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                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549




                                   FORM 10-QSB




   [X]  Quarterly Report under to Section 13 or 15(d) of the Securities Exchange
        Act of 1934

        For the quarterly period ended   March 31, 2002
                                         --------------

   [_]  Transition Report Under Section 13 or 15 (d) of the Exchange Act

        For the transition period from __________ to __________



        Commission file Number       1-4591
                                  ------------



                          FAIRMOUNT CHEMICAL CO., INC.
                          ----------------------------
        (Exact name of small business issuer as specified in its charter)


          New Jersey                                             22-0900720
-------------------------------                                --------------
(State of other jurisdiction of                                (IRS Employer
 incorporation or organization)                              Identification No.)


                     117 Blanchard Street, Newark, NJ 07105
                    ----------------------------------------
                    (Address of principal executive offices)


                                 (973) 344-5790
                           ---------------------------
                           (Issuer's telephone number)



     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date:

     Common Stock, $1 Par Value - 8,292,866 shares outstanding as of May 10,
2002

Transitional Small Business Disclosure Format (check one):  Yes [_]    No [X]

================================================================================
<PAGE>
                                      INDEX
                                      -----


                                                                            PAGE
PART I   FINANCIAL INFORMATION

         Item 1.  Financial Statements

                  Statements of Operations
                  Three months ended March 31, 2002 and 2001                  3

                  Balance Sheets
                  March 31, 2002 and December 31, 2001                        4

                  Statement of Changes in Stockholders' (Deficit)
                  Equity and Comprehensive Loss for the three
                  months ended March 31, 2002 and 2001                        5

                  Statements of Cash Flows
                  Three months ended March 31, 2002 and 2001                  6

                  Notes to Financial Statements                          7 - 13



         Item 2.  Management's Discussion and Analysis
                  or Plan of Operations                                 14 - 18





PART II  OTHER INFORMATION

         Item 1.  Legal Proceedings                                          19

         Item 2.  Changes in Securities                                      19

         Item 3.  Defaults upon Senior Securities                            19

         Item 4.  Submission of Matters to Vote of Securities Holders        19

         Item 5.  Other Information                                          19

         Item 6.  Exhibits and Reports on Form 8-K                      19 - 20







                                        2
<PAGE>
                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
         --------------------

                          FAIRMOUNT CHEMICAL CO., INC.
                          ----------------------------
                            STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE><CAPTION>


                                                     THREE MONTHS ENDED
                                             ----------------------------------
                                             MARCH 31, 2002      MARCH 31, 2001
                                             --------------      --------------
<S>                                          <C>                 <C>
Net sales                                    $    1,428,400      $    2,784,000

Cost of goods sold                                1,586,500           2,860,000
                                             --------------      --------------

Gross loss                                         (158,100)            (76,000)

Research & development                               87,300             102,500

Selling, general and administrative expense         449,400             520,700
                                             --------------      --------------

        Operating loss                             (694,800)           (699,200)

Interest expense, net                               (43,700)            (30,100)

Foreign currency exchange loss                           --             (50,800)

Other expenses, net                                  (1,300)            (10,000)
                                             --------------      --------------

Net loss before income taxes                       (739,800)           (790,100)

Income taxes                                             --                  --
                                             --------------      --------------
        Net loss                             $     (739,800)     $     (790,100)
                                             ==============      ==============

Loss per share

     Basic                                   $         (.09)     $         (.10)
                                             ==============      ==============
     Diluted                                 $         (.09)     $         (.10)
                                             ==============      ==============

Common shares and equivalents outstanding

     Basic                                        8,292,866           8,292,866
                                             ==============      ==============
     Diluted                                      8,292,866           8,292,866
                                             ==============      ==============
</TABLE>

                 See accompanying notes to financial statements.

                                        3
<PAGE>
                          FAIRMOUNT CHEMICAL CO., INC.
                          ----------------------------
                                 BALANCE SHEETS


<TABLE><CAPTION>
                                                              MARCH 31,        DECEMBER 31,
                                                                2002               2001
                                                            ------------       ------------
                                                             (Unaudited)
<S>                                                         <C>                <C>
ASSETS
------
CURRENT ASSETS:
     Cash                                                   $    313,000       $    494,800
     Accounts receivable, less allowance for doubtful
        accounts of $59,700 in 2002 and 2001                     940,900          1,242,100
     Inventories                                                 972,300            884,900
     Prepaid expenses                                             74,700            124,100
     Other current assets                                          9,000              9,100
                                                            ------------       ------------
              Total Current Assets                             2,309,900          2,755,000

     Property, plant and equipment Less accumulated
        depreciation of $6,371,500 and $6,245,800 in
        2002 and 2001, respectively                            3,450,700          3,576,400
     Other assets                                                    700                700
                                                            ------------       ------------
        Total Assets                                        $  5,761,300       $  6,332,100
                                                            ============       ============


LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
     Short-term bank borrowings                                  700,000            700,000
     Promissory note payable                                     673,600                 --
     Accounts payable                                          1,138,100          1,725,100
     Accrued pension liability                                   167,300            130,400
     Accrued interest to affiliated parties                       80,900             62,200
     Other accrued liabilities                                   486,000            276,700
     Promissory notes to affiliated parties                    1,571,600          1,571,600
                                                            ------------       ------------
              Total Current Liabilities                        4,817,500          4,466,000

     Accrued pension liability                                        --            182,500

     Redeemable convertible preferred stock, par and
        liquidation value $1 per share:
        Authorized - 10,000,000 shares: 5,400,000
        shares issued and outstanding (liquidation
        value $5,400,000)                                      5,400,000          5,400,000
     Commitments and contingencies

     Stockholders' Deficit:
        Common stock, par value $1 per share:
        Authorized - 15,000,000 shares; 8,293,366
        shares issued and outstanding in 2002 and 2001         8,293,400          8,293,400
     Less: Treasury stock (at cost) - 500 shares                    (500)              (500)
     Capital in excess of par value                            7,316,000          7,316,000
     Accumulated deficit                                     (19,664,500)       (18,924,700)
     Accumulated other comprehensive loss -
        additional minimum pension liability                    (400,600)          (400,600)
                                                            ------------       ------------
              Total Stockholders' Deficit                     (4,456,200)        (3,716,400)
                                                            ------------       ------------
        Total Liabilities and Stockholders' Deficit         $  5,761,300       $  6,332,100
                                                            ============       ============
</TABLE>

                 See accompanying notes to financial statements.

