UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB





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

For the quarterly period ended       June 30, 2001

[ ]  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 registrant as specified in its charter.)

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

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

                                 (973)-344-5790
                (Issuer's Telephone Number, Including Area Code)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.


                              YES [X]       NO [ ]


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

     Common Stock, $1 Par Value - 8,292,866 shares as of August 13, 2001

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



<PAGE>


                                      INDEX
                                                                           PAGE

PART I        FINANCIAL INFORMATION

         Item 1

              Statements of Operations
                    Three months and six months ended
                    June 30, 2001 and 2000                                   3

              Balance Sheets
                    June 30, 2001 and December 31, 2000                      4

              Statement of Changes in Stockholders' (Deficit)
              Equity and Comprehensive (Loss) Income for the
              six months ended June 30, 2001 and 2000                        5

              Statements of Cash Flows
                    Six months ended June 30, 2001 and 2000                  6

              Notes to Financial Statements                             7 - 10

         Item 2.

              Management's Discussion and Analysis of
                    Financial Condition and Results of Operation       11 - 14

         Item 3.

              Quantitative and Qualitative Disclosures about
                    Market Risks                                            14


PART II  OTHER INFORMATION

         Item 1.  Legal Proceedings                                         15

         Item 4. Submission of Matters to Vote of Security Holders          15

         Item 6. Exhibits and Reports on Form 8-K                           15






                                       2
<PAGE>


                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements


                          FAIRMOUNT CHEMICAL CO., INC.

                            Statements of Operations

        For The Three Months and Six Months Ended June 30, 2001 and 2000
                                   (Unaudited)

<TABLE>
<CAPTION>
                                           Three Months Ended                  Six Months Ended
                                    ------------------------------     ---------------------------------
                                     June 30, 2001   June 30, 2000     June 30, 2001      June 30, 2000
                                    --------------   -------------     -------------      --------------
<S>                                    <C>            <C>               <C>                <C>
Net sales                              $3,198,400     $3,070,400        $ 5,982,400        $6,534,500
Cost of goods sold                      3,027,100      2,393,000          5,887,100         5,101,400
                                       ----------     ----------        -----------        ----------
           Gross profit                   171,300        677,400             95,300         1,433,100

Research and development                  100,400        103,800            202,900           205,200
Selling, general and
  administrative expense                  508,600        489,700          1,029,300         1,028,300
                                       ----------     ----------        -----------        ----------
        Operating (loss) income          (437,700)        83,900         (1,136,900)          199,600

Interest expense                          (84,500)       (45,900)          (114,600)          (88,900)
Insurance proceeds                         53,100        233,100             53,100           333,100
Foreign currency exchange
     Income (loss)                            600           --              (50,200)             --
Other income, net                          44,600         28,800             34,600            44,100
                                       ----------     ----------        -----------        ----------

       (Loss) income before income
           taxes                         (423,900)       299,900         (1,214,000)          487,900

Income taxes                                 --             --                 --                --
                                       ----------     ----------        -----------        ----------
      Net (loss) income                $ (423,900)    $  299,900        $(1,214,000)       $  487,900
                                       ==========     ==========        ===========        ==========
(Loss) income per common share
     Basic                             $     (.05)    $      .04        $      (.15)       $      .06
                                       ==========     ==========        ===========        ==========
     Diluted                           $     (.05)    $      .02        $      (.15)       $      .03
                                       ==========     ==========        ===========        ==========
Common shares and equivalents
  outstanding

     Basic                              8,292,866      8,292,866          8,292,866         8,292,866
                                       ==========     ==========        ===========        ==========

     Diluted                            8,292,866     14,259,000          8,292,866        14,243,000
                                       ==========     ==========        ===========        ==========
</TABLE>




                See accompanying notes to financial statements.




                                       3
<PAGE>


                          FAIRMOUNT CHEMICAL CO., INC.

