SECURITIES AND EXCHANGE COMMISSION
                  Washington, DC  20549

                     FORM 10-KSB

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

        For the fiscal year ended FEBRUARY 28, 2001

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

              Commission file number 0-17741

                        EPOLIN, INC.
       (Name of Small Business Issuer in Its Charter)

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

358-364 Adams Street
Newark, New Jersey                                     07105
(Address of principal                             (Zip Code)
executive offices)

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

Securities registered under Section 12(b) of the Exchange Act:
                           None

Securities registered under Section 12(g) of the Exchange Act:
                  Common Stock (no par value)

Check whether the Issuer: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

                       Yes   X      No

Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B  not contained in this
form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB. [  ]

State Issuer's revenues for its most recent fiscal year:
                      $2,329,610

As of February 28, 2001, the aggregate market value of the
Common Stock held by non-affiliates of the Issuer (4,674,431
shares) was approximately $981,630.  The number of shares
outstanding of the Common Stock (no par value) of the Issuer as
of the close of business on February 28, 2001 was 11,339,355.

 Documents Incorporated by Reference:  None

<PAGE>
<PAGE>
                        PART I

Item 1.  Description of Business.

Introduction

     Epolin Inc. ("Epolin" or the "Company") is a
manufacturing and research and development company which was
incorporated in the State of New Jersey on May 8, 1984. The
Company is engaged in commercial production and sale of
specialty chemicals, especially certain dyes which management
believes are useful materials because they have the capability
to absorb near infrared radiation. Its principal offices are
located at 358-364 Adams Street, Newark, New Jersey 07105 and
its telephone number is (973) 465-9495.

     In April 1989, Epolin successfully completed an initial
public offering of its securities pursuant to a public offering
generating net proceeds of approximately $1,950,000.
Simultaneously, upon closing of the offering, Epolin acquired
100% of the stock of Accort Labs, Inc. ("Accort"), then an
affiliated entity.

     Commencing upon completion of the Company's public
offering through January 1990, the Company's efforts were
primarily devoted to the renovation and completion of its
17,000 square foot manufacturing  and office facility. The
principal product(s) that the Company developed were expanding
polymeric coatings. The Company has since curtailed this effort
due primarily to the high cost of the product and the lower
price commanded by similar products now sold into this maturing
market. The Company has more recently established itself as a
supplier of near  infrared dyes as well as other specialty
chemical products. It sells its dyes primarily to lens
manufacturers who serve as the suppliers to the laser
protection eyewear market as well as the welding market.

     Since completion of the Company's public offering, the
Company's revenues had been primarily generated through the
synthesis and sale of specialty organic chemical products.
Building upon this base, the Company singled out near infrared
dye technology as a most promising product line and has
emphasized the development, manufacture and sale of these dyes
to the optical industry.

     The Company's prior emphasis on the expanding monomer
technology has been significantly modified. The expanding
monomers failed to reach any significant level of sales and
sales growth because the price of UV coatings, a major
application for  the technology, had fallen dramatically and
the market could not sustain the higher pricing for the
Company's product. Research and development on expanding
monomer applications was therefore curtailed and the Company
became fully committed to specialty chemical manufacture
especially to near infrared dye development, manufacture and
sales. This part of the product line has proven to be a
successful one to pursue in that the sales of  these dyes have
averaged at a growth rate of approximately 15% to 20% per year
for the last five years. No assurance can be given that such
trend will continue. The Company believes that its future lies
with dye technology and is formulating long range plans to
exploit new applications for both the near infrared dyes as
well as other dyes. Paralleling the growth of the dye business,
the Company has maintained 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. A
discussion of this market is described in the first subsection
that follows. Thereafter the current market for dyes are
described as well as the newer  applications which will be the
basis for new markets for dyes.

     In July 1997, the Board of Directors of Epolin approved
a plan of merger (the "Plan") wherein Epolin's wholly-owned
subsidiary, Accort, would merge into Epolin.  The effective
date of the Plan was deemed to have occurred as of the
beginning of fiscal 1998.  The merger was approved by the State
of New

<PAGE>

Jersey as of December 30, 1998.  As a result, Accort's
assets, liabilities and stockholders' equity as of March 1,
1997 were transferred to Epolin.

     The Company's wholly-owned subsidiary, Epolin Holding
Corp. ("Epolin Holding"), was incorporated in the State of New
Jersey as a real estate holding company.  Prior to being
acquired by the Company in January 1998, it was owned and
controlled by Murray S. Cohen and James Ivchenko (officers and
directors of the Company).

     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.  The Company does not intend to update these forward-
looking statements.

Specialty Chemical Products

     Although the Company is heavily engaged in the
manufacture and sale of dyes,  specialty chemical manufacture
continues to constitute approximately 22% of its sales.  It is
currently working on the preparation and sale of a variety of
specialty chemical products on behalf of companies that sell
into the adhesives, plastics, aerospace,  pharmaceutical and
flavors and fragrance industries.  The Company's products
primarily serve as intermediates, additives and process aids
for complex chemical formulations. The Company markets its
products to other companies who are in need of low level
quantities of unique chemicals which provide specialized
functions and are necessary elements in complex chemical
mixtures manufactured by the Company's respective customers.
These products are produced on a low volume basis in chemical
production equipment ranging from 50 liter size flasks to two
hundred gallon reactors. The Company sustains this business
because its customers find it economically inefficient to
manufacture such low volume specialty chemicals for their own
use. Raw materials utilized in connection with the preparation
of specialty chemical products are either available from
chemical suppliers or made by the Company in its own
facilities.

     This segment of the Company's business is manufactured
on an individual basis to meet each customers respective needs.
Presently, the Company provides products used as components in
plastics, process aids, adhesives and coatings, flavors and
odorant mixtures, pharmaceutical and medical products and
aerospace materials.

     Although the specialty chemical business currently
commands approximately 22% of total sales, the Company does not
expect this segment of its business to grow. It has, instead,
made a strong research and development commitment to the growth
of the specialty dye business. This market is described in
segments in the following subsections.

Dyes for Laser Protection

     The Company has sold near infrared dyes since 1990 to
customers who manufacture and sell eyewear to protect personnel
from the harmful effects of laser light. In the first stages of
the Company's marketing efforts, the Company sold dyes that had
a special capability to absorb the emissions of the neodynium-
YAG laser. This laser was and is used by the military for range
finders carried by tanks. Following the Company's

<PAGE>

success in
selling dyes for military usage, new markets were developed
selling to manufacturers of safety eyewear for personnel who
worked with lasers or were exposed to very strong  sources of
infrared  radiation.

     The Company sells dyes into a market that requires the
use of absorptive dyes for face shields, helmets and goggles to
protect personnel from the harmful effects of radiation from
welding. Nationally prescribed specifications now state that
welding shields must absorb specific levels of the infrared
generated by the welding arc in order to protect personnel from
eye damage. The specifications have come about because a number
of studies had shown that excessive infrared  radiation can
cause the development of premature cataracts. Thus, for
different levels of  protection, a specific reduction of
ultraviolet, visible and infrared emissions are now required.
As a result, the Company now offers a line of dyes for welding
that  absorb the entire range of welding radiation.  Management
believes many welding customers and potential customers are
attracted to the Company's dyes because they had been tied to
dye suppliers who would only sell the dyes if the customer were
to purchase the suppliers resin or formulated resin. Freedom to
formulate any resin and do in plant injection molding of lenses
or shields, has significant cost implications for these
customers. The availability of the Company's dyes has allowed
the Company to gain new customers. The Company expects to see
this welding market grow in the future not only because of
increased sensitivity to the health effects of conventional
welding methods but also because of the increasing use of
lasers for welding. These instruments will require closer
monitoring for exposure of personnel to laser light but will
also require personnel peripheral to the welding operation to
be protected.

