UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                      WASHINGTON, DC 20549

                           FORM 10-Q

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

          For the quarterly period ended May 31, 2008

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

        For the transition period from ________ to ______

                Commission file number 000-17741

                          EPOLIN, INC.
     (Exact name of Registrant as Specified in its Charter)

New Jersey                                              22-2547226
(State or other jurisdiction                      (I.R.S. Employer
of incorporation or                            Identification No.)
organization)

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

                         (973) 465-9495
      (Registrant's Telephone Number, Including Area Code)

                         Not applicable
 (Former Name, Former Address and Former Fiscal Year, if Changed
                       Since Last Report)


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

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

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

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

State  the  number of shares outstanding of each of the  Issuer's
classes  of common stock, as of the latest practicable  date:  no
par value per share: 11,966,355 outstanding as of July 1, 2008.

<PAGE>

                          EPOLIN, INC.

                        TABLE OF CONTENTS

                                                       Page
PART I - FINANCIAL INFORMATION





Item 1.  Financial Statements.                            3
Item 2.  Management's Discussion and Analysis
         of Financial Condition and
         Results of Operations.                           3
Item 3.  Quantitative  and Qualitative  Disclosures
         About Market Risk.                               8
Item 4T. Controls and Procedures.                         8

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.                               9
Item 2.  Unregistered Sales of Equity Securities  and
         Use of Proceeds.                                 9
Item 3.  Default   upon   Senior   Securities.            9
Item 4.  Submission of Matters to a Vote of Security
         Holders.                                         9
Item 5.  Other Information.                               9
Item 6.  Exhibits.                                        9

SIGNATURES                                                10


<PAGE>
                 PART I - FINANCIAL INFORMATION

Item 1.   Financial Statements.

      See  the Consolidated Financial Statements annexed to  this
report.


Item  2.    Management's  Discussion and  Analysis  of  Financial
Condition and Results of Operations.

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

Forward-Looking Statements

     This report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs
and assumptions made by the Company's management as well as
information currently available to the management.  When used in
this document, the words "anticipate", "believe", "estimate", and
"expect" and similar expressions, are intended to identify
forward-looking statements.  Such statements reflect the current
views of the Company with respect to future events and are
subject to certain risks, uncertainties and assumptions.  Should
one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may
vary materially from those described herein as anticipated,
believed, estimated or expected.  Certain of these risks and
uncertainties are discussed under the caption "Uncertainties and
Risk Factors" in Part I, Item 1 "Description of Business" of the
Company's Form 10-KSB for the year ended February 29, 2008.  The
Company does not intend to update these forward-looking
statements.

Executive Overview

     Epolin, Inc. (the "Company", "we", "us" and "our") is a
specialized chemical company primarily engaged in the
manufacturing, marketing, research and development of infrared
dyes, laser absorbing dyes and infrared dye formulations.  Our
business is heavily weighted towards the development, manufacture
and sale of near infrared dyes.  Applications for these dyes
cover several markets that include laser protection, welding,
sunglasses, optical filters, glazing and imaging and security
inks and tagants.  We also manufacture specialty chemicals for
certain chemical manufacturers.

     We have succeeded in growing over the last decade based on
the development, application and manufacture of near infrared
dyes.     In recent years, we have embarked on an aggressive
campaign to make our dyes easier to use.  In this regard, we
offer technical service support for extrusion and injection
molding of our dyes with a variety of resin substrates.  Our dyes
can now be uniquely formulated to each customer's specifications
and manufactured in our own facility.  In addition, we hold a
broad range of dyes in inventory for immediate sale.

     We sell our products to manufacturers of plastics/resins,
credit cards, electronics, glass and other basic materials.  Our
customers are located in all regions of the world, although a
material portion of our business is dependent on certain domestic
customers, the loss of which could have a material effect on
operations.  As the service economy continues to dwarf the
manufacturing sector in the United States, we now offer our
customers added service in the form of formulated inks and
resins.  This has resulted in increasing our worldwide sales of
these products and, we believe, lessens the threat of competition
from lower cost dyes manufactured abroad.  During the three
months ended May 31, 2008, approximately 31.8% of sales were to
three customers.  During the three months ended May 31, 2007,
approximately 37.4% of sales were to three customers.  The loss
of one or more key customers could have a material adverse effect
on the Company.

Results of Operations

     The following tables set forth operations data for the three
months ended May 31, 2008 and 2007.

<PAGE>

                         Three Months Ended May 31,

                         2008      2007           % change

Sales                   $912,791  $842,001         8.4%

Gross profit             522,729   513,345         1.8%

Gross profit percentage     57.3%     61.0%       -3.7%

Selling, general
& administrative         293,647   295,999        -0.8%

Operating income         229,082   217,346         5.4%
Other Income              17,005    14,940        13.8%

Income before taxes      246,087   232,286         5.9%

Income taxes              96,935    79,510        21.9%

Net income
(after taxes)           $149,152  $157,776        -5.5%


Sales

     For the three months ended May 31, 2008, sales were $913,000
as compared to $842,000 for the three months ended May 31, 2007,
an increase of 71,000 or 8.4%.

     The increase in sales is primarily due to an increase in
sales in the light management market which increased by $69,000
for the quarter ended May 31, 2008 compared to the prior year
period.  Our custom dye market also increased by $5,000 during
the three months ended May 31, 2008 compared to May 31, 2007.
Sales in the eye protection market, which represents our oldest
and traditional market, showed no change in the three months
ended May 31, 2008 compared to the prior year period, and sales
in the ink and coating market decreased by $5,000 in the same
periods.  The decrease in sales in the ink and coating market is
primarily due to reduced sales in the security inks business,
which had been a key area of our growth from 2005 to 2007, but
has declined since then to approximately the level of sales we
achieved in this market in fiscal 2005.

