UNITED STATES

                 SECURITIES AND EXCHANGE COMMISSION

                      Washington, D.C. 20549

                           FORM 10-KSB


ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES 
EXCHANGE ACT OF 1934 (Fee Required)

           For the fiscal year ended      December 31, 1997

                Commission file Number         1-4591

                     FAIRMOUNT CHEMICAL CO., INC.
(Exact name of registrant as specified in its charter.)

                New Jersey                     22-0900720
      (State or 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)

Issuer's telephone number, including area code: 973-344-5790

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

                   Common Stock $1 Par Value
                       (Title of Class)

  Check whether the issuer (1) has filed all reports required to be 
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 
during the past 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 [     ]

  Check if there is no disclosure of delinquent filers in response to 
Item 405 of Regulation S-B contained in this form, and no disclosure 
will be contained, to the best of Issuer's knowledge, in definitive 
proxy or information statements incorporated by reference in Part III 
of this Form 10-KSB or any amendment to this Form 10-KSB [ X]  

  Issuer's revenue for its most recent fiscal year:  $11,911,200.

  The aggregate market value of the Issuer's Common Stock $1 par value 
("Common Stock"), held by non-affiliates of the Issuer on March 20, 
1998 (1,356,452 shares) was approximately $108,516, based on $.08 per 
share.  The Company's shares do not trade on any exchange nor has 
there been any significant market activity with respect to such shares 
since the last quarter of 1991, at which time the average of the bid 
and asked prices was approximately $.05.

  The total number of shares of Issuer's Common Stock outstanding on 
March 20, 1998 was 8,293,366.

Page 1 of 39 Pages

                DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of the Issuer's Definitive Proxy Statement for its Annual 
Meeting of Stockholders to be held May 20, 1998, to be filed with the 
Securities and Exchange Commission within 120 days after December 31, 
1997 (the end of the registrant's fiscal year covered by this Form 10-
KSB) ("1998 Definitive Proxy Statement") are incorporated by reference 
into Part III.

2. Exhibit A to the Issuer's Definitive Proxy Statement for its Annual 
Meeting of Stockholders held April 19, 1983 is incorporated by 
reference into Part III.

3. Exhibit A to the Issuer's Definitive Proxy Statement for its Annual 
Meeting of Stockholders held May 15, 1985 is incorporated by reference 
into Part III.

4. Exhibits A and B to the Issuer's Definitive Proxy Statement for its 
Annual Meeting of Stockholders held May 10, 1988 are incorporated by 
reference into Part III.

5. Exhibit A to the Issuer's Definitive Proxy Statement for its Annual 
Meeting of Stockholders held May 23, 1990 is incorporated by reference 
into Part III.

6. Exhibit A to the Issuer's Definitive Proxy Statement for its Annual 
Meeting of Stockholders held May 6, 1991 is incorporated by reference 
into Part III.

7. Exhibit A to the Issuer's Definitive Proxy Statement for its Annual 
Meeting of Stockholders held May 4, 1993 is incorporated by reference 
into Part III.

8. Exhibit (19) (ii) (sequentially numbered pages 14 through 15) to 
the Issuer's Form 10-Q for the fiscal quarter ended June 30, 1986 are 
incorporated by reference into Part III.

9. Amendment No. 9, dated March 29, 1987, to the Statement on Schedule 
13D, filed by Phoenix Chemical Company and Phoenix Chemical 
Corporation with the Securities and Exchange Commission on March 19, 
1982 and April 9, 1982 respectively, and the American Stock Exchange 
on March 22, 1982, and April 12, 1982, respectively, with respect to 
Issuer's issuance to Phoenix Chemical Company of 500,000 shares of 
Issuer's Common Stock in cancellation of current debt to Phoenix, is 
incorporated into Part III.

10. Amendment No. 10, dated September 10, 1987, to the Statement on 
Schedule 13D, filed by Phoenix Chemical Company and Phoenix Chemical 
Corporation with the Securities and Exchange Commission on March 19, 
1982 and April 9, 1982, respectively, and the American Stock Exchange 
on March 22, 1982 and April 12, 1982, respectively, with respect to 
Issuer's issuance to Phoenix Chemical Company of 100,000 shares of 
Issuer's Common Stock in cancellation of current debt to Phoenix, is 
incorporated into Part III.

11. Amendment No. 11, dated December 17, 1987, to the Statement on 
Schedule 13D, filed by Phoenix Chemical Company and Phoenix Chemical 
Corporation with the Securities and Exchange Commission on March 19, 
1982 and April 9, 1982, respectively, and the American Stock Exchange 
on March 22, 1982 and April 12, 1982, respectively, with respect to 
Issuer's issuance to Phoenix Chemical Company of 133,334 shares of 
Issuer's Common Stock in cancellation of current debt to Phoenix, is 
incorporated into Part III.

12. Amendment No. 12, dated July 7, 1988, to the Statement on Schedule 
13D, filed by Phoenix Chemical Company and Phoenix Chemical 
Corporation with the Securities and Exchange Commission on March 19, 
1982 and April 9, 1982 respectively, and the American Stock Exchange 
on March 22, 1982, and April 12, 1982, respectively, with respect to 
Issuer's issuance to Phoenix Chemical Company of 1,000,000 shares of 
Issuer's Common Stock in cancellation of current debt to Phoenix, is 
incorporated into Part III.

13. Amendment No. 13, dated August 7, 1989, to the Statement on 
Schedule 13D, filed by Phoenix Chemical Company and Phoenix Chemical 
Corporation with the Securities and Exchange Commission on March 19, 
1982 and April 9, 1982, respectively, and the American Stock Exchange 
on March 22, 1982, and April 12, 1982, respectively, with respect to 
Issuer's issuance to Phoenix Chemical Company of 1,000,000 shares of 
Issuer's Common Stock in cancellation of current debt to Phoenix, is 
incorporated into Part III.

14. Amendment No. 14, dated May 23, 1990, to the Statement on Schedule 
13D, filed by Phoenix Chemical Company and Phoenix Chemical 
Corporation with the Securities and Exchange Commission on March 19, 
1982 and April 9, 1982, respectively, and the American Stock Exchange 
on March 22, 1982, and April 12, 1982, respectively, with respect to 
Issuer's issuance to Phoenix Chemical Company of 1,500,000 shares of 
Issuer's Common Stock in cancellation of current debt to Phoenix, is 
incorporated into Part III.

15. Amendment No. 15, dated December 5, 1990, to the Statement on 
Schedule 13D, filed by Phoenix Chemical Company and Phoenix Chemical 
Corporation with the Securities and Exchange Commission on March 19, 
1982 and April 9, 1982, respectively, and the American Stock Exchange 
on March 22, 1982, and April 12, 1982, respectively, with respect to 
Issuer's issuance to Phoenix Chemical Company of 1,000,000 shares of 
Issuer's Common Stock in cancellation of current debt to Phoenix, is 
incorporated into Part III.

16. Statement on Schedule 13D, dated April 6, 1992, filed by William 
E. Leistner with the Securities and Exchange Commission on April 15, 
1992 with respect to the liquidation and winding up of Phoenix 
Chemical Company and the distribution of 3,789,200 shares of Issuer's 
Common Stock to Leistner, who was a 60% partner in Phoenix, as the 
result of such liquidation is incorporated into Part III.

17. Statement on Schedule 13D, dated April 6, 1992, filed by the 
Estate of Olga H. Knoepke with the Securities and Exchange Commission 
on May 4, 1992 with respect to the liquidation and winding up of 
Phoenix Chemical Company and the distribution of 2,526,134 shares to 
the Estate of Olga H. Knoepke, who was a 40% partner in Phoenix, as 
the result of such liquidation, is incorporated in Part III.

18. Amendment No. 1 dated December 28, 1992, to the Statement on 
Schedule 13D, filed by William E. Leistner with the Securities and 
Exchange Commission on April 15, 1992, with respect to Issuer's 
issuance to Leistner of 1,000,000 shares of Issuer's Common Stock in 
cancellation of current debt to Leistner, is incorporated into Part 
III.

19. Statement on Schedule 13D, dated March 30, 1994, filed by the 
Estate of William E. Leistner with the Securities and Exchange 
Commission on March 30, 1994 with respect to the Estate of William E. 
Leistner acquiring direct beneficial ownership of William E. 
Leistner's 4,790,200 shares of Common Stock and 5,400,000 shares of 
Preferred Stock of Fairmount Chemical Co., Inc. upon his death on 
September 19, 1993 is incorporated into Part III.

20. Form 8-K of Issuer, dated September 10, 1987, with respect to 
Issuer's issuance to Phoenix Chemical Company of 100,000 shares of 
Issuer's Common Stock in cancellation of current debt to Phoenix, is 
incorporated into Part III.

21. Form 8-K of Issuer, dated December 17, 1987, with respect to 
Issuer's issuance to Phoenix Chemical Company of 133,334 shares of 
Issuer's Common Stock in cancellation of current debt to Phoenix is 
incorporated into Part III.

22. Form 8-K of Issuer, dated July 7, 1988, with respect to Issuer's 
issuance to Phoenix Chemical Company of 1,000,000 shares of Issuer's 
Common Stock in cancellation of current debt to Phoenix, is 
incorporated into Part III.

23. Form 8-K of Issuer, dated May 23, 1990, with respect to Issuer's 
issuance to Phoenix Chemical Company of 1,500,000 shares of Issuer's 
Common Stock in cancellation of current debt to Phoenix, is 
incorporated into Part III.

24. Form 8-K of Issuer, dated December 5, 1990, with respect to 
Issuer's issuance to Phoenix Chemical Company of 1,000,000 shares of 
Issuer's Common Stock in cancellation of current debt to Phoenix, is 
incorporated into Part III.

25. Form 8-K of Issuer, dated December 28, 1992, with respect to 
Issuer's issuance to William E. Leistner of 1,000,000 shares of 
Issuer's Common Stock in cancellation of current debt to Leistner, is 
incorporated into Part III.

