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, 1997

      [ ] 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:  (201) 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         No   X

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: $1,414,226.

As of May 23, 1997, the aggregate market value of the Common Stock held by 
non-affiliates of the Issuer (5,301,631 shares) was approximately $503,650.  
The number of shares outstanding of the Common Stock (no par value) of the 
Issuer as of the close of business on May 23, 1997 was 11,611,555.

                  Documents Incorporated by Reference:  None
<PAGE>
                              PART I

Item 1.   Description of Business.

Introduction

     Epolin Inc. ("Epolin") is a manufacturing and research and development
company which was incorporated in the State of New Jersey on May 8, 1984.
Epolin, together with its wholly owned subsidiary Accort Labs, Inc.
("Accort"), 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.  Both Epolin and Accort  are hereinafter collectively referred
to as the "Company" or the "Registrant".   The Board of Directors of Epolin
has authorized the merger of Accort into Epolin which will be completed in
fiscal 1998 but will be deemed to have occurred as of the beginning of
fiscal 1998.  The Company's principal offices are located at 358-364 Adams
Street, Newark, NJ 07105 and its telephone number is (201) 465-9495.

     In April 1989,  the Company 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, 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. This effort proved to be unsuccessful because
of 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. All 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 32% a 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.

     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 processing 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
created 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, 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 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 significantly 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 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 Hard Coatings

     There are a number of transparent plastics that are difficult to
process with near infrared dyes because they are formed at temperatures
that exceed the dye's thermal stability. As a result, some of the dye is
destroyed in the process. For example, a number of lens manufacturers
cannot extrude or injection mold polycarbonate pellets with these dyes.
However, they still want to incorporate the dyes in their lenses. Since all
polycarbonate lenses and panels have a very soft surface, they must be
protected from abrasion by using a hard coat on the surface. The Company
believes that a successful way to incorporate the dye would be to place it
in the hard coating. Another, larger scale application, is to use the dye
in a coating on shatterproof windows to act as a heat shield. In this
application the structure to be molded is too large for incorporating most
near infrared dyes because such large structures have to be heated to too
high a temperature and remain at too high a temperature for the dye to
survive.   Management believes coatings, in the form of a hard coat, is a
practical solution for the use of near infrared dyes. The Company has
formed a cooperative partnership with the Exxene Corporation, a leader in
the hard coating field, and both companies plan to pursue this market
vigorously.  No assurance can be given that the Company, together with the
Exxene Corporation, will be able to successfully develop this market.

Licensing Agreement

     The Company's Expanding Monomer technology (which was previously
emphasized by the Company but has since been abandoned) was developed by
the late Dr. William Bailey, a former director of the Company. In June
1983, Dr. Bailey was issued U.S. Patent 4,387,215 which granted Dr. Bailey
broad generic claims in regard to the Expanding Monomer and polymer
systems.  Pursuant to a licensing agreement dated January 31, 1986  (which
terminated and replaced a previous agreement with the Company), and as
amended in 1988, the  Company was granted until the expiration of the
patent (June 2000) the exclusive right to exploit the patent  and to
manufacture, produce, market, use and sell products and materials derived
thereunder.  Pursuant to the agreement, the Company is required to pay a
percentage royalty (based on various levels of sales) and a fixed royalty
fee of $50,000 per year (reduced by percentage royalties, if any, paid
during that year). Fixed royalties have not been paid since 1990 because
the Company decided to postpone payments under the licensing agreement
pending receipt of orders for Expanding Monomer products. Since then, and
as described above, the Company has abandoned this technology.  As provided
in the agreement, Dr. Bailey's sole remedy for non-payment of fixed
royalties shall be the cancellation of the licensing agreement without
further recourse against the Company.   Although the Company has not
received any notification from Dr. Bailey's estate regarding termination or
cancellation of the licensing agreement, any such notice that the Company
would receive would have no material impact on the Company's business since
the Company has previously decided to curtail and cease the development of
Expanding Monomer technology.

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 to grow.  There are also
plans to make 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 significant competition in all areas
of its business from numerous other 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.  Although there can be no assurance, management
recently completed negotiations with the U.S. Patent Office (the "Patent
Office") and is awaiting issuance of a new patent.  Other patent
disclosures have been submitted and the Company intends to prepare
appropriate applications to be submitted in fiscal 1998 to the Patent
Office.  No assurance can be given that patents with regard to any of 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 cease 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 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.

Marketing and Sales

     The marketing of the Company's dye products is primarily the
responsibility of Mr. Chester Swasey, an executive officer of the Company.
The marketing of  specialty products which primarily include flavors and
fragrances, polymer additives and process aids is handled primarily by Mr.
James Ivchenko, President of the Company, and Dr. Murray Cohen, Chairman of
the Board and Chief Executive Officer of the Company. These specialty
products are marketed to companies who need low volume amounts of unique
chemicals usually used in small amounts in complex chemical formulations.

