UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB



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

For the quarterly period ended                   March 31, 1998
                              ---------------------------------

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)

 Registrant's telephone number, including area code: (973)-344-5790
                                                    -----------------


     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 [ ]



    State 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 May 7, 1998.

     Transitional small business disclosure format (check one):

                                YES [ ] NO [ X ]







<PAGE>



                          PART I. FINANCIAL INFORMATION

                          FAIRMOUNT CHEMICAL CO., INC.

               Statements Of Income (Loss) and Accumulated Deficit

               For The Three Months Ended March 31, 1998 and 1997
                                   (Unaudited)

(Dollar amounts rounded to hundreds, except per share data)

<TABLE>
<CAPTION>
                                                     1998                               1997
                                                     ----                               ----

<S>                                                <C>                                 <C>       
Net Sales                                          $3,217,800                          $3,156,800
   Cost of goods sold                               2,465,600                           2,742,000
   ------------------                               ---------                           ---------
Gross Profit                                          752,200                             414,800

Research & development                                 85,000                             116,600

Selling, general and
   administrative expense                             467,000                             509,000
   ----------------------                             -------                             -------

Operating income/(loss)                               200,200                            (210,800)

Interest expense                                       35,900                              19,000
Other expense (income)                                (16,300)                                900
Insurance proceeds                                 (1,140,100)                                 --
-------------------                                 -----------                        ----------
Net  Income/(loss) before provision for             1,320,700                            (230,700)
   income taxes

Provision for income taxes                                 --                                  --
--------------------------                          ----------                          ---------

Net Income/(loss)                                  $1,320,700                          $ (230,700)

Accumulated Deficit
   Balance December 31                            (14,866,200)                        (14,570,000)
   -------------------                            ------------                       -------------

Accumulated Deficit
   Balance March 31                              $(13,545,500)                       $(14,800,700)
   ================                              =============                       ============

Basic earnings per share                          $    .16                           $   (.03)
========================                           ========                           ======== 


Diluted earnings per share                        $    .10                           $   (.03)            
==========================                         ========                           ========              
</TABLE>

See Accompanying Notes to Financial Statements


                                      - 2 -

<PAGE>



                          FAIRMOUNT CHEMICAL CO., INC.

                                 Balance Sheets
(Dollar amounts rounded to hundreds)
<TABLE>
<CAPTION>
                                                            March 31, 1998                 December 31, 1997
                                                                                (Unaudited)
Assets
   Current Assets:

<S>                                                      <C>                                 <C>        
   Cash                                                  $    1,930,200                      $   711,800
   Accounts receivable-trade                                  1,874,200                        1,845,700
   Inventories                                                2,171,900                        1,709,600
   Prepaid expenses                                             290,000                          282,500
   Other current assets                                          97,200                          102,800
   --------------------                                          ------                          -------
   Total Current Assets                                       6,363,500                        4,652,400
   --------------------                                      ----------                        ---------
   Property, plant and equipment
     less accumulated depreciation of
     $4,114,400 and $3,934,400                                4,353,400                        4,504,400
   Other assets                                                  44,900                           44,900
   -----------------------                                    ---------                        ---------
Total Assets                                                $10,761,800                       $9,201,700
============                                               ============                      ===========

Liabilities and
Stockholders' Equity
Current Liabilities:
   Accounts payable                                        $    845,700                      $   499,900
   Accrued compensation                                          95,400                           55,900
   Other pension liability                                      185,400                          194,800
    Other accrued liabilities                                   203,200                          127,000
    Short-term bank borrowings                                  187,100                          387,100
   ----------------------------                                 -------                          -------
   Total Current Liabilities                                  1,516,800                        1,264,700
   -------------------------                              -------------                   --------------
   Promissory Notes to affiliated parties                     1,571,600                        1,571,600
   Long-term bank borrowings                                     21,200                           33,900
   Accrued pension liability                                    486,300                          486,300
Stockholders' Equity
   Preferred stock, par value $1 per share
     authorized - 10,000,000 shares;  5,400,000
     shares issued and outstanding                            5,400,000                        5,400,000
   Common stock, par value $1 per share
     authorized - 15,000,000 shares; 8,293,366 shares
     issued and outstanding in 1998 and 1997                  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                                      (13,545,500)                     (14,866,200)
   Additional minimum liability                                (297,500)                        (297,500)
   -----------------------------                               ---------                        ---------

   Total Stockholders' Equity                                 7,165,900                        5,845,200
   ----------------------------                              ----------                        ---------

Total Liabilities and
Stockholders' Equity                                       $ 10,761,800                      $ 9,201,700
=====================                                      ============                      ===========
</TABLE>

See accompanying Notes to Financial Statements.