Dyes for Sun Protection

     There have been various reports that near infrared
radiation causes slow but long term damage to the eye leading
to premature cataracts.  Certain customers incorporate the
Company's dyes into premium sunglasses to sell at premium
pricing.  An additional value in sunglasses containing near
infrared dyes is that there is a noticeable heat reduction on
the eye which allows long term use in the sun.  Management
believes that this reduces problems associated with discomfort
due to perspiration around the eye.

Dyes for Filters

     A smaller but not well characterized market exists for
filters that block certain frequencies in the near infrared and
visible spectrum. Most of the inquiries come from instrument
makers who purchase glass filters containing rare earth oxides.
These filters are expensive and are subject to chipping,
shattering and other breakage. Management believes the use of a
clear plastic filter containing the Company's dyes would lower
cost and increase reliability. This high value added market is
under development.  No assurance can be given that the Company
will be able to successfully develop this market.

Dyes for Heat Shields

     It has been shown in experimental and theoretical
studies that a window containing near infrared dyes is capable
of reducing the internal heat load of a structure by 40 to 50
percent. This type of  application of infrared dyes is reported
in use for sun roofs of automobiles in Japan. The specific
advantage offered by near infrared dyes is heat reduction
coupled with good visible transparency. This allows high
visibility while, at the same time, effectively blocking the
frequencies responsible for transporting heat. Management
believes near infrared dyes can be effectively used in a wide
variety of applications  as heat shields.  The Company has set
its sights on this potential market by initiating research and
development studies leading to dyes or dye combinations that
can meet the tight requirements demanded by this market. Of
particular concern to the Company is the need for  long term
performance which, at a minimum, requires a working lifetime of
seven years exposure to  direct sunlight. By developing dyes of
greatly improved thermal and ultraviolet stability, the Company
believes it can meet the long term exposure requirements for
heat shields.  The

<PAGE>

Company further believes that of particular
importance is the ability of these new dyes to be used in the
manufacture of extruded engineering plastic products.  Known
near infrared dyes do not possess the thermal stability to
survive processing of large extruded structures.  The Company
believes that it can demonstrate that these new dyes offer a
degree of freedom in plastics processing and that this can
represent an important developing market.  No assurance can be
given, however, that the foregoing can be demonstrated, or if
demonstrated, that the Company will be able to successfully
develop this market.

Dyes for Security Inks

     Certain of the near infrared dyes absorb very little of
the visible spectrum. These can be used at low concentration in
inks and paints and not be visually detected. However, when
viewed by reflection of an infrared laser or lamp, the presence
of dye is easily seen as a black marking. Mechanical "readers"
can be used to detect the presence of dyes by responding with a
simple "go, no-go" signal. Management believes that the
industrial security and currency marking is  potentially a
large volume application for these dyes.  No assurance can be
given that the Company will be able to successfully develop
this market.

Dyes for Interlayer and Laminates

     One of the most abrasion resistant surfaces is that of
glass.  The Company has found that the interlayer used for
glass to glass laminates can incorporate dyes and bond to the
glass strongly.  These laminated glass structures can perform
like the plastic heat shields described above.  The Company
believes that such laminated glass structures have the added
advantage of abrasion resistance and in automotive
applications, are shatter-proof.  The Company is pursuing
markets for laminates as shatter-proof windshield and sun
roofs.  No assurance can be given that the Company will find a
successful developer in this market.

Effect of Compliance With Government Regulation

     Manufacturers of chemical products are subject to
extensive Federal and State environmental regulations. Although
the Company believes that its manufacturing processes do not
result in the emission of volatile organic vapors into the
atmosphere, and that the Company is not  in violation of any
State or Federal environmental regulations, the Company is
required to comply with such regulations with respect to
manufacture, storage and/or disposal of toxic materials. To the
Company's knowledge, it is 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 the Company's business. In addition, the Company is
subject to the State of New Jersey Industrial Site Recovery Act
(ISRA), which, among other requirements, requires the Company
to obtain prior approval before relocating its facilities or
consummating a transaction that would result in a change in
control of the Company. The Company's facilities are subject to
inspection to ascertain whether the Company has complied with
State environmental regulations.  While the Company believes it
has complied with such regulations, there can be no assurance
that the Company will not be required to incur expenses to
remedy any future environmental violations discovered. The
Company is in the process of registering certain new and
proprietary products with the Toxic Substances Control Agency
(TSCA) which is required in order for the Company to offer for
sale any new chemical product.  No assurances can be given that
such registrations will be approved.

Research and Development

     The Company has made a commitment of resources to
research and development for new dyes and for improvement of
the Company's capability to provide technical services to its
dye customers. In this regard, the Company has undertaken a dye
synthesis effort to develop and produce dyes with greatly
improved thermal stability.  These dyes are now a part of the
Company's product line and sales have started

<PAGE>

to grow.  There
is available to the Company the plastic processing equipment
similar to that used by the Company's customers to extrude and
injection mold plastic-dye formulations. Management expects
that this will allow the Company to better understand its
customer's problems and to design solutions.

Competition

     The Company generally experiences, in management's
opinion, limited competition in all areas of its business from
some companies many of which are larger and better financed.
At the present time, however, the Company believes that it has
a  unique position as a supplier of near infrared dyes.
Management believes that the only other suppliers of these dyes
use them as a vehicle to sell other products.  Management
believes that these companies will only sell the dye to
purchasers of their resins or to those who buy their formulated
resin or their finished lenses. Such companies do not sell the
pure dye which is done by the Company. Insofar as the major
profit incentive comes from the manufacture and sale of
finished product, Management believes those companies that have
the capability to formulate dyes in resin and injection mold
the formulated resin, have a strong incentive to purchase the
dye without any other requirements.  However, in the future,
other dye manufacturers may change their policy and sell dye
directly.  This will present the Company with a challenge to
its pricing structure. However, because of the Company's low
overhead, it is believed that such a challenge can be met
successfully.

     The Company has also invested resources in improved
processes for the manufacture of dyes so that the Company can
consider itself a low cost producer. The research and
development program has introduced a new family of near
infrared dyes that show a marked improvement in thermal and
light stability over existing dyes. The Company believes that
this new family of dyes will allow it to maintain a strong
position as a dye supplier for laser safety and welding
optical wear.

Technological Obsolescence

     The chemical and plastics industry is characterized by
rapid technological changes. Although the near infrared dyes
that form the major portion of the Company's product line have
been used in protective eyewear since 1976, the field has
proven to be an active one for other applications and the
Company must anticipate competition to develop.  To remain
competitive, the Company has committed itself to make capital
investments to maintain its position as a key dye supplier in
this field. There can be no assurance that the Company's dye
technology will not be rendered less competitive, or obsolete,
by the development by others of new methods to achieve laser
safety and other forms of eye protection.  Furthermore, to
remain competitive, the Company may be required to make large,
ongoing capital investments to develop and produce dyes at
competitive prices. There is no assurance that can be given
that the funds for such investments will be available to the
Company.

Patents and Proprietary Protection

     The Company does not rely upon patents for protection of
its dye business. It has, however, anticipated the need for
such proprietary protection and has acted by applying for
patents on a class of new dyes that it has developed.  In
connection therewith, a patent was recently granted by the U.S.
Patent Office (U.S. Patent 5,686,639) for a new class of
quinone diimmonium salts in November 1997.  Other patent
disclosures have been submitted and the Company intends to
prepare appropriate applications as it deems necessary in the
future.  No assurance can be given that other patents with
regard to the foregoing will be issued. The Company has allowed
its patent position on two patents it owns on Expanding
Monomers to lapse by not paying the maintenance fees. This will
have no material impact on the Company's business since the
Company decided previously to curtail the development of this
technology.  The Company intends to continue an intensive
patent program on new dyes, especially in those instances where
composition of matter

<PAGE>

claims can be obtained. There can be no
assurance that these patents will be of commercial benefit to
the Company, or otherwise offer the Company protection from
competing products. Although the issuance of a patent entitles
the owner to a statutory presumption of validity, the
presumption is not conclusive as to validity or the scope of
enforceability  of the claims therein. The enforceability and
validity of a patent can be challenged by litigation after its
issuance and, if the outcome of litigation is adverse to the
owner of the patent, other parties may be free to use the
subject  matter covered by the patent. Moreover, the cost of
defending these patents against infringement could require
substantial expenditures which the Company may decide it is
unable to afford. In addition, persons or entities may have
filed patent applications and may have been issued patents on
inventions or otherwise possess proprietary rights to
technologies potentially useful to the Company. There can be no
assurance that others may not independently develop the same,
similar or alternative technologies or otherwise obtain access
to the Company's proprietary technologies.