                                        4
<PAGE>
                          FAIRMOUNT CHEMICAL CO., INC.
                          ----------------------------
             STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY
                             AND COMPREHENSIVE LOSS
                                   (Unaudited)

<TABLE><CAPTION>
                                                               THREE MONTHS ENDED MARCH 31,
                                          ---------------------------------------------------------------------
                                                       2002                                  2001
                                          -------------------------------       -------------------------------
                                                             COMPREHENSIVE                         COMPREHENSIVE
                                                                 LOSS                                  LOSS
                                                             ------------                          ------------
<S>                                       <C>                <C>                <C>                <C>
Common stock:
   Balance at March 31,                      8,293,400                             8,293,400
   (8,293,366 shares)

Capital in excess of par value:              7,316,000                             7,316,000
   Balance at March 31,


Accumulated deficit:
   Balance at January 1,                   (18,924,700)                          (14,246,800)
   Net loss                                   (739,800)          (739,800)          (790,100)          (790,100)
                                          ------------                          ------------
   Balance at March 31,                    (19,664,500)                          (15,036,900)

Accumulated other comprehensive loss:
   Balance at January 1,                      (400,600)                             (177,400)
                                                             ------------                          ------------
   Comprehensive loss                                            (739,800)                             (790,100)

                                          ------------                          ------------
Balance at March 31,                          (400,600)                             (177,400)

Treasury stock:
   Balance at March 31,                           (500)                                 (500)
   (500 shares)
                                          ------------                          ------------
Total Stockholders' (Deficit) Equity      $ (4,456,200)                         $    394,600
                                          ============                          ============
</TABLE>





                 See accompanying notes to financial statements

                                        5
<PAGE>
                          FAIRMOUNT CHEMICAL CO., INC.
                          ----------------------------
                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)


<TABLE><CAPTION>
                                                                THREE MONTHS ENDED MARCH 31,
                                                              -------------------------------
                                                                  2002               2001
                                                              ------------       ------------
<S>                                                           <C>                <C>
CASH FLOW FROM OPERATING ACTIVITIES:
   Net loss                                                   $   (739,800)      $   (790,100)
   Adjustments to reconcile net loss to
      net cash used in operating activities
   Depreciation                                                    125,700            165,000
   Increase (decrease) from changes in:
      Accounts receivable-trade                                    301,200           (536,300)
      Inventories                                                  (87,400)           (90,500)
      Prepaid expenses                                              49,400            (18,000)
      Other current assets                                             100             (5,600)
      Accounts payable                                              86,600             70,800
      Accrued interested to affiliated parties                      18,700                 --
      Other liabilities                                             63,700           (123,700)
                                                              ------------       ------------
           Net Cash Used in Operating Activities                  (181,800)        (1,327,400)

CASH FLOW USED IN INVESTING ACTIVITIES:
   Capital expenditures                                                 --            (26,200)
                                                              ------------       ------------
   Net Cash Used In Investing Activities                                --            (26,200)

CASH FLOW PROVIDED BY FINANCING ACTIVITIES:
   Bank borrowing                                                       --            500,000
                                                              ------------       ------------
           Net Cash Provided by Financing Activities                    --            500,000
                                                              ------------       ------------

DECREASE IN CASH                                                  (181,800)          (853,600)

Cash at Beginning of Period                                        494,800          2,093,900
                                                              ------------       ------------

CASH AT END OF PERIOD                                         $    313,000       $  1,240,300
                                                              ============       ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Interest paid                                                 $     27,500       $     60,400
                                                              ============       ============
Income taxes paid                                             $         --       $         --
                                                              ============       ============

NON CASH FINANCING ACTIVITIES
   Reclassification of accounts payable to note  payable      $    673,600       $         --
                                                              ============       ============

</TABLE>

                 See accompanying notes to financial statements

                                        6
<PAGE>

                           FAIRMOUNT CHEMICAL CO., INC.
                           ----------------------------
                          NOTES TO FINANCIAL STATEMENTS

                           March 31, 2002 (Unaudited)


NOTE 1. GOING CONCERN

     The December 31, 2001 financial statements contain an explanatory paragraph
in the Independent Auditor's Report relating to Fairmount's ability to continue
as a going concern. Fairmount has reported substantial losses during the last
three years and does not expect performance to improve during the first half of
2002. The Company's working capital, defined as current assets less current
liabilities, decreased by $796,600 in the three months ended March 31, 2002,
resulting in negative working capital of $2,507,600 compared to a negative
working capital of $1,711,000 as of December 31, 2001. These matters raise
substantial doubt about Fairmount's ability to continue as a going concern.
There is too much uncertainty for Fairmount to predict its short-term future
prospects. If the promissory note holders demand payment as a result of the
default on principal and interest payments as discussed in Note 4, and 5, or if
Fairmount is unable to effect cost savings, enter into strategic alliances or a
merger, and achieve other short-term solutions, it may result in the Company not
having sufficient capital to continue its operations as presently conducted. In
which event, the Company may find it necessary to seek protection under Federal
bankruptcy laws or other laws affecting debtor's and creditor's rights.