     Sales overseas increased in Asia and Europe for the three
months ended May 31, 2008 while sales decreased in the United
States for the three months ended May 31, 2008 compared to the
prior year period.   For the three months ended May 31, 2008,
sales in Asia increased to $201,000 from $155,000 while in
Europe, sales increased to $85,000 for the three months ended May
31, 2008 from $22,000 for the prior year period.  In the United
States, sales decreased to $626,000 in the three months ended May
31, 2008 from $661,000 in the three months ended May 31, 2007.

Gross Profit

     Gross profit, defined as sales less cost of sales, was
$523,000 or 57.3% of sales for the three months ended May 31,
2008 compared to $513,000 or 61.0% of sales for the three months
ended May 31, 2007.

     Cost of sales was $390,000 for the three months ended May
31, 2008 which represented 42.7% of sales compared to $329,000
for the three months ended May 31, 2007 which represented 39.0%
of sales.  Total cost of materials increased $51,000 in the three
months ended May 31, 2008 compared to the prior year period,
while total factory overhead increased $10,000 in the three
months ended May 31, 2008 compared to the three months ended May
31, 2007.

Selling, General and Administrative Expenses

     Selling, general and administrative expenses decreased to
$294,000 or 32.2% of sales for the three months ended May 31,
2008 compared to $296,000 or 35.2% of sales for the three months
ended May 31, 2007, a decrease of $2,000.  Such decrease in
absolute dollars was primarily due to a decrease in officers'
salaries (primarily from the

<PAGE>

Chairman of the Board's decision to
become a part-time employee effective in September 2006 with a
corresponding reduction in his base salary) and a decrease in
directors and officers insurance in the three months ended May
31, 2008 offset by an increase in administrative salaries,
payroll taxes and employer contributions to our SEP Plan.   In
addition, we incurred a placement fee of $12,000 in the three
months ended May 31, 2007 for which there was no comparable item
in the three months ended May 31, 2008.

Operating Income

     Operating income, in terms of absolute dollars, increased to
$229,000 for the three months ended May 31, 2008 from $217,000
for the three months ended May 31, 2007, an increase of $12,000.
Operating income increased primarily due an increase in sales
together with a slight decrease in selling, general and
administrative expenses offset by an increase in cost of sales.
As a percentage of sales, operating income was 25.1% of sales for
the three months ended May 31, 2008 compared to 25.8% of sales
for the three months ended May 31, 2007.

Other Income

     Total other income for the three months ended May 31, 2008
was $17,000 as compared to $15,000 for the three months ended May
31, 2007.   We realized rental income of $4,500 for the three
months ended May 31, 2008 compared to no rental income for the
three months ended May 31, 2007.  Our interest income was $13,000
for the three months ended May 31, 2008 compared to $15,000 for
the prior year period.

Net Income

     During the three months ended May 31, 2008, we reported
income before taxes of $246,000 as compared to income before
taxes of $232,000 for the three months ended May 31, 2007, an
increase of $14,000.  Income taxes were $97,000 for the three
months ended May 31, 2008 compared to $80,000 for the three
months ended May 31, 2007, an increase of $17,000.  As a
percentage of our income, the amount of income taxes for the
three months ended May 31, 2008 increased compared to the prior
year period primarily due to tax depreciation deductions
resulting from the purchase of certain computer hardware and
software taken in the prior fiscal year which are not available
to us in the current fiscal year.    Net income after taxes was
$149,000 or $0.01 per share for the three months ended May 31,
2008 compared to net income after taxes of $153,000 or $0.01 per
share for the three months ended May 31, 2007.

     Net income in the future will be dependent upon our ability
to increase revenues faster than increases, if any, in our
selling, general and administrative expenses, research and
development expenses and other expenses.  Prior to fiscal 2007,
sales had grown for a number of consecutive years.  In fiscal
2007, however, sales decreased by $91,000 compared to fiscal 2006
and, in fiscal 2008, sales decreased by $17,000 compared to
fiscal 2007.   While sales have decreased, net income did improve
in fiscal 2008 by $101,000 compared to fiscal 2007 and net income
increased by $29,000 in fiscal 2007 compared to fiscal 2006.
During the first three months of fiscal 2009, we achieved an
increase in sales of $71,000 compared to the prior year period,
while our net income (although less by $4,000) was substantially
the same.

Operations Outlook

     Since fiscal 2005, we have been going through a period of
reassessing our direction in order to increase value for our
shareholders.  Our business, though reasonably healthy, did not
grow to the degree management anticipated from 2002 to 2005.
While the sales level of $2,880,000 reached during fiscal 2005
was at the time an all time high for the Company, it was not
significantly more than the sales level we achieved in 2004
($2,734,000), 2003 ($2,690,000) or 2002 ($2,550,000). The plateau
of sales during that four years was in contrast to the greater
sales growth the Company experienced in certain years prior to
2002.  Based upon these observations, we tried to learn what
could be done to stimulate growth and recapture the promise of
our early years.  As a result, we assembled a business plan and
began to make changes consistent with such plan.  The plan showed
us that developments coming out of our R&D were not reaching the
marketplace and therefore, not commanding their proper attention.
Through this teamwork of R&D with marketing, we revamped our web
site, streamlined our pricing structure and reached out to our
key customers and agents. We believe the business plan made clear
the necessity of hiring a Sales/Marketing executive along with
back up technical service help, both of which have been
accomplished.  In order to cover the cost of these additional
personnel and place a greater emphasis on company growth, we
suspended in fiscal 2005 the cash dividends program which we had
been in place during fiscal 2002, 2003 and 2004 in order to place
greater emphasis on business growth.  All of the foregoing
resulted in strong sales growth and we achieved $3,701,000 in
sales for fiscal 2006 which was $821,000 or 28.5% greater than


<PAGE>

the prior year.  Nevertheless, in fiscal 2007, sales decreased to
$3,610,000, a decrease of 2.5% from the prior year, and in fiscal
2008, sales decreased to $3,593,000, a decrease of 0.5% from the
prior year, although for the first three months of fiscal 2009,
we achieved an increase of $71,000 in sales compared to the first
three months of fiscal 2008.  During these periods of reduced
sales, we had a major decline in sales of security inks for the
credit card market which had been a key area of our growth in
recent periods.  While this market remains a major source of
business for us, we may not be able achieve the same type of
growth in the security inks market in the future.  Nevertheless,
we are confident that with our core group of products, we will be
able to maintain sales in our principal markets while always
seeking new areas for the use of our dyes.