Sales

     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 year
ended February 28, 2001, approximately 52.4% of sales were to
four customers.  Three of these customers, located in the
Eastern United States, comprised 43.8% of sales at February 28,
2001. During the year ended February 29, 2000, approximately
46.9% of sales were to four customers. Three of these
customers, located in the Eastern United States, comprised
35.1% of sales at February 29, 2000.

Employees

     The Company presently employees six persons, all on a
full time basis.  The Company's employees are not represented
by labor unions.

Item 2.  Description of Property.

     The Company presently occupies approximately 19,500
square feet of manufacturing, warehouse and administrative
space in Newark, New Jersey which property the Company has
occupied since June 1989.  Prior to October 1996, the Company
occupied approximately 17,000 square feet of such space.
During fiscal 1996, Management decided to explore the
possibility of purchasing said property from its then owner, a
non-affiliated entity which purchase would include such
additional space of approximately 2,500 square feet.  In order
to finance the purchase, the Company was advised by its
proposed lender that the members of the Company's Board of
Directors would be required to guarantee the repayment of any
financing.  At a meeting of the Board of Directors held in June
1996, only Murray S. Cohen and James Ivchenko, each an officer
and director of the Company, agreed to participate in any such
arrangement.  It was agreed that Dr. Cohen and Mr. Ivchenko, or
an entity to be formed by them, would purchase the property and
lease the property to the Company under a long term
arrangement.  As a result, Dr. Cohen and Mr. Ivchenko entered
into an agreement to purchase the property for the sum of
$450,000, which agreement was prior to closing assigned to
Epolin Holding Corp. ("Epolin Holding") a company formed by Dr.
Cohen and Mr. Ivchenko to acquire the property. Such purchase
was completed in October 1996.  Simultaneously with the
closing, the Company entered into substantially similar leasing
arrangements with Epolin Holding as then existed with the
former owner of the property.  Such new lease expires in
October 2001 (with three 5 year options) with annual rent of
$97,740 subject to annual adjustments based on increases in the
Consumer Price Index.   Such  rent  includes  real estate taxes
and insurance expenses.  In January 1998, Epolin Holding became
a wholly-owned subsidiary of Epolin.

<PAGE>


Item 3.  Legal Proceedings.

     In August 2000, the Company received a letter from a law
firm representing a former officer of the Company (who is also
a current director) alleging age discrimination and other
monetary claims pertaining to such former officer's past
employment.  In addition, in September 2000, the Company
received a letter from the same law firm on behalf of another
director (who was then an employee of the Company) alleging
similar claims.  In December 2000, these individuals instituted
suit in the Superior Court of New Jersey, Bergen County-Law
Division, against the Company and the other directors of the
Company alleging claims pursuant to their past employment as
well as a derivative claim, as minority stockholders.  The
Company believes such claims are without merit and intends to
defend such matter vigorously.  Nevertheless, while the outcome
of this action cannot be predicted at this time, taking into
account the uncertainty and risks inherent in any litigation,
management does not anticipate that the ultimate disposition
will have a material adverse effect on the Company.  Other than
the foregoing matter, there are no other material pending legal
proceedings to which the Company is a party or to which any of
its property is subject.

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

     No matter was submitted during the fourth quarter of the
fiscal year covered by this report to a vote of security
holders.


                  PART II

Item 5.  Market for Common Equity and Related Stockholder
         Matters.

     (a)  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 bid quotations 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.

Period                                     Bid Prices

Fiscal year ended February 29, 2000:    High           Low

March 1, 1999 to May 31, 1999           $.24           $.19
June 1, 1999 to Aug. 31, 1999           $.31           $.19
Sept. 1, 1999 to Nov. 30, 1999          $.31           $.23
Dec. 1, 1999 to Feb. 29, 2000           $.8125         $.24

Fiscal year ended February 28, 2001:    High           Low

March 1, 2000 to May 31, 2000           $.8125         $.3125
June 1, 2000 to Aug. 31, 2000           $.40           $.25
Sept. 1, 2000 to Nov. 30, 2000          $.44           $.29
Dec. 1, 2000 to Feb. 28, 2001           $.30           $.15

<PAGE>

     (b)  Holders.

     As of February 28, 2001 there were approximately 300
record holders of the Company's Common Stock.

     (c)  Dividends.

     The Company has never declared any cash dividends on its
Common Stock.  The Company expects to pay a dividend on its
Common Stock in fiscal 2002.

Item 6.  Management's Discussion and Analysis or Plan of
         Operation.

     The following discussion of the Company's financial
condition and results of operations is based on the Company's
Consolidated Financial Statements and the related notes
thereto.

Overview

     Epolin, Inc. is a manufacturing and research and
development company which was incorporated  in the State of New
Jersey in May 1984.   The Company is principally  engaged in
the development, production and sale of near infrared dyes to
the optical industry for laser protection and for welding
applications and other dyes, specialty chemical products that
serve as intermediates and additives used in the adhesive,
plastic, aerospace, pharmaceutical, flavors and fragrance
industries to a group of customers located in  in the United
States and throughout the world.

Results of Operations

     Fiscal 2001 Compared to Fiscal 2000

     During the year ended February 28, 2001, the Company
reported sales of approximately $2,330,000 as compared to sales
of approximately $1,927,000, an increase of approximately
$403,000 or 20.9%.  This increase in sales was primarily
attributable to an increase in sales of the Company's near
infrared absorbing dyes, and increases in sales of new dyes for
new applications.

     Operating income for fiscal 2001 increased to
approximately $916,000 as compared to operating income of
approximately $680,000 for fiscal 2000, an increase of
approximately $236,000.  This change resulted primarily from an
increase in sales as well as decreases in selling, general and
administrative expenses.  Cost of sales in fiscal 2001 was
approximately $699,000 compared to cost of sales in fiscal 2000
of approximately $501,000.  In fiscal 2001, the Company's
selling, general and administrative expenses were approximately
$714,000 as compared to selling, general and administrative
expenses of approximately $746,000 for the fiscal year ended
February 29, 2000.

     During the fiscal year ended February 28, 2001, the
Company realized approximately $74,000 in interest income as
compared to approximately $50,000 in interest income for the
prior year.  This increase resulted primarily from increases in
available cash in fiscal 2001.

     During the fiscal year ended February 28, 2001, the
Company reported income before taxes of approximately $990,000
as compared to income before taxes of approximately $730,000
for the fiscal year ended February 29, 2000.  Net income after
taxes was approximately $835,000 or $.07 per share for fiscal
2001 as compared to net income after taxes of approximately
$380,000 or $.03 per share for fiscal 2000.

<PAGE>

     Fiscal 2000 Compared to Fiscal 1999

     During the year ended February 29, 2000, the Company
reported sales of approximately $1,927,000 as compared to sales
of approximately $1,681,000 during the year ended February 28,
1999, an increase of approximately $246,000 or 14.6%.  This
increase in sales was primarily attributable to an increase in
sales of the Company's near infrared absorbing dyes, and
increases in sales of new dyes for new applications.

     Operating income for fiscal 2000 increased to
approximately $680,000 as compared to operating income of
approximately $280,000 for fiscal 1999, an increase of
approximately $400,000.  This change resulted primarily from an
increase in sales as well as decreases in cost of sales and
decreases in selling, general and administrative expenses.
Cost of sales in fiscal 2000 was approximately $501,000
compared to cost of sales in fiscal 1999 of approximately
$671,000.  In fiscal 2000, the Company's selling, general and
administrative expenses were approximately $746,000 as compared
to selling, general and administrative expenses of
approximately $731,000 for the fiscal year ended February 28,
1999.