26. Form 8-K of Issuer, dated November 19, 1993, with respect to the 
death of William E. Leistner, Chairman of the Board and Chief 
Executive Officer and majority stockholder of Fairmount, as well as 
changes in management, is incorporated into Part III.

THE EXHIBIT INDEX IS ON SEQUENTIALLY NUMBERED PAGES 28 THROUGH 39.

Total number of pages in this Form 10-KSB: 39, including the "cover 
page" and all exhibits (sequentially numbered pages 1 through 39).

                             PART I

Item 1.  Business

Fairmount Chemical Co., Inc. (herein referred to as the "Company" or 
the "Registrant") was incorporated in New Jersey on June 18, 1938.

The business of the Company is the manufacture and distribution of 
chemicals, principal among which are (1) chemical intermediates for 
the imaging industry, (2) hydrazine, its salts and derivatives, for 
use in products manufactured by the Company and by various industries, 
(3) additives used in the manufacture of plastics and (4) specialty 
chemicals, including pharmaceutical intermediates.  The Company sells 
chemicals directly or through distributors to industrial users and 
manufactures intermediates for other manufacturers.

The Company's major products and their markets include:

Imaging Chemicals

The Company custom manufactures chemicals for various imaging 
customers. In addition, the Company manufactures and sells imaging 
chemicals, including photosensitizers, stabilizers, antihalation dyes 
and diazo resins. The Company's imaging chemicals are used in the 
manufacture of photographic film and lithographic printing plates.

Hydrazine Based Products

Hydrazine is sold primarily to power generators as a feedwater 
treatment. Hydrazine salts and derivatives are used in the 
manufacture of many chemical products, including corrosion control 
chemicals for commercial boiler systems.

Plastic Additives

The Company manufactures and/or sells additives such as antioxidants, 
metal deactivators and UV stabilizers that are used in the manufacture 
of plastics such as polyolefins, PVC, engineering resins and polyester 
resins. The Company develops its own products, which it currently 
markets commercially to the plastics industry. 

Specialty Chemicals

The Company produces pharmaceutical intermediates and custom organic 
chemicals.

Major Product Sales

The percentage of total sales in each of the last two calendar years 
contributed by each class of similar products was as follows:

                              1997              1996
                              ----              ----
Plastic additives              34%               33%
Imaging chemicals              18%               26%
Hydrazine blends               19%               16%
Specialty chemicals            17%               14%
Hydrazine derivatives          12%               11%
                             ----              ----
                              100%              100%
                             ====              ====

The Company sells its products in the domestic and international 
markets and continues its efforts to expand both domestic and export 
sales. Net sales of $11,911,200 and $12,551,700, in 1997 and 1996, 
respectively, included export sales of $4,751,300 and $5,414,400.  Net 
sales by major foreign geographical area were as follows:

                              1997              1996
                              ----              ----
Europe                        24.9%             22.1%
Other Export                  15.0%             21.0%

During 1997 and 1996, two customers accounted for approximately 23.2% 
and 26.6% of the Company's sales, respectively. The loss of one of 
these customers would have a material adverse effect on the Company's 
business.

New Products

The Company continues the search for new products to add to its 
plastics additives, imaging, hydrazine blends, hydrazine derivatives 
and pharmaceutical markets. The Company is also engaged in developing 
and manufacturing products for others on a proprietary basis. 

Raw Materials

The raw materials required by the Company are commercially available 
in adequate supply from its suppliers.

Trademarks and Patents

The Company holds a number of trademarks and patents. However, it 
does not believe that the sales of any of its products depend to any 
significant extent on the use of trademarks and patents. 

Research and Development

The Company maintains research facilities at its manufacturing 
location in Newark, New Jersey.

During the years ended December 31, 1997 and 1996, the Company spent 
approximately $418,900 and $484,200, respectively, in research and 
development activities. Research and development expenditures in 1997 
were lower than 1996 due to the reassignment of two research employees 
to the quality control department. This was done in order to cover 
personnel reductions resulting from the restructuring of the Company 
during the second quarter of 1997. The Company expects 1998 research 
and development expenditures to approximate the 1997 level.

Technology Sale

During 1996, the Company entered into an exclusive agreement with a 
third party to license certain technology and provide other 
information for a period of ten years. Consideration received under 
this agreement is included in other income. The impact of this 
technology sale on the future operations of the Company is immaterial.

Competitive Conditions

The Company competes with various other companies, both domestic and 
foreign, producing and distributing the same or similar products and, 
in some instances, with companies producing different products 
utilized for similar purposes. Certain of such competitors are better 
known, substantially larger and have greater financial resources. 
Competition is primarily on the basis of price, quality and service to 
customers.  The Company believes that its products are competitive on 
these bases.

Environmental Laws and Government Regulations

The chemical industry, including the Company, is subject to 
environmental laws and regulations. The Company believes it has the 
ability in terms of staff and financial resources to comply with the 
present environmental statutes applicable to its business.  The 
Company has an ongoing program to treat and monitor its wastewater 
effluent for compliance with the requirements of local laws and 
regulations. Samples are analyzed for biological oxygen demand.  An 
outside testing laboratory performs a complete chemical analysis 
monthly. All results are forwarded to the New Jersey Department of 
Environmental Protection.

The Company monitors compliance with environmental laws and 
regulations. Tank dikes and equipment are inspected for leakage and 
any evidence of potential soil contamination. The Company utilizes a 
training program which includes instruction on the Company's 
responsibilities with respect to environmental laws and regulations. 
The Company's chemical processing operations are carried out at 
atmospheric pressure or vacuum, thereby mitigating the potential for 
atmospheric pollution from equipment rupture.

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. 

The Company has no knowledge of contamination of soil on the premises.  
There are no underground storage tanks on the Company's property.  The 
Company's manufacturing effluent system is connected to an above 
ground piping system. The effluent is discharged to the local sewage 
commission. In 1996, the Company received a complaint alleging 
discharges of benzene in excess of the permissible limits on two 
separate occasions during 1996. In 1997 the Company received 
complaints alleging discharges of methylene chloride in excess of the 
permissible limits on two separate occasions.  Fines associated with 
these complaints were not material to the results of operations or 
financial position of the Company. 

Environmental compliance, waste disposal and regulatory fees totaled 
approximately $210,300 and $84,600 in 1997 and 1996, respectively.  
These costs are included in general and administrative expenses.

Employees

As of December 31, 1997, the Company had 50 employees, all of whom 
were full-time employees. The Company has a contract with 
International Brotherhood of Teamsters Local 575, which covers all 
hourly employees. The contract expires on December 12, 1999.

Item 2.  Properties

The Company has a plant located in an industrial area of Newark, New 
Jersey, and owns substantially all of its property, plant and 
equipment.  The plant is located on approximately 13 acres of fenced 
land with two railroad spur connections.  It consists of 14 buildings, 
of brick, cinder block or metal-clad construction.  They provide 
approximately 97,100 square feet of floor space, in which are located 
chemical process equipment, warehouse, shipping, refrigeration, steam 
boilers, maintenance, office and research and development facilities.  
In addition, certain process equipment and tanks are located and 
operated out-of-doors.

The Summit Bank line of credit is collateralized by the accounts 
receivable, inventory and personal property of the Company.  The 
Company's debt to affiliated parties is subordinated to the Summit 
Bank line of credit and is collateralized by the accounts receivable 
and the machinery and equipment of the Company.  See Item 6 "Liquidity 
And Capital Resources," Page 9.  Except for such lien, there are no 
mortgages or liens on the property of the Company.

The Company normally operates its plant on a 24-hour day with a 
workweek of five days.  While the Company believes that its plant, 
buildings, and equipment are adequately maintained and, on the whole, 
are reasonably suitable and sufficient for its current operations, 
further capital investment may be required for maintenance of the 
Company's operations and compliance with applicable laws.  In the 
opinion of management, the Company maintains adequate levels of 
property insurance on the entire premises.

On March 25, 1997 there was an explosion in a building in which some 
of the Company's products are dried.  There were no injuries to any 
employees.  The damage to the building and contained equipment was 
extensive.  There was minor collateral damage to other buildings.  The 
Company received $200,000 from its property insurance carrier during 
the second quarter of 1997 in partial settlement for the Company's 
property losses caused by the explosion.  In January, 1998 the Company 
received an additional payment of $1,140,100 for these property 
losses.  The building in which the explosion occurred has been razed 
(see Note 16).

In 1997, the Company spent approximately $450,400 on capital 
expenditures to upgrade and expand other production facilities and for 
building and equipment improvements.

Item 3. Legal Proceedings

None.

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

The Company submitted no matters to a vote of its security holders 
during the last quarter of its fiscal year ending December 31, 1997.

                              PART II

Item 5. Market for Issuer's Common Equity and Related Stockholder 
Matters

On July 5, 1991, the Company's shares of common stock were deleted 
from NASDAQ as a result of the Company's failure to meet the capital 
and surplus requirements as set forth in Section 1(c)(3), Part II of 
Schedule D of the NASD by-laws.  The Company's common stock is now 
traded over the counter and is not quoted on the automated quotation 
system of a registered securities association.  For each fiscal 
quarter, the charts below reflect the high and low bid prices for the 
Common Stock.  The bid prices reflect inter-dealer quotations without 
retail mark-ups, mark-downs or commissions and do not necessarily 
represent actual transactions.  Price Ranges of Common Stock were as 
follows:

                       Common Stock Bid Prices
                       ------------------------
                       1997 1              1996 1
                       -------           -------
 Quarter            High   Low         High   Low
----------          ------------    ---------------
 First             $.13   $.09        $.25   $.22
 Second             .12    .09         .20    .15
 Third              .10    .08         .16    .10
 Fourth             .10    .08         .15    .09

There were approximately 266 stockholders of record at December 31, 
1997. The Company did not declare or pay any dividends in 1997 or 
1996.
_________________________

1There was no significant market activity for the common stock during 
1997 and 1996.  


