112,936
  Federal and State Income Taxes Payable                                    172,105
  Accrued Expenses and Other Current Liabilities                            609,214
                                                                        -----------

  Total Current Liabilities                                               3,029,525

Non-Current Liabilities:
  Notes Payable - Related Party                                             276,444
  Non-Current Rent Payable                                                  107,183
  Deferred Income Taxes                                                      31,000
                                                                        -----------

  Total Non-Current Liabilities                                             414,627

Commitments and Contingencies [4]                                                --

Stockholders' Equity:
  Preferred Stock                                                                --

  Common Stock                                                                6,140

  Additional Paid-in Capital                                                687,256

  Retained Earnings                                                       1,717,019

  Total Stockholders' Equity                                              2,410,415

  Total Liabilities and Stockholders' Equity                            $ 5,854,567
                                                                        ===========



The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
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                                         2

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


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


                                                              Three months ended
                                                                 September 30,
                                                             1 9 9 6       1 9 9 5
                                                             -------       -------
<S>                                                        <C>          <C> 

Sales                                                      $2,108,454   $ 1,981,339

Cost of Sales                                               1,590,259     1,446,876
                                                           ----------   -----------

  Gross Profit                                                518,195       534,463

Selling and Administrative Expenses                           578,549       573,165
                                                           ----------   -----------

  Operating [Loss]                                            (60,354)      (38,702)
                                                           ----------   -----------

Other Income [Expense]:
  Interest Expense                                            (26,469)      (13,856)
  Interest and Investment Income                                  782         2,693
                                                           ----------   -----------

  Total Other [Expense]                                       (25,687)      (11,163)
                                                           ----------   -----------

  [Loss] Before Income Taxes                                  (86,041)      (49,865)

Federal and State Income Taxes [Benefit]                      (22,155)      (15,600)
                                                           ----------   -----------

  Net [Loss]                                               $  (63,886)  $   (34,265)
                                                           ==========   ===========

  Net [Loss] Per Share                                     $     (.02)  $      (.01)
                                                           ==========   ===========

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


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

                                         3
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CHEM INTERNATIONAL, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1996.
[UNAUDITED]
------------------------------------------------------------------------------



                                                                            Total
                            Common Stock    Preferred  Paid-in   RetainedStockholders'
                          Shares   Par Value  Stock    Capital   Earnings  Equity
<S>                      <C>        <C>      <C>      <C>        <C>         <C>

Balance - July 1, 1996   $3,370,000 $ 6,740  $     -- $1,883,132 $1,700,905 $3,590,777

  Reversal of Issuance of
   Bridge Units          (300,000)     (600)       -- (1,199,400) 80,000    (1,120,000)

  Imputed Interest on Note
   Payable - Related Party     --        --        --     3,524       --        3,524

  Net [Loss]                   --        --        --        --  (63,886)     (63,886)
                         --------  --------  -------- --------- --------    --------

Balance - September 30, 
1996                    3,070,000 $ 6,140  $    -- $ 687,256  $1,717,019    $2,410,415
                        ==========  =====  ======== =========  ==========   ==========
                      


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

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                                         4

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


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


                                                             Three months ended
                                                                 September 30,
                                                             1 9 9 6       1 9 9 5
                                                             -------       -------
<S>                                                        <C>          <C>  


Operating Activities:
  Net [Loss]                                               $  (63,886)  $   (34,265)
                                                           ----------   -----------
  Adjustments to Reconcile Net Income to Net Cash
   [Used for] Operating Activities:
   Depreciation and Amortization                               62,183        56,202
   Non-Current Rent Charge                                     (1,570)        8,899
   Deferred Income Taxes                                      (12,000)      (16,367)
   Imputed Interest on Note Payable - Related Party             3,524         3,524

  Changes in Assets and Liabilities:
   Increase [Decrease] in:
     Accounts Receivable                                      753,322       175,856
     Inventories                                             (316,642)       37,007
     Prepaid Expenses and Other Current Assets                 39,742      (101,340)

   [Increase] Decrease in:
     Accounts Payable                                        (764,254)     (724,029)
     Federal and State Income Taxes Payable                     3,140      (112,087)
     Accrued Expenses and Other Liabilities                   159,591       (41,160)
                                                           ----------   -----------

   Total Adjustments                                          (72,964)     (713,495)
                                                           ----------   -----------

  Net Cash - Operating Activities - Forward                  (136,850)     (747,760)
                                                           ----------   -----------

Investing Activities:
  Payment for Property and Equipment                          (21,776)      (44,703)
  Loans to Stockholders'                                       (1,427)       (6,725)
  Repayment of Note Receivable                                  1,048            --
  Repayment of Loan from Affiliated Company                        --            --
  Loan to Related Company                                        (722)           --
  Contribution to Paid-in Capital                                  --         2,977
                                                           ----------   -----------