                                      - 3 -

<PAGE>




                          FAIRMOUNT CHEMICAL CO., INC.

                            Statements of Cash Flows

               For The Three Months Ended March 31, 1998 and 1997
                                   (Unaudited)

(Dollar amounts rounded to hundreds)

<TABLE>
<CAPTION>
                                                                    1998              1997
                                                                    ----              ----
Cash Flow From Operating Activities:
<S>                                                             <C>               <C>           
   Net income/(loss)                                            $  1,320,700      $    (230,700)
Adjustments to reconcile net income to
   net cash provided by operating activities:
   Depreciation                                                      180,000            143,800

Increase (decrease) from changes in:
   Accounts receivable-trade                                         (28,500)           22,200
   Inventories                                                      (462,300)         (306,800)
   Prepaid expenses                                                   (7,500)             (500)
   Other assets                                                        5,600            11,400
   Accounts payable                                                  345,800           371,300
   Accrued compensation                                               39,500            52,000
   Other liabilities                                                  66,800           (11,300)
   -----------------                                              -----------         ---------
Cash Flow  Provided  by Operating Activities                       1,460,100            51,400
--------------------------------------------                      -----------         ---------

Cash Flow Used in Investing Activities:
   Capital expenditures                                              (29,000)         (117,100)
   --------------------                                           -------------       ---------

Cash Flow Used in Financing Activities:
   Bank loan                                                        (212,700)          (12,700)
   ---------------                                                   ---------         --------
   Net Cash Used in Financing Activities                            (212,700)          (12,700)
   -------------------------------------                         -------------         --------

Increase/(Decrease) in Cash                                        1,218,400           (78,400)


Cash at Beginning of Period                                          711,800           427,900
---------------------------                                          --------          -------

Cash at End of Period                                           $  1,930,200       $   349,500
=====================                                            ============       ===========

Supplemental Disclosure of Cash Flow Information:

Interest paid                                                   $     35,900       $    19,000
                                                                      =======           ======

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

See accompanying Notes to Financial Statements.




                                      - 4 -

<PAGE>




                          FAIRMOUNT CHEMICAL CO., INC.
                          NOTES TO FINANCIAL STATEMENTS
                                 March 31, 1998

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 1997 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.

RECLASSIFICATIONS

         Certain prior year amounts have been  reclassified  to conform with the
1998 presentation.

REVENUE

         Revenue is  recognized  on the date of invoice to a customer  (invoices
are prepared on or after the date of shipment).

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.

         No  provisions  for income taxes have been recorded by the Company as a
result of net operating losses utilized. A valuation allowance has been recorded
at March 31, 1998 and 1997 for that portion of deferred tax assets which are not
presently considered more likely than not to be realized.

FINANCIAL STATEMENTS

         The statements of income (loss) and  accumulated  deficit for the three
months ended March 31, 1998 and 1997, the statements of cash flows for the three
months ended March 31, 1998 and 1997, and the balance sheet as of March 31, 1998
are unaudited. The balance sheet as of December 31, 1997 is audited.





                                      - 5 -

<PAGE>



Notes to Financial Statements (Continued)

Note 2.  Earnings Per Share
---------------------------

         In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial  Accounting  Standards ("SFAS") No. 128, "Earnings
Per Share" ("SFAS 128"). SFAS 128 became effective for financial  statements for
both interim and annual periods ending after December 15, 1997. It also required
all prior period  earnings per share data  presented to be restated.  Under SFAS
128, basic earnings per share are based on the net  income/(loss) of the Company
since there were no preferred dividends paid in the periods ending March 31,1998
or March 31, 1997. The net income of the Company for the period ending March 31,
1998 is  divided  by the  weighted  average  number of  shares  of common  stock
outstanding  adjusted  for  dilutive  common  stock  equivalents.  Common  stock
equivalents  include shares  outstanding  under stock option plans and preferred
stock,  as converted to common stock in the ratio of one-to-one.  The share base
for the period  ending  March 31, 1998 was  13,693,366  (based on  8,293,366  of
common shares and 5,400,000 of convertible  preferred  shares).  The net loss of
the Company for the period ending March 31, 1997 is divided by only the weighted
average number of shares of common stock outstanding  (8,293,366 shares). Due to
the  Company  reporting  a loss  for the  period  ending  March  31,  1997,  the
conversion of the preferred stock is not assumed as the result is anti-dilutive.
The exercise price exceeded the average market price for all of the  outstanding
stock options of the Company  during the periods ending March 31, 1998 and March
31, 1997 and therefore,  it is not assumed that any options are  exercisable for
purposes of calculating earnings per share.

Note 3.  Long Term Debt To Affiliated Parties
---------------------------------------------

         A.  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.

         B. 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 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.






                                      - 6 -

<PAGE>



Notes to Financial Statements (Continued)


         All of the  promissory  notes  described  above have similar  terms and
conditions.  Interest  on the unpaid  principal  from  January  1, 1997  through
December 31, 1997 is at the rate of 6% per annum.  Interest payable from January
1, 1998  through  December  31,  1998 is at the rate of 7% per  annum.  Interest
payable thereafter commencing with 1999, is at the corporate base rate posted by
Citibank,  N.A.  (or its  successor)  on the last  banking  day of the  previous
calendar  year. All of the promissory  notes are  subordinated  to the Company's
line of credit  financing  with  Summit  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  Summit  Bank and to the new
promissory  notes,  totaling  $1,080,000,  that  replaced  the Credit  Facility.
Interest paid on the promissory  notes/long-term  debt to affiliated parties was
$27,500  and  $15,000  for the three  months  ended March 31, 1998 and March 31,
1997, respectively.


         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 Fairmount  Chemical,  as
well as the  promissory  notes  held by the  Leistner  Estate.   The  Trust will
terminate on June 19, 2002.

         All loans payable and future  borrowings under the Credit Facility have
been  collateralized  by the accounts  receivable and machinery and equipment of
the Company.

Note 4.  Majority Stockholder
-----------------------------

         The Howard R. Leistner,  Hedi Mizrack and Gilbert Leistner  Irrevocable
Grantor  Trust  owns  approximately  57.8%  of  the common stock of the Company.
Howard R. Leistner, Hedi Mizrack and Gilbert Leistner each have sole voting  and
investment  power  over   1,596,400  common  shares  of  the  total of 4,789,200
of   common   shares  held  in  the  Trust.   The Trust also  owns all 5,400,000
outstanding shares of the cumulative  convertible preferred stock.

Note 5.  Inventory
------------------

     Inventories  at March 31,  1998 and  December  31,  1997  consisted  of the
following:

                                March 31, 1998       December 31, 1997
                                ---------------      -----------------

            Finished Goods        $1,662,000           $  1,452,800
            Raw Material             509,900                256,800
                                 -------------          -----------
                                  $2,171,900           $  1,709,600
                                 ============           ===========








                                      - 7 -

<PAGE>



Notes to Financial Statements (Continued)


Note 6.  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  parties  will  bring  claims  against
Fairmount   alleging  that  it  is  at  least  partially   responsible  for  the
contamination.

































                                      - 8 -

<PAGE>




                          FAIRMOUNT CHEMICAL CO., INC.

                           MANAGEMENT'S DISCUSSION AND
                       ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS
                                 March 31, 1998

Liquidity and Capital Resources
-------------------------------

         To meet its liquidity requirements,  including its capital program, the
Company  accesses funds generated from  operations,  its available cash balances
and its bank line of credit with Summit Bank in Hackensack, New Jersey. The line
of credit is due for renewal  during the second  quarter of 1998.  Management is
not aware of any issue that would violate the covenants in the credit  agreement
with Summit Bank or prevent the renewal of the Company's line of credit.

         The  Company's  working  capital  increased by  $1,412,000 in the first
three  months of 1998  compared to a decrease of $216,700 for the same period in
1997.  The increase was primarily  due to a payment of $1,140,100  received form
the  Company's  property  insurance  carrier as part of the  settlement  for the
property  damages  sustained from a dryer  explosion  during March,  1997.  Also
contributing to the increase in working capital was higher  inventory - $462,300
and lower bank borrowings - $200,000.  The inventory was higher due to increased
production  of two major  products.  One product's  production  was increased to
avoid projected  production  bottlenecks around mid-year and the other product's
inventory was higher due to a large  scheduled  shipment due to be made early in
the second quarter of 1998.  Bank borrowings were lower during the first quarter
of 1998 as the Company paid down some of its borrowings from the working capital
line of credit.  The  increase in working  capital in these areas was  partially
offset by higher accounts payable - $345,800 and higher other accrued expenses -
$76,200.  Accounts  payable were higher due to the Company's  biweekly check run
not  being  due to go out  until  early in the  month of  April.  Other  accrued
expenses  increased due mainly to the accrual of plant  shutdown  expenses for a
planned two week  maintenance  shutdown  during July.  As a result of this plant
maintenance shutdown, shipments will be curtailed during July. This accrual more
evenly matches  revenues with  expenses,  by allocating the two weeks of payroll
costs during the July shutdown to the other months of the year.

         On January 13, 1998,  Mr. Todd K. Walker  resigned as President,  Chief
Executive  Officer,  Chairman  of the Board of  Directors  and as a director  of
Fairmount  Chemical Co., Inc. Dr. Reidar Halle,  a director of the Company,  was
retained to serve as Chief Executive  Officer of the Company on an interim basis
until an employment agreement is negotiated. Howard R. Leistner, also a director
of the  Company,  was  appointed  as Chairman  of the Board.  One of the current
directors,  James F. Gilday,  declined to stand for  reelection at the Company's
upcoming  annual  meeting of  shareholders.  The  Company has not  identified  a
successor at this time, and there will be a vacancy on the Board in the interim.





                                      - 9 -

<PAGE>



Liquidity and Capital Resources (Continued)


         The Company's  capital  expenditures in 1998 have been for the purchase
of computers, production pumps and filters and a laboratory effluent system.

Results of Operations
---------------------

         Net sales  for the first  three  months  of 1998  were  $3,217,800,  an
increase of $61,000 or 1.9% versus the same period in 1997.  The increase in net
sales was primarily  due to an increase in sales volumes of imaging  chemicals -
$573,500;  partially offset by lower volumes of specialty  chemicals - $298,200,
lower  volumes  and prices of polymer  additives - $117,500  and lower  volumes,
partially  offset  by higher  prices  of  hydrazine  derivatives  - $52,900  and
hydrazine blends - $43,900.


         The gross  profit for the first  three  months of 1998 was  $752,200 an
increase of $337,400 or 81.3%  versus the same period in 1997.  The increase was
mainly due to the higher sales volume of high margin imaging chemicals,  coupled
with lower  manufacturing  payroll  expenses  due to the  Company  restructuring
during  the  second  quarter  of 1997;  partially  offset  by lower  volumes  of
specialty chemicals,  polymer additives and hydrazine derivatives,  coupled with
higher environmental expenses mainly due to increased waste disposal costs.

         Research   and   development   expenses   and   selling,   general  and
administrative  expenses decreased due to reductions in payroll expenditures due
to the restructuring during the second quarter of 1997.

         Interest  expense  was higher  during the first  quarter of 1998 versus
1997 due to an increase of 1% in the interest rate on the remaining debt owed to
affiliated  parties per the new promissory note agreements,  coupled with higher
bank borrowings for most of the first quarter of 1998 from the Company's working
capital line of credit.

         During January,  1998 the Company received a payment of $1,140,100 from
its  property  insurance  carrier  as part of the  settlement  for the  property
damages  sustained  from a March,  1997 dryer  explosion.  This  payment  was an
addition to a $200,000  initial  payment  received  during the second quarter of
1997.  The Company is continuing to negotiate with its carrier for an additional
amount in final  settlement of this claim. The amount the Company is negotiating
for is somewhere  between the two amounts already  received.  The outcome of the
final  resolution  of this claim is  uncertain.  For the period ending March 31,
1998 the  effect  of the  $1,140,100  payment  on basic  earnings  per share and
diluted earnings per share was $.14 per share and $.08 per share, respectively.

         Basic  earnings and diluted  earnings  per share for the period  ending
March 31, 1998,  excluding the receipt of the  $1,140,100 of insurance  proceeds
was $.02 per share and $.01 per share, respectively.

         No  provisions  for income taxes have been recorded by the Company as a
result of net operating losses utilized. A valuation allowance has been recorded
at March 31, 1998 and 1997 for that portion of deferred tax assets which are not
presently considered more likely than not to be realized.




                                     - 10 -

<PAGE>




PART II - OTHER INFORMATION


Reports on Form 8-K


A report on Form 8-K, dated January 13, 1998, was filed during the first quarter
of 1998,  reporting  the  resignation  of Todd K.  Walker  as  President,  Chief
Executive  Officer,  Chairman  of the Board of  Directors  and as a director  of
Fairmount  Chemical Co.,  Inc. Dr.  Reidar Halle,  a director of the Company was
retained at this time to serve as Chief  Executive  Officer of the Company on an
interim  basis until a President and Chief  Executive  Officer was chosen by the
Board.  Howard R.  Leistner,  also a  director  of the  Company,  was  appointed
Chairman of the Board.






































                                     - 11 -

<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 7, 1998                               S/Dr. Reidar Halle
-----------                               ------------------
Date                                      Dr. Reidar Halle

                                          Chief Executive Officer and President




May 7, 1998                               S/James F. Gilday
-----------                               -----------------
Date                                      James F. Gilday
                                          Chief Financial Officer &
                                          Secretary






                                     - 12 -