Item 6. Management's Discussion and Analysis of Financial Condition 
and Results of Operations

Liquidity and Capital Resources

In 1996, the Company realized a significant improvement in its 
liquidity position by obtaining a $1,250,000 line of credit from 
Summit Bank in Hackensack, New Jersey.  Summit Bank renewed the 
Company's line of credit during the second quarter of 1997. 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 decreased by $174,800 in 1997 resulting 
in working capital of $3,387,700 compared to working capital of 
$3,562,500 in 1996. The decrease in working capital in 1997 resulted 
mainly from higher current long term debt - $327,100 and lower 
accounts receivables - $245,300; partially offset by higher cash 
balances - $283,900, higher inventory - $47,200 and lower accounts 
payables - $63,600. The current portion of long term debt increased 
due to borrowings for working capital purposes. Some of these 
borrowings have been repaid during the first quarter of 1998.  
Accounts receivable decreased due to the receipt of several large 
foreign payments received in December.  Part of the increase in cash 
was due to the receipt of $200,000 from the Company's property 
insurance carrier for partial settlement of the Company's claim 
resulting from the March 25, 1997 explosion (see below). Inventories 
rose slightly due to a modest increase in orders to be shipped early 
in 1998; partially offset by the write-off of a finished product that 
was not shippable (see below).

On March 25, 1997 there was an explosion in a building in which some 
of the Company's products are dried. There was minor collateral damage 
to other surrounding buildings. The Company has discontinued drying 
the product that was being dried at the time of the explosion. This 
product is now being sold in a wet condition. The Company has lost 
some orders for this product because of this change, but the effect of 
this change on the Company's operations for the year was immaterial.  
However, during 1997 the Company wrote-off inventory of $87,800 that 
was similar in nature to the product that exploded due to volatility 
concerns of shipping this product in an already dried condition. The 
Company received $200,000 from its property insurance carrier during 
the second quarter of 1997 in partial settlement for the Company's 
property losses caused by the explosion. In January, 1998 the Company 
received an additional payment of $1,140,100 for these property losses 
(see Note 16).

During the second quarter of 1997 the Company's management conducted a 
review of operations and of the financial condition of the Company and 
concluded that it was necessary to implement a restructuring of the 
organization. As a result, in May, the Company reduced the workforce 
by eighteen salaried and hourly employees.  The Company also decided 
to discontinue the manufacturing of a number of small volume products 
that were no longer profitable to produce.  Net income for the year 
includes a restructuring charge of $310,000 for severance, early 
retirement and accrued vacation time.

On June 24, 1997, following the Annual Meeting of Shareholders, 
William E. Setzler, Chairman of the Board and Chief Executive Officer 
and Sondra M. Jacoby, Chief Financial Officer, Corporate Secretary and 
a Board Director resigned as directors and officers of the Company.  
The President of the Company, Todd K. Walker was appointed to the 
position of Chairman of the Board and Chief Executive Officer. James 
F. Gilday, the Controller of the Company, was appointed Chief 
Financial Officer and Corporate Secretary and also appointed to the 
Board of Directors.

On July 2, 1997 the Company replaced certain outstanding debt 
obligations payable to affiliated parties with promissory notes.  On 
this date William E. Setzler and Sondra M. Jacoby, the executors of 
the Leistner Estate, terminated the Credit Facility with affiliated 
parties.  The Credit Facility borrowings, $1,080,000, were replaced by 
four promissory notes due on January 1, 2005. The Leistner Estate 
received a note for $648,000. Three notes were issued to the 
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.  The balance of the Leistner Loan, $491,600, 
that was due April 1, 1998 was replaced with a promissory note to the 
Leistner Estate for the same amount, due January 1, 2005. (See Note 
4).

At a Board of Directors meeting held on September 5, 1997, the Board 
of Directors elected three new outside directors, Howard R. Leistner, 
Richard Mizrack, and Dr. Reidar Halle. At the meeting, the resignation 
of Board member Leonard R. Wood was accepted.

On October 9, 1997 the executors of the Leistner Estate endorsed two 
promissory notes of $684,000 and $491,600 to the order of the Howard 
Leistner, Hedi Mizrack and Gilbert Leistner Irrevocable Grantor 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 (see Note 16).

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 a President and Chief Executive 
Officer is chosen by the board. Mr. Howard R. Leistner, also a 
director of the Company was appointed as Chairman of the Board.

The Company has conducted a comprehensive review of its computer 
systems to identify the systems that could be affected by the "Year 
2000" issue and has developed an implementation plan to resolve the 
issue.  The Year 2000 problem is the result of computer programs being 
written using two digits rather than four to define the applicable 
year. Any of the Company's programs that have time-sensitive software 
may recognize a date using "00" as the year 1900 rather than the year 
2000. This could result in a major system failure or miscalculations. 
The Company presently expects that, with modifications to existing 
software and converting to new software, the Year 2000 problem will 
not pose significant operational problems for the Company's computer 
systems.  However, if such modifications and conversions are not 
completed timely, the Year 2000 problem may have a material impact on 
the operations of the Company.

In June 1997, the Financial Accounting Standards Board (the "FASB") 
issued Statement of Financial Accounting Standards ("SFAS") No. 130, 
"Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes 
standards for reporting and display of comprehensive income and its 
components in the financial statements. SFAS 130 is effective for 
fiscal years beginning after December 15, 1997. Reclassification of 
financial statements for earlier periods provided for comparative 
purposes is required. The adoption of SFAS 130 will have no impact on 
the Company's consolidated results of operations, financial position 
or cash flows.

In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments 
of an Enterprise and Related Information" ("SFAS 131"). SFAS 131 
establishes standards for the way public business enterprises report 
information about operating segments in annual financial statements 
and requires that those enterprises report selected information about 
operating segments in interim financial reports issued to 
shareholders.  It also establishes standards for related disclosures 
about products and services, geographic areas and major customers. 
SFAS 131 is effective for financial statements for fiscal years 
beginning after December 15, 1997, and the Company will comply 
beginning with year-end 1998 results. Financial statement disclosures 
for prior periods are required to be restated.  The Company is in the 
process of evaluating the disclosure requirements. The adoption of 
SFAS 131 will have no impact on the Company's consolidated results of 
operations, financial position or cash flows.

Research and Development

During the years ended December 31, 1997 and 1996, the Company spent 
approximately $418,900 and $484,200, respectively, in research and 
development activities. Research and development expenditures in 1997 
were lower than 1996 due to the reassignment of two research employees 
to the quality control department. This was done in order to cover 
personnel reductions resulting from the restructuring of the Company 
during the second quarter of 1997. The Company expects 1998 research 
and development expenditures to approximate the 1997 level.

Environmental Laws and Government Regulations

The chemical industry, including the Company, is subject to 
environmental laws and regulations.  The Company believes it has the 
ability in terms of staff and financial resources to comply with the 
present environmental statutes applicable to its business. The 
Company has an ongoing program to treat and monitor its wastewater 
effluent for compliance with the requirements of local laws and 
regulations.  Samples are analyzed for biological oxygen demand. An 
outside testing laboratory performs a complete chemical analysis 
monthly. All results are forwarded to the New Jersey Department of 
Environmental Protection.

The Company monitors compliance with environmental laws and 
regulations. Tank dikes and equipment are inspected for leakage and 
any evidence of potential soil contamination. The Company utilizes a 
training program which includes instruction on the Company's 
responsibilities with respect to environmental laws and regulations. 
The Company's chemical processing operations are carried out at 
atmospheric pressure or vacuum, thereby mitigating the potential for 
atmospheric pollution from equipment rupture.

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. 

The Company has no knowledge of contamination of soil on the premises. 
There are no underground storage tanks on the Company's property.  The 
Company's manufacturing effluent system is connected to an above 
ground piping system. The effluent is discharged to the local sewage 
commission.  In 1996, the Company received a complaint alleging 
discharges of benzene in excess of the permissible limits on two 
separate occasions during 1996. In 1997, the Company received 
complaints alleging discharges of methylene chloride in excess of the 
permissible limits on two separate occasions. Fines associated with 
these complaints were not material to the results of operations or 
financial position of the Company. 

Environmental compliance, waste disposal and regulatory fees totaled 
approximately $210,300 and $84,600 in 1997 and 1996, respectively. 
These costs are included in general and administrative expenses.

Results of Operations 1997 - 1996

A. Net sales for 1997 were $11,911,200, a decrease of $640,500 or 5.1% 
as compared to 1996.  The decrease in net sales was primarily due to 
lower volumes of imaging chemicals mainly due to lower demand from a 
major customer that initiated a major restructuring in 1997 and 
delayed ordering substantial volumes until early 1998 - $1,159,300. 
Also contributing to the decrease in sales were lower prices for 
polymer additives due to competitive pressures from foreign 
competitors - $135,900; partially offset by increased volumes of 
specialty chemicals - $388,400, hydrazine blends - $176,600 and 
hydrazine derivatives - $89,700  Gross profit for 1997 increased 
$208,700 or 10.2% versus 1996 due to improved margins that resulted 
from the lowering of costs achieved through the restructuring program 
initiated during the second quarter of 1997.

Net Sales                            1997       1996
                                    -----------------

Plastic additives                     34%        33% 

Imaging chemicals                     18%        26% 

Hydrazine blends                      19%        16% 

Specialty chemicals                   17%        14%

Hydrazine derivatives                 12%        11%
                                    -----------------
                                     100%       100%
                                    -----------------

B. Operating loss was $384,800, an improvement of $72,900 versus an 
operating loss of $457,700 in 1996.  The improvement in operating 
income was due to the cost savings realized in the manufacturing, 
general and administrative and research departments from the 
restructuring during the second quarter of 1997.  The amount of the 
restructuring charge in 1997 was $310,000 which was for expenses 
associated with payments for severance, early retirements and accrued 
vacation time.  Environmental expenses increased $125,700 in 1997 
versus 1996 due to increased costs for waste removal, environmental 
compliance and an OSHA consultant.