Liquidity and Capital Resources

     Our primary source of funds is cash flow from operations in
the normal course of selling products.  On May 31, 2008, we had
working capital of $2,913,000, a debt to equity ratio of 0.13 to
1, and stockholders' equity of $3,821,000 compared to working
capital of $2,599,000, a debt to equity ratio of 0.19 to 1, and
stockholders' equity of $3,565,000 on May 31, 2007.  On May 31,
2008, we had $1,907,000 in cash and cash equivalents, total
assets of $4,305,000 and total liabilities of $484,000, compared
to $1,686,000 in cash and cash equivalents, total assets of
$4,230,000 and total liabilities of $665,000 on May 31, 2007.

     Net cash provided by operating activities for the three
months ended May 31, 2008 was $195,000 which was primarily the
result of net income of $149,000, plus decreases in accounts
receivable of $50,000, inventories of $33,000 and prepaid
expenses of $17,000, and increases in taxes payable of $56,000,
offset by a decrease in accrued expenses of $145,000.  Net cash
provided by operating activities for the three months ended May
31, 2007 was $219,000 which was primarily the result of net
income of $153,000, plus decreases in prepaid expenses of $20,000
and increases in accrued expenses of $63,000 and taxes payable of
$68,000, offset by increases in accounts receivable of $50,000
and decreases in accounts payable of $29,000.  Net cash used by
investing activities for the three months ended May 31, 2008 was
$29,000 compared to $46,000 for the three months ended May 31,
2007 which change was primarily due to a decrease in equipment
purchases.  For the three months ended May 31, 2008 and May 31,
2007, net cash used by financing activities was $239,000 which
was primarily due to the payment of dividends which occurred in
both the first three months of fiscal 2009 and the first three
months of fiscal 2008.

     We anticipate, based on currently proposed plans and
assumptions relating to our operations, that our current cash and
cash equivalents together with projected cash flows from
operations and projected revenues will be sufficient to satisfy
its contemplated cash requirements for more than the next 12
months.  Our contemplated cash requirements for the balance of
fiscal 2009 and beyond will depend primarily upon level of sales
of our products, inventory levels, product development, sales and
marketing expenditures and capital expenditures.

     Inflation has not significantly impacted our operations.

Significant Accounting Policies

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

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

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


<PAGE>

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

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

     Stock-based Compensation - We have adopted disclosure-only
provisions of SFAS No. 123 "Accounting for Stock-Based
Compensation," and SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an Amendment of FASB
Statement No. 123."  Compensation cost for stock options, if any,
is measured as the excess of the quoted market price of the stock
at the date of grant over the amount an employee must pay to
acquire the stock.

     In December 2004, the FASB issued Statement of Financial
Accounting Standards ("SFAS") No. 123(R), "Share-Based Payment".
SFAS 123R revises SFAS No. 123 and supersedes APB 25 to require
companies to measure and recognize in operations the cost of
employee services received in exchange for an award of equity
instruments based on the grant-date fair value.  That cost will
be recognized over the vesting period during which an employee is
required to provide service in exchange for the award.  On
April 14, 2005, the Securities and Exchange Commission issued a
ruling that amended the effective date for SFAS 123R. As a
result, we did adopt SFAS 123R on March 1, 2006.

Other Information

     Subsequent to the end of fiscal 2006, the Board of Directors
approved the adoption of a dividend policy under which we will
issue a regular annual cash dividend on shares of our Common
Stock.  The amount of the dividend, record date and payment date
will be subject to approval every year by the Board of Directors.
In accordance with the new dividend policy, a regular annual cash
dividend of $0.02 per share was paid in each of May 2006, May
2007 and May 2008.   In addition, since of the adoption of the
dividend policy in fiscal 2007, a special cash dividend of $0.02
per share has been paid in each of January 2007 and January 2008.

      In addition to the foregoing, and considering our cash
position, the Board of Directors has recently declared a
supplemental special cash dividend of $0.04 per share which will
be payable on August 7, 2008 to shareholders of record of our
Common Stock at the close of business on July 24, 2008.  Although
there can be no assurance, it is anticipated that we will pay
another special cash dividend in January 2009 similar to the
special cash dividends we have paid in January of prior years.

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

     In September 2007, Murray S. Cohen advised the Board of
Directors that beginning as of October 1, 2007 and in accordance
with his employment agreement he will reduce the time he devotes
to Company business to approximately 25% of his time.   Dr. Cohen
had been devoting approximately 50% of his time to the business
since September 2006.  Dr. Cohen has been and will remain
Chairman of the Board and Chief Scientist of the Company.


<PAGE>


Off-Balance Sheet Arrangements

     The Company has no off-balance sheet arrangements as defined
in Item 303(c) of Regulation S-B.


Item 3.   Quantitative and Qualitative Disclosures About Market
          Risk.

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


Item 4T.   Controls and Procedures.

     Under the supervision and with the participation of our
management, including the Principal Executive Officer and
Principal  Financial Officer, we have evaluated the effectiveness
of our disclosure controls and procedures (as defined in Rule 13a-
15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of
the period covered by this report. Based on that evaluation, our
Principal Executive Officer and Principal Financial Officer have
concluded that, as of May 31, 2008, these disclosure controls and
procedures were effective to ensure that all information required
to  be disclosed by us in the reports that we file or submit
under the Exchange Act is: (i) recorded, processed, summarized
and reported, within the time periods specified in the
Commission's rule and forms; and (ii) accumulated and
communicated to our management, including our Principal Executive
Officer and Principal Financial Officer, as appropriate to allow
timely decisions regarding required disclosure.

     There have been no significant changes in our internal
controls over financial reporting that occurred during the fiscal
quarter covered by this report that have materially affected, or
are reasonably likely to materially affect, our internal control
over financial reporting.