     During the fiscal year ended February 29, 2000, the
Company realized approximately $50,000 in interest income as
compared to approximately $27,000 in interest income for the
prior year.  This increase resulted primarily from increases in
available cash in fiscal 2000.

     During the fiscal year ended February 29, 2000, the
Company reported income before taxes of approximately $730,000
as compared to income before taxes of approximately $307,000
for the fiscal year ended February 28, 1999.  Net income after
taxes was approximately $380,000 or $.03 per share for fiscal
2000 as compared to net income after taxes of approximately
$148,000 or $.01 per share for fiscal 1999.

Liquidity and Capital Resources

     On February 28, 2001, the Company had working capital of
approximately $2,357,000, an equity to debt ratio of
approximately 5.80 to 1, and stockholders' equity of
approximately $2,835,000.  On February 28, 2001, the Company
had approximately $1,690,000 in cash and cash equivalents,
total assets of approximately $3,324,000 and total liabilities
of approximately $488,000.   The Company believes that its
available cash, cash flow from operations and projected
revenues will be sufficient to fund the Company's operations
for more than the next 12 months.

     The Company does not anticipate making any significant
additional capital expenditures in the immediate future as it
believes its present machinery and equipment will be sufficient
to meet its near term needs.

     Inflation has not significantly impacted the Company's
operations.

Other Information

     In March 1998, the Board of Directors of the Company
authorized a stock repurchase program of up to $150,000 of the
Company's outstanding shares of Common Stock. In connection
therewith, the Company announced that purchases may be made in
the open market or in privately negotiated transactions from
time to time, based on market prices and that the repurchase
program may be suspended without further notice. Management
believes the Company's shares are undervalued at current price
levels and this program offers the Company a chance not only to
repurchase some of its stock at prices management perceives to
be attractive but it also enables the Company to enhance
shareholder value although no assurance can be given that any
such repurchases will have such effect.  A total of 574,700
shares have been repurchased under this program through
February 28, 2001 at a cumulative cost of $148,641, which
includes 104,000 shares

<PAGE>

repurchased during the fiscal year
ended February 28, 2001 at a cost of $33,135.

Item 7.  Financial Statements.

     See the Consolidated Financial Statements annexed to
this report.

Item 8. Changes in and Disagreements with Accountants
      on Accounting and Financial Disclosure.

     None.

                  PART III

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

     Set forth below are the present directors and executive
officers of the Company.  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     75   Chairman of the        1984
                         Board, Chief Executive
                         Officer, Secretary
                         and Director

James Ivchenko      61   President and Director 1993

Claire Bluestein    75   Director               1984

Morris Dunkel       73   Director               1984

Chester C. Swasey   57   Director               1994

Abdelhamid
  A.H. Ramadan      61   Director               1994

     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, Chief Executive
Officer and Chairman of the Board of the Company since June
1984 and Secretary since March 2001.  From June 1984 to August
1994, Dr. Cohen was also President.  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

<PAGE>

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 Administrations from Fairleigh Dickinson
University in New Jersey.

     CLAIRE BLUESTEIN has served as Director of the Company
since June 1984.  Since 1976, Dr. Bluestein has been president
and sole shareholder of Captan Associates, Inc., a company
engaged in the development of materials for commercial
applications of radiation curing technology.  Dr. Bluestein has
been issued several patents by the United States Department of
Commerce, Trademark and Patent Offices and has published a
variety of chemistry related articles.  Dr. Bluestein received
her Bachelor of Arts Degree from the University of Pennsylvania
in 1947.  In 1948 she received a Master of Science Degree and
in 1950 a Ph.D. in Organic Chemistry from the University of
Illinois.

     MORRIS DUNKEL has served as Director of the Company
since June 1984.  From 1976 through 1983, Dr. Dunkel was
employed by Tenneco Chemicals, Inc., a firm engaged in chemical
production activities, in the capacities of manager and
director of Tenneco's organic chemicals research and
development division.  Dr. Dunkel has been issued several
United States patents and has published numerous articles
relating to chemical processes.  He received a Bachelor of
Science Degree in 1950 from Long Island University.  Dr. Dunkel
received a Master of Science Degree from Brooklyn College in
1954 and Ph.D. in Organic Chemistry from the University of
Arkansas in 1956.

     CHESTER C. SWASEY has served as Director of the Company
since 1994.  From August 1994 to August 2000, he was Vice
President of Sales and Marketing.  He is no longer employed by
the Company.  From 1992 to 1994, Mr. Swasey was employed as a
Director of Marketing at Fairmount Chemical Company.  From 1989
to 1992, he was employed as Manager of New Business Development
at Union Carbide Corporation. Mr. Swasey has received several
United States patents and has published a variety of technical
papers related to the performance of plastics additives.  Mr.
Swasey received a Bachelor of Science degree in Chemistry from
the City College of New York in 1965, and a Master of Business
Administration degree from Fairleigh Dickinson University in
1973.

     ABDELHAMID A.H. RAMADAN has been a Director of the
Company since July 1994.  From November 1993 to December 2000,
he was Manager for Research, Process Development and Quality
Assurance of the Company.  He is no longer employed by the
Company.  From March 1992 through October 1993, he served as
production manager at Celgene Corp., and from 1989 through
February 1992, he served as Senior Chemist and Chemical Hygiene
Officer of the Company.  From 1982 through 1988, Mr. Ramadan
served as Production Department Head at Tenneco Chemicals.  Mr.
Ramadan received a Bachelor of Science Degree in Chemistry in
1963 from Ain Shams University - Cairo - Egypt.

<PAGE>

Item 10.  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, 2001, February 29, 2000 and February
28, 1999, of those persons who were, at February 28, 2001 (i)
the chief executive officer and (ii) the other most highly
compensated executive officers of the Company, whose annual
base salary and bonus compensation was in excess of $100,000
(the named executive officers):

               Summary Compensation Table
                               Annual
                               Compensation

Name and Principal     Fiscal
Position               Year        Salary         Bonus

Murray S. Cohen       2001         $177,290(1)(3) $29,000
Chairman of the       2000         $127,874(3)    $20,000
Board and Chief       1999         $111,538(3)    $20,000
Executive Officer

James Ivchenko        2001         $162,318(2)(3) $24,000
President             2000         $123,502(3)    $15,000
                      1999         $106,538(3)    $15,000


                         Long-Term
                         Compensation

                                Restricted     Shares
Name and Principal  Fiscal      Stock          Underlying
Position            Year        Awards         Options

Murray S. Cohen       2001         0            0
Chairman of the       2000         0            0
Board and Chief       1999         0            75,000
Executive Officer

James Ivchenko        2001         0            0
President             2000         0            0
                      1999         0            75,000


     (1)  Includes $38,400 of additional compensation due to
     Murray S. Cohen based upon the Company's sales for
     fiscal 2000 paid in fiscal 2001 as determined under his
     employment contract.  Does not include, however,
     additional compensation due to Dr. Cohen based upon the
     Company's sales for fiscal 2001 as determined under his
     employment contract which will be paid in fiscal 2002
     which will be in the amount of $52,416.  Also, does not
     include $49,948 paid to Dr. Cohen in fiscal 2001 for
     previously accrued salary.

     (2)  Includes $28,905 of additional compensation due to James
     Ivchenko based upon the Company's sales for fiscal 2000
     paid in fiscal 2001 as determined under his employment
     contract.  Does not include, however, additional
     compensation due to Mr. Ivchenko based upon the
     Company's sales for fiscal 2001 as determined under his
     employment contract which will be paid in fiscal 2002
     which will be in the amount of $40,768.

     (3)  Does not include any deferred compensation arrangements
     for each of Dr. Cohen and Mr. Ivchenko.  See "Deferred
     Compensation/Employment Contracts" below.