Interest expense was higher in 1997 versus 1996 due to the Company in 
1997 beginning to pay interest on its $491,600 debt obligation to an 
affiliated party, coupled with increased borrowings through the bank 
line of credit for working capital purposes and an increase of 1% in 
the interest rate on the remaining debt owed to affiliated parties per 
the new promissory note agreements (see Note 4). Other income was 
lower during 1997 versus 1996 due to the granting of a technology 
license for the manufacture, production and sale of one of the 
Company's products in 1996 - $175,000, and to custom duty refunds in 
1996 - $46,500.

During 1997 the Company received insurance proceeds of $200,000 as a 
partial settlement for the property losses sustained from the March 
25, 1997 explosion.  Part of these proceeds were used to repair damage 
to buildings caused by the explosion - $29,000 (see Note 16).

1998 Outlook

The Company has budgeted approximately $500,000 for capital 
expenditures in 1998. Major expenditures will consist of the 
replacement and improvement of process equipment, coupled with safety 
and environmental projects.

The Company continues to experience competitive pressure on the 
pricing of certain of its products and has reacted by closely 
monitoring the cost of its raw materials and by reevaluating its 
manufacturing processes. Management believes the reduced operating 
cost structure of the Company realized through the second quarter 1997 
restructuring has repositioned the Company to operate profitably 
during 1998, as it has during the third and fourth quarters of 1997.

The Company is refocusing the direction of its marketing efforts by 
concentrating on more aggressively expanding the customer base for the 
Company's existing product line. The Company will also continue to 
develop new products when it determines that there is a profitable 
market potential to be realized in relation to the costs and efforts 
expended.

To meet liquidity requirements, including capital programs, the 
Company will look primarily to cash generated from operations, its 
available cash balances and its bank line of credit. The Company 
believes these sources to be adequate to meet operating requirements 
for the year ending December 31,1998.



Item 7.  Financial Statements and Supplementary Data

Index to Financial Statements and Related Information

Financial Statements                                          Page
                                                            --------
Independent Auditors' Report                                   14

Statements of Operations for the years ended December 31,
  1997 and 1996                                                15

Balance Sheets as of December 31, 1997 and 1996                16

Statements of Stockholders' Equity 
  for the years ended December 31, 1997 and 1996               17

Statements of Cash Flows for the years ended December 31,
  1997 and 1996                                                18

Notes to Financial Statements                               19-27



              INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
Fairmount Chemical Co., Inc.:


Independent Auditors' Report

The Board of Directors and Stockholders
Fairmount Chemical Co., Inc.:

We have audited the accompanying balance sheets of Fairmount Chemical 
Co., Inc. as of December 31, 1997 and 1996, and the related statements 
of operations, stockholders' equity and cash flows for the years then 
ended. These financial statements are the responsibility of the 
Company's management. Our responsibility is to express an opinion on 
these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit 
to obtain reasonable assurance about whether the financial statements 
are free of material misstatement. An audit includes examining, on a 
test basis, evidence supporting the amounts and disclosures in the 
financial statements. An audit also includes assessing the accounting 
principles used and significant estimates made by management, as well 
as evaluating the overall financial statement presentation. We believe 
that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present 
fairly, in all material respects, the financial position of Fairmount 
Chemical Co., Inc. as of December 31, 1997 and 1996, and the results 
of its operations and its cash flows for the years then ended in 
conformity with generally accepted accounting principles.

As discussed in note 1 to the financial statements, the Company 
changed its method of determining the cost of inventories in 1996.

March 16, 1998



<TABLE>
<CAPTION>


                       FAIRMOUNT CHEMICAL CO., INC.

                        Statements of Operations

                 Years Ended December 31, 1997 and 1996

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


                                       1997                    1996
                                   -----------            ------------

<S>                               <C>                     <C>

Net sales                          $11,911,200             $12,551,700
Cost of goods sold                   9,657,700              10,506,900
----------------------------------------------------------------------
     
Gross profit                         2,253,500               2,044,800 

Research & development                 418,900                 484,200

Selling, general and
     administrative expenses         1,909,400               2,018,300

Restructuring charge (Note 15)         310,000                      --
----------------------------------------------------------------------

Operating loss                        (384,800)               (457,700)

Interest expense (Note 4)              129,200                  77,300
Other income (Note 8)                  (46,800)               (257,900)

Insurance proceeds (Note 16)          (171,000)                     --
----------------------------------------------------------------------

Net loss before income taxes       $  (296,200)           $   (277,100)
Provision for income taxes                  --                      --
----------------------------------------------------------------------

Net loss                           $  (296,200)           $   (277,100)
======================================================================
Basic loss per share (Note 10)     $      (.04)           $       (.03)
======================================================================

See accompanying notes to financial statements.

</TABLE>



<TABLE>
<CAPTION>


                         FAIRMOUNT CHEMICAL CO., INC.

                               Balance Sheets

                           December 31, 1997 and 1996 

(Dollar amounts rounded to hundreds)
                                                        1997                    1996
                                                     ----------             ----------
<S>                                              <C>                    <C>
Assets
Current Assets:               
Cash                                               $    711,800            $   427,900
Accounts receivable-trade                             1,845,700              2,091,000
Inventories (Note 2)                                  1,709,600              1,662,400
Prepaid expenses                                        282,500                263,700
Other current assets                                    102,800                 57,900
--------------------------------------------------------------------------------------
Total Current Assets                                  4,652,400              4,502,900
--------------------------------------------------------------------------------------
Property, plant and equipment
  less accumulated depreciation of
  $3,934,400 and $4,336,800 in 1996 (Note 3)          4,504,400              4,775,000
Other assets (Note 7)                                    44,900                 56,000
--------------------------------------------------------------------------------------
Total Assets                                         $9,201,700             $9,333,900
======================================================================================
Liabilities and
Stockholders' Equity 
Current Liabilities:
Accounts payable                                     $  499,900             $  563,500
Accrued compensation                                     55,900                 73,100
Accrued pension liability (Note 7)                      194,800                155,000
Other accrued liabilities                               127,000                 88,800
Short-term bank borrowings (Note 5)                     387,100                 60,000
--------------------------------------------------------------------------------------
Total Current Liabilities                             1,264,700                940,400
--------------------------------------------------------------------------------------
Promissory notes to affiliated parties (Note 4)       1,571,600                     --
Accrued interest to affiliated party (Note 4)                --                491,600
Long-term notes payable to affiliated party 
  (Note 4)                                                   --              1,080,000
Long-term bank borrowings (Note 5)                       33,900                111,700
Accrued pension liability (Note 7)                      486,300                353,400
Stockholders' Equity 
Preferred stock, par value $1 per share
  authorized - 10,000,000 shares; 5,400,000 
  shares issued and outstanding  (Note 10)            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 1997 and 1996             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                                 (14,866,200)           (14,570,000)
Additional minimum liability (Note 7)                  (297,500)               (82,100)
--------------------------------------------------------------------------------------

Total Stockholders' Equity                            5,845,200              6,356,800
--------------------------------------------------------------------------------------

Total Liabilities and 
Stockholders' Equity                                $ 9,201,700            $ 9,333,900
======================================================================================

See accompanying notes to financial statements.

</TABLE>



<TABLE>
<CAPTION>


                                                     FAIRMOUNT CHEMICAL CO., INC.

                                                 Statements of Stockholders' Equity 

                                               Years Ended December 31, 1997 and 1996

                                                 (Dollar amounts rounded to hundreds)



                                                                 Additional      Capital                    Additional  
                    Preferred Stock       Common Stock         Treasury Stock   in Excess    Accumulated     Minimum
                    Shares      Amount    Shares    Amount     Shares  Amount  of par Value   Deficit       Liability    Total
--------------------------------------------------------------------------------------------------------------------------------
Balance
<S>               <C>        <C>         <C>        <C>         <C>    <C>     <C>         <C>               <C>     <C>

December 31, 1995  5,400,000  $5,400,000  8,293,366  $8,293,400  (500)  ($500)  $7,316,000  ($14,292,900)         --  $6,716,000

Net loss for 1996                                                                               (277,100)               (277,100)

Additional minimum
liability (Note 6)                                                                                          ($82,100)    (82,100)
--------------------------------------------------------------------------------------------------------------------------------
Balance as adjusted
December 31, 1996  5,400,000  $5,400,000  8,293,366  $8,293,400  (500)  ($500)  $7,316,000  ($14,570,000)   ($82,100) $6,356,800

Net loss for 1997                                                                               (296,200)               (296,200)

Additional minimum
liability (Note 6)                                                                                          (215,400)   (215,400)
--------------------------------------------------------------------------------------------------------------------------------
Balance 
December 31, 1997  5,400,000  $5,400,000  8,293,366  $8,293,400  (500)  ($500)  $7,316,000  ($14,866,200)  ($297,500) $5,845,200
================================================================================================================================

See accompanying notes to financial statements.

</TABLE>



<TABLE>
<CAPTION>


                   FAIRMOUNT CHEMICAL CO., INC.

                    Statements of Cash Flows

             Years Ended December 31, 1997 and 1996

              (Dollar amounts rounded to hundreds)


                                                   1997                1996
                                               -----------         ----------

<S>                                            <C>             <C>

Cash Flow from Operating Activities:
Net loss                                        $ (296,200)     $    (277,100)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation                                       721,000            869,800
  
Increase (decrease) from changes in:
Accounts receivable-trade                          245,300           (188,900)
Inventories                                        (47,200)           407,700 
Prepaid expenses                                   (18,800)          (103,600)
Other assets                                       (33,800)           (86,900)
Accounts payable                                   (63,600)             3,300  
Accrued compensation                               (17,200)           (21,900)
Other liabilities                                   (4,500)           (67,200)
-----------------------------------------------------------------------------
Cash Flow Provided by Operating Activities         485,000            535,200 
-----------------------------------------------------------------------------

Cash Flow (Used in) Investing Activities:
Capital expenditures                              (450,400)          (481,200)
-----------------------------------------------------------------------------

Cash Flow From Financing Activities:
Capitalized lease obligations                           --           (230,600)
Bank borrowings                                    249,300            171,700
-----------------------------------------------------------------------------

Cash Flow (Used in)/Provided by Financing 
  Activities                                       249,300            (58,900)
-----------------------------------------------------------------------------

Increase/(Decrease) in Cash                        283,900             (4,900)

Cash at Beginning of Period                        427,900            432,800
-----------------------------------------------------------------------------

Cash at End of Period                        $     711,800        $   427,900
=============================================================================
Supplemental Disclosure of Cash Flow 
  Information:

Interest Paid                                $     129,200        $    77,300
                                                   =======             ======
Income taxes paid                            $          --        $        --
                                                   =======             ======

Non-Cash Transaction:

Minimum pension liability adjustment:        $     215,400        $    82,100
                                                   =======             ======

See accompanying notes to financial statements.

