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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 June 30, 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 August 9,
2002

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


                                      INDEX
                                      -----
                                                                        PAGE
                                                                        ----

PART I    FINANCIAL INFORMATION

Item 1.   Financial Statements

          Statements of Operations
            Three and six months ended June 30,
            2002 and 2001                                                 3

          Balance Sheets
            June 30, 2002 and December 31, 2001                           4

          Statement of Changes in Stockholders' Deficit
            and Comprehensive Loss for the six
            months ended June 30, 2002 and 2001                           5

          Statements of Cash Flows
            Six months ended June 30, 2002 and 2001                       6

          Notes to Financial Statements                                7-13


Item 2.   Management's Discussion and Analysis or
            Plan of Operations                                        14-19




PART II   OTHER INFORMATION

Item 1.   Legal Proceedings                                              20

Item 2.   Changes in Securities                                          20

Item 3.   Defaults upon Senior Securities                                20

Item 4.   Submission of Matters to Vote of Securities Holders            21

Item 5.   Other Information                                              21

Item 6.   Exhibits and Reports on Form 8-K                               21


                                        2
<PAGE>
                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                          FAIRMOUNT CHEMICAL CO., INC.
                          ----------------------------
                            STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE><CAPTION>
                                           THREE MONTHS ENDED                 SIX MONTHS ENDED
                                     ------------------------------    ------------------------------
                                     JUNE 30, 2002    JUNE 30, 2001    JUNE 30, 2002    JUNE 30, 2001
                                     -------------    -------------    -------------    -------------
<S>                                  <C>              <C>              <C>              <C>
Net sales                            $   1,310,400    $   3,198,400    $   2,738,800    $   5,982,400
Cost of goods sold                       1,399,300        3,027,100        2,985,800        5,887,100
                                     -------------    -------------    -------------    -------------
     Gross (loss) profit                   (88,900)         171,300         (247,000)          95,300

Research and development                    83,300          100,400          170,600          202,900
Selling, general and
  administrative expense                   356,500          508,600          805,900        1,029,300

     Operating loss                       (528,700)        (437,700)      (1,223,500)      (1,136,900)

Interest expense                           (55,000)         (84,500)         (98,700)        (114,600)
Insurance proceeds                            --             53,100             --             53,100
Foreign currency exchange
     Income (loss)                            --                600             --            (50,200)
Other income, net                            5,700           44,600            4,400           34,600
                                     -------------    -------------    -------------    -------------
     Loss before income taxes             (578,000)        (423,900)      (1,317,800)      (1,214,000)

Income taxes                                  --               --               --               --
                                     -------------    -------------    -------------    -------------
     Net loss                        $    (578,000)   $    (423,900)   $  (1,317,800)   $  (1,214,000)
                                     =============    =============    =============    =============
Loss per common share
     Basic                           $        (.07)   $        (.05)   $        (.16)   $        (.15)
                                     =============    =============    =============    ==============

     Diluted                         $        (.07)   $        (.05)   $        (.16)   $        (.15)
                                     =============    =============    =============    =============
Common shares and equivalents
  outstanding
     Basic                               8,292,866        8,292,866        8,292,866        8,292,866
                                     =============    =============    =============    =============

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




                 See accompanying notes to financial statements.

                                        3
<PAGE>
                          FAIRMOUNT CHEMICAL CO., INC.
                          ----------------------------
                                 BALANCE SHEETS
<TABLE><CAPTION>
                                                     JUNE 30,      DECEMBER 31,
                                                       2002            2001
                                                   ------------    ------------
                                                    (Unaudited)
<S>                                                <C>             <C>
ASSETS
------
   CURRENT ASSETS:
     Cash                                          $    143,400    $    494,800
     Accounts receivable, less allowance
       for doubtful accounts of $59,700
       in 2002 and 2001                                 530,600       1,242,100
     Inventories                                        887,500         884,900
     Prepaid expenses                                    97,300         124,100
     Other current assets                                 9,000           9,100
                                                   ------------    ------------
          Total Current Assets                        1,667,800       2,755,000

   Property, plant and equipment
     Less accumulated depreciation of
     $6,497,200 and $6,245,800 in 2002
     and 2001, respectively                           3,325,000       3,576,400
   Other assets                                             700             700
                                                   ------------    ------------