  Net Cash - Investing Activities - Forward                   (22,877)      (48,451)
                                                           ----------   -----------

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

  Net Cash - Financing Activities - Forward                $ (267,894)  $  (248,448)



The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.
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                                         5

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


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


                                                             Three months ended
                                                                 September 30,
                                                             1 9 9 6       1 9 9 5
                                                             -------       -------
<S>                                                        <C>          <C>  

  Net Cash - Operating Activities - Forwarded              $ (136,850)  $  (747,760)

  Net Cash - Investing Activities - Forwarded                 (22,877)      (48,451)

  Net Cash - Financing Activities - Forwarded                (267,894)     (248,448)
                                                             ----------   -----------

  Net [Decrease] Increase in Cash and Cash Equivalents       (427,621)   (1,044,659)

Cash and Cash Equivalents - Beginning of Periods              765,065     1,870,747
                                                           ----------   -----------

  Cash and Cash Equivalents - End of Periods               $  337,444   $   826,088
                                                           ==========   ===========

Supplemental Disclosures of Cash Flow Information:
  Cash paid during the periods for:
   Interest                                                $   14,586   $    26,247
   Income Taxes                                            $      457   $    95,000



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

                                         6
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<PAGE>




CHEM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------



[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  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 statements include all
adjustments  [consisting  only of normal  recurring  items] which are considered
necessary  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 for the year ended June 30, 1996 included in the
Chem  International,  Inc. Form SB- 2 which was declared  effective  October 29,
1996.

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

No amounts have been ascribed to previously  outstanding Class A preferred stock
in any period since such stock has been  redeemed  and the dividend  preferences
thereon have been waived.

[D]  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  is insolvent and the Company has recorded a loss on
its investment and a charge for approximately 50% of its note receivable for the
year then ended. At September 30, 1996, the balance of this note is $32,672.

[3] Inventories

Inventories consist of the following at September 30, 1996:

Raw Materials                 $   887,934
Work-in-Process                   138,741
Finished Goods                    723,199
                              -----------

  Total                       $ 1,749,874
  -----                       ===========

[4] Commitments and Contingencies

Certain  manufacturing  and  office  facilities  are leased  from  Gerob  Realty
Partnership  whose partners are stockholders of the Company.  The current lease,
which  expires on December 31, 1996,  provides  for a minimum  annual  rental of
$120,000 plus payment of all real estate taxes. Rent and real estate tax expense
for the  three  months  ended  September  30,  1996 and 1995 on this  lease  was
approximately $43,000 and $43,000, respectively.

                                        7

<PAGE>



CHEM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
------------------------------------------------------------------------------



[4] Commitments and Contingencies [Continued]

The Company's lease agreement for other warehouse and office facilities  expires
on November 14, 2001 and provides for minimum annual rentals of $332,500 through
November 14, 1999 and $370,000 from November 15, 1999 through  November 14, 2001
plus real estate taxes and building operating expenses.  The rentals under these
leases are recorded for financial  accounting purposes on a straight-line basis.
At June 30, 1996, accrued future rentals of $108,753,  which give effect to both
future scheduled  increases and certain  concessions at the lease inception have
been reflected as a non-current  liability in the attached  balance sheet.  This
liability will be reduced in future years to the extent that the minimum rentals
payable  in  those  years  exceeds  the  average  net  expense  recorded  on the
straight-line  basis.  At its  option,  the  Company has the right to renew this
lease for an additional five year period. In September 1996, a limited liability
company, which is 50% owned by the Company's president and principal stockholder
and certain family members, contracted to purchase these premises.

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

Year Ending
  June 30,
   1997                       $   495,681
   1998                           435,681
   1999                           435,681
   2000                           459,119
   2001                           473,181
   Thereafter                     177,443
                              -----------

   Total                      $ 2,476,786
   -----                      ===========

Total rent expense,  including real estate taxes and  maintenance  charges,  was
approximately  $137,000 and $106,000  for the three months ended  September  30,
1996 and 1995, respectively.  The Company subleases a portion of its premises on
a  month-to-month  basis.  Rent  expense  is stated  net of  sublease  income of
approximately  $62,000 and $45,000 for the three months ended September 30, 1996
and 1995, respectively.

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  $458,000  for the year ending June 30, 1997 and
$680,000  for the year ending June 30,  1998.  These  agreements  are subject to
annual  increases equal to at least the increase in the customer price index for
the Northeastern area. An agreement with one of the officers also provides for a
$100,000 signing bonus which is refundable on a pro rata basis during the period
from July 1, 1996 to June 30, 1997, if the executive voluntarily  terminates his
employment.

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.