</TABLE>



                       FAIRMOUNT CHEMICAL CO., INC.
                      Notes to Financial Statements

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

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Fairmount Chemical Co., Inc. ("Fairmount" or "the Company") is 
incorporated in the State of New Jersey and is in the business of 
manufacturing and distributing specialty chemicals. Fairmount is 57.8% 
owned by the Estate of William E. Leistner as of December 31, 1997. 
(See Note 16) 

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the 
1997 presentation.

REVENUE

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

CASH EQUIVALENTS

Cash equivalents are all highly liquid short-term investments with a 
maturity of three months or less.

INVENTORIES

Inventories are stated at the lower of cost or market. Cost is 
determined by the first-in, first-out (FIFO) method.  During 1996, in 
order to better match revenues and expenses, the Company adopted the 
FIFO method for inventories, which had previously been costed on the 
last-in, first-out (LIFO) method.  The Company has applied this change 
in method retroactively, which resulted in a decrease in the 
accumulated deficit of $118,300 at that date. The impact on operations 
in 1996 was to increase the loss by $22,600. The effect on earnings 
per share in 1996 was zero. There are no general and administrative 
costs allocated to inventory.

PROPERTY, PLANT and EQUIPMENT

Property, plant and equipment are stated at cost and are depreciated 
using the straight-line method over the estimated useful lives of the 
respective assets. Maintenance and repairs are charged to expense as 
incurred, and expenditures for renewals and betterments are 
capitalized.  Gains or losses on sales or retirements are recognized 
in income.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are charged to operations as incurred.

INCOME TAXES

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



USE OF ESTIMATES

The preparation of financial statements in conformity with generally 
accepted accounting principles 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. Actual results could differ 
from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

As of December 31, 1997 and 1996, the fair values of the Company's 
financial instruments, principally cash and debt, approximates their 
carrying amount.

NOTE 2.  INVENTORIES

Inventories at December 31, consisted of:
                                             1997            1996
                                          -------------------------
Finished goods                          $ 1,452,800     $ 1,455,100
Raw materials and work in process           256,800         207,300
                                          -------------------------
                                        $ 1,709,600     $ 1,662,400
                                          =========================

The reserve for obsolete inventory was $35,400 and $87,400 at December 
31, 1997 and 1996, respectively.

NOTE 3. PROPERTY, PLANT and EQUIPMENT

Property, plant and equipment, by major classification, at December 
31, 1997 and 1996 is summarized as follows:

                                             1997            1996
                                          -------------------------

Land                                      $ 259,300       $ 259,300

Buildings                                 3,461,500       3,486,800

Machinery and  equipment                  4,562,500       5,210,600

Vehicles                                     66,800          66,800

Furniture and fixtures                       88,700          88,300
                                          -------------------------

                                          8,438,800       9,111,800

Less: Accumulated depreciation            3,934,400       4,336,800
                                          -------------------------

                                       $  4,504,400      $4,775,000
                                          =========================

Construction in progress of approximately $39,800 at December 31, 1997 
and $57,600 at December 31, 1996 is included in machinery and 
equipment.



NOTE 4.  PROMISSORY NOTES/LONG-TERM PAYABLE 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.

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 $94,300 in 1997. 
Interest paid on long-term debt to affiliated parties was $54,000 in 
1996.

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"). This trust was established to expedite the settlement 
of the Leistner Estate and to be the repository of the common and 
preferred shares of Fairmount, as well as the promissory notes held by 
the Leistner Estate. (See Note 16)



<TABLE>
<CAPTION>


                      Indebtedness to Affiliated  Parties - Non Current
                             Dec. 31                               Dec. 31                             Dec. 31
                              1995     Additions     Reductions     1996      Additions     Reductions    1997
                              ----     ---------     ----------     ----      ---------     ----------    ----
<S>                       <C>           <C>           <C>    <C>            <C>        <C>               <C>

Estate of W.E. Leistner    $ 491,600      --             --    $ 491,600          --     $  491,600          --
(Leistner Loan Interest)

Fairmount Fund             1,080,000      --             --    1,080,000          --      1,080,000          --
(Leistner Estate, 60%)
(Knoepke Estate, 40%)

Promissory Notes:                                                                                --
(Leistner Estate)                                                         $  491,600                  $ 491,600

(Leistner Estate)                                                            648,000             --     648,000

(da Mota Family)                                                             224,640             --     224,640

(Glen da Mota Family)                                                        142,560             --     142,560

(Lynn da Mota)                                                                64,800             --      64,800
                           ---------   -----          -----    ---------   ---------      ---------   ---------
  Total                   $1,571,600      --             --   $1,571,600  $1,571,600     $1,571,600  $1,571,600
                           =========   =====          =====    =========   =========      =========   =========

</TABLE>



NOTE 5.  LONG-TERM DEBT

                                           1997          1996
                                          ------        ------
Capital Expenditures Line of Credit     $ 84,500    $ 135,200
Working Capital Line of Credit           336,500       36,500
                                         -------      --------
Less Current Indebtedness                387,100       60,000
                                         -------      --------
Long Term Debt                          $ 33,900    $ 111,700
                                         =======      ========
In July 1996, the Company obtained a $1,250,000 line of credit from 
Summit Bank. Part of the proceeds of the borrowings during 1996 were 
used to eliminate outstanding capitalized lease obligations. The line 
of credit is comprised of two separate available balances.  There is 
$750,000 available for working capital purposes and $500,000 available 
to finance capital expenditures.  Interest on the borrowings are at 
the bank's prime rate plus 1%. Borrowings and repayments under the 
working capital line of credit are handled on a revolving credit 
basis.  Borrowings against the capital expenditures line of credit are 
treated as a three-year note. The line of credit is subject to an 
annual review for renewal. The bank has been given a first security 
interest in the accounts receivable, inventory, and personal property 
of the Company.

NOTE 6.  INCENTIVE STOCK OPTIONS

On April 19, 1983, the stockholders approved an Incentive Stock Option 
Plan (the "1983 Plan"), which was adopted by the Board of Directors on 
August 17, 1982. The 1983 Plan provides for granting incentive stock 
options to key employees to purchase not more than 75,000 shares of 
common stock of the Company. The option price per share cannot be less 
than the market price on date of grant. The option is exercisable 
after the optionee has been in the employ of the Company for at least 
one year after the date of grant (subject to limited exceptions) and 
may be exercised for a period of 10 years from the date of grant 
unless an earlier date is stated in the option.

On July 10, 1984, the Board of Directors amended the 1983 Plan, 
increasing the number of shares in the Plan by 100,000 shares. The 
stockholders approved this amendment on May 15, 1985. On November 29, 
1988, the Board of Directors further amended the plan, effective 
January 1, 1987, to reflect changes made by the Internal Revenue Code 
of 1986 by modifying the provisions regarding the annual dollar 
limitation with respect to grants of options and the sequence in which 
stock options may be exercised. On January 29, 1991, the Board of 
Directors adopted a new amendment to the Plan, increasing the maximum 
number of shares for which options can be granted under the Plan from 
175,000 shares to 350,000 shares. The stockholders approved such 
amendment on May 6, 1991.  In addition, on March 2, 1993, the Board of 
Directors adopted a new amendment to the Plan, increasing the maximum 
number of shares for which options can be granted under the Plan from 
350,000 shares to 500,000 shares. The stockholders approved such 
amendment on May 4, 1993.

Effective as of January 1, 1996, the Company adopted Statement of 
Financial Accounting Standards ("SFAS") 123, Accounting for Stock-
Based Compensation.  SFAS 123 encourages, but does not require, 
companies to record compensation cost for stock-based employee 
compensation plans at fair value. The Company has chosen to continue 
to account for stock-based compensation using the intrinsic value 
method prescribed in Accounting Principles Board Opinion No. 25, 
"Accounting For Stock Issued to Employees," and related 
interpretations. Accordingly, compensation cost for stock options is 
measured as the excess, if any, of the quoted market price at the date 
of the grant over the amount the employee must pay to acquire the 
stock.  Because the Company grants options at a price equal to the 
market price of the stock at the date of grant, no compensation 
expense is recorded. Although pro forma disclosures of compensation 
expense as determined under the provisions of SFAS 123 is required, 
the Company has not provided such disclosures, as such.  Proforma 
effect on net (loss) and (loss) per share is not materially 
different from reported net (loss) and (loss) per share in 1997 and 
1996, respectively. The current effect of applying SFAS 123 may not 
be representative of the effects on reported net income/(loss) for 
future years.



Stock option transactions for the years ended December 31, 1997 and 
1996 under the plans were as follows:

                           1997                         1996
-------------------------------------------------------------------
                    Shares       Price           Shares       Price
Outstanding
at beginning
of the year        164,000       $1.00          222,000       $1.00

Granted                 --          --               --          --

Forfeited          (59,500)      $1.00          (58,000)      $1.00

Expired            (32,000)      $1.00               --       $1.00
-------------------------------------------------------------------
Outstanding
at end
of the year         72,500       $1.00          164,000       $1.00
-------------------------------------------------------------------

Exercisable         72,500       $1.00          164,000       $1.00
===================================================================

All stock options outstanding as of December 31, 1997 and 1996 are 
exercisable at $1.00 per share.  The average life of stock options 
outstanding as of December 31, 1997 and 1996 is four and five years 
respectively.

