SECURITIES AND EXCHANGE COMMISSION
                      WASHINGTON, DC 20549

                          FORM 10-QSB

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

        For the quarterly period ended November 30, 2004

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

    For the transition period from            to


                 Commission file number 0-17741


                          EPOLIN, INC.
(Exact name of Small Business Issuer as Specified in its Charter)


New Jersey                                              22-2547226
(State or Other Jurisdiction                      (I.R.S. Employer
of Incorporation or                                 Identification
Organization)                                              Number)

                      358-364 Adams Street
                    Newark, New Jersey 07105
            (Address of Principal Executive Offices)

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

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

                  Yes   [  X   ] No   [      ]

State  the  number of shares outstanding of each of  the  Issuers
classes of common equity, as of the latest practicable date:

          Common, no par value per share: 11,852,855
               outstanding as of December 31, 2004

<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  or  Plan  of
Operation.

     The  following discussion should be read in conjunction with
the Financial Statements included 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 this report  under  the  caption
"Uncertainties  and Risk Factors" in Part I, Item 1  "Description
of  Business"  of the Company's Form 10-KSB for  the  year  ended
February  29, 2004.  The Company does not intend to update  these
forward-looking statements.

Executive Overview

     Epolin,  Inc.  (the  "Company") is  a  specialized  chemical
company   primarily  engaged  in  the  manufacturing,  marketing,
research  and  development  of dyes and  dye  formulations.   The
Company's  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.   The  Company  also  manufactures
specialty   chemicals   for  certain   United   States   chemical
manufacturers.

      The  Company has succeeded in growing over the last  decade
based  on  the development, application and manufacture  of  near
infrared  dyes.  Although the Company does not rely upon  patents
for  protection  of  its  dye business, no  competitors,  to  the
Company's  knowledge, actively market near infrared dyes  without
bundling the dyes as part of another product.  The Company's dyes
can  be uniquely formulated to each customer's specifications and
manufactured  in  the Company's own facility.  In  addition,  the
Company  holds  a broad range of dyes in inventory for  immediate
sale.

       The  Company  sells  its  products  to  manufacturers   of
plastics/resins, credit cards, electronics, glass and other basic
materials.  The Company's customers are located in all regions of
the  world, although 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.   As  the  service
economy continues to dwarf the manufacturing sector in the United
States,  the  Company  anticipates  that  its  products  will  be
increasingly  used by manufacturers located abroad.   During  the
nine months ended November 30, 2004, approximately 48.8% of sales
were  to three customers. Two of these customers, located in  the
eastern United States, accounted for 42.9% of sales.  During  the
nine months ended November 30, 2003, approximately 62.1% of sales
were  to four customers.  Two of these customers, located in  the
eastern  United States, accounted for 38.9% of sales.   The  loss
of one

<PAGE>

or more key customers could have a material adverse effect
on the Company.

Results of Operations

      The following table sets forth operations data expressed as
a percentage of sales.

                  Three  Months  Ended        Nine Months Ended

                   November 30, November 30, November 30, November 30,
                   2004         2003         2004         2003

Sales                    100%        100%       100%      100%

Cost of sales and expenses:
   Cost  of  sales        37.5       28.1       35.2      30.6
   Selling, general
   and administrative     33.9       40.8       31.5      42.1
     Total                71.4       68.9       66.7      72.7

Operating Income          28.6       31.1       33.3      27.3



Income before taxes       30.2       32.9       34.9      29.0

Net  income
(after  taxes)            15.6       22.0       20.5      19.0


Sales

      Sales  increased  to $703,000 for the  three  months  ended
November  30,  2004  from  $561,000 for the  three  months  ended
November  30,  2003, an increase of $142,000 or 25.3%.   For  the
nine   months  ended  November  30,  2004,  sales  increased   to
$2,007,000 from $1,929,000 for the nine months ended November 30,
2003,  an  increase of $78,000 or 4.0%.  The Company  experienced
increased  orders from many of its regular customers  during  the
second  and third quarter of the current fiscal year compared  to
the  first three months of the current year  in which the Company
experienced reduced orders from many of such customers.

     While Management believes the Company has remained strong in
the  sale of dyes in its traditional markets of welding  and  eye
protection, sales have remained relatively stagnant since  fiscal
2002.   The recent modest increases in total Company sales  since
2002  is  the  result of increases in sales of dyes for  security
inks  which  is  the  area  the Company expects  to  achieve  its
strongest growth.

Cost of Sales and Expenses

           Cost  of  sales  increased to $263,000  and  $706,000,
respectively,  for the three and nine months ended  November  30,
2004 from $158,000 and $590,000, respectively, for the three  and
nine  months  ended  November  30, 2003.   Selling,  general  and
administrative  expenses  increased to  $238,000  for  the  three
months ended November 30, 2004 from $229,000 for the three months
ended November 30, 2003.  For the nine months ended November  30,
2004,  selling, general and administrative expenses decreased  to
$633,000  from  $812,000 for the nine months ended  November  30,
2003.   The  total of cost of sales and expenses  for  the  three
months  ended  November  30, 2004 was  $502,000  as  compared  to
$387,000  for  the  three  months ended  November  30,  2003,  an
increase  of  $115,000  or  29.7%.  For  the  nine  months  ended
November  30, 2004, the total of costs of sales and expenses  was
$1,339,000  as compared to $1,402,000 for the nine  months  ended
November  30,  2003,  a  decrease  of   $63,000  or  7.8%.   Such
increases  in  cost of sales were primarily due to  increases  in
costs  related  to  R&D salaries, specialty  chemical  costs  and
applied  factory overhead, with smaller increases  in  laboratory
salaries,  insurance  expense  and  laboratory  supplies.    Such
decrease in selling, general

<PAGE>

and administrative expenses for  the
nine  months ended November 30, 2004 compared to the  prior  year
was  primarily  due  to  the  lump sum payment  of  approximately
$193,000  included  in  the selling, general  and  administrative
expenses  for the nine months ended November 30, 2003  for  which
there  was  not  a  comparable item in the current  fiscal  year,
partially  offset  by increases in salaries and consulting  fees,
and advertising and marketing.  Such lump sum payment was made in
connection  with  the settlement reached in fiscal  2003  in  the
litigation commenced in December 2000 by two individuals (each  a
former  director  and  former  employee  of  the  Company).    In
financial  statements previously filed with  the  Securities  and
Exchange  Commission, the Company had classified  such  lump  sum
payment  as  an  extraordinary item but as a result  of  comments
received  from  the  Commission such  lump  sum  payment  is  now
included in the selling, general and administrative expenses  for
the nine months ended November 30, 2003.