                                        8

<PAGE>



CHEM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3
------------------------------------------------------------------------------



[5] New Authoritative Pronouncement

The Financial  Accounting Standards Board ["FASB"] issued 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," in March of
1995.  SFAS No. 121  establishes  accounting  standards  for the  impairment  of
long-lived assets,  certain  identifiable  intangibles,  and goodwill related to
those  assets  to be held  and  used,  and for  long-lived  assets  and  certain
identifiable  intangibles  to be  disposed  of.  SFAS No. 121 is  effective  for
financial  statements issued for fiscal years beginning after December 15, 1995.
SFAS No. 121 could have a material impact on the Company's financial statements.

The FASB has also issued SFAS No. 123 "Accounting for Stock-Based Compensation,"
in October 1995.  SFAS No. 123 uses a fair value based method of recognition for
stock options and similar equity  instruments  issued to employees as contrasted
to the  intrinsic  valued based method of  accounting  prescribed  by Accounting
Principles  Board  ["APB"]  Opinion  No.  25,  "Accounting  for Stock  Issued to
Employees."  The  recognition  requirements  of SFAS No. 123 are  effective  for
transactions  entered into in fiscal  years that begin after  December 15, 1995.
The Company will continue to apply Opinion No. 25 in recognizing its stock based
employee arrangements. The disclosure requirements of SFAS No. 123 are effective
for financial statements for fiscal years beginning after December 15, 1995. The
Company  adopted  the  disclosure  requirements  on July 1, 1996.  SFAS 123 also
applies to  transactions  in which an entity  issues its equity  instruments  to
acquire  goods  or  services  from  non-employees.  Those  transactions  must be
accounted for based on the fair value of the consideration  received or the fair
value of the equity instrument  issued,  whichever is more reliably  measurable.
This requirement is effective for  transactions  entered into after December 15,
1995.

[6] Subsequent Events

[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 and 25,974  shares at 110% of the  offering  price
were granted. Such options become exercisable on October 16, 1997.

[B] Bridge Units - On October 16, 1996,  the bridge  lenders waived their rights
to the bridge units and agreed to the cancellation of the underlying securities.
Accordingly,  the Company has eliminated the amount previously  recorded for the
bridge units and the related bridge loan finance costs.

[C] Initial  Public  Offering - On October 29,  1996,  the Company  received net
proceeds of approximately $3,431,425 from the sale of 625,000 units at $7.00 per
unit.  Each  unit  consisted  of two  shares  of  Common  Stock  and two Class A
Redeemable Common Stock Purchase Warrants.



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

                                        9

<PAGE>



Item 2.

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


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

Three months ended September 30, 1996 Compared to September 30, 1995

Results of Operations

The Company's net losses for the three months ended  September 30, 1996 and 1995
were $(63,886) and $(34,265), respectively.

Sales for the three months ended September 30, 1996 and 1995 were $2,108,454 and
$1,981,339,  respectively, an increase of approximately $127,000 or 6.4%. Retail
and mail order sales for the first quarter of 1996 totaled  $183,404 as compared
to $188,974 for the first quarter of 1995, a decrease of $5,570 or 2.9%.

For the three months ended  September  30, 1996,  the Company had net sales to a
customer,  who  accounted  for 42% of net  sales  in 1996,  and  that  generated
approximately 45% of net sales in 1995.

Cost of sales  increased to $1,590,259 for the first quarter of 1996 as compared
to  $1,446,876  for the first  quarter  of 1995.  Cost of sales  increased  as a
percentage  of sales to 75.4% for the first  quarter  of 1996 from 73.0% for the
first  quarter of 1995.  The  increase in cost of sales is due to an increase in
manufacturing expenses.

Selling and  administrative  expenses for the three months ended  September  30,
1996 were $578,549  versus $573,165 for the same period a year ago. The increase
of $5,384 was primarily  attributable to officers' compensation of approximately
$37,000,  a  decrease  in travel and  entertainment  expenses  of  approximately
$33,000,  a decrease  in freight  out of  approximately  $23,000,  a decrease in
consulting  fees of  approximately  $17,000 and a decrease in office expenses of
approximately $20,000.

Other income  [expense]  was $(25,687) for the first quarter of 1996 as compared
to  $(14,524)  for the first  quarter  of 1995.  This  decrease  of  $11,163  is
attributable  to an  increase in interest  expense due to  increased  borrowings
under the Company's line of credit.

Liquidity and Capital Resources

At September 30, 1996, the Company had working  capital of $821,286 and cash and
cash  equivalents of $337,444.  The Company  utilized  $136,850 and $747,760 for
operations for the three months ended September 30, 1996 and 1995, respectively.
The Company utilized  $22,877 and $48,451 in investing  activities for the three
months ended  September 30, 1996 and 1995,  respectively.  The Company  utilized
$267,894 and $248,448 from financing activities for the quarter ending September
30, 1996 and 1995.