     On October 4, 2001, Fairmount laid off 13 production employees, or
approximately 50% of its production employees, and subsequently terminated two
management employees. This action was necessary because of Fairmount's
deteriorating business. During the first quarter of 2002, Fairmount terminated
one administrative and two sales/marketing employees.

     One of Fairmount's major foreign customers reduced its purchases by 75% in
the fourth quarter of 2001. Because of the low selling price, high cost of
production and the strong dollar, Fairmount has not pursued this business.
Another major customer, Polaroid Corporation, has filed a voluntary petition for
reorganization under Chapter 11 of the U.S. Bankruptcy Code. The potential loss
of this customer is expected to have a material adverse effect on Fairmount
going forward since sales to Polaroid during the first quarter of 2002 were
$156,600, compared to $343,800 during the same period of 2001. Polaroid
accounted for $995,700 or 9.9% of sales during year ended December 31, 2001.

     During the second quarter of 2001, Fairmount started receiving orders for a
hydrazine derivative product from a new customer. Worldwide sales to this
customer were $2,445,600 in 2001, compared to none in 2000. In January 2002,
Fairmount advised the customer that it could no longer supply the product under
the same terms and conditions. As a consequence, Fairmount does not anticipate
significant sales of the product to this customer in 2002.

     To meet its liquidity requirements, including its capital program,
Fairmount relies upon funds generated from operations, its available cash
balances, and its bank line of credit with Fleet Bank in Princeton, New Jersey.
From November 30, 2001 to March 2002, the credit facility was extended on a
month to month basis. The Company entered into an extension agreement effective
February 28, 2002, with modified terms including a new maturity date of February
28, 2003.

     In February 2002, the Newark Division of Water/Sewer notified Fairmount
that the Company's 2002 annual sewer charge will be $659,900, an increase of
$421,600 in anticipated cash outflows as compared to 2001. Fairmount is
appealing this increase.
                                        7
<PAGE>
Notes to Financial Statements (Continued)


NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

     Fairmount Chemical Co., Inc. ("Fairmount" or "the Company") was
incorporated in 1938 under the laws of the State of New Jersey and is in the
business of manufacturing and distributing specialty chemicals.

REVENUE

     Revenue is recognized upon shipment of product. The Company's terms are FOB
shipping point and, accordingly, title for goods pass to the customer when
product is shipped. Sales are generally final, without a right of return. If the
product does not meet specifications, the Company may accept returns.

ACCOUNTS RECEIVABLE

     Trade accounts receivable are recorded at the invoice amount. Potential
uncollectable amounts are recognized when, in the judgment of management,
collection is in doubt. There was a provision for bad debts $59,700 as of March
31, 2002 and December 31, 2001.

INCOME TAXES

     The Company accounts for income taxes in accordance with the asset and
liability method. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.

USE OF ESTIMATES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 of revenues and
expenses during the reporting period. Those estimates include allowance for
doubtful accounts, valuation of inventories and recoverability of long-lived
assets. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

     The fair value of financial instruments is determined by reference to
market data and other valuation techniques as appropriate. The Company believes
the fair value of its financial instruments, principally cash, accounts
receivable, inventories, prepaid expenses, other current assets, short term bank
borrowings, promissory note payable, accounts payable, accrued pension
liability, other accrued liabilities, accrued interest to affiliated parties,
and promissory notes to affiliated parties approximates their recorded value due
to the short-term nature of the instruments or interest rates, which are
comparable with current rates.

                                        8
<PAGE>
Notes to Financial Statements (Continued)


NOTE 3. INVENTORIES

     Inventories at March 31, 2002 and December 31, 2001 consisted of:

                                MARCH 31,          DECEMBER 31,
                                   2002                2001
                                ---------           ---------
        Finished goods          $ 856,900           $ 752,400
        Raw materials             115,400             132,500
                                ---------           ---------
                 Total          $ 972,300           $ 884,900
                                =========           =========

     The reserve for obsolete inventory was $249,400 at March 31, 2002 and
December 31, 2001.

NOTE 4. PROMISSORY NOTES/LONG-TERM PAYABLE TO AFFILIATED PARTIES

     As of January 1, 1993, the Company owed William E. Leistner $5,603,700 (the
"Leistner Loan"). At the Board meeting following the 1993 Annual Meeting, the
board approved the sale of 5,400,000 shares of cumulative convertible preferred
stock, $1.00 par value per share, in a private transaction to Leistner, the
Company's principal stockholder, in consideration of retirement of debt owed to
Leistner of $5,400,000. The balance of the Leistner Loan was paid out of
corporate funds of approximately $203,700 during May 1993. This transaction
retired the principal of the Leistner Loan. Accrued interest of $491,600
remained. On July 2, 1997, the Company replaced the $491,600 balance of the
Leistner Loan that was due April 1, 1998, with a promissory note to the Leistner
Estate for the same amount, due January 1, 2005.

     On March 20, 1992, a Credit Facility Loan Agreement ("Credit Facility") was
created with monies contributed to a fund (the "Fairmount Fund") by William E.
Leistner and the Estate of Olga H. Knoepke. At that date, the Fairmount Fund
provided the Company with a $2,494,000 credit facility under which all
borrowings paid interest at the rate of 5% per annum. The outstanding borrowings
from the Credit Facility were $1,080,000. On July 2, 1997, the Credit Facility
was terminated and the Company replaced the $1,080,000 of credit facility
borrowings with new promissory notes due January 1, 2005. The Leistner Estate
received a note for $648,000. Three additional notes were issued to
beneficiaries of the Knoepke Estate. These three notes were issued to the Da
Mota Family Partnership - $224,640, Glen Da Mota - $142,560 and Lynn Da Mota -
$64,800. Accordingly, notes held by affiliates are as follows:

     Promissory Notes:
               Leistner Trust                   $   491,600
               Leistner Trust                       648,000
               Da Mota Family Partnership           224,640
               Glen Da Mota                         142,560
               Lynn Da Mota                          64,800
                                                -----------
                                                $ 1,571,600

     All of the promissory notes described above have similar terms and
conditions. Interest is payable, at the corporate base rate posted by Citibank,
N.A. (or its successor) on the last banking day of the previous calendar year.
Interest on the unpaid principal for 2002 is at the rate of 4.75% per annum.
Interest payable from January 1, 2001 through December 31, 2001 was at the rate
of

                                        9
<PAGE>
Notes to Financial Statements (Continued)



9.5% per annum. All of the promissory notes are subordinated to the Company's
line of credit financing with Fleet Bank and are collaterized by security
agreements on the Company's accounts receivables, inventories and personal
property. The promissory note to the Leistner Estate for $491,600 is
subordinated to the Company's line of credit financing with Fleet Bank and to
the new promissory notes, totaling $1,080,000, that replaced the Credit
Facility.

     On October 9, 1997, the executors of the Leistner Estate endorsed two
promissory notes of $648,000 and $491,600 to the order of the Howard Leistner,
Hedi Mizrack and Gilbert Leistner Irrevocable Grantor Trust (the "Trust"). The
Trust was established to expedite the settlement of the Leistner Estate and to
be the repository of the common and preferred shares of the Company, as well as
the promissory notes held by the Leistner Estate. Howard Leistner, Hedi Mizrack
and Gilbert Leistner have sole voting rights to their common stock holdings.

     Interest paid on promissory notes to affiliated parties in during the three
months ended March 31, 2001 was $37,300. However, because of the Fairmount's
financial difficulties, interest payments have not been made since July 2001.
The total unpaid interest as of March 31, 2002 was $80,900. The failure to pay
interest when due is an event of default which can be cured if payment is made
within 15 days of written notice to Fairmount. No written notice has been
received, however, failure to make interest payments is an event of default and,
accordingly, the promissory notes have been reclassified to current liabilities.


NOTE 5. PROMISSORY NOTE PAYABLE

     As of March 1, 2002, Fairmount owed Bayer Corporation approximately
$673,600 for raw material purchases. Fairmount issued a promissory note (the
"Note") to Bayer for the amount owed as of March 1, 2002. The Note matures
February 1, 2003, and includes a payment schedule. Non-payment is an event of
default and interest of 10% on the unpaid principal balance will accrue until
the default is cured. The Note contains a "confession of judgment" provision,
which may result in a court judgment being entered against Fairmount, upon
written notice but without a hearing, and that the Company's real estate may be
sold on a writ of execution. Fairmount failed to make the required payments for
April and May 2002 and, as of May 2, 2002, the Company is in default of payments
totaling $151,300, including interest of $11,300.


NOTE 6. LONG-TERM DEBT
                                             MARCH 31,    DECEMBER 31,
                                               2002           2001
                                             --------       --------

     Working Capital Line of Credit -
     Current installment                     $700,000       $700,000
                                             ========       ========

     The Company presently has a line of credit facility with Fleet Bank. From
November 30, 2001 to March 2002, the credit facility was extended on a month to
month basis. In April 2002, Fairmount executed a definitive loan agreement, that
extends the facility's maturity date to February 28, 2003. The extension terms
include (a) an interest rate equal to the bank's prime rate plus 2%, (b) an
extension fee equal to 2% of the maximum amount available under the facility
(i.e., $700,000), (c) a continuation of the bank's existing security interest in
Fairmount's accounts receivable, inventory, machinery and equipment, (d)
principal repayment of $15,000 per month commencing May 2002 and (e) a cap on
borrowings based upon a percentage of eligible accounts receivable and eligible
finished goods inventory. The bank is entitled to receive warrants to purchase
up to 200,000 shares of Fairmount's Common Stock at $.11 per share in connection

                                       10
<PAGE>
Notes to Financial Statements (Continued)



with the extension of the facility. The warrants will expire March 1, 2005. In
addition, if Fairmount sells, assigns or leases any of its trade secrets,
processes, or technologies, Fairmount is obligated to pay Fleet Bank 50% of the
net proceeds from such transaction, which shall be applied against the
facility's outstanding principal.


NOTE 7. NET LOSS PER SHARE

     Basic loss per share is based on the net loss of the Company since there
were no preferred dividends paid in 2001 and 2000. Due to the Company reporting
losses for 2001 and 2000, the exercise of options and the conversion of the
preferred stock is not assumed, as the result would be anti-dilutive. As of
March 31, 2002, there were 1,041,500 stock options outstanding and exercisable,
41,500 with an exercise price of $1.00 per share and 1,000,000 with an exercise
price of $.11 per share.


NOTE 8. FOREIGN SALES AND MAJOR CUSTOMERS

     One of Fairmount's major foreign customers reduced its purchases by 75% for
the fourth quarter of 2001. Because of the low selling price, high cost of
production and the stronger dollar, Fairmount has not pursued this business.
Another major customer, Polaroid Corporation, has filed a voluntary petition for
reorganization under Chapter 11 of the U.S. Bankruptcy Code. The potential loss
of this customer is expected to have a material adverse effect on Fairmount
going forward since Polaroid accounted for $156,600 in sales for the three
months ended March 31, 2002 and $995,700 or 9.9 % of sales during year ended
December 31, 2001.