Operating Income

      Operating  income for the three months ended  November  30,
2004  increased  to $201,000 from $175,000 for the  three  months
ended  November  30,  2003, an increase  of  $26,000.   Operating
income  for the nine months ended November 30, 2004 increased  to
$668,000  from  $527,000 for the nine months ended  November  30,
2003,  an increase of $141,000.  The increase in operating income
for the nine months ended November 30, 2004 compared to the prior
year  was  primarily  due  to increases in  sales  together  with
decreases in selling, general and administrative expenses  (which
decreased  for the reasons described above), partially offset  by
increases in cost of sales.

Other Income

      Total  other  income for the three and  nine  months  ended
November  30,  2004  was  $11,000 and $32,000,  respectively,  as
compared  to $10,000 and $32,000, respectively for the three  and
nine months ended November 30, 2003.  The Company realized $9,000
and  $27,000,  respectively, in rental income for the  three  and
nine  months  ended  November 30, 2004  and  November  30,  2003.
Effective  November  1,  2002,  the  Company  began  to  sublease
approximately  2,500 square feet of its office space  to  a  non-
related  party to operate an optics and security inks  laboratory
at  an  annual  rent  of $36,000.  The Company realized  interest
income of $2,000 and $5,000, respectively, for the three and nine
months  ended  November 30, 2004 compared to $1,000  and  $5,000,
respectively,  for the three and nine months ended  November  30,
2003.

Income

      During  the three and nine months ended November 30,  2004,
the Company reported income before taxes of $212,000 and $700,000
as  compared to income before taxes of $185,000 and $559,000  for
the  three and nine months ended November 30, 2003.  Income taxes
were  $103,000 and $288,000 for the three and nine  months  ended
November 30, 2004 compared to $62,000 and $192,000 for the  three
and  nine months ended November 30, 2003.  The increase in income
taxes was primarily attributed to ordinary changes from period to
period  in  sales  and  expenses.  Net  income  after  taxes  was
$109,000  or $0.01 per share for the three months ended  November
30,  2004  as  compared to net income after taxes of $123,000  or
$0.01  per  share for the three months ended November  30,  2003.
Net  income after taxes was $412,000 or $0.03 per share  for  the
nine  months  ended November 30, 2004 as compared to  net  income
after  taxes  (an extraordinary item) of $367,000  or  $0.03  per
share for the three and nine months ended November 30, 2003.  The
increase  in  net  income after taxes for the nine  months  ended
November 30, 2004 compared to the prior year was primarily due to
increases  in  sales together with decreases in selling,  general
and  administrative  expenses (which decreased  for  the  reasons
described above), partially offset by increases in cost of sales.

      Net income in the future will be dependent upon our ability
to increase revenues faster than we increase our selling, general
and administrative expenses, research and development expense and
other  expenses.  Although we suffered a setback in sales in  the
first  quarter of fiscal 2005, business has improved since  then.
We  are  encouraged  that  we have recently  shipped  development
quantities  of dyes to certain new

<PAGE>

customers which we  hope  will
lead  to  new  ongoing business for the Company's  products.   No
assurance can be given however that that such will be the case or
that our sales will remain at the level experienced in the second
and third quarter or improve.

Operations Outlook

      We  are currently going through a period of reassessing our
direction  in order to increase value for our shareholders.   Our
business,  though reasonably healthy, has not recently  grown  to
the  degree  management anticipated.  For example, during  fiscal
2004  sales reached an all time high of $2.73 million.  But  this
was  not significantly more than in 2003 ($2.69 million) or  2002
($2.55  million). The plateau of sales over the last three  years
was  in  contrast to the sales growth we saw since  1991.   Based
upon these observations, we tried to learn what could be done  to
stimulate  growth  and recapture the promise  of  a  true  growth
company.  Our  first  task was to draw up a  business  plan.   We
believe this highlighted our one major weakness and that  was  in
sales  and marketing.  For years we felt it to be unnecessary  to
go  out  and reach our customers.  We believed that our web  site
was  sufficiently explicit to attract anyone interested  in  near
infrared light management to come to us because we were the "only
game in town".  We now realize that the customer has alternatives
which  do  not  include the use of Epolin dyes.  We  believe  the
business   plan   made   clear  the   necessity   of   hiring   a
Sales/Marketing  executive (which has  been  accomplished)  along
with  back  up technical service help (which is in process).   In
order  to cover the cost of these additional personnel,  we  have
for the time being suspended the cash dividends program which  we
have  had in place since 2002.   At the present time, we  believe
it  is in the long term best interest of the shareholders for  us
to reinvest profits for future growth.

      Management  has  recognized that the Company's  traditional
markets   -   serving   welding  and  eye   protection   plastics
manufacturers - have gone through certain changes over  the  last
few  years  in  that  certain customers have consolidated  and/or
moved manufacturing operations to low-cost countries, usually  in
the Far East.  In some of these countries, eye protection may not
be  as  highly valued by the citizenry.  Management expects  that
this  market  will  remain important as a  continuing  source  of
revenue,  but it is not expected to contribute meaningful  growth
on a short-term or long-term basis.  The Company now offers fully
formulated   dye  packages  which  can  be  used  by   the   lens
manufacturer  simply by adding the package to  polycarbonate  and
injection  molding  the  final product.   This  has  allowed  the
Company to maintain a strong position in this market, although it
is  not expected to be a market which will experience significant
growth.  To date, such changes have not had a detrimental  impact
on  net  sales,  inventories or cash  flows.   There  can  be  no
assurance  that such trend will continue.   As a result,  greater
emphasis has recently been placed on sales and marketing in order
to  grow  the  Company's business in security inks and  coatings.
The  new products that are now the firm underpinnings for  future
growth  are  based  upon  such security  inks,  new  visible  and
infrared  dyes and the forward integration of the Company's  dyes
into  formulated  pellets.  For the three and nine  months  ended
November  30, 2004, sales in these new product areas  represented
approximately  17%  and 21%, respectively, of all  Company  sales
compared to the three and nine months ended November 30, 2003 for
which  sales in these new product areas represented approximately
20% and 12%, respectively, of all Company sales.

