================================================================================

                                  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 NOVEMBER 30, 2009

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

Indicate by check mark 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:  12,166,355
outstanding as of January 1, 2010.

================================================================================

<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.       9
   Item 4T.  Controls and Procedures.                                          9

PART II - OTHER INFORMATION

   Item 1.   Legal Proceedings.                                               10
   Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.     10
   Item 3.   Default upon Senior Securities.                                  10
   Item 4.   Submission of Matters to a Vote of Security Holders.             10
   Item 5.   Other Information.                                               10
   Item 6.   Exhibits.                                                        10

SIGNATURES                                                                    11

                                        2

<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 in Part I, Item 1A "Risk  Factors" of the Company's  Form 10-K for the
year ended  February  28,  2009.  The  Company  does not intend to update  these
forward-looking statements.

EXECUTIVE OVERVIEW

      Epolin, Inc. (the "Company",  "we", "us" and "our") which was incorporated
in the State of New  Jersey  in May  1984,  is a  specialized  chemical  company
primarily engaged in the manufacturing,  marketing,  research and development of
dyes  and dye  formulations.  Our  business  is  heavily  weighted  towards  the
development,  manufacture and sale of near infrared dyes. Applications for these
dyes cover several markets that include laser protection,  welding,  sunglasses,
optical filters, glazing and imaging and security inks and tagants.  Paralleling
the growth of the dye business,  we maintain a level of production  and sales of
specialty products made on a custom basis. These include additives for plastics,
thermochromic  materials for use in paints as well as other specialty  chemicals
made in low volume to sell at prices that reflect the value of the product.

      We sell our products to  manufacturers of  plastics/resins,  credit cards,
electronics,  glass and other basic materials.  Our customers are located in all
regions of the world,  although a material  portion of our business is dependent
on certain domestic customers, the loss of which could have a material effect on
operations.  During the nine months ended November 30, 2009, approximately 38.0%
of sales were to three  customers.  During the nine months  ended  November  30,
2008,  approximately 31.0% of sales were to three customers.  The loss of one or
more key customers could have a material adverse effect on the Company.

RESULTS OF OPERATIONS

      The  following  tables  set forth  operations  data for the three and nine
months ended November 30, 2009 and 2008.

                                        3

<PAGE>

                         THREE MONTHS ENDED NOVEMBER 30,

                                                2009        2008       % change
                                             ----------   ----------   --------

Sales                                        $  805,913   $  733,045        9.9%

Gross profit                                    460,974      415,891       10.8%

Gross profit percentage                            57.2%        56.7%       0.5%

Selling, general & administrative               262,402      321,330      -18.3%
                                             ----------   ----------

Operating income                                198,572       94,561      110.0%
Other Income                                      5,893        9,372      -37.1%
                                             ----------   ----------

Income before taxes                             204,465      103,933       96.7%

Income taxes                                     77,457       28,952      167.5%
                                             ----------   ----------

Net income (after taxes)                     $  127,008   $   74,981       69.4%
                                             ==========   ==========

                         NINE MONTHS ENDED NOVEMBER 30,

                                                2009         2008      % change
                                             ----------   ----------   --------
Sales                                        $2,240,660   $2,497,516      -10.3%

Gross profit                                  1,289,528    1,413,855       -8.8%

Gross profit percentage                            57.6%        56.6%       1.0%

Selling, general & administrative               814,658      945,395      -13.8%
                                             ----------   ----------

Operating income                                474,870      468,460        1.4%
Other Income                                     25,017       49,381      -49.3%
                                             ----------   ----------

Income before taxes                             499,887      517,841       -3.5%

Income taxes                                    185,533      187,021      - 0.8%
                                             ----------   ----------

Net income (after taxes)                     $  314,354   $  330,820      - 5.0%
                                             ==========   ==========

SALES

      For the three months  ended  November  30,  2009,  sales were  $806,000 as
compared to $733,000 for the three months ended  November 30, 2008,  an increase
of $73,000 or 9.9%.  Sales  decreased  to  $2,241,000  for the nine months ended
November 30, 2009 from $2,498,000 for the nine months ended November 30, 2008, a
decrease of $257,000 or 10.3%.

      Such  increases in sales for the three months ended  November 30, 2009 are
primarily  due to  increased  sales in the eye  protection  market  which  sales
increased  by $85,000  and light  management  market  which sales  increased  by
$68,000  compared to the prior year period,  offset by reduced  sales in the ink
and  coating  market  which  decreased  by $76,000.  For the nine  months  ended
November 30, 2009,  decreases in sales are  primarily  due to a reduced sales in
the ink and coating  market which  decreased  by $253,000  compared to the prior
year period and reduced  sales in the custom  market  which sales  decreased  by
$72,000, offset by an increase in sales in the eye protection market which sales
increased  by $53,000 and an increase  in sales in the light  management  market
which sales increased by $19,000.

                                        4

<PAGE>

      For the three and nine months ended November 30, 2009, sales in the custom
market were  $23,000 and $64,000  compared to $29,000 and $136,000 for the three
and nine months ended November 30, 2008. Sales in the eye protection market were
$428,000 and  $1,155,000  for the three and nine months ended  November 30, 2009
compared to $343,000 and $1,102,000 for the nine months ended November 30, 2008.
With regard to the ink and coating  market,  sales were $97,000 and $425,000 for
the three and nine  months  ended  November  30, 2009  compared to $173,000  and
$678,000  for the three and nine months ended  November 30, 2008.  For the light
management  market,  sales were  $256,000  and  $591,000  for the three and nine
months ended  November 30, 2009  compared to $188,000 and $572,000 for the three
and nine months ended November 30, 2008.