          Total Assets                             $  4,993.500    $  6,332,100
                                                   ============    ============

LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
   CURRENT LIABILITIES:
     Short-term bank borrowings                         685,000         700,000
     Promissory note payable                            533,600            --
     Accounts payable                                   743,400       1,725,100
     Accrued pension liability                          150,000         130,400
     Accrued interest to affiliated parties              99,500          62,200
     Other accrued liabilities                          725,900         276,700
     Promissory notes to affiliated parties           1,571,600       1,571,600
                                                   ------------    ------------
          Total Current Liabilities                   4,509,000       4,466,000

   Accrued pension liability                            118,700         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                              (20,242,500)    (18,924,700)
   Accumulated other comprehensive loss -
     additional minimum pension liability              (400,600)       (400,600)
                                                   ------------    ------------
          Total Stockholders' Deficit                (5,034,200)     (3,716,400)
                                                   ------------    ------------
   Total Liabilities and Stockholders' Deficit     $  4,993,500    $  6,332,100
                                                   ============    ============
</TABLE>
                 See accompanying notes to financial statements.

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

                                                     SIX MONTHS ENDED JUNE 30,
                                      ------------------------------------------------------
                                                 2002                        2001
                                      --------------------------  --------------------------
                                                   COMPREHENSIVE               COMPREHENSIVE
                                                        LOSS                        LOSS
                                                   -------------               -------------
<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,             (18,924,700)                              (14,246,800)
     Net loss                           (1,317,800)   (1,317,800)   (1,214,000)   (1,214,000)
                                      ------------                ------------
     Balance at June 30,               (20,242,500)                (15,460,800)

Accumulated other comprehensive
     loss:
            Balance at January 1,         (400,600)                   (177,400)
                                                    ------------                ------------
            Comprehensive loss                        (1,317,800)                 (1,214,000)
                                                    ============                ============
                                      ------------                ------------
Balance at June 30,                       (400,600)                   (177,400)

Treasury stock:
     Balance at June 30,                      (500)                       (500)
            (500 shares)
                                      ------------                ------------
Total Stockholders' Deficit           $ (5,034,200)               $    (29,300)
                                      ============                ============
</TABLE>





                 See accompanying notes to financial statements

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

                                                      SIX MONTHS ENDED JUNE 30,
                                                     --------------------------
                                                         2002           2001
                                                     -----------    -----------
CASH FLOW FROM OPERATING ACTIVITIES:
    Net loss                                         $(1,317,800)   $(1,214,000)
   Adjustments to reconcile net loss
        to net cash used in
        operating activities:
             Depreciation                                251,400        330,000
             Insurance proceeds                             --          (53,100)

   Increase (decrease) from changes in:
        Accounts receivable-trade                        711,500       (275,700)
        Inventories                                       (2,600)      (303,500)
        Prepaid expenses                                  26,800        (73,200)
        Other current assets                                 100         (5,100)
        Accounts payable                                (308,100)       767,000
        Accrued interested to affiliated parties          37,300           --
        Other liabilities                                405,000         50,000
                                                     -----------    -----------

               Net Cash Used in
                     Operating Activities               (196,400)      (877,600)

CASH FLOW PROVIDED BY
   INVESTING ACTIVITIES:
     Capital expenditures                                   --          (45,200)
     Insurance proceeds                                     --           53,100
                                                     -----------    -----------
         Net Cash Provided By
          Investing Activities                              --            7,900

CASH FLOW (USED IN) PROVIDED BY
 FINANCING ACTIVITIES:
   Bank repayment                                        (15,000)          --
   Repayment of promissory note                         (140,000)
   Bank borrowing                                           --          500,000
                                                     -----------    -----------

        Net Cash (Used In) Provided by
             Financing Activities                       (155,000)       500,000
                                                     -----------    -----------
DECREASE IN CASH                                        (351,400)      (369,700)

Cash at Beginning of Period                              494,800      2,093,900
                                                     -----------    -----------
CASH AT END OF PERIOD                                $   143,400    $ 1,724,200
                                                     ===========    ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid                                        $    30,700    $   114,600
                                                     ===========    ===========
Income taxes paid                                    $      --      $      --
                                                     ===========    ===========
NON CASH FINANCING ACTIVITIES
     Reclassification of accounts payable to note
       payable                                       $   673,600    $      --
                                                     ===========    ===========

