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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended FEBRUARY 28, 2010

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                        Commission file number 000-17741

                                  EPOLIN, INC.
             (Exact Name of Registrant as Specified in Its Charter)

NEW JERSEY                                                            22-2547226
(State or other jurisdiction                                    (I.R.S. Employer
of incorporation or organization)                         Identification Number)

358-364 ADAMS STREET
NEWARK, NEW JERSEY                                                         07105
(Address of principal executive offices)                              (Zip Code)

       Registrant's telephone number, including area code: (973) 465-9495

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

Securities  registered  pursuant to Section  12(g) of the Exchange  Act:  COMMON
STOCK (NO PAR VALUE)

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act.
                                 Yes [ ] No [X]

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or 15(d) of the Act.
                                 Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
                                 Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted  electronically  and
posted on its corporate Web site, if any, every  Interactive  Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter)  during the  preceding 12 months (or for such shorter  period that
the registrant was required to submit and post such files).
                                 Yes [ ] No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated filer, a non-accelerated  filer, or a smaller reporting company. See
the definition of "large accelerated  filer",  "accelerated  filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

          Large accelerated filer [ ]     Accelerated filer [ ]
          Non-accelerated filer [ ]       Smaller reporting company [X]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Act).
                                 Yes [ ] No [X]

The aggregate  market value of the voting and  non-voting  common equity held by
non-affiliates of the registrant  (8,484,310  shares) as of August 31, 2009, the
last  business day of the  registrant's  most recently  completed  second fiscal
quarter, was approximately  $4,157,000.  The number of shares outstanding of the
Common Stock (no par value) of the registrant as of the close of business on May
18, 2010 was 12,166,355.

                    Documents Incorporated by Reference: None

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                                  EPOLIN, INC.

                                TABLE OF CONTENTS

                                                                            Page

                                     PART I

Item 1.       Description of Business                                         3

Item 1A.      Risk Factors                                                    6

Item 1B.      Unresolved Staff Comments                                       9

Item 2.       Properties                                                      9

Item 3.       Legal Proceedings                                               9

Item 4.       Reserved                                                        9

                                     PART II

Item 5.       Market for Registrant's Common Equity, Related Stockholder
              Matters and Issuer Purchases of Equity Securities               9

Item 6.       Selected Financial Data                                        11

Item 7.       Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                      11

Item 7A.      Quantitative and Qualitative Disclosures About Market Risk     17

Item 8.       Financial Statements and Supplementary Data                    17

Item 9.       Changes in and Disagreements with Accountants on
              Accounting and Financial Disclosure                            17

Item 9A(T).   Controls and Procedures                                        17

Item 9B.      Other Information                                              17

                                    PART III

Item 10.      Directors, Executive Officers and Corporate Governance         18

Item 11.      Executive Compensation                                         20

Item 12.      Security Ownership of Certain Beneficial Owners and
              Management and Related Stockholder Matters                     22

Item 13.      Certain Relationships and Related Transactions, and
              Director Independence                                          23

Item 14.      Principal Accountant Fees and Services                         24

                                     PART IV

Item 15.      Exhibits and Financial Statement Schedules                     24

              Signatures                                                     26

                                        2

<PAGE>

                           FORWARD-LOOKING STATEMENTS

      This report contains  certain  forward-looking  statements and information
relating to the Company  that are based on the beliefs and  assumptions  made by
the  Company's  management  as well as  information  currently  available to the
management.  When  used in this  document,  the words  "anticipate",  "believe",
"estimate",  and  "expect"  and similar  expressions,  are  intended to identify
forward-looking  statements.  Such  statements  reflect the current views of the
Company  with  respect  to future  events  and are  subject  to  certain  risks,
uncertainties   and   assumptions.   Should  one  or  more  of  these  risks  or
uncertainties  materialize,  or should  underlying  assumptions prove incorrect,
actual results may vary materially  from those described  herein as anticipated,
believed,  estimated or expected.  Certain of these risks and  uncertainties are
discussed in this report in Part I, Item 1A "Risk Factors". The Company does not
intend to update these forward-looking statements.

                                     PART I

ITEM 1.     BUSINESS.

INTRODUCTION

      Epolin,  Inc. (referred to herein as "Epolin",  the "Company",  "we", "us"
and "our"),  which was incorporated in the State of New Jersey in May 1984, is a
specialized chemical company primarily engaged in the manufacturing,  marketing,
research and development of dyes and dye  formulations.  Our business is heavily
weighted  towards the  development,  manufacture and sale of near infrared dyes.
Applications for these dyes cover several markets that include laser protection,
welding, sunglasses,  optical filters, glazing and imaging and security inks and
tagants.

      Our wholly-owned subsidiary,  Epolin Holding Corp. ("Epolin Holding"), was
incorporated in the State of New Jersey as a real estate holding company. Epolin
Holding became a wholly-owned subsidiary in January 1998.

      Following  completion of Epolin's  public  offering in 1989,  our revenues
were then  primarily  generated  through  the  synthesis  and sale of  specialty
organic  chemical  products.  Building upon this base,  Epolin  singled out near
infrared  dye  technology  as a most  promising  product line and since 1991 has
emphasized the development, manufacture and sale of these dyes.

      Paralleling  the  growth  of the dye  business,  we  maintain  a level  of
production and sales of specialty products made on a custom basis. These include
additives  for  plastics,  thermochromic  materials for use in paints as well as
other specialty  chemicals made in low volume to sell at prices that reflect the
value of the product.  However,  unlike the dye  business,  we do not expect our
specialty chemical business to grow.

      We sell our  products  to the  manufacturers  of  plastics/resins,  credit
cards,  electronics,  glass,  and other basic materials  primarily in the United
States, Asia, and Europe.

      Our principal  offices are located at 358-364 Adams  Street,  Newark,  New
Jersey 07105 and our telephone number is (973) 465-9495.  Epolin's  web-site can
be accessed at www.epolin.com.

      Unless the context otherwise  requires,  all references herein to "Epolin"
or the "Company" refer to Epolin, Inc. and its consolidated  subsidiary,  Epolin
Holding Corp.

INFRARED DYES

      Based upon our years of  experience  in the  specialty  dye  business,  we
believe that Epolin  possesses the largest  offering of near infrared (NIR) dyes
in the world.  Our  Epolight(TM)  NIR dyes absorb in the near infrared region of
the  electromagnetic  light spectrum which is 700nm to 1600nm.  However,  we are
unaware of any  statistical  evidence  available  to support or  contradict  the
belief that Epolin is the largest NIR dye producer.

      Epolight(TM)  dyes  are  sold  as  pure  crystalline  dyes  or  formulated
mixtures.  We also  incorporate  our dyes into  liquid  inks and  thermoplastics
pellets. We have approximately 275 to 300 product  formulations and have created
a more vertically  integrated  product line over the past three years to address
more applications.

                                        3

<PAGE>

      Our products can be divided into five distinct  product groups:  dyes, dye
blends, inks and coatings, laminate pellets and other.

      We sell our products into three primary market segments.  Any product that
does not fall into any of the three primary markets is characterized as Custom.

      EYE PROTECTION

      Our eye  protection  products  are  used in  plastic  lenses,  eyeglasses,
goggles,  windows and shields  that  protect  eyes from high energy  ultraviolet
(UV),  visible and near infrared  radiation.  Typical end-users include welders,
military,  industrial  and medical  laser users.  The eye  protection  market is
concentrated with several major and medium-sized customers in the United States,
Asia and Europe.

      We believe our products are important because our dyes protect the eyes by
absorbing the harmful wavelengths of light while simultaneously allowing visible
light  transmission.  Consumers  are  increasingly  aware of the risk of macular
degeneration  due to long term  exposure to the sun's  harmful NIR light  waves.
This  concern  has  generated  interest  in the  Company's  products  for use in
sunglasses.

      SECURITY INK

      Our inks and coatings  are used on credit  cards as well as security  inks
for  documents  and  packaging.   Typical  end-users  include  banks,  printers,
publishers  and  consumer  goods  companies.  The ink  and  coatings  market  is
worldwide  with  several  security ink makers in the United  States,  Europe and
Asia. Our products make transparent ATM cards readable by ATM machines. Our near
infra-red  (NIR) dyes are almost  invisible and mask important data or otherwise
tag  products  by code as  genuine.  Our  products  are  viable  tools to thwart
counterfeiting and fraud.

      LIGHT MANAGEMENT

      Our light  Management  products  are used in laser  equipment,  electronic
displays,  night vision  systems,  solar heat shields,  heat and light  sensors,
imaging systems,  plasma  televisions and data storage discs.  Typical end-users
include a large variety of industrial,  automotive,  aerospace, construction and
electronic  users.  The light  Management  market  includes many diverse  market
niches  worldwide.  Our  light  Management  dyes  allow  for the  filtering  and
manipulation of visible light and NIR light for many applications.

SPECIALTY CHEMICAL PRODUCTS

      We also  maintain a level of  production  and sales of specialty  products
made on a custom  basis.  These include  additives  for plastics,  thermochromic
materials  for use in paints as well as other  specialty  chemicals  made in low
volume to sell at prices that reflect the value of the product.  The  production
and sale of these products represents less than 10% of the overall business.

EFFECT OF COMPLIANCE WITH GOVERNMENT REGULATION

      Manufacturers  of chemical  products are subject to extensive  Federal and
State  environmental  regulations.  Although we believe  that our  manufacturing
processes  do not result in the  emission  of volatile  organic  vapors into the
atmosphere,  and  that  we  are  not  in  violation  of  any  State  or  Federal
environmental  regulations,  Epolin is required to comply with such  regulations
with respect to manufacture,  storage and/or disposal of toxic materials. To our
knowledge, we are in compliance with present regulations. However, no assurances
can be given that future regulations will not be adopted,  compliance with which
will  result in  substantial  expense  to, and  otherwise  adversely  affect our
business. In addition, we are subject to the State of New Jersey Industrial Site
Recovery  Act (ISRA),  which,  among other  requirements,  requires us to obtain
prior approval  before  relocating our facilities or  consummating a transaction
that would result in a change in control of Epolin.  Our  facilities are subject
to  inspection to ascertain  whether we have  complied with State  environmental
regulations.  While we believe Epolin has complied with such regulations,  there
can be no assurance that we will not be required to incur expenses to remedy any
future environmental violations discovered.  We register all new and proprietary
products with the Toxic  Substances  Control  Agency (TSCA) which is required in
order for us to offer for sale any new chemical  product.  No assurances  can be
given that such registrations will be approved for any new product.

                                        4

<PAGE>

      During the years  ended  February  28,  2010 and  February  28,  2009,  we
expended  approximately $40,000 and $36,000,  respectively,  for compliance with
environmental  laws. Actual costs to be incurred in future periods may vary from
the foregoing costs,  given inherent  uncertainties in evaluating  environmental
exposures.  Subject to the imprecision in estimating future environmental costs,
we do  not  expect  that  any  sum  we  may  have  to  pay  in  connection  with
environmental  matters would have a materially  adverse  effect on our financial
condition or results of operations in any one year.

SOURCES AND AVAILABILITY OF RAW MATERIALS

      We purchase  chemicals from several large chemical  manufacturers and then
further processes them into our saleable  products.  Although we limit ourselves
to a  relatively  small  number  of  suppliers,  we are not  restricted  to such
suppliers,  and Management  believes the  availability  to such raw materials is
widespread. During the year ended February 28, 2010, no significant difficulties
were encountered in obtaining  adequate supplies of raw materials.  We typically
purchase  materials in large  quantities and volumes to provide up to a two year
supply of certain raw materials.

RESEARCH AND DEVELOPMENT

      Our research and development  efforts are devoted to (i) developing new or
improved  products to satisfy  defined  market  needs,  (ii)  providing  quality
technical  services to assure the  success of our  products  for our  customers'
applications,  (iii)  providing  technology  for  improvements  to our products,
processes and  applications,  and (iv)  providing  support to our  manufacturing
plant for cost reduction, productivity and quality improvement programs.

      We have committed resources to research and development of new dyes and to
our capability to provide technical services to customers.  New applications are
supported by a Director of Research with  contributions from his staff including
Murray S. Cohen, Ph.D., our Chief Scientist.

      During the years  ended  February  28, 2010 and  February  28,  2009,  the
amounts spent on research and development activities were approximately $374,000
and  461,000,  respectively.  All research  and  development  costs are borne by
Epolin.

SALES AND DISTRIBUTION

      Our internal sales team sells directly to customers on a worldwide  basis.
We also hire  independent  distributors  and have sales agents in North America,
Europe and Asia. In total, we currently sell to customers in twenty nations.  We
also use our  customer-centric  website to develop new  customers  and marketing
opportunities at www.epolin.com.

COMPETITION

      We experience,  in management's opinion,  limited competition in all areas
of our business.  Management  believes that other dye companies do not offer the
broad range of dyes nor provide  the level of  technical  service as provided by
Epolin. We believe that our extensive product portfolio, technical expertise and
customer support are the key factors in our competitiveness.

TECHNOLOGICAL OBSOLESCENCE

      The major portion of our product line has been used in protective  eyewear
since 1976. Yet the field has proven to be an active one and we must  anticipate
competition to develop.

      Epolin has committed  itself to make capital  investments  to maintain its
position as a key supplier in this field. There can be no assurance that our dye
technology  will  not  be  rendered  less  competitive,   or  obsolete,  by  the
development  of new  methods to  achieve  laser  safety  and other  forms of eye
protection.

PATENTS AND PROPRIETARY PROTECTION

      We have not  generally in the past relied upon patents for  protection  of
our dye business or to provide us with any significant  competitive advantage as
it relates to our existing product lines.  There can be no assurance that others
may not independently  develop the same, similar or alternative  technologies or
otherwise obtain access to our proprietary  technologies.  However,  we recently
filed a patent  application  in the  United  States  and Canada for a new IR dye
compound.  Even if this patent  application is granted,  we cannot guaranty that
such will be of commercial benefit to the Company or otherwise offer the Company
protection from competing products.

                                        5

<PAGE>

DEPENDENCE ON CERTAIN CUSTOMERS

      A material  portion  of our  business  is  dependent  on certain  domestic
customers, the loss of which could have a material effect on operations.  During
the year ended  February  28, 2010,  approximately  33.4% of sales were to three
customers. During the year ended February 28, 2009, approximately 31.0% of sales
were to three customers.

EMPLOYEES

      We presently  employ ten persons on a full time basis.  Our  employees are
not  represented  by labor unions.  We believe that relations with our employees
are good.

AVAILABLE INFORMATION

      We  are  subject  to the  informational  requirements  of  the  Securities
Exchange  Act of 1934,  as  amended,  and file  annual,  quarterly  and  current
reports, proxy statements and other information with the Securities and Exchange
Commission ("SEC"). Such reports,  proxy statements and other information may be
inspected  at the  public  reference  room  of the  SEC at 100 F  Street,  N.E.,
Washington D.C. 20549. Copies of such material can be obtained from the facility
at  prescribed  rates.  Please  call the SEC  toll  free at  1-800-SEC-0330  for
information  about  its  public  reference  room.   Because  we  file  documents
electronically  with the SEC, you may also obtain this  information  by visiting
the SEC's Internet website at http://www.sec.gov.

ITEM 1A.    RISK FACTORS.

      OUR  BUSINESS  INVOLVES  A HIGH  DEGREE  OF  RISK.  IN  ADDITION  TO OTHER
INFORMATION IN THIS REPORT,  POTENTIAL  INVESTORS SHOULD CAREFULLY  CONSIDER THE
RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE OTHER INFORMATION IN THIS REPORT
BEFORE  DECIDING  WHETHER TO INVEST IN SHARES OF OUR COMMON  STOCK.  EACH OF THE
FOLLOWING  RISKS MAY  MATERIALLY AND ADVERSELY  AFFECT OUR BUSINESS,  RESULTS OF
OPERATIONS  AND FINANCIAL  CONDITION.  THESE RISKS MAY CAUSE THE MARKET PRICE OF
OUR COMMON  STOCK TO  DECLINE,  WHICH MAY CAUSE YOU TO LOSE ALL OR A PART OF THE
MONEY YOU PAID TO BUY OUR COMMON STOCK.

      OPERATING  RESULTS MAY  FLUCTUATE.  Our  operating  results may  fluctuate
because of a number of factors,  many of which are beyond our  control.  Some of
these  factors  that affect our results  but which are  difficult  to control or
predict are: the reduction,  rescheduling or cancellation of orders by customers
whether  as a result of  slowing  demand for our  products,  stockpiling  of our
products  or  otherwise;  fluctuations  in the  timing  and  amount of  customer
requests for product shipments;  fluctuations in product life cycles; changes in
the mix of products that our  customers  buy;  competitive  pressures on selling
prices;  the  ability of our  customers  to obtain  products  from  their  other
suppliers; and general economic conditions.

      DEPENDENCE ON KEY CUSTOMERS.  Our customers are concentrated,  so the loss
of one or more key customers could significantly reduce our revenues. During the
year  ended  February  28,  2010,  approximately  33.4% of  sales  were to three
customers. During the year ended February 28, 2009, approximately 31.0% of sales
were to three customers.

      CONCENTRATION OF CREDIT RISKS. At February 28, 2010, four of our customers
represented 44.5% of our trade receivables.  Such accounts receivable subject us
to a  significant  concentration  of risk.  There can be no assurance  that such
clients will not experience financial difficulties or other problems which could
delay such  customers  in paying for  product on a timely  basis or at all.  Any
problems with such  customers can be expected to have a material  adverse effect
on our business.

      TECHNOLOGICAL CHANGES. The major portion of our product line has been used
in protective  eyewear since 1976.  Yet the field has proven to be an active one
and we must anticipate  competition to develop.  Epolin has committed  itself to
make  capital  investments  to maintain  its  position as a key supplier in this
field.  There can be no assurance that our dye  technology  will not be rendered
less  competitive,  or obsolete,  by the  development  of new methods to achieve
laser safety and other forms of eye protection.

                                        6

<PAGE>

      COMPETITION.  We experience,  in management's opinion, limited competition
in all areas of our  business.  Management  believes that other dye companies do
not offer the broad range of dyes nor provide the level of technical  service as
provided by Epolin. We believe that our extensive product  portfolio,  technical
expertise  and  customer  support  are the key  factors in our  competitiveness.
However,  as mentioned above,  there can be no assurance that we will be able to
maintain  our  competitive  position in the event new  methods to achieve  laser
safety and other forms of eye protection are developed.

      ENVIRONMENTAL  REGULATION.  Manufacturers of chemical products are subject
to  extensive  Federal  and State  environmental  regulations.  While we believe
Epolin has complied  with such  regulations,  there can be no assurance  that we
will not be  required  to incur  expenses  to remedy  any  future  environmental
violations  discovered.  In  addition,  no  assurances  can be given that future
regulations  will  not  be  adopted,   compliance  with  which  will  result  in
substantial expense to, and otherwise adversely affect our business.

      PATENTS AND  PROPRIETARY  PROTECTION.  We have not  generally  in the past
relied upon patents for protection of our dye business or to provide us with any
significant  competitive  advantage as it relates to our existing product lines.
There can be no assurance  that others may not  independently  develop the same,
similar  or  alternative   technologies  or  otherwise   obtain  access  to  our
proprietary technologies. However, we recently filed a patent application in the
United  States  and  Canada  for a new IR dye  compound.  Even  if  this  patent
application  is  granted,  we cannot  guaranty  that such will be of  commercial
benefit to the Company or otherwise offer the Company  protection from competing
products.

      SOURCES AND  AVAILABILITY  OF RAW  MATERIALS.  We purchase  chemicals from
several  large  chemical  manufacturers  and then further  process them into its
saleable  products.  Although we limit ourselves to a relatively small number of
suppliers, we are not restricted to such suppliers,  and Management believes the
availability to such raw materials is widespread.  Nevertheless, there can be no
assurance  that  raw  materials  will  continue  to be  easily  obtainable.  Any
difficulty in obtaining raw materials  would have a material  adverse  effect on
our business.

      THE LOSS OF OUR CHIEF  EXECUTIVE  OFFICER,  PRESIDENT  OR  CHAIRMAN OF THE
BOARD WOULD DISRUPT OUR BUSINESS.  Our success depends in substantial  part upon
the services our three principal  executive  officers.  Although our Chairman of
the Board  presently  works only on a part-time  basis, a loss of one or more of
our current  officers could severely and negatively  impact our  operations.  In
addition,  we do not  maintain  key-man  life  insurance  on  any  of our  three
principal executive officers and we have no plans to obtain this insurance.

      WE ARE DEPENDENT ON KEY PERSONNEL.  Due to the  specialized  nature of our
business, our success depends in part upon attracting and retaining the services
of qualified  managerial  and technical  personnel.  The market for such persons
remains  competitive  and the  relative  small  size of Epolin  may make it more
difficult for us to recruit and retain qualified persons.

      DIVIDENDS.  During fiscal 2007, Epolin approved the adoption of a dividend
policy under which Epolin will issue a regular annual cash dividend on shares of
its Common Stock. The amount of the dividend,  record date and payment date will
be subject to approval  every year by the Board of Directors.  As a result,  any
such future dividends will depend on earnings,  other financial requirements and
other factors, many of which may be beyond the control of Epolin.

      MAINTAINING AND IMPROVING OUR FINANCIAL  CONTROLS MAY STRAIN OUR RESOURCES
AND DIVERT  MANAGEMENT'S  ATTENTION.  We are subject to the  requirements of the
Securities   Exchange  Act  of  1934,   including   the   requirements   of  the
Sarbanes-Oxley Act of 2002. The requirements of these rules and regulations have
increased,  and we expect will  continue to  increase,  our legal and  financial
compliance costs, make some activities more difficult,  time-consuming or costly
and may also place undue strain on our  personnel,  systems and  resources.  The
Sarbanes-Oxley  Act  requires,  among other things,  that we maintain  effective
disclosure   controls  and  procedures  and  internal   control  over  financial
reporting.  This  can be  difficult  to do.  As a  result  of this  and  similar
activities, management's attention may be diverted from other business concerns,
which could have a material adverse effect on our business,  financial condition
and results of operations.

                                        7

<PAGE>

      THE ONGOING  ECONOMIC  SLOWDOWN MAY HAVE A MATERIAL  ADVERSE IMPACT ON OUR
BUSINESS AND FINANCIAL  CONDITION THAT WE CURRENTLY CANNOT PREDICT.  The ongoing
global economic slowdown has caused disruptions and extreme volatility in global
financial  markets,  increased  rates of default and  bankruptcy,  and declining
consumer and  business  confidence.  While the ultimate  outcome of these events
cannot be predicted,  they could  materially  adversely  affect our business and
financial condition.  For example, the consequences of the economic crisis could
result in interruptions or delays in our suppliers' or customers' performance of
any  contracts,  reductions and delays in customer  purchases,  delays in or the
inability  of  customers  to obtain  financing  to purchase  our  products,  and
bankruptcy of customers. Any of these events may materially adversely affect our
business.

      OUR STOCK PRICE MAY EXPERIENCE VOLATILITY.  The market price of the Common
Stock,  which currently is listed in the OTC Bulletin  Board,  has, in the past,
fluctuated  over time and may in the future be  volatile.  We believe that there
are a small number of market makers that make a market in our Common Stock.  The
actions of any of these market makers could substantially  impact the volatility
of our Common Stock.

      POTENTIAL  FUTURE SALES PURSUANT TO RULE 144. Many of the shares of Common
Stock  presently  held by management and others are  "restricted  securities" as
that term is defined in Rule 144,  promulgated  under the Securities  Act. Under
Rule 144, a person (or persons whose shares are  aggregated) who has satisfied a
certain holding period,  may, under certain  circumstances sell such shares or a
portion of such shares.  Effective as of February 15, 2008,  the holding  period
for the resale of  restricted  securities  of reporting  companies was shortened
from one year to six months. Additionally, the SEC substantially simplified Rule
144  compliance  for  non-affiliates  by allowing  non-affiliates  of  reporting
companies to freely resell  restricted  securities  after satisfying a six-month
holding period (subject only to the Rule 144(c) public  information  requirement
until the securities have been held for one year) and by allowing non-affiliates
of  non-reporting   companies  to  freely  resell  restricted  securities  after
satisfying a 12-month holding period. Therefore, actual sales or the prospect of
sales of such shares  under Rule 144 in the future may depress the prices of the
Company's securities.

      OUR COMMON STOCK IS A PENNY STOCK.  Our Common  Stock is  classified  as a
penny stock,  which is traded on the OTCBB. As a result, an investor may find it
more  difficult to dispose of or obtain  accurate  quotations as to the price of
the shares of the Common Stock. In addition,  the "penny stock" rules adopted by
the  Securities  and Exchange  Commission  subject the sale of the shares of the
Common Stock to certain regulations which impose sales practice  requirements on
broker-dealers.  For example, broker-dealers selling such securities must, prior
to effecting  the  transaction,  provide  their  customers  with a document that
discloses the risks of investing in such securities.  Furthermore, if the person
purchasing  the  securities is someone  other than an accredited  investor or an
established  customer of the broker-dealer,  the broker-dealer must also approve
the  potential  customer's  account  by  obtaining  information  concerning  the
customer's financial situation, investment experience and investment objectives.
The  broker-dealer  must also make a  determination  whether the  transaction is
suitable for the customer and whether the customer has sufficient  knowledge and
experience  in  financial  matters to be  reasonably  expected  to be capable of
evaluating  the  risk of  transactions  in  such  securities.  Accordingly,  the
Commission's  rules may  result in the  limitation  of the  number of  potential
purchasers  of the shares of the  Common  Stock.  In  addition,  the  additional
burdens  imposed  upon   broker-dealers  by  such  requirements  may  discourage
broker-dealers  from  effecting  transactions  in the Common Stock,  which could
severely limit the market of our Common Stock.

      LIMITATIONS  OF THE OTCBB CAN  HINDER  COMPLETION  OF  TRADES.  Trades and
quotations  on  the  OTCBB  involve  a  manual  process  that  may  delay  order
processing.  Price  fluctuations  during a delay can result in the  failure of a
limit  order  to  execute  or  cause  execution  of a  market  order  at a price
significantly  different  from the price  prevailing  when an order was entered.
Consequently, one may be unable to trade in our Common Stock at optimum prices.

      THE OTCBB IS  VULNERABLE TO MARKET FRAUD.  OTCBB  securities  are frequent
targets of fraud or market  manipulation,  both because of their  generally  low
prices and because OTCBB reporting requirements are less stringent than those of
the stock exchanges or NASDAQ.

      INCREASED DEALER  COMPENSATION  COULD ADVERSELY AFFECT STOCK PRICE.  OTCBB
dealers'  spreads (the difference  between the bid and ask prices) may be large,
causing higher purchase prices and less sale proceeds for investors.

      Except  as  required  by the  Federal  Securities  Law,  Epolin  does  not
undertake   any   obligation   to  release   publicly   any   revisions  to  any
forward-looking  statements to reflect events or circumstances after the date of
this Form 10-K or for any other reason.

                                        8

<PAGE>

ITEM 1B.    UNRESOLVED STAFF COMMENTS.

      We are a  smaller  reporting  company  as  defined  by Rule  12b-2  of the
Securities  Exchange Act of 1934 and are not required to provide the information
under this item.

ITEM 2.     PROPERTIES.

      We presently  occupy  approximately  19,500 square feet of  manufacturing,
warehouse  and  administrative  space in Newark,  New Jersey which  property the
Company has occupied since June 1989. The property is currently  owned by Epolin
Holding Corp.  ("Epolin  Holding"),  our wholly-owned  subsidiary.  We presently
occupy the property pursuant to a lease,  effective  November 1, 1996, which was
for an initial term of five years with three five years options with annual rent
of $97,740,  subject to annual  adjustments  based on  increases in the Consumer
Price Index which  adjustments  have been  waived by Epolin  Holding.  Such rent
includes real estate taxes and insurance expenses. Generally, we expect that the
lease  will be renewed in the normal  course of  business.  We believe  that the
current facility is adequate for the foreseeable future.

      We entered into a sublease with a non-related  party  effective  September
2005 for an initial  term  ending  October  31,  2007  pursuant to which we were
subleasing  approximately  2,500  square feet of our space for the  subtenant to
operate a laboratory  at an annual  rental of $18,000.  Following the end of the
initial term, the subtenant  remained in the premises on a month-to-month  basis
until May 2009 at which time the premises were abandoned by the subtenant.

ITEM 3.     LEGAL PROCEEDINGS.

      There are no material pending legal  proceedings to which the Company is a
party or to which any of its property is subject.

ITEM 4.     RESERVED.

                                     PART II

ITEM  5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
            AND ISSUER PURCHASES OF EQUITY SECURITIES.

MARKET INFORMATION

      The   Company's   Common   Stock  is   presently   being   traded  in  the
over-the-counter  market  under  the  symbol  "EPLN"  and is  listed  on the OTC
Bulletin  Board.  The  following  chart sets forth the range of the high and low
sales prices per share for the Company's Common Stock for each period indicated.
The  quotations  represent  prices  between  dealers and do not  include  retail
markups,  markdowns,  commissions  or other  adjustments  and may not  represent
actual transactions.

FISCAL YEAR ENDED FEBRUARY 28, 2010                  HIGH              LOW

March 1, 2009 to May 31, 2009                        $0.66             $0.35
June 1, 2009 to Aug. 31, 2009                        $0.65             $0.45
Sept. 1, 2009 to Nov. 30, 2009                       $0.52             $0.30
Dec. 1, 2009 to Feb. 28, 2010                        $0.48             $0.30

FISCAL YEAR ENDED FEBRUARY 28, 2009:                 HIGH              LOW

March 1, 2008 to May 31, 2008                        $0.64             $0.57
June 1, 2008 to Aug. 31, 2008                        $0.65             $0.54
Sept. 1, 2008 to Nov. 30, 2008                       $0.63             $0.27
Dec. 1, 2008 to Feb. 28, 2009                        $0.50             $0.27

                                        9

<PAGE>

HOLDERS

      As of May 18, 2010, there were approximately 262 stockholders of record of
the Company's Common Stock.  This does not reflect persons or entities that hold
their stock in nominee or "street name".

DIVIDENDS

      Subsequent to the end of fiscal 2006, the Board of Directors  approved the
adoption of a dividend  policy  under which we will issue a regular  annual cash
dividend on shares of our Common Stock. The amount of the dividend,  record date
and  payment  date  will be  subject  to  approval  every  year by the  Board of
Directors.  In accordance  with the new dividend  policy,  a regular annual cash
dividend of $0.02 per share was paid in each of May 2006, May 2007 and May 2008.
In  addition,  since of the  adoption of the  dividend  policy in fiscal 2007, a
special  cash  dividend of $0.02 per share was paid in each of January  2007 and
January 2008,  and a  supplemental  special cash dividend of $0.04 per share was
paid in August  2008.  No further  dividends  have been paid since  August  2008
primarily  due to the Company's  decision to seek  strategic  alternatives.  The
Board determined to postpone any action regarding the declaration of the regular
annual cash dividend for 2009 and beyond pending the outcome of this process.

RECENT SALES OF UNREGISTERED SECURITIES

      During the fiscal years ended  February 28, 2009 and February 28, 2010, we
issued or sold the following  equity  securities that were not registered  under
the Securities Act of 1933, as amended (the "Securities Act"):

      Pursuant to the Epolin,  Inc.  2008 Stock  Incentive  Plan,  each director
shall  receive a stock  award  annually  of 25,000  shares of Common  Stock.  On
September 1, 2008, a total of 100,000 shares of Common Stock were granted to the
Company's four directors, and similarly, on October 21, 2009, a total of 100,000
shares of Common  Stock were granted to the  Company's  four  directors,  all of
which shares were issued under the 2008 Stock Incentive Plan.

      All of such  securities  were issued in reliance upon the  exemption  from
registration pursuant to Section 4(2) of the Securities Act for "transactions by
the issuer not involving any public offering".

EQUITY COMPENSATION PLAN INFORMATION

      2008 STOCK INCENTIVE PLAN

      On June 18, 2008, our Board of Directors  approved and adopted the Epolin,
Inc. 2008 Stock Incentive Plan (the "2008 Plan"),  and authorized us to issue up
to  1,500,000  shares  of our  Common  Stock  under the 2008  Plan  (subject  to
adjustment to take account of stock dividends,  stock splits,  recapitalizations
and similar corporate events). The 2008 Plan was approved by the stockholders on
August 18,  2008.  The  purpose of the 2008 Plan is to provide  officers,  other
employees  and directors  of, and  consultants  to, us an incentive to (a) enter
into  and  remain  in our  service  or that of our  subsidiaries  or to  provide
services to us or our  subsidiaries,  (b) enhance our long term  performance and
that of our  subsidiaries,  and (c) acquire a proprietary  interest in us. Under
the 2008 Plan, we will have the right to issue stock options, stock appreciation
rights,   restricted  stock,  restricted  stock  units,  performance  shares  or
performance units, and stock or stock-based  awards.  Pursuant to the 2008 Plan,
each director  shall  receive a stock award  annually of 25,000 shares of Common
Stock. As of February 28, 2010, 200,000 shares of Common Stock have been granted
under the 2008 Plan.  No options or any other  awards have been  granted to date
under the 2008 Plan.

      PRIOR STOCK OPTION PLAN

      In  December  1998,  the Company  adopted the 1998 Stock  Option Plan (the
"1998 Plan") for employees, officers, consultants or directors of the Company to
purchase up to 750,000  shares of Common  Stock of the  Company  (the "1998 Plan
Option Pool").  In September 2001, the Board of Directors  increased the size of
the 1998 Plan Option Pool to 1,500,000  shares.  Options  granted under the 1998
Plan shall be non-statutory  stock options which do not meet the requirements of
Section  422 of the Code.  Under the terms of the 1998  Plan,  participants  may
receive  options to purchase Common Stock in such amounts and for such prices as
may be  established  by the Board of Directors  or a committee  appointed by the
Board to administer the 1998 Plan.  Options  exercised through February 28, 2010
total 686,000. Options cancelled or expired for all years totaled 311,000, which
under the 1998 Plan were  available  for future  grant,  and as of February  28,
2010, there are options outstanding to acquire 245,000 shares. With the approval
of the 2008 Plan by our stockholders,  the 1998 Plan terminated and therefore we
are no longer able to grant options under it. However, options that have already
been granted under the 1998 Plan will continue to be outstanding.

                                       10

<PAGE>

      Information regarding equity compensations plans, as of February 28, 2010,
is set forth in the table below:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
                                                                          NUMBER OF SECURITIES
                      NUMBER OF SECURITIES                                REMAINING AVAILABLE FOR
                      TO BE ISSUED UPON         WEIGHTED-AVERAGE          FUTURE ISSUANCE UNDER
                      EXERCISE OF               EXERCISE PRICE OF         EQUITY COMPENSATION PLANS
                      OUTSTANDING OPTIONS,      OUTSTANDING OPTIONS,      (EXCLUDING SECURITIES REFLECTED
PLAN CATEGORY         WARRANTS AND RIGHTS (A)   WARRANTS AND RIGHTS (B)   IN COLUMN (A)) (C)
---------------------------------------------------------------------------------------------------------
<S>                   <C>                       <C>                       <C>
Equity compensation
plans approved by              -0-                       -0-                     1,300,000
security holders
---------------------------------------------------------------------------------------------------------
Equity compensation
plans not approved           245,000                    $0.49                       -0-
by security holders
---------------------------------------------------------------------------------------------------------

Total                        245,000                    $0.49                    1,300,000
---------------------------------------------------------------------------------------------------------
</TABLE>

SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

      In August 2001, the Board of Directors of the Company authorized a 500,000
share stock repurchase program.  Pursuant to the repurchase program, the Company
may  purchase up to 500,000  shares of its common stock in the open market or in
privately negotiated transactions from time to time, based on market prices. The
Company indicated that the timing of the buyback of the Company's shares will be
dictated  by  overall  financial  and  market  conditions  and  other  corporate
considerations.  The repurchase program may be suspended without further notice.
There were no  repurchases  made by the  Company  of shares of its Common  Stock
during the fiscal years ended February 29, 2008,  February 28, 2009 and February
28, 2010.  In prior  years,  since the adoption of the program in August 2001, a
total of 331,500 shares were repurchased at a cumulative cost of $195,766.

ITEM 6.     SELECTED FINANCIAL DATA.

      We are a  smaller  reporting  company  as  defined  by Rule  12b-2  of the
Securities  Exchange Act of 1934 and are not required to provide the information
under this item.

ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS.

      The following  discussion  should be read in conjunction  with the audited
consolidated  financial  statements and the notes thereto appearing elsewhere in
this report and is qualified in its entirety by the foregoing.

EXECUTIVE OVERVIEW

      Epolin, Inc. (the "Company",  "we", "us" and "our") which was incorporated
in the State of New  Jersey  in May  1984,  is a  specialized  chemical  company
primarily engaged in the manufacturing,  marketing,  research and development of
dyes  and dye  formulations.  Our  business  is  heavily  weighted  towards  the
development,  manufacture and sale of near infrared dyes. Applications for these
dyes cover several markets that include laser protection,  welding,  sunglasses,
optical filters, glazing and imaging and security inks and tagants.  Paralleling
the growth of the dye business,  we maintain a level of production  and sales of
specialty products made on a custom basis. These include additives for plastics,
thermochromic  materials for use in paints as well as other specialty  chemicals
made in low  volume to sell at prices  that  reflect  the value of the  product.
However,  unlike  the dye  business,  we do not expect  our  specialty  chemical
business to grow.

                                       11

<PAGE>

      We sell our products to  manufacturers of  plastics/resins,  credit cards,
electronics,  glass and other basic materials.  Our customers are located in all
regions of the world,  although a material  portion of our business is dependent
on certain domestic customers, the loss of which could have a material effect on
operations.  During the year ended  February  28, 2010,  approximately  33.4% of
sales  were to  three  customers.  During  the year  ended  February  28,  2009,
approximately  31.0% of sales were to three  customers.  The loss of one or more
key customers could have a material adverse effect on the Company.

RESULTS OF OPERATIONS

      The following tables set forth operations data for the year ended February
28, 2010 and year ended February 28, 2009.

                                        2010          2009      % change
                                    -----------   -----------   --------

Sales                               $ 2,944,628   $ 3,091,539      -4.8%

Gross profit                          1,670,860     1,647,340       1.4%

Gross profit percentage                    56.7%         53.3%      3.4%

Selling, general & administrative     1,118,622     1,251,521     -10.6%
                                    -----------   -----------

Operating income                        552,238       395,819      39.5%
Other Income                             30,335        70,861     -57.2%
                                    -----------   -----------

Income before taxes                     582,573       466,680      24.8%

Income taxes                            113,503       139,111     -18.4%
                                    -----------   -----------

Net income (after taxes)            $   469,070   $   327,569      43.2%
                                    ===========   ===========

SALES

      For the year ended February 28, 2010, sales were $2,945,000 as compared to
$3,092,000 for the year ended February 28, 2009, a decrease of $147,000 or 4.8%.

      Such decrease in sales for the year ended  February 28, 2010 are primarily
due to decreased  sales in the ink and coating market which  decreased  $245,000
and the custom market which  decreased  $68,000 for the year ended  February 28,
2010 compared to the prior year, offset by increased sales in the eye protection
market which sales increased by $62,000 and light management  market which sales
increased by $106,000 for the year ended February 28, 2010 compared to the prior
year.

      In both fiscal 2009 and fiscal 2010, the eye protection market represented
our largest market with sales in the eye protection representing 45.4% and 50.0%
of  sales  in  fiscal  2009  and  fiscal  2010,  respectively.  Sales in the eye
protection  market  were  $1,467,000  for the year ended  February  28, 2010 and
$1,405,000  for the year  ended  February  28,  2009.  For the light  management
market,  sales were $803,000 and $687,000 for the years ended  February 28, 2010
and 2009. With regard to the ink and coating market, sales were $576,000 for the
year ended  February 28, 2010  compared to $821,000 for the year ended  February
28, 2009. For the year ended February 28, 2010,  sales in the custom market were
$93,000 compared to $161,000 for the year ended February 28, 2009.

      Categorized by geographic  area,  sales in the United States increased for
the year ended  February  28,  2010  while  sales  decreased  in Asia and Europe
compared to the prior year. For the year ended February 28, 2010 compared to the
prior year,  sales increased in the United States to $2,402,000 from $2,115,000,
while in Asia sales  decreased to $290,000  from  $578,000,  and in Europe sales
decreased to $247,000 from $398,000.

                                       12

<PAGE>

GROSS PROFIT

      Gross profit, defined as sales less cost of sales, was $1,671,000 or 56.7%
of sales for the year ended February 28, 2010 compared to $1,647,000 or 53.3% of
sales for the year ended  February  28, 2009,  an increase of 3.4%.  In terms of
absolute dollars,  gross profit increased $24,000 in fiscal 2010 compared to the
prior year, an increase of 1.4%.

      Cost of sales was  $1,274,000  for the year ended  February 28, 2010 which
represented  43.3% of sales  compared to $1,444,000  for the year ended February
28, 2009 which represented 46.7% of sales. In terms of absolute dollars, cost of
sales decreased $170,000 for fiscal 2010 compared to the prior year.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

      Selling,  general and  administrative  expenses decreased to $1,119,000 or
38.0% of sales for the year ended  February 28, 2010  compared to  $1,252,000 or
40.5% of sales for the year ended  February  28,  2009,  a decrease of $133,000.
Such  decrease in absolute  dollars was primarily due to a decrease in officers'
salaries and administrative salaries, and decreases in commission and consulting
fees offset by increases in  professional  fees  primarily  resulting from costs
associated  with the potential  sale of the Company as previously  disclosed and
described below.

OPERATING INCOME

      Operating income,  in terms of absolute dollars,  increased to $552,000 in
fiscal 2010 from $396,000 in fiscal 2009,  an increase of $156,000.  While sales
did decrease in fiscal 2010 compared to fiscal 2009, such decrease was offset by
a greater decrease in selling,  general and administrative expenses as well as a
decrease in cost of sales to sales ratio compared to the prior year.

OTHER INCOME

      Total  other  income  for the year ended  February  28,  2010 was  $30,000
compared to $71,000 for the year ended  February  28,  2009.  We realize  rental
income of $4,500 for fiscal 2010  compared to $18,000  for fiscal  2009.  In May
2009, our subtenant  abandoned the premises which it had been  subleasing  since
September  2005.  In addition,  our interest  income was $26,000 for fiscal 2010
compared to $53,000 for fiscal 2009.

NET INCOME

      During  fiscal  2010,  we  reported  income  before  taxes of  $583,000 as
compared to income  before  taxes of $467,000  for fiscal  2009,  an increase of
$116,000.  Income taxes were  $114,000 for fiscal 2010  compared to $139,000 for
fiscal 2009.  Changes in income taxes are  generally  attributed to changes from
period to period in sales and  expenses.  Net income after taxes was $469,000 or
$0.04 per share for the year ended  February 28, 2010 as compared to $328,000 or
$0.03 per share for the year ended  February 28, 2009. As a percentage of sales,
net income  after taxes was 15.9% of sales for the year ended  February 28, 2010
compared to 10.6% of sales for the year ended February 28, 2009.

      Net income in the future  will be  dependent  upon our ability to maintain
revenues  in excess of our cost of sales  and  other  expenses.  Prior to fiscal
2007,  sales  had  grown  for a number of  consecutive  years.  In fiscal  2007,
however, sales decreased by $91,000 compared to fiscal 2006 and, in fiscal 2008,
sales  decreased by $17,000  compared to fiscal 2007.  The largest  reduction in
sales in recent years occurred in fiscal 2009 with sales  decreasing by $501,000
compared  to fiscal  2008.  While  sales  continued  to  decrease in fiscal 2010
compared to fiscal 2009,  such  decrease was not nearly as dramatic as the prior
year with sales  decreasing  by $147,000 in fiscal 2010 compared to fiscal 2009.
Nevertheless,  we have had four  consecutive  years  of sales  having  decreased
compared to sales in the immediate  prior year. One positive sign,  however,  is
that net income did improve by  $142,000  in fiscal  2010  compared to the prior
year.  This  favorably  compares to net income in fiscal 2009 compared to fiscal
2008 in which net income decreased by $396,000.

                                       13

<PAGE>

OPERATIONS OUTLOOK

      Following a period of  readjustment  in our business  priorities,  we were
able to achieved $3,701,000 in sales for fiscal 2006 which was $821,000 or 28.5%
greater than the prior fiscal year. In fiscal 2007, however,  sales decreased to
$3,610,000,  a decrease of 2.5% from the prior year,  and in fiscal 2008,  sales
decreased to  $3,593,000,  a decrease of 0.5% from fiscal 2007.  This  continued
into fiscal 2009 in which sales  decreased at a much greater rate to  $3,092,000
or 14.0%  compared to fiscal 2008.  As  mentioned  above,  however,  while sales
continued to decrease in fiscal 2010 compared to fiscal 2009,  such decrease was
not nearly as  dramatic as the prior year with sales  decreasing  by $147,000 in
fiscal 2010 compared to fiscal 2009.  During these periods of reduced sales,  we
had a major  decline in sales of security  inks for the credit card market which
had been a key area of our growth from 2005 to 2007. While this market remains a
source of business  for us, we will likely not be able to achieve the same level
of sales in the future which we achieved  from 2005 to 2007 in the security inks
market. Nevertheless,  we are confident that with our core group of products, we
will  be  able to  maintain  sales  in our  principal  markets,  such as the eye
protection  market and the light  management  market,  while always  seeking new
areas for the use of our dyes.

      As a result of  expressions  of  interest  received,  management  began in
fiscal 2009 to explore strategic alternatives for the Company. In February 2009,
the  Company  retained  Millburn  Capital  Group  as its  financial  advisor  in
connection with the Board's decision to explore  strategic  alternatives for the
Company,  including the potential sale of the Company.  In May 2009, the Company
announced that it has entered into a non-binding letter of intent whereby all of
the  outstanding  capital  stock of the Company would be acquired by a strategic
purchaser.  Pursuant to an amendment entered into in September 2009, the Company
had agreed to negotiate exclusively with such strategic purchaser until December
15, 2009. In November 2009, such proposed  purchaser  terminated the non-binding
letter of intent as a result of which  the  Company's  obligation  to  negotiate
exclusively  with  such  purchaser  was  terminated  as  well.  The  Company  is
continuing to pursue  strategic  and financial  options which it believes are in
the  best  interests  of its  shareholders  including  but  not  limited  to the
potential  sale  to a  third  party  including  the  above  mentioned  strategic
purchaser.  There can be no assurance that any such  transaction  can or will be
completed. The Company does not currently intend to publicly disclose additional
information  about the  status of this  process  but will  publicly  report  all
required information on a timely basis.

LIQUIDITY AND CAPITAL RESOURCES

      Our  primary  source of funds is cash flow from  operations  in the normal
course of selling  products.  On February  28, 2010,  we had working  capital of
$3,099,000,  a debt to equity  ratio of 0.06 to 1, and  stockholders'  equity of
$4,038,000 compared to working capital of $2,561,000,  a debt to equity ratio of
0.15 to 1, and  stockholders'  equity of  $3,549,000  on February 28,  2009.  On
February 28, 2010, we had $1,909,000 in cash and cash equivalents,  total assets
of $4,299,000 and total liabilities of $261,000,  compared to $1,545,000 in cash
and cash  equivalents,  total  assets of  $4,096,000  and total  liabilities  of
$547,000 on February 28, 2009.

      Net cash provided by operating  activities for the year ended February 28,
2010 was $403,000 which was primarily the result of net income of $469,000, plus
non-cash items including  depreciation of $104,000 and a deferred tax expense of
$14,000,  plus a decrease in prepaid  taxes of  $194,000,  offset by increase in
accounts  receivable of $98,000 and  inventories  of $17,000,  and a decrease in
accrued expenses of $237,000 and accounts payable of $22,000.  Net cash provided
by operating  activities for the year ended February 28, 2009 was $445,000 which
was  primarily  the  result  of net  income of  $328,000,  plus  non-cash  items
including  depreciation of $105,000,  plus a decrease in accounts  receivable of
$247,000 and an increase in accounts  payable of $29,000 and accrued expenses of
$14,000,  offset by  increases  in  inventories  of  $25,000,  prepaid  taxes of
$228,000, and decreases in taxes payable of $37,000.

      Net cash used by investing activities for year ended February 28, 2010 was
$39,000 due to property and equipment  purchases of $64,000 offset by a decrease
in the cash value of a life insurance policy of $25,000,  while net cash used by
investing  activities  for year ended  February  28,  2009 was  $162,000  due to
property  and  equipment  purchases  of $150,000 and increase in cash value of a
life insurance  policy of $12,000.  For the year ended February 28, 2010,  there
was no net cash used by  financing  activities  compared to $718,000 in net cash
used in financing  activities  for the year ended  February 28, 2009 due to cash
dividends of $718,000 having been paid during that fiscal year.

      We anticipate,  based on currently proposed plans and assumptions relating
to our  operations,  that our current cash and cash  equivalents  together  with
projected cash flows from  operations and projected  revenues will be sufficient
to satisfy its contemplated  cash requirements for more than the next 12 months.
Our  contemplated  cash  requirements  for fiscal  2011 and beyond  will  depend
primarily  upon  level of  sales  of our  products,  inventory  levels,  product
development, sales and marketing expenditures and capital expenditures.

                                       14

<PAGE>

      Inflation has not significantly impacted our operations.

SIGNIFICANT ACCOUNTING POLICIES

      Our  discussion  and analysis of the  Company's  financial  condition  and
results of operations are based upon our consolidated financial statements which
have been  prepared  in  conformity  with  U.S.  generally  accepted  accounting
principles.  Our significant  accounting policies are described in Note B to the
consolidated  financial statements included elsewhere herein. The application of
our critical accounting  policies is particularly  important to the portrayal of
our financial  position and results of  operations.  These  critical  accounting
policies  require us to make  estimates and  judgments  that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities.  We believe the following critical accounting
policies  reflect  the more  significant  judgments  and  estimates  used in the
preparation of the consolidated financial statements.

      ACCOUNTS  RECEIVABLE  -  Accounts  receivable  are  stated  at the  amount
management expects to collect from outstanding balances. Management provides for
probable  uncollectible  amounts  though a charge to earnings  and a credit to a
valuation  allowance  based  on its  assessment  of  the  status  of  individual
accounts.  This allowance is an amount estimated by management to be adequate to
absorb possible losses. Balances that are still outstanding after management has
used  reasonable  collection  efforts  are  written  off through a charge to the
valuation allowance and a credit to accounts receivable.

      INVENTORIES - Our inventories  consist of raw materials,  work in process,
finished  goods and supplies which we value at the lower of cost or market under
the first-in, first-out method.

      PLANT,  PROPERTY AND  EQUIPMENT - Our plant,  property and  equipment  are
stated at cost. We compute  provisions  for  depreciation  on the  straight-line
methods,  based upon the estimated  useful lives of the various assets.  We also
capitalize the costs of major renewals and betterments.  Repairs and maintenance
are charged to operations as incurred.  Upon  disposition,  the cost and related
accumulated  depreciation  are removed and any related gain or loss is reflected
in earnings.

      INCOME  TAXES - We account for income  taxes under  Statement of Financial
Accounting  Standards No. 109, "Accounting for Income Taxes", in which the asset
and  liability  method is used in  accounting  for income  taxes.  We  recognize
deferred  taxes for  temporary  differences  between  the  basis of  assets  and
liabilities  for  financial  statement  and for income tax  purposes.  Temporary
differences   relate  primarily  to  different   accounting   methods  used  for
depreciation   and   amortization   of  property  and   equipment  and  deferred
compensation.

      REVENUE  RECOGNITION - We recognize revenue consistent with the provisions
of SEC Staff  Accounting  Bulletin No. 104,  "Revenue  Recognition",  which sets
forth guidelines in the timing of revenue recognition based upon factors such as
passage of title,  payments and customer acceptance.  Any amounts received prior
to  satisfying  our revenue  recognition  criteria  will be recorded as deferred
revenue in the  accompanying  balance sheet.  We recognize  revenue from product
sales when there is persuasive  evidence that an arrangement  exists, when title
has passed, the price is fixed or determinable, and we are reasonably assured of
collecting the resulting  receivable.  Our policy is to replace certain products
that do not conform to customer specifications, however replacements are made at
our discretion  subject to in house product lab analysis.  There are no terms or
conditions  set forth  within  our sales  contracts  that  provide  for  product
replacements. We expense replacement costs as incurred.

      STOCK-BASED  COMPENSATION  -  Effective  March 1,  2006,  we have  adopted
Statement of Financial  Accounting  Standards ("SFAS") No. 123(R),  "Share-Based
Payment".  SFAS 123R  requires  companies to measure and recognize in operations
the cost of  employee  services  received  in  exchange  for an award of  equity
instruments  based  on  the  grant-date  fair  value.  In  accordance  with  the
provisions of the Securities and Exchange  Commission Staff Accounting  Bulletin
No.  107, we have  adapted the  modified-prospective  transition  method.  Prior
periods were not restated to reflect the impact of adopting the new standard. We
determine the fair value of  stock-based  compensation  using the  Black-Scholes
option-pricing  model,  which requires us to make  assumptions  regarding future
dividends,  expected  volatility  of our stock,  and the  expected  lives of the
options.  Under  SFAS  123R we also make  assumptions  regarding  the  number of
options and the number of shares of restricted stock and performance shares that
will  ultimately  vest.  As a result of the  adoption  of FAS 123R,  stock-based
compensation   expense  recognized   includes   compensation   expense  for  all
share-based  payments  granted on or prior to, but not yet vested as of March 1,
2006,  based on the grant  date fair  value  estimated  in  accordance  with the
original  provisions  of FAS 123,  and  compensation  cost  for all  share-based
payments granted on or subsequent to March 1, 2006, based on the grant date fair
value estimated in accordance with the provisions of FAS 123R.

                                       15

<PAGE>

RECENTLY ADOPTED ACCOUNTING STANDARDS

      On March 1, 2008, we adopted  Statement of Financial  Accounting  Standard
("SFAS") No. 157, "Fair Value Measurements" ("FAS 157") for financial assets and
liabilities,  which clarifies the meaning of fair value, establishes a framework
for measuring fair value and expands  disclosures about fair value measurements.
Fair value is defined under FAS 157 as the exchange price that would be received
for an  asset  or  paid  to  transfer  a  liability  in the  principal  or  most
advantageous  market for the  assets or  liabilities  in an orderly  transaction
between market participants on the measurement date.  Subsequent changes in fair
value of these  financial  assets and  liabilities are recognized in earnings or
other comprehensive income when they occur. The effective date of the provisions
of FAS 157 for non-financial assets and liabilities, except for items recognized
at fair  value on a  recurring  basis,  was  deferred  by  Financial  Accounting
Standards  Board  ("FASB")  Staff  Position  FAS 157-2 ("FSP FAS 157-2") and are
effective for the fiscal year  beginning  March 1, 2009. The adoption of FAS 157
for financial  assets and liabilities did not have an impact on our consolidated
financial position or results of operations.

      Also,  effective  March 1, 2008,  we adopted  SFAS No. 159 "The Fair Value
Option for Financial Assets and Financial  Liabilities" ("FAS 159") which allows
an entity  the  irrevocable  option to elect  fair  value  for the  initial  and
subsequent  measurement  for  certain  financial  assets  and  liabilities  on a
contract-by-contract  basis.  As of February 28,  2010,  we have not elected the
fair value option for any additional  financial  assets and  liabilities  beyond
those  already  prescribed by accounting  principles  generally  accepted in the
United States.

      In  October  2008,   the  FASB  issued  Staff   Position  No.  FAS  157-3,
"Determining  the Fair Value of a Financial Asset in a Market That Is Not Active
("FSP FAS 157-3")."  FSP FAS 157-3  clarifies  the  application  of FAS 157 in a
market that is not active and defines additional key criteria in determining the
fair value of a financial  asset when the market for that financial asset is not
active. FSP FAS 157-3 applies to financial assets within the scope of accounting
pronouncements that require or permit fair value measurements in accordance with
FAS 157. FSP FAS 157-3 was effective  upon issuance and the  application  of FSP
FAS  157-3  did  not  have  a  material  impact  on our  consolidated  financial
statements.

OTHER INFORMATION

      Subsequent to the end of fiscal 2006, the Board of Directors  approved the
adoption of a dividend  policy  under which we will issue a regular  annual cash
dividend on shares of our Common Stock. The amount of the dividend,  record date
and  payment  date  will be  subject  to  approval  every  year by the  Board of
Directors.  In accordance  with the new dividend  policy,  a regular annual cash
dividend of $0.02 per share was paid in each of May 2006, May 2007 and May 2008.
In  addition,  since of the  adoption of the  dividend  policy in fiscal 2007, a
special  cash  dividend of $0.02 per share was paid in each of January  2007 and
January 2008,  and a  supplemental  special cash dividend of $0.04 per share was
paid in August  2008.  No further  dividends  have been paid since  August  2008
primarily  due to the Company's  decision to seek  strategic  alternatives.  The
Board determined to postpone any action regarding the declaration of the regular
annual cash dividend for 2009 and beyond pending the outcome of this process.

      In August 2001, the Board of Directors of the Company authorized a 500,000
share stock repurchase program.  Pursuant to the repurchase program, the Company
may  purchase up to 500,000  shares of its common stock in the open market or in
privately negotiated transactions from time to time, based on market prices. The
Company indicated that the timing of the buyback of the Company's shares will be
dictated  by  overall  financial  and  market  conditions  and  other  corporate
considerations.  The repurchase program may be suspended without further notice.
There were no  repurchases  made by the  Company  of shares of its Common  Stock
during the fiscal years ended February 29, 2008,  February 28, 2009 and February
28, 2010.  In prior  years,  since the adoption of the program in August 2001, a
total of 331,500 shares were repurchased at a cumulative cost of $195,766.

OFF-BALANCE SHEET ARRANGEMENTS

      We do not have any off  balance  sheet  arrangements  that are  reasonably
likely to have a current or future effect on our financial condition,  revenues,
and results of operations, liquidity or capital expenditures.

                                       16

<PAGE>

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

      We are a  smaller  reporting  company  as  defined  by Rule  12b-2  of the
Securities  Exchange Act of 1934 and are not required to provide the information
under this item.

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

      See the Financial Statements annexed to this report.

ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE.

      None.

ITEM 9A(T). CONTROLS AND PROCEDURES.

      Under  the  supervision  and with  the  participation  of our  management,
including the Principal  Executive Officer and Principal  Financial Officer,  we
have evaluated the  effectiveness of our disclosure  controls and procedures (as
defined in Rule  13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end
of the period covered by this report.  Based on that  evaluation,  the Principal
Executive  Officer and Principal  Financial  Officer have concluded  that, as of
February 28, 2010,  these  disclosure  controls and procedures were effective to
ensure that all  information  required to be disclosed by us in the reports that
we file or submit under the Exchange Act is: (i) recorded, processed, summarized
and reported,  within the time periods  specified in the  Commission's  rule and
forms; and (ii)  accumulated and  communicated to our management,  including our
Principal  Executive Officer and Principal  Financial Officer, as appropriate to
allow timely decisions regarding required disclosure.

      There have been no material  changes in internal  control  over  financial
reporting that occurred  during the fourth fiscal  quarter that have  materially
affected,  or are reasonably  likely to materially  affect our internal  control
over financial reporting.

MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

      Our management is responsible for  establishing  and maintaining  adequate
internal  control over  financial  reporting.  Internal  control over  financial
reporting is a process  designed by, or under the  supervision of, the Principal
Executive  Officer and Principal  Financial Officer and effected by our Board of
Directors,  management  and other  personnel,  to provide  reasonable  assurance
regarding  the  reliability  of  financial  reporting  and  the  preparation  of
financial statements for external purposes in accordance with generally accepted
accounting principles.

      Our evaluation of internal control over financial reporting includes using
the COSO  framework,  an  integrated  framework  for the  evaluation of internal
controls  issued by the  Committee of Sponsoring  Organizations  of the Treadway
Commission,  to  identify  the  risks  and  control  objectives  related  to the
evaluation of our control environment.

      Based  on  our  evaluation  under  the  frameworks  described  above,  our
management has concluded that our internal control over financial  reporting was
effective as of February 28, 2010.

      This annual report does not include an attestation report of the Company's
registered  public  accounting  firm regarding  internal  control over financial
reporting.  Management's  report was not subject to attestation  requirements by
the company's  registered  public accounting firm pursuant to temporary rules of
the Securities and Exchange  Commission  that permit the company to provide only
management's report in this annual report.

ITEM 9B.    OTHER INFORMATION.

      Not applicable.

                                       17

<PAGE>

                                    PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND
            CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
            ACT.

      Set forth below are our present  directors  and executive  officers.  Note
that  there are no other  persons  who have been  nominated  or chosen to become
directors  nor are  there  any  other  persons  who have  been  chosen to become
executive officers.  There are no arrangements or understandings  between any of
the  directors,  officers  and other  persons  pursuant to which such person was
selected as a director or an officer.  Directors  are elected to serve until the
next annual meeting of stockholders and until their successors have been elected
and have qualified. Officers serve at the discretion of the Board of Directors.

                                 PRESENT POSITION          HAS SERVED AS
NAME                     AGE     AND OFFICES               DIRECTOR SINCE

Murray S. Cohen          85      Chairman of the           1984
                                 Board, Chief Scientist,
                                 Secretary and Director

James Ivchenko           70      President and Director    1993

Greg Amato               53      Chief Executive Officer   --

James R. Torpey, Jr.     60      Director                  2001

Herve A. Meillat         54      Director                  2005

      None of the  directors  and  officers is related to any other  director or
officer of the Company.

      Set forth below are brief accounts of the business  experience  during the
past five years of each director and  executive  officer of the Company and each
significant employee of the Company.

      MURRAY S. COHEN has served as  Director  and  Chairman of the Board of the
Company  since  June 1984 and  Secretary  since  March  2001.  From June 1984 to
January  2006,  Dr.  Cohen was Chief  Executive  Officer,  and from June 1984 to
August 1994, he was also  President.  Dr. Cohen also  currently  serves as Chief
Scientist.  From January  1978  through May 1983,  Dr. Cohen was the Director of
Research and Development for Apollo  Technologies Inc., a company engaged in the
development of pollution control procedures and devices.  Dr. Cohen was employed
as a Vice President and Technical  Director of  Borg-Warner  Chemicals from 1973
through  January 1978,  where his  responsibilities  included the  organization,
project  selection  and project  director of a 76 person  technical  staff which
developed materials for a variety of plastic products. He received a Bachelor of
Science  Degree from the  University  of Missouri in 1949 and a Ph.D. in Organic
Chemistry from the same institution in 1953.

      JAMES IVCHENKO has served as Director of the Company since September 1993,
President  since  August 1994,  and from  February  1992 to August 1994,  he was
Technical Director and Vice President of Operations. Prior thereto, Mr. Ivchenko
was  employed by Ungerer & Co. as Plant  Manager for the Totowa,  New Jersey and
Bethlehem,  Pennsylvania  facilities from May 1988 to May 1991. Mr. Ivchenko has
over  30  years  of  experience  in the  flavor,  fragrance  and  pharmaceutical
intermediate  industry.  He received  his  Bachelor of Arts  Degree,  Masters of
Science  and  Masters  of  Business   Administration  from  Fairleigh  Dickinson
University in New Jersey.

      GREG AMATO has been  employed by the Company  since  November 2004 and has
been Chief Executive  Officer since January 2006. From,  January 2005 to January
2006, he was Vice President of Sales and Marketing. From 1993 to 2004, Mr. Amato
was  with  Elementis,  PLC  and  certain  of  its  subsidiaries,  divisions  and
predecessors,  which company is a specialty chemical  manufacturer.  During such
period,   Mr.  Amato  was  Vice  President,   Specialty   Markets  of  Elementis
Specialties,  Inc.,  located  in  Hightstown,  New  Jersey  from  2000 to  2004;
President and CEO of Elementis Performance Polymers,  located of Belleville, New
Jersey from 1998 to 2000; and from 1993 to 1998,  Sales Manager of Rheox,  which
was  acquired by Elementis  in 1998.  Mr. Amato  received a Bachelor of Chemical
Engineering from Georgia Institute of Technology in 1978.

                                       18

<PAGE>

      JAMES R.  TORPEY,  JR. has served as Director  of the  Company  since July
2001. Mr. Torpey is Director of Market Development for SunPower  Corporation,  a
major world wide supplier of solar electric equipment and systems.  From 2002 to
2007, he was President of Madison Energy  Consultants,  a consulting firm in the
energy industry. From 1995 to 2002, he was Director of Technology Initiatives at
First  Energy/GPU,  Chairman  of  the  Solar  Electric  Power  Association,  and
President  and  member of the Board of  Directors  of GPU Solar,  Inc.  He was a
member of the U.S.  Department of Energy Solar Industry Advisory Board from 2001
to 2005. Mr. Torpey received his Masters of Business Administration from Rutgers
University in 1991.

      HERVE A.  MEILLAT has served as  Director of the Company  since July 2005.
Since  September  2006, Mr. Meillat has been the sole owner and CEO of Christian
Dalloz  Sunoptics   ("CDS"),   a  company  located  in  France  which  develops,
manufactures and sells worldwide  non-prescription ocular lenses and shields for
premium sunglasses in all market segments  including luxury,  fashion and sports
eyewear.  In February 2009, CDS filed for bankruptcy  protection in France.  Mr.
Meillat is a former Senior Vice  President of the  Bacou-Dalloz  Group,  a world
leader in the design,  manufacturing and sales of personal protection equipment.
While  with  Bacou-Dalloz,  he was  Senior  Vice  President  of its eye and face
business  unit from 2001 to 2004,  the President of Dalloz Safety Inc. from 1996
to 2001 and Chief Operating  Officer of Christian  Dalloz in France from 1989 to
1995.

      To the knowledge of the Company,  and except as described  above,  none of
the officers or directors  has been  personally  involved in any  bankruptcy  or
insolvency  proceedings.  To the knowledge of the Company, none of the directors
or officers have been convicted in any criminal  proceedings  (excluding traffic
violations and other minor offenses) or are the subject of a criminal proceeding
which is presently pending, nor have such persons been the subject of any order,
judgment,  or decree  of any court of  competent  jurisdiction,  permanently  or
temporarily  enjoining them from acting as an investment  advisor,  underwriter,
broker  or  dealer  in  securities,  or as an  affiliated  person,  director  or
insurance company,  or from engaging in or continuing in any conduct or practice
in connection  with any such activity or in connection with the purchase or sale
of any security,  nor were any of such persons the subject of a federal or state
authority barring or suspending, for more than 60 days, the right of such person
to be  engaged  in any such  activity,  which  order  has not been  reversed  or
suspended.

AUDIT COMMITTEE FINANCIAL EXPERT

      We do not  have an  audit  committee  financial  expert,  as such  term is
defined in Item  407(d)(5) of  Regulation  S-K,  serving on our audit  committee
because  we have no  audit  committee  and are  not  required  to have an  audit
committee because we are not a listed security.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

      Section  16(a)  of the  Securities  Exchange  Act  of  1934  requires  the
Company's  directors and executive  officers,  and persons who own more than ten
percent of the Company's  Common Stock, to file with the Securities and Exchange
Commission  initial  reports of ownership and reports of changes of ownership of
Common Stock of the Company.  Officers,  directors  and greater than ten percent
stockholders  are required by SEC  regulation to furnish the Company with copies
of all Section 16(a) forms they file.

      Based  solely on the  Company's  review of such forms  received  by it, or
written representations from certain of such persons, the Company believes that,
with  respect to the fiscal year ended  February  28,  2010,  all Section  16(a)
filing requirements  applicable to its officers,  directors and greater than 10%
beneficial owners were complied with.

CODE OF ETHICS

      The Board of  Directors  has  adopted a Code of Ethics  applicable  to its
principal executive officer,  principal financial officer,  principal accounting
officer  or  controller,  or  persons  performing  similar  functions,  which is
designed to promote honest and ethical conduct; full, fair, accurate, timely and
understandable  disclosure;  and  compliance  with  applicable  laws,  rules and
regulations. A copy of the Code of Ethics will be provided to any person without
charge upon written  request to the  Secretary  of the Company at its  executive
offices, 358-364 Adams Street, Newark, New Jersey 07105.

                                       19

<PAGE>

ITEM 11.    EXECUTIVE COMPENSATION.

      The following summary compensation tables set forth information concerning
the annual and  long-term  compensation  for services in all  capacities  to the
Company for the fiscal  years ended  February  28, 2010 and February 28, 2009 of
those persons who were, at February 28, 2010,  (i) the chief  executive  officer
and (ii) the other most highly  compensated  executive  officers of the Company,
whose  total  compensation  was in  excess  of  $100,000  (the  named  executive
officers):

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
                                                                NON-EQUITY         NONQUALIFIED
NAME AND                                    STOCK      OPTION   INCENTIVE PLAN     DEFERRED         ALL OTHER
PRINCIPAL                SALARY     BONUS   AWARDS     AWARDS   COMPENSATION       COMPENSATION     COMPENSATION
POSITION          YEAR   ($)        ($)     ($)        ($)      ($)                EARNINGS ($)     ($)            TOTAL
---------------------------------------------------------------------------------------------------------------------------
<S>               <C>    <C>        <C>     <C>        <C>      <C>                <C>              <C>            <C>
Greg Amato        2010   $165,000   $   0   $    0     $    0   $            0     $          0     $          0   $165,000
Chief Executive   2009   $165,000   $   0   $    0     $    0   $            0     $          0     $          0   $165,000
Officer
---------------------------------------------------------------------------------------------------------------------------
Murray S. Cohen   2010   $ 50,827   $   0   $5,000(1)  $    0   $      127,500(2)  $          0     $          0   $183,327
Chairman of the   2009   $ 50,826   $   0   $7,000(1)  $    0   $      120,000(2)  $          0     $          0   $177,826
Board
---------------------------------------------------------------------------------------------------------------------------
James Ivchenko    2010   $195,478   $   0   $5,000(1)  $    0   $      112,500(3)  $     32,000(4)  $          0   $344,978
President         2009   $195,478   $   0   $7,000(1)  $    0   $      105,000(3)  $     32,000(4)  $          0   $339,478
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   Represents the dollar amount recognized for financial  statement reporting
      purposes with respect to the fiscal year in accordance with SFAS 123R.

(2)   Dr. Cohen  received  additional  compensation  of $127,500 and $120,000 in
      fiscal 2010 and 2009,  respectively,  based upon the  Company's  sales for
      fiscal 2009 and 2008, as determined  under his  employment  contract which
      expired as of February 28, 2009.

(3)   Mr. Ivchenko received additional  compensation of $112,500 and $105,000 in
      fiscal 2010 and 2009,  respectively,  based upon the  Company's  sales for
      fiscal 2009 and 2008, as determined  under his  employment  contract which
      expired as of February 28, 2009.

(4)   Represents  the  amount  paid to Mr.  Ivchenko  in  fiscal  2010  and 2009
      pursuant  to  his   deferred   compensation   agreement.   See   "Deferred
      Compensation/Employment  Contracts  and  Change in  Control  Arrangements"
      below.

EQUITY AWARDS

      The following table provides certain information  concerning equity awards
held by the named executive officers as of February 28, 2010.

                  OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

<TABLE>
<CAPTION>
                              OPTION AWARDS                                                 STOCK AWARDS
------------------------------------------------------------------------------------------------------------------------
                           NO. OF        NUMBER OF
                         SECURITIES     SECURITIES                                 NUMBER OF       EQUITY INCENTIVE PLAN
                         UNDERLYING     UNDERLYING                                 SHARES OR        AWARDS: NUMBER OF
                         UNEXERCISED    UNEXERCISED      OPTION      OPTION      UNITS OF STOCK   UNEARNED SHARES, UNITS
                         OPTIONS (#)    OPTIONS (#)     EXERCISE    EXPIRATION   THAT HAVE NOT     OR OTHER RIGHTS THAT
NAME                     EXERCISABLE   UNEXERCISABLE    PRICE ($)      DATE        VESTED (#)       HAVE NOT VESTED(#)
------------------------------------------------------------------------------------------------------------------------
<S>                      <C>           <C>             <C>          <C>          <C>              <C>
Greg Amato                       -0-       -0-                N/A          N/A        -0-                 -0-
------------------------------------------------------------------------------------------------------------------------
Murray S. Cohen               20,000       -0-         $     0.41     2/9/2014        -0-                 -0-
                              50,000       -0-         $     0.54    6/20/2010        -0-                 -0-
------------------------------------------------------------------------------------------------------------------------
James Ivchenko                20,000       -0-         $     0.41     2/9/2014        -0-                 -0-
                              50,000       -0-         $     0.54    6/20/2010        -0-                 -0-
------------------------------------------------------------------------------------------------------------------------
</TABLE>

COMPENSATION OF DIRECTORS

      Since  fiscal  2002,  the Company has paid  directors  $750 for each board
meeting  attended.  Commencing in fiscal 2007, only  non-employee  directors are
paid such amount. In addition, commencing in fiscal 2007, non-employee directors
are also paid $750 for each committee  meeting  attended.  Directors have always
been and will  continue to be reimbursed  for  reasonable  expenses  incurred on
behalf of the Company.

                                       20

<PAGE>

      In  addition  to the  foregoing,  pursuant  to  Epolin,  Inc.  2008  Stock
Incentive Plan (the "2008 Plan"),  adopted by the Board of Directors on June 18,
2008 and approved by the  stockholders  on August 18, 2008,  each director shall
receive a stock award annually of 25,000 shares of Common Stock.

      The following table provides  certain summary  information  concerning the
compensation paid to non-employee directors during fiscal 2010. All compensation
paid to Dr.  Cohen and Mr.  Ivchenko is set forth in the table under  "Executive
Compensation".

                              DIRECTOR COMPENSATION

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
                         FEES
                       EARNED OR                                  ALL OTHER
                        PAID IN      STOCK         OPTION       COMPENSATION
NAME                   CASH ($)    AWARDS (S)   AWARDS ($)(1)        ($)       TOTAL ($)
----------------------------------------------------------------------------------------
<S>                    <C>         <C>          <C>             <C>            <C>
James R. Torpey, Jr.   $   3,000   $  5,000(1)       -0-             -0-       $   8,000
----------------------------------------------------------------------------------------
Herve A. Meillat       $   3,000   $  5,000(1)       -0-             -0-       $   8,000
----------------------------------------------------------------------------------------
</TABLE>

(1)   Represents  the dollar  amount  recognized  in fiscal  2009 for  financial
      reporting  purposes of stock awarded computed in accordance with Financial
      Accounting Standards 123R.

DEFERRED COMPENSATION/EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS

      Effective as of November 1, 2004,  the Company  entered into an employment
agreement  with Greg Amato.  Such  agreement  provided  that Mr.  Amato would be
employed "at-will" and that such employment can be terminated by either party at
any time  without  reason or cause  provided at least six months  prior  written
notice is given.  The  employment  agreement  also provides that Mr. Amato would
receive bonus  compensation  for 2004 based upon a formula and would be entitled
to  receive,   following  the  fiscal  year  ending  February  28,  2006,  bonus
compensation  equal to 10% of the increase in the  Company's  net income for the
fiscal year  ending  February  28, 2006  compared  to  February  28,  2005.  For
subsequent  fiscal  years,  Mr.  Amato shall be entitled to receive  annual cash
bonuses  as  the   Compensation   Committee  shall  determine  with  performance
objectives determined prior to the start of the applicable year. Pursuant to the
employment  agreement,  the Company  also agreed to grant Mr. Amato an option to
purchase  100,000  shares of Common  Stock of the Company at an  exercise  price
equal to the fair market value of the Company's Common Stock on November 1, 2004
which option  shall be  exercisable  only after the  completion  of Mr.  Amato's
second year of employment under his employment agreement. Such option expired as
of November 1, 2009.  In addition,  pursuant to the  employment  agreement,  the
Company  agreed to grant to Mr. Amato,  one year from the date of his employment
agreement  provided  he is then  employed  by the  Company,  100,000  shares  of
restricted Common Stock of the Company.

      Pursuant to a deferred compensation  agreement,  as amended,  entered into
with James Ivchenko, President of the Company, the Company has agreed to pay Mr.
Ivchenko $32,000 per year for ten consecutive  years commencing the first day of
the month following Mr. Ivchenko  reaching the age of 65. The obligations to Mr.
Ivchenko under his deferred  compensation  agreement are partially funded with a
life  insurance  policy owned by the  Company.  Through  February 28, 2010,  six
payments of $32,000 each have been paid to Mr. Ivchenko,  leaving four remaining
payments owing to Mr.  Ivchenko which in the aggregate  amounts to $128,000 (the
"Deferred  Compensation  Remaining  Balance").  Subsequent  to  the  year  ended
February 28,  2010,  and as of May 14,  2010,  the Board of Directors  agreed to
surrender the life insurance  policy for its net surrender value  (approximately
$168,000) and pay Mr. Ivchenko the Deferred Compensation Remaining Balance.

      Effective  as of  March  1,  1999,  the  Company  entered  into a ten year
employment agreement with Mr. Ivchenko.  Pursuant thereto, Mr. Ivchenko shall be
paid an annual  salary of not less than the greater of his annual base salary in
effect  immediately  prior  to  the  effective  date  of  the  agreement  or any
subsequently  established annual base salary. In addition thereto,  Mr. Ivchenko
shall  receive as additional  compensation  a certain  percentage  (as set forth
below) of the Company's  annual gross sales up to but not exceeding annual gross
sales of $3 million.  Such percentage  starts at 1.50% for the fiscal year ended
February  29,  2000 and  increases  by 0.25%  per  year  during  the term of the
agreement. In the event of death or disability,  the agreement provides that Mr.
Ivchenko or his estate will  receive  100% of his annual  salary and  additional
compensation  as  described  above for the fiscal year  during  which he died or
became disabled, and 50% of his annual salary and annual additional compensation
which he would  have  received  (if not for his  death  or  disability)  for the
remainder of the ten year term. Such agreement expired as of February 28, 2009.

                                       21

<PAGE>

      Effective  as of March 1, 1999,  the Company  also entered into a ten year
employment agreement with Murray S. Cohen, Chairman of the Board of the Company.
Pursuant thereto,  Dr. Cohen shall be paid an annual salary of not less than the
greater of his annual base salary in effect  immediately  prior to the effective
date of the agreement or any  subsequently  established  annual base salary.  In
addition thereto,  Dr. Cohen shall receive as additional  compensation a certain
percentage  (as set forth below) of the  Company's  annual gross sales up to but
not exceeding annual gross sales of $3 million.  Such percentage starts at 2.00%
for the fiscal  year ended  February  29, 2000 and  increases  by 0.25% per year
during the term of the  agreement.  Pursuant to an amendment  to the  employment
agreement  entered  into on March 30,  2006,  Dr. Cohen shall have the option to
partially  retire pursuant to which Dr. Cohen will devote  approximately  50% of
his time to the  Company in which  event he will be paid 50% of his annual  base
salary and 100% of the additional compensation for the remainder of the term. He
shall also have the option to either (i) substantially  retire pursuant to which
Dr.  Cohen will  devote  approximately  25% of his time to the  Company in which
event he will be paid 25% of his annual base  salary and 100% of the  additional
compensation  for the remainder of the term, or (ii) fully retire in which event
he will be paid no annual base salary and 50% of the additional compensation for
the  remainder of the term. In the event of death or  disability,  the amendment
provides that Dr. Cohen or his estate will receive 100% of his annual salary and
additional  compensation  as described above for the fiscal year during which he
died or became  disabled,  and 50% of his annual  salary  and annual  additional
compensation  which he would have received (if not for his death or  disability)
for the  remainder  of the ten  year  term,  provided  at the  time of  death or
disability  Dr.  Cohen  was a  full-time  employee.  If at the  time of death or
disability Dr. Cohen was fully,  partially or substantially  retired, then other
percentage  rates are  provided in the  amendment  for the payment of the annual
salary and annual  additional  compensation  to Dr.  Cohen or his estate for the
balance of the term. Such agreement expired as of February 28, 2009.

      The Company had previously entered into a deferred compensation  agreement
in June 1998 with Dr. Cohen which  provided for the payment of certain  funds to
Dr.  Cohen for a period of ten years  beginning  two weeks after the date of his
retirement.  Such agreement was  terminated in connection  with the execution of
the employment agreement with Dr. Cohen. In addition to the foregoing,  pursuant
to a deferred  compensation  agreement  entered  into in January  1996 which was
terminated in June 1998, there were unfunded  accruals of $79,041 (the "Deferred
Compensation  Accrual")  due to Dr.  Cohen which the parties  previously  agreed
would be paid to Dr. Cohen upon retirement either in equal  consecutive  monthly
payments for a period not exceeding 60 months or a single  payment which will be
at the  discretion  of the Company.  Subsequent  to the year ended  February 28,
2010, and as of May 14, 2010, the Board of Directors agreed to pay Dr. Cohen the
Deferred Compensation Accrual as soon as practicable.

      The  Company  does  not  have  any   termination   or  change  in  control
arrangements with any of its named executive officers.

INDEBTEDNESS OF MANAGEMENT

      No member of management was indebted to the Company during its last fiscal
year.

ITEM  12.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND MANAGEMENT AND
           RELATED STOCKHOLDER MATTERS.

      The following  table sets forth, as of May 18, 2010,  certain  information
with regard to the record and beneficial ownership of the Company's Common Stock
by (i) each  stockholder  owning  of record  or  beneficially  5% or more of the
Company's Common Stock,  (ii) each director of the Company,  (iii) the Company's
Chief  Executive  Officer and other executive  officers,  if any, of the Company
whose  total  compensation  was in  excess of  $100,000  (the  "named  executive
officers"), and (iv) all officers and directors of the Company as a group:

                                 AMOUNT AND NATURE         PERCENT
NAME OF BENEFICIAL OWNER         OF BENEFICIAL OWNERSHIP   OF CLASS

Murray S. Cohen(1)*                            1,990,958       16.3%
James Ivchenko(2)*                             1,589,587       13.0%
James R. Torpey, Jr.(3)*                         147,500        1.2%
Herve A. Meillat*                                 54,000         **
Greg Amato*                                      100,000         **
Claire Bluestein*                                970,155        8.0%
Santa Monica Partners, L.P.(4)                   825,900        6.8%
Sandra Lifschitz(5)                              605,000        5.0%
Hummingbird Management, LLC(6)                 1,029,119        8.5%
All Executive Officers and
Directors as a Group (5 persons)               3,882,045       31.4%

                                       22

<PAGE>

----------
*     The address for each is 358-364 Adams Street, Newark, New Jersey 07105.

**    Less than 1%.

(1)   Includes  1,895,958 shares held by Dr. Cohen and 25,000 shares held by the
      wife of Dr. Cohen.  Also,  includes  70,000 shares which Dr. Cohen has the
      right to  acquire  within 60 days  pursuant  to the  exercise  of  options
      granted under the 1998 Plan.

(2)   Includes  1,055,000  shares held by Mr.  Ivchenko  and 464,587 held by Mr.
      Ivchenko and his wife,  as joint  tenants.  Also,  includes  70,000 shares
      which Mr. Ivchenko has the right to acquire within 60 days pursuant to the
      exercise of options granted under the 1998 Plan.

(3)   Includes 60,000 shares which Mr. Torpey has the right to acquire within 60
      days pursuant to the exercise of options granted under the 1998 Plan.

(4)   This information is based solely upon information reported in filings made
      to the SEC on behalf of Santa  Monica  Partners,  L.P. Its address is 1865
      Palmer Avenue, Larchmont, New York.

(5)   This information is based solely upon information reported in filings made
      to the SEC on behalf of Sandra  Lifschitz.  Her address is 7 Tulane Drive,
      Livingston, New Jersey.

(6)   This information is based solely upon information reported in filings made
      to the SEC on behalf of  Hummingbird  Management,  LLC. Its address is 145
      East 57th Street, New York, New York.

THE STOCKHOLDERS AGREEMENT

      Pursuant to a Stockholders Agreement executed in October 2002, each of the
then  members of the Board of  Directors  (Dr.  Cohen and Messrs.  Ivchenko  and
Torpey, as well as Morris Dunkel, Claire Bluestein and Peter Kenny) has provided
the Company with certain rights of refusal in the event any of such  individuals
desire to sell any of the shares of the Company's Common Stock which any of them
hold of record or  beneficially.  Excluded from such  restrictions  are gifts in
which the proposed  donee agrees to be bound to the  Stockholders  Agreement and
transfers by will or the laws of descent,  provided the shares remain subject to
said  restrictions.  In addition,  shares may be transferred by such individuals
with the  prior  approval  of the  Board of  Directors  of the  Company  (or any
committee authorized by the Board to give such approval).

ITEM  13.  CERTAIN   RELATIONSHIPS  AND  RELATED   TRANSACTIONS,   AND  DIRECTOR
           INDEPENDENCE.

      See  "Deferred  Compensation/Employment  Contracts  and  Change in Control
Arrangements" above for information on the transactions described therein.

      Other than described therein, since March 1, 2009, there has not been, nor
is there currently proposed,  any transaction or series of similar  transactions
to which we were or will be a party:  (i) in which the amount  involved  exceeds
the lesser of  $120,000  or one  percent of the  average of our total  assets at
year-end  for the last  three  completed  fiscal  years;  and (ii) in which  any
director, executive officer, shareholder who beneficially owns 5% or more of our
common stock or any member of their  immediate  family had or will have a direct
or indirect material interest.

DIRECTOR INDEPENDENCE

      We  have  determined  that  two  of our  four  directors  are  independent
directors.  Messrs.  Torpey and Meillat are our independent  directors.  We have
determined their independence using the general independence  criteria set forth
in the Nasdaq Marketplace Rules.

                                       23

<PAGE>

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES.

      The  following  is a summary  of the fees  billed  to us by the  principal
accountants  to the Company for  professional  services  rendered for the fiscal
years ended February 28, 2010 and February 28, 2009:

                           Fiscal 2010   Fiscal 2009
      Fee Category         Fees          Fees

      Audit Fees           $    51,000   $    51,000
      Audit Related Fees   $         0   $         0
      Tax Fees             $     3,500   $     3,000
      All Other Fees       $     4,000   $         0

      Total Fees           $    58,500   $    54,000

      Audit Fees. Consists of fees billed for professional services rendered for
the  audit of our  financial  statements  and  review  of  interim  consolidated
financial  statements  included  in  quarterly  reports  and  services  that are
normally provided by the principal  accountants in connection with statutory and
regulatory filings or engagements.

      Audit  Related  Fees.  Consists of fees billed for  assurance  and related
services that are reasonably  related to the  performance of the audit or review
of our  consolidated  financial  statements  and are not  reported  under "Audit
Fees".

      Tax Fees.  Consists  of fees  billed  for  professional  services  for tax
compliance,  tax advice and tax planning.  These services include preparation of
federal and state income tax returns.

      All Other Fees.  Consists of fees for product and services  other than the
services reported above.

      Pre-Approval Policies and Procedures

      Prior to engaging its  accountants  to perform a particular  service,  the
Company's  Board  of  Directors  obtains  an  estimate  for  the  service  to be
performed.  All of the services  described  above were  approved by the Board of
Directors in accordance with its procedures.

                                     PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

The following documents are filed as part of this report:

(1)   Financial Statements

      Financial Statements are listed in the Contents to Consolidated  Financial
      Statements included with this report.

(2)   Financial Statement Schedules

      No financial  statement  schedules are included because such schedules are
      not  applicable,  are not required,  or because  required  information  is
      included in the financial statements or notes thereto.

(3)   Exhibits

      3.1   Epolin Inc.'s certificate of incorporation as amended (1)

      3.2   Epolin Inc.'s by-laws(1)

      4.1   Specimen certificate for common stock(1)

      31.1  Certification of Chief Executive  Officer pursuant to Section 302 of
            the  Sarbanes-Oxley  Act of 2002  (Rules  13a-14  and  15d-14 of the
            Exchange Act)

                                       24

<PAGE>

      31.2  Certification of Principal Financial Officer pursuant to Section 302
            of the  Sarbanes-Oxley  Act of 2002 (Rules  13a-14 and 15d-14 of the
            Exchange Act)

      32.1  Certification  pursuant to Section 906 of the  Sarbanes-Oxley Act of
            2002 (18 U.S.C. 1350)

--------------------------------------------------------------------------------

      (1)   Filed with the Company's Form S-18  Registration  Statement SEC File
            33-25405-NY.

                                       25

<PAGE>

                                   SIGNATURES

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

                                             EPOLIN, INC.
                                             (Registrant)

                                     By:     /s/ Murray S. Cohen
                                             -------------------
                                             Murray S. Cohen,
                                             Chairman of the Board

                                     Dated:  May 28, 2010
                                             ------------

      Pursuant to the requirements of the Securities  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/ Greg Amato             Chief Executive Officer         May 28, 2010
------------------------   (Principal Executive Officer)   ------------
Greg Amato

/s/ Murray S. Cohen        Chairman of the Board,          May 28, 2010
------------------------   Secretary and Director          ------------
Murray S. Cohen

/s/ James Ivchenko         President and Director          May 28, 2010
------------------------   (Principal Financial Officer)   ------------
James Ivchenko

/s/ James R. Torpey, Jr.   Director                        May 28, 2010
------------------------                                   ------------
James R. Torpey, Jr.

/s/ Herve A. Meillat       Director                        May 28, 2010
------------------------                                   ------------
Herve A. Meillat

                                       26

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY

                        CONSOLIDATED FINANCIAL STATEMENTS

                                   YEARS ENDED

                           FEBRUARY 28, 2010 AND 2009

<PAGE>

                                    CONTENTS

                                                                           PAGE
                                                                           ----

Independent Auditor's Report                                                 1

Consolidated Financial Statements:

   Consolidated Balance Sheets                                             2 - 3

   Consolidated Statements of Income                                         4

   Consolidated Statements of Stockholders' Equity                           5

   Consolidated Statements of Cash Flows                                     6

Notes to Consolidated Financial Statements                                7 - 23

<PAGE>

                          INDEPENDENT AUDITOR'S REPORT
             Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders
EPOLIN, INC. AND SUBSIDIARY
Newark, New Jersey

      We have audited the  accompanying  Consolidated  Balance Sheets of Epolin,
Inc. and it's wholly owned  Subsidiary  as of February 28, 2010 and 2009 and the
related Consolidated  Statements of Income,  Stockholders' Equity and Cash Flows
for each of the two years in the periods ended February 28, 2010 and 2009. 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 the  standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
financial  statements  are free of  material  misstatement.  The  Company is not
required  to have,  nor were we engaged  to  perform,  an audit of its  internal
control over financial reporting.  Our audit included  consideration of internal
control over financial  reporting as a basis for designing audit procedures that
are appropriate in the  circumstances,  but not for the purpose of expressing an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting. 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.

      In our opinion, the financial statements referred to above present fairly,
in all material  respects,  the financial position of Epolin Inc. and Subsidiary
as of February 28, 2010 and 2009, and the results of its operations and its cash
flows for each of the two years in the periods ended February 28, 2010 and 2009,
in conformity with accounting principles generally accepted in the United States
of America.

/s/ Weismann Associates LLC
---------------------------
Weismann Associates LLC
Branchburg, NJ 08876

May 11, 2010

                                        1

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

                                                           FEBRUARY 28,
                                                      -----------------------
                                                         2010          2009
                                                      ----------    ---------
CURRENT ASSETS:
   Cash and cash equivalents                          $1,908,752    1,544,966
   Accounts receivable                                   469,035      371,443
   Inventories                                           683,995      667,184
   Prepaid expenses                                       55,094       56,298
   Prepaid taxes                                          33,870      228,346
   Deferred tax assets-current portion                    14,698       18,377
                                                      ----------    ---------

      Total current assets                             3,165,444    2,886,614
                                                      ----------    ---------

PLANT, PROPERTY AND EQUIPMENT - AT COST:
   Land                                                   81,000       81,000
   Building and improvements                             770,537      767,300
   Laboratory equipment                                  210,555      191,549
   Furniture and office equipment                        273,863      233,387
   Leasehold improvements                                532,131      532,131
                                                      ----------    ---------

      Total                                            1,868,086    1,805,367

   Less: Accumulated depreciation and amortization     1,008,372      905,242
                                                      ----------    ---------

      Net plant, property and equipment                  859,714      900,125
                                                      ----------    ---------

OTHER ASSETS:
   Deferred tax assets-non current portion                85,460       95,504
   Cash value - life insurance policy                    188,641      213,452
                                                      ----------    ---------

      Total other assets                                 274,101      308,956
                                                      ----------    ---------

         Total                                        $4,299,259    4,095,695
                                                      ==========    =========

        The accompanying notes are an integral part of these consolidated
                              financial statements.

                                        2

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                            FEBRUARY 28,
                                                                      ------------------------
                                                                         2010          2009
                                                                      -----------   ----------
<S>                                                                   <C>           <C>
CURRENT LIABILITIES:
   Accounts payable                                                   $    16,777       38,698
   Accrued expenses                                                        47,145      284,424
   Taxes payable:
      Payroll                                                               2,208        2,208
                                                                      -----------   ----------
         Total current liabilities                                         66,130      325,330

OTHER LIABILITIES - Deferred compensation                                 195,082      221,388
                                                                      -----------   ----------

         Total liabilities                                                261,212      546,718
                                                                      -----------   ----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
   Preferred stock, $2.50 par value; 940,000 shares authorized;
      none issued
   Preferred stock, series A convertible non-cumulative,
      $2.50 par value; redemption price and liquidation preference;
      60,000 shares authorized; 5,478 shares issued and redeemed
   Common stock, no par value; 20,000,000 shares authorized;
      13,115,000 and 13,015,000 shares issued, and 12,166,355 and
      12,066,355 shares outstanding at February 28, 2010 and
      2009, repectively                                                 2,364,693    2,364,693
      Additional paid-in capital                                          124,820      104,820
      Retained earnings                                                 1,899,616    1,430,546
                                                                      -----------   ----------

            Total                                                       4,389,129    3,900,059
      Less: Treasury stock - at cost                                      351,082      351,082
                                                                      -----------   ----------

         Total stockholders' equity                                     4,038,047    3,548,977
                                                                      -----------   ----------

            Total                                                     $ 4,299,259    4,095,695
                                                                      ===========   ==========
</TABLE>

        The accompanying notes are an integral part of these consolidated
                              financial statements.

                                        3

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
                     YEARS ENDED FEBRUARY 28, 2010 AND 2009

<TABLE>
<CAPTION>
                                                                  2010           2009
                                                              ------------   -----------
<S>                                                           <C>            <C>
SALES                                                         $  2,944,628     3,091,539
                                                              ------------   -----------

COST OF SALES AND EXPENSES:
   Cost of sales                                                 1,273,768     1,444,199
   Selling, general and administrative                           1,118,622     1,251,521
                                                              ------------   -----------

      Total                                                      2,392,390     2,695,720
                                                              ------------   -----------

OPERATING INCOME                                                   552,238       395,819
                                                              ------------   -----------

OTHER INCOME:
   Rental income                                                     4,500        18,000
   Interest                                                         25,835        52,861
                                                              ------------   -----------

      Total                                                         30,335        70,861
                                                              ------------   -----------

INCOME BEFORE TAXES                                                582,573       466,680

INCOME TAXES                                                       113,503       139,111
                                                              ------------   -----------

NET INCOME                                                    $    469,070       327,569
                                                              ============   ===========

PER SHARE DATA:
   Basic earnings per common share                            $       0.04          0.03
                                                              ============   ===========

   Fully diluted earnings per common share                    $       0.04          0.03
                                                              ============   ===========

   Weighted average number of common shares outstanding         12,101,972    12,015,944
                                                              ============   ===========

   Fully diluted number of common shares outstanding            12,104,872    12,056,380
                                                              ============   ===========
</TABLE>

        The accompanying notes are an integral part of these consolidated
                              financial statements.

                                        4

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     YEARS ENDED FEBRUARY 28, 2010 AND 2009

<TABLE>
<CAPTION>
                                                            ADDITIONAL
                                NUMBER OF        COMMON      PAID-IN-     RETAINED     TREASURY    TREASURY    STOCKHOLDERS'
                              SHARES ISSUED      STOCK        CAPITAL     EARNINGS      SHARES       STOCK         EQUITY
                              -------------   -----------   ----------   ----------   ---------   ----------   -------------
<S>                           <C>             <C>           <C>          <C>          <C>         <C>          <C>

BALANCE - March 1, 2008          12,915,000   $ 2,364,693       76,820    1,820,958     948,645     (351,082)      3,911,389

DIVIDENDS PAID                            -             -            -     (717,981)          -            -        (717,981)

STOCK-BASED COMPENSATION            100,000             -       28,000            -           -            -          28,000

NET INCOME                                -             -            -      327,569           -            -         327,569
                              -------------   -----------   ----------   ----------   ---------   ----------   -------------

BALANCE - February 28, 2009      13,015,000   $ 2,364,693      104,820    1,430,546     948,645     (351,082)      3,548,977
                              =============   ===========   ==========   ==========   =========   ==========   =============

BALANCE - March 1, 2009          13,015,000   $ 2,364,693      104,820    1,430,546     948,645     (351,082)      3,548,977

STOCK-BASED COMPENSATION            100,000             -       20,000            -           -            -          20,000

NET INCOME                                -             -            -      469,070           -            -         469,070
                              -------------   -----------   ----------   ----------   ---------   ----------   -------------

BALANCE - February 28, 2010      13,115,000   $ 2,364,693      124,820    1,899,616     948,645     (351,082)      4,038,047
                              =============   ===========   ==========   ==========   =========   ==========   =============
</TABLE>

   The accompanying notes are an integral part of these consolidated financial
                                   statements.

                                        5

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED FEBRUARY 28, 2010 AND 2009

<TABLE>
<CAPTION>
                                                                     2010         2009
                                                                 -----------   ----------
<S>                                                              <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                    $   469,070      327,569
   Adjustments to reconcile net income to net cash provided by
      operating activities:
         Depreciation and amortization                               104,432      104,599
         Deferred tax expense                                         13,723        6,274
         Stock-based compensation                                     20,000       28,000
         Obligation under deferred compensation agreement            (26,306)     (25,295)
   (Increase) decrease in:
         Accounts receivable                                         (97,592)     247,002
         Inventories                                                 (16,811)     (24,655)
         Prepaid expenses                                              1,204        4,114
         Prepaid taxes                                               194,476     (228,346)
   Increase (decrease) in:
         Accounts payable                                            (21,921)      29,038
         Accrued expenses                                           (237,279)      13,669
         Taxes payable                                                     -      (37,081)
                                                                 -----------   ----------

            Net cash provided by operating activities                402,996      444,888
                                                                 -----------   ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   (Increase) decrease in cash value - life insurance policy          24,811      (12,083)
   Payments for plant, property and equipment                        (64,021)    (150,000)
                                                                 -----------   ----------

            Net cash provided (used) in investing activities         (39,210)    (162,083)
                                                                 -----------   ----------

CASH FLOWS USED IN FINANCING ACTIVITIES -
   Dividends paid                                                          -     (717,981)
                                                                 -----------   ----------

INCREASE (DECREASE) IN CASH                                          363,786     (435,176)

CASH AND CASH EQUIVALENTS:
   Beginning                                                       1,544,966    1,980,142
                                                                 -----------   ----------

   Ending                                                        $ 1,908,752    1,544,966
                                                                 ===========   ==========

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
   Income taxes paid                                             $   129,700      273,398
                                                                 ===========   ==========
</TABLE>

   The accompanying notes are an integral part of these consolidated financial
                                   statements.

                                        6

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - ORGANIZATION:
------

      The  Company is engaged in the  development,  production  and sale of near
infrared  dyes  to  the  optical  industry  for  laser  protection  and  welding
applications,  and other  dyes and  specialty  chemical  products  that serve as
intermediates  and additives used in the adhesive,  plastic,  aerospace,  credit
card security and protective  documents  industries to customers  located in the
United States and throughout the world.

      The Company's wholly owned  Subsidiary,  Epolin Holding  Corporation,  was
incorporated in New Jersey as a real estate holding company whose assets consist
of land and a building.  On January 29, 1998,  the Company  acquired 100% of the
stock   in   Epolin   Holding   Corporation.    Prior   to   acquisition,    two
officers/stockholders of the Company controlled it.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------

BASIS OF PRESENTATION - The Consolidated  Financial  Statements presented herein
reflect all normal and recurring adjustments that, in the opinion of management,
are  necessary  for a fair  presentation  of the  consolidated  balance  sheets,
consolidated  operating  results  and  consolidated  cash flows for the  periods
presented in accordance with  accounting  principles  generally  accepted in the
United States of America. All significant intercompany accounts and transactions
have been eliminated.

CASH AND CASH  EQUIVALENTS - Includes cash in bank and money market accounts for
purposes of preparing the Statement of Cash Flows.

CONCENTRATIONS OF CREDIT RISKS - The Company and its Subsidiary at various times
of the year had cash deposits in financial institutions and a brokerage house in
excess of the amount  insured by the  agencies  of the  federal  government.  In
evaluating this credit risk, the Company periodically evaluates the stability of
the financial institution and brokerage house.

      Financial   instruments,   which   potentially   subject  the  Company  to
concentrations  of credit  risk,  consist  principally  of accounts  receivable.
Generally,  the  Company  does not require  collateral  or other  securities  to
support  its  accounts  receivable.  Four  customers  represented  44.5%  of the
Company's trade receivables at February 28, 2010.

SOURCE OF RAW  MATERIALS - The Company  purchases  chemicals  from several large
chemical  manufacturers,  further  processing  them into its saleable  products.
Although the Company limits itself to a relatively small number of suppliers, it
is not restricted to such suppliers,  and  availability of such raw materials is
widespread.

                                        7

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
------

PRINCIPLES OF CONSOLIDATION - The accompanying Consolidated Financial Statements
include the accounts of the Company and Subsidiary.  Inter-company  transactions
and balances have been  eliminated  in  consolidation.  Condensed  Consolidating
Financial Statements as of February 28, 2010 and for the year then ended are:

                      CONDENSED CONSOLIDATING BALANCE SHEET

<TABLE>
<CAPTION>
                                        EPOLIN          EPOLIN
                                          INC.      HOLDING, CORP.   ELIMINATIONS   CONSOLIDATED
                                      -----------   --------------   ------------   ------------
<S>                                   <C>           <C>              <C>            <C>
Current assets                        $ 2,712,079          453,365              -      3,165,444
Non-current assets                      1,587,180          643,688     (1,097,053)     1,133,815
                                      -----------   --------------   ------------   ------------
         Total                        $ 4,299,259        1,097,053     (1,097,053)     4,299,259
                                      ===========   ==============   ============   ============

   Total liabilities                  $   261,212           24,435        (24,435)       261,212
                                      -----------   --------------   ------------   ------------
Stockholders' equity:
   Common stock                         2,364,693                -              -      2,364,693
   Additional paid-in capital             124,820                -              -        124,820
   Retained earnings                    1,899,616        1,072,618     (1,072,618)     1,899,616
   Treasury stock                        (351,082)               -              -       (351,082)
                                      -----------   --------------   ------------   ------------

   Total stockholders' equity           4,038,047        1,072,618     (1,072,618)     4,038,047
                                      -----------   --------------   ------------   ------------

      Total                           $ 4,299,259        1,097,053     (1,097,053)     4,299,259
                                      ===========   ==============   ============   ============
</TABLE>

                   CONDENSED CONSOLIDATING STATEMENT OF INCOME

<TABLE>
<CAPTION>
                                         EPOLIN        EPOLIN
                                          INC.      HOLDING, CORP.   ELIMINATIONS   CONSOLIDATED
                                      -----------   --------------   ------------   ------------
<S>                                   <C>                  <C>            <C>          <C>
Sales                                 $ 2,944,628                -              -      2,944,628
Rental income                                   -          102,240        (97,740)         4,500
                                      -----------   --------------   ------------   ------------
      Total                             2,944,628          102,240        (97,740)     2,949,128
                                      -----------   --------------   ------------   ------------
Cost of sales                           1,273,768                -              -      1,273,768
Selling, general and administrative     1,185,013           31,349        (97,740)     1,118,622
                                      -----------   --------------   ------------   ------------

      Total                             2,458,781           31,349        (97,740)     2,392,390
                                      -----------   --------------   ------------   ------------

Operating income                          485,847           70,891              -        556,738

Other income - interest                    19,089            6,746              -         25,835
                                      -----------   --------------   ------------   ------------

Income before taxes                       504,936           77,637              -        582,573

Income taxes                              107,323            6,180              -        113,503
                                      -----------   --------------   ------------   ------------

Net income                            $   397,613           71,457              -        469,070
                                      ===========   ==============   ============   ============
</TABLE>

                                        8

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
------

ACCOUNTS  RECEIVABLE - Accounts  receivable are stated at the amount  management
expects to collect from outstanding  balances.  Management provides for probable
uncollectible  amounts  though a charge to earnings  and a credit to a valuation
allowance  based on its  assessment of the status of individual  accounts.  This
allowance is an amount estimated by management to be adequate to absorb possible
losses. Balances that are still outstanding after management has used reasonable
collection  efforts are written off through a charge to the valuation  allowance
and a credit to accounts receivable.

PLANT,  PROPERTY AND EQUIPMENT - Stated at cost. Provisions for depreciation are
computed on the straight-line  methods, based upon the estimated useful lives of
the various assets.

A summary of the major categories of the Company's plant, property and equipment
are as follows:

                                                 ESTIMATED YEARS
                                                 ---------------
Building and improvements        Straight Line         39
Laboratory equipment             Straight Line      5 - 7
Furniture and office equipment   Straight Line      5 - 7
Leasehold Improvements           Straight Line    10 - 39

      The costs of major renewals and betterments are  capitalized.  Repairs and
maintenance are charged to operations as incurred.  Upon  disposition,  the cost
and related accumulated depreciation are removed and any related gain or loss is
reflected in earnings.

      Depreciation  and  amortization  expense totaled $104,432 and $104,599 for
the years ended February 28, 2010 and 2009, respectively.

INCOME  TAXES - The  Company  accounts  for  income  taxes  under  Statement  of
Financial Accounting  Standards No. 109, "Accounting for Income Taxes",  wherein
the asset and liability method is used in accounting for income taxes.  Deferred
taxes are recognized for temporary  differences  between the basis of assets and
liabilities  for  financial  statement  and for income tax  purposes.  Temporary
differences   relate  primarily  to  different   accounting   methods  used  for
depreciation   and   amortization   of  property  and   equipment  and  deferred
compensation.

      FASB  Interpretation  No. 48, ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES -
AN INTERPRETATION  OF FASB STATEMENT NO. 109 (FIN 48),  clarifies the accounting
for  uncertainty in income tax  positions,  as defined.  FIN 48 requires,  among
other  matters,  that the Company  recognize in its  financial  statements,  the
impact of a tax  position,  if that  position  is more  likely than not of being
sustained on audit,  based on the technical merits of the position.  The Company
became subject to the provisions of FIN 48 as of March 1, 2007, the beginning of
fiscal year ended 2008, and analyzed the filing  positions in all of the federal
and state jurisdictions where it is required to file income tax returns, as well
as all open tax  years in these  jurisdictions.  The  adoption  of FIN 48 had no
impact on the Company's  financial  statements for fiscal year ended 2009. As of
February  28, 2010 and 2009,  the Company  did not record any  unrecognized  tax
benefits. The Company's policy, if it had unrecognized benefits, is to recognize
accrued interest and penalties  related to unrecognized tax benefits as interest
expense and other expense, respectively.

                                        9

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
------

USE OF ESTIMATES - The  preparation  of the  Company's  financial  statements in
conformity with accounting  principles  generally  accepted in the United States
requires management to make estimates, judgments and assumptions that affect the
reported amounts of assets and liabilities,  disclosure of contingent assets and
liabilities at the date of the financial  statements and the reported  amount of
expenses  during the  reporting  period.  The  Company  bases its  estimates  on
historical  experience and on various other  assumptions that are believed to be
reasonable  under the  circumstances,  the  results  of which form the basis for
making  judgments about the carrying  values of assets and liabilities  that are
not readily  apparent from other  sources.  Actual results may differ from these
estimates under different assumptions or conditions.

REVENUE  RECOGNITION  - The  Company  recognizes  revenue  consistent  with  the
provisions  of SEC Staff  Accounting  Bulletin No. 104,  "Revenue  Recognition",
which sets forth  guidelines  in the  timing of revenue  recognition  based upon
factors such as passage of title, payments, and customer acceptance. Any amounts
received prior to satisfying our revenue  recognition  criteria will be recorded
as deferred  revenue in the accompanying  balance sheet. The Company  recognizes
revenue from product sales when there is persuasive evidence that an arrangement
exists,  when  title has  passed,  the price is fixed or  determinable,  and the
Company is  reasonably  assured of  collecting  the  resulting  receivable.  The
Company's policy is to replace certain  products that are in nonconformity  with
customer specifications; however, replacements are made at the discretion of the
Company  subject  to in  house  product  lab  analysis.  There  are no  terms or
conditions  set forth  within the  Company's  sales  contracts  that provide for
product replacements. Replacement costs are expensed as incurred.

REGULATIONS - The Company  expended  approximately  $40,312 and $36,331  through
February 28, 2010 and 2009,  respectively,  to maintain  compliance with certain
Federal,  State and City  government  regulations  relative to the production of
near infrared dyes and specialty chemicals.

NET INCOME PER SHARE - Basic net income per share is  calculated on the basis of
the weighted average number of shares outstanding  during the period,  excluding
dilution.  Diluted net income per share is computed on the basis of the weighted
average number of shares plus  potentially  dilutive  common shares arising from
the assumed exercise of stock options.

INVENTORIES - Consists of raw  materials,  work in process,  finished  goods and
supplies  valued at the lower of cost or market  under the  first-in,  first-out
method.

ADVERTISING  COSTS -  Advertising  costs,  included in operating  expenses,  are
expensed as incurred.  Advertising  expenses amounted to $19,031 and $19,905 for
the years ended February 28, 2010 and 2009, respectively.

                                       10

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
------

STOCK-BASED  COMPENSATION  -  Effective  March 1, 2006,  the Company has adopted
Statement of Financial  Accounting  Standards ("SFAS") No. 123(R),  "Share-Based
Payment".  SFAS 123R  requires  companies to measure and recognize in operations
the cost of  employee  services  received  in  exchange  for an award of  equity
instruments  based  on  the  grant-date  fair  value.  In  accordance  with  the
provisions of the Securities and Exchange  Commission Staff Accounting  Bulletin
No. 107,  the Company has adapted the  modified-prospective  transition  method.
Prior  periods  were not  restated  to reflect  the impact of  adopting  the new
standard.  The Company  determines  the fair value of  stock-based  compensation
using the Black-Scholes option-pricing model, which requires the Company to make
assumptions  regarding future dividends,  expected  volatility of its stock, and
the  expected  lives of the  options.  Under  SFAS 123R the  Company  also makes
assumptions  regarding  the  number  of  options  and the  number  of  shares of
restricted  stock and performance  shares that will ultimately vest. As a result
of the  adoption  of  FAS  123R,  stock-based  compensation  expense  recognized
includes  compensation  expense for all share-based payments granted on or prior
to, but not yet  vested as of March 1, 2006,  based on the grant date fair value
estimated  in  accordance   with  the  original   provisions  of  FAS  123,  and
compensation cost for all share-based payments granted on or subsequent to March
1, 2006,  based on the grant date fair value  estimated in  accordance  with the
provisions of FAS 123R.

      Prior to the  adoption  of FAS 123R and for the year  ended  February  28,
2007, no tax benefits  from the exercise of stock options have been  recognized.
Any future  excess tax benefits  derived from the exercise of stock options will
be recorded  prospectively and reported as cash flows from financing  activities
in accordance with FAS 123R.

      Deferred  charges for options granted to  non-employees  are determined in
accordance with FAS No. 123 and EITF 96-18  "Accounting  for Equity  Instruments
That Are Issued to Other Than  Employees for Acquiring,  or in Conjunction  with
Selling,  Goods or Services" as the fair value of the  consideration or the fair
value of the equity instruments issued, whichever is more reliably measured.

      The weighted  average  Black-Scholes  value of options  granted  under the
stock  plans  during  the  years  ended  February  28,  2010 and 2009 was  $.18,
respectively.  The fair value of each option  grant is  estimated on the date of
grant using the Black-Scholes  option-pricing  model with the following weighted
average assumptions used for grants:

                                                      FEBRUARY 28,
                                                -----------------------
                                                   2010         2009
                                                ----------   ----------
      Weighted average expected life in years            2            2
      Dividends per share                                -         0.06
      Volatility                                       7.0%         7.0%
      Risk-free interest rate                          2.8%         4.0%

                                       11

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
------

RECENTLY  ADOPTED  ACCOUNTING  STANDARDS - On March 1, 2008, the Company adopted
Statement  of  Financial  Accounting  Standard  ("SFAS")  No.  157,  "Fair Value
Measurements" ("FAS 157") for financial assets and liabilities,  which clarifies
the meaning of fair value,  establishes a framework for measuring fair value and
expands disclosures about fair value  measurements.  Fair value is defined under
FAS 157 as the  exchange  price that would be  received  for an asset or paid to
transfer a liability in the principal or most advantageous market for the assets
or liabilities in an orderly  transaction  between  market  participants  on the
measurement date. Subsequent changes in fair value of these financial assets and
liabilities are recognized in earnings or other  comprehensive  income when they
occur. The effective date of the provisions of FAS 157 for non-financial  assets
and liabilities, except for items recognized at fair value on a recurring basis,
was deferred by Financial Accounting Standards Board ("FASB") Staff Position FAS
157-2 ("FSP FAS 157-2") and are effective for the fiscal year beginning March 1,
2009. The adoption of FAS 157 for financial  assets and liabilities did not have
an impact  on the  Company's  consolidated  financial  position  or  results  of
operations. For additional information on the fair value of financial assets and
liabilities, see Note N - Fair Value Measurements.

      Also,  effective March 1, 2008, the Company adopted SFAS No. 159 "The Fair
Value Option for Financial Assets and Financial  Liabilities"  ("FAS 159") which
allows an entity the irrevocable  option to elect fair value for the initial and
subsequent  measurement  for  certain  financial  assets  and  liabilities  on a
contract-by-contract basis. As of February 28, 2010, the Company has not elected
the fair value option for any additional financial assets and liabilities beyond
those  already  prescribed by accounting  principles  generally  accepted in the
United States.

      In  October  2008,   the  FASB  issued  Staff   Position  No.  FAS  157-3,
"Determining  the Fair Value of a Financial Asset in a Market That Is Not Active
("FSP FAS 157-3")."  FSP FAS 157-3  clarifies  the  application  of FAS 157 in a
market that is not active and defines additional key criteria in determining the
fair value of a financial  asset when the market for that financial asset is not
active. FSP FAS 157-3 applies to financial assets within the scope of accounting
pronouncements that require or permit fair value measurements in accordance with
FAS 157. FSP FAS 157-3 was effective  upon issuance and the  application  of FSP
FAS  157-3  did  not  have  a  material  impact  on our  consolidated  financial
statements.

                                       12

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE C - INCOME TAXES:
------

1. Federal and State deferred tax assets include:

                                                               FEBRUARY 28,
                                                          ---------------------
                                                             2010        2009
                                                          ---------   ---------
      Temporary differences:
         Accelerated amortization                         $     219       2,629
         Deferred compensation                               83,885      95,198
         Stock-based compensation                            16,054      16,054
                                                          ---------   ---------
               Total                                        100,158     113,881

      Less: Current portion                                  14,698      18,377
                                                          ---------   ---------

      Non-current portion                                 $  85,460      95,504
                                                          =========   =========

2.  Income tax:

                                                               FEBRUARY 28,
                                                          ---------------------
                                                             2010        2009
                                                          ---------   ---------
      Current:
         Federal                                          $  79,000     108,635
         State                                               20,780      24,202
                                                          ---------   ---------

               Total current                                 99,780     132,837
                                                          ---------   ---------

      Deferred:
         Federal                                             10,140       3,718
         State                                                3,583       2,556
                                                          ---------   ---------

               Total deferred                                13,723       6,274
                                                          ---------   ---------

                  Total                                   $ 113,503     139,111
                                                          =========   =========

3. Reconciliation of income tax at the statutory rate to the Company's effective
rate:

                                                               FEBRUARY 28,
                                                          ---------------------
                                                             2010        2009
                                                          ---------   ---------
         Computed at the statutory rate                   $ 198,075     158,671
         State income taxes (net)                            20,780      24,202
         (Increase) Decrease in deferred tax asset           13,723       6,274
         General business credits                           (12,740)    (29,944)
         Other reconciling items                           (106,335)    (20,092)
                                                          ---------   ---------

               Effective tax                              $ 113,503     139,111
                                                          =========     =======

                                       13

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE D - TREASURY STOCK:
------

Consists of 948,645 shares at a net cost of $351,082 as of February 28, 2010 and
2009,  respectively.  There were no purchases of treasury shares made during the
years ended February 28, 2010 and 2009, respectively.

NOTE E - ECONOMIC DEPENDENCY:
------

      A material  portion of the  Company's  business  is  dependent  on certain
domestic  customers,  the  loss  of  which  could  have  a  material  effect  on
operations.  During the years ended  February 28, 2010,  approximately  33.4% of
sales  were to three  customers.  During  the years  ended  February  28,  2009,
approximately 31.0% of sales were to three customers.

NOTE F - RENTAL INCOME UNDER SUBLEASE:
------

      The Company  entered into an agreement with a non-related  party effective
September  1, 2005 for a term  ending  October 31,  2007,  and  continuing  on a
month-to-month  basis  thereafter  through May 31, 2009.  Under the terms of the
agreement,  the  tenant is to pay a base rent of  $18,000  per year.  On May 31,
2009, the tenant abandoned the property.

NOTE G - RESEARCH AND DEVELOPMENT:
------

      The Company has developed substantial research and development capability.
The  Company's  efforts are devoted to (i)  developing  new  products to satisfy
defined market needs, (ii) providing  quality  technical  services to assure the
continued  success  of its  products  for  its  customers'  applications,  (iii)
providing   technology  for   improvements   to  its  products,   processes  and
applications,  and (iv) providing  support to its  manufacturing  plant for cost
reduction,  productivity  and quality  improvement  programs.  Expenditures  for
Company  sponsored  product  research  and product  development  of $373,948 and
$460,682  were  included in cost of sales for the years ended  February 28, 2010
and  2009,  respectively.  Expenditures  for the  fiscal  year  ended  2011  are
projected to remain at approximately the same level as in fiscal 2010.

NOTE H - EMPLOYEE BENEFITS:
------

SIMPLIFIED  EMPLOYEE PENSION PLAN - Effective June 1, 1994, the Company provides
a SAR/SEP  plan to its  employees  as a  retirement  and  income  tax  reduction
facility. Full time employees are eligible to participate immediately. Employees
may make pre-tax and after-tax contributions subject to Internal Revenue Service
limitations.  Company  contributions range from three to five percent.  Employer
contributions  totaled $47,503 and $42,915 for the years ended February 28, 2010
and 2009, respectively.

                                       14

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE H - EMPLOYEE BENEFITS (CONTINUED):
------

STOCK  OPTION PLAN - The Company  adopted the 1998 Stock Option Plan on December
1, 1998.  Under the terms of the plan,  the Company  reserved  750,000 shares of
common  stock for  issuance  pursuant  to the  exercise of options to be granted
under the Plan,  which do not meet the  requirements of Section 422 of the Code.
On  September  15,  2001,  the  Board of  Directors  increased  the  reserve  to
1,500,000.  Options  granted expire five or ten years after the date granted and
are subject to various vesting periods as follows: (1) none exercisable prior to
the first  anniversary  of the date of grant,  and (2)  certain  options  become
exercisable  as to 50% of the shares  underlying the option on each of the first
and  second  anniversaries  of the  date  granted  (3)  certain  options  become
exercisable as to 50% of the shares  underlying the option on each of the second
and fourth  anniversaries of the date granted.  From inception  through February
28, 2010, options granted totaled 1,242,000,  options exercised totaled 686,000;
options cancelled or expired for all years totaled 311,000.

      A summary of the status of the  Company's  1998  stock  option  plan as of
February 28, 2010,  and the changes during the years ended February 28, 2010 and
2009 is presented below:

                                                               WEIGHTED-AVERAGE
FIXED OPTIONS:                                       SHARES     EXERCISE PRICE
--------------                                       -------   ----------------
Balance - February 28, 2009                          316,000         $.50
                                                     =======

Balance - February 28, 2010                          245,000         $.49
                                                     =======

Exercisable at February 28, 2010                     245,000         $.49
                                                     =======

STOCK OPTION PLANS - The  following  table  summarizes  information  about fixed
stock options outstanding at February 28, 2010:

             OUTSTANDING OPTIONS                    EXERCISABLE OPTIONS
---------------------------------------------  -----------------------------
                  NUMBER     WEIGHTED-AVERAGE    NUMBER
   RANGE OF     OUTSTANDING     REMAINING      EXERCISABLE  WEIGHTED-AVERAGE
EXERCISE PRICE  AT 02/28/10  CONTRACTUAL LIFE  AT 02/28/10   EXERCISE PRICE
--------------  -----------  ----------------  -----------  ----------------
     $.41            95,000         4.0             95,000         .32
      .54           150,000         0.3            150,000         .68

                                       15

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE H - EMPLOYEE BENEFITS (CONTINUED):
------

STOCK OPTION AND STOCK-BASED COMPENSATION PLAN - On June 18, 2008, the Company's
Board of Directors  approved and adopted the Epolin,  Inc. 2008 Stock  Incentive
Plan (the "2008 Plan"), and authorized us to issue up to 1,500,000 shares of our
Common Stock under the 2008 Plan (subject to adjustment to take account of stock
dividends, stock splits,  recapitalizations and similar corporate events). Under
the 2008 Plan,  the Company  will have the right to issue stock  options,  stock
appreciation  rights,  restricted stock, Common Stock or convertible  securities
that may or may not be subject to restrictions or forfeiture,  restricted  stock
units,  performance  shares and performance  units. With the adoption of the new
2008 Plan, the 1998 Plan  terminated,  and the Company will no longer be able to
grant  options under it.  However,  options that have already been granted under
the 1998 Plan will continue to be outstanding.  As of February 28, 2010, 200,000
shares of Common  Stock have been  granted  and  1,300,000  shares  remain to be
granted.

      The  purpose  of the Plan is to  provide  officers,  other  employees  and
directors of, and  consultants  to, the Company,  an incentive to (a) enter into
and remain in the Company's  service or to provide services to the Company,  (b)
enhance the Company's long-term performance,  (c) acquire a proprietary interest
in the Company.

      The Compensation  Committee or another committee of our Board of Directors
(or if there is no committee, the Board of Directors itself) will administer the
Plan. It will  determine  the persons to whom awards will be made,  the types of
awards that will be made to particular  persons,  the numbers of shares to which
awards will relate,  the dates when awards will vest in whole or in part and the
other terms of awards,  including the payments,  if any, that  participants will
have to make to benefit from awards.

      The 2008 Plan provides that each year,  commencing September 1, 2008, each
person who serves as a Director  during  the  current  year shall  automatically
receive a stock award of 25,000 shares of Common Stock.  The dollar value of the
shares of Common  Stock  granted  each year is  calculated  based  upon the fair
market value of our Common Stock at the date of grant.  Stock-based compensation
in the  amount of $20,000  and  $28,000  was  charged to  selling,  general  and
administrative  expenses  were for the years ended  February  28, 2010 and 2009,
respectively.

                                       16

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE I - SEGMENT REPORTING:
------

      The Company currently operates in a single operating segment. In addition,
financial  results are prepared and reviewed by management as a single operating
segment.  The Company  continually  evaluates its operating  activities  and the
method  utilized by management to evaluate such  activities and will report on a
segment basis if and when appropriate to do so.

Sales by geographic area are as follows:

                                                  YEARS ENDED
                                                  FEBRUARY 28,
                                            -------------------------
                                               2010          2009
                                            -----------   -----------
            United States                   $ 2,402,128     2,114,706
            Asia                                290,358       578,060
            Europe                              246,731       398,173
            Other nations                         5,411           600
                                            -----------   -----------

               Total                        $ 2,944,628     3,091,539
                                            ===========   ===========

      One customer, located in the United States, accounted for more than 10% of
revenues from continuing operations.  This customer accounted for 14.0% of sales
of infrared dies.

      Long-lived assets include net plant,  property and equipment.  The Company
had long-lived  assets of $859,714 and $900,125  located in the United States at
February 28, 2010 and February 28, 2009, respectively.

                                       17

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE J - ACCRUED EXPENSES:
------

      Accrued  expenses  consisted of the  following as of February 28, 2010 and
2009, respectively:

                                                FEBRUARY 28,
                                           ---------------------
                                              2010        2009
                                           ---------   ---------
   Purchases                               $   3,455      10,980
   Commissions                                10,545       8,444
   Rent                                        8,145           -
   Employment agreement                            -     240,000
   Professional fees                          25,000      25,000
                                           ---------   ---------

      Total accrued expenses               $  47,145     284,424
                                           =========   =========

NOTE K - INVENTORIES:
------
                                                 FEBRUARY 28,
                                           ---------------------
                                              2010        2009
                                           ---------   ---------
   Raw materials and supplies              $ 160,387     138,730
   Work in process                            92,421     117,314
   Finished goods                            431,187     411,140
                                           ---------   ---------

      Total                                $ 683,995     667,184
                                           =========   =========

                                       18

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE L - EARNINGS PER SHARE:
------

      Basic earnings per share are computed on the basis of the weighted average
number of shares of common stock outstanding during the period. Diluted earnings
per share is computed on the basis of the weighted  average  number of shares of
common stock plus the effect of dilutive  potential  common  shares  outstanding
during the period using the treasury  stock method.  Dilutive  potential  common
shares include  outstanding  stock options.  The components of basic and diluted
earnings per share are as follows:

                                                              YEARS ENDED
                                                              FEBRUARY 28,
                                                        -----------------------
                                                           2010         2009
                                                        ----------   ----------

         BASIC EARNINGS PER COMMON SHARE:

         Net income                                        469,070      327,569
                                                        ==========   ==========

         Average common shares outstanding              12,101,972   12,015,944
                                                        ----------   ----------

         Basic earnings per common share                      0.04         0.03
                                                        ----------   ----------

         DILUTED EARNINGS PER COMMON SHARE:

         Net income                                        469,070      327,569
                                                        ----------   ----------

         Average common shares outstanding              12,101,972   12,015,944

         Common shares issuable with respect to
            options issued to employees with a
            dilutive effect                                  2,900       40,436
                                                        ----------   ----------

         Total diluted common shares outstanding        12,104,872   12,056,380
                                                        ----------   ----------

         Diluted earnings per common share
                                                              0.04         0.03
                                                        ==========   ==========

                                       19

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE M - COMMITMENTS AND CONTINGENCIES:
------

      Losses for contingencies such as litigation and environmental  matters are
recognized  in income when they are  probable and can be  reasonably  estimated.
Gain contingencies are not recognized in income.

LEASE  OBLIGATIONS - The Company leases its real estate under an operating lease
with a related  party.  The lease  effective  November 1, 1996 was for a term of
five (5)  years  with  three (3) five (5) year  options  at  annual  rentals  of
$97,740.  The Cost of Living Index adjustment effective with the second year has
been  waived  by the  subsidiary.  Rent  includes  reimbursed  insurance  costs.
Generally,  management  expects  that the lease  will be  renewed  in the normal
course of business.

Rental expense charged to operations,  eliminated in consolidation,  amounted to
$97,740 for the years ended February 28, 2010 and 2009, respectively.

Future minimum payments for the current option period:

      FISCAL YEARS ENDING FEBRUARY:
      -----------------------------
                  2011                    $65,160

DEFERRED  COMPENSATION  - On  December  29,  1995,  the Company  entered  into a
deferred compensation agreement with James Ivchenko, President, whose additional
annual compensation of $19,645 plus interest is deferred until he reaches age 65
or is terminated. The obligation is funded by the cash value in a life insurance
policy. Commencing on December 2005, annual payments will be made to the officer
in the amount of $32,000 for ten consecutive years. Subsequent to the year ended
February  28,  2010,  as of May 14,  2010,  the  Board of  Directors  agreed  to
surrender the life insurance policy and pay the remaining  balance due in a lump
sum payment during the current year.

      In connection with this agreement,  deferred compensation in the amount of
$5,694 and $6,706 was charged to selling,  general and  administrative  expenses
for the years ended February 28, 2010 and 2009, respectively.

On January 1, 1996, the Company entered into a deferred  compensation  agreement
with Dr. Murray S. Cohen, PhD,  Chairman of the Board,  wherein $25,000 per year
was accrued.  This agreement,  with unfunded accruals of $79,041,  terminated on
June 25, 1998.  Subsequent  to the year ended  February 28, 2010,  as of May 14,
2010,  the Board of  Directors  agreed to pay the balance due during the current
year.

                                       20

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE M - COMMITMENTS AND CONTINGENCIES (CONTINUED):
------

EMPLOYMENT  AGREEMENTS  -  Effective  March 1, 1999,  the Company  entered  into
ten-year employment agreements with officers/directors:

      Murray S. Cohen,  PhD, Chairman of the Board - To be paid an annual salary
of not less than the  greater of his annual  base  salary in effect  immediately
prior to the  effective  date of the agreement or any  subsequently  established
annual base salary.  Dr.  Cohen is to receive  2.00% on gross annual sales of no
more  than  $3,000,000,  effective  with  the  year  ended  February  28,  2000,
increasing  by 0.25% a year  during the term of the  agreement.  In the event of
partial  retirement,  (50%  employment),  Dr. Cohen will receive  fifty  percent
salary and 100% additional compensation. In the event of substantial retirement,
(25% employment),  Dr. Cohen will receive 25% percent salary and 100% additional
compensation.  In the event of full  retirement,  Dr.  Cohen  will  receive  50%
additional  compensation.  In the  event  of death or  disability,  while  fully
employed  during the fiscal  year,  Dr. Cohen or his estate will receive 100% of
his annual salary plus additional  compensation as described  above,  and 50% of
his annual salary plus  additional  compensation  each  subsequent  year for the
remainder of the ten-year  term. If at the time of death or disability Dr. Cohen
was  retired,  then  other  percentage  rates are  provided  for based  upon his
retirement status.

      James  Ivchenko,  President - To be paid an annual salary of not less than
the  greater  of his  annual  base  salary  in effect  immediately  prior to the
effective  date of the  agreement or any  subsequently  established  annual base
salary.  He is to receive 1.5% on gross annual sales of no more than $3,000,000,
effective  with the year ended  February  28, 2000,  increasing  by 0.25% a year
during the term of the agreement. In the event of death or disability during the
fiscal year,  Mr.  Ivchenko or his estate will receive 100% of his annual salary
plus additional  compensation as described  above,  and 50% of his annual salary
plus  additional  compensation  each  subsequent  year for the  remainder of the
ten-year term.

      Accrued compensation included in selling, general and administrative as of
February 28, 2009 was $240,000.

                                       21

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE N - FAIR VALUE MEASUREMENTS:
------

      Effective  March 1, 2008, the Company  adopted FAS 157, which defines fair
value as the  exchange  price  that  would be  received  for an asset or paid to
transfer a  liability  (an exit  price) in the  principal  or most  advantageous
market for the asset or  liability  in an  orderly  transaction  between  market
participants  at the measurement  date. FAS 157  establishes a three-level  fair
value  hierarchy that  prioritizes  the inputs used to measure fair value.  This
hierarchy  requires  entities  to  maximize  the use of  observable  inputs  and
minimize  the use of  unobservable  inputs.  The three  levels of inputs used to
measure fair value are as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than quoted prices included in Level 1, such
          as quoted prices for similar assets and liabilities in active markets;
          quoted prices for identical or similar assets and liabilities in
          markets that are not active; or other inputs that are observable or
          can be corroborated by observable market data.

Level 3 - Unobservable inputs that are supported by little or no market activity
          and that are significant to the fair value of the assets or
          liabilities. This includes certain pricing models, discounted cash
          flow methodologies and similar techniques that use significant
          unobservable inputs.

All  financial  assets that are measured at fair value on a recurring  basis (at
least annually) have been segregated into the most appropriate  level within the
fair value hierarchy based on the inputs used to determine the fair value at the
measurement  date.  These assets measured at fair value on a recurring basis are
summarized below:

                                   FEBRUARY 28, 2010        FEBRUARY 28, 2009
                                -----------------------   ---------------------
                                 CARRYING       FAIR       CARRYING     FAIR
                                  AMOUNT        VALUE       AMOUNT      VALUE
                                -----------   ---------   ---------   ---------
ASSETS:
-------
Cash and cash equivalents       $ 1,908,752   1,908,752   1,544,966   1,544,966
Other assets:
   Cash value - life insurance      188,641     188,641     213,452     213,452
                                -----------   ---------   ---------   ---------

Total assets at fair value      $ 2,097,393   2,097,393   1,758,418   1,758,418
                                ===========   =========   =========   =========
LIABILITIES:
------------
Deferred compensation           $   195,082     195,082     221,388     221,388
                                ===========   =========   =========   =========

                                       22

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE N - DIVIDENDS:
------

      In July 2008, the Company's Board of Directors declared a cash dividend of
$0.04 per share on all common shares outstanding. The dividend, in the amount of
$478,654  was paid on August 7, 2008 to  shareholders  of record at the close of
business on July 24, 2008.

      In April 2008, the Company's  Board of Directors  declared a cash dividend
of $0.02 per share on all common shares outstanding. The dividend, in the amount
of $239,327 was paid on May 14, 2008 to  shareholders  of record at the close of
business on April 30, 2008.

NOTE O - ENVIRONMENTAL MATTERS
------

      The Company's past and present daily operations include activities,  which
are  subject  to  extensive   federal,   and  state   environmental  and  safety
regulations. Compliance with these regulations has not had, nor does the Company
expect such  compliance  to have,  any  material  effect upon  expected  capital
expenditures,  net income,  financial condition,  or competitive position of the
Company.  The Company believes that its current  practices and procedures comply
with applicable regulations. The Company's policy is to accrue environmental and
related costs of a non-capital  nature when it is both probable that a liability
has been  incurred  and that the amount  can be  reasonably  estimated.  No such
amounts have been accrued in these statements.

                                       23