      Categorized by geographic  area,  sales in the United States increased for
the nine months ended November 30, 2009 while sales decreased in Europe and Asia
compared to the prior year period.  For the nine months ended  November 30, 2009
compared  to the prior year  period,  sales  increased  in the United  States to
$1,869,000  from  $1,725,000,  while in Europe sales  decreased to $206,000 from
$336,000, and in Asia, sales decreased to $161,000 from $436,000.

GROSS PROFIT

      Gross profit,  defined as sales less cost of sales,  was $461,000 or 57.2%
of sales for the three  months ended  November 30, 2009  compared to $416,000 or
56.7% of sales the three  months ended  November  30, 2008.  For the nine months
ended November 30, 2009,  gross profit was $1,290,000 or 57.6% of sales compared
to $1,414,000 or 56.6% of sales for the nine months ended  November 30, 2008. In
terms of absolute  dollars,  gross profit increased $45,000 for the three months
ended  November  30,  2009  compared  to the prior year  period,  and  decreased
$124,000 for the nine months ended November 30, 2009 compared to the nine months
ended November 30, 2008.

      Cost of sales was $345,000  for the three  months ended  November 30, 2009
which represented 42.8% of sales compared to $317,000 for the three months ended
November 30, 2008 which  represented  43.3% of sales.  For the nine months ended
November 30, 2009, cost of sales was $951,000 which  represented 42.4% of sales,
compared  to  $1,084,000  which  represented  43.4% of sales for the nine months
ended November 30, 2008. In terms of absolute  dollars,  cost of sales increased
$28,000 for the three months ended  November 30, 2009 compared to the prior year
period and  decreased  $132,000  for the nine  months  ended  November  30, 2009
compared to the prior year period.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

      Selling, general and administrative expenses decreased to $262,000 for the
three months ended  November 30, 2009  compared to $321,000 for the three months
ended  November  30,  2008, a decrease of $59,000,  while  selling,  general and
administrative expenses decreased to $815,000 for the nine months ended November
30, 2009 from  $945,000 for the nine months ended  November 30, 2008, a decrease
of $130,000.  Such decrease in absolute  dollars was primarily due to a decrease
in officers' salaries and administrative  salaries,  and decreases in commission
and consulting fees offset by increases in professional fees primarily resulting
from costs  associated  with the  potential  sale of the  Company as  previously
disclosed and described  below. As a percentage of sales,  selling,  general and
administrative  expenses were 32.5% of sales for the three months ended November
30, 2009 compared to 43.8% for the three months ended  November 30, 2008,  while
for the nine months ended November 30, 2009, selling, general and administrative
expenses  were  36.4%  of sales  compared  to 37.8%  for the nine  months  ended
November 30, 2008.

OPERATING INCOME

      Operating income, in terms of absolute dollars,  increased to $199,000 for
the three months ended November 30, 2009 from $95,000 for the three months ended
November 30, 2008, an increase of $104,000,  while operating income increased to
$475,000 for the nine months ended  November 30, 2009 from $468,000 for the nine
months  ended  November  30,  2008,  an increase of $7,000.  For the three month
periods,  such change was primarily due to an increase in sales  together with a
decrease in cost of sales to sales ratio and a decrease in selling,  general and
administrative  expenses. With regard to the nine month periods, while sales did
decrease for the first nine months of fiscal 2010, such decrease was offset by a
greater decrease in selling,  general and  administrative  expenses as well as a
decrease in cost of sales to sales ratio compared to the prior year period.

                                        5

<PAGE>

OTHER INCOME

      Total  other  income was $6,000 and  $25,000 for the three and nine months
ended  November  30, 2009  compared to $9,000 and $49,000 for the three and nine
months ended  November 30, 2008.  We realize  rental income of $0 and $4,500 for
the three and nine months ended  November 30, 2009  compared to rental income of
$4,500 and $13,500 for the three and nine months ended  November  30, 2008.  Our
interest  income was  $6,000 and  $20,000  for the three and nine  months  ended
November 30, 2009 compared to $5,000 and $36,000 for the prior year periods.

NET INCOME

      During the three months ended November 30, 2009, we reported income before
taxes of $204,000 as compared to income  before  taxes of $104,000 for the three
months ended November 30, 2008, an increase of $100,000.  During the nine months
ended November 30, 2009, we reported income before taxes of $500,000 as compared
to income before taxes of $518,000 for the nine months ended  November 30, 2008,
a decrease of $18,000.  Income taxes were $77,000 and $186,000 for the three and
nine months ended November 30, 2009 while income taxes were $29,000 and $187,000
for the  comparable  periods of 2008. The changes in income taxes were generally
attributed  to changes from period to period in sales and  expenses.  Net income
after taxes was $127,000 or $0.01 per share for the three months ended  November
30, 2009 as compared to net income after taxes of $75,000 or $0.01 per share for
the three months ended November 30, 2008. For the nine months ended November 30,
2009,  net income after taxes was $314,000 or $0.03 per share as compared to net
income  after taxes of  $331,000  or $0.03 per share for the nine  months  ended
November 30, 2008. As a percentage of sales, net income after taxes was 15.8% of
sales for the three  months ended  November 30, 2009  compared to 10.2% of sales
for the three  months ended  November 30, 2008,  while for the nine months ended
November 30, 2009,  net income after taxes was 14.0% of sales  compared to 13.3%
of sales for the nine months ended November 30, 2008.

