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, 1996 

                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: 201-344-5790

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:  $12,551,700.

  The aggregate market value of the Issuer's Common Stock $1 par value 
("Common Stock"), held by non-affiliates of the Issuer on March 21, 1997 
(2,670,042 shares) was approximately $240,304, based on $.09 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 21, 1997  was 8,293,366.

                DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of the Issuer's Definitive Proxy Statement for its Annual 
Meeting of Stockholders to be held May 7, 1996, to be filed with the 
Securities and Exchange Commission within 120 days after December 31, 
1995 (the end of the registrant's fiscal year covered by this Form 10-
KSB) ("1996 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 27 THROUGH 36

Total number of pages in this Form 10-KSB: 36, including the "cover 
page" and all exhibits (sequentially numbered pages 1 through 36).

                             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 which 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:

                               1996    1995
                               ----    ----
Plastic additives                33%    34%
Imaging chemicals                26%    22%
Hydrazine blends                 16%    14%
Specialty chemicals              14%    21%
Hydrazine derivatives            11%     9%
                               ----   ----
                               100%   100%    
                               ====   ====


The Company sells its products principally in the domestic market and 
continues its efforts to expand both domestic and export sales. Net 
sales of $12,551,700 and $12,234,000, in 1996 and 1995, respectively, 
included export sales of $5,414,400 and $6,257,900. Net sales by major 
foreign geographical area were as follows:

                      1996    1995
                     -----   -----
Europe               22.1%   32.3%
Other Export         21.0%   18.5%

During 1996 and 1995, two customers accounted for approximately 26.6% 
and 24.8% 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. New products for use in the electronics and 
automotive industry are scheduled for introduction later in 1997. 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 depends 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, 1996 and 1995, the Company spent 
approximately $484,200 and $488,500, respectively, in research and 
development activities. The Company expects 1997 Research and 
Development expenditures to approximate the 1996 level.

Technology Sale

During 1996, the Company entered into an 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 waste water effluent for 
compliance with the requirements of  local laws and regulations. 
Samples are analyzed for biological oxygen demand. A complete chemical 
analysis is performed monthly by an outside testing laboratory. All 
results are forwarded to the New Jersey Department of Environmental 
Protection.

The Company employs an environmental engineer to monitor the Company's 
compliance with environmental laws and regulations. The engineer 
inspects pipelines, tank dikes and equipment 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. On December 27, 1996, the Company received a complaint 
alleging discharges of benzene in excess of the permissible limits on 
two separate occasions during 1996. Fines associated with this 
complaint are not material to the results of operations or financial 
position of the Company. 

Environmental compliance, waste disposal and regulatory fees totaled 
approximately $ 84,600 and $87,100 in 1996 and 1995, respectively. 
These costs are included in general and administrative expenses.

Employees

As of December 31, 1996, the Company had 70 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 13 buildings, of brick, 
cinder-block or metal-clad construction. They provide approximately 
85,000 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 and inventory of the Company. The Leistner Loan is 
subordinate 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 work 
week 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 believes it will have alternate means of drying products in 
place in less than sixty days. Insurance coverage is sufficient to 
cover the property and material losses sustained. Therefore, the 
Company believes that this occurrence will not result in any materially 
adverse effect to its 1997 operations.

In 1996, the Company spent approximately $481,200 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, 1996.

                                 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
                       ------------------------
                        1996 1             1995 1
                       -------           -------
 Quarter            High    Low      High     Low
----------          ------------    ---------------
 First             $.25    $.22     $.28     $.20
 Second             .20     .15      .28      .22
 Third              .16     .10      .25      .22
 Fourth             .15     .09      .25      .22

There were approximately 289 stockholders of record at December 31, 
1996. The Company did not declare or pay any dividends in 1996 and 
1995.
_________________________

1 There was no significant market activity for the common stock during 
  1996 and 1995. 


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. 