                                 Balance Sheets

<TABLE>
<CAPTION>
                                                                 June 30,     December 31,
                                                                   2001          2000
                                                                ----------     ----------
                                                                (Unaudited)
<S>                                                              <C>            <C>
     Assets
        Current Assets:
              Cash                                               1,724,200      2,093,900
              Accounts receivable, less allowance
                   for doubtful accounts of $20,600
                   in 2001 and 2000                              2,189,100      1,913,400
              Inventories                                        3,003,600      2,700,100
              Prepaid expenses                                     197,300        124,100
              Other current assets                                  16,400         11,300
                                                                ----------     ----------
                       Total Current Assets                      7,130,600      6,842,800

        Property, plant and equipment
             Less accumulated depreciation of
             $6,086,800 and $5,756,800 in 2001
            and 2000, respectively                               3,654,000      3,938,900
        Other assets                                                   700            700
                                                                ----------     ----------
              Total Assets                                      10,785,300     10,782,400
                                                                ==========     ==========

     Liabilities and Stockholders' Equity
        Current Liabilities:
              Short-term bank borrowings                           700,000        200,000
              Accounts payable                                   2,439,200      1,590,400
              Accrued compensation                                  54,600        136,400
              Accrued pension liability                            108,600        153,000
              Other accrued liabilities                            531,400        399,600
                                                                ----------     ----------
                       Total Current Liabilities                 3,833,800      2,479,400

        Promissory notes to affiliated parties                   1,571,600      1,571,600
        Accrued pension liability                                    9,200        146,700

        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) Equity:
        Common stock, par value $1 per share:
             Authorized - 15,000,000 shares; 8,293,366
             shares issued and outstanding in 2001 and 2000      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                                    (15,460,800)   (14,246,800)
        Accumulated other comprehensive loss -
             additional minimum pension liability                 (177,400)      (177,400)
                                                                ----------     ----------
              Total Stockholders' (Deficit) Equity                 (29,300)     1,184,700
                                                                ----------     ----------
        Total Liabilities and Stockholders' (Deficit) Equity    10,785,300     10,782,400
                                                                ==========     ==========
</TABLE>

                See accompanying notes to financial statements.




                                       4
<PAGE>


                          FAIRMOUNT CHEMICAL CO., INC.

             Statement of Changes in Stockholders' (Deficit) Equity
                                       And
                           Comprehensive (Loss) Income
                   For Six Months Ended June 30, 2001 and 2000
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                       2001                                 2000
                                           ----------------------------        -----------------------------
                                                          Comprehensive                        Comprehensive
                                                               Loss                                Income
                                                          -------------                        -------------
<S>                                        <C>            <C>                  <C>               <C>
Common stock:
      Balance at June 30,                    8,293,400                           8,293,400
           (8,293,366 shares)

Capital in excess of par value:              7,316,000                           7,316,000
     Balance at June 30,


Accumulated deficit:
     Balance at January 1,                 (14,246,800)                        (13,574,700)
     Net (loss) income                      (1,214,000)    (1,214,000)             487,900         487,900
                                           -----------                         -----------
     Balance at June 30,                   (15,460,800)                        (13,086,800)

Accumulated other comprehensive
     loss:
           Balance at January 1,              (177,400)                            (97,200)
                                                          -----------                            ---------
             Comprehensive (loss) income                  $(1,214,000)                           $ 487,900
                                           -----------                         -----------
Balance at June 30,                           (177,400)                            (97,200)

Treasury stock:
     Balance at June 30,                          (500)                               (500)
           (500 shares)
                                           -----------                         -----------
Total Stockholders' (Deficit) Equity       $   (29,300)                        $ 2,424,900
                                           ===========                         ===========
</TABLE>







                 See accompanying notes to financial statements




                                       5
<PAGE>


                          FAIRMOUNT CHEMICAL CO., INC.