     The Company has entered into a marketing agreement with the Exxene
Corporation whereby it will sell hard coatings containing the Company's
dyes. This agreement requires Exxene to purchase target amounts of dye in a
specific time period in order for the agreement to stay active.  (See "Dyes
for Hard Coatings" in Part I, Item 1 above.)

     A material portion of the Company's business is dependent on certain
customers, the loss  of which could have a material effect on operations.
During fiscal 1997, approximately 66.5% of sales were to five customers,
one of which totaled 18.9%.  Two of these customers comprised 48.8% of
accounts receivable at February 28, 1997.

Employees

     The Company presently employees approximately eight persons, all on a
full time basis of which approximately four are employed in manufacturing
and production, two in research and development, one in sales and marketing
and one in administration and supervision. The Company's employees are not
represented by labor unions.

Item 2.   Description of Property.

     The Company presently leases 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.

Item 3.   Legal Proceedings.

     In May 1997, an action was commenced by Passaic Valley Sewerage
Commissioners ("PVSC")  against the Company in the Superior Court of New
Jersey, Essex County.  PVSC is a body politic and corporate organized
pursuant to the laws of the State of New Jersey for the purpose of
collecting and treating wastewater generated in a four-county area along
the Passaic Valley river basin.  In such action, PVSC alleges that the
Company failed to submit certain required forms and reports  and a certain
completed permit application on time and that the Company has also failed
to install certain monitoring equipment.  This suit requests that the
Company be enjoined from further violations, that the Company be declared a
"significant noncomplier" and that the Company be assessed civil penalties.
The Company has not filed an Answer to the Complaint but is presently in
discussions with PVSC which concern among other things management's
assertion that such monitoring equipment has in fact been installed.
Although management is unable to predict the outcome of this lawsuit, the
Company believes based on preliminary discussions that this matter will be
amicably resolved with PVSC and that any such resolution will not have a
material adverse effect on the business, financial condition of the Company
or its operational capabilities.

     Other than the foregoing, there are no material pending legal
proceedings to which the Company is a party or to which any of its property
is subject.

Item 4.   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, 1996:         High      Low

March 1, 1995 to May 31, 1995                $.04      $.04
June 1, 1995 to Aug. 31, 1995                $.0625    $.03
Sept. 1, 1995 to Nov. 30, 1995               $.03      $.02
Dec. 1, 1995 to Feb. 28, 1996                $.03      $.02

Fiscal year ended February 28, 1997:         High      Low

March 1, 1996 to May 31, 1996                $.03      $.02
June 1, 1996 to Aug. 31, 1996                $.10      $.03
Sept. 1, 1996 to Nov. 30, 1996               $.15      $.03125
Dec. 1, 1996 to Feb. 29, 1997                $.15      $.0625

     (b)  Holders.

     As of May 23, 1997 there were approximately 350 record holders of the
Company's Common Stock.

     (c)  Dividends.

     The Company has never declared any cash dividends on its Common Stock
and does not anticipate declaring cash dividends in the foreseeable future.

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.  The financial statements for the
years ended February 28, 1997 and February 29, 1996 have been audited.  The
financial statements for the year ended February 28, 1995 (included in the
Company's Annual Report on Form 10-KSB for the year ended February 29,
1996) are unaudited.

Overview

     Epolin, Inc. ("Epolin") 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 primarily in the United States, Europe, Australia and
the Far East.

Results of Operations

     Fiscal 1997 Compared to Fiscal 1996

     During the year ended February 28, 1997, the Company reported sales of
approximately $1,414,000 as compared to sales of approximately $1,384,000
during the year ended February 29, 1996, an increase of approximately
$30,000 or 2%.  This increase in sales was primarily attributable to a
small increase in sales of the Company's near infrared absorbing dyes.

     Operating income for fiscal 1997 decreased to approximately $297,000
as compared to operating income of approximately $338,000 for fiscal 1996,
a decrease of approximately $41,000.  This change resulted primarily from
increases in selling, general and administrative expenses, partially offset
by a decrease in cost of sales.  Cost of sales in fiscal 1997 was
approximately $501,000 compared to cost of sales in fiscal 1996 of
approximately $614,000.  In fiscal 1997, the Company's selling, general and
administrative expenses were approximately $616,000 as compared to selling,
general and administrative expenses of approximately $433,000 for the
fiscal year ended February 29, 1996. This change resulted primarily from
increases in salaries, benefits and commissions, and legal and accounting
fees.

     During the fiscal year ended February 28, 1997, the Company realized
approximately $13,000 in interest income as compared to approximately
$7,500 in interest income for the prior year.  This increase resulted from
increases in available cash in fiscal 1997.

     During the fiscal year ended February 28, 1997, the Company reported
income before taxes of approximately $332,000 as compared to income before
taxes of approximately $342,000 for the fiscal year ended February 29,
1996.  Net income after taxes was approximately $210,000 or $.02 per share
for fiscal 1997 as compared to net income after taxes of approximately
$626,000 or $.05 per  share  for fiscal 1996.  For fiscal 1997, the Company
had an income tax expense of approximately $123,000 as compared to an
income tax credit (deferred tax benefit) of approximately $284,000 for
fiscal 1996.