<PAGE>

                   PART II - OTHER INFORMATION

Item 1.    Legal Proceedings.

     There are no material pending legal proceedings to which we
are a party or to which any of our property is subject.


Item  2.   Unregistered  Sales of Equity Securities  and  Use  of
           Proceeds.

     None.


Item 3.    Defaults Upon Senior Securities.

     None.


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

     None.


Item 5.    Other Information.

          None.


Item 6.    Exhibits.

     31.1 Certification of Chief Executive Officer pursuant to
     Section 302 of the Sarbanes-Oxley Act of     2002 (Rules 13a-
     14 and 15d-14 of the Exchange Act)
     31.2 Certification of Principal Financial Officer pursuant
     to Section 302 of the Sarbanes-Oxley Act of  2002 (Rules 13a-
     14 and 15d-14 of the Exchange Act)
     32.1 Certification pursuant to Section 906 of the Sarbanes-
     Oxley Act of 2002 (18 U.S.C. 1350)

<PAGE>

                          SIGNATURES

     Pursuant to the requirements 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)


Dated:    July 11, 2008            By:  /s/ Greg Amato
                                       Greg Amato,
                                       Chief Executive Officer


Dated:    July 11, 2008            By:  /s/ James Ivchenko
                                       James Ivchenko,
                                       President
                                       (Principal Financial Officer)


<PAGE>


                           EPOLIN, INC. AND SUBSIDIARY

                              FINANCIAL STATEMENTS

                               THREE MONTHS ENDED

                              MAY 31, 2008 AND 2007

<PAGE>

                                    CONTENTS

                                                                     Page
                                                                    ------

Review Report of Independent Registered Accounting Firm                1

Consolidated Financial Statements:

   Consolidated Balance Sheets                                       2 - 3

   Consolidated Statements of Income                                   4

   Consolidated Statements of Stockholders' Equity                     5

   Consolidated Statements of Cash Flows                               6

Notes to Consolidated Financial Statements                          7 - 20

<PAGE>

         REVIEW REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

      We have reviewed the  accompanying  Consolidated  Balance Sheets of Epolin
Inc.  and  Subsidiary  as of May 31, 2008 and 2007 and the related  Consolidated
Statements of Income,  Stockholders'  Equity, and Cash Flows for the three-month
periods then ended. These interim financial statements are the responsibility of
the Company's management.

      We conducted  our review in  accordance  with the  standards of the Public
Company  Accounting  Oversight  Board  (United  States).  A  review  of  interim
financial information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting matters. It
is  substantially  less in scope than an audit  conducted in accordance with the
standards of the Public Company  Accounting  Oversight  Board,  the objective of
which is the expression of an opinion  regarding the financial  statements taken
as a whole. Accordingly, we do not express such an opinion.

      Based on our review, we are not aware of any material  modifications  that
should be made to the accompanying  interim financial  statements for them to be
in conformity with U.S. generally accepted accounting principles.

/s/ Weismann Associates LLC
---------------------------
Weismann Associates LLC
Branchburg, NJ 08865

                                        1

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                                May 31,
                                                                                    ---------------------------
                                                                                       2008              2007
                                                                                    -----------       ---------
<S>                                                                                 <C>               <C>
Current assets:

   Cash and cash equivalents                                                        $ 1,906,536       1,685,540
   Accounts receivable                                                                  568,800         596,625
   Inventories                                                                          609,687         656,249
   Prepaid expenses                                                                      43,655          57,781
   Prepaid taxes
                                                                                              -             470
   Deferred tax assets-current portion                                                   20,212          10,542
                                                                                    -----------       ---------

      Total current assets                                                            3,148,890       3,007,207
                                                                                    -----------       ---------

Plant, property and equipment - at cost:
   Land                                                                                  81,000          81,000
   Building and improvements                                                            734,578         710,758
   Laboratory equipment                                                                 189,300         280,368
   Furniture and office equipment                                                       217,795         195,388
   Leasehold improvements                                                               458,495         456,790
                                                                                    -----------       ---------

      Total                                                                           1,681,168       1,724,304

   Less: Accumulated depreciation and amortization                                      825,826         878,166
                                                                                    -----------       ---------

      Net plant, property and equipment                                                 855,342         846,138
                                                                                    -----------       ---------

Other assets:
   Deferred tax assets-non current portion                                               96,626         146,111
   Cash value - life insurance policy                                                   204,389         230,667
                                                                                    -----------       ---------

      Total other assets                                                                301,015         376,778
                                                                                    -----------       ---------

         Total                                                                      $ 4,305,247       4,230,123
                                                                                    ===========       =========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        2

<PAGE>

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

                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                              May 31,
                                                                                    ---------------------------
                                                                                        2008             2007
                                                                                    -----------       ---------
<S>                                                                                 <C>               <C>
Current liabilities:
   Accounts payable                                                                 $    13,742          23,112
   Accrued expenses                                                                     126,208         308,322
   Taxes payable:
      Payroll                                                                             1,889           1,889
      Income                                                                             93,835          75,194
                                                                                    -----------       ---------

         Total current liabilities                                                      235,674         408,517

Other liabilities - Deferred compensation                                               248,359         256,450
                                                                                    -----------       ---------

         Total liabilities                                                              484,033         664,967
                                                                                    -----------       ---------

Commitments and Contingencies

Stockholders' equity:
   Preferred stock, $15.513 par value; 940,000 shares authorized;
      none issued
   Preferred stock, series A convertible non-cumulative,
      $2.50 par value; redemption price and liquidation preference;
      60,000 shares authorized; 5,478 shares issued and redeemed

   Common stock, no par value; 20,000,000 shares authorized;
      12,915,000 shares issued, and 11,966,355
      shares outstanding at 2008 and 2007, respectively                               2,364,693       2,364,693
      Additional paid-in capital                                                         76,820          62,111
      Retained earnings                                                               1,730,783       1,489,434
                                                                                    -----------       ---------