                            Statements of Cash Flows
                 For The Six Months Ended June 30, 2001 and 2000
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                             2001           2000
                                                         -----------    -----------
<S>                                                      <C>            <C>
     Cash Flow from Operating Activities:
         Net (loss) income                               $(1,214,000)   $   487,900
        Adjustments to reconcile net (loss)
             earnings to net cash used
             operating activities
                  Depreciation                               330,000        330,000
                  Insurance proceeds                         (53,100)      (333,100)

        Increase (decrease) from changes in:
             Accounts receivable-trade                      (275,700)      (987,400)
             Inventories                                    (303,500)      (750,400)
             Prepaid expenses                                (73,200)        39,800
             Other assets                                     (5,100)           300
             Accounts payable                                848,800        766,800
             Accrued compensation                            (81,800)        27,000
             Other liabilities                               (50,000)       109,900
                                                         -----------    -----------

                    Cash Flow Used In
                          Operating Activities              (877,600)      (309,200)

     Cash Flow Provided by (Used In)
      Investing Activities:
        Capital expenditures                                 (45,200)      (654,800)
         Insurance proceeds                                   53,100        333,100
                                                         -----------    -----------

         Net Cash Provided by (Used In)
              Investing Activities                             7,900       (321,700)

     Cash Flow Provided by
      Financing Activities:
        Bank borrowing                                       500,000        170,000
                                                         -----------    -----------

             Cash Flow Provided by
                  Financing Activities                       500,000        170,000
                                                         -----------    -----------


     Decrease in Cash                                       (369,700)      (460,900)

     Cash at Beginning of Period                           2,093,900      2,481,100
                                                         -----------    -----------

     Cash at End of Period                               $ 1,724,200    $ 2,020,200
                                                         ===========    ===========

     Supplemental Disclosure of Cash Flow Information:

     Interest paid                                       $   114,600    $    88,900
                                                         ===========    ===========

     Income taxes paid                                   $      --      $      --
                                                         ===========    ===========
</TABLE>




                 See accompanying notes to financial statements




                                       6
<PAGE>


                          FAIRMOUNT CHEMICAL CO., INC.
                          NOTES TO FINANCIAL STATEMENTS
                                 March 31, 2001


Note 1.  Summary of Significant Accounting Policies

ORGANIZATION

     The accompanying financial statements,  which should be read in conjunction
with the financial  statements of Fairmount  Chemical Co., Inc. (the  "Company")
included in the 2000 Annual Report filed on Form 10-KSB,  are unaudited but have
been  prepared in the  ordinary  course of business for the purpose of providing
information  with respect to the interim period.  The Company  believes that all
adjustments (none of which were other than normal recurring  accruals) necessary
for a fair  presentation  for such periods  have been  included.  The  Company's
interim  results of  operations  are not  necessarily  indicative of what may be
expected for the full year.

RECLASSIFICATIONS

     Certain  prior year amounts have been  reclassified  to conform to the 2001
presentation.

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 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 were no provisions for bad debts recorded in 2001
and 2000.

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.

     The Company, as a result of net operating losses utilized,  has recorded no
provisions for income taxes. A valuation allowance has been recorded at June 30,
2001 and June 30,  2000 for that  portion of  deferred  tax assets  that are not
presently considered more likely than not to be realized.

Note 2.  Earnings Per Share

     Basic  earnings per share is based on the net earnings of the Company since
there were no preferred  dividends  paid in the periods  ended June 30, 2001 and
2000.  Basic (loss)  earnings per share is calculated by dividing the net (loss)
earnings by the average number of common shares  outstanding.  Diluted  earnings
per share is calculated by dividing the net earnings of the Company



                                       7
<PAGE>


Notes to Financial Statements (Continued)

by the  weighted  average  number of shares  outstanding  adjusted  for dilutive
common share  equivalents  including,  preferred  stock and shares granted under
stock  option  arrangements.  Due to the Company  reporting a loss for the three
months  and six  months  ended  June 30,  2001,  the  exercise  of  options  and
conversion  of the  preferred  stock is not  assumed,  as the  results  would be
anti-dilutive.  As of June 30, 2001,  1,059,000 stock options were  outstanding,
59,000 with an exercise price of $1.00 per share, and 1,000,000 with an exercise
price of $.11 per share.  As of June 30,  2000,  1,072,500  stock  options  were
outstanding,  72,500 with an exercise  price of $1.00 per share,  and  1,000,000
with an exercise price of $.11 per share.