     Fiscal 1996 Compared to Fiscal 1995

     During the year ended February 29, 1996, the Company reported sales of
approximately $1,384,000 as compared to sales of approximately $889,000
during the year ended February 28, 1995, an increase of approximately
$495,000 or 55%.  This increase in sales was primarily attributable to
increased sales of the Company's near infrared absorbing dyes.

     Operating income for fiscal 1996 increased to approximately $338,000
as compared to an operating loss of approximately $(1,800) for fiscal 1995,
an increase of approximately $339,800.  This change resulted primarily from
increases in sales in 1996.  Cost of sales in fiscal 1996 was approximately
$614,000 compared to cost of sales in fiscal 1995 of approximately
$536,000.  In fiscal 1996, the Company's selling, general and
administrative expenses were approximately $433,000 as compared to selling,
general and administrative expenses of approximately $355,000 for the
fiscal year ended February 28, 1995.  This change resulted  primarily from
an increase in expenses related to the Company's increased sales, plus
increases in salaries and benefits.

     During the fiscal year ended February 29, 1996, the Company realized
approximately $7,500 in interest income as compared to approximately $3,500
in interest income from the prior year.  This increase resulted from
increases in available cash in fiscal 1996 resulting from significant
increases in sales.

     During the year ended February 29, 1996, the Company reported net
income of approximately $626,000 or $.05 per share as compared to net
income of approximately $11,000 for the fiscal year ended February 28,
1995.  This increase in net income primarily reflects the effect of the
Company's dramatic increase in sales during fiscal 1996 and a deferred tax
benefit of $284,000.

Liquidity and Capital Resources

     On February 28, 1997, the Company had working capital of approximately
$908,000, an equity to debt ratio of 16.7 to 1, and stockholder's equity of
approximately $1,360,000.  On February 28, 1997, the Company had
approximately $253,000 in cash and cash equivalents, total assets of
approximately $1,440,000 and total liabilities of approximately $81,000.
The Company believes that its available cash, cash flow from operations and
projected revenues will be sufficient to fund the Company's operations for
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.

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     72       Chairman of the              1984
                             Board, Chief
                             Executive
                             Officer and Director    
                                      
James Ivchenko      57       President                    1993
                             and Director

Chester C. Swasey   53       Vice President of            1994
                             Sales and Marketing,
                             Secretary and Director

Claire Bluestein    71       Director                    1984

Morris Dunkel       69       Director                    1984

Abdelhamid A.H.
Ramadan             57       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.  From June 1984 to
August 1994, Dr. Cohen was also President.  Since May 1983, Dr. Cohen has
been an officer of Accort Labs, Inc., a wholly-owned subsidiary of the
Company.  From January 1978 through May 1983, Dr. Cohen was the Director of
Research and Development for Apollo Technologies Inc., a company engaged in
the development of pollution control procedures and devices.  Dr. Cohen was
employed as a Vice President and Technical Director of Borg-Warner
Chemicals from 1973 through January 1978, where his responsibilities
included the organization, project selection and project director of a 76
person technical staff which developed materials for a variety of plastic
products.  He received a Bachelor of Science Degree from the University of
Missouri in 1949 and a Ph.D. in Organic Chemistry from the same institution
in 1953.

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

     CHESTER C. SWASEY has served as Director of the Company since 1994 and
Vice President of Sales and Marketing since August 1994.  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.

     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.

     ABDELHAMID A.H. RAMADAN has been a Director of the Company since July
1994, and has served as Manager for Research, Process Development and
Quality Assurance of the Company since November 1993.  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.

Item 10.  Executive Compensation.

     The following summary compensation table sets forth information
concerning the annual and long-term compensation for services in all
capacities to the Company for the fiscal years ended February 28, 1997,
1996 and 1995, of those persons who were, at February 28, 1997 (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(1)       1997      $88,542        $7,950
Chairman of the          1996      $48,619        $7,500
Board and Chief          1995      $56,619        $7,500
Executive Officer

James Ivchenko(3)        1997      $83,125(4)     $7,950
President                1996      $79,166(4)     $7,000
                         1995      $69,167        $5,833

Chester C. Swasey(5)     1997      $82,596        $4,300
Vice President of        1996      $57,243        $4,000
Sales and Marketing      1995      $21,801        $2,404

                              Summary Compensation Table

                              Long-Term
                              Compensation

                                   Restricted     Shares
Name and Principal       Fiscal    Stock          Underlying
Position                 Year      Awards         Options
Murray S. Cohen(1)       1997      0              0
Chairman of the          1996      1,000,000(2)   75,000
Board and Chief          1995      0              0
Executive Officer

James Ivchenko(3)        1997      0              0
President                1996      0              75,000
                         1995      0              0

Chester C. Swasey(5)     1997      0              0
Vice President of        1996      0              75,000
Sales and Marketing      1995      100,000        0


(1)  Dr. Cohen was also President from June 1984 to August 1994.

(2)  Represents shares issued to Dr. Cohen during fiscal 1996 in lieu of
     $40,000 of accrued salary.