NOTE 9. ENVIRONMENTAL MATTERS AND COMMITMENTS AND CONTINGENCIES

     The Company has received notice from the New Jersey Department of
Environmental Protection ("NJDEP") that the NJDEP is investigating whether any
material from the Company has caused or contributed to the contamination
detected at the Ciuba landfill property in Newark. The NJDEP alleges that there
is a possibility that, during the 1970's, the Company disposed of waste
generated at the Company's facility through contracts with certain garbage
removal companies located at the Ciuba landfill. The Company has also received
notice from the United States Environmental Protection Agency ("USEPA") that the
USEPA has information indicating that hazardous substances from the Company may
have been discharged into the Passaic River. It is the Company's understanding
that these allegations by the EPA are related to historical rather than present
events. The Company has taken the position that its material neither caused nor
contributed to the contamination of the Passaic River and that it has not
discharged hazardous substances into the Passaic River. In both cases, it is
possible that potentially responsible party will bring claims against the
Company alleging that it is at least partially responsible for the
contamination. To date, no litigation has commenced with respect to these
matters.

     The New York State Department of Environment Conservation filed a lawsuit
against certain Potentially Responsible Parties ("PRP") for contamination of the
Hexagon Laboratories, Inc. site in the Bronx, New York ("Hexagon" and the
"Site"). Information obtained from records removed from the Site indicate that
Fairmount entered into a toll charging/custom manufacturing agreement with
Hexagon though it is not clear as to whether any materials were ever shipped by

Fairmount to Hexagon. Fairmount has received notice that it is considered a PRP
and has received an offer to enter into settlement negotiations. Fairmount has
not been named as a party to the existing lawsuit and has not been presented
with sufficient evidence to conduct settlement negotiations.

                                       11
<PAGE>
Notes to Financial Statements (Continued)



     It is the Company's policy to accrue and charge against earnings,
environmental cleanup costs when it is probable that a liability has been
incurred and an amount is reasonably estimable. These accruals are reviewed
periodically and adjusted, if necessary, as additional information becomes
available. These accruals can change substantially due to such factors as
additional information on the nature or extent of the contamination, methods of
remediation required and other actions by government agencies or private
parties. Cash expenditures often lag behind the period in which an accrual is
recorded by a number of years. The Company has not accrued cost associated with
the above three matters, because the amounts cannot be reasonably estimated.

     Management does not believe that the resolution of such matters will have a
material adverse affect on the financial position of the Company but could be
material to the results of operations and cash flow of the Company in any one
accounting period.

     On May 13, 1999, a toxic tort case was brought against the Company and
other defendants by former employees, family members of the former employees or
heirs of deceased former employees of La Gloria and Gas Company and the La
Gloria Refinery located in Tyler, Texas. The claimants contended that the
employee plaintiffs and their families were exposed to a number of toxic
chemicals by working in and around the chemicals or with the chemicals at the La
Gloria Plant and by second-hand exposure occurring as a result of the toxic
substance being brought home on the clothing and bodies of the employee
plaintiffs. Plaintiffs have sued the employer defendants and numerous
manufacturers, suppliers, and distributors of chemicals, solvents and products
supplied to the La Gloria Plant. The Company sold a hydrazine blend to La Gloria
during 1990 and 1991. On October 21, 1999, the Federal Court granted defendants'
motion to dismiss because of lack of subject matter jurisdiction. Claimants
re-filed this cause of action in Texas state court in the District Court of
Harrison County, Texas on December 15, 1999. Claimants' allegations in the state
court petition are identical to the allegations discussed above. This claim was
settled on June 26, 2001, for an immaterial amount.

     On October 10, 2000, a breach of contract claim was brought against the
Company in the Worcester Superior Court of the Commonwealth of Massachusetts.
The plaintiff alleges that a defective component chemical used in the
plaintiff's manufacturing process was supplied by Fairmount. This action has
been moved from Worcester Superior Court to the Federal District Court for the
Western District of Massachusetts and was settled on July 9, 2001, for an
immaterial amount.

     The Company also is subject to various other claims, and other routine
litigation arising in the normal course of its business. Management believes
that the resolution of such matters will not have a material adverse affect on
the financial position of the Company but could be material to the results of
operations of the Company in any one accounting period.


NOTE 10. NEW ACCOUNTING PRONOUNCEMENTS

     Effective January 1, 2002, Fairmount adopted SFAS No. 142, "Goodwill and
Other Intangible Assets" for existing and other intangible assets. This standard
eliminates the amortization of goodwill and intangible assets with indefinite
useful lives and requires annual testing for impairment. This standard requires
the assignment of assets acquired and liabilities assumed, including goodwill,
to reporting units for the purpose of goodwill impairment testing. Fairmount had
no unamortized goodwill and other intangible asset at December 31, 2001,
consequently, adoption of the standard had no affect on Fairmount's financial
statements.

     Effective January 1, 2002, Fairmount adopted SFAS No. 144 "Accounting for
the Impairment or Disposal of Long-Lived Assets". This statement supersedes or
amends existing accounting literature related to the impairment and disposal of
long-lived assets. Adoption of this

                                       12
<PAGE>
Notes to Financial Statements (Continued)




standard did not have a material impact on the Fairmount's financial position or
results of operations.

     In June 2001, the Financial Accounting Standards Board issued SFAS No. 143,
Accounting for Asset Retirement Obligations". This standard establishes for
accounting for obligations associated with the retirement of tangible long-lived
assets. The standard is required to be adopted beginning on January 1, 2003.
Management is currently assessing the details of the standard and is preparing a
plan of implementation.