Stock Option Plans

     The Company previously adopted the 1986 Employees' Stock
Option Plan (the "1986 Plan").  As of April 1996, options may
no longer be granted under the 1986 Plan.  Under the terms of
the 1986 Plan, options granted thereunder could be designated
as options which qualify for incentive stock option treatment
under Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code"), or options which do

<PAGE>

not so qualify.  In
December 1995, options to acquire up to 490,000 shares of the
Company's Common Stock were granted under the 1986 Plan.  Such
options expire on December 1, 2005.  To date, options to
acquire 270,000 shares of the Company's Common Stock have been
exercised under the 1986 Plan.    The Company has repurchased
120,000 of such shares which were acquired upon exercise.

     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.  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.  As of
February 28, 2001, options to acquire 475,000 shares of the
Company's Common Stock have been granted under the 1998 Plan
and 275,000 options were available for future grant.  To date,
options to acquire 12,500  shares of the Company's Common Stock
have been exercised under the 1998 Plan.    The Company has
repurchased all of such shares which were acquired upon
exercise.

     No stock options or other stock appreciation rights were
granted to any of  the persons named in the Summary
Compensation Table during the fiscal year ended February 28,
2001.

     The following table set forth certain information as to
each exercise of stock options during the year ended February
28, 2001, by the persons named in the Summary Compensation
Table and the fiscal year-end value of unexercised options:

Aggregated Option Exercises in Fiscal 2001
and Year-End Option Value

                                    Number of Securities
                 Shares             Underlying Unexercised
                 Acquired           Options at February 28, 2001
                 On        Value
                 Exercise  Realized Exercisable Unexercisable

Murray S. Cohen    -0-      -0-     150,000      0
James Ivchenko     -0-      -0-     150,000      0


                             Value of Unexercised
                             In-the-Money Options
                             at February 28, 2001(1)

                            Exercisable    Unexercisable

Murray S. Cohen               $17,250        $0
James Ivchenko                $17,250        $0
________________________

     (1)  Realizable values are reported net of the option
     exercise price but before any income taxes that the
     executive may have to pay.  Actual gains, if any, on
     stock option exercises are dependent on the future
     performance of the Common Stock as well as the option
     holder's continued employment through the vesting
     period.  The amounts reflected in this table may never
     be obtained.

Compensation of Directors

     Since inception, no director has received any cash
compensation for his services as such. In the past, directors
have been and will continue to be reimbursed for reasonable
expenses incurred on behalf of the Company.

Deferred Compensation/Employment Contracts

     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
obligation is being funded with a life insurance policy owned
by the Company.

<PAGE>

     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 had received
(if not for his death or disability) for the remainder of the
ten year term.

     Effective as of March 1, 1999, the Company also entered
into a  ten year employment agreement with Murray S. Cohen,
Chairman of the Board and Chief Executive Officer 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.  In the event of
death or disability, the agreement 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 had
received (if not for his death or disability) for the remainder
of the ten year term. 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, Dr. Cohen will be entitled to
receive $79,041 upon his retirement in connection with a
deferred compensation agreement entered into in January 1996
which was terminated in June 1998.  Such amount will 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.

     The Company has also entered into deferred compensation
agreements with Chester C. Swasey and Abdelhamid A.H. Ramadan.
These agreements provide for annual payments of 50% of each
employee's salary before bonuses at his respective retirement
dates, to be paid in biweekly installments for 10 years.
Management  has elected not to provide any additional funding
for either employee subsequent to the date at which each of the
two employees were no longer employed with the Company.

Item 11.  Security Ownership of Certain Beneficial Owners and
          Management.

     The following table sets forth, as February 28, 2001,
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 individually, (iii) all
officers and directors of the Company as a group:

<PAGE>

                        Amount and Nature of    Percent
Name                    Beneficial Ownership    of Class
Murray S. Cohen(1)(2)*     2,845,958            24.8%
James Ivchenko(1)*         1,719,587            15.0%
Chester C. Swasey(3)*        930,822             8.2%
Claire Bluestein(4)*         970,155             8.5%
Morris Dunkel(4)*            225,000             2.0%
Abdelhamid R.H. Ramadan(3)*  398,402             3.5%
All Officers and Directors
as a Group (6 persons)     7,089,924            62.0%

     * Indicates a Director of the Company.  The address for
     each is 358-364 Adams Street, Newark, New Jersey 07105.

     (1)  Includes 150,000 shares which each has the right to
     acquire within 60 days pursuant to the exercise of stock
     options granted under the Company's Stock Option Plans.
     Subsequent to the end of fiscal 2001, each of Dr. Cohen
     and Mr. Ivchenko acquired 75,000 shares upon exercise of
     certain stock options.

     (2)  Includes 1,000,000 shares owned by three grandchildren
     of Dr. Cohen, which shares are held by Dr. Cohen's
     daughters as custodian.  Dr. Cohen holds a proxy with
     respect to such shares which proxy expires in August
     2002.  As a result, Dr. Cohen may be deemed to be the
     beneficial owner of such shares.

     (3)  Includes 75,000 shares which each has the right to
     acquire within 60 days pursuant to the exercise of stock
     options granted under the 1998 Plan.

     (4)  Includes 25,000 shares which each has the right to
     acquire within 60 days pursuant to the exercise of stock
     options granted under the 1998 Plan.

Item 12.  Certain Relationships and Related Transactions.

     None.

Item 13.  Exhibits and Reports on Form 8-K.

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

     (b)  Reports on Form 8-K.

     Listed below are reports on Form 8-K filed during the
last quarter of the period covered by this report:

     None.

<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,
                         Chief Executive Officer

                    Dated:  May 4, 2001

    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/ Murray S. Cohen     Chief Executive Officer,        5/4/01
Murray S. Cohen         Chairman of the Board,
                        Secretary and Director
                        (Principal Executive Officer and
                        Principal Financial Officer)


/s/ James Ivchenko      President and Director          5/4/01
James Ivchenko


/s/ Claire Bluestein    Director                        5/1/01
Claire Bluestein


/s/ Morris Dunkel       Director                        5/3/01
Morris Dunkel


Chester C. Swasey       Director



Abdelhamid A.H. Ramadan Director

<PAGE>




                           EPOLIN, INC. AND SUBSIDIARY

                              FINANCIAL STATEMENTS

                          YEARS ENDED FEBRUARY 28, 2001
                              AND FEBRUARY 29, 2000

<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 - 7

Notes to Consolidated Financial Statements                            8 - 16

<PAGE>

                          INDEPENDENT AUDITOR'S REPORT




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 its wholly owned Subsidiary as of February 28, 2001 and February 29,
2000 and the related Consolidated Statements of Income, Stockholders' Equity and
Cash Flows for the years ended February 28, 2001, February 29, 2000 and February
28, 1999. 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 audit.

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

         In our opinion, the Consolidated Financial Statements referred to above
present fairly, in all material respects, the financial position of Epolin Inc.
and Subsidiary as of February 28, 2001 and February 29, 2000 and the results of
its operations and cash flows for the years ended February 28, 2001, February
29, 2000 and February 28, 1999 in conformity with generally accepted accounting
principles.



                                          POLAKOFF WEISMANN LEEN LLC
April 11, 2001

                                       F-1

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

                                                       February 28, February 29,
                                                          2001         2000
                                                       -----------  -----------
CURRENT ASSETS:
  Cash and cash equivalents                            $ 1,690,455    1,182,937
  Accounts receivable                                      306,283      288,836
  Inventories                                              501,592      475,215
  Prepaid expenses                                          29,123       30,999
  Employee loans                                                --        4,769
  Deferred tax assets-current portion                        8,328      113,577
                                                       -----------  -----------

         Total current assets                            2,535,781    2,096,333
                                                       -----------  -----------

PLANT, PROPERTY AND EQUIPMENT - AT COST:
  Land                                                      81,000       81,000
  Building                                                 369,000      369,000
  Machinery and equipment                                  228,837      213,606
  Furniture and fixtures                                    11,407       11,407
  Leasehold improvements                                   432,037      432,037
                                                       -----------  -----------

         Total                                           1,122,281    1,107,050

    Less:  Accumulated depreciation and amortization       673,014      648,937
                                                       -----------  -----------

         Net plant, property and equipment                 449,267      458,113
                                                       -----------  -----------

OTHER ASSETS:
  Deferred tax assets-non current portion                  232,450       33,975
  Cash value - life insurance policy                       106,051       80,579
                                                       -----------  -----------

         Total other assets                                338,501      114,554
                                                       -----------  -----------

         Total                                         $ 3,323,549    2,669,000
                                                       ===========  ===========


         The accompanying notes are an integral part of these statements.