      Another factor that was considered in the business plan was
management  succession.  Murray S. Cohen, the Company's  Chairman
of  the  Board  and  Chief Executive Officer, has  announced  his
intention  to  step  down  as  Chief  Executive  Officer  at   an
undetermined future date, while continuing to remain as  Chairman
of  the  Board  and  Chief Scientist for the Company.   With  the
hiring of a Sales/Marketing executive, such will add to our  pool
of  personnel  who  can be considered at a  later  date  for  the
position of CEO.

Liquidity and Capital Resources

      On  November 30, 2004, the Company had working  capital  of
$2,276,000,  a  debt  to  equity  ratio  of  0.16   to   1,   and
stockholders' equity of $3,034,000 compared to working capital of
$1,891,000,  a  debt  to  equity to  ratio  of  0.15  to  1,  and
stockholders'  equity  of $2,636,000 on November  30,  2003.   On
November  30, 2004, the Company had $1,250,000 in cash  and  cash
equivalents, total assets of $3,517,000 and total liabilities  of

<PAGE>

$484,000,  compared  to  $728,000 in cash and  cash  equivalents,
total  assets of $3,027,000 and total liabilities of $392,000  on
November  30, 2003.  Increases in cash and cash equivalents  were
primarily  due  an  increase in net cash  provided  by  operating
activities  and  a change in financing activities  for  the  nine
months ended November 30, 2004 compared to the nine months  ended
November  30,  2003.   Net cash provided by operating  activities
increased to $789,000 for the nine months ended November 30, 2004
from  $155,000  for  the  nine months  ended  November  30,  2003
primarily  due  to an increase in net income from operations,  as
well  as  a decrease in accounts receivable along with  a  lesser
increase in inventories compared to the comparable period of  the
prior  year.   Net  cash  used by investing  activities  remained
relatively  unchanged and was $90,000 for the nine  months  ended
November  30, 2004 as well as the nine months ended November  30,
2003.   Net cash provided by financing activities was $3,000  for
the nine months ended November 30, 2004 compared to net cash used
by  financing activities of $306,000 resulting primarily from the
stock  dividend  paid in fiscal 2003 for which there  was  not  a
comparable item for fiscal 2004.

      The  Company anticipates, based on currently proposed plans
and assumptions relating to its operations, that its 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.   The Company's contemplated cash requirements  for  2005
and  beyond  will  depend primarily upon level of  sales  of  its
products,  inventory  levels,  product  development,  sales   and
marketing   expenditures   and   capital   expenditures.    While
Management believes the Company has remained strong in  the  sale
of dyes in its traditional markets of welding and eye protection,
such  sales  have not increased in volume in the past few  years.
Recently, greater emphasis has been placed on sales and marketing
in  order  to  grow the Company's business in security  inks  and
coatings which Management expects to contribute meaningful growth
to the Company.

      Inflation  has  not  significantly impacted  the  Company's
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
accordance  with  generally accepted auditing  standards  in  the
United  States  of America.  Our significant accounting  policies
are  described in Note B to the consolidated financial statements
included elsewhere herein.

Other Information

     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.
During the nine months ended November 30, 2004, no repurchases of
shares  were  made by the Company. During the fiscal  year  ended
February 29, 2004, a total of 184,000 shares were repurchased  at
a  cumulative  cost  of $103,405.  During the fiscal  year  ended
February 28, 2003, a total of 32,500 shares were repurchased at a
cumulative  cost  of $18,624 while during the fiscal  year  ended
February 28, 2002, a total of 30,000 shares were repurchased at a
cumulative cost of $14,837.

     During fiscal 2004, the Company paid two cash dividends, the
first  being  $.02 per share in August 2003 and the second  being
$.02  per shares in February 2004.  During the fiscal year  ended
February 28, 2003, the Company also paid two cash dividends,  the
first being $.04 per share in July 2002 and the second being $.03
per  share in January 2003.  Prior thereto, and during the fiscal
year  ended  February 28, 2002, the Company also  paid  two  cash
dividends,  the  first being $.03 per share in June  2001  (which
represented the first time that a cash dividend was paid  by  the
Company) and the second being $.04 per share in February 2002.

<PAGE>

Off-Balance Sheet Arrangements

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


Item 3.   Controls and Procedures.

     The   Company's   Chief  Executive  Officer  and   Principal
Financial Officer have reviewed the Company's disclosure controls
and  procedures  as  of  the end of the period  covered  by  this
report.   Based upon this review, such officers believe that  the
Company's  disclosure controls and procedures  are  effective  in
timely  alerting  them  to material information  required  to  be
included  in this report.  The corrective action which  has  been
taken  in the financial statements included with this report  has
not  impacted  upon  management's conclusions.   Such  corrective
action  which resulted from comments received from the Securities
and  Exchange Commission pertains to the reclassification of  the
litigation  settlement  in  2003  previously  classified  as   an
extraordinary item to  its current treatment which is to  include
the  settlement  payment in selling, general  and  administrative
expenses.   There  have been no significant changes  in  internal
control over financial reporting that occurred during the  fiscal
quarter covered by this report that have materially affected,  or
are   reasonably  likely  to  materially  affect,  the  Company's
internal   control  over  financial  reporting,   including   the
corrective action described above.


                   PART II - OTHER INFORMATION


Item 1.  Legal Proceedings.

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


Item 2.  Changes in Securities.

     None.


Item 3.  Defaults Upon Senior Securities.

     None.


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

      On October 28, 2004,  an  annual  meeting   of stockholders
was  held  to  elect four Directors  to  serve as  the  Board  of
Directors  of  the  Company until the next Annual    Meeting   of
Stockholders  and   until   their successors shall be elected and
shall   qualify.   At  such  meeting,  Murray  S.  Cohen,   James
Ivchenko,    Morris  Dunkel and James R.  Torpey,  Jr.,  each  an
incumbent  director,  were  duly  elected  as  directors  of  the
Company.  Murray  S. Cohen received 9,337,766  affirmative  votes
and   2,000  negative  votes, each of James Ivchenko  and  Morris
Dunkel  received 9,332,266 affirmative votes and  7,500  negative
votes,   and  James R. Torpey, Jr. received 9,324,766 affirmative
votes and 15,000 negative votes.