                 See accompanying notes to financial statements

                                        6
<PAGE>
                          FAIRMOUNT CHEMICAL CO., INC.
                          ----------------------------
                          NOTES TO FINANCIAL STATEMENTS
                            June 30, 2002 (Unaudited)


NOTE 1. BASIS OF PRESENTATION

     The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles in the
United States of America for interim financial information and with the
instruction to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they
do not include all the information and footnotes necessary for a comprehensive
presentation of financial position, results of operations and cash flows

     It is management's opinion, however, that all material adjustments
(consisting of normal recurring accruals) have been made which are necessary for
a fair financial statement presentation. These financial statements should be
read in conjunction with the consolidated financial statements and notes thereto
included in Fairmount's Form 10-KSB filed for December 31, 2001.

     The results for the interim period are not necessarily indicative of the
results to be expected for the full year.

NOTE 2. 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 second half of
2002. The Company's working capital, defined as current assets less current
liabilities, decreased by $1,130,200 in the six months ended June 30, 2002,
resulting in negative working capital of $2,841,200 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 5, 6, and 7, 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. On August 2 2002,
Fairmount Chemical Co., Inc. laid off an additional 9 hourly employees at its
Newark, NJ facility for an indefinite period. Fairmount is in discussions with
other manufacturers about entering into tolling agreements, whereby those
manufacturers would produce some of Fairmount's products. These actions are
deemed necessary due to Fairmount's deteriorating business condition and lack of
financial resources to purchase raw materials and supplies.

     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, filed a voluntary petition for
reorganization under Chapter 11 of the U.S. Bankruptcy Code. Polaroid, or

                                        7
<PAGE>
Notes to Financial Statements (Continued)

a company formed with the assets purchased from Polaroid, is operating and
Fairmount expects that it business with Polaroid will remain at the 2001 sales
level. Sales to Polaroid during the first half of 2002 were $465,300, compared
to $736,700 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. 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. Upon execution of the agreement, Fairmount paid an extension fee of
$14,000 and interest is automatically deducted from Fairmount's account.
Fairmount has not made the scheduled principal payments and as of August 2,
2002, is in default of payments totaling $45,000.

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

NOTE 3. 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.

                                        8
<PAGE>
Notes to Financial Statements (Continued)

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.

NOTE 4. INVENTORIES

     Inventories at June 30, 2002 and December 31, 2001 consisted of:

                                                 JUNE 30,       DECEMBER
                                                   2002         31, 2001
                                                ---------      ---------
     Finished goods                             $ 755,000      $ 752,400
     Raw materials                                132,500        132,500
                                                ---------      ---------
       Total                                    $ 887,500      $ 884,900
                                                =========      =========

     The reserve for obsolete inventory was $249,400 at June 30, 2002 and
December 31, 2001.

NOTE 5. 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

                                        9
<PAGE>
Notes to Financial Statements (Continued)


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 9.5% 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 six
months ended June 30, 2001 was $74,600. However, because of the Fairmount's
financial difficulties, interest payments have not been made since July 2001.
The total unpaid interest as of June 30, 2002 was $99,500. 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 6. 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
since May 2002 and as of August 2, 2002, the Company is in default of payments
totaling $305,900, including interest of $25,900.

NOTE 7. LONG-TERM DEBT
                                             JUNE 30,      DECEMBER 31,
                                               2002           2001
                                             --------       --------
     Working Capital Line of Credit -
     Current installment                     $685,000       $700,000
                                             ========       ========

                                       10
<PAGE>
Notes to Financial Statements (Continued)


     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
with the extension of the facility. The fair value of the warrants were
determined by the Company to be inmaterial. The warrants will expire March 1,
2005. As of June 30, 2002 the warrants have not been issued. 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.

     Fairmount has not made the June, July, and August scheduled payments and as
of August 2, 2002, Fairmount is in default of principal payments totaling
$45,000. Interest is automatically deducted from Fairmount's account.