            Total                                                                     4,172,296       3,916,238
      Less: Treasury stock - at cost                                                    351,082         351,082
                                                                                    -----------       ---------

         Total stockholders' equity                                                   3,821,214       3,565,156
                                                                                    -----------       ---------

            Total                                                                   $ 4,305,247       4,230,123
                                                                                    ===========       =========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        3

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
                    THREE MONTHS ENDED MAY 31, 2008 AND 2007

<TABLE>
<CAPTION>
                                                                                         2008            2007
                                                                                    --------------    ---------
<S>                                                                                 <C>               <C>
Sales                                                                               $      912,791       842,001
                                                                                    --------------    ----------
Cost of sales and expenses:
   Cost of sales                                                                           390,062       328,656
   Selling, general and administrative                                                     293,647       295,999
                                                                                    --------------    ----------

      Total                                                                                683,709       624,655
                                                                                    --------------    ----------

Operating income                                                                           229,082       217,346
                                                                                    --------------    ----------

Other income:

   Rental income                                                                             4,500             -
   Interest                                                                                 12,505        14,940
                                                                                    --------------    ----------

      Total                                                                                 17,005        14,940
                                                                                    --------------    ----------

Income before taxes                                                                        246,087       232,286

Income taxes                                                                                96,935        79,510
                                                                                    --------------    ----------

Net income                                                                          $      149,152       152,776
                                                                                    ==============    ==========

Per share data:
   Basic earnings per common share                                                  $         0.01          0.01
                                                                                    ==============    ==========

   Fully diluted earnings per common share                                          $         0.01          0.01
                                                                                    ==============    ==========

   Weighted average number of common shares outstanding                                 11,966,355    11,964,806
                                                                                    ==============    ==========

   Fully diluted number of common shares outstanding                                    12,006,791    12,003,424
                                                                                    ==============    ==========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        4

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    THREE MONTHS ENDED MAY 31, 2008 AND 2007

<TABLE>
<CAPTION>
                             Number of                 Additional
                            Outstanding    Common        Paid-in-    Retained   Treasury   Treasury   Stockholders'
                              Shares        Stock        Capital     Earnings    Shares      Costs       Equity
                            -----------  -----------   ----------   ---------   --------   --------   -------------
<S>                         <C>          <C>           <C>          <C>         <C>        <C>        <C>
Balance - March 1, 2007      12,915,000  $ 2,364,693       62,111   1,575,985    948,645   (351,082)      3,651,707

Dividends paid                        -            -            -    (239,327)         -          -        (239,327)

Net income                            -            -            -     152,776          -          -         152,776
                            -----------  -----------   ----------   ---------   --------   --------   -------------

Balance - May 31, 2007       12,915,000  $ 2,364,693       62,111   1,489,434    948,645   (351,082)      3,565,156
                            ===========  ===========   ==========   =========   ========   ========   =============

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

Dividends paid                        -            -            -    (239,327)         -          -        (239,327)

Net income                            -            -            -     149,152          -          -         149,152
                            -----------  -----------   ----------   ---------   --------   --------   -------------

Balance - May 31, 2008       12,915,000  $ 2,364,693       76,820   1,730,783    948,645   (351,082)      3,821,214
                            ===========  ===========   ==========   =========   ========   ========   =============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        5

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    THREE MONTHS ENDED MAY 31, 2008 AND 2007

<TABLE>
<CAPTION>
                                                                              2008           2007
                                                                          -----------    -----------
<S>                                                                       <C>            <C>
Cash flows from operating activities:
   Net income                                                             $   149,152        152,776
   Adjustments to reconcile net income to net cash provided by
      operating activities:
      Depreciation and amortization                                            25,233         19,315
      Deferred tax expense                                                      3,317          6,060
      Obligation under deferred compensation agreement                          1,676        (29,414)
   (Increase) decrease in:
      Accounts receivable                                                      49,645        (49,673)
      Inventories                                                              32,842         (4,601)
      Prepaid expenses                                                         16,757         19,986
      Prepaid taxes                                                                 -          1,450
   Increase (decrease) in:
      Accounts payable                                                          4,082        (28,670)
      Accrued expenses                                                       (144,547)        63,417
      Taxes payable                                                            56,435         68,658
                                                                          -----------    -----------

         Net cash provided by operating activities                            194,592        219,304
                                                                          -----------    -----------

Cash flows from investing activities:
   (Increase) decrease in cash value - life insurance policy                   (3,020)        (3,409)
   Payments for equipment                                                     (25,851)       (42,374)
                                                                          -----------    -----------

         Net cash used by investing activities                                (28,871)       (45,783)
                                                                          -----------    -----------
Cash flows from financing activities:
   Dividends paid                                                            (239,327)      (239,327)
                                                                          -----------    -----------

         Net cash used by financing activities                               (239,327)      (239,327)
                                                                          -----------    -----------

Increase (decrease) in cash                                                   (73,606)       (65,806)

Cash and cash equivalents:
   Beginning                                                                1,980,142      1,751,346
                                                                          -----------    -----------

   Ending                                                                 $ 1,906,536      1,685,540
                                                                          ===========    ===========

Supplemental disclosures of cash flows:
   Income taxes paid                                                      $   337,842          3,242
                                                                          ===========    ===========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        6

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2008 AND 2007

NOTE A - Organization:

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

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

NOTE B - Summary of Significant Accounting Policies:

Basis of Presentation - The interim Consolidated  Financial Statements presented
herein are unaudited  and should be read in  conjunction  with the  Consolidated
Financial Statements presented in the Company's Annual Report on Form 10-KSB for
the fiscal year ended  February 28, 2008.  Such interim  Consolidated  Financial
Statements reflect all normal and recurring  adjustments that, in the opinion of
management,  are necessary for a fair  presentation  of the financial  position,
results of operations  and cash flows of the Company for the periods  presented.
All significant intercompany accounts and transactions have been eliminated.

      The results of operations for the three-month interim period ended May 31,
2008 and 2007 are not  necessarily  indicative of the results of operations  for
the fiscal year ending February 29, 2009.