     In April 2002, the Financial Accounting Standards Board issued SFAS No.
145, "Rescission on FASB Statement 4, 44 and 64, Amendment of FASB Statement No.
13 and Technical Corrections". Under certain provisions of SFAS No. 145, gains
and losses related to the extinguishment of debt should no longer be segregated
on the income statement as extraordinary items net of the effect of income
taxes. Instead, those gains and losses should be included as a component of
income before income taxes. The provisions of SFAS No. 145 are effective for
fiscal years beginning after May 15, 2002 with early adoption encouraged. Any
gain or loss on the extinguishment of debt that was classified as an
extraordinary item should be reclassified upon adoption. The adoption of SFAS
No. 145 is not expected to have a significant impact on Fairmount's financial
statements














                                       13
<PAGE>
                          FAIRMOUNT CHEMICAL CO., INC.
                          ----------------------------

ITEM 2  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
------  ----------------------------------------------------------
                                 March 31, 2002

Liquidity and Capital Resources
-------------------------------
     To meet its liquidity requirements, including its capital program,
Fairmount relies upon funds generated from operations, its available cash
balances, and its bank line of credit with Fleet Bank in Princeton, New Jersey.
From November 30, 2001 to March 2002, the credit facility was extended on a
month to month basis. In April 2002, Fairmount executed a definitive loan
agreement that extends the facility's maturity date to February 28, 2003. The
extension terms include (a) an interest rate equal to the bank's prime rate plus
2%, (b) an extension fee equal to 2% of the maximum amount available under the
facility (i.e., $700,000), (c) a continuation of the bank's existing security
interest in Fairmount's accounts receivable, inventory, machinery and equipment,
(d) principal repayment of $15,000 per month commencing May 2002 and (e) a cap
on borrowings based upon a percentage of eligible accounts receivable and
eligible finished goods inventory. The bank is entitle to receive warrants to
purchase up to 200,000 shares of Fairmount's Common Stock at $.11 per share, in
connection with the extension of the facility. The warrants will expire March 1,
2005. In addition, if Fairmount sells, assigns or leases any of its trade
secrets, processes, or technologies, Fairmount is obligated to pay to Fleet Bank
50% of the net proceeds from such transaction, which amount shall be applied
against the facility's outstanding principal.

     The December 31, 2001 financial statements contain an explanatory paragraph
in the Independent Auditor's Report relating to Fairmount's ability to continue
as a going concern. Fairmount has reported substantial losses during the last
fiscal three years and does not expect performance to improve during the first
half of 2002. On October 4, 2001, Fairmount laid off 13 production employees, or
approximately 50% of its production employees, and subsequently terminated two
management employees. During the first quarter of 2002, Fairmount terminated one
administrative employee and two sales/marketing employees.

     One of Fairmount's major foreign customers reduced its purchases by 75% in
the fourth quarter of 2001. Because of the low selling price, high cost of
production and the stronger dollar, Fairmount has not pursued this business.
Another major customer, Polaroid Corporation, has filed a voluntary petition for
reorganization under Chapter 11 of the U.S. Bankruptcy Code. The potential loss
of this customer is expected to have a material adverse effect on Fairmount
going forward since Polaroid accounted for $156,600 of sales for the three
months ended March 31, 2002 compared to $ 343,800 during the same period in
2001. Sales to Polaroid were $995,700 or 9.9 % of sales during year ended
December 31, 2001.

     During the second quarter of 2001, Fairmount started receiving orders for a
hydrazine derivative product from a new customer. Worldwide sales to this
customer were $2,445,600 in 2001, compared to none in 2000. In January 2002,
Fairmount advised the customer that it could no longer supply the product under
the same terms and conditions. As a consequence, Fairmount does not anticipate
sales of this product to the customer in 2002.

     As of March 1, 2002, Fairmount owed Bayer Corporation approximately
$673,600 for raw material purchases. Fairmount issued a promissory note (the
"Note") to Bayer for the amount owed as of March 1, 2002. The Note matures
February 1, 2003, and includes a payment schedule. Non-payment is an event of
default and interest of 10% on the unpaid principal balance will accrue until
the default is cured. The Note contains a "confession of judgment" provision,
which may result in a court judgment being entered against Fairmount, upon
written notice but                14
<PAGE>
without a hearing, and that the Company's real estate may be sold on a writ of
execution. Fairmount failed to make the required payments for April and May 2002
and, as of May 2, 2002, the Company is in default of payments totaling $151,300,
including interest of $11,300.

     The Company's working capital, defined as current assets less current
liabilities, decreased by $796,600 in the three months ended March 31, 2002,
resulting in negative working capital of $2,507,600, compared to a negative
working capital of $1,711,000 as of December 31, 2001. As of March 31, 2001,
Fairmount's had working capital of $3,649,400. The decrease in working capital
during the first quarter of 2002 was due to decreased accounts receivables of
$301,200, decreased cash of $181,800 and increased other accrued liabilities of
$209,000.

     In February 2002, the Newark Division of Water/Sewer notified Fairmount
that its 2002 sewer charge will be $659,900, an increase of $421,600 in
anticipated cash outflows as compared to 2001. Fairmount is appealing this
increase.

     There is too much uncertainty for Fairmount to predict its short-term
future prospects. If the promissory note holders demand payment as a result of
the default on principal and interest payments as discussed in Note 4, and 5, or
if Fairmount is unable to effect cost savings, enter into strategic alliances or
a merger, and achieve other short-term solutions, it may result in the Company
not having sufficient capital to continue its operations as presently conducted.
In which event, the Company may find it necessary to seek protection under
Federal bankruptcy laws or other laws affecting debtor's and creditor's rights.

New Accounting Pronouncements
-----------------------------
     Effective January 1, 2002, Fairmount adopted SFAS No. 142, "Goodwill and
Other Intangible Assets" for existing and other intangible assets. This standard
eliminates the amortization of goodwill and intangible assets with indefinite
useful lives and requires annual testing for impairment. This standard requires
the assignment of assets acquired and liabilities assumed, including goodwill,
to reporting units for the purpose of goodwill impairment testing. Fairmount had
no unamortized goodwill and other intangible asset at December 31, 2001,
consequently, adoption of the standard had no affect on Fairmount's financial
statements.

     Effective January 1, 2002, Fairmount adopted SFAS No. 144 "Accounting for
the Impairment or Disposal of Long-Lived Assets". This statement supersedes or
amends existing accounting literature related to the impairment and disposal of
long-lived assets. Adoption of this standard did not have a material impact on
the Fairmount's financial position or results of operations.