(3)  Mr. Ivchenko has been President since August 1994.  Prior thereto, he
     was Technical Director and Vice President of Operations.

(4)  Does not include $19,779 and $19,645 for fiscal 1997 and 1996,
     respectively, being deferred pursuant to an Deferred Compensation
     Agreement entered into in December 1995 with Mr. Ivchenko.

(5)  Mr. Swasey has been employed by the Company since August 1994.

Stock Options Granted in Fiscal 1997

     No stock options or other stock appreciation rights were granted to
any of the named executive officers during fiscal 1997.

Stock Options Exercised in Fiscal 1997;
Fiscal Year-End Values

     During the fiscal year ended February 28, 1997, none of the named
executive officers exercised any previously granted stock options.

     The following table indicates the total number of exercisable and
unexercisable stock options held by each named executive officer on
February 28, 1997, the last day of fiscal 1997, and the value of "in the
money" options held by each named executive officer on such date.

                         Number of Unexercised
                         Options Held at
                         February 28, 1997
Name                     Exercisable    Unexercisable

Murray S. Cohen          75,000         0
James Ivchenko           75,000         0
Chester C. Swasey        75,000         0

                         Value of Unexercised
                         In-the-Money Options
                         February 28, 1997(1)
Name                     Exercisable    Unexercisable

Murray S. Cohen          $10,406        0
James Ivchenko           $10,406        0
Chester C. Swasey        $10,406        0


(1)  Based on the average of the closing bid and asked prices of the
     Company's Common Stock at February 28, 1997.

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.

Employment Contracts

     In December 1995, the Company entered into a Deferred Compensation
Agreement with James Ivchenko, President of the Company, pursuant to which
annual compensation of $19,645 plus interest will be deferred until Mr.
Ivchenko reaches the age of 65 or his employment is terminated.  Annual
payments of $32,000 for ten consecutive years shall commence the first day
of the month following the executive reaching the age of 65 or termination
of his employment.  Such obligation is being funded with a life insurance
policy owned by the Company.

Employee Stock Option Plan

     The Company previously  adopted an Employee Stock Option Plan (the
"Plan") .  As of April 1996, options may no longer be granted under the
Plan.  Under the terms of the 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, or
options which do not so qualify.  In December 1995, options to acquire up
to 490,000 shares of the Company's Common Stock were granted under the
Plan.  Such options expire on December 1, 2005.  None of such options have
been exercised.

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

     The following table sets forth, as May 23, 1997, 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:

                              Amount and Nature of     Percent
Name                          Beneficial Ownership     of Class

Murray S. Cohen(1)*           2,790,958(2)             23.9%
James Ivchenko(1)*            1,644,587                14.1%
Chester C. Swasey(1)*           705,822                 6.0%
Claire Bluestein*               945,155                 8.1%
Morris Dunkel*                  200,000                 1.7%
Abdelhamid R.H. Ramadan(1)*     323,402                 2.8%

All Officers and Directors
as a Group (6 persons)        6,609,924                55.5%


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

(1)  Includes 75,000 which he has the right to acquire within 60 days
     pursuant to the exercise of 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
     2000.  As a result, Dr. Cohen may be deemed to be the beneficial owner
     of such shares.

Item 12.  Certain Relationships and Related Transactions.

     See Part I, Item 2 for information on the leasing arrangements entered
into between  Epolin Holding Corp. ("Epolin Holding"), a company owned and
controlled by Murray S. Cohen and James Ivchenko, and the Company.  As
described therein, in October 1996, Epolin Holding purchased the premises
then leased by the Company for $450,000 and simultaneously with the closing
entered into a lease with the Company, as tenant.  The downpayment of
$100,000 was obtained from the Company evidenced by a five year promissory
note of $75,565 (after charge for three months security deposit under the
terms of the lease) payable in monthly principal payments of $1,541
including interest at an annual rate of 8.25%.  At February 28, 1997, the
remaining amount due from Epolin Holding on the loan was $71,504.  In
addition, at February 28, 1997, there is a related party receivable due
from Epolin Holding in the amount of $20,097.

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

     (a)  Exhibits.

          3.1       Registrant's certificate of incorporation as amended
                    (1)
          3.2       Registrant'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: June 10, 1997

     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,      06/10/97   
Murray S. Cohen          Chairman of the Board,
                         Director (Principal
                         Executive Officer and
                         Principal Financial Officer)

/s/James Ivchenko        President, Director           06/12/97    
James Ivchenko

/s/Chester C. Swasey     Vice President of             06/11/97    
Chester C. Swasey        Sales and Marketing,
                         Secretary, Director

/s/Claire Bluestein      Director                      06/11/97    
Claire Bluestein

/s/Morris Dunkel         Director                      06/12/97    
Morris Dunkel

/s/Abdelhamid A.H.
Ramadan                  Director                      06/10/97
Abdelhamid A.H. Ramadan