NOTE 8. 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 2002 and 2001. Due to the Company reporting
losses for 2002 and 2001 the exercise of options and the conversion of the
preferred stock is not assumed, as the result would be anti-dilutive.
Accordingly, basic loss per share is equal to diluted loss per share. As of June
30, 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 9. FOREIGN SALES AND MAJOR CUSTOMERS

     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, filed a voluntary petition for
reorganization under Chapter 11 of the U.S. Bankruptcy Code. Polaroid, or a
company formed with the assets purchased from Polaroid, is operating and
Fairmount expects that it business with Polaroid will remain at the 2001 sales
level. Sales to Polaroid during the first half of 2002 were $465,300, compared
to $736,700 during the same period of 2001. Polaroid accounted for $995,700 or
9.9% of sales during year ended December 31, 2001.

NOTE 10. ENVIRONMENTAL MATTERS AND COMMITMENTS ANDCONTINGENCIES

     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.

                                       11
<PAGE>
Notes to Financial Statements (Continued)


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 a 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.

     During 2001, the NJDEP conducted an air compliance inspection of the
Company's facility. As a result of certain alleged violations observed during
the inspection, an administrative order and penalty assessment was issued by the
NJDEP and an administrative hearing was requested. In the interim, the Company
initiated efforts to bring the facility into compliance and obtained necessary
compliance extensions. In early 2002, the NJDEP refused to grant any additional
extensions and approved the request for an administrative hearing. Discovery is
currently underway.

     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.

     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 11. 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.
                                       12
<PAGE>
Notes to Financial Statements (Continued)



     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 reclassified upon adoption. The adoption of SFAS
No. 145 is not expected to have a significant impact on Fairmount's financial
statements

     In June 2002, SFAS No. 146 "Accounting for Costs Associates with Exit or
Disposal Activities" was issued. This statement provides guidance on the
recognition and measurement of liabilities associated with disposal activities
and is effective for Fairmount on January 1, 2003. Given that SFAS No. 146 was
issued in June 2002 and is not yet effective, the impact on the Company's
financial position or results of operations from adopting SFAS No. 146 has not
been determined.

NOTE 12. SUBSEQUENT EVENTS

     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. On August 2, 2002,
Fairmount Chemical Co., Inc. laid off an additional 9 hourly employees at its
Newark, NJ facility for an indefinite period. Fairmount is in discussions with
other manufacturers about entering into tolling agreements, whereby those
manufacturers would produce some of Fairmount's products. These actions are
deemed necessary due to Fairmount's deteriorating business condition and lack of
financial resources to purchase raw materials and supplies.







                                       13
<PAGE>
ITEM 2                    FAIRMOUNT CHEMICAL CO., INC.
------                    ----------------------------
                          MANAGEMENT'S DISCUSSION AND
                         ANALYSIS OR PLAN OF OPERATIONS

                                 June 30, 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 entitled 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. The fair value of the warrants were determined by the Company to be
immaterial. As of June 30, 2002 the warrants have not been issued. 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.

     Fairmount has not made the scheduled principal payments and as of August 2,
2002, Fairmount is in default of payments totaling $45,000. Interest is
automatically deducted from Fairmount's account.

     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 second
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. On August 2, 2002,
Fairmount Chemical Co., Inc. laid off an additional 9 hourly employees at its
Newark, NJ facility for an indefinite period. Fairmount is in discussions with
other manufacturers about entering into tolling agreements, whereby those
manufacturers would produce some of Fairmount's products. These actions are
deemed necessary due to Fairmount's deteriorating business condition and lack of
financial resources to purchase raw materials and supplies.

     One of Fairmount's major customers, Polaroid Corporation, filed a voluntary
petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
Polaroid, or a company formed with the assets purchased from Polaroid, is
operating and Fairmount expects that it business with Polaroid will remain at
the 2001 sales level. Sales to Polaroid during the first half of 2002 were
$465,300, compared to $736,700 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

                                       14
<PAGE>
2001. 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 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
since May 2002 and, as of August 2, 2002, the Company is in default of payments
totaling $305,900, including interest of $25,900.

     The Company's working capital, defined as current assets less current
liabilities, decreased by $1,130,200 in the six months ended June 30, 2002,
resulting in negative working capital of $2,841,200, compared to a negative
working capital of $1,711,000 as of December 31, 2001. The decrease in working
capital during the first six months of 2002 was due to decreased accounts
receivables of $711,500, decreased cash of $351,400, increased promissory note
payable of $533,600 and increased other accrued liabilities of $449,200,
somewhat offset by lower accounts payable of $981,700.