                                       F-2
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                      LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>

                                                            February 28,  February 29,
                                                                2001          2000
                                                            -----------   -----------
<S>                                                         <C>           <C>
CURRENT LIABILITIES:
  Accounts payable                                          $    10,193        17,330
  Accrued expenses                                              134,158       162,084
  Taxes payable:
     Payroll                                                      3,725         1,310
     Income                                                      30,700       221,619
                                                            -----------   -----------

     Total current liabilities                                  178,776       402,343
                                                            -----------   -----------

OTHER LIABILITIES:
  Deferred compensation                                         299,401       229,196
  Loans payable-officers                                         10,319        10,319
                                                            -----------   -----------

     Total other  liabilities                                   309,720       239,515
                                                            -----------   -----------

         Total liabilities                                      488,496       641,858
                                                            -----------   -----------

STOCKHOLDERS' EQUITY:
    Preferred stock, $15.513 par value; 940,000
      shares authorized; none issued
    Perferred 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; 11,956,500 and 11,806,500 shares issued
      and outstanding at 2001 and 2000, respectively          2,229,658     2,220,384
    Paid-in capital                                               6,486         6,486
    Retained earnings (deficit)                                 754,225       (80,822)
                                                            -----------   -----------

        Total                                                 2,990,369     2,146,048
    Less: Treasury stock-at cost                                155,316       118,906
                                                            -----------   -----------

     Total stockholders' equity                               2,835,053     2,027,142
                                                            -----------   -----------

        Total                                               $ 3,323,549     2,669,000
                                                            ===========   ===========
</TABLE>

         The accompanying notes are an integral part of these statements.

                                       F-3
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME

     YEARS ENDED FEBRUARY 28, 2001, FEBRUARY 29, 2000, AND FEBRUARY 28, 1999

<TABLE>
<CAPTION>

                                                2001          2000          1999
                                            -----------   -----------   -----------
<S>                                         <C>           <C>           <C>
SALES                                       $ 2,329,610     1,926,992     1,681,243
                                            -----------   -----------   -----------

COST OF SALES AND EXPENSES:
   Cost of sales                                699,386       501,437       670,793
   Selling, general and administrative          714,335       745,743       730,816
                                            -----------   -----------   -----------

         Total                                1,413,721     1,247,180     1,401,609
                                            -----------   -----------   -----------

OPERATING INCOME                                915,889       679,812       279,634
                                            -----------   -----------   -----------


OTHER INCOME - INTEREST                          73,968        50,080        27,304
                                            -----------   -----------   -----------

INCOME BEFORE TAXES                             989,857       729,892       306,938

INCOME TAXES                                    154,810       350,334       159,010
                                            -----------   -----------   -----------

NET INCOME                                  $   835,047       379,558       147,928
                                            ===========   ===========   ===========


PER SHARE DATA:
  Basic earnings per common share                  0.07          0.03          0.01
                                            ===========   ===========   ===========

  Fully diluted earnings per common share          0.07          0.03          0.01
                                            ===========   ===========   ===========

  Weighted average number of
     common shares outstanding               11,341,466    11,284,591    11,597,048
                                            ===========   ===========   ===========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       F-4
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                    Additional    Retained
                                         Common      Paid-in-     Earnings      Treasury    Stockholders'
                                         Stock       Capital      Deficit        Costs         Equity
                                       ----------   ----------   ----------    ----------    ----------
<S>                                    <C>          <C>          <C>           <C>           <C>
Balance - March 1, 1998                $2,216,984        6,486     (608,308)           --     1,615,162

Common stock issued for stock option        3,400           --           --            --         3,400

Net income                                     --           --      147,928            --       147,928

Less cost of treasury stock                    --           --           --       (34,084)      (34,084)
                                       ----------   ----------   ----------    ----------    ----------

Balance - February 28, 1999             2,220,384        6,486     (460,380)      (34,084)    1,732,406

Net income                                     --           --      379,558            --       379,558

Less cost of treasury stock                    --           --           --       (84,822)      (84,822)
                                       ----------   ----------   ----------    ----------    ----------

Balance - February 29, 2000             2,220,384        6,486      (80,822)     (118,906)    2,027,142

Common stock issued for stock option        9,274           --           --            --         9,274

Net income                                     --           --      835,047            --       835,047

Less cost of treasury stock                    --           --           --       (36,410)      (36,410)
                                       ----------   ----------   ----------    ----------    ----------

Balance - February 28, 2001            $2,229,658        6,486      754,225      (155,316)    2,835,053
                                       ==========   ==========   ==========    ==========    ==========
</TABLE>

         The accompanying notes are an integral part of these statements

                                       F-5
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

     YEARS ENDED FEBRUARY 28, 2001, FEBRUARY 29, 2000 AND FEBRUARY 28, 1999

<TABLE>
<CAPTION>

                                                       2001         2000         1999
                                                    ---------    ---------    ---------
<S>                                                 <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                        $ 835,047      379,558      147,928
  Adjustments to reconcile net income
    to net cash provided by operating
    activities:
      Depreciation and amortization                    24,077       17,423       62,113
      Deferred tax expense                            (93,226)       8,555       42,817
      Obligation under deferred compensation
        agreement                                      70,205       84,432       50,964
(Increase) decrease in:
     Accounts receivable                              (17,447)      42,078     (115,938)
     Inventories                                      (26,377)    (195,591)     102,652
     Employee loans                                     4,769        5,593       (4,496)
     Prepaid expenses:
     Income taxes                                          --       22,504       10,295
  Other                                                 1,876      (14,052)       6,809
 Security deposits                                         --           --       12,635
Increase (decrease) in:
     Accounts payable                                  (7,137)     (26,074)       3,019
     Accrued expenses                                 (27,926)     111,057       (4,516)
     Taxes payable:
           Payroll                                      2,415           --         (353)
           Income                                    (190,919)     188,384       33,235
                                                    ---------    ---------    ---------

        Net cash provided by operating activities     575,357      623,867      347,164
                                                    ---------    ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Loans payable - officers                                   --           --       10,319
Increase in cash value - life insurance policy        (25,472)     (18,021)     (19,881)
Assets from acquisition of subsidiary -
net of accumulated depreciation                            --           --      (20,319)
Payments for equipment                                (15,231)     (13,815)          --
                                                    ---------    ---------    ---------

         Net cash used by investing activities        (40,703)     (31,836)     (29,881)
                                                    ---------    ---------    ---------
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       F-6
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

     YEARS ENDED FEBRUARY 28, 2001, FEBRUARY 29, 2000 AND FEBRUARY 28, 1999

<TABLE>
<CAPTION>

                                                    2001           2000           1999
                                                -----------    -----------    -----------
<S>                                             <C>            <C>            <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from the issuance of capital stock         9,274             --          3,400
  Purchase of treasury stock                        (36,410)       (84,822)       (34,084)
                                                -----------    -----------    -----------

        Net cash used by financing activities       (27,136)       (84,822)       (30,684)
                                                -----------    -----------    -----------

INCREASE IN CASH                                    507,518        507,209        286,599

CASH AND CASH EQUIVALENTS:
  Beginning                                       1,182,937        675,728        389,129
                                                -----------    -----------    -----------

  Ending                                        $ 1,690,455      1,182,937        675,728
                                                ===========    ===========    ===========

SUPPLEMENTAL INFORMATION:

  Income taxes paid                             $   483,391        149,649         80,700
                                                ===========    ===========    ===========

  Interest paid                                 $       248         12,279             --
                                                ===========    ===========    ===========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       F-7
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2001



NOTE A - ORGANIZATION AND BASIS OF PRESENTATION:

         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, pharmaceutical and flavors and fragrance industries to
         customers located in the United States and throughout the world.