<PAGE>


                        EPOLIN, INC. AND SUBSIDIARY

                             FEBRUARY 28, 1997



<PAGE>


                        EPOLIN, INC. AND SUBSIDIARY

                             FEBRUARY 28, 1997

                                 CONTENTS








                                                                 PAGE

Report of Independent Certified Public                            1

Consolidated Financial

    Consolidated Balance                                          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>


I. WEISMANN ASSOCIATES
Certified Public Accountants

                                              218 Ridgedale Avenue
                                              PO Box 2207
                                              Morristown, NJ 07962-2207

                                              (201) 984-8900


                      INDEPENDENT AUDITOR'S REPORT


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

     We have audited the accompanying Consolidated Balance Sheets of Epolin,
Inc. & Subsidiary as of February 28, 1997, and February 29, 1996 the
related Consolidated Statements of Income, Stockholders' Equity, and Cash
Flows for the years then ended.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our audit.

     We conducted our audit 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. & Subsidiary as of February 28, 1997, and February 29, 1996, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.






                            /s/I. Weismann Associates
                            CERTIFIED PUBLIC ACCOUNTANTS

May 6, 1997

                                     1

<PAGE>
                        EPOLIN, INC. AND SUBSIDIARY

                        CONSOLIDATED BALANCE SHEETS

                                  ASSETS

                                          FEBRUARY 28,    FEBRUARY 29,
                                             1997            1996
CURRENT ASSETS:
  Cash and cash equivalents               $   252,803         231,800
  Accounts receivable (Note 3)                226,524         164,266
  Inventories (Note 4)                        341,688         245,426
  Related party receivables (Note 12):
  Advances                                      4,056               -
  Loan                                         16,041               -
 Prepaid expenses:
  Income taxes                                 10,145               -
  Other                                        14,764          11,311
  Deferred taxes (Note 5)                     100,555          92,820

        Total current assets                  966,576         745,623

PROPERTY, PLAN AND EQUIPMENT - AT COST:
  Machinery and equipment                     166,306         166,306
  Furniture and fixtures                       44,682          38,892
  Leasehold improvements                      427,743         415,526

        Total                                 638,731         620,724

Less:  Accumulated depreciation 
and amortization                              495,595         430,573

  Net depreciated cost                        143,136         190,151

OTHER ASSETS:
  Loan receivable - related party 
  (Note 12)                                    71,504               -
  Deferred taxes (Note 5)                     199,494         294,649
  Security deposits                            37,070          12,635
  Cash value - life insurance policy 
   (Note 11)                                   23,902           6,569

  Total other assets                          331,970         313,853

    Total                                  $1,441,682       1,249,627

       The accompanying notes are an integral part of these statements.
                                       2


                          EPOLIN, INC. AND SUBSIDIARY

                    CONSOLIDATED BALANCE SHEETS (CONTINUED)

                     LIABILITIES AND STOCKHOLDERS' EQUITY

                                       FEBRUARY 28,     FEBRUARY 29,
                                          1997             1996
CURRENT LIABILITIES:
  Accounts payable                     $    18,725           49,160
  Accrued expenses                          33,214           11,426
  Taxes payable:
     Payroll                                 6,347                -
     Income                                      -           34,975

       Total current liabilities            58,286           95,561

DEFERRED COMPENSATION (NOTE 11)             23,053            3,274

        Total liabilities                   81,339           98,835

COMMITMENTS (NOTE 11)

STOCKHOLDERS' EQUITY:
  Preferred stock, $2.50 par value; 
   940,000  shares authorized; 
   none issued                                    -               -
  Series A convertible non-cumulative 
   preferred stock, $15,513 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; 
   11,654,000 shares issued and
   outstanding at 1997 and 1996   
   (Note 6)                               2,206,984       2,206,984
  Common stock unissued (Note 7)             10,000          10,000

  Paid-in capital                             6,486           6,486
  Accumulated deficit                      (863,127)     (1,072,678)

      Total                               1,360,343       1,150,792
  Less:  Treasury stock (Note 8)                  -               -

    Total stockholders' equity            1,360,343       1,150,792

      Total                              $1,441,682       1,249,627


       The accompanying notes are an integral part of these statements.

                                       3


                          EPOLIN, INC. AND SUBSIDIARY

                       CONSOLIDATED STATEMENTS OF INCOME

                                                    YEARS ENDED
                                            FEBRUARY 28,       FEBRUARY 29,
                                                1997              1996

Sales (Notes 2 and 3)                       $    1,414,226        1,384,410

COST AND EXPENSES:
  Cost of sales                                    500,975          613,879
  Selling, general and administrative
    expenses (Notes 2, 6, 7, 9 & 11)               616,438          432,783

        Total                                    1,117,413        1,046,662

OPERATING INCOME                                   296,813          337,748

OTHER INCOME (LOSS):
  Interest income                                   12,933            7,518
  Gain (loss) on disposal of assets                 22,525           (3,570)

INCOME BEFORE TAXES                                332,271          341,696

INCOME TAXES (NOTE 5)                              122,720         (284,467)

NET INCOME                                   $     209,551          626,163


PER SHARE DATA:
  Net  income per common share               $        0.02             0.05
  Weighted average number of
    shares of common outstanding             $  11,611,555       11,444,888


       The accompanying notes are an integral part of these statements.