Diluted common shares and equivalents outstanding as of June 30, 2001:

                                 Three Months Ended          Six Months Ended
                                    June 30, 2001             June 30, 2001
                              -----------------------   ------------------------
                                 Shares      Earnings      Shares       Earnings
                              Outstanding   Per Share   Outstanding    Per Share
                              -----------   ---------   -----------    ---------
Common shares out standing     8,292,900      $ .04       8,292,900      $ .06
Preferred stock                5,400,000                  5,400,000
Common share equivalents:
   Stock options                 566,100                    550,100
                              ----------      -----      ----------      -----
Total diluted                 14,259,000      $ .02      14,243,000      $ .03
                              ==========      =====      ==========      =====

Note 3. Long Term Promissory Notes to Affiliated Parties

     All promissory notes 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 payable from January 1,
2001  through  December  31, 2001 is at the rate of 9.5 % per annum.  All of the
promissory notes are subordinated to the Company's line of credit financing with
Fleet Bank (formerly Summit Bank) and are collateralized by security  agreements
on the Company's accounts  receivable,  inventories and personal  property.  All
promissory  notes are due January 1, 2005.  Interest paid on promissory notes to
affiliated  parties  during the six months  ended June 30,  2001 was $74,600 and
$66,800 during the six months ended June 30, 2000.

            Promissory Notes:
                     Leistner Trust                    $  491,600
                     Leistner Trust                    $  648,000
                     DaMota Family Partnership         $  224,600
                     Glen DaMota                       $  142,600
                     Lynn DaMota                       $   64,800
                                                       ----------
                                                       $1,571,600
                                                       ==========

Note 4. Bank Borrowings

     The Company has a $1,250,000 line of credit from Fleet Bank,  $1,083,600 of
which was  available,  and $700,000 was  outstanding  as of June 30, 2001. As of
June 30, 2000  Fairmount's  line of credit was  $1,250,000 of which $170,000 was
outstanding.  The bank has been given a first security  interest in the accounts
receivable, inventories and personal property of the Company. The line of credit
is subject to an annual review for renewal.  Fleet Bank has extended the line of
credit to August 31, 2001 and has advised  Fairmount  that it will not renew the
line of credit.  Fairmount  is seeking to find a  commercial  bank lender and is
also  negotiating  with  various  lenders and  believes  that it will be able to
refinance  the Fleet Bank  outstanding  loan  shortly,  however  there can be no
assurance  financing  will be available or on terms  acceptable  to the Company.
Commercial banks expressed little interest in refinancing Fairmount,  because of
its



                                       8
<PAGE>


Notes to Financial Statements (Continued)

size,  its  losses  and the small  amount of the line of  credit.  Fairmount  is
negotiating with asset- based lenders,  who traditionally charge higher fees and
interest.  In addition there are more restrictions and the lender exercises more
control over the borrower.


Note 5. Inventories

     Inventories  at June 30,  2001  and  December  31,  2000  consisted  of the
following:

                                   June 30, 2001     December 31, 2000
                                   -------------     -----------------
     Finished goods                 $ 2,794,300         $ 2,481,500
     Raw materials                      209,300             218,600
                                    -----------         -----------
                                    $ 3,003,600         $ 2,700,100
                                    ===========         ===========

Note 6. Insurance Proceeds

     On November 10, 1999, a fire destroyed  certain  equipment and a portion of
the roof in one of the production buildings.  The Company received $333,100 from
its  property  insurance  carrier  during the six months  ended June 30, 2000 in
partial  settlement  for its property  losses  caused by the fire.  During 2001,
Fairmount received insurance proceeds of $53,100, for property damaged caused by
a delivery truck.