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

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

      Financial   instruments,   which   potentially   subject  the  Company  to
concentrations  of credit  risk,  consist  principally  of accounts  receivable.
Generally,  the  Company  does not require  collateral  or other  securities  to
support  its  accounts  receivable.  Three  customers  represented  33.9% of the
Company's trade receivables at May 31, 2008.

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

                                       7

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  MAY 31, 2008

NOTE B - Summary of Significant Accounting Policies (continued):

Principles of Consolidation - The accompanying Consolidated Financial Statements
include the accounts of the Company and Subsidiary.  Inter-company  transactions
and balances have been  eliminated  in  consolidation.  Condensed  consolidating
financial statements as of May 31, 2008 and for the three months then ended are:

                      CONDENSED CONSOLIDATING BALANCE SHEET

<TABLE>
<CAPTION>
                                          Epolin          Epolin
                                           Inc.        Holding, Corp.     Eliminations      Consolidated
                                        -----------    --------------     ------------      ------------
<S>                                     <C>            <C>                <C>               <C>
Current assets                          $ 2,834,373           314,517                -         3,148,890
Non-current assets                        1,468,704           642,718         (955,065)        1,156,357
                                        -----------    --------------     ------------      ------------
         Total                          $ 4,303,077           957,235         (955,065)        4,305,247
                                        ===========    ==============     ============      ============

   Total liabilities                    $   481,863            26,605          (24,435)          484,033
                                        -----------    --------------     ------------      ------------

Stockholders' equity:
   Common stock                           2,364,693                 -                -         2,364,693
   Additional paid-in capital                76,820                 -                -            76,820
   Retained earnings                      1,730,783           930,630         (930,630)        1,730,783
   Treasury stock                          (351,082)                -                -          (351,082)
                                        -----------    --------------     ------------      ------------

   Total stockholders' equity             3,821,214           930,630         (930,630)        3,821,214
                                        -----------    --------------     ------------      ------------

      Total                             $ 4,303,077           957,235         (955,065)        4,305,247
                                        ===========    ==============     ============      ============
</TABLE>

                   CONDENSED CONSOLIDATING STATEMENT OF INCOME

<TABLE>
<CAPTION>
                                          Epolin          Epolin
                                           Inc.        Holding, Corp.     Eliminations      Consolidated
                                        -----------    --------------     ------------      ------------
<S>                                     <C>            <C>                <C>               <C>
Sales                                   $   912,791                 -                -           912,791
Rental income                                     -            28,935          (24,435)            4,500
                                        -----------    --------------     ------------      ------------
      Total                                 912,791            28,935          (24,435)          917,291
                                        -----------    --------------     ------------      ------------

Cost of sales                               390,062                 -                -           390,062
Selling, general and administrative         311,363             6,719          (24,435)          293,647
                                        -----------    --------------     ------------      ------------

      Total                                 701,425             6,719          (24,435)          683,709
                                        -----------    --------------     ------------      ------------

Operating income                            211,366            22,216                -           233,582

Other income - interest                      11,956               549                -            12,505
                                        -----------    --------------     ------------      ------------

Income before taxes                         223,322            22,765                -           246,087

Income taxes                                 94,767             2,168                -            96,935
                                        -----------    --------------     ------------      ------------

Net income                              $   128,555            20,597                -           149,152
                                        ===========    ==============     ============      ============
</TABLE>

                                        8

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2008 AND 2007

NOTE B - Summary of Significant Accounting Policies (continued):

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

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 - The carrying amount of all reported assets
and liabilities,  which represent  financial  instruments,  approximate the fair
values of such amounts due to the nature of their relatively short maturity.

Plant,  Property and Equipment - Stated at cost. Provisions for depreciation are
computed on the straight-line  methods, based upon the estimated useful lives of
the various assets.

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

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

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

      Depreciation and amortization expense totaled $25,233 and $19,315 for the
three months ended May 31, 2008 and 2007, respectively.

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

                                        9

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2008 AND 2007

NOTE B - Summary of Significant Accounting Policies (continued):

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

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

Regulations - The Company expended approximately $3,600 through May 31, 2008 and
$9,702  through May 31, 2007, to maintain  compliance  with certain  Federal and
State  and  City  government  regulations  relative  to the  production  of near
infrared dyes and specialty chemicals.

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

Advertising  Costs -  Advertising  costs,  included in operating  expenses,  are
expensed as incurred. Advertising expenses amounted to $5,860 and $1,769 for the
three months ended May 31, 2008 and 2007, respectively.

                                       10

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2008 AND 2007

NOTE B - Summary of Significant Accounting Policies (continued):

Stock-Based  Compensation  - Prior to March 1, 2006 the  Company  accounted  for
stock based compensation under Statement of Financial  Accounting  Standards No.
123 Accounting for Stock-Based  Compensation  (FAS 123). As permitted under this
standard,  compensation  cost was  recognized  using the intrinsic  value method
described in Accounting  Principles  Board Opinion No. 25,  Accounting for Stock
Issued to Employees (APB 25).  Effective  March 1, 2006, the Company has adopted
Statement of Financial  Accounting  Standards ("SFAS") No. 123(R),  "Share-Based
Payment".  SFAS 123R  revises  SFAS No.  123 and  supersedes  APB 25 to  require
companies to measure and recognize in operations  the cost of employee  services
received in exchange for an award of equity  instruments based on the grant-date
fair value.  In accordance  with the  provisions of the  Securities and Exchange
Commission  Staff  Accounting  Bulletin  No.  107,  the  Company has adapted the
modified-prospective  transition  method.  Prior  periods  were not  restated to
reflect the impact of adopting the new standard.  As a result of the adoption of
FAS 123R,  stock-based  compensation expense recognized for the period ended May
31, 2008 includes  compensation  expense for all share-based payments granted on
or prior to,  but not yet  vested as of March 1,  2006,  based on the grant date
fair value estimated in accordance with the original  provisions of FAS 123, and
compensation cost for all share-based payments granted on or subsequent to March
1, 2006,  based on the grant date fair value  estimated in  accordance  with the
provisions of FAS 123R.