         The Company's wholly owned Subsidiary, Epolin Holding, Corp., was
         incorporated in New Jersey as a real estate holding company whose asset
         consist of land and a building. Prior to being acquired on January 29,
         1998, it was controlled by two officers/stockholders of the Company.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

         PRINCIPLES OF CONSOLIDATION - The accompanying Consolidated Financial
         Statements include the accounts of the Company and its Subsidiary.
         Intercompany transactions and balances have been eliminated in
         consolidation. Condensed consolidating financial statements for the
         year ended February 28, 2001 follows:

                      CONDENSED CONSOLIDATING BALANCE SHEET
<TABLE>
<CAPTION>

                                                        Epolin
                                         Epolin         Holding     Eliminations   Consolidated
                                       -----------    -----------   -----------    -----------
<S>                                    <C>            <C>           <C>            <C>
Current assets                         $ 2,539,465        197,087      (200,771)     2,535,781
Non-current assets                         970,202        408,929      (591,363)       787,768
                                       -----------    -----------   -----------    -----------
          Total                        $ 3,509,667        606,016      (792,134)     3,323,549
                                       ===========    ===========   ===========    ===========

Total liabilities                      $   674,614        360,078      (546,196)       488,496
                                       -----------    -----------   -----------    -----------

Stockholders' equity:
    Common stock                         2,229,658             --            --      2,229,658
    Additional paid-in capital               6,486             --            --          6,486
    Retained earnings                      754,225        245,938      (245,938)       754,225
    Treasury stock                        (155,316)            --            --       (155,316)
                                       -----------    -----------   -----------    -----------

          Total stockholders' equity     2,835,053        245,938      (245,938)     2,835,053
                                       -----------    -----------   -----------    -----------

                Total                  $ 3,509,667        606,016      (792,134)     3,323,549
                                       ===========    ===========   ===========    ===========
</TABLE>

                                       F-8

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2001


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

                   CONDENSED CONSOLIDATING STATEMENT OF INCOME

                                          Epolin
                            Epolin        Holding    Eliminations  Consolidated
                          -----------   -----------  -----------   -----------
Sales                     $ 2,329,610            --           --     2,329,610

Other revenue                      --        97,740      (97,740)           --
                          -----------   -----------  -----------   -----------
Total                       2,329,610        97,740      (97,740)    2,329,610
                          -----------   -----------  -----------   -----------

Cost of sales                 699,386            --           --       699,386
Selling, general
  and administrative          799,999        12,076      (97,740)      714,335
                          -----------   -----------  -----------   -----------
           Total            1,499,385        12,076      (97,740)    1,413,721
                          -----------   -----------  -----------   -----------

Operating income              830,225        85,664           --       915,889

Other income - interest        73,968            --           --        73,968
                          -----------   -----------  -----------   -----------

Income before taxes           904,193        85,664           --       989,857

Income taxes                  148,652         6,158           --       154,810
                          -----------   -----------  -----------   -----------

Net income                $   755,541        79,506           --       835,047
                          ===========   ===========  ===========   ===========


         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 has cash deposits in
         financial institutions and brokerage houses in excess of the amount
         insured by agencies of the federal government in the amounts of
         $1,590,457 and $1,082,937 at February 28, 2001 and February 29, 2000,
         respectively. In evaluating this credit risk, the Company periodically
         evaluates the stability of these financial institutions.

         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.

         FAIR VALUE OF FINANCIAL INSTRUMENTS - All reported assets and
         liabilities, which represent financial instruments, approximate the
         carrying values of such amounts.

                                       F-9

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2001


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

         PLANT, PROPERTY AND EQUIPMENT - Stated at cost less accumulated
         depreciation and amortization. Provisions for depreciation are computed
         on the straight-line and declining balance methods, based upon the
         estimated useful lives of the assets.

         Depreciation and amortization expense totaled $24,077, $17,423 and
         $62,113 for the fiscal years 2001, 2000 and 1999, 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 income
         tax purposes. The temporary differences relate primarily to different
         accounting methods used for depreciation and amortization of property
         and equipment, allowance for doubtful accounts and net operating loss
         carry forwards.

         USE OF ESTIMATES - The preparation of financial statements in
         conformity with generally accepted accounting principles requires
         management to make estimates and assumptions that affect the reported
         amounts of assets and liabilities and disclosure of contingent assets
         and liabilities at the date of the financial statements and the amounts
         of sales and expenses during the reporting period. Actual results could
         differ from those estimates.

NOTE C - 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 year ended February 28, 2001, approximately
         52.4% of sales were to four customers. Three of these customers,
         located in the Eastern United States, account for 43.8% of sales at
         February 28, 2001. During the year ended February 29, 2000,
         approximately 46.9% of sales were to four customers. Three of these
         customers located in the Eastern United States comprised 35.1% of sales
         at February 29, 2000.

                                      F-10

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2001


NOTE D - INVENTORIES:
                                                         2001         2000
                                                      ----------   ----------
         Raw materials and supplies                   $   37,769       45,517
         Work in process                                  65,624       12,074
         Finished goods                                  398,199      417,624
                                                      ----------   ----------
                                   Total              $  501,592      475,215
                                                      ==========   ==========

NOTE E - INCOME TAXES:
<TABLE>
<CAPTION>
                                                                2001         2000
                                                             ----------   ----------
<S>                                                          <C>          <C>
         1.  Federal and State deferred tax assets include
               the following:

             Temporary differences - principally
                accelerated amortization of leasehold
                improvements for book purposes and
                deferred compensation                        $  240,778      147,502
                                                             ----------   ----------

             Current portion                                      8,328      113,527
                                                             ----------   ----------
             Non-current portion                             $  232,450       33,975
                                                             ==========   ==========
</TABLE>

         2.  Income tax expense (benefit) consists of the following components:
<TABLE>
<CAPTION>

                                                            2001         2000         1999
                                                         ---------    ---------    ---------
<S>                                                      <C>          <C>          <C>
                   Current
                      Federal                            $ 199,776      296,300      112,341
                      State                                 48,260       45,479        3,852
                                                         ---------    ---------    ---------

                          Total current                    248,036      341,779      116,193
                                                         ---------    ---------    ---------

                  Deferred:
                      Federal                              (72,158)     (18,947)       9,995
                      State                                (21,068)      27,502       32,822
                                                         ---------    ---------    ---------

                          Total deferred                   (93,226)       8,555       42,817
                                                         ---------    ---------    ---------

                                     Total               $ 154,810      350,334      159,010
                                                         =========    =========    =========
</TABLE>

                                      F-11

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2001


NOTE E - INCOME TAXES (CONTINUED):

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

                                                       2001         2000         1999
                                                    ---------    ---------    ---------
<S>                                                 <C>          <C>          <C>
                  Computed at the statutory rate    $ 283,916      245,159      219,815
                  State income taxes (net)             48,260       45,479        3,852
                  (Increase) Decrease in deferred
                               tax asset              (93,226)      34,476           --
                  General business creditor           (51,314)      (4,577)          --
                  Non-deductible items                (32,826)      29,797      (64,657)
                                                    ---------    ---------    ---------

                         Effective tax rate         $ 154,810      350,334      159,010
                                                    =========    =========    =========
</TABLE>

             The Company does not have any net operating loss carryforwards
             available for either Federal or State tax purposes.

NOTE F - ACCRUED SALARIES:

         On April 25, 1995, the Board of Directors authorized the issuance of
         1,000,000 shares of common stock (market value $.04 per share) to an
         officer in lieu of $40,000 of his remaining accrued salary of $89,948.
         The remaining unpaid balance of $49,948 was paid in the current period.