                                       4

                          EPOLIN, INC. AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY




                       COMMON     ADDITIONAL       ACCUMULATED  STOCKHOLDERS'
                       STOCK      PAID-IN-CAPITAL  DEFICIT      EQUITY

Balance - 
March 1, 1995         $2,176,984     6,486         (1,698,841)     484,629

Common stock issued 
for accured
salary (Note 6)           40,000         -                  -       40,000

Net income - 
Year ended 
February 29, 1996              -         -             626,163     626,163

Balance - 
February 29, 1996      2,216,984     6,486          (1,072,678)  1,150,792

Net income - 
Year ended 
February 28, 1997              -         -             209,551     209,551

Balance - 
February 28, 1997     $2,216,984     6,486            (863,127)  1,360,343




       The accompanying notes are an integral part of these statements.

                                       5


                          EPOLIN, INC. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                    YEARS ENDED
                                           FEBRUARY 28,       FEBRUARY 29,
                                              1997               1996
Cash flows from operating activities:
  Net income                                   $209,551            626,163
  Adjustments to reconcile net income
     to net cash provided by operating
     activities:
     Depreciation and amortization               65,022             70,677
     Deferred taxes                              87,420           (320,995)
     Loss on disposal of assets                       -              3,570
     Obligation under deferred 
      compensation agreement                     19,779              3,274
     Stock issued for accrued salary 
      (Note 6)                                        -             40,000
  Changes in assets and liabilities:
     Accounts receivable                        (62,258)           (44,266)
     Inventories                                (96,262)          (145,614)
     Advances and loans                          (4,056)                 -
     Prepaid expenses                            (3,453)             3,616
     Prepaid income taxes                       (10,145)                 -
     Accounts payable                           (30,435)            26,183
     Accrued expenses                            21,788              2,426
     Accrued salaries                                 -            (89,948)
     Taxes payable:
        Payroll                                   6,347             (5,179)
        Income                                  (34,975)            33,328

     Net cash provided by 
      operating activities                      168,323            203,235


       The accompanying notes are an integral part of these statements.

                                       6




                          EPOLIN, INC. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (CONTINUED)



                                                        YEARS ENDED
                                               FEBRUARY 28,     FEBRUARY 29,
                                                  1997             1996
Cash flows from investing activities:
  Related party loan                               (87,545)            -
  Patents (net)                                          -         7,588
  Cash value - life insurance policy               (17,333)       (6,569)
  Payments for equipment - net                     (18,007)      (29,761)
  Security deposits                                (24,435)            -

   Net cash used by investing activities          (147,320)      (28,742)

Increase in cash                                    21,003       174,493

CASH AND CASH EQUIVALENTS:

  Beginning                                        231,800        57,307

  Ending                                       $   252,803       231,800

 SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION:

  Income taxes paid                          $     42,050          1,662

  Interest paid                              $          -             28


       The accompanying notes are an integral part of these statements.

                                       7


                      EPOLIN, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          FEBRUARY 28, 1997

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION:

    Epolin, Inc. (the "Company") was incorporated on May 8, 1984 pursuant to
    the laws of the State of New Jersey to develop, manufacture and market a
    class of monomer and polymer formulations with applications in the
    composition and manufacture of a new type of highly protective and durable
    material.  The Company's activities during its development stage from May
    8, 1984 (inception) through February 28, 1990 had been substantially
    devoted to developing its principal products.  Active operations in the
    monomer and polymer technologies have ceased.

    The Company's wholly-owned subsidiary, Accort Labs, Inc., 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,
    specialty chemical products that serve as intermediates and additives used
    in the adhesive, plastic, aerospace, pharmaceutical, flavors and fragrance
    industries to customers located in the eastern part of the United States.

NOTE 2 - 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.  The consolidation is accounted for as a "pooling of
    interests" under generally accepted accounting principles.  Condensed
    consolidating financial statements for the year ended February 28, 1997
    follows:

           CONDENSED CONSOLIDATING BALANCE SHEET

                           EPOLIN        ACCORT    ELIMINATIONS  CONSOLIDATED
Current assets             $    484,304  586,245   (103,973)          966,576
Non-current assets              944,496    9,566   (478,956)          475,106
  Total                    $  1,428,800  595,811   (582,929)        1,441,682

Total liabilities          $     68,457  116,855   (103,973)           81,339

Stockholders' equity:
  Common stock                2,216,984      100       (100)        2,216,984
  Additional paid-in 
   capital                        6,486    6,486     (6,486)            6,486
    Accumulated 
    earnings (deficit)         (863,127) 472,370   (472,370)         (863,127)
     Total stockholders'
      equity                  1,360,343  478,956   (478,956)        1,360,343

        Total               $ 1,428,800  595,811   (582,929)        1,441,682


                                       8


                          EPOLIN, INC. AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               FEBRUARY 28, 1997