NOTE 7. PENSION PLAN

The Company has a defined benefit pension plan covering all of its 
employees. The benefits are based on years of service and the 
employees' compensation.  The Company's funding policy is to 
contribute annually the statutory minimum. In 1997, the Company made 
contributions of $141,000 and $53,500 for the plan years of 1997 and 
1996, respectively. In 1996 the Company made contributions of $90,000 
and $21,000 for the plan years 1996 and 1995, respectively. Assets of 
the plan are held by an insurance company in guaranteed annuity 
contracts.

The following table sets forth the plan's funded status and amounts 
recognized in the Company's balance sheet at December 31, 1997 and 
1996.

Actuarial data related to plan obligations:
Disclosure of plan obligation:
                                            1997            1996
                                           -----           -----

Vested benefit obligation              $ 3,574,000     $ 3,268,900
                                         ---------       ---------
Accumulated benefit obligation         $ 3,663,400     $ 3,350,500 
                                         ---------       ---------

Projected benefit obligation           $(3,880,700)    $(3,525,600)

Plan assets, fair value                  2,982,300       2,842,100
                                         ---------       ---------

Funded status                             (898,400)       (683,500)
Remaining unrecognized net obligation
  at adoption of SFAS No. 87                44,200          55,300
Unrecognized prior service cost            (68,300)        (81,700)
Unrecognized net loss                      583,100         338,900 
Additional minimum liability              (341,700)       (137,400)
                                         ---------       ---------

Accrued pension liability              $  (681,100)    $  (508,400)
                                         =========       =========
Current portion                        $   194,800     $   155,000
Long-term portion                      $   486,300     $   353,400

Included in other assets is an associated intangible pension asset of 
$44,200 in 1997 and $55,300 in 1996.



Net pension cost included in operating results for 1997 and 1996 
amounted to $162,900 and $171,100, respectively, and was comprised of 
the following:
                                            1997            1996
                                           -----           -----

Service cost                             $ 136,200       $ 139,700 

Interest cost on projected benefit 
  obligation                               255,100         241,200

Return on plan assets                     (156,300)       (167,500)

Net amortization and deferral              (72,100)        (42,300)
                                         ---------       ---------

Total net pension cost                   $ 162,900       $ 171,100
                                         =========       =========

The weighted average discount rate and the rate of increase in future 
compensation levels used in determining the actuarial present value of 
the projected benefit obligation were 7.0 percent and 5 percent, 
respectively, as of December 31, 1997 and 7.5 percent and 5 percent, 
respectively, as of December 31, 1996. The expected long-term rate of 
return on assets was 8 percent for the measurement period ending on 
each of those dates.

The provisions of SFAS No. 87, "Employees Accounting for Pensions", 
requires recognition in the balance sheet of an additional minimum 
liability when accumulated benefits are in excess of plan assets.  The 
Company recorded a net adjustment of $204,300, to recognize the 
additional minimum liability in 1997. The adjustment had no effect on 
1997 operations but was accounted for as a further reduction of 
stockholders' equity and the reduction of an intangible pension asset 
established in 1996.

NOTE 8. SUPPLEMENTARY (INCOME) AND EXPENSE STATEMENT INFORMATION

                                           Year Ended December 31
                                          ----------------------
                                           1997              1996
                                        -----------      -----------

Maintenance and repairs                   $ 723,700        $ 782,000

Licensing Fee                             $      --        $(175,000)

Taxes, other than income
and payroll taxes                         $ 137,900        $ 152,500

Duty drawback                             $      --        $ (46,500)

Duty drawback, included in Other (income), was primarily due to the 
receipt of prior year customs duty refunds. Duty drawback is a refund 
of customs duty paid on imported raw materials, which are converted to 
finished products and subsequently exported.  

In October 1996, the Company entered into an exclusive agreement with 
a third party to license certain technology and provide certain other 
information for a period of ten years. Consideration received under 
this agreement is included in other income. The impact of the 
licensing of this technology on the future operations of the Company 
is immaterial.



NOTE 9. INCOME TAXES (BENEFITS)

The Company has not provided for any federal or state income taxes for 
the years ended December 31, 1997 and December 31, 1996 due to net 
operating losses utilized.

Income tax expense for the years ended December 31, 1997 and 1996 
differed from the amounts computed by applying the U.S. federal income 
tax rate of 34% to pretax income (loss) as a result of the following:

                                             1997             1996
                                         -----------      -----------

Computed "expected" tax (benefit)          $ (70,900)       $ (94,200)
State tax net of federal benefit             (12,400)         (16,400)
Loss of state net operating loss 
  carryforwards                              123,000               --
Change in valuation allowance                (46,400)         108,600
Non-deductible penalties                       4,700               --
Non-deductible travel and entertainment        2,000            2,000
                                             =======          =======
                                           $      -0-       $      -0-
                                             =======          =======

The temporary differences which give rise to a significant portion of 
deferred tax assets and liabilities at December 31, 1997 and 1996 are 
presented below.

                                             1997            1996
                                         -----------      -----------

Deferred tax assets:
 Involuntary conversion                  $    64,000       $       --
 Restructuring                                12,700               --
 Pension                                     145,800          158,500
 Interest                                    196,600          196,600
 Inventory                                    85,200           97,700
 Research and development tax credits        434,000          434,000
 Net operating loss - state                  127,200          246,300
 Net operating loss - federal              4,201,000        4,189,000
                                         -----------      -----------
Total tax assets                           5,266,500        5,322,100
Valuation allowance                        5,049,800        5,096,200 
                                         -----------      -----------
Net deferred tax assets                      216,700          225,900
Deferred tax liability:
 Depreciation deferred tax credit           (216,700)        (225,900)
                                         ===========      ===========
Net deferred tax asset                   $        -0-      $       -0-
                                         ===========      ===========

The Company has federal net operating loss carryforwards of 
approximately $12,356,200 which expire through the year 2007.

NOTE 10. (LOSS) 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 loss of the Company since 
there were no preferred dividends paid in 1997 or 1996. The net loss 
of the Company is divided by the weighted average number of shares of 
common stock outstanding (based on 8,293,366 in both 1997 and 1996). 
Common stock equivalents include principally convertible preferred stock
at December 31, 1997 and 1996, respectively. Because the company reported 
losses in 1997 and 1996, the conversion of the preferred stock is not
assumed, as the result is anti-dilutive.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 Company 
had 5,400,000 shares of convertible preferred stock outstanding in 1997 
and 1996 which are dilutive.  The exercise price exceeded the average 
market price for all of the outstanding stock options of the Company 
during both 1997 and 1996 and therefore are not dilutive.

NOTE 11.  STOCK PURCHASES AND DISTRIBUTIONS

On May 4, 1993, the Company converted $5,400,000 of amounts due 
Leistner to equity by issuing Leistner 5,400,000 shares of cumulative 
convertible preferred stock at $1.00 per share. This transaction was 
approved by the Board of Directors. The preferred stock is convertible 
into common stock on a one-for-one basis. Dividends, as declared and 
determined by the Board from time to time, are cumulative. There were 
no dividends declared during 1997 and 1996. In the event of 
involuntary liquidation, each preferred shareholder be entitled to 
cash payment, at par value plus declared but unpaid dividends in 
preference over the common stockholders. There are no restrictions on 
retained earnings.

The preferred shareholder may redeem at par value all or any portion 
of the shares of preferred stock owned and/or convert dollar-for-
dollar all or any portion of the shares of preferred stock owned to 
common stock if there is significant change of ownership or control, 
sale of the business or reorganization.

NOTE 12. IMPAIRMENT OF LONG-LIVED ASSETS

The Company adopted the provisions of SFAS No. 121, "Accounting for 
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be 
Disposed Of," as of January 1, 1996.  This statement requires that 
long-lived assets and certain identifiable intangibles be reviewed for 
impairment whenever events or changes in circumstances indicate that 
the carrying amount of an asset may not be recoverable. Recoverability 
of assets to be held and used is measured by a comparison of the 
carrying amount of an asset to the future net cash flows expected to 
be generated by the asset.  If such assets are considered to be 
impaired, the impairment to be recognized is measured by the amount by 
which the carrying amount of the assets exceeds the fair value of the 
assets.  Assets to be disposed of are reported at the lower of the 
carrying amount or fair value less the cost to sell. Adoption of this 
Statement did not have an impact on the Company's financial position 
or results of operations.

NOTE 13. FOREIGN SALES AND MAJOR CUSTOMERS

The business of the Company is the manufacturing and distribution of 
chemical products, principally to customers in the domestic market.  
Export sales in 1997 and 1996 amounted to $4,751,300 and $5,414,400, 
respectively. In 1997 and 1996, two customers accounted for 
approximately 23.2% and 26.6% of sales, respectively.

NOTE 14. COMMITMENTS AND CONTINGENCIES 

The Company has received notice from the New Jersey Department of 
Environmental Protection ("NJDEP") that the NJDEP is investigating 
whether any material from the Company has caused or contributed to the 
contamination detected at the Ciuba landfill property in Newark. The 
NJDEP alleges that there is a possibility that during the 1970's the 
Company disposed of waste generated at the Company's facility through 
contracts with certain garbage removal companies located at the Ciuba 
landfill. The Company has also received notice from the United States 
Environmental Protection Agency ("USEPA") that the USEPA has 
information indicating that hazardous substances from the Company may 
have been discharged into the Passaic River. It is the Company's 
understanding that these allegations by the EPA are related to 
historical rather than present events. The Company has taken the 
position that its material neither caused nor contributed to the 
contamination of the Passaic River and that it has not discharged 
hazardous substances into the Passaic River. In both cases, it is 
possible that potentially responsible parties will bring claims 
against Fairmount alleging that it is at least partially responsible 
for the contamination.