      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.  The largest
reduction in sales in recent years occurred in fiscal 2009 with sales decreasing
by $501,000  compared to fiscal 2008. While over the first nine months of fiscal
2010 sales decreased 10.0% compared to the prior year period,  we did achieve an
increase in sales of 10.0% for the quarter  ended  November 30, 2009 compared to
the quarter  ended  November 30,  2008.  Our level of sales for the three months
ended November 30, 2009 of $806,000 was our largest quarterly sales volume since
the quarter  ended  August 31, 2008 when we had sales of  $852,000.  While it is
certainly  too  soon to  place  any  significance  on this  development,  we are
encouraged  with  this  increase  in sales  to  $806,000  for the most  recently
completed quarter compared to the previous four consecutive quarters in which we
had sales of $709,000, $726,000, $594,000 and $733,000.

      Unlike fiscal 2008 and 2007,  however,  in which net income did improve in
each year  compared to the prior year,  net income in fiscal 2009  decreased  by
$396,000  compared  to fiscal  2008.  While  such  decrease  in net  income  has
continued into the first nine months of fiscal 2010, such decrease has been much
less with net income decreasing by $17,000 in the nine months ended November 30,
2009 compared to the nine months ended November 30, 2008.

OPERATIONS OUTLOOK

      Following a period of  readjustment  in our business  priorities,  we were
able to achieved $3,701,000 in sales for fiscal 2006 which was $821,000 or 28.5%
greater than the prior fiscal year. In fiscal 2007, however,  sales decreased to
$3,610,000,  a decrease of 2.5% from the prior year,  and in fiscal 2008,  sales
decreased to  $3,593,000,  a decrease of 0.5% from fiscal 2007.  This  continued
into fiscal 2009 in which sales  decreased at a much greater rate to  $3,092,000
or 14.0%  compared to fiscal 2008.  During the first nine months of fiscal 2010,
sales have decreased  10.3%  compared to the  comparable  period of fiscal 2009.
During  these  periods  of  reduced  sales,  we had a major  decline in sales of
security inks for the credit card market which had been a key area of our growth
from 2005 to 2007.  While this market  remains a source of  business  for us, we
will likely not be able to achieve  the same level of sales in the future  which
we achieved from 2005 to 2007 in the security inks market. Nevertheless,  we are
confident  that with our core  group of  products,  we will be able to  maintain
sales in our principal markets,  such as the eye protection market and the light
management market, while always seeking new areas for the use of our dyes.

                                        6

<PAGE>

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

LIQUIDITY AND CAPITAL RESOURCES

      Our  primary  source of funds is cash flow from  operations  in the normal
course of selling  products.  On November  30, 2009,  we had working  capital of
$2,969,000,  a debt to equity  ratio of 0.10 to 1, and  stockholders'  equity of
$3,883,000 compared to working capital of $2,561,000,  a debt to equity ratio of
0.15 to 1, and  stockholders'  equity of  $3,549,000  on February 28,  2009.  On
November 30, 2009, we had $1,811,000 in cash and cash equivalents,  total assets
of $4,269,000 and total liabilities of $386,000,  compared to $1,545,000 in cash
and cash  equivalents,  total  assets of  $4,096,000  and total  liabilities  of
$547,000 on February 28, 2009.

      Net cash  provided  by  operating  activities  for the nine  months  ended
November 30, 2009 was $259,000  which was  primarily the result of net income of
$314,000, plus a decrease in prepaid taxes of $227,000, and an increase in taxes
payable of $63,000,  offset by increases in accounts  receivable of $176,000 and
inventories of $32,000, and a decrease in accrued expenses of $237,000. Net cash
provided by operating activities for the nine months ended November 30, 2008 was
$445,000  which was  primarily  the  result  of net  income  of  $331,000,  plus
decreases in accounts  receivable of $187,000 and increases in accounts  payable
of $23,000,  offset by increases in  inventories of $73,000 and prepaid taxes of
$90,000,  and  decreases  in accrued  expenses of $11,000  and taxes  payable of
$37,000.

      Net cash  provided  by  investing  activities  for the nine  months  ended
November  30, 2009 was $7,000 due a decrease  in cash value of a life  insurance
policy of $35,000  offset by payments  for  property  and  equipment of $28,000,
compared to net cash used by investing activities of $82,000 for the nine months
ended  November  30, 2008 due to an  increase in cash value of a life  insurance
policy of $9,000 and payments for property and equipment of $74,000.

      For the nine months ended November 30, 2009, there were no cash flows from
or  used  in  financing  activities  compared  to  $718,000  used  in  financing
activities in the nine months ended  November 30, 2008 due to dividends  paid to
shareholders.  There were no comparable  dividends paid in the nine months ended
November 30, 2009.

      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 2010 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.

                                        7

<PAGE>

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

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

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

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

RECENTLY ADOPTED ACCOUNTING STANDARDS

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

      Also,  effective  March 1, 2008,  we adopted  SFAS No. 159 "The Fair Value
Option for Financial Assets and Financial  Liabilities" ("FAS 159") which allows
an entity  the  irrevocable  option to elect  fair  value  for the  initial  and
subsequent  measurement  for  certain  financial  assets  and  liabilities  on a
contract-by-contract  basis.  As of February 28,  2009,  we have not elected the
fair value option for any additional  financial  assets and  liabilities  beyond
those  already  prescribed by accounting  principles  generally  accepted in the
United States.