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)

                 CONSOLIDATING STATEMENT OF INCOME

                      EPOLIN      ACCORT     ELIMINATIONS     CONSOLIDATED
Sales                 $      -    1,414,226            -        1,414,226
Other revenue          848,291            -     (848,291)               -
Total                  848,291    1,414,226     (848,291)       1,414,226

Cost of sales                -      500,975            -          500,975
Gross profit           848,291      913,251     (848,291)         913,251
Selling, general
and administrative     701,603      541,475     (626,640)         616,438
Operating income       146,688      371,776     (221,651)         296,813

Other income            35,458            -            -           35,458

Income before taxes    182,146      371,776     (221,651)         332,271

Income tax             (27,405)     150,125            -          122,720

Net income            $209,551      221,651     (221,651)         209,551


CASH  AND  CASH EQUIVALENTS - For purposes of preparing the statement of cash
flows, cash  and  cash  equivalents  include  cash  in  bank and money market
accounts.

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

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

LEASEHOLD  IMPROVEMENTS  -  Stated  at  cost  less  accumulated amortization,
amortized over the lesser of the term of the related  lease  or the estimated
useful lives of the assets.

Depreciation and amortization expense totaled $68,396 and  $70,053 for the 
years 1997 and 1996, respectively.

                                     9


                        EPOLIN, INC. AND SUBSIDIARY
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             FEBRUARY 28, 1997

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)

  PATENTS  -  Costs amortized on the straight-line method over a period  of
  seventeen  years.   Patents  of  no  value  costing  $11,763  along  with
  accumulated  amortization  totaling $4,175 were allowed to lapse and were
  written off during the year  ending  February  28,  1997. The unamortized
  cost  of  $7,588  was  included  in  selling,  general and administrative
  expenses.

  INCOME TAXES -The Company accounts for income taxes  under  Statement  of
  Financial  Accounting  Standards  No. 109, "Accounting for Income taxes."
  Under Statement 109, 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, goodwill, allowance  for doubtful
  accounts and net operating loss carry forwards.  A valuation allowance is
  recorded  for  deferred  tax assets when it is more likely than not  that
  some or all of the deferred  tax  assets  will  not  be  realized through
  future operations.

  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 3 - 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, 1997, approximately 66.5%
  of  sales  were  to five customers, one of which totaled 18.9%.   Two  of
  these customers comprised  48.8%  of  accounts receivable at February 28,
  1997 with locations in the Eastern United States.

NOTE 4 - INVENTORIES:
    Raw materials and supplies             $   19,887
    Work in process                             6,781
    Finished goods                            315,020

                        Total                $341,688



                                      10


                          EPOLIN, INC. AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               FEBRUARY 28, 1997


NOTE 5 - INCOME TAXES:

  Deferred tax assets at February 28, 1997  represents  recognition  of net
  operating  loss  carryforwards  and  for differences in using accelerated
  depreciation methods for book purposes as follows:
                                           1997         1996

    Total deferred tax assets              $413,263     502,611
    Less:   valuation allowance             113,214     115,142

                                            300,049     387,469

    Current portion                         100,555      92,820
    Non-current portion                    $199,494     294,649
  Deferred tax assets 
   include the following:

  Net operating loss carryforwards         $204,159     306,794
  Temporary differences - 
  principally accelerated 
  amortization of leasehold
  improvements for book purposes             95,890      80,675

                                           $300,049     387,469

  Income tax expense (credit) 
  consists of the following 
  components:

                                           1997         1996

    Current:
              State                        $ 35,300       36,528

    Deferred:
              Federal                        90,625     (318,053)
               State                         (3,205)      (2,942)

                  Total deferred             87,420     (320,995)

                                 Total     $122,720     (284,467)



                                      11


                          EPOLIN, INC. AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               FEBRUARY 28, 1997


NOTE 5 - INCOME TAXES (CONTINUED):

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

  Computed at the statutory rate          $112,972       116,177
          State income taxes (net)          23,298        24,108
          Decrease in deferred tax asset
            valuation allowance                  -      (418,763)

          Non-deductible items             (13,550)       (5,989)

              Total provision for taxes   $122,720      (284,467)

For  Federal  tax  purposes,  the  Company  has  available  approximately
$619,000 of net operating loss carryforwards  as  of  February  28, 1997,
which  expire  in  the  years 2005 through 2007.  In addition, there  are
State net operating loss  carryforwards of approximately $1,275,000 which
expire in the years 1997 through 2004.

NOTE 6 - ACCRUED SALARIES:

Four  officers and one former  employee  previously  elected  to  defer  a
portion  of  their  salaries  to  preserve  the  Company's  cash position.
Salaries of three officers and the former employee were waived and removed
from the books during 1996 and 1995 and credited to income.

On  April  25,  1995,  the  Board of Directors authorized the issuance  of
1,000,000 shares of common stock  to  the  remaining  officer  in  lieu of
$40,000  of his remaining accrued salary of $89,948.  The remaining unpaid
balance of  $49,948  was  credited  to selling, general and administrative
expenses.