<PAGE>

Item 5.  Other Information.

          None.


Item 6.  Exhibits and Reports on Form 8-K.

          (a)  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)

          (b)  Reports on Form 8-K.

Listed  below are reports on Form 8-K filed during the
fiscal quarter ended November 30, 2004.

             None.


<PAGE>



                           SIGNATURES

     In accordance with the requirements of the Exchange Act, the
Registrant caused this Report to be signed on its behalf  by  the
undersigned thereunto duly authorized.


                                   EPOLIN, INC.
                                   (Registrant)



Dated: January 11, 2005       By: /s/ Murray S. Cohen
                              Murray S. Cohen,
                              Chairman of the Board
                              and Chief Executive Officer


Dated: January 11, 2005       By: /s/ James Ivchenko
                              James Ivchenko,
                              President (Principal Financial
                              Officer)


<PAGE>






                           EPOLIN, INC. AND SUBSIDIARY

                              FINANCIAL STATEMENTS

                  NINE MONTHS ENDED NOVEMBER 30, 2004 AND 2003

<PAGE>

                                    CONTENTS

                                                                          Page
                                                                          ----

Accountant's Review Report                                                  1

Consolidated Financial Statements:

    Consolidated Balance Sheets                                           2 - 3

    Consolidated Statements of Income                                     4 - 5

    Consolidated Statements of Stockholders' Equity                         6

    Consolidated Statements of Cash Flows                                 7 - 8

Notes to Consolidated Financial Statements                                9 - 22
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


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

         We have reviewed the accompanying Consolidated Balance Sheets of Epolin
Inc. and Subsidiary as of November 30, 2004 and 2003 and the related
Consolidated Statements of Income, Stockholders' Equity and Cash Flows for the
three-month and nine-month periods then ended. These interim financial
statements are the responsibility of the Company's management.

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

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


IWA FINANCIAL CONSULTING LLC
----------------------------
IWA FINANCIAL CONSULTING LLC
Livingston, NJ 07039


January 7, 2005

                                       1
<PAGE>


<TABLE>
<CAPTION>

                           EPOLIN, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

                                                             November 30,
                                                     ---------------------------
Current assets:                                          2004           2003
                                                     ------------   ------------
<S>                                                  <C>                 <C>
  Cash and cash equivalents                          $  1,250,450        728,278
  Accounts receivable                                     387,587        462,043
  Inventories                                             790,666        760,642
  Prepaid expenses                                         44,476         72,669
  Deferred tax assets-current portion                       4,128          1,376
                                                     ------------   ------------

     Total current assets                               2,477,307      2,025,008
                                                     ------------   ------------
Plant, property and equipment - at cost:
  Land                                                     81,000         81,000
  Building                                                369,000        369,000
  Machinery and equipment                                 264,759        243,111
  Furniture and fixtures                                   12,223         12,223
  Leasehold improvements                                  629,391        599,139
                                                     ------------   ------------

     Total                                              1,356,373      1,304,473

Less: Accumulated depreciation and amortization           741,122        708,799
                                                     ------------   ------------

     Net plant, property and equipment                    615,251        595,674
                                                     ------------   ------------
Other assets:
  Deferred tax assets-non current portion                 218,451        239,912
  Cash value - life insurance policy                      206,170        166,772
                                                     ------------   ------------

     Total other assets                                   424,621        406,684
                                                     ------------   ------------

     Total                                           $  3,517,179      3,027,366
                                                     ============   ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        2
<PAGE>
<TABLE>
<CAPTION>

                           EPOLIN, INC. AND SUBSIDIARY

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                                            November 30,
                                                                     ---------------------------
                                                                         2004           2003
                                                                     ------------   ------------
<S>                                                                  <C>                  <C>
Current liabilities:
 Accounts payable                                                    $     20,456         14,101
 Accrued expenses                                                         137,000        115,206
 Taxes payable:
  Payroll                                                                   1,719          1,569
  Income                                                                   42,390          2,769
                                                                     ------------   ------------

  Total current liabilities                                               201,565        133,645
                                                                     ------------   ------------

Other liabilities - Deferred compensation                                 282,070        257,991
                                                                     ------------   ------------

     Total liabilities                                                    483,635        391,636
                                                                     ------------   ------------

Commitments and Contingencies

Stockholders' equity:
 Preferred stock, $15.513 par value; 940,000 shares authorized;
  none issued
 Preferred stock, series A convertible non-cumulative,
  $2.50 par value; redemption price and liquidation preference;
  60,000 shares authorized; 5,478 shares issued and redeemed
 Common stock, no par value; 20,000,000 shares authorized;
  12,716,500 and 12,641,500 shares issued, 11,852,855 and
  11,825,355 shares outstanding at 2004 and 2003, respectively          2,337,058      2,333,933
 Paid-in capital                                                            6,486          6,486
 Retained earnings                                                        982,182        582,343
                                                                     ------------   ------------

     Total                                                              3,325,726      2,922,762
Less: Treasury stock-at cost                                              292,182        287,032
                                                                     ------------   ------------

  Total stockholders' equity                                            3,033,544      2,635,730
                                                                     ------------   ------------

  Total                                                              $  3,517,179      3,027,366
                                                                     ============   ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        3
<PAGE>
<TABLE>
<CAPTION>

                           EPOLIN, INC. AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME

                  NINE MONTHS ENDED NOVEMBER 30, 2004 AND 2003

                                                               2004           2003
                                                           ------------   ------------
<S>                                                        <C>               <C>
Sales                                                      $  2,006,984      1,928,891
                                                           ------------   ------------
Cost of sales and expenses:
 Cost of sales                                                  706,225        590,442
 Selling, general and administrative                            632,922        811,758
                                                           ------------   ------------

   Total                                                      1,339,147      1,402,200
                                                           ------------   ------------

Operating income                                                667,837        526,691
                                                           ------------   ------------
Other income:
 Rental income                                                   27,000         27,000
 Interest                                                         5,193          5,491
                                                           ------------   ------------