Note 7. New Accounting Pronouncements

     Effective  January 1, 2001,  the Company  adopted  Statement  of  Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative  Instruments and
Hedging  Activities" as amended by SFAS No. 137 and SFAS No. 138. This statement
requires the  recognition  of derivative  financial  instruments  on the balance
sheet as assets or liabilities,  at fair value.  Gains or losses  resulting from
changes in the value of derivatives  are accounted for depending on the intended
use of the  derivative  and  whether  it  qualifies  for hedge  accounting.  The
implementation  of this standard did not have a material effect on the Company's
financial statements because the Company did not have any financial  instruments
entered into for trading or hedging  purposes  during the quarter and six months
ended  June 30,  2001,  nor  does  the  Company  currently  have any  derivative
financial  instruments or derivative commodity  instruments  outstanding at June
30, 2001.

Note 8. Major Customer

     One of Fairmount's major customers is having serious financial problems and
the loss of this customer  would have a material  adverse effect on the Company.
During the first six months of 2001,  sales to this  customer  were $736,000 and
$945,000  during the same period in 2000.  For the twelve months ended  December
31, 2000 sales to this customer were $1,850,000.

Note 9. 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 USEPA are related to historical



                                       9
<PAGE>


Notes to Financial Statements (Continued)

rather than present  events.  The Company  believes  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  parties 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.

     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 costs associated with
the above two 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.

     A bodily  injury claim was filed against the Company on December 2, 1998 in
the Superior  Court of New Jersey Law  Division,  Hudson  County.  The plaintiff
alleges that on March 25, 1997, the date of an explosion at the Company's plant,
the force of the  explosion  threw him backward  and  resulted in injuries.  The
plaintiff was an invitee upon the adjoining property to the Company.  This claim
was settled on July 20, 2000, for an immaterial amount.

     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 contend that the employee
plaintiffs  and their  families  were exposed to a number of toxic  chemicals by
working  in  and  around  them  or  with  them  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.  The Company's  commercial  general  liability and
commercial  umbrella insurance carrier was defending the Company in that action.
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.  The Company is in the process of exchanging
documents.  The Company  intends to contest the case  vigorously.  The Company's
commercial  general  liability and  commercial  umbrella  insurance  carrier was
defending  the Company in that  action.  This claim was settled on July 9, 2001,
for an immaterial amount.

     The  Company is subject to various  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 and cash flow of the Company in any one accounting period.




                                       10
<PAGE>


                          FAIRMOUNT CHEMICAL CO., INC.

Item 2                     MANAGEMENT'S DISCUSSION AND
                       ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS
                                  June 30, 2001

Liquidity and Capital Resources

     To  meet  its  liquidity  requirements,   including  its  capital  program,
Fairmount accesses funds generated from operations, its available cash balances,
and  its  bank  line of  credit  with  Fleet  Bank  (formerly  Summit  Bank)  in
Hackensack,  New Jersey.  The line of credit is subject to an annual  review for
renewal.  Fleet Bank has  extended the line of credit to August 31, 2001 and has
advised  Fairmount  that it will not  renew  the line of  credit.  Fairmount  is
negotiating  with various lenders and believes that it will be able to refinance
the Fleet Bank  outstanding  loan  shortly,  however  there can be no  assurance
financing  will be available or on terms  acceptable to the Company.  Commercial
banks have so for expressed little interest in refinancing Fairmount, because of
its size,  its losses and the small  amount of the line of credit.  Fairmount is
seeking  to  find  a  commercial  bank  lender  and  is  also  negotiating  with
asset-based  lenders,  who  traditionally  charge higher fees and  interest.  In
addition there are more  restrictions and the lender exercises more control over
the borrower.  If Fairmount cannot refinance the Fleet Bank loan timely, and the
loan is  called,  Fairmount  would  have to use its funds to repay  Fleet  while
trying to secure financing from other sources. This would have an adverse effect
on Fairmount's operations.  The bank has been given a first security interest in
the accounts receivable, inventories and personal property of the Company. As of
June 30, 2001,  Fairmount's  borrowing  availability  was  $1,083,600,  of which
Fairmount had borrowed $700,000.  As of June 30, 2000 Fairmount's line of credit
was $1,250,000 of which $170,000 was  outstanding.  In the event that management
does not obtain additional financing, management believes that it has sufficient
financial  resources to fund its  operations  for a  reasonable  period of time,
although, no assurance can be provided.