     In June 2001, the Financial Accounting Standards Board issued SFAS No. 143,
Accounting for Asset Retirement Obligations". This standard establishes for
accounting for obligations associated with the retirement of tangible long-lived
assets. The standard is required to be adopted beginning on January 1, 2003.
Management is currently assessing the details of the standard and is preparing a
plan of implementation.

     In April 2002, the Financial Accounting Standards Board issued SFAS No.
145, "Rescission on FASB Statement 4, 44 and 64, Amendment of FASB Statement No.
13 and Technical Corrections". Under certain provisions of SFAS No. 145, gains
and losses related to the extinguishment of debt should no longer be segregated
on the income statement as extraordinary items net of the effect of income
taxes. Instead, those gains and losses should be included as a component of
income before income taxes. The provisions of SFAS No. 145 are effective for
fiscal years beginning after May 15, 2002 with early adoption encouraged. Any
gain or loss on the extinguishment of debt that was classified as an
extraordinary item should be
                                       15
<PAGE>
reclassified upon adoption. The adoption of SFAS No. 145 is not expected to have
a significant impact on Fairmount's financial statements.

Results of Operations
---------------------
     Net sales for the three months ended March 31, 2002 were $1,428,200, a
decrease of $1,355,600, or 48.7% as compared to 2001. The following sets forth
revenues from the Company's various product lines and the change in such
revenues from the prior comparable period.

                                              THREE MONTHS ENDED MARCH 31,
                                        ---------------------------------------
                                            2002          2001         CHANGE
                                        -----------   -----------   -----------
     Imaging & photographic chemicals   $   500,700   $   778,300   $  (277,600)
     Hydrazine blends                       471,600       446,000        25,600
     Hydrazine derivatives                  131,800       484,400      (352,600)
     Plastic additives                       51,900       787,800      (735,900)
     Specialty chemicals                    272,400       287,500       (15,100)
                                        -----------   -----------   -----------
                       Total            $ 1,428,400   $ 2,784,000   $(1,335,600)
                                        ===========   ===========   ===========

     One of Fairmount's major customers for imaging and photographic chemical,
Polaroid Corporation, has filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code. The loss of this customer is expected to
have a material adverse effect on Fairmount going forward since Polaroid
accounted for $156,600 or 1.1% of sales during the three months ended March 31,
2002, and $343,800 or 1.2% during the three months ended March 31, 2001. Sales
to Polaroid for the year ended December 31, 2001 were $995,700 or 9.9% of sales.
In addition, the demand for certain types of chemicals used in photographic
films is expected to decrease during the coming years as the market for film
diminishes due, in part, to new digital imaging technologies.

     Sale of plastic additives decreased to $51,900 during the three months
ended March 31, 2002 from $787,800 during the three months ended March 31, 2001.
Because of the low selling price, high cost of production and the strong dollar,
Fairmount has not pursued this business during the first quarter of 2002.

     There were no material changes in sales of specialty chemicals during the
three months ended March 31, 2002 compared to the same periods in 2001.

     The gross loss for the three months of March 31, 2002 was $158,100,
compared to a gross loss of $76,000 for the first quarter of 2001. The increase
in the gross loss was due lower sales volume somewhat offset by lower expenses
and cost of production.

     Research and development expenses during the three months ended March 31,
2002 were $87,300, compared to $102,500 during the three months ended March 31,
2001. The main reason for the decrease was lower salaries during the first
quarter of 2002.

     Selling, general and administrative expenses decreased by $71,300 in the
first quarter of 2002 compared to the same period in 2001. Selling expenses
decreased $72,500, and general and administrative expenses increased by $1,200
in the first quarter of 2002 compared to the first quarter of 2001 The primary
reason for the decrease on selling expenses were lower commissions of $31,300,
lower payroll and payroll related expenses of $13,800, lower travel related
expenses of $9,200, and lower advertising expenses of $7,500.

     Interest expense was higher in the three months ended March 31, 2002,
versus the same period in 2001, due to the increased interest on higher bank

                                       16
<PAGE>
borrowings, interest on Bayer promissory note, somewhat off set by lower
interest on the remaining debt owed to affiliated parties.

     During the three months ended March 31, 2001, Fairmount recorded a foreign
exchange currency loss of approximately $50,800. There was no corresponding loss
during the first quarter of 2002, because there were no sales to customers
denominated in EURO currency.

     As a result of the above, the Company reported an operating loss of
$739,800 in the three months ended March 31, 2002, compared to an operating loss
of $790,100 in the same period of 2001

     As a result of the continuing operating losses no provision for income
taxes has been recorded in the financial statements of the Company and the
Company has reserved fully against its net deferred tax asset.

Forward Looking Statements

     This document contains forward-looking statements that involve risks and
uncertainties that could cause the results of Fairmount to differ materially
from those expressed or implied by such forward-looking statements. These
statements constitute "forward-looking statements" within the meaning of such
term in Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These risks include the timely development,
production and acceptance of new products and services; competition; the flow of
products into third-party distribution channels; and other risks detailed from
time to time in Fairmount's Securities and Exchange Commission filings. The
words "anticipates," "believes," "estimates," "expects," "intends," "will,"
"may," "could" and similar expressions, as they relate to Fairmount or our
management, may identify forward-looking statements. Such statements reflect the
current views of Fairmount with respect to future events and are subject to
certain risks, uncertainties and assumptions. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary from those described herein as anticipated, believed,
estimated or expected. Fairmount does not intend to update these forward-looking
statements.

CRITICAL ACCOUNTING POLICIES
----------------------------
     The SEC staff recently released a cautionary advice regarding critical
accounting policies and practices. The staff has defined critical policies and
practices as items that are both most important to the portrayal of a company's
financial condition and results, and require management's most difficult,
subjective or complex judgments, often as a result of the need to make estimates
about the effects of matters that are inherently uncertain.