   Total other income                                            32,193         32,491
                                                           ------------   ------------

Income before taxes                                             700,030        559,182

Income taxes                                                    287,968        192,432
                                                           ------------   ------------

Net income                                                 $    412,062        366,750
                                                           ============   ============
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        11,847,828     11,849,668
                                                           ============   ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        4
<PAGE>
<TABLE>
<CAPTION>

                           EPOLIN, INC. AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME

                  THREE MONTHS ENDED NOVEMBER 30, 2004 AND 2003

                                                               2004           2003
                                                           ------------   ------------
<S>                                                        <C>               <C>
Sales                                                      $    702,682        561,406
                                                           ------------   ------------
Cost of sales and expenses:
 Cost of sales                                                  263,347        157,852
 Selling, general and administrative                            238,471        228,793
                                                           ------------   ------------

   Total                                                        501,818        386,645
                                                           ------------   ------------

Operating income                                                200,864        174,761
                                                           ------------   ------------
Other income:
 Rental income                                                    9,000          9,000
 Interest                                                         2,127          1,214
                                                           ------------   ------------

   Total other income                                            11,127         10,214
                                                           ------------   ------------

Income before taxes                                             211,991        184,975

Income taxes                                                    102,601         61,504
                                                           ------------   ------------

Net income                                                 $    109,390        123,471
                                                           ============   ============
Per share data:
 Basic earnings per common share                           $       0.01           0.01
                                                           ============   ============

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

 Weighted average number of common shares outstanding        11,847,828     11,849,668
                                                           ============   ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        5
<PAGE>
<TABLE>
<CAPTION>

                           EPOLIN, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                  NINE MONTHS ENDED NOVEMBER 30, 2004 AND 2003


                               Number of                Additional
                              Outstanding    Common      Paid-in-     Retained      Treasury     Treasury    Stockholders'
                                Shares       Stock       Capital      Earnings       Shares       Costs         Equity
                              ----------   ----------   ----------   ----------    ----------   ----------    ----------
<S>                           <C>          <C>               <C>        <C>           <C>         <C>          <C>
Balance - March 1, 2003       12,566,500   $2,304,558        6,486      452,700       679,645     (188,777)    2,574,967

Common stock issued for
 stock option                     75,000       29,375           --           --            --           --        29,375

Dividends paid                        --           --           --     (237,107)           --           --      (237,107)

Treasury stock purchased              --           --           --           --       174,000      (98,255)      (98,255)

Net income                            --           --           --      366,750            --           --       366,750
                              ----------   ----------   ----------   ----------    ----------   ----------    ----------

Balance - November 30, 2003   12,641,500   $2,333,933        6,486      582,343       853,645     (287,032)    2,635,730
                              ==========   ==========   ==========   ==========    ==========   ==========    ==========


Balance - March 1, 2004       12,704,000   $2,333,933        6,486      570,120       863,645     (292,182)    2,618,357

Common stock issued for
 stock option                     12,500        3,125           --           --            --           --         3,125

Net income                            --           --           --      412,062            --           --       412,062
                              ----------   ----------   ----------   ----------    ----------   ----------    ----------

Balance - November 30, 2004   12,716,500   $2,337,058        6,486      982,182       863,645     (292,182)    3,033,544
                              ==========   ==========   ==========   ==========    ==========   ==========    ==========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        6
<PAGE>
<TABLE>
<CAPTION>

                           EPOLIN, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  NINE MONTHS ENDED NOVEMBER 30, 2004 AND 2003

                                                                         2004           2003
                                                                     ------------   ------------
<S>                                                                  <C>                 <C>
Cash flows from operating activities:
 Net income                                                          $    412,062        366,750
 Adjustments to reconcile net income to net cash provided by
 operating activities:
   Depreciation and amortization                                           25,041         21,379
   Deferred tax expense                                                    10,548         44,088
   Obligation under deferred compensation agreement                        18,059        (89,567)
 (Increase) decrease in:
   Accounts receivable                                                    255,994        (90,582)
   Inventories                                                            (32,899)      (131,330)
   Prepaid expenses                                                        83,559         68,313
 Increase (decrease) in:
   Accounts payable                                                        19,197          7,691
   Accrued expenses                                                       (41,090)       (43,716)
   Taxes payable                                                           38,682          2,198
                                                                     ------------   ------------

      Net cash provided by operating activities                           789,153        155,224
                                                                     ------------   ------------
Cash flows from investing activities:
 Increase in cash value - life insurance policy                           (39,398)       (38,186)
 Notes receivable                                                              --         14,139
 Payments for equipment                                                   (50,360)       (66,389)
                                                                     ------------   ------------

      Net cash used by investing activities                               (89,758)       (90,436)
                                                                     ------------   ------------
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        7
<PAGE>
<TABLE>
<CAPTION>

                           EPOLIN, INC. AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                  NINE MONTHS ENDED NOVEMBER 30, 2004 AND 2003

                                                                         2004           2003
                                                                     ------------   ------------
<S>                                                                  <C>                 <C>
Cash flows from financing activities:
 Issuance of common stock                                                   3,125         29,375
 Dividends paid                                                                --       (237,107)
 Treasury stock purchased                                                      --        (98,255)
                                                                     ------------   ------------

      Net cash provided (used) by financing activities                      3,125       (305,987)
                                                                     ------------   ------------

Increase (decrease) in cash                                               702,520       (241,199)

Cash and cash equivalents:
 Beginning                                                                547,930        969,477
                                                                     ------------   ------------

 Ending                                                              $  1,250,450        728,278
                                                                     ============   ============
Supplemental information:
 Income taxes paid                                                   $    226,800        281,400
                                                                     ============   ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        8

<PAGE>


                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 2004 AND 2003

Note A - Basis of Presentation:

         The interim financial data as of November 30, 2004, and for the nine
months ended November 30, 2004 and 2003 are unaudited. In the opinion of
management, the accompanying balance sheets and related interim statements of
income, cash flows, and stockholders' equity include all adjustments, consisting
only of normal recurring items, necessary for their fair presentation in
conformity with accounting principles generally accepted in the United States of
America (U.S. GAAP). Preparing financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses. Actual results and outcomes may differ from
management's estimates and assumptions.