The Company has no knowledge of contamination of soil on the premises. 
There are no underground storage tanks on the Company's property.  The 
Company's manufacturing effluent system is connected to an above 
ground piping system. The effluent is discharged to the local sewage 
commission. In 1996, the Company received a complaint alleging 
discharges of benzene in excess of the permissible limits on two 
separate occasions during 1996. In 1997, the company received 
complaints alleging discharges of methylene chloride in excess of the 
permissible limits on two separate occasions. Fines associated with this 
complaint are not material to the results of operations or financial 
position of the Company.

It is the Company's policy to accrue and charge against operations, 
environmental clean-up costs when it is probable that a liability has 
been incurred and an amount is reasonably estimable. In this regard, 
environmental compliance, waste disposal and regulatory fees aggregated 
$210,300 and $84,600 in 1997 and 1996 respectively. These costs are 
included in general and administrative expenses.


During the second quarter of 1997, the Company received notice of two 
claims for personal injuries to individuals working at a location 
adjacent to the Company's property. The injuries were allegedly 
sustained as a result of the March 25 explosion of the Company's 
property. The Company has not received details as to the extent of the 
injuries or for a dollar value of the claims.

The Company is subject to various claims, including environmental 
matters, and other routine litigation arising in the normal course of 
its business. Based on the advice of legal counsel, 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.

In 1994, the Company received notification from a customer stating 
that a certain product sold was defective, resulting in damage to the 
customer's product. In 1996, this matter was settled with the 
customer. The Company's insurance carrier fully reimbursed the Company 
for the cost of this settlement.

NOTE 15. SECOND QUARTER 1997 RESTRUCTURING

During the second quarter of 1997 the Company's management conducted a 
review of operations and of the financial condition of the Company and 
concluded that it was necessary to implement a restructuring of the 
organization. As a result, in May, the Company reduced the workforce 
by eighteen salaried and hourly employees. The Company also decided to 
discontinue the manufacturing of a number of small volume products 
that were no longer profitable to produce. Net income for the year 
includes a restructuring charge of $310,000 for severance, early 
retirement and accrued vacation time.

NOTE 16. SUBSEQUENT EVENTS

On January 28, 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 the March 25, 1997 dryer explosion.  
This payment is in 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 its 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. The destroyed assets, 
principally property, plant and equipment, were fully depreciated at 
the time of the incident.

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 a President and Chief Executive 
Officer is chosen by the Board. Mr. Howard R. Leistner, also a 
director of the Company, was appointed as Chairman of the Board.

It is expected that in April, 1998 the transfer of 4,789,200 of common 
shares and 5,400,000 of preferred shares of the Company's stock will 
be executed from the Estate of William E. Leistner to the Howard R. 
Leistner, Hedi Mizrack and Gilbert Leistner Irrevocable Grantor Trust. 
This trust will terminate on June 19, 2002. Howard R. Leistner, Hedi 
Mizrack and Gilbert Leistner are William E. Leistner's children.



Item 8. Changes In and Disagreement with Accountants on Accounting and 
Financial Disclosure

None

PART III

Item 9. Directors, Executive Officers and Control Persons of the 
Issuer, Compliance with Section 16(a) of the Exchange Act.

Incorporated by reference to the Company's 1998 Definitive Proxy 
Statement.

Item 10. Executive Compensation

Incorporated by reference to the Company's 1998 Definitive Proxy 
Statement.

Item 11. Security Ownership of Certain Beneficial Owners and 
Management

Incorporated by reference to the Company's 1998 Definitive Proxy 
Statement.

Item 12. Certain Relationships and Related Transactions

Incorporated by reference to the Company's 1998 Definitive Proxy 
Statement.

PART IV

Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 
8-K

(a) Exhibits

Reference is made to the Index of Exhibits commencing this page; all 
Exhibits are listed.

(a) (3) Exhibits:

(3) Restated Certificate of Incorporation filed May 11, 1982 with 
Secretary of State of New Jersey, incorporated by reference from the 
Company's Form 10-K for the fiscal year ending December 31, (Exhibit 
3.3).

(3) Restated Certificate of Incorporation filed May 13, 1993 with the 
Secretary of State of New Jersey, attached to Form 10-KSB (Exhibit 
3.1.)

(3) Restated Certificate of Incorporation filed June 8, 1994 with the 
Secretary of the State of New Jersey, attached to Form 10-KSB as 
(Exhibit 3.1.)

(3) Certificate of Amendment to Certificate of Incorporation filed 
June 9, 1986 with Secretary of State of New Jersey.

(3) Certificate of Amendment to Certificate of Incorporation filed 
June 1, 1988 with Secretary of State of New Jersey, incorporated by 
reference from the Company's Form 10-K for the fiscal year ending 
December 31, 1988 (Exhibit 3)

(3) By-laws as last amended February 21, 1984, incorporated by 
reference from Company's Form 10-K for the fiscal year ending December 
31, 1983 (sequentially numbered pages 56 through 69).

(4) Loan and Security Agreement, dated as of March 21, 1989, by and 
between the Issuer and Phoenix Chemical Company, incorporated by 
reference from the Company's Form 10-K for the fiscal year ending 
December 31, 1988 (Exhibit (4)(a)).



(4) Promissory Note, dated as of March 21, 1989, executed by Issuer in 
favor of Phoenix Chemical Company, incorporated by reference from the 
Company's Form 10-K for the fiscal year ending December 31, 1988 
(Exhibit (4)(b)).

(4) Credit Facility Loan Agreement, dated as of March 21, 1989, by and 
between the Issuer and Phoenix Chemical Company, incorporated by 
reference from the Company's Form 10-K for the fiscal year ending 
December 31, 1988 (Exhibit (4)(c)).

(4) Loan and Security Agreement, dated as of March 19, 1990, by and 
between the Issuer and Phoenix Chemical Company, attached to the 
Company's Form 10-K for the fiscal year ending December 31, 1989 as 
(Exhibit (4)(a)), sequentially numbered pages 34 through 44.

(4) Promissory Note, dated as of March 19, 1990, executed by Issuer in 
favor of Phoenix Chemical Company,  attached to the Company's Form 10-
K for the fiscal year ending December 31, 1989 as (Exhibit 4(b)), 
sequentially numbered pages 45 through 47.

(4) 1990 Credit Facility Loan Agreement, dated as of March 19, 1990, 
by and between the Issuer and Phoenix Chemical Company, attached to 
the Company's Form 10-K for the fiscal year ending December 31, 1989 
as (Exhibit 4(c)), sequentially numbered pages 48 through 49.

(4) Loan and Security Agreement, dated as of March 18, 1991, by and 
between the Issuer and Phoenix Chemical Company, incorporated by 
reference from the Company's Form 10-K for the fiscal year ending 
December 31, 1990 (Exhibit 4(a)).

(4) Promissory Note, dated as of March 18, 1991, by Issuer in favor of 
Phoenix Chemical Company, incorporated by reference from the Company's 
Form 10-K for the fiscal year ending  December 31, 1990 (Exhibit 
4(b)).

(4) 1991 Credit Facility Loan Agreement, dated as of January 29, 1991, 
by and between the Issuer and Phoenix Chemical Company, incorporated 
by reference from the Company's Form 10-K for the fiscal year ending 
December 31, 1990 (Exhibit 4(c)).

(4) Amendment to 1991 Credit Facility Loan Agreement, dated as of 
March 18, 1991, by and between the Issuer and Phoenix Chemical 
Company, incorporated by reference from the Company's Form 10-K for 
the fiscal year ending December 31, 1990 (Exhibit 4(d)).

(4) 1992 Credit Facility Loan Agreement ("1992 Credit Facility"), 
dated as of March 20, 1992, by and among Issuer and the Phoenix 
Chemical Company/Fairmount Fund, incorporated by reference to the 
Company's Form 10-K for the fiscal year ending December 31, 1991 
(Exhibit 4 (a)).

(4) Letter Agreement extending the date for maturity of the Leistner 
Loan and all borrowings under the Credit Facility to December 31, 
1994, attached to  Form 10-KSB for the fiscal year ending
December 31, 1992 (Exhibit 4(a)).
     
(4) Letter Agreement extending the date for maturity of current 
indebtedness to the Fairmount Fund and the Estate of Leistner to July 
15, 1995, attached to Form 10-KSB for the fiscal year ending 
December 31, 1993 (Exhibit 4(a)).
 
(4) Letter Agreement extending the date for maturity of current 
indebtedness to the Fairmount Fund and the Estate of Leistner to 
January  15, 1996 attached to Form 10-KSB for the fiscal year ending 
December 31, 1994 (Exhibit 4(a)).

(4) Letter Agreement extending the date for maturity of current 
indebtedness to the Fairmount Fund and the Estate of Leistner to April 
1, 1997 attached to Form 10-KSB for the fiscal year ending
December 31, 1995.  (Exhibit 4(a)).

(4) Letter Agreement extending the date for maturity of current 
indebtedness to the Fairmount Fund and the Estate of Leistner to April 
1, 1998 attached to Form 10-KSB for the fiscal year ending 
December 31, 1996. (Exhibit 4(a)).
          
(4) Employment agreement between Todd K. Walker (Employee) and Fairmount 
Chemical Co., Inc. (Employer), attached to Form 10-KSB for the fiscal 
year ending December 31, 1994 as Exhibit 4(b).

(4) Termination of the 1992 Credit Facility Loan Agreement attached to 
this Form 10-KSB for the fiscal year ending December 31, 1997 as 
Exhibit 4(a).

(10)(i) Amendment No. 10, dated September 10, 1987, to the Statement 
on Schedule 13D, filed by Phoenix Chemical Company and the Phoenix 
Chemical Corporation with the Securities  and Exchange Commission on 
March 19, 1982 and April 9, 1982, respectively, and the American Stock 
Exchange on March 22, 1982 and April 12, 1982, respectively, with 
respect to Issuer's issuance to Phoenix Chemical Company of 100,000 
shares of Issuer's Common Stock in cancellation of current debt to 
Phoenix.