     In addition, one of Fairmount's major customers is having serious financial
problems and the loss of this customer  would have a material  adverse effect on
the Company.  During the first six months of 2001,  sales to this  customer were
$736,000  and  $945,000  during the same period in 2000.  For the twelve  months
ended December 31, 2000 sales to this customer were $1,850,000.

     The working  capital,  defined as current assets less current  liabilities,
was  $3,296,800 at June 30, 2001 and $4,363,400 at December 31, 2000, a decrease
of  $1,066,600.  The decrease in working  capital was due in part to net losses,
higher accounts payable of $848,800,  and increased borrowings of $500,000.  The
decrease was partially  offset by higher  accounts  receivable of $275,700,  and
higher inventories of $303,500.

     On November 10, 1999, a fire  destroyed some equipment and a portion of the
roof in one of the production buildings. No employees were injured. The fire had
an adverse  effect on operations  during the fourth  quarter of 1999,  and first
half of 2000.  Production  returned to normal levels in the second half of 2000.
Fairmount  incurred  approximately  $17,500 in professional  cost related to the
fires and  wrote-off  approximately  $22,000 of net  capitalized  equipment  and
building improvements damaged or destroyed by the fire.

     Fairmount's insurance carrier notified Fairmount that when its property and
boiler  insurance  policy  expired on February 1, 2000,  it would not be renewed
because of adverse loss  experience.  Fairmount  has obtained  coverage  through
another carrier, though at a substantially higher premium.






                                       11
<PAGE>


Results of Operations

     Net sales for the three  months  ended June 30,  2001 were  $3,198,400,  an
increase of $128,000 or 4.2 % as compared to 2000.

                                           Three Months Ended June 30,
                                     -------------------------------------
                                        2001          2000         Change
                                     ----------    ----------    ---------
     Imaging & photographic
          chemicals                  $  469,200    $  884,700    $(415,500)
     Hydrazine blends                   532,900       631,500      (98,600)
     Hydrazine derivatives            1,119,900       270,300      849,600
     Plastic additives                  582,100       833,400     (251,300)
     Specialty chemicals                494,300       450,500       43,800
                                     ----------    ----------    ---------
              Total                  $3,198,400    $3,070,400    $ 128,000
                                     ==========    ==========    =========

     Net sales for the six months June 30, 2001 were  $5,982,400,  a decrease of
$551,500 or 8.5 % as compared to 2000.

                                           Six Months Ended June 30,
                                     -------------------------------------
                                        2001         2000         Change
                                     ----------   ----------   -----------
     Imaging & photographic
          chemicals                  $1,247,400   $1,734,300   $  (486,900)
     Hydrazine blends                   978,900    1,212,000      (233,100)
     Hydrazine derivatives            1,604,300      482,900     1,121,400
     Plastic additives                1,370,400    2,238,900      (868,500)
     Specialty chemicals                781,400      866,400       (85,000)
                                     ----------   ----------   -----------
              Total                  $5,982,400   $6,534,500   $  (552,100)
                                     ==========   ==========   ===========

     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.  Fairmount  is aware of this
possibility  and is taking steps to  substitute  new  products  that are used in
making  photographic paper and increase its market share of existing products by
broadening its customer base.