      During  the  three  months  ended May 31,  2007,  the  Company  recognized
stock-based  compensation  expenses  of  $5,688,  related to  outstanding  stock
options according to the provisions of FAS 123R, using the  modified-prospective
transition method.

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

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

      The weighted  average  Black-Scholes  value of options  granted  under the
stock  plans  during  the three  months  ended  May 31,  2008 and 2007 was $.18,
respectively.  The fair value of each option  grant is  estimated on the date of
grant using the Black-Scholes  option-pricing  model with the following weighted
average assumptions used for grants:

                                                  Three Months Ended
                                                         May 31,
                                                  ------------------
                                                    2008       2007
                                                  -------     ------
      Weighted average expected life in years           3          4
      Dividends per share                            0.04       0.04
      Volatility                                      7.0%       6.0%
      Risk-free interest rate                         4.9%       4.9%

                                       11

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2008 AND 2007

NOTE C - Income Taxes:

1. Federal and State deferred tax assets include:

                                                2008          2007
                                              --------      -------
      Temporary differences:
         Accelerated amortization             $  7,750       24,990
         Deferred compensation                  93,034      129,217
         Stock-based compensation               16,054        2,446
                                              --------      -------
             Total                             116,838      156,653

      Current portion                           20,212       10,542
                                              --------      -------

      Non-current portion                     $ 96,626      146,111
                                              ========      =======

2. Income tax expense:

                                                2008          2007
                                              --------      -------
      Current:
         Federal                              $ 73,400       59,300
         State                                  20,218       14,150
                                              --------      -------

             Total current                      93,618       73,450
                                              --------      -------

      Deferred:
         Federal                                 1,640        4,460
         State                                   1,677        1,600
                                              --------      -------

             Total deferred                      3,317        6,060
                                              --------      -------

                Total                         $ 96,935       79,510
                                              ========      =======

                                       12

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2008 AND 2007

NOTE D - Treasury Stock:

Consists  of 948,645  shares at a net cost of  $351,082,  as of May 31, 2008 and
2007, respectively.

NOTE E - Economic Dependency:

      A material  portion of the  Company's  business  is  dependent  on certain
domestic  customers,  the  loss  of  which  could  have  a  material  effect  on
operations.  During the three months ended May 31, 2008,  approximately 31.8% of
sales were to three  customers.  During  the three  months  ended May 31,  2007,
approximately  37.4% of sales were to three  customers,  two of these customers,
located in the Eastern United States, accounted for 30.5% of sales.

NOTE F - Rental Income Under Sublease:

      The Company  entered into an agreement with a non-related  party effective
September  1, 2005 for a term ending  October 31,  2007.  Under the terms of the
agreement, the tenant is to pay a base rent of $18,000 per year.

NOTE G - Research and Development:

      The Company has developed substantial research and development capability.
The  Company's  efforts are devoted to (i)  developing  new  products to satisfy
defined market needs, (ii) providing  quality  technical  services to assure the
continued  success  of its  products  for  its  customers'  applications,  (iii)
providing   technology  for   improvements   to  its  products,   processes  and
applications,  and (iv) providing  support to its  manufacturing  plant for cost
reduction,  productivity  and quality  improvement  programs.  Expenditures  for
Company  sponsored  product  research  and product  development  of $105,692 and
$79,594  were  included in cost of sales for the three months ended May 31, 2008
and 2007,  respectively.  Expenditures  for fiscal  year 2009 are  projected  to
remain at approximately the same level as in fiscal 2008.

NOTE H - Employee Benefits:

Simplified  Employee Pension Plan - Effective June 1, 1994, the Company provides
a SAR/SEP  plan to its  employees  as a  retirement  and  income  tax  reduction
facility. Full time employees are eligible to participate immediately. Employees
may make pre-tax and after-tax contributions subject to Internal Revenue Service
limitations.  Company  contributions  range  from  three to five  percent  after
completion of one year of service.  Employer  contributions  totaled $16,836 and
$11,750 for the three months ended May 31, 2008 and 2007, respectively.

                                       13

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2008 AND 2007

NOTE H - Employee Benefits (continued):

Stock  Option Plan - The Company  adopted the 1998 Stock Option Plan on December
1, 1998.  Under the terms of the plan,  the Company  reserved  750,000 shares of
common  stock for  issuance  pursuant  to the  exercise of options to be granted
under the Plan,  which do not meet the  requirements of Section 422 of the Code.
On  September  15,  2001,  the  Board of  Directors  increased  the  reserve  to
1,500,000.  Options  granted expire five or ten years after the date granted and
are subject to various vesting periods as follows: (1) none exercisable prior to
the first  anniversary of the date of grant, and (2) certain options will become
exercisable  as to 50% of the shares  underlying the option on each of the first
and second  anniversaries  of the date  granted (3) certain  options will become
exercisable as to 50% of the shares  underlying the option on each of the second
and fourth  anniversaries  of the date granted.  From inception  through May 31,
2008,  options granted totaled  1,242,000,  options  exercised  totaled 686,000,
options  cancelled or expired for all years  totaled  240,000.  All cancelled or
expired options are available for future grants.

      A summary of the status of the Company's  1998 stock option plan as of May
31,  2008,  and the  changes  during  the three  months  ended  May 31,  2008 is
presented below:

                                                       Weighted-Average
Fixed Options:                            Shares        Exercise Price
---------------------------              --------      ----------------
Balance - February 29, 2008               316,000      $            .50
                                         ========

Balance - May 31, 2008                    316,000      $            .50
                                         ========

Exercisable at May 31, 2008               316,000
                                         ========

Stock Option and  Stock-Based  Employee  Compensation - On November 1, 2004, the
Company  entered into an "Option  Agreement and  Investment  Agreement"  with an
employee, the terms of which are as follows:

      1. Stock Option - An option to purchase  100,000 shares of common stock at
      an exercise  price equal to the fair market value of the Company's  common
      stock at the date of grant.  The  option  is  exercisable  only  after the
      completion of the second year of employment.