NOTE 7 - EMPLOYEE BENEFITS:

SIMPLIFIED EMPLOYEE PENSION PLAN - Effective  June  1,  1994,  the Company
initiated  a  prototype  covering all eligible participating employees  as
defined. Employer contributions  totaled  $11,191 and $5,744 for the years
ended February 28, 1997 and February 29, 1996 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.

                                      12


                          EPOLIN, INC. AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               FEBRUARY 28, 1997


NOTE 7 - EMPLOYEE BENEFITS (CONTINUED):

Shares issued are determined at fifty percent of the closing bid price and
vested and delivered over a three year period.

At February 28, 1997, 20,000  vested  shares  of  common  stock covering a
previously awarded bonus have not been issued to an employee.

EMPLOYEE  STOCK OPTION PLAN - The Company previously adopted  an  Employee
Stock Option  Plan  ("Plan").   As of April 1996, options may no longer be
granted under the Plan.  Under the  terms  of  the  Plan,  options granted
thereunder  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.

      OUTSTANDING OPTIONS:
          Shares allocated                                  $490,000

          Option price                                      $   0.04

          Balance outstanding February 28, 1996             $      -

                 Granted                                     490,000
                 Expired                                           -
                 Exercised                                         -

          Balance outstanding February 28, 1997             $490,000

     All outstanding options are exercisable currently.

NOTE 8 - TREASURY STOCK:

Represents 42,445 shares returned  to  Company  when shares were deemed to
have no market value.


                                      13



                          EPOLIN, INC. AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               FEBRUARY 28, 1997



 NOTE 9 - RESEARCH AND DEVELOPMENT:

Included  in  selling, general and administrative expenses  are  costs  of
$170,468 and $152,700 for the years 1997 and 1996, respectively.

NOTE 10 - ACQUISITION:

On April 5, 1989, the Company acquired Accort Labs, Inc. in a business
combination accounted  for  as  a  pooling of interests which became a
wholly-owned subsidiary through the  exchange  of  896,424  shares  of
common stock for all of its outstanding stock.

NOTE 11 - 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 Dr. Murray S. Cohen and Mr. 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  Dr.  Murray S. Cohen and Mr. James A. Ivchenko were mandatory.   Other
directors declined to participate in this transaction.

The down payment  of $100,000 was obtained from Epolin, Inc., 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, entered into on  the  same day as the purchase of the property,
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
from the start of  the  second year.  Rent includes reimbursed real estate
taxes and insurance expenses under terms of the lease.



                                      14



                          EPOLIN, INC. AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               FEBRUARY 28, 1997


 NOTE 11 - COMMITMENTS (CONTINUED):


     The minimum annual rentals under the lease are as follows:

          YEARS ENDED
          FEBRUARY 28,        AMOUNTS

            1998              $97,740
            1999               97,740
            2000               97,740
            2001               97,740
            2002               65,160

Rental expense charged to  operations  amounted to $90,717 and $90,437
for the years 1997 and 1996, respectively.

DEFERRED COMPENSATION - On December 29, 1995, the Company entered into
a   deferred  compensation  agreement  with  an  officer   whereby   annual
compensation of $19,645 plus interest would be deferred until such time the
officer  reaches  age  65 or is terminated.  The obligation is being funded
with  a  life  insurance  policy.   Annual  payments  of  $32,000  for  ten
consecutive years shall commence  the  first day of the month following the
executive's 65th birthday or termination.

LICENSING AGREEMENT - The Company entered  into  a licensing agreement
in November 1985 (amended 1988) with one of its stockholders (now deceased)
for  the  exclusive  right to manufacture, produce, market,  use  and  sell
products and materials under U.S. Patent 4,387,215 related to the Company's
now abandoned expanding  monomer  technology.   Included in its terms was a
commitment for payment of annual fixed royalties  of  $50,000  and  royalty
payments as a percentage of gross sales.  Payment due November 30, 1989 was
paid over the twelve month period ending May 1990, with subsequent payments
postponed  until  such  time  as  demand  for  Expanding Monomer technology
commenced.  The Company abandoned this technology and has since reversed to
income  all  accruals  made  in prior years that related  to  unpaid  fixed
royalty payments.  Under the terms  of  the  agreement, the licensor's only
remedy  against  the Company for non-payment of  any  prior  fixed  royalty
payment is cancellation  of the license agreement. To date, no notification
regarding the termination  or  cancellation  of the licensing agreement has
been received from the licensor's estate.


                                      15

                          EPOLIN, INC. AND SUBSIDIARY
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               FEBRUARY 28, 1997



NOTE 12 - RELATED PARTY TRANSACTIONS:

At  February  28,  1997,  the Company has advanced  Epolin  Holding  Corp.
(controlled by the officers/stockholders  of  the Company) $4,056 covering
expenses related to the purchase of the premises leased by the Company.

Loan receivable - related party consists of the  remaining amount due from
loan by the Company to Epolin Holding Corp. covering  the down payment for
the purchase of the premises.



                                   16