Interim results are not necessarily indicative of results for a full year. The
information included in this Form 10-Q should be read in conjunction with
Management's Discussion and Analysis and financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the year ended
February 29, 2004.

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, Corp., was incorporated
in New Jersey as a real estate holding company whose assets consist of land and
a building. Prior to being acquired on January 29, 1998, two
officers/stockholders of the Company controlled it.

Note B - Summary of Significant Accounting Policies:

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 had cash
deposits in a financial institution and brokerage house in excess of the amount
insured by agencies of the federal government in amounts of $1,150,000 and
$628,000 at November 30, 2004 and 2003, respectively. In evaluating this credit
risk, the Company periodically evaluates the stability of the financial
institution and brokerage house.

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.

                                       9
<PAGE>


<TABLE>
<CAPTION>

                           EPOLIN, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                NOVEMBER 30, 2004

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation - The accompanying Consolidated Financial Statements
include the accounts of the Company and Subsidiary. Intercompany transactions
and balances have been eliminated in consolidation. Condensed consolidating
financial statements for the nine months ended November 30, 2004 are:

                      CONDENSED CONSOLIDATING BALANCE SHEET

                                                         Epolin
                                          Epolin         Holding     Eliminations   Consolidated
                                       ------------   ------------   ------------   ------------
<S>                                    <C>                 <C>       <C>              <C>
Current assets                         $  2,237,592        239,715             --      2,477,307
Non-current assets                        1,279,587        541,806       (781,521)     1,039,872
                                       ------------   ------------   ------------   ------------
     Total                             $  3,517,179        781,521       (781,521)     3,517,179
                                       ============   ============   ============   ============

   Total liabilities                        483,635        174,825       (174,825)       483,635
                                       ------------   ------------   ------------   ------------

Stockholders' equity:
 Common stock                             2,337,058             --             --      2,337,058
 Additional paid-in capital                   6,486             --             --          6,486
 Retained earnings                          982,182        606,696       (606,696)       982,182
 Treasury stock                            (292,182)            --             --       (292,182)
                                       ------------   ------------   ------------   ------------

   Total stockholders' equity             3,033,544        606,696       (606,696)     3,033,544
                                       ------------   ------------   ------------   ------------

     Total                             $  3,517,179        781,521       (781,521)     3,517,179
                                       ============   ============   ============   ============
</TABLE>
<TABLE>
<CAPTION>

                   CONDENSED CONSOLIDATED STATEMENT OF INCOME

                                                         Epolin
                                          Epolin         Holding     Eliminations   Consolidated
                                       ------------   ------------   ------------   ------------
<S>                                    <C>                 <C>       <C>              <C>
Sales                                  $  2,006,984             --             --      2,006,984
Other revenue                                    --        100,305        (73,305)        27,000
                                       ------------   ------------   ------------   ------------
     Total                                2,006,984        100,305        (73,305)     2,033,984
                                       ------------   ------------   ------------   ------------

Cost of sales                               706,225             --             --        706,225
Selling, general and administrative         695,346         10,881        (73,305)       632,922
                                       ------------   ------------   ------------   ------------

     Total                                1,401,571         10,881        (73,305)     1,339,147

Operating income                            605,413         89,424             --        694,837

Other income - interest                       3,750          1,443             --          5,193
                                       ------------   ------------   ------------   ------------

Income before taxes                         609,163         90,867             --        700,030

Income taxes                                279,788          8,180             --        287,968
                                       ------------   ------------   ------------   ------------

Net income                             $    329,375         82,687             --        412,062
                                       ============   ============   ============   ============
</TABLE>

                                       10

<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 2004 AND 2003

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

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

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

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

Building                            Straight Line 39 Years
Machinery and equipment             Straight Line 5 - 7 Years
Furniture and Fixtures              Straight Line 7 Years
Leasehold Improvements              Straight Line 10 - 39 Years

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

Depreciation and amortization expense totaled $25,041 and $21,379 for the nine
months ended November 30, 2004 and 2003, 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.

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.

Advertising Costs - Advertising costs, included in operating expenses, are
expensed as incurred. Advertising expenses amounted to $18,569 and $2,430 for
the nine months ended November 30, 2004 and 2003, respectively.

                                       11
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 2004 AND 2003

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 do not conform to customer
specifications, however replacements are made at the discretion of the Company
basis 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.

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

Reclassifications - Certain amounts in the consolidated financial statements for
prior periods have been reclassified to conform with the current presentation.

Stock-based Compensation - As permitted by SFAS No. 123 "Accounting for
Stock-Based Compensation," The Company continues to apply intrinsic value
accounting for its stock option plans. Compensation cost for stock options, if
any, is measured as the excess of the quoted market price of the stock at the
date of grant over the amount an employee must pay to acquire the stock. The
Company has adopted disclosure-only provisions of SFAS No. 123 and SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure - an
Amendment of FASB Statement No. 123."

         The weighted average Black-Scholes value of options granted under the
stock plans during the nine months ended November 30, 2004 and 2003 was $.10 and
$.11, 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:

Nine Months Ended November 30,                               2004       2003
                                                           --------   --------
        Weighted average expected life in years                   7          5
        Dividends per share                                    0.04       0.03
        Volatility                                              6.0%       6.0%
        Risk-free interest rate                                 3.9%       4.1%

                                       12
<PAGE>
<TABLE>
<CAPTION>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 2004 AND 2003

Note B - Summary of Significant Accounting Policies (continued

Stock-based Compensation - The Company's pro forma net earnings and pro forma
earnings per share based upon the fair value at the grant dates for awards under
Epolin's plans are disclosed below.

                                                                 Nine Months Ended
                                                                    November 30,
                                                               2004            2003
                                                           ------------    ------------
<S>                                                        <C>                  <C>
Net earnings as reported                                   $    412,062         366,750

Deduct total additional stock-based employee
compensation cost, net of tax that would
have been included in net earnings under
fair value method                                                33,175          15,225
                                                           ============    ============

Proforma net earnings                                      $    378,887         351,525
                                                           ============    ============
Basic earnings per share:
  As reported                                              $       0.03            0.03
                                                           ============    ============
  Proforma                                                 $       0.03            0.03
                                                           ============    ============

Average common shares outstanding                            11,847,828      11,849,668

Diluted earnings per share:
  As reported                                              $       0.03            0.03
                                                           ------------    ------------
  Proforma                                                 $       0.03            0.03
                                                           ------------    ------------

Total diluted common shares outstanding                      12,023,101      11,975,123
                                                           ============    ============
</TABLE>

Regulations - The Company expended approximately $15,461 to maintain compliance
with certain Federal and State and City government regulations relative to the
production of near infrared dyes and specialty chemicals.