                                        8

<PAGE>

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

OTHER INFORMATION

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

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

OFF-BALANCE SHEET ARRANGEMENTS

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

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
November 30, 2009,  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.

                                        9

<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.

      Pursuant to the Epolin,  Inc.  2008 Stock  Incentive  Plan,  each director
shall  receive a stock  award  annually  of 25,000  shares of Common  Stock.  On
October 21, 2009, a total of 100,000  shares of Common Stock were granted to the
Company's four  directors.  All of such  securities were issued in reliance upon
the exemption from  registration  pursuant to Section 4(2) of the Securities Act
of 1933, as amended,  for  "transactions  by the issuer not involving any public
offering".

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)

                                       10

<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: January 13, 2010                 By: /s/ Greg Amato
       ----------------                     --------------
                                            Greg Amato,
                                            Chief Executive Officer

Dated: January 13, 2010                 By: /s/ James Ivchenko
       ----------------                     ------------------
                                            James Ivchenko,
                                            President
                                            (Principal Financial Officer)

                                       11

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY

                  CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

                                NINE MONTHS ENDED

                           NOVEMBER 30, 2009 AND 2008

<PAGE>

                                    CONTENTS

                                                                           PAGE
                                                                          ------

Consolidated Financial Statements:

   Consolidated Balance Sheets (Unaudited)                                2 - 3

   Consolidated Statements of Income Nine Months Ended
       (Unaudited)                                                          4

   Consolidated Statements of Income Three Months Ended
       (Unaudited)                                                          5

   Consolidated Statements of Stockholders' Equity (Unaudited)              6

   Consolidated Statements of Cash Flows (Unaudited)                        7

Notes to Consolidated Financial Statements (Unaudited)                    8 - 24

                                        1

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                      NOVEMBER 30,
                                                          2009       FEBRUARY 28,
                                                      (UNAUDITED)        2009
                                                      ------------   ------------
<S>                                                   <C>            <C>
CURRENT ASSETS:
   Cash and cash equivalents                          $  1,811,055      1,544,966
   Accounts receivable                                     547,438        371,443
   Inventories                                             698,982        667,184
   Prepaid expenses                                         58,629         56,298
   Prepaid taxes                                             1,100        228,346
   Deferred tax assets-current portion                      11,804         18,377
                                                      ------------   ------------

      Total current assets                               3,129,008      2,886,614
                                                      ------------   ------------

PLANT, PROPERTY AND EQUIPMENT - AT COST:
   Land                                                     81,000         81,000
   Building and improvements                               767,300        767,300
   Laboratory equipment                                    191,549        191,549
   Furniture and office equipment                          260,962        233,387
   Leasehold improvements                                  532,131        532,131
                                                      ------------   ------------

      Total                                              1,832,942      1,805,367

   Less: Accumulated depreciation and amortization         981,142        905,242
                                                      ------------   ------------

      Net plant, property and equipment                    851,800        900,125
                                                      ------------   ------------

OTHER ASSETS:
   Deferred tax assets-non current portion                 110,044         95,504
   Cash value - life insurance policy                      178,443        213,452
                                                      ------------   ------------

      Total other assets                                   288,487        308,956
                                                      ------------   ------------

             Total                                    $  4,269,295      4,095,695
                                                      ============   ============
</TABLE>

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

                                        2

<PAGE>

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

                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                               NOVEMBER 30,
                                                                                                   2009       FEBRUARY 28,
                                                                                                (UNAUDITED)       2009
                                                                                               ------------   ------------
<S>                                                                                            <C>            <C>
CURRENT LIABILITIES:
   Accounts payable                                                                            $     48,029         38,698
   Accrued expenses                                                                                  47,168        284,424
   Taxes payable:
      Income                                                                                         62,900             --
      Payroll                                                                                         2,208          2,208
                                                                                               ------------   ------------

            Total current liabilities                                                               160,305        325,330

OTHER LIABILITIES - Deferred compensation                                                           225,659        221,388
                                                                                               ------------   ------------

            Total liabilities                                                                       385,964        546,718
                                                                                               ------------   ------------

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; 13,115,000 and 13,015,000
         shares issued, and 12,166,355 and 12,066,355 shares outstanding at
         November 30, 2009 and February 28, 2009, repectively                                     2,364,693      2,364,693
         Additional paid-in capital                                                                 124,820        104,820
         Retained earnings                                                                        1,744,900      1,430,546
                                                                                               ------------   ------------

               Total                                                                              4,234,413      3,900,059
         Less: Treasury stock - at cost                                                             351,082        351,082
                                                                                               ------------   ------------

            Total stockholders' equity                                                            3,883,331      3,548,977
                                                                                               ------------   ------------

                  Total                                                                        $  4,269,295      4,095,695
                                                                                               ============   ============
</TABLE>

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

                                        3

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                  CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                  NINE MONTHS ENDED NOVEMBER 30, 2009 AND 2008

<TABLE>
<CAPTION>
                                                                  2009               2008
                                                             ---------------    --------------
<S>                                                          <C>                <C>
SALES                                                        $     2,240,660         2,497,516
                                                             ---------------    --------------

COST OF SALES AND EXPENSES:
   Cost of sales                                                     951,132         1,083,661
   Selling, general and administrative                               814,658           945,395
                                                             ---------------    --------------