     Sales of plastics  additives  decreased from $833,400 in the second quarter
of 2000 to  $582,100  in the second  quarter of 2001,  a decrease of $251,300 or
30.2 %. For the six months ended June 30, 2001,  sales were $1,370,400  compared
to $2,238,900  for the six months ended June 30, 2000, a decrease of $868,500 or
38.8 %. The decrease in plastic  additive  sales is due to lower  shipments to a
major European  customer and an Asia customer.  The sales decrease also reflects
the negative  effect of the weak EURO during the first  quarter of 2001. To meet
competition,  Fairmount  sales  are at a fixed  EURO  price and the  Company  is
therefore subject to currency exchange rate changes.  Fairmount sells at a fixed
EURO price for competitive  reasons.  As in prior years,  Fairmount  expects the
downward pressure on plastic additive prices to continue.


     Hydrazine  blend sales decreased from $631,500 during the second quarter of
2000 to $532,900, a decrease of $98,600. Sales for the six months ended June 30,
2001 were  $978,900  compared to  $1,212,000  during the same period in 2000,  a
decrease of $233,100. The decrease in hydrazine blend sales is mainly due to the
loss of customers and customer's demand was lower.



                                       12
<PAGE>


     Hydrazine  derivatives increased from $270,300 during the second quarter of
2000 to $1,119,900  during the second  quarter of 2000, an increase of $849,600.
Sales for the six  months  ended  June 30,  2001  were  $1,604,300  compared  to
$482,900 for the same period in 2000, an increase of  $1,121,400.  This increase
is due to a new customer and  Fairmount  expects  shipments to this  customer to
remain at the first quarter level for the balance of 2001.


     Each class of similar  products  contributed  the  following  percentage of
total sales in each of the following periods:

                                          Three Months Ended    Six Months Ended
                                                June 30,             June 30,
                                          ------------------    ----------------
                                            2001      2000       2001     2000
                                           -----     -----      -----    -----
     Imaging & photographic chemicals       14.7%     28.80%     20.9%    26.5%
     Hydrazine blends                       16.7%     20.6%      16.4%    18.5%
     Hydrazine derivatives                  35.0%      8.8%      26.8%     7.4%
     Plastic additives                      18.2%     27.1%      22.9%    34.3%
     Specialty chemicals                    15.4%     14.7%      13.0%    13.3%
                                           -----     -----      -----    -----
                                           100.0%    100.0%     100.0%   100.0%
                                           =====     =====      =====    =====

     The gross  profit for the three  months of June 30,  2001 was  $171,300,  a
decrease of $506,100  compared to the same period in 2000. As a percent of sales
the gross margin was 5.4 % compared to 22.1 % during 2000.

     The gross  profit for the six months  ended June 30,  2001 was  $95,300,  a
decrease of $1,337,800  compared to 2000. As a percent of gross sales, the gross
margin  during the first six months of 2000 was 1.6 % compared  to 21.9 % during
2000.  This decrease was due in part to lower sales volume and the products sold
had a lower gross  profit  compared  the  products  sold in 2000.  In  addition,
production was lower,  but  production  expenses were higher in 2001 compared to
the same period in 2000

     Selling,  general and  administrative  expenses increased by $18,900 in the
second  quarter of 2001  compared to the same period in 2000.  Selling  expenses
increased $27,700,  and general and administrative  expenses decreased by $8,800
in the second  quarter of 2001 compared to the second  quarter of 2000 There was
no material change in selling,  general and administrative expenses from the six
months ended June 30,200 compared to the same period in 2000.

     Operating  income was  $83,900  in the three  months  ended  June 30,  2000
compared to a loss of $437,700 in 2001.  For the six months  ended June 30, 2000
the operating income was $199,600 compared to an operating loss of $1,136,900 in
the same period in 2001.