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

                                       13
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 2004 AND 2003

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

Note C - Inventories:
                                                        2004         2003
                                                     ----------   ----------
    Raw materials and supplies                       $   53,550       48,457
    Work in process                                     312,956      196,408
    Finished goods                                      424,160      515,777
                                                     ----------   ----------

      Total                                          $  790,666      760,642
                                                     ==========   ==========

Note D - Income Taxes:

1. Federal and State deferred tax assets include:
                                                        2004         2003
                                                     ----------   ----------
Temporary differences:
  Accelerated amortization                           $   80,226       94,197
  Deferred compensation                                 142,353      147,091
                                                     ----------   ----------
      Total                                             222,579      241,288

   Current portion                                        4,128        1,376
                                                     ----------   ----------

Non-current portion                                  $  218,451      239,912
                                                     ==========   ==========

2. Income tax expense:
                                                        2004         2003
                                                     ----------   ----------
   Current:
     Federal                                         $  214,900      112,630
     State                                               62,520       35,714
                                                     ----------   ----------

      Total current                                     277,420      148,344
                                                     ----------   ----------
   Deferred:
     Federal                                              8,432       35,147
     State                                                2,116        8,941
                                                     ----------   ----------

      Total deferred                                     10,548       44,088
                                                     ----------   ----------

         Total                                       $  287,968      192,432
                                                     ==========   ==========

                                       14
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 2004 AND 2003

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, 2004, approximately 48.8%
of sales were to three customers. Two of these customers, located in the Eastern
United States, accounted for 42.9% of sales. During the nine months ended
November 30, 2003, approximately 62.1% of sales were to four customers, two of
these customers, located in the Eastern United States, accounted for 38.9% of
sales.

Note F - Rental Income Under Sublease:

         The Company entered into a sublease agreement with a non-related party
effective November 1, 2002 for a five-year term ending October 31, 2007. Under
the terms of the lease, the tenant is to pay a base rent of $36,000 per year. In
addition, the tenant is to reimburse the Company for all costs and expenses
incurred by the Company for improvements to such leased property in excess of
$75,000. The excess amount was recorded on the balance sheet as a note
receivable. Payments on the note were $2,500 a month including interest of 6% a
year. The note was paid in full as of August 31, 2003.

Note G - Treasury Stock:

         Consists of 863,645 shares as of November 30, 2004 at a net cost of
$292,182 and 853,645 shares at a net cost of $287,032 as of November 30, 2003.

The Company made no purchases of shares during the nine months ended November
30, 2004 and purchased 174,000 shares during the nine months ended November 30,
2003.

Note H - Acquisitions:

On January 29, 1998, the Company acquired 100% of stock in Epolin Holding Corp.

Note I - 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 3 to 5 percent after completion of
one year of service. Employer contributions totaled $30,072 and $28,592 for the
nine months ended November 30, 2004 and 2003, respectively.

                                       15
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 2004 AND 2003

Note I - Employee Benefits (continued):

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

Stock Option Plan - The Company previously adopted The 1986 Stock Option Plan.
As of April 1996, under the terms of the Plan, options may no longer be granted.
On December 1, 1995, options to acquire up to 490,000 shares of the Company's
common stock were granted. Options exercised for all prior years totaled
455,000. Options totaling 35,000 were cancelled in prior years. There were no
outstanding options as of November 30, 2004.

         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 a vesting
period as follows: (1) none exercisable prior to the first anniversary of the
date of grant, and (2) each of the options will become exercisable as to 50% of
the shares underlying the option on each of the first and second anniversaries
of the date granted. Options exercised through November 30, 2004 totaled
587,500. Options cancelled for all prior years totaled 75,000.

         A summary of the status of the Company's 1998 stock option plan as of
November 30, 2004, and the changes during the nine months ended November 30,
2004 is presented below:

                                                         Weighted-Average
Fixed Options:                                Shares      Exercise Price
--------------                              ----------    --------------
Balance - March 1, 2003                        367,500         $.24
     Granted                                   162,000          .30
     Exercised                                (137,500)         .25
                                            ----------

Balance - February 28, 2004                    392,000          .29
     Granted                                        --           --
     Exercised                                 (12,500)         .25
                                            ----------

Balance - November 30, 2004                    379,500         $.29
                                            ==========

Exercisable at November 30, 2004               217,500

                                       16
<PAGE>
<TABLE>
<CAPTION>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 2004 AND 2003

Note I - Employee Benefits (continued):

Stock Option Plan - The following table summarizes information about fixed stock
options outstanding at November 30, 2004:

              Outstanding Options                          Exercisable Options
-------------------------------------------------    -----------------------------
                     Number      Weighted-average      Number
Range of          Outstanding       Remaining        Exercisable   Weighted-average
Exercise Price    at 11/30/04    Contractual Life    at 11/30/04    Exercise Price
--------------    -----------    ----------------    -----------    --------------
<S>                   <C>           <C>                  <C>            <C>
    $.25              192,500       1.8 years            192,500        $.25
     .30               25,000       3.0                   25,000         .30
     .35              162,000       9.1                       --         .35
</TABLE>

There are 458,000 options attributable to future grants.

Note J - 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 $302,307 and
$284,443 were included in cost of sales for the nine months ended November 30,
2004 and 2003, respectively. Expenditures in 2004 are projected to remain at
approximately the same level as in 2003.

Note K - Reportable Segment Data:

         Operating segments with similar products and services, production
processes, types of customers, and sales channels are combined into reportable
segments for disclosure purposes. The Company's specialty dye and specialty
chemical production have similar economic characteristics that meet the
aggregation criteria of paragraph 17 of SFAS 131, which allows combined
reporting. These processes are synonymous in their production and are reported
as a single operating segment.