      Total                                                        1,765,790         2,029,056
                                                             ---------------    --------------

OPERATING INCOME                                                     474,870           468,460
                                                             ---------------    --------------

OTHER INCOME:
   Rental income                                                       4,500            13,500
   Interest                                                           20,517            35,881
                                                             ---------------    --------------

      Total                                                           25,017            49,381
                                                             ---------------    --------------

INCOME BEFORE TAXES                                                  499,887           517,841

INCOME TAXES                                                         185,533           187,021
                                                             ---------------    --------------

NET INCOME                                                   $       314,354           330,820
                                                             ===============    ==============

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

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

   Weighted average number of common shares outstanding           12,080,847        11,999,446
                                                             ===============    ==============

   Fully diluted number of common shares outstanding              12,083,747        12,039,882
                                                             ===============    ==============
</TABLE>

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

                                        4

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                  CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                  THREE MONTHS ENDED NOVEMBER 30, 2009 AND 2008

<TABLE>
<CAPTION>
                                                                  2009               2008
                                                             ---------------    --------------
<S>                                                          <C>                <C>
SALES                                                        $       805,913           733,045
                                                             ---------------    --------------

COST OF SALES AND EXPENSES:
   Cost of sales                                                     344,939           317,154
   Selling, general and administrative                               262,402           321,330
                                                             ---------------    --------------

      Total                                                          607,341           638,484
                                                             ---------------    --------------

OPERATING INCOME                                                     198,572            94,561
                                                             ---------------    --------------

OTHER INCOME:
   Rental income                                                          --             4,500
   Interest                                                            5,893             4,872
                                                             ---------------    --------------

      Total                                                            5,893             9,372
                                                             ---------------    --------------

INCOME BEFORE TAXES                                                  204,465           103,933

INCOME TAXES                                                          77,457            28,952
                                                             ---------------    --------------

NET INCOME                                                   $       127,008            74,981
                                                             ===============    ==============

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           12,109,834        12,066,355
                                                             ===============    ==============

   Fully diluted number of common shares outstanding              12,112,734        12,106,791
                                                             ===============    ==============
</TABLE>

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

                                        5

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
                  NINE MONTHS ENDED NOVEMBER 30, 2009 AND 2008

<TABLE>
<CAPTION>
                                                               ADDITIONAL
                                 NUMBER OF        COMMON        PAID-IN-       RETAINED     TREASURY    TREASURY    STOCKHOLDERS'
                               SHARES ISSUED      STOCK         CAPITAL        EARNINGS      SHARES      STOCK         EQUITY
                               -------------   -----------    ------------    ----------    --------    ---------   -------------
<S>                            <C>             <C>            <C>             <C>           <C>         <C>         <C>
BALANCE - March 1, 2008           12,915,000   $ 2,364,693          76,820     1,820,958     948,645     (351,082)      3,911,389

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

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

NET INCOME                                --            --              --       330,820          --           --         330,820
                               -------------   -----------    ------------    ----------    --------    ---------   -------------

BALANCE - November 30, 2008       13,015,000   $ 2,364,693         104,820     1,433,797     948,645     (351,082)      3,552,228
                               =============   ===========    ============    ==========    ========    =========   =============

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

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

NET INCOME                                --            --              --       314,354          --           --         314,354
                               -------------   -----------    ------------    ----------    --------    ---------   -------------

BALANCE - November 30, 2009       13,115,000   $ 2,364,693         124,820     1,744,900     948,645     (351,082)      3,883,331
                               =============   ===========    ============    ==========    ========    =========   =============
</TABLE>

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

                                        6

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                  NINE MONTHS ENDED NOVEMBER 30, 2009 AND 2008

<TABLE>
<CAPTION>
                                                                               2009         2008
                                                                           -----------   ---------
<S>                                                                        <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                              $   314,354     330,820
   Adjustments to reconcile net income to net cash provided by operating
    activities:
      Depreciation and amortization                                             75,900      77,579
      Deferred tax expense                                                      (7,967)      6,638
      Stock-based compensation                                                  20,000      28,000
      Obligation under deferred compensation agreement                           4,271       5,029
   (Increase) decrease in:
      Accounts receivable                                                     (175,995)    186,538
      Inventories                                                              (31,798)    (72,909)
      Prepaid expenses                                                          (2,331)       (538)
      Prepaid taxes                                                            227,246     (90,450)
   Increase (decrease) in:
      Accounts payable                                                           9,331      22,722
      Accrued expenses                                                        (237,256)    (11,407)
      Taxes payable                                                             62,900     (37,400)
                                                                           -----------   ---------

         Net cash provided by operating activities                             258,655     444,622
                                                                           -----------   ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
   (Increase) decrease in cash value - life insurance policy                    35,009      (8,603)
   Payments for property and equipment                                         (27,575)    (73,713)
                                                                           -----------   ---------

         Net cash provided (used) in investing activities                        7,434     (82,316)
                                                                           -----------   ---------

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

INCREASE (DECREASE) IN CASH                                                    266,089    (355,675)

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

   Ending                                                                  $ 1,811,055   1,624,467
                                                                           ===========   =========

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

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

                                        7

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 unaudited interim consolidated financial statements
as of and for the three months and nine months ended November 30, 2009 have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission (the "SEC") for interim financial reporting and should
be read in conjunction with the Consolidated Financial Statements presented in
the Company's Annual Report on Form 10-K for the fiscal year ended February 28,
2009. 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 consolidated balance sheets, consolidated operating
results and consolidated cash flows for the periods presented in accordance with
accounting principles generally accepted in the United States of America. All
significant intercompany accounts and transactions have been eliminated.