     The preparation of the Company's financial statements requires its
management to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues, and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, the Company evaluates
its estimates, including those related to doubtful accounts, inventory
valuation, property, plant and equipment, and environmental matters and
commitments and contingencies. The Company bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. The Company believes the
following critical accounting policies are the most important to the portrayal
of the Company's financial condition and results and require management's more
significant judgments and estimates in the preparation of the Company's
financial statements.

                                       17
<PAGE>

Allowance for Doubtful Accounts
-------------------------------
           The Company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to make required payments.
Management continuously assesses the financial condition of the Company's
customers and the markets in which these customers participate. If the financial
condition of the Company's customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required.

Valuation of Inventories
------------------------
           Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out (FIFO) method. There are no general and
administrative costs in inventory. The Company writes down its inventories for
estimated obsolescence or unmarketable inventory equal to the difference between
the cost of inventory and the estimated market value based upon assumptions
about future demand and market conditions. If actual market conditions are less
favorable than those projected by management, additional inventory write-downs
may be required.

Recoverability of Long-Lived Assets
-----------------------------------
           The Company reviews the carrying value of its assets for impairment
whenever events or changes in circumstances indicate that the amount of assets
may not be fully recovered. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to the future
undiscounted net cash flows expected to be generated by the asset. The asset
will be written down to fair value if it is determined that its carrying value
is not recoverable by operations. Discounted cash flows or appraised values are
used to determine the fair market value, depending on the nature of the asset.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less the cost to sell. The Company considers various valuation
factors in determining fair value, principally discounted cash flows to assess
any impairment amount. If the Company's assumptions related to assets to be held
and used are inaccurate, write-downs may be required in the future.




                                       18
<PAGE>
                           PART II - OTHER INFORMATION



Item 1. Legal Proceedings
-------------------------
During the quarter ended March 31, 2002 there were no material changes in the
potential claims reported by Fairmount in its Annual Report on Form 10-KSB in
"Item 1. Business- Environment Laws and Government Regulations" and "Item 3.
Legal Proceedings."


Item 2. Changes in Securties
----------------------------
None


Item 3. Defaults Upon Senior Securities
---------------------------------------
On October 9, 1997 the executors of the Leistner Estate endorsed two promissory
notes of $648,000 and $491,600 to the order of the Howard Leistner, Hedi Mizrack
and Gilbert Leistner Irrevocable Grantor Trust (the "Trust"). The Trust was
established to expedite the settlement of the Leistner Estate and to be the
repository of the common and preferred shares of the Company, as well as the
promissory notes held by the Leistner Estate. Howard Leistner, Hedi Mizrack and
Gilbert Leistner have sole voting rights to their common stock holdings.Interest
paid on promissory notes to affiliated parties in during the three months ended
March 31, 2001 was $37,300, however because of the Fairmount's financial
difficulties, interest payments have not been made since July 2001. The total
unpaid interest as of March 31, 2002 was $80,900. The failure to pay interest
when due is an event of default which can be cured if payment is made within 15
days of written notice to Fairmount. No written notice has been received,
however, failure to make interest payments is an event of default and,
accordingly, the promissory notes have been reclassified to current liabilities.

As of March 1, 2002, Fairmount owed Bayer Corporation approximately $673,600 for
raw material purchases. Fairmount issued a promissory note (the "Note") to Bayer
for the amount owed as of March 1, 2002. The Note matures February 1, 2003, and
includes a payment schedule. Non-payment is an event of default and interest of
10% on the unpaid principal balance will accrue until the default is cured. The
Note contains a Fairmount agreed to confession of judgment provision, which may
result in a court judgment against Fairmount, upon written notice but without a
hearing, and that the Company's real estate may be sold on a writ of execution.
Fairmount failed to make the required payments for April and May 2002 and, as of
May 2, 2002, the Company is in default of payments totaling $151,300, including
interest of $11,300.


Item 4. Submission of Matters to Vote of Security Holder
--------------------------------------------------------
None


Item 5. Other Information
-------------------------
None



                                       19
<PAGE>

Item 6. Exhibits and Reports on Form 8-K
----------------------------------------
(a)  Exhibits

     3.1 By-laws as last amended as of April 23, 2002

     10.1 Definitive loan agreement between Fairmount and Fleet Bank

     10.2 Promissory note issued to Bayer Corporation


(b)  Forms 8-K

     On January 22, 2002, the Company filed a Form 8-K (Date of Report: January
     15, 2002) with the SEC, in which the Company reported, as an Item 5 event,
     that its line of credit with Fleet National Bank in the amount of $700,000
     was to become due and payable on January 31, 2002.

     On February 1, 2002, the Company filed a Form 8-K (Date of Report: February
     1, 2002) with the SEC, in which the Company reported, as an Item 5 event,
     that its line of credit with Fleet National Bank in the amount of $700,000
     was to become due and payable on February 28, 2002 and that the board of
     directors elected Jerrel Branson a director and retained him as the senior
     executive of Fairmount.



                                       20
<PAGE>

                          FAIRMOUNT CHEMICAL CO., INC.
                          ----------------------------



                                   SIGNATURE
                                   ---------



     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.


                                    FAIRMOUNT CHEMICAL CO., INC.
                                    -----------------------------
                                            Registrant


May 22, 2002                        /S/ Jerrel Branson
                                    -----------------------------
                                    Jerrel Branson
                                    Chief Executive Officer


May 22, 2002                        /S/ Reidar Halle
                                    -----------------------------
                                    Reidar T. Halle
                                    President


May 22, 2002                        /S/ William C. Kaltnecker
                                    -----------------------------
                                    William C. Kaltnecker
                                    Principal Accounting Officer







                                       21