                                       17
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 2004 AND 2003

Note K - Reportable Segment Data (continued):

Sales by geographic area are as follows:

                                                Nine Months Ended November 30,
                                                     2004           2003
                                                 ------------   ------------
         United States                           $  1,693,343      1,725,605
         Asia                                         187,374        112,332
         Europe                                       124,802         90,954
         Other nations                                  1,465             --
                                                 ------------   ------------

           Total                                 $  2,006,984      1,928,891
                                                 ============   ============

Two customers, located in the Eastern United States, accounted for more than 10%
of revenues from continuing operations. One customer accounted for 26% of sales
of which 16% was near infrared dyes and 10% was security inks. The other
customer accounted for 16.9% of sales of near infrared dyes.

Long-lived assets include net property and equipment. The Company had long-lived
assets of $615,251 and $595,674 located in the United States at November 30,
2004 and November 30, 2003, respectively.

Note L - Accrued Expenses:

Accrued expenses consisted of the following as of November 30, 2004 and 2003,
respectively:

                                                     2004           2003
                                                 ------------   ------------
         Salaries and wages                      $      7,511             --
         Employment agreement                         120,419        106,089
         Professional fees                              5,000          5,000
         Property taxes                                 4,070          4,117
                                                 ============   ============

           Total accrued expenses                $    137,000        115,206
                                                 ============   ============

                                       18
<PAGE>
<TABLE>
<CAPTION>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 2004 AND 2003

Note M - 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:

                                                 Nine Months Ended            Three Months Ended
                                                    November 30,                  November 30,
                                                2004           2003           2004           2003
                                            ------------   ------------   ------------   ------------
<S>                                         <C>                 <C>            <C>            <C>
Basic Earnings Per Common Share:

Net income                                  $    412,062        366,750        109,390        123,471

Average common shares
 outstanding                                  11,847,828     11,849,668     11,847,828     11,849,668
                                            ============   ============   ============   ============
Basic earnings per
 common share                               $       0.03           0.03           0.01           0.01
                                            ============   ============   ============   ============

Diluted Earnings Per Common Share:

Net income                                  $    412,062        366,750        109,390        123,471
                                            ============   ============   ============   ============
Average common shares
 outstanding                                  11,847,828     11,849,668     11,847,828     11,849,668

Common shares issuable with respect
 to options issued to employees
 with a dilutive effect                          175,273        125,455        175,273        125,455
                                            ------------   ------------   ------------   ------------
Total diluted common shares
 outstanding                                  12,023,101     11,975,123     12,023,101     11,975,123
                                            ============   ============   ============   ============
Diluted earnings per
 common share                               $       0.03           0.03           0.01           0.01
                                            ============   ============   ============   ============
</TABLE>

                                       19
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 2004 AND 2003

Note N - 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 $48,870 for the nine months ended November 30, 2004 and 2003,
respectively.

Future minimum payments for the current option period:

         Fiscal years ending February:
         -----------------------------
                    2005                               $24,435
                    2006                                97,740
                    2007                                97,740
                    2008                                97,740
                    2009                                65,160

Deferred Compensation - On December 29, 1995, the Company entered into a
deferred compensation agreement with an officer whose additional annual
compensation of $19,645 plus interest is deferred until he reaches age 65 or is
terminated. The obligation is being funded by a life insurance policy. Annual
payments to the officer of $32,000 for ten consecutive years shall commence the
first day of the month following his 65th birthday or termination.

         In connection with this agreement, deferred compensation of $18,060 was
charged to selling, general and administrative expenses for the nine months
ended November 30, 2004 and 2003, respectively.

         On January 1, 1996, the Company entered into a deferred compensation
agreement with another officer 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.

                                       20
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 2004 AND 2003

Note N - Commitments and Contingencies (continued):

Deferred Compensation - Effective March 1, 1999, the Company adopted deferred
compensation agreements for two of its former employees. Under the term of the
agreement, each employee would receive one twenty sixth (1/26) of fifty percent
(50%) of their annual salary (excluding bonuses) as of the date of retirement.
Each has a death-vesting schedule. These agreements are no longer operative as a
result of the settlement of the lawsuit, which had been instituted by such two
former employees, the terms of which are detailed under Note Q.

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 and Chief Executive Officer
- To be paid an annual salary of not less than the greater of his annual base
salary in effect immediately prior to the effective date of the agreement or any
subsequently established annual base salary. He is to receive 2.00% on gross
annual sales of no more than $3,000,000, effective with the year ended February
28, 2001, increasing by 0.25% a year during the term of the agreement.

         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, 2001, increasing by 0.25% a year
during the term of the agreement.

         Accrued compensation included in selling, general and administrative as
of November 30, 2004 and 2003 was $120,419 and $106,089, respectively.

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.

                                       21
<PAGE>

                           EPOLIN, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           NOVEMBER 30, 2004 AND 2003

Note P - Stock Dividends:

         In July 2003, the Company's Board of Directors declared a cash dividend
of two cents per share on all common shares outstanding. The dividend was paid
on August 29, 2003 to shareholders of record August 15, 2003. In February 2004,
the Company's Board of Directors declared a cash dividend of two cents per share
on all common shares outstanding. The dividend was paid on February 27, 2004 to
shareholders of record February 23, 2004.

Note Q - Litigation:

         In December 2000, two individuals (each a former director and former
employee of the Company) instituted suit in the Superior Court of New Jersey,
Bergen County-Law Division, against the Company and the other directors of the
Company alleging claims pursuant to their past employment as well as a
derivative claim, as minority stockholders. Such claims included breach of
contract, civil rights, age discrimination, wrongful termination, infliction of
emotional distress and a shareholder derivative claim. In June 2003, the Company
executed an agreement, which settled the lawsuit, and the action has been
dismissed. The settlement included a lump sum payment to the plaintiffs in the
amount of $312,000. In addition, the Company agreed to buy back 126,500 shares
owned by one of the plaintiffs for the aggregate amount of $69,575 ($0.55 per
share) as treasury stock. The Company has been reimbursed a portion of the
settlement payments from its insurance company in the amount of $118,560.

Included in the selling, general and administrative expenses for the nine months
ended November 30, 2003 is the lump sum payment of $193,440.

                                       22