      The results of operations for the nine-month interim period ended November
30, 2009 and 2008 are not  necessarily  indicative  of the results of operations
for the fiscal year ending February 28, 2010.

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

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

      Financial   instruments,   which   potentially   subject  the  Company  to
concentrations  of credit  risk,  consist  principally  of accounts  receivable.
Generally,  the  Company  does not require  collateral  or other  securities  to
support  its  accounts  receivable.  Four  customers  represented  49.7%  of the
Company's trade receivables at November 30, 2009.

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.

                                        8

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

PRINCIPLES OF CONSOLIDATION - The accompanying  Unaudited Consolidated Financial
Statements  include the  accounts of the Company and  Subsidiary.  Inter-company
transactions  and balances  have been  eliminated  in  consolidation.  Condensed
Unaudited Consolidating Financial Statements as of November 30, 2009 and for the
nine months then ended are:

                      CONDENSED CONSOLIDATING BALANCE SHEET

<TABLE>
<CAPTION>
                                         EPOLIN         EPOLIN
                                          INC.      HOLDING, CORP.   ELIMINATIONS   CONSOLIDATED
                                      -----------   --------------   ------------   ------------
<S>                                   <C>           <C>              <C>            <C>
Current assets                        $ 2,681,165          447,843             --      3,129,008
Non-current assets                      1,588,130          633,509     (1,081,352)     1,140,287
                                      -----------   --------------   ------------   ------------
      Total                           $ 4,269,295        1,081,352     (1,081,352)     4,269,295
                                      ===========   ==============   ============   ============

   Total liabilities                  $   385,964           24,435        (24,435)       385,964
                                      -----------   --------------   ------------   ------------

Stockholders' equity:
   Common stock                         2,364,693               --             --      2,364,693
   Additional paid-in capital             124,820               --             --        124,820
   Retained earnings                    1,744,900        1,056,917     (1,056,917)     1,744,900
   Treasury stock                        (351,082)              --             --       (351,082)
                                      -----------   --------------   ------------   ------------

   Total stockholders' equity           3,883,331        1,056,917     (1,056,917)     3,883,331
                                      -----------   --------------   ------------   ------------

      Total                           $ 4,269,295        1,081,352     (1,081,352)     4,269,295
                                      ===========   ==============   ============   ============
</TABLE>

                   CONDENSED CONSOLIDATING STATEMENT OF INCOME

<TABLE>
<CAPTION>
                                         EPOLIN         EPOLIN
                                          INC.      HOLDING, CORP.   ELIMINATIONS   CONSOLIDATED
                                      -----------   --------------   ------------   ------------
<S>                                   <C>           <C>              <C>            <C>
Sales                                 $ 2,240,660               --             --      2,240,660
Rental income                                  --           77,805        (73,305)         4,500
                                      -----------   --------------   ------------   ------------
      Total                             2,240,660           77,805        (73,305)     2,245,160
                                      -----------   --------------   ------------   ------------

Cost of sales                             951,132               --             --        951,132
Selling, general and administrative       865,130           22,833        (73,305)       814,658
                                      -----------   --------------   ------------   ------------

      Total                             1,816,262           22,833        (73,305)     1,765,790
                                      -----------   --------------   ------------   ------------

Operating income                          424,398           54,972             --        479,370

Other income - interest                    14,933            5,584             --         20,517
                                      -----------   --------------   ------------   ------------

Income before taxes                       439,331           60,556             --        499,887

Income taxes                              180,733            4,800             --        185,533
                                      -----------   --------------   ------------   ------------
Net income                            $   258,598           55,756             --        314,354
                                      ===========   ==============   ============   ============
</TABLE>

                                        9

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

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

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

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

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

      Depreciation and amortization  expense totaled $75,900 and $77,579 for the
nine months ended November 30, 2009 and 2008, respectively.

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

      FASB  Interpretation No. 48, ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES --
AN INTERPRETATION  OF FASB STATEMENT NO. 109 (FIN 48),  clarifies the accounting
for  uncertainty in income tax  positions,  as defined.  FIN 48 requires,  among
other  matters,  that the Company  recognize in its  financial  statements,  the
impact of a tax  position,  if that  position  is more  likely than not of being
sustained on audit,  based on the technical merits of the position.  The Company
became subject to the provisions of FIN 48 as of March 1, 2007, the beginning of
fiscal year ended 2008, and analyzed the filing  positions in all of the federal
and state jurisdictions where it is required to file income tax returns, as well
as all open tax  years in these  jurisdictions.  The  adoption  of FIN 48 had no
impact on the Company's  financial  statements for fiscal year ended 2009. As of
November  30, 2009 and 2008,  the Company  did not record any  unrecognized  tax
benefits. The Company's policy, if it had unrecognized benefits, is to recognize
accrued interest and penalties  related to unrecognized tax benefits as interest
expense and other expense, respectively.

                                       10

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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  $33,669 and $24,822  through
November 30, 2009 and 2008,  respectively,  to maintain  compliance with certain
Federal,  State and City  government  regulations  relative to the production of
near infrared dyes and specialty chemicals.