      2.  Stock-Based  Employee  Compensation  - A grant of  100,000  shares  of
      restricted common stock one year from the date of the agreement,  provided
      the employee is then  employed by the  Company.  In  connection  with this
      agreement,  compensation  in the amount of $33,000 was charged to selling,
      general and administrative expenses for the year ended February 28, 2007.

                                       14

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2008 AND 2007

NOTE H - Employee Benefits (continued):

Stock Option Plans - The following table summarizes information about fixed
stock options outstanding at May 31, 2008:

         Outstanding Options                        Exercisable Options
---------------------------------------------  -----------------------------
                   Number    Weighted-Average    Number
   Range of     Outstanding     Remaining      Exercisable  Weighted-Average
Exercise Price   at 5/31/08  Contractual Life   at 5/31/08    Exercise Price
--------------  -----------  ----------------  -----------  ----------------
$          .41    116,000            6.0         116,000           .41
           .51    100,000            1.7         100,000           .51
           .54    200,000            2.3         200,000           .54

There are 498,000 options attributable to future grants.

NOTE I - Inventories:
                                              May 31,
                                      ----------------------
                                          2008         2007
                                      ----------     -------

      Raw materials and supplies      $  162,222      66,132
      Work in process                     50,550     217,501
      Finished goods                     396,915     372,616

         Total                        $  609,687     656,249
                                      ==========     =======

                                       15

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2008 AND 2007

NOTE J - Segment Reporting:

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

Sales by geographic area are as follows:

                                        Three Months Ended
                                             May 31,
                                      ----------------------
                                         2008         2007
                                      ----------     -------
      United States                   $  626,360     661,267
      Asia                               201,059     154,946
      Europe                              85,372      22,288
      Other nations                            -       3,500
                                      ----------     -------

         Total                        $  912,791     842,001
                                      ----------     -------

      One  customer,  located in Asia,  accounted  for more than 10% of revenues
from  continuing  operations.  This customer  accounted for 15.2% of sales.  All
sales to this customer were near infrared dies.

      Long-lived assets include net plant,  property and equipment.  The Company
had long-lived  assets of $855,342 and $846,138  located in the United States at
May 31, 2008 and 2007, respectively.

NOTE K - Accrued Expenses:

      Accrued  expenses  consisted of the following as of May 31, 2008 and 2007,
respectively:

                                         2008         2007
                                      ----------     -------
      Salaries and wages              $   20,712      16,104
      Employment agreement                73,023     273,150
      Purchases                           11,073           -
      Professional fees                   10,500      19,068
      Pension contribution                10,900           -

         Total accrued expenses       $  126,208     308,322
                                      ==========     =======

                                       16

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2008 AND 2007

NOTE L - Earnings Per Share:

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

                                                 Three Months Ended
                                                       May 31,
                                              -------------------------
                                                  2008          2007
                                              ------------   -----------

       Basic Earnings Per Common Share:

       Net income                             $    149,152       152,776
                                              ============   ===========

       Average common shares
          outstanding                           11,966,355    11,964,806
                                              ------------   -----------

       Basic earnings per
          common share                        $       0.01          0.01
                                              ------------   -----------

       Diluted Earnings Per Common Share:

       Net income                             $    149,152       152,776
                                              ------------   -----------

       Average common shares
          outstanding                           11,966,355    11,964,806

       Common shares issuable with respect
          to options issued to employees
          with a dilutive effect                    40,436        38,618

       Total diluted common shares
          outstanding                           12,006,791    12,003,424
                                              ============   ===========

       Diluted earnings per
          common share                        $       0.01          0.01
                                              ------------   -----------

                                       17

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2008 AND 2007

NOTE M - Commitments and Contingencies:

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

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

Rental expense charged to operations,  eliminated in consolidation,  amounted to
$24,435 for the three months ended May 31, 2008 and 2007, respectively.

Future minimum payments for the current option period:

        Fiscal Years Ending February:
        -----------------------------
                    2009                   $ 73,305
                    2010                     97,740
                    2011                     65,160

Deferred  Compensation  - On  December  29,  1995,  the Company  entered  into a
deferred compensation agreement with James Ivchenko, President, whose additional
annual compensation of $19,645 plus interest is deferred until he reaches age 65
or is terminated. The obligation is funded by the cash value in a life insurance
policy. Commencing on December 2005, annual payments will be made to the officer
in the amount of $32,000 for ten consecutive years.

     On  January 1,  1996,  the  Company  entered  into a deferred  compensation
agreement with Dr. Murray S. Cohen, PhD, Chairman of the Board,  wherein $25,000
per year was  accrued.  This  agreement,  with  unfunded  accruals  of  $79,041,
terminated  on June 25, 1998,  and will be paid upon  retirement in either 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.

                                       18

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2008 AND 2007

NOTE M - Commitments and Contingencies (continued):

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

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

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

     Accrued compensation included in selling,  general and administrative as of
May 31, 2008 and 2007 was $73,023 and $63,150, respectively.

Bonus  Agreement - Effective for the year ending  February 28, 2006, the company
shall pay Gregory  Amato,  CEO,  bonus  compensation  in an amount  equal to ten
percent of the increase,  if any, in the Company's current year consolidated net
income as  compared  to the  consolidated  net income for the fiscal year ending
February 28, 2006. The term net income shall mean  consolidated net income after
taxes but before any  extraordinary  items.  For  subsequent  fiscal years,  the
employee shall be eligible for cash bonuses in such amounts as determined by the
Compensation Committee.

                                       19

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2008 AND 2007

NOTE N - Dividends:

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

     In April 2007, the Company's Board of Directors declared a cash dividend of
$0.02 per share on all common shares outstanding. The dividend, in the amount of
$239,327  was paid on May 14,  2007 to  shareholders  of  record at the close of
business on April 30, 2007.

NOTE O - Environmental Matters

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