On October  19,  1996,  the Company  successfully  completed  an initial  public
offering  whereby the Company  sold 625,000  units at $7.00 per unit,  each unit
consisting of two shares of Common Stock and two Class A Redeemable Common Stock
Purchase Warrants.  The net proceeds to the Company after deducting underwriting
discounts  and  commissions  of $575,575  and other  expenses of the offering of
approximately $368,000 were approximately $3,431,425.


                                       10

<PAGE>



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


Three months ended September 30, 1996 Compared to September 30, 1995

Liquidity and Capital Resources [Continued]

The Company had a  revolving  line of credit with a bank which bore  interest at
 .75% over the bank's prime  lending  rate and expired on November  30, 1996.  At
September 30, 1996, the outstanding  balance under the credit line was $500,000.
On November 6, 1996, the Company paid off the outstanding  balance.  The Company
had  additionally  secured a $350,000  equipment line of credit/term  loan which
bore  interest at 1.50% over the bank's prime  lending  rate.  At September  30,
1996,  the Company had  borrowed  $94,156.  On November  29,  1996,  the Company
borrowed an additional  $132,844 to finance the purchase of a blister  packaging
machine.  The Company  intends to renew the line of credit for  $500,000  and to
convert the equipment line of credit/term loan to a five year term loan.

The  Company's  principal   commitments  at  September  30,  1996  consisted  of
obligations under operating leases for facilities.

Effective July 1, 1996, the Company entered into employment agreements with each
of its executive officers providing for aggregate  compensation in the amount of
$680,000 for the fiscal year ending June 30, 1997. Such compensation  amounts to
an approximate increase of $300,000 as compared to fiscal 1996.

On October 16, 1996,  the bridge lenders waived their rights to the bridge units
and agreed to the cancellation of the underlying  securities.  Accordingly,  the
Company  eliminated the amount previously  recorded for the bridge units and the
related  bridge loan  finance  costs.  Stockholders'  equity has been reduced by
$1,120,000.

Management  believes  that the net proceeds  from the initial  public  offering,
borrowing  available under the anticipated  line of credit and anticipated  cash
flows from operations  will be sufficient to meet the Company's  working capital
needs for the foreseeable future.

New Authoritative Pronouncement

The Financial  Accounting Standards Board ["FASB"] issued 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," in March of
1995.  SFAS No. 121  establishes  accounting  standards  for the  impairment  of
long-lived assets,  certain  identifiable  intangibles,  and goodwill related to
those  assets  to be held  and  used,  and for  long-lived  assets  and  certain
identifiable  intangibles  to be  disposed  of.  SFAS No. 121 is  effective  for
financial  statements issued for fiscal years beginning after December 15, 1995.
SFAS No. 121 could have a material impact on the Company's financial statements.

The FASB has also issued SFAS No. 123 "Accounting for Stock-Based Compensation,"
in October 1995.  SFAS No. 123 uses a fair value based method of recognition for
stock options and similar equity  instruments  issued to employees as contrasted
to the  intrinsic  valued based method of  accounting  prescribed  by Accounting
Principles  Board  ["APB"]  Opinion  No.  25,  "Accounting  for Stock  Issued to
Employees."  The  recognition  requirements  of SFAS No. 123 are  effective  for
transactions  entered into in fiscal  years that begin after  December 15, 1995.
The Company will continue to apply Opinion No. 25 in recognizing its stock based
employee arrangements. The disclosure requirements of SFAS No. 123 are effective
for financial statements for fiscal years beginning after December 15, 1995. The
Company  adopted  the  disclosure  requirements  on July 1, 1996.  SFAS 123 also
applies to  transactions  in which an entity  issues its equity  instruments  to
acquire  goods  or  services  from  non-employees.  Those  transactions  must be
accounted for based on the fair value of the consideration  received or the fair
value of the equity instrument  issued,  whichever is more reliably  measurable.
This requirement is effective for  transactions  entered into after December 15,
1995.

Impact of Inflation

The Company does not believe that inflation has significantly affected its
 results of operations

                                       11

<PAGE>



Part II: Other Information

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



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

                                       12

<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. AND SUBSIDIARIES

Date: December 9, 1996             By:/s/ E. Gerald Kay
                                      E. Gerald Kay,
                                       President and Chief Executive Officer

Date: December 9, 1996             By:/s/ Eric Friedman
                                      Eric Friedman,
                                       Chief Financial Officer

                                       13

<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. AND SUBSIDIARIES

Date: December 9, 1996             By:
                                      E. Gerald Kay,
                                       President and Chief Executive Officer

Date: December 9, 1996             By:
                                      Eric Friedman,
                                       Chief Financial Officer

                                       13