The Company's working capital increased by $132,300 in 1996 resulting 
in working capital of $3,562,500 compared to working capital of 
$3,430,200 in 1995. The increase in working capital in 1996 resulted 
from higher balances of trade receivables - $188,900 and prepaid assets 
- $103,600 coupled with lower balances of other accrued liabilities - 
$107,600 and capitalized leases - $154,600. Trade receivables increased 
due to an increased mix of foreign receivables which have longer 
collection terms. Prepaid assets were higher due to payment in 1996 for 
a three year pollution liability insurance policy. Other accrued 
balances were lower due to higher accruals in 1995 for sales commissions 
on an agency agreement that was terminated during 1996 and for chemical 
disposal expenses that were paid during the first quarter of 1996. 
Capitalized leases in 1996 were reduced through normal monthly payments 
until the bank line of credit was obtained, at which time monies were 
borrowed and used to repay the remaining balances. Decreases in working 
capital were due to lower inventory balances - $407,700 coupled with 
short-term bank borrowings - $60,000. Inventory decreased as a result 
of lower production during December due to a holiday shutdown.

As of January 1, 1993, the Company owed W.E. Leistner ("Leistner"), 
$5,603,700, (the "Leistner Loan"). At the Board of Director's 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 registrant's 
principal stockholder, in consideration of retirement of debt to 
Leistner of $5,400,000. The balance of the Leistner Loan principal was 
paid out of corporate funds of approximately $203,700 during May, 1993. 
The Leistner Loan is controlled by the co-executors of the Estate of 
Leistner ("Leistner Estate"). Accrued interest for the Leistner Loan as 
of December 31, 1996 and 1995 was $491,600. The executors of the Estate 
of W.E. Leistner ("Leistner Estate") have agreed to extend repayment of 
the interest until April 1, 1998.

The balance of Notes Payable to Affiliated Parties as of December 31, 
1995, was $1,080,000 which represents borrowings under a separate 
financing, the Credit Facility Loan Agreement ("Credit Facility"). On 
March 20, 1992, the Credit Facility was created with monies contributed 
to a fund (the "Fund") by Leistner and the Estate of Olga H. Knoepke. 
At that date, the Fund provided the Company with a $2,494,000 credit 
facility under which all borrowings bear interest at the rate of 5% per 
annum. The Fund is controlled by the co-executors of the Leistner 
Estate. There were no borrowings from the Credit Facility in 1996. 
There were borrowings of $290,000 from the Credit Facility in 1995 used 
primarily for working capital purposes. The executors of the Leistner 
Estate have agreed to extend repayment of the Credit Facility 
indebtedness until April 1, 1998.

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 believes it will have alternate means of drying products in 
place in less than sixty days. Insurance coverage is sufficient to 
cover the property and material losses sustained. Therefore, the 
Company believes that this occurrence will not result in any materially 
adverse effect to its 1997 operations.

The Company's capital expenditures of approximately $481,200 in 1996 
were used for the expansion and upgrade of production capacity and 
building and equipment improvements. 


Research and Development

During the years ended December 31, 1996 and 1995, the Company spent 
approximately $484,200 and $488,500, respectively, in research and 
development activities. The Company expects 1997 Research and 
Development expenditures to approximate the 1996 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 waste water effluent for 
compliance with the requirements of local laws and regulations. Samples 
are analyzed for biological oxygen demand. A complete chemical analysis 
is performed monthly by an outside testing laboratory. All results are 
forwarded to the New Jersey Department of Environmental Protection.

The Company employs an environmental engineer to monitor the Company's 
compliance with environmental laws and regulations. The Company 
engineer inspects pipelines, tank dikes and equipment 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 taken the position that its material was not 
sent to 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 internal effluent system is connected to an above ground 
piping system. The effluent is discharged to the local sewage 
commission. On March 24, 1994, the Company received and subsequently 
entered into a consent order of final judgement with the local sewage 
commission covering the period from July 1, 1991 to the date of the 
consent order. During this period, the Company exceeded discharge 
limits for toluene on ten separate occasions. The Company paid a 
settlement in the amount of $10,000 and agreed to and did have toluene 
emissions under the discharge limit by October 1, 1994. 

Environmental compliance, waste disposal and regulatory fees totaled 
approximately $87,100 and $131,700 in 1995 and 1994, respectively. 
These costs are included in general and administrative expenses.


Results of Operations 1996 - 1995

A. Net sales for 1996 were $12,551,700, an increase of $227,700 or 
1.8% as compared to 1995. The increase in net sales was primarily due 
to increased volumes of imaging chemicals - $550,900, hydrazine blends - 
$309,700, hydrazine derivatives - $195,000 and polymer additives - 
$37,900; partially offset by lower volumes of specialty chemicals mainly 
due to the loss of a customer that began manufacturing for themselves a 
product formerly supplied by the Company - ($865,800). Gross profit for 
1996 decreased $844,700 or 29.2% due to lower margins resulting from 
stiff price competition in several products coupled with increased 
manufacturing expenses. Included in this decrease is a loss of $106,000 
due to the shipment of off-spec material to a customer. The Company is 
attempting to recover this loss from its insurance carrier.

Net Sales                              1996      1995
                                    -----------------
Plastic additives                      33%       34% 

Imaging chemicals                      26%       22% 

Hydrazine blends                       16%       14% 

Specialty chemicals                    14%       21%

Hydrazine derivatives                  11%        9%
                                    -----------------
                                      100%       100%
                                    -----------------

B. Operating loss was $457,700, a change of $789,500 versus operating 
income of $331,800 in 1995. The change was due to the lower margins and 
increased manufacturing costs affecting gross profit. Research and 
development and selling, general and administrative expenses were 
slightly lower versus 1995.

Interest expense to an affiliate was slightly higher in 1996 versus 
1995 due to lower borrowings during the early part of 1995. Other 
income increased $135,200 versus 1995. The increase was the result of 
the Company granting a technology license for the manufacture, 
production and sale of one of the Company's products - $175,000, coupled 
with customs duty refunds; partially offset by the receipt of a state 
grant for safety training during 1995.

1997 Outlook

The Company has budgeted approximately $475,000 for capital 
expenditures in 1997. Major expenditures will consist of capital 
repairs to buildings, the replacement of process equipment and storage 
tanks.

Improved operating results will depend on improving the 1996 level of 
sales volumes to existing major customers. 

 The Company should realize improved margins through lower raw 
materials costs coupled with improved manufacturing efficiencies.

  The 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.



Item 7. Financial Statements and Supplementary Data

Index to Financial Statements and Related Information

Financial Statements                                      Page
                                                       --------
Independent Auditors' Report                              13

Statements of Operations for the years 
  ended December 31, 1996 and 1995                        14

Balance Sheets as of December 31, 1996 and 1995           15

Statements of Stockholders' Equity 
  for the years ended December 31, 1996 and 1995          16

Statements of Cash Flows for the years
  ended December 31, 1996 and 1995                        17

Notes to Financial Statements                          18-25     



             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, 1996 and 1995, and 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, 1996 and 1995,  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 notes 1 to the financial statements, the Company 
changed its method of determining the cost of inventories in 1996.


/s/ KPMG Peat Mark LLP
-----------------------
KPMG Peat Mark LLP 

Short Hills, New Jersey
March 24, 1997



<TABLE>
<CAPTION>
                      FAIRMOUNT CHEMICAL CO., INC.

                       Statements of Operations

                Years Ended December 31, 1996 and 1995

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

                                             1996             1995
                                         -----------     ------------
<S>                                      <C>              <C>
Net sales                                 $12,551,700     $12,324,000
Cost of goods sold                         10,506,900       9,434,500
----------------------------------------------------------------------
Gross profit                                2,044,800       2,889,500

Research & development                        484,200         488,500

Selling, general and
  administrative expenses                  2,018,300       2,069,200
----------------------------------------------------------------------
Operating income/(loss)                      (457,700)        331,800  

Interest expense                               77,300          68,700
Other income (Note 7)                        (257,900)       (117,300)
----------------------------------------------------------------------
Net (loss)/income before income taxes     $  (277,100)      $ 380,400 
Provision for income taxes                         --              --
----------------------------------------------------------------------
Net (loss)/income                         $  (277,100)      $ 380,400 
======================================================================
(Loss)/earnings per share                  $     (.02)        $   .03
======================================================================

See accompanying Notes to Financial Statements.

</TABLE>



<TABLE>
<CAPTION>
                        FAIRMOUNT CHEMICAL CO., INC.

                              Balance Sheets

                          December 31, 1996 and 1995

(Dollar amounts rounded to hundreds)    
                                              1996            1995
                                           ----------     ----------
<S>                                        <C>             <C>
Assets
Current Assets:   
Cash                                      $  427,900       $ 432,800
Accounts receivable-trade                  2,091,000       1,902,100
Inventories (Note 2)                       1,662,400       2,070,100
Prepaid expenses                             263,700         160,100
Other current assets                          57,900          26,300
---------------------------------------------------------------------
Total Current Assets                       4,502,900       4,591,400
---------------------------------------------------------------------
Property, plant and equipment
  less accumulated depreciation of
  $10,986,100 in 1996 and $10,116,300 
  in 1995 (Note 3)                         4,775,000       5,163,600
Other assets (Note 7)                         56,000             700
---------------------------------------------------------------------
Total Assets                              $9,333,900      $9,755,700
=====================================================================
Liabilities and
Stockholders' Equity 
Current Liabilities:         
Accounts payable                          $  563,500      $  560,200
Accrued compensation                          73,100          95,000
Other accrued liabilities                    243,800         351,400
Short-term bank borrowings (Note 5)           60,000              --
Capitalized lease obligations (Note 5)            --         154,600
---------------------------------------------------------------------
Total Current Liabilities                    940,400       1,161,200
---------------------------------------------------------------------

Accrued interest to
 affiliated party (Note 4)                   491,600         491,600
Long-term notes payable to
 affiliated party (Note 4)                 1,080,000       1,080,000
Long-term bank borrowings (Note 5)           111,700              --
Long-term capitalized lease 
 obligations (Note 5)                             --          76,000
Accrued pension liability (Note 7)           353,400         230,900
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 1996 and 1995             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                      (14,570,000)    (14,292,900)
Additional minimum liability (Note 7)        (82,100)             --
---------------------------------------------------------------------

Total Stockholders' Equity                 6,356,800       6,716,000
---------------------------------------------------------------------

Total Liabilities and 
Stockholders' Equity                     $ 9,333,900     $ 9,755,700
=====================================================================

See accompanying Notes to Financial Statements.

</TABLE>

<TABLE>
<CAPTION>


                                                    FAIRMOUNT CHEMICAL CO., INC.

                                                Statements of Stockholders' Equity 

                                             Years Ended December 31, 1996 and 1995

                                               (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, 1994     5,400,000  $5,400,000  8,293,366    $8,293,400  (500)  ($500) $7,316,000  ($14,791,600)      --   $6,217,300

Adjustment for the 
cumulativeeffect 
on prior years of
applying retroactively
the new method of
accounting for
inventories (Note 1)                                                                                 118,300               118,300
-----------------------------------------------------------------------------------------------------------------------------------
Balance as adjusted
December 31, 1994    5,400,000  $5,400,000   8,293,366    $8,293,400  (500)  ($500) $7,316,000  ($14,673,300)           $6,335,600

Net income for 1995                                                                                  380,400               380,400
-----------------------------------------------------------------------------------------------------------------------------------
Balance as adjusted
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 
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
==================================================================================================================================
See accompanying Notes to Financial Statements.
</TABLE>



<TABLE>
<CAPTION>



                  FAIRMOUNT CHEMICAL CO., INC.

                   Statements of Cash Flows

            Years Ended December 31, 1996 and 1995

             (Dollar amounts rounded to hundreds)

       
                                                   1996         1995
                                               -----------  ----------
<S>                                            <C>          <C>
Cash Flow From Operating Activities:
Net (loss)/Income                               (277,100)  $  380,400 
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation                                     869,800      821,300
 
Increase (decrease) from changes in:
Accounts receivable-trade                       (188,900)    (492,000)
Inventories                                      407,700     (480,400)
Prepaid expenses                                (103,600)      99,600
Other assets                                     (86,900)       2,800
Accounts payable                                   3,300       67,900
Accrued compensation                             (21,900)      48,700
Other liabilities                                (67,200)     (41,200)
----------------------------------------------------------------------
Cash Flow Provided by Operating Activities       535,200      407,100
----------------------------------------------------------------------

Cash Flow Used in Investing Activities:
Capital expenditures                            (481,200)    (955,800)
----------------------------------------------------------------------

Cash Flow From Financing Activities:
 Capitalized lease obligations                  (230,600)     230,600
 Bank borrowings                                 171,700           --
 Credit facility                                      --      290,000
----------------------------------------------------------------------
Cash Flow Used in/Provided by 
  Financing Activities                           (58,900)     520,600
----------------------------------------------------------------------
Decrease in Cash                                  (4,900)     (28,100)

Cash at Beginning of Period                      432,800      460,900
----------------------------------------------------------------------
Cash at End of Period                        $   427,900    $ 432,800
======================================================================
Supplemental Disclosure of Cash Flow Information:

Interest Paid                                 $   77,300   $   68,700
                                              ==========   ==========
Income taxes paid                              $      --    $      --
                                              ==========   ==========
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, 1996. 

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform with the 
1996 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 1995 was 
to increase net income by $1,700 and in 1996 to increase the loss by 
$22,600. The effect on earnings per share in 1996 and 1995 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, 1996 and 1995, 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:
                                                 1996         1995
                                            -------------------------
Finished goods                              $  1,455,100  $ 1,854,400
Raw materials and work in process                207,300      215,700
                                            -------------------------
                                            $  1,662,400  $ 2,070,100
                                            =========================

The reserve for obsolete inventory was $87,400 and $98,600 at 
December 31, 1996 and 1995, respectively.

NOTE 3. PROPERTY, PLANT and EQUIPMENT

Property, plant and equipment, by major classification, at December 31, 
1996 and 1995 is summarized as follows:
                                                1996          1995
                                           -------------------------
Land                                        $  259,300     $ 259,300

Buildings                                    4,658,700     4,554,800

Machinery and  equipment                    10,305,500     9,990,700

Vehicles                                       152,100       135,900

Furniture and fixtures                         385,500       339,200
                                           -------------------------
                                            15,761,100    15,279,900

Less:  Accumulated depreciation             10,986,100    10,116,300
                                           -------------------------
                                          $  4,775,000    $5,163,600
                                           =========================

Construction in progress of approximately $57,600 at December 31, 1996 
and $345,300 at December 31, 1995 is included in machinery and 
equipment.





NOTE 4. LONG-TERM PAYABLE TO AFFILIATED PARTY

A. As of January 1, 1993 the Company owed William E. Leistner 
("Leistner") $5,603,700 (the "Leistner Loan"). At the Board of 
Director's 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. 

Beginning on April 1, 1992, the Leistner Loan had an interest rate 
equal to one percent above the prime rate as announced by First Fidelity 
Bank, Newark, New Jersey. Accrued interest payable for the Leistner 
Loan is $491,600 for 1996 and 1995, respectively. The Leistner Loan is 
controlled by the co-executors of the Estate of Leistner ("Leistner 
Estate"). The executors of the Leistner Estate have agreed to extend 
repayment of the interest until April 1, 1998.

B. The balance of Notes Payable to Affiliated Parties as of  December 
31, 1996 and 1995 was $1,080,000, which represents borrowings under a 
separate financing, the Credit Facility Loan Agreement ("Credit 
Facility"). On March 20, 1992, the Credit Facility was created with 
monies contributed to a fund (the "Fund") by Leistner and the Estate of 
Olga H. Knoepke. The Fund is now controlled by the co-executors of the 
Estate of Leistner. At that date, the Fund provided the Company with a 
$2,494,000 credit facility under which all borrowings bear interest at 
the rate of 5% per annum. Interest expense was $54,000 and $50,800 for 
1996 and 1995. There were no borrowings from the Credit Facility in 
1996. There were borrowings of $290,000 from the Credit Facility in 
1995. The executors of the Leistner Estate have agreed to extend 
repayment of the Credit Facility indebtedness until April 1, 1998.



<TABLE>
<CAPTION>

                     Indebtedness to Related Parties - Non Current
                     ---------------------------------------------
                                                      Fairmount Fund (60% 
                       Estate of  W.E. Leistner       Estate of W. E. Leistner, 40%
                       (Leistner Loan Interest)       Estate of O.H. Knoepke)
                       ------------------------       -----------------------
<S>                           <C>                       <C>
Balance as of
December 31, 1994               $ 491,600                  $  790,000

Additions                              --                     290,000

Reductions                             --                          --
                              -----------               -------------
Balance as of
December 31, 1995              $  491,600                 $ 1,080,000

Additions                              --                          --

Reductions                             --                          --
                              -----------               -------------
Balance as of
December 31, 1996                $491,600                  $1,080,000
                              ===========               =============

</TABLE>


Notes to Financial Statements (Continued)

NOTE 5. LONG-TERM DEBT

                                                   1996         1995
                                                  --------     -------
Capital Expenditures Line of Credit               $171,700      $   --
Capitalized Leases                                      --     230,600
                                                  --------     -------
Less Current Indebtedness                           60,000     154,600
                                                  --------     -------
Long Term Debt                                    $111,700     $76,000
                                                  ========     =======


In July, 1996, the Company obtained a $1,250,000 line of credit from a 
bank. The proceeds of the borrowings during 1996 were used to eliminate 
the 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. There are 
currently no borrowings against the working capital line. 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 and inventory 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. This 
amendment was approved by the stockholders 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 an 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)/income and (loss)income per share is not 
materially different from reported net (loss)/income and (loss)/income 
per share in 1996 and 1995, respectively. The current effect of 
applying SFAS 123 may not be representative of the effects on reported 
net income for future years.


Stock option transactions for the years ended December 31, 1996 and 1995 
under the plans were as follows:

                              1996                     1995    
-------------------------------------------------------------------
                      Shares        Price       Shares       Price
Outstanding
at beginning
of the year            222,000       $1.00       252,375      $1.00

Granted                     --          --            --         --

Forfeited              (58,000)      $1.00        (4,000)     $1.00

Expired                     --       $1.00       (26,375)     $1.00
-------------------------------------------------------------------
Outstanding
at end
of the year            164,000       $1.00       222,000      $1.00
-------------------------------------------------------------------
Exercisable            164,000       $1.00       222,000      $1.00
===================================================================

All stock options outstanding as of December 31, 1996 and 1995 are 
exercisable at $1.00 per share. The average life of stock options 
outstanding as of December 31, 1996 and 1995 is five and six 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 1996, the Company made contributions 
of $90,000 and $21,000 for the plan years of 1996 and 1995, 
respectively. In 1995 the Company made contributions of $141,000 and 
$73,000 for the plan years 1995 and 1994, 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, 1996 and 1995.

Actuarial data related to plan obligations:
Disclosure of plan obligation:
                                           1996             1995
                                        -----------      -----------
Vested benefit obligation               $ 3,268,900      $ 2,986,600
Accumulated benefit obligation          $ 3,350,500      $ 3,056,000 
                                        -----------      -----------
Projected benefit obligation            $(3,525,600)     $(3,212,600)

Plan assets, fair value                   2,842,100        2,788,400
                                        -----------      -----------
Funded status                              (683,500)        (424,200)
Remaining unrecognized net obligation
 at adoption of SFAS No. 87                  55,300           66,400
Unrecognized prior service cost             (81,700)         (95,100)
Unrecognized net loss (gain)                338,900          142,000 
Additional minimum liability               (137,400)              --
                                        -----------      -----------
Accrued pension liability                $ (508,400)     $  (310,900)
                                        ===========      ===========
Current portion                          $  155,000       $   80,000
Long-term portion                        $  353,400        $ 230,900

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



Net pension cost included in operating results for 1996 and 1995 
amounted to $171,100 and $88,800, respectively, and was comprised of the 
following:
                                           1996              1995
                                        -----------      -----------
Service cost                              $ 139,700        $  87,800 

Interest cost on projected 
  benefit obligation                        241,200          220,400

Return on plan assets                      (167,500)        (170,000)

Net amortization and deferral               (42,300)         (49,400)
                                        -----------      -----------
Total net pension cost                   $  171,100         $ 88,800
                                        ===========      ===========

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 7.5 percent and 5 percent, 
respectively, as of December 31, 1996 and 7.0 percent and 5 percent, 
respectively, as of December 31, 1995. 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 an adjustment of $137,400, to recognize the minimum 
liability. The adjustment had no effect on 1996 operations but was 
accounted for as a reduction of stockholders' equity and the recognition 
of an intangible pension asset.

NOTE 8. SUPPLEMENTARY (INCOME) AND EXPENSE STATEMENT INFORMATION

                                           Year Ended December 31
                                          ----------------------
                                           1996              1995
                                        -----------      -----------
Maintenance and repairs                   $ 782,000        $ 806,900

Licensing Fee                             $(175,000)              --

Taxes, other than income
and payroll taxes                         $ 152,500        $ 144,000

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 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, 1996 and December 31, 1995 due to net 
operating losses utilized.

Income tax expense for the years ended December 31, 1996 and 1995 
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:
       

                                            1996              1995
                                         -----------      -----------

Computed "expected" tax (benefit)          $ (94,200)       $ 129,300
State tax net of federal benefit             (16,400)          22,600
Change in valuation allowance                108,600         (154,020)
Non-deductible travel and entertainment        2,000            2,120
                                         ===========      ===========
                                             $   -0-         $    -0-
                                         ===========      ===========

The temporary differences which give rise to a significant portion of 
deferred tax assets and liabilities at December 31, 1996 and 1995 are 
presented below.


                                            1996              1995
                                         -----------      -----------
Deferred tax assets:
 Pension                                  $ 158,500        $ 126,100
 Interest                                   196,600          196,600
 Inventory                                   97,700          107,900
 Research and development tax credits       434,000          434,000
 Net operating loss - state                 246,300          235,000
 Net operating loss - federal             4,189,000        4,123,000
                                        -----------      -----------
Total tax assets                          5,322,100        5,222,600
Valuation allowance                       5,096,200        4,987,600 
                                        -----------      -----------
Net deferred tax assets                     225,900          235,000
Deferred tax liability:
 Depreciation deferred tax credit          (225,900)        (235,000)
                                        -----------      -----------
Net deferred tax asset                      $    -0-         $    -0-
                                        ===========      ===========

The Company has federal net operating loss carryforwards of 
approximately $12,321,700 which expire in the year 2006.

NOTE 10. NET INCOME (LOSS) PER SHARE

Net income (loss) per share are based on earnings (loss) divided by the 
weighted average number of shares of common stock outstanding adjusted 
for dilutive common stock equivalents. Common stock equivalents include 
shares outstanding under stock option plans and preferred stock, as 
converted to common stock in the ratio of one-to-one. At December 31, 
1996 and 1995, the share base was 13,693,366, respectively.

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 1996 and 1995. In the event of involuntary 
liquidation, each preferred shareholder is 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 1996 and 1995 amounted to $5,414,400 and $6,257,900, 
respectively. In 1996 and 1995, two customers accounted for 
approximately 26.6% and 24.8% 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. On December 27, 1996, the Company received a complaint 
alleging discharges of benzene in excess of the permissible limits on 
two separate occasions during 1996. 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 
$84,600 and $87,100 in 1996 and 1995 respectively. These costs are 
included in general and administrative expenses.

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. SUBSEQUENT EVENT

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 believes it will have alternate means of drying products in 
place in less than sixty days. Insurance coverage is sufficient to 
cover the property and material losses sustained. Therefore, the 
Company believes that this occurrence will not result in any materially 
adverse effect to its 1997 operations.

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

None

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 1997 Definitive Proxy 
Statement.

Item 10. Executive Compensation

Incorporated by reference to the Company's 1997 Definitive Proxy 
Statement.

Item 11. Security Ownership of Certain Beneficial Owners and Management

Incorporated by reference to the Company's 1997 Definitive Proxy 
Statement.

Item 12. Certain Relationships and Related Transactions

Incorporated by reference to the Company's 1997 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.

(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 this Form 10-KSB for the fiscal year ending 
December 31, 1996 as 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).

(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'sissuance 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 this Form 10-KSB as Exhibit 25, sequentially 
numbered page 36.

(b) Reports on Form 8-K during the last quarter of 1996 - 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/William E. Setzler   
        ---------------------
        William E. Setzler, Chairman of the Board and
        Chief Executive Officer

     By: S/Sondra Jacoby   
        ----------------
       Sondra Jacoby, 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/W.E. Setzler             Chairman of the Board,
--------------              and Chief Executive Officer       1997
(William E. Setzler)
   

/S/Leonard Wood             Director, Vice Chairman 
--------------              of the Board                      1997
(Leonard Wood)


/S/Todd K. Walker           Director, President and
----------------            Chief Operating Officer
(Todd K. Walker)                                              1997


/S/Sondra Jacoby            Director, Vice President,
---------------             Treasurer, Chief Financial
(Sondra Jacoby)             Officer and Secretary             1997


********************

EXHIBIT 25

March 24, 1997


Fairmount Chemical Co., Inc.
117 Blanchard Street
Newark, N.J. 07105

Gentlemen:

We have audited the balance sheets of Fairmount Chemical Co., Inc. as of 
December 31, 1996 and 1995, and the related statements of operations, 
stockholder's equity, and cash flows for the years then ended and have 
reported thereon under date of March 24, 1997. The aforementioned 
financial statements and our report thereon are included in the 
Company's annual report on Form 10 KSB for the year ended December 31, 
1996. As stated in Note 1 to those financial statements, the Company 
changed its method of accounting for inventories from the last-in first-
out (LIFO) method to the first-in first-out (FIFO) method, and states 
that the newly adopted accounting principle is preferable in the 
circumstances because it better matches revenue and expenses. In 
accordance with your request, we have reviewed and discussed with 
company officials the circumstances and business judgment and planning 
upon which the decision to make this change in the method of accounting 
was based.

With regard to the aforementioned accounting change, authoritative 
criteria have not been established for evaluating the preferability of 
one acceptable method of accounting over another acceptable method. 
However, for purposes of Fairmount Chemical Co., Inc.'s compliance with 
the requirements of the Securities and Exchange Commission, we are 
furnishing this letter.

Based on our review and discussion, with reliance on management's 
business judgment and planning, we concur that the newly adopted method 
of accounting is preferable in the Company's circumstances.

Very truly yours,



KPMG Peat Marwick LLP