(10)(i) Amendment No. 11, dated December 17, 1987, to the Statement on 
Schedule 13D, filed by Phoenix Chemical Company and Phoenix Chemical 
Corporation with the Securities and Exchange Commission on March 19, 
1982 and April 9, 1982, respectively, and the American Stock Exchange 
on March 22, 1982 and April 12, 1982, respectively, with respect to 
Issuer's issuance to Phoenix Chemical Company of 133,334 shares of 
Issuer's Common Stock in cancellation of current debt to Phoenix.

(10)(i) Amendment No. 12, dated July 7, 1988, to the Statement on 
Schedule 13D, filed by Phoenix Chemical Company and Phoenix Chemical 
Corporation with the Securities and Exchange Commission on March 19, 
1982, and April 9, 1982, respectively, and the American Stock
Exchange on March 22, 1982 and April 12, 1982, respectively, with 
respect to Issuer's issuance to Phoenix Chemical Company of 1,000,000 
shares of Issuer's Common Stock in cancellation of current debt to 
Phoenix.

(10)(i) Amendment No. 13, dated August 7, 1989 to the Statement on 
Schedule 13D, filed by Phoenix Chemical Company and Phoenix Chemical 
Corporation with the Securities and Exchange Commission on March 19, 
1982 and April 9, 1982, respectively, and the American Stock 
Exchange on March 22, 1982, and April 12, 1982, respectively, with 
respect to Issuer's issuance to Phoenix Chemical Company of 1,000,000 
shares of Issuer's Common Stock in cancellation of current debt to 
Phoenix.

(10)(i) Amendment No. 14, dated May 23, 1990, to the Statement on 
Schedule 13D, filed by Phoenix Chemical Company and Phoenix Chemical 
Corporation with the Securities and Exchange Commission on March 19, 
1982 and April 9, 1982, respectively, and the American Stock
Exchange on March 22, 1982 and April 12, 1982, respectively, with 
respect to Issuer's issuance to Phoenix Chemical Company of 1,500,000 
shares of Issuer's Common Stock in cancellation of current debt to 
Phoenix.

(10)(i) Amendment No. 15, dated December 5, 1990, to the Statement on 
Schedule 13D, filed by Phoenix Chemical Company and Phoenix Chemical 
Corporation with the Securities and Exchange Commission on March 19, 
1982 and April 9, 1982, respectively, and the American Stock Exchange 
on March 22, 1982, and April 12, 1982, respectively, with respect to 
Issuer's issuance to Phoenix Chemical Company of 1,000,000 shares of 
Issuer's Common Stock in cancellation of current debt to Phoenix.

(10)(i) Statement on Schedule 13D, dated April 6, 1992, filed by 
William E. Leistner with the Securities and Exchange Commission on 
April 15, 1992 with respect to the liquidation and winding up of 
Phoenix Chemical Company and the distribution of 3,789,200 shares of 
Issuer's Common Stock to Leistner, who was a 60% partner in Phoenix, 
as the result of such liquidation is incorporated into Part III.

(10)(i) Statement on Schedule 13D, dated April 6, 1992, filed by the 
Estate of Olga H. Knoepke, with the Securities and Exchange Commission 
on May 4, 1992, with respect to the liquidation and winding up of 
Phoenix Chemical Company and the distribution of 2,526,134 shares to 
the Estate of Olga H. Knoepke, who was a 40% partner in Phoenix, as 
the result of such liquidation is incorporated into Part III.     

(10)(i) Statement on Schedule 13D, dated September 19, 1993, filed by 
the Estate of William E. Leistner with the Securities and Exchange 
Commission on March 30, 1994 with respect to the Estate of William E. 
Leistner acquiring direct beneficial ownership of William E. 
Leistner's 4,790,200 shares of Common Stock and 5,400,000 shares of 
Preferred Stock of Fairmount Chemical Co., Inc. upon his death on 
September 19, 1993 is incorporated into Part III.

(10)(i) Amendment No. 1, dated December 28, 1992, to the Statement on 
Schedule 13D, filed by William E. Leistner with the Securities and 
Exchange Commission on April 15, 1992, with respect to Issuer's 
issuance to Leistner of 1,000,000 shares of Issuer's Common Stock in 
cancellation of current debt to Leistner is incorporated into Part 
III..

(10)(i) Form 8-K of Issuer, dated September 10, 1987, with respect to 
Issuer's issuance to Phoenix Chemical Company of 100,000 shares of  
Issuer's Common Stock in cancellation of current debt to Phoenix.

(10)(i) Form 8-K of Issuer, dated December 17, 1987, with respect to 
Issuer's issuance to Phoenix Chemical Company of 133,334 shares of 
Issuer's Common Stock in cancellation of current debt to Phoenix.

(10)(i) Form 8-K of Issuer, dated July 7, 1988, with respect to 
Issuer's issuance to Phoenix Chemical Company of 1,000,000 shares of 
Issuer's Common Stock in cancellation of current debt to Phoenix.

(10)(i) Form 8-K of Issuer, dated May 23, 1990, with respect to 
Issuer's issuance to Phoenix Chemical Company of 1,500,000 shares of 
Issuer's Common Stock in cancellation of current debt to Phoenix.

(10)(i) Form 8-K of Issuer, dated December 5, 1990, with respect to 
Issuer's issuance to Phoenix Chemical Company of 1,000,000 shares of 
Issuer's Common Stock in cancellation of current debt to Phoenix.

(10)(i) Agreement, dated as of March 20, 1992, by and among the estate 
of Olga H. Knoepke and William E. Leistner regarding the Phoenix 
Chemical Company/Fairmount Fund, incorporated by reference to the 
Company's Form 10-K for the fiscal year ending December 31, 1991
(Exhibit 10(ii) (A) (1)).

(10)(i) Assignment, dated as of March 31, 1992, by the estate of Olga 
H. Knoepke (the "Estate") in favor of William E. Leistner, pursuant to 
which the Estate sells and transfers to Dr. Leistner all of its rights 
in and to the Issuer's indebtedness to Phoenix Chemical Company, 
incorporated by reference to the Company's Form 10-K for the fiscal 
year ending December 31, 1991 (Exhibit (10)(ii) (A) (2)).

(10)(i) Offer, dated April 7, 1992, made by William E. Leistner to 
cancel 40% ($4,402,480) of the  Issuer's current total indebtedness to 
William E. Leistner for $440,248 and the Issuer's acceptance of such 
offer, incorporated by reference to the Company's Form 10-K for the
fiscal year ended December 31, 1991 (Exhibit 10(i)).



(10)(i) Form 8-K of Issuer, dated December 28, 1992, with respect to 
Issuer's issuance to William E. Leistner of 1,000,000 shares of 
Issuer's Common Stock in cancellation of current debt to Leistner.
     
(10)(i) Form 8-K of Issuer, dated November 19, 1993, with respect to 
the death of William E. Leistner, Chairman of the Board, Chief 
Executive Officer and majority stockholder of Fairmount, as well 
as changes in control of management.

(10)(ii)(A)Incentive Stock Option Plan, incorporated by reference to 
Company's Definitive Proxy Statement for its Annual Meeting of 
Stockholders held April 19, 1983 (Exhibit A), and amendment thereto, 
incorporated by reference from the Company's Definitive Proxy 
Statement for its Annual Meeting of Stockholders held May 15, 1985 
(Exhibit A); Incentive Stock Option Plan, as amended in 1988, 
incorporated by reference from the Company's Form 10-K for the 
fiscal year ending December 31, 1988 (Exhibit 10); and amendment to 
Incentive Stock Option Plan in 1991, incorporated by reference to the 
Company's Definitive Proxy Statement for its Annual Meeting of 
Stockholders held May 6, 1991 (Exhibit A).

(24) Consent of KPMG Peat Marwick LLP, Independent Certified Public 
Accountants, attached to this Form 10-KSB as Exhibit 24, sequentially 
numbered page 35.

(25) Letter by KPMG Peat Marwick LLP, Independent Certified Public 
Accountants, attached to Form 10-KSB for the fiscal year ending
December 31, 1996 as Exhibit 25, sequentially numbered page 36.

(b) Reports on Form 8-K during the last quarter of 1997 - None.



SIGNATURES

In accordance with Section 13 or 15 (d) of the Securities and Exchange 
Act of 1934, the Registrant caused this report to be signed on its 
behalf by the undersigned, thereunto duly authorized.


                              FAIRMOUNT CHEMICAL CO., INC.
                              Registrant


                              By: S/Reidar T. Halle               
                                     Chief Executive Officer and 
                                     President


                              By: S/James F. Gilday               
                                 Vice President, Treasurer,
                                 Chief Financial Officer and Secretary


In accordance with the Securities and Exchange Act of 1934, this 
report has been signed below by the following persons on behalf of the 
Registrant and in the capacities and on the dates indicated.



Signature              Title                                    Date

S/Howard R. Leistner   Chairman of the Board                April 1, 1998
(Howard R. Leistner)


S/Dr. Reidar T. Halle  Director, Chief Executive Officer,   April 1, 1998
(Dr. Reidar T. Talle)  President


S/James F. Gilday      Director, Vice President, Treasurer  April 1, 1998
James F. Gilday        Chief Financial Officer and Secretary



                                        EXHIBIT 24



CONSENT OF INDEPENDENT AUDITORS



The Board of Directors and Stockholders
Fairmount Chemical Co., Inc.




We consent to incorporation by reference in the Registration 
Statements Nos. 2-84988 and 2-99610 on Form S-8 of Fairmount Chemical 
Co., Inc. of our report dated March 16, 1998, relating to the balance 
sheets of Fairmount Chemical Co., Inc. as of December 31, 1997 and 
1996, and the related statements of operations, stockholders' equity, 
and cash flows for the years then ended, which report appears in the 
December 31, 1997 annual report on Form 10-KSB of Fairmount Chemical 
Co., Inc.  Our report refers to a change to the FIFO method of valuing 
inventory.



New York, New York
March 16, 1998


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