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

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

ADVERTISING  COSTS -  Advertising  costs,  included in operating  expenses,  are
expensed as incurred.  Advertising  expenses amounted to $13,096 and $13,356 for
the nine months ended November 30, 2009 and 2008, respectively.

                                       11

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

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

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

      The weighted  average  Black-Scholes  value of options  granted  under the
stock plans  during the nine months  ended  November 30, 2009 and 2008 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:

                                                      YEARS ENDED
                                                -----------------------
                                                      NOVEMBER 30,
                                                -----------------------
                                                   2009         2008
                                                ----------   ----------
      Weighted average expected life in years            2            3
      Dividends per share                               --         0.06
      Volatility                                       7.0%         7.0%
      Risk-free interest rate                          2.8%         4.3%

                                       12

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

      Also,  effective March 1, 2008, the Company adopted SFAS No. 159 "The Fair
Value Option for Financial Assets and Financial  Liabilities"  ("FAS 159") which
allows an entity the irrevocable  option to elect fair value for the initial and
subsequent  measurement  for  certain  financial  assets  and  liabilities  on a
contract-by-contract basis. As of November 30, 2009, the Company has not elected
the fair value option for any additional financial assets and liabilities beyond
those  already  prescribed by accounting  principles  generally  accepted in the
United States.

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

                                       13

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE C - INCOME TAXES:

1. Federal and State deferred tax assets include:

                                          NOVEMBER 30,
                                      -------------------
                                         2009       2008
                                      ---------   -------
   Temporary differences:
      Accelerated amortization        $   8,761    11,877
      Deferred compensation              97,033    85,586
      Stock-based compensation           16,054    16,054
                                      ---------   -------
         Total                          121,848   113,517

   Less: Current portion                 11,804    18,770
                                      ---------   -------

   Non-current portion                $ 110,044    94,747
                                      =========   =======

2. Income tax:

                                          NOVEMBER 30,
                                      -------------------
                                         2009       2008
                                      ---------   -------
   Current:
      Federal                         $ 150,200   142,776
      State                              43,300    37,607
                                      ---------   -------

         Total current                  193,500   180,383
                                      ---------   -------

   Deferred:
      Federal                            (8,590)    4,179
      State                                 623     2,459
                                      ---------   -------

         Total deferred                  (7,967)    6,638
                                      ---------   -------

            Total                     $ 185,533   187,021
                                      =========   =======

                                       14

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE D - TREASURY STOCK:

Consists of 948,645  shares at a net cost of  $351,082,  as of November 30, 2009
and February 28, 2009, respectively.  There were no purchases of treasury shares
made during the nine months ended  November 30, 2009 and the year ended February
28, 2009, respectively.

NOTE E - ECONOMIC DEPENDENCY:

      A material  portion of the  Company's  business  is  dependent  on certain
domestic  customers,  the  loss  of  which  could  have  a  material  effect  on
operations.  During the nine months ended November 30, 2009, approximately 38.0%
of sales were to three  customers.  During the nine months  ended  November  30,
2008, approximately 31.0% of sales were to three customers.

NOTE F - RENTAL INCOME UNDER SUBLEASE:

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

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 $293,030 and
$342,611 were  included in cost of sales for the nine months ended  November 30,
2009 and 2008,  respectively.  Expenditures  for the fiscal  year ended 2010 are
projected to remain at approximately the same level as in fiscal 2009.

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 $34,586 and
$40,905 for the nine months ended November 30, 2009 and 2008, respectively.

                                       15

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE H - EMPLOYEE BENEFITS (CONTINUED):

STOCK  OPTION PLAN - The Company  adopted the 1998 Stock Option Plan on December
1, 1998.  Under the terms of the plan,  the Company  reserved  750,000 shares of
common  stock for  issuance  pursuant  to the  exercise of options to be granted
under the Plan,  which do not meet the  requirements of Section 422 of the Code.
On  September  15,  2001,  the  Board of  Directors  increased  the  reserve  to
1,500,000.  Options  granted expire five or ten years after the date granted and
are subject to various vesting periods as follows: (1) none exercisable prior to
the first  anniversary  of the date of grant,  and (2)  certain  options  become
exercisable  as to 50% of the shares  underlying the option on each of the first
and  second  anniversaries  of the  date  granted  (3)  certain  options  become
exercisable as to 50% of the shares  underlying the option on each of the second
and fourth  anniversaries of the date granted.  From inception  through November
30, 2009, options granted totaled 1,242,000,  options exercised totaled 686,000;
options cancelled or expired for all years totaled 311,000.

      A summary of the status of the  Company's  1998  stock  option  plan as of
November 30,  2009,  and the changes  during the nine months ended  November 30,
2009 and 2008 is presented below:

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

Balance - November 30, 2009         245,000         $.49
                                    =======

Exercisable at November 30, 2009    245,000         $.49
                                    =======

STOCK OPTION PLANS - The following table summarizes information about fixed
stock options outstanding at November 30, 2009:

              OUTSTANDING OPTIONS                       EXERCISABLE OPTIONS
-----------------------------------------------   ------------------------------
                    NUMBER     WEIGHTED-AVERAGE      NUMBER
   RANGE OF      OUTSTANDING       REMAINING      EXERCISABLE   WEIGHTED-AVERAGE
EXERCISE PRICE   AT 11/31/09   CONTRACTUAL LIFE   AT 11/31/09    EXERCISE PRICE
--------------   -----------   ----------------   -----------   ----------------
     $.41           95,000            4.2            95,000            .23
      .54          150,000            0.6           150,000            .68

                                       16

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE H - EMPLOYEE BENEFITS (CONTINUED):

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

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

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

      The 2008  Plan  provides  that on  September  1 of each  year,  commencing
September  1, 2008,  each  person  who  serves as a Director  on such date shall
automatically receive a stock award of 25,000 shares of Common Stock. The dollar
value of the  shares of Common  Stock  granted  on  September  1 of each year is
calculated  based upon the fair market  value of our Common Stock at the date of
grant. Stock-based compensation in the amount of $20,000 and $28,000 was charged
to selling,  general and administrative  expenses were for the nine months ended
November 30, 2009 and 2008, respectively.