     Interest  expense was higher in the three month and six month  period ended
June 30, 2001 versus the same period in 2000, due to the increased interest rate
on the  remaining  debt  owed to  affiliated  parties  per the  promissory  note
agreements and increased interest on bank borrowings.

     During 2000, the Company  received gross insurance  proceeds of $333,100 as
partial  settlement of the property losses sustained from a fire on November 10,
1999.  During  2001,  Fairmount  received  insurance  proceeds of  $53,100,  for
property damaged caused by a delivery truck.

     During the six months  ended June 30, 2001 the  Company  recorded a foreign
exchange currency loss of approximately $50,200.



                                       13
<PAGE>


     The Company as a result of net  operating  losses  utilized has recorded no
provisions for income taxes. A valuation allowance has been recorded at June 30,
2001 and 2000 for that portion of deferred tax assets,  which are not  presently
considered more likely than not to be realized.



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 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," 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.



Item 3. Quantitative and Qualitative Disclosures about Market Risk

     In the normal course of operations,  the Company is exposed to market risks
arising from adverse changes in interest rates. Market risk is defined for these
purposes as the potential change in the fair value of debt instruments resulting
from an adverse  movement in interest rates.  The Company's  short-term  working
capital borrowings have historically borne interest based on the prime rate. The
Company believes that its exposure to market risk relating to interest rate risk
is not material.

     The Company has no derivative financial instruments or derivative commodity
instruments,  nor does the Company have any financial  instruments  entered into
for trading or hedging purposes.  To meet competition,  the Company sales to one
European  customer at a fixed EURO price and the Company is therefore subject to
currency  exchange  rate  changes.  Fairmount  sells at a fixed  EURO  price for
competitive reasons.







                                       14
<PAGE>


                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings

During the quarter ended June 30, 2001 the Company  settled the toxic tort claim
filed  against the Company on December 15, 1999.  This claim was settled on June
26, 2001, for an immaterial  amount.  During the quarter ended June 30, 2001 the
Company  settled  the breach of  contract  claim  filed  against  the Company on
October  10,  2000.  This claim was  settled  on July 9, 2001 for an  immaterial
amount.  There were not other material  changes in the potential claims reported
by the  Company  in its  Annual  Report on Form  10-KSB in "Item 1.  Business  -
Environmental Laws and Government Regulations".

     Item 4. Submission of Matters to Vote of Security Holders

     On June 7, 2001 the Company held its annual meeting of  stockholders at its
offices,  117  Blanchard  Street  Newark,  NJ 07105.  There were two issues that
shareholders  voted  on;  the  election  of  the  Board  of  Directors  and  the
appointment  of  independent  auditors  for 2001.  There were  8,292,866  shares
eligible to vote.  All five  nominees  were elected to the Board of Directors as
follows:

     Nominee                            In Favor                   Withheld
     -------                            --------                   --------
     Marshall Beil                      6,593,228                 1,597,703
     Glen A. DaMota                     8,189,628                     1,303
     Beno Hubler                        8,189,628                     1,303
     Dr. Reidar T. Halle                6,593,228                 1,597,703
     Richard Mizrack                    6,593,228                 1,597,703

     KPMG LLP was ratified as independent auditors for 2001 as follows:

     In Favor:                          8,178,906
     Against:                               1,250
     Abstain:                              10,775

Item 6. Exhibits and Reports on Form 8-K

     (a)  Exhibits

             None


     (b)  No reports have been filed on Form 8-K during the quarter ended
          June 30, 2001.








                                       15
<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





August 15, 2001                                  /S/ Reidar Halle
---------------                                  ------------------------
Date                                             Reidar T. Halle
                                                 Chief Executive Officer &
                                                 President



August 15, 2001                                  /S/ William C. Kaltnecker
---------------                                  -------------------------
Date                                             William C. Kaltnecker
                                                 Controller








                                       16