     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 5, 6, and 7,
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

     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.

     In June 2002, SFAS No. 146 "Accounting for Costs Associates with Exit or
Disposal Activities" was issued. This statement provides guidance on the
recognition and measurement of

                                       15
<PAGE>
liabilities associated with disposal activities and is effective for Fairmount
on January 1, 2003. Given that SFAS No. 146 was issued in June 2002 and is not
yet effective, the impact on the Company's financial position or results of
operations from adopting SFAS No. 146 has not been determined.

RESULTS OF OPERATIONS

     Net sales for the three months ended June 30, 2002 were $1,310,400, a
decrease of $1,888,000, or 59.0% 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 JUNE 30,
                                    -----------------------------------------
                                       2002           2001          CHANGE
                                    ----------     ----------     -----------
        Imaging & photographic
          chemicals                 $  639,900     $  469,200     $   170,700
        Hydrazine blends               360,700        532,900        (172,200)
        Hydrazine derivatives           96,900      1,119,900      (1,023,000)
        Plastic additives              102,500        582,100        (479,600)
        Specialty chemicals            110,400        494,300        (383,900)
                                    ----------     ----------     -----------
               Total                $1,310,400     $3,198,400     $(1,888,000)
                                    ==========     ==========     ===========

     Net sales for the six months June 30, 2002 were $2,738,800, a decrease of
$3,243,600 or 54.2 % 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.

                                            Six Months Ended June 30,
                                            ------------------------
                                       2002           2001          Change
                                    ----------     ----------     -----------
        Imaging & photographic
             chemicals              $1,140,600     $1,247,400     $  (106,800)
        Hydrazine blends               832,200        978,900        (146,700)
        Hydrazine derivatives          229,000      1,604,300      (1,375,300)
        Plastic additives              154,500      1,370,400      (1,215,900)
        Specialty chemicals            382,500        781,400        (398,900)
                                    ----------     ----------     -----------
               Total                $2,738,800     $5,982,400     $(3,243,600)
                                    ==========     ==========     ===========

     One of Fairmount's major customers, Polaroid Corporation, filed a voluntary
petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
Polaroid, or a company formed with the assets purchased from Polaroid, is
operating and Fairmount expects that it business with Polaroid will remain at
the 2001 sales level. Sales to Polaroid during the first half of 2002 were
$465,300, compared to $736,700 during the same period of 2001. Polaroid
accounted for $995,700 or 9.9% of sales during year ended December 31, 2001.

     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.

     Hydrazine derivatives sales for the three months ended June 30, 2002 were
$96,900 compared to $1,119,900 during the same period during 2001, a decrease of
$1,023,000. For the six month period ended June 30, 2002 sales were $229,000
compared to $1,604,300 during the same period in 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.
In January 2002, Fairmount advised the customer that it could no longer

                                       16
<PAGE>
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.

     Sales of plastic additives decreased to $102,500 during the three months
ended June 30, 2002 from $582,100 during the three months ended June 30, 2001, a
decrease of $479,600. For the six months ended June 30, 2002 sales of plastic
additive products were $154,500 compared to $1,370,400 during the same period in
2001, a decrease of $1,215,900. Because of the low selling price, high cost of
production and the strong dollar, Fairmount has not pursued this business during
the first half of 2002.

     Specialty sales were $382,500 during the first six months of 2002 compared
to $781,400 during the same period in 2001, a decrease of $398,900 or 51 %.
During the 2nd quarter of 2002 sales of specialty produce were $110,400 compared
to $494,300 during the same period in 2001. This decrease was due to a sale of
an agricultural produce to a customer during the second quarter of 2001 that did
not recur during 2002.

     The gross loss for the three months ended June 30, 2002 was $88,900,
compared to a gross profit of $171,300 for the second 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 June 30,
2002 were $83,300, compared to $100,400 during the three months ended June 30,
2001. For the six months ended June 30, 2002 expenses were $170,600 compared to
$202,900 during the same period in 2001. The main reason for the decrease was
lower salaries and lower payroll related expenses during the three and six
months ended June 30, 2002.