                                       17

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE I - SEGMENT REPORTING:

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

Sales by geographic area are as follows:

                                  NINE MONTHS ENDED
                                    NOVEMBER 30,
                              ------------------------
                                  2009         2008
                              -----------   ----------
      United States           $ 1,869,034    1,724,971
      Asia                        161,395      435,500
      Europe                      205,576      336,445
      Other nations                 4,655          600
                              -----------   ----------

        Total                 $ 2,240,660    2,497,516
                              -----------   ----------

      Three customers, located in the United States and Asia, accounted for more
than 10% of revenues from continuing  operations.  These customers accounted for
38.0% of sales of infrared dies.

      Long-lived assets include net plant,  property and equipment.  The Company
had long-lived  assets of $851,800 and $900,125  located in the United States at
November 30, 2009 and February 28, 2009, respectively.

                                       18

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE J - ACCRUED EXPENSES:

      Accrued  expenses  consisted of the  following as of November 30, 2009 and
2008, respectively:

                                   NOVEMBER 30,   FEBRUARY 28,
                                       2009           2009
                                   ------------   ------------
      Salaries and wages           $     22,248             --
      Purchases                           4,060         10,980
      Commissions                         6,715          8,444
      Rent                                8,145             --
      Employment agreement                   --        240,000
      Professional fees                   6,000         25,000
                                   ------------   ------------

         Total accrued expenses    $     47,168        284,424
                                   ------------   ------------

NOTE K - INVENTORIES:

                                   NOVEMBER 30,   FEBRUARY 28,
                                       2009           2009
                                   ------------   ------------
      Raw materials and supplies   $    150,752        138,730
      Work in process                   132,379        117,314
      Finished goods                    415,851        411,140

         Total                     $    698,982        667,184
                                   ------------   ------------

                                       19

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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:

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED           NINE MONTHS ENDED
                                             NOVEMBER 30,                NOVEMBER 30,
                                      -------------------------    ------------------------
                                          2009          2008          2009          2008
                                      -----------    ----------    ----------    ----------
<S>                                   <C>            <C>           <C>           <C>
BASIC EARNINGS PER COMMON SHARE:

Net income                            $   127,008        74,981       314,354       330,820
                                      -----------    ----------    ----------    ----------

Average common shares
   outstanding                         12,109,834    12,066,355    12,080,847    11,999,446
                                      -----------    ----------    ----------    ----------

Basic earnings per
   common share                       $      0.01          0.01          0.03          0.03
                                      -----------    ----------    ----------    ----------

DILUTED EARNINGS PER COMMON SHARE:

Net income                            $   127,008        74,981       314,354       330,820
                                      -----------    ----------    ----------    ----------

Average common shares
   outstanding                         12,109,834    12,066,355    12,080,847    11,999,446

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

Total diluted common shares
   outstanding                         12,112,734    12,106,791    12,083,747    12,039,882
                                      -----------    ----------    ----------    ----------

Diluted earnings per
   common share                       $      0.01          0.01          0.03          0.03
                                      -----------    ----------    ----------    ----------
</TABLE>

                                       20

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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
$73,305 for the nine months ended November 30, 2009 and 2008, respectively.

Future minimum payments for the current option period:

      FISCAL YEARS ENDING FEBRUARY:
      -----------------------------
                   2010               $24,435
                   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.

     In connection with this agreement,  deferred  compensation in the amount of
$4,270 and $5,031 was charged to selling,  general and  administrative  expenses
for the nine months ended November 30, 2009 and 2008, respectively.

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

                                       21

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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
November 30, 2008 was $199,801.

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.

                                       22

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE N - FAIR VALUE MEASUREMENTS:

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

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

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

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

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

<TABLE>
<CAPTION>
                                      NOVEMBER 30, 2009         FEBRUARY 28, 2009
                                   -----------------------   -----------------------
                                    CARRYING      FAIR        CARRYING      FAIR
                                     AMOUNT       VALUE        AMOUNT       VALUE
                                   ----------   ----------   ----------   ----------
<S>                                <C>          <C>          <C>          <C>
ASSETS:
Cash and cash equivalents          $1,811,055    1,811,055    1,544,966    1,544,966
Other assets:
   Cash value - life insurance        178,443      178,443      213,452      213,452
                                   ----------   ----------   ----------   ----------

Total assets at fair value         $1,989,498    1,989,498    1,758,418    1,758,418
                                   ==========   ==========   ==========   ==========
LIABILITIES:

Deferred compensation              $  225,659      225,659      221,388      221,388
                                   ==========   ==========   ==========   ==========
</TABLE>

                                       23

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE N - DIVIDENDS:

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

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

NOTE O - ENVIRONMENTAL MATTERS

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

                                       24