NOTE G - EMPLOYEE BENEFITS:

         SIMPLIFIED EMPLOYEE PENSION PLAN - Effective June 1, 1994, covering all
         eligible participating employees as defined. Employer contributions
         totaled $20,728, $15,397 and $12,908 for the years ended February 28,
         2001, February 29, 2000 and 1999, respectfully.

         INCENTIVE COMPENSATION PLAN - On December 1989, the Company approved
         the 1989 Incentive Compensation Plan for the purpose of attracting and
         retaining key personnel. All employees of the Company are eligible to
         participate in the plan whereby incentive bonuses are determined by the
         Board of Directors and payable in shares of common stock. Shares issued
         are determined at fifty percent of the closing bid price, vested, and
         delivered over a three-year period. During the year ended February 28,
         1999, 20,000 shares of common stock were issued covering a previously
         awarded bonus to an employee on May 18, 1998.

                                      F-12

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2001


NOTE G - EMPLOYEE BENEFITS (CONTINUED):

         EMPLOYEE OPTION PLAN - The Company previously adopted The 1986 Stock
         Option Plan. As of April 1996, options may no longer be granted. Under
         the terms of the Plan, options granted could be designated as portions
         which qualify for incentive stock option treatment under Section 422A
         of the Internal Revenue Code of 1986, as amended, or options which do
         not qualify. In December 1995, options to acquire up to 490,000 shares
         of the Company's common stock were granted and expire on December 1,
         2005. In the current year, 150,000 shares of common stock were issued
         to two employees. Common stock issued for all prior years totaled
         120,000 shares.

         Outstanding options remaining under the plan are as follows:

            Shares allocated as of February 28, 2001          220,000
                                                              =======

            Option price                                      $  0.04
                                                              =======

         All outstanding options are exercisable currently. No options were
         granted or expired during fiscal year ended February 28, 2001.

         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. Options expire ten years after the date granted and
         are subject to a vesting period as follows: (1) no portion will be
         exercisable prior to the first anniversary of the date of grant, and
         (2) each of the options will become exercisable as to 50% of the shares
         underlying the option on each of the first and second anniversaries of
         the date granted at $0.15 per share.

         Options exercised as of February 28, 2001 - 12,500.

         Options granted as of February 28, 2001:

         No. of
         Shares              Date Granted                Expiration Date
         ------            -----------------            -----------------

         425,000           December 1, 1998             November 30, 2008
          25,000           February 10, 1999            February 9, 2009
          25,000           February 10, 2000            February 9, 2010

         There are 275,000 options attributable to future grants.


                                      F-13

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2001


NOTE H - TREASURY STOCK:

         The Company made several purchases of their own common stock during the
         year ended February 28, 2001, totaling 104,000 shares at a cost of
         $33,135. Treasury stock at February 28, 2001 totaled 617,145 shares,
         including 42,445 shares, which were returned to the Company at no cost
         in prior years, at a cumulative cost of $155,316.

NOTE I - RESEARCH AND DEVELOPMENT:

         Included in selling, general and administrative expenses totaling
         $288,481, $212,014 and $183,111 for the fiscal years 2001, 2000 and
         1999, respectively.

NOTE J - ACQUISITIONS:

         On January 29, 1998, the Company acquired 100 shares (100% interest) of
         Epolin Holding Corp.'s common stock.

NOTE K - COMMITMENTS:

         On October 17, 1996, the premises leased from 350 South Street
         Partnership was purchased for $450,000 by Epolin Holding Corp., a New
         Jersey Corporation, controlled by Murray S. Cohen, Ph.D. and James A.
         Ivchenko, officers/stockholders of Epolin, Inc. This transaction was
         approved by the Board of Directors in June 1996 based upon the terms of
         a $350,000 mortgage obtained from the Broad National Bank wherein
         personal guarantees of two officers/stockholders were mandatory. Other
         directors declined participation in this transaction.

         The down payment of $100,000 was obtained from The Company, evidenced
         by a five (5) year promissory note of $75,565 (net of a three (3)
         months security deposit) under the terms of a five (5) year lease
         payable in monthly payments of $1,541, including interest at an annual
         rate of 8.25%.

         The lease, is for a term of five (5) years with three (3) five (5) year
         options at annual rentals of $97,740 subject to a Cost of Living Index
         adjustment effective with the second year. Rent includes reimbursed
         insurance. Epolin Holding Corp. became a wholly owned Subsidiary of
         Epolin, Inc. as of January 29, 1998.

                                      F-14

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2001


NOTE K - COMMITMENTS (CONTINUED):

         The minimum annual rental balance under the current lease expiring
         October 31, 2001 amounts to $65,160 for the year ending February 28,
         2002.

               Years Ended                              Amounts
               -----------                              -------
               February 28, 2002                         65,160

         Management anticipates renewing the lease at terms yet to be
         determined.

         Rental expense charged to operations, eliminated in consolidation,
         amounted to $97,740, $97,740 and $89,595 for the years 2001, 2000 and
         1999, respectively.

         DEFERRED COMPENSATION - On December 29, 1995, the Company entered into
         a deferred compensation agreement with an officer. The officer's
         additional annual compensation of $19,645 plus interest is being
         deferred until such time the officer reaches age 65 or is terminated.
         The obligation is being funded by a life insurance policy. Annual
         payments of $32,000 for ten consecutive years shall commence the first
         day of the month following the officer's 65th birthday or termination.
         On January 1, 1996 the company entered into a deferred compensation
         agreement with a second officer wherein $25,000 per year was accrued.
         This agreement, terminated on June 25, 1998, with unfunded accruals of
         $79,041 will be paid upon retirement either in equal consecutive
         monthly payments for a period not exceeding sixty (60) months or a
         single payment equal to the then present value of the account, said
         selection to be at the discretion of the company. The company entered
         into a second deferred compensation agreement with the same officer on
         June 25, 1998 which provided for the payment of certain funds for a
         period of ten years beginning two weeks after the date of his
         retirement. This agreement was terminated March 1, 1999.

         Effective March 1, 1999, the company adopted deferred compensation
         agreement with two of its employees. Under the term of the agreement,
         each employee will receive one twenty sixth (1/26) of fifty percent
         (50%) of their annual salary (excluding bonuses) as of the date of
         retirement. Each has a death vesting schedule. Management has elected
         not to provide any additional funding for either employee subsequent to
         the date at which each of the two employees were no longer employed
         with the company.

         Deferred compensation of $70,204, $22,932 and $21,840 was charged to
         operations for the years ended February 28, 2001, February 29, 2000 and
         1999, respectively.

                                      F-15

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2001


NOTE K - COMMITMENTS (CONTINUED):

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

                  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. In addition,
                  he is to receive 1.5% of gross annual sales of no more than
                  $3,000,000, effective with the year ended February 29, 2000,
                  increasing by 0.25% a year during the term of the agreement.

                  Murray S. Cohen, PhD, Chairman of the Board and Chief
                  Executive Officer - 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 2.00% of gross annual sales of no more than
                  $3,000,000, effective with the year ended February 29, 2000,
                  increasing by 0.25% a year during the term of the agreement.


         CONTINGENCIES:

         In August 2000, the Company received a letter from a law firm
         representing a former officer of the Company (who is also a current
         director) alleging age discrimination and other monetary claims
         pertaining to such former officer's past employment. In addition,
         September 2000, the Company received a letter from the same law firm on
         behalf of another former employee of the Company (who is also a current
         director) alleging similar claims. In December 2000, these individuals
         instituted suit in the Superior Court of New Jersey, Bergen County -
         Law Division, against the Company and other directors of the Company
         alleging claims pursuant to their past employment as well as a
         derivative claim, as minority stockholders. The Company believes such
         claims are without merit and intends to defend such matter vigorously.
         Nevertheless, while the outcome of this action cannot be predicted at
         this time, taking into account the uncertainty and risks inherent in
         any litigation, management does not anticipate that the ultimate
         disposition will have a material adverse effect on the Company.

                                      F-16