     Selling, general and administrative expenses decreased by $152,100 in the
second quarter of 2002 compared to the same period in 2001. Selling expenses
decreased $111,000, and general and administrative expenses decreased by $41,100
in the second quarter of 2002 compared to the second quarter of 2001. During the
first six months of 2002 selling, general and administrative expenses were
$805,900 compared to $1,029,300 during the same period in 2001, a decrease of
$223,400. Selling expenses decreased by $183,500 and general and administrative
expenses decreased by $39,900. The primary reasons for the decrease on selling
expenses were lower commissions, lower payroll and payroll related expenses,
lower travel related expenses, and lower advertising expenses.

     Interest expense was lower in the three and six months ended June 30, 2002,
versus the same period in 2001, due to the lower interest rates, somewhat offset
by interest accrued on the Bayer promissory note.

     During the six months ended June 30, 2001, Fairmount recorded a foreign
exchange currency loss of approximately $50,800. There was no corresponding loss
during the six months of 2002, because there were no sales to customers
denominated in EURO currency.

     During the three months ended June 30, 2001 Fairmount received insurance
proceeds of $53,100 for property damaged caused by a delivery truck.

     As a result of the above, the Company reported an operating loss of
$578,000 in the three months ended June 30, 2002, compared to an operating loss
of $423,900 in the same period of 2001. For the six months ended June 30, 2002,
Fairmount recorded a loss of $1,317,800 compared to a loss of $1,214,000 during
the same period in 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.

                                       17
<PAGE>
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.

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.

                                       18
<PAGE>

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.

VALUATION OF LONG-LIVED ASSETS
------------------------------

     Fairmount assesses the impairment of identifiable assets and long-lived
assets whenever events or changes in circumstances indicate that the carrying
value may not be recoverable. Factors that management considers important which
could trigger an impairment review include significant underperformance relative
to projected operating results, significant changes in the manner of use of the
acquired assets, or the strategy of the overall business, or any significant
negative industry or economic trends.
                                       19
<PAGE>
                           PART II - OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS

     During 2001, the NJDEP conducted an air compliance inspection of the
Company's facility. As a result of certain alleged violation observed during the
inspection, an administrative order and penalty assessment was issued by the
NJDEP and an administrative hearing was requested. In the interim, the Company
initiated efforts to bring the facility into compliance and obtained necessary
compliance extensions. In early 2002, the NJDEP refused to grand any additional
extensions and approved the request for an administrative hearing. Discovery is
currently underway.

     During the quarter ended June 30, 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 SECURITIES

     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 June 30, 2002 was $99,500. 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
since May and, as of August 2, 2002, the Company is in default of payments
totaling $305,900, including accrued interest of $25,900.

     The Company presently has a line of credit facility with Fleet Bank. The
Company entered into an extension agreement effective February 28, 2002, with
modified terms including a new maturity date of February 28, 2003. Fairmount has
not made the scheduled principal payments and as of August 2, 2002, is in
default of payments totaling $45,000.

                                       20
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDER
--------------------------------------------------------

     On June 18, 2002 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 2002. There were 8,292,866 shares
eligible to vote. All four nominees were elected to the Board of Directors as
follows:

     NOMINEE                       IN FAVOR               WITHHELD
     -------                       --------               --------
     Jerrel Branson                8,194,822              1,901
     Glen A. DaMota                8,195,222              1,501
     Beno Hubler                   8,194,822              1,901
     Dr. Reidar T. Halle           8,194,666              2,057


     KPMG LLP was ratified as independent auditors for 2002 as follows:

     In Favor:                     8,193,917
     ---------                     ---------
     Against:                            800
     Abstain:                          2,006


ITEM 5. OTHER INFORMATION
-------------------------

     None


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, 2002.


                                       21
<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 21, 2002                         /s/ Jerrel Branson
                                        ----------------------------
                                        Jerrel Branson
                                        Chief Executive Officer



August 21, 2002                         /s/ Reidar Halle
                                        ----------------------------
                                        Reidar T. Halle
                                        President



August 21, 2002                         /s/ William C. Kaltnecker
                                        ----------------------------
                                        William C. Kaltnecker
                                        Principal